With the changing fortunes in Congress, pundits have forecast more initiatives to address healthcare concerns. As to the possible form of such proposals, one might review the AFL-CIO â€œFair Share Health Careâ€ campaign in which “activists are working with state legislators to win legislation to require corporations to pay their fair share for health care.”
Inevitably, however, State and local initiatives will encounter the preemptive borders of ERISA if employer mandates form a part of the funding of such plans. In the most recent example, the Golden Gate Restaurant Association, described as a nonprofit group representing the interests of restaurant owners, filed suit yesterday in the U.S. District Court in San Francisco alleging that San Francisco’s Worker Healthcare Security Ordinance is preempted by ERISA.
According to an article appearing in the San Francisco Examiner, the ordinance requires businesses with 20 employees or more to invest $1.06 to $1.60 for each employee hour worked for health care.
The complaint alleges that “if implemented, the ordinance would intrude both directly and indirectly upon the administration of such [ERISA] plans.â€ On the other hand, Ken Jacobs, chairman of the UC Berkeley Center for Labor and Research, is quoted as stating that “This law was written very carefully to avoid pre-emption under ERISA . . .â€
Jacobs claims that â€œ[t]his law is like the minimum wage law. It sets standards for spending on health care. The law says nothing about the content of the health services, which is what ERISA addresses.â€
The preemption issue is a substantial threat, however, as the District Court of Maryland has only this summer struck down legislation aimed at increasing healthcare spending through employer dollars. On July 19, 2006, the District of Maryland ruled that Marylandâ€™s so-called â€œWal-Mart law,â€ was preempted by ERISA.
Under The Fair Share Health-Care Fund Act, Md. Code Ann., Lab. & Empl. Â§ 8.5-101, et seq. (â€œFair Share Actâ€), non-governmental employers of 10,000 or more people that â€œ[do] not spend up to 8% of the total wages paid to employees in the state on health insurance costs, shall pay to the Secretary an amount equal to the difference between what the employer spends for health insurance costs, and an amount equal to 8% of the total wages paid to employees in the State.â€ See, Retail Leader Associate v. Fielder, (D. Md. 2006)
The Maryland legislation targeted Wal-Mart in a way distinguishable from the San Francisco ordinance, but it remains to be seen if the financial burden on employer plans may nonetheless find apt analogies in the Fielder decision. (The Fielder decision is reportedly being appealed – see August 2006 Lorman newsletter prepared by McGuire, Woods.)
Presumably, the approach taken by the San Francisco ordinance has been informed by experience gained from observing the fate of the Fair Share initiative in Maryland. For more discussion of the policy driving such legislation, a good resource may be found on The Faculty Law Blog where Saul Levmore provides insight on the Chicago â€œbig-boxâ€ retail store ordinance and additional links.
On a related issue, the Los Angeles Times online portal includes an article today, “San Francisco Labor Hails Passage of Sick Leave Measure” (unrelated ordinance):
Cementing its reputation as a progressive haven and further irking business groups, San Francisco has become the first city in the country to mandate paid sick leave for all employees. The ballot measure, which hardly generated discussion here and passed with a resounding 61% of the vote, comes at a time when businesses are reeling from a city plan that requires employers to contribute to universal healthcare and a citywide minimum wage boost phased in over the last few years.
Whatever the outcome of the legal battle in San Francisco, two items are certain -the decision on the ERISA preemption issue in that case will have an impact well beyond its borders – and the City’s “irksome” reputation will undoubtedly stick for some time to come among business groups.