Under a proposed rule the agency unveiled Thursday, employers can only offer "de minimis incentives," like a water bottle or a gift card of modest value, to draw workers into company-sponsored health initiatives that would require them to hand over medical information.
The proposal replaces an earlier iteration that a D.C. federal court struck down in 2017 that cleared businesses to offer a heftier incentive for workers who sign up for these activities.
Critics had argued in a successful court challenge that the agency's initial regulation, which let companies shave up to 30% off the cost of wellness participants' self-only insurance premiums, made the stakes of participating too high.
With such weighty prizes and penalties, the critics said workers were essentially forced into these activities and into handing over sensitive medical data, running afoul of the Americans with Disabilities Act, which mandates these initiatives be voluntary.
The new de minimis blueprint alleviates those concerns, the EEOC said in Thursday's draft, but attorneys say it has triggered another headache for businesses trying to work out how to make their workforces get vaccinated.
Eric Meyer, a management-side partner at FisherBroyles LLP, said many company leaders he's heard from were leaning toward encouraging their rosters to get the coronavirus vaccine, rather than requiring it, but Meyer said they had been hoping to hold out a larger carrot.
"Some of the ideas that people were coming up with were we'll give them a couple of extra vacation days or give them a little something extra in their paycheck, some kind of meaningful financial incentive," Meyer said. "But the way these proposed regulations read, basically all you can do is give them a water bottle."
For employers that may have some vaccine-resistant workers on their payrolls, they've lost a key tool for getting them on board, said Seyfarth Shaw LLP employee benefits partner Ben Conley.
"If you're hesitant about it, a water bottle is not going to change your mind," Conley said. "Nobody is going to take a risk on something they don't trust for a water bottle or de minimis gift card."
Conley said Thursday's proposal deals a blow to businesses that were looking to run a corporate-sponsored vaccine program that offered meaningful incentives for workers to take part.
"I think this, in many respects, takes this type of program off the table," he said.
Both defense-side attorneys told Law360 they weren't thrilled with the proposal, as they said generally it tamps down on businesses' flexibility when organizing wellness activities, and the tighter restrictions make it harder for employers to avoid discrimination liability.
However, the draft included a broad carveout that could let a lot of businesses bypass the proposed restrictions, according to ADA expert Jonathan Mook of DiMuroGinsberg PC.
The agency installed a safe harbor in the measure which says that corporate wellness programs are free from the de minimis rule if they're health-contingent — meaning the incentive is handed out based on a health factor, like steps taken or hours of exercise — and are tied to a group health plan.
For these initiatives, the Health Insurance Portability and Accountability Act would govern the incentive rules, not the ADA, according to the draft, and the former law blesses the 30% standard the EEOC had initially tried to roll out.
"They came up with an escape hatch," Mook said, as he noted that a significant swath of companies have this type of group health plan. "The EEOC has proposed that a large segment of wellness plans aren't regulated by the ADA in terms of the incentive aspect of the wellness plan," he said.
This provision has already drawn pushback from the AARP, which launched the legal challenge that saw the initial regulation struck down.
The nonprofit, which is focused on issues affecting people over the age of 50, lauded the de minimis element of the proposal but flagged the safe harbor provision as a problem in a statement Thursday.
"While AARP is still reviewing the proposed rules, we agree that truly no-more-than-de minimis consequences for non-disclosure are unlikely to be coercive," said William Alvarado Rivera, the AARP Foundation's senior vice president for litigation. "We remain concerned about the EEOC's proposed carve-out for health-contingent wellness programs, which are the most intrusive."
Mook added that if this language makes it into the final rule, it will land in front of the courts. "If the EEOC moves forward and adopts this analysis as part of its final rule, there will be court challenges obviously," Mook said.
However, management-side attorneys said they appreciate this part of the draft.
"I think it took a lot of mental gymnastics for them to get to why that [safe harbor] exists and what they did with that, but ultimately I'm glad that some wellness programs have some more meaty provisions," Conley said.
Thursday's proposed rule, which would amend ADA rules governing these employer-sponsored activities, was unveiled alongside a sister proposal that touches on similar changes under the Genetic Information Nondiscrimination Act.
Both are now headed to the Federal Register for a 60-day comment period. An EEOC spokesperson declined to comment further on the documents, noting that they are "simply proposals and they do not change the law or regulations."
"We are unable to answer any questions regarding any impact that they might have on vaccinations or other matters," said EEOC spokesperson James Ryan. "They do not have any impact at this point because they are only proposals, and we do not want to speculate at this time."
-- Additional reporting by Braden Campbell and Vin Gurrieri. Editing by Abbie Sarfo.
For a reprint of this article, please contact email@example.com.