More Regulatory Reversals Impact Employers

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This month, two more Obama-era regulatory initiatives suffered reversals – the Equal Employment Opportunity Commission’s revised and expanded EEO-1 form and its wellness program regulations.

Proposed Revisions to EEO-1 Form Placed on Hold.  In January 2016, the EEOC issued proposed regulations to revise the EEO-1 survey form. The original EEO-1 form sought information regarding the race, ethnicity, and sex of the workforce in 10 job categories. The proposed revisions would have added the requirement to provide aggregated data on pay and hours worked, broken down into 12 pay bands across the 10 job categories, by the same racial, ethnic, and sex groups. The proposed regulations were revised in July 2016, in part to move the annual submission period of the form from September to March. In September 2016, the EEOC issued the actual revised EEO-1 form, which was to be used beginning in March 2018.

On August 29, 2017, however, the Office of Management and Budget, which has the responsibility of reviewing all significant regulatory actions before they take effect, informed the EEOC that it was initiating an immediate stay of the pay data collection aspects of the revised EEO-1 form and would be reviewing their effectiveness. In light of this action, the EEOC stated that employers should plan to comply with the prior version of the EEO-1 form, although by the new submission deadline of March 31, 2018, rather than the traditional September 30 deadline.

EEOC Acting Chair Victoria Lipnic issued a statement, noting that she had urged the OMB to issue a decision as to the proposed regulation and form so that employers would be aware of their reporting obligations. Interestingly, she stated that she hoped the OMB’s action would “prompt a discussion of other more effective solutions” to address the pay equity gap,  which implies that she did not believe the proposed pay data collection would have been effective.

Wellness Program Regulations Sent Back to EEOC.  In May 2016, the EEOC issued regulations under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) regarding healthcare wellness programs that may require employees to disclose protected health information. Under these regulations, employers may provide limited incentives to employees or inducements to their spouses for answering disability-related questions or undergoing medical examinations as part of a voluntary, reasonably designed wellness program in order to earn a reward or avoid a penalty. The regulations provided that the use of a penalty or incentive of up to 30% of the cost of self-only coverage does not render “involuntary” such a program.

The regulations were challenged by the AARP in AARP v. EEOC, arguing that, among other things, the EEOC had failed to sufficiently justify its reversal of its prior longstanding policy prohibiting the use of incentives and, moreover, that it failed to adequately explain how it determined that the 30% level was a reasonable measure for voluntariness.

The U.S. District Court for the District of Columbia found that the EEOC “failed to provide a reasoned explanation for its decision to adopt the 30% incentive levels in both the ADA and GINA rules.” The Court noted, however, that the rules were already in effect, and that “[e]mployer health plans for the year 2017 were undoubtedly designed in reliance on these rules.” Thus, the Court found that vacating the rules was not likely to restore the status quo and was, in fact, “likely to have significant disruptive consequences.” Accordingly, the Court remanded the rules to the EEOC for reconsideration, while leaving them in effect for the time being.

Employers need not take any actions with regard to their wellness programs at this time, but they should be aware that changes may be forthcoming.