Vacating an EEOC rule on wellness programs

by Nicholas Bagley — Thursday, Dec. 21, 2017

A few months back, I flagged an opinion from a D.C. district court holding that a new EEOC rule governing wellness programs was arbitrary and capricious. The rule allowed employers to impose huge penalties on employees who refused to participate in wellness programs, even though the Americans with Disabilities Act says those programs must be “voluntary.”

In the court’s view, the EEOC had basically ignored the problem in its rulemaking, asserting without explanation that wellness programs backed by enormous penalties were somehow voluntary. I applauded the decision: I’ve been railing against the EEOC for two years now for blessing mandatory wellness programs over the ADA’s express prohibition.

But I was “a little flummoxed by the remedy.” The court declined to vacate the rule, instead leaving it intact while EEOC went back to the drawing board. I didn’t think the remand-without-vacatur remedy was appropriate given the depth of the rule’s deficiencies, the likelihood that EEOC would dither, and the very real prospect that no rule could pass legal muster. I thus “strongly encourage[d] the AARP to file a motion to amend the judgment” to ask the court to vacate the rule, but to stay its mandate—to put that judgment on hold—until January 2018.

To my delight, the AARP did exactly that. Better still, the district court yesterday granted AARP’s motion to amend the judgment. The court thought, with some reason, that vacating the rule in two weeks might be disruptive. But “there is plenty of time for employers to develop their 2019 wellness plans with knowledge that the [rule has] been vacated.” Plus, the court reasoned, “[i]t is far from clear that EEOC will view a 30% incentive level as sufficiently voluntary upon reexamination of the evidence presented to it.”

Beyond that, the court was concerned about the slow timeframe that EEOC proposed for devising a replacement rule. “If left to its own devices, … EEOC will not have a new rule ready to take effect for over three years—not what the Court envisioned when it assumed that the Commission could address its errors ‘in a timely manner.’”

The court therefore stayed its mandate through 2018, but held that the rule will be vacated as of January 1, 2019. That’s an enormous victory for those of us with deep misgivings about wellness programs.

I’m also gratified to see a district court give serious consideration to a remedial question after ruling on the merits. I endorsed this sort of bifurcated approach in my article, Remedial Restraint in Administrative Law. For any number of reasons, it’s rare that remedial questions get the attention they deserve when the parties are fighting over the legality of an agency action. Once that question has been resolved, it makes a ton of sense to allow the parties to circle back to the court with arguments about the remedy.

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About Nicholas Bagley

Nicholas Bagley is a Professor of Law at the University of Michigan Law School.

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