Aarp v. United States Equal Employment Opportunity Commission
267 F.Supp.3d 14 (2017)
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Rule of Law:
Under the Administrative Procedure Act, an agency's interpretation of an ambiguous statutory term is arbitrary and capricious if the agency fails to provide a reasoned explanation for its decision, does not consider relevant factors, and cannot demonstrate a rational connection between the administrative record and the interpretation it chose.
Facts:
- The Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) both permit employers to collect sensitive employee health and genetic information through wellness programs, provided that employee participation is 'voluntary.'
- Neither the ADA nor GINA defines the term 'voluntary.'
- The Equal Employment Opportunity Commission (EEOC) previously interpreted 'voluntary' to mean that employers could not condition incentives on an employee's disclosure of protected information.
- In 2016, the EEOC promulgated new rules reversing its prior position.
- The new ADA rule stated that a wellness program would not be considered 'involuntary' if the financial incentive or penalty was up to 30% of the total cost of self-only health insurance coverage.
- Similarly, the new GINA rule permitted an incentive of up to 30% of the cost of self-only coverage for the disclosure of a spouse's medical history, which is defined as the employee's genetic information under GINA.
- AARP challenged these rules, arguing that a potential penalty of 30% of insurance costs is so high that it coerces employees into disclosing their protected information, rendering the programs involuntary.
Procedural Posture:
- AARP filed a lawsuit against the EEOC in the U.S. District Court for the District of Columbia challenging two EEOC regulations under the Administrative Procedure Act (APA).
- AARP filed a motion for a preliminary injunction to stay the applicability of the rules, which the court denied.
- The EEOC filed a motion to dismiss for lack of jurisdiction and, in the alternative, a motion for summary judgment.
- AARP filed a cross-motion for summary judgment, asking the court to find the regulations unlawful.
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Issue:
Are the EEOC's regulations, which permit employers to offer incentives up to 30% of the cost of self-only health coverage for participation in wellness programs that require disclosure of medical or genetic information, an arbitrary and capricious interpretation of the 'voluntary' requirement under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA)?
Opinions:
Majority - Judge John D. Bates
Yes, the EEOC's regulations are an arbitrary and capricious interpretation of the statutory requirement that participation be 'voluntary.' While a court must defer to an agency's reasonable interpretation of an ambiguous statute, the agency must provide a reasoned explanation for its decision. Here, the EEOC failed to articulate a satisfactory explanation for its choice of the 30% incentive level. The agency's primary justification—harmonizing its regulations with the Affordable Care Act's (ACA) amendments to HIPAA—was flawed because the 30% cap in HIPAA serves a different statutory purpose (preventing insurance discrimination) and does not interpret a 'voluntary' requirement. Furthermore, the EEOC's rules are not even consistent with HIPAA's, as they apply to all wellness programs (HIPAA's cap applies only to health-contingent programs) and use a different cost basis. The EEOC's other justifications, such as reliance on 'current insurance rates' and a single comment letter, were unsubstantiated by the administrative record. Crucially, the EEOC failed to consider relevant factors, such as the potentially coercive economic impact of a significant financial penalty on low-income employees, the very people the ADA and GINA are meant to protect. Because the agency failed to provide a reasoned basis for its decision rooted in the administrative record, the rules are arbitrary and capricious.
Analysis:
This decision reinforces the 'hard look' doctrine in administrative law, limiting the deference afforded to agencies under the Chevron framework. It clarifies that an agency cannot simply borrow a standard from a different statute without thoroughly explaining why that standard is appropriate for the unique context and purpose of the statute it is interpreting. The ruling emphasizes that an agency must build an administrative record that supports its conclusions and must meaningfully engage with relevant factors, such as the economic impact of a rule on the population it affects. The case serves as a strong precedent that agency reasoning must be logical and transparent, not just a conclusory statement of policy goals like 'harmonization.'
