Court Vacates Parts of EEOC Wellness Rule

Author: Robert S. Teachout, XpertHR Legal Editor

January 4, 2018

A federal court has vacated portions of rules issued by the Equal Employment Opportunity Commission (EEOC) that would have allowed employers to increase healthcare insurance premiums of employees who do not participate in wellness programs. However, the order will not take effect until January 1, 2019, to avoid business disruptions.

In an August 2017 ruling, a federal judge in the District of Columbia had found the rules to be arbitrary and capricious because the EEOC provided insufficient data and analysis to support the proposed maximum 30% cost increase as a cut-off level before participation would not be considered voluntary. The court sent the rules back to the EEOC for reconsideration, at the same time stating that it still might vacate the rules if the agency did not act promptly.

Shortly after that ruling, the EEOC filed a status report with the court saying that it did not intend to issue a notice of proposed rulemaking until August 2018 or a final rule until October 2019. The agency also stated that any rule would not be applicable until the start of 2021 at the earliest.

In the new opinion vacating the rules, District Court Judge John D. Bates expressed dismay at the EEOC's proposed timetable to propose and issue replacement regulations, calling it "unacceptable." "If left to its own devices, then, EEOC will not have a new rule ready to take effect for over three years," Bates wrote, "not what the Court envisioned when it assumed that the Commission could address its errors 'in a timely manner.'"

Although the court vacated portions of the regulations, the order will not take effect until January 1, 2019. The court cited the need to avoid disruption for businesses, which need sufficient time to plan their wellness programs. The court also ordered the EEOC to provide a status report in March 2018, and said it would hold the agency to its intended August 2018 deadline for issuing a notice of proposed rulemaking.