Litigation

Government-Mandated health benefits vs. ERISA, Round 5

By John Walch

We previously discussed an ordinance adopted by the city of San Francisco that requires employers to provide their employees with health benefits costing at least certain amounts or to pay those amounts to the city to fund the city's public health care program.  Employer organizations sued to enjoin enforcement, claiming that ERISA preempted the ordinance.  Initially, the employers did well, prevailing in District Court.  In January 2008, however, the Ninth Circuit stayed the District Court decision, allowing the city to begin enforcing the law while the Ninth Circuit considered the appeal.

Today, Golden Gate Restaurant Association v. San Francisco, the Ninth Circuit ruled in favor of the city, holding that ERISA did not preempt the ordinance.  It also held the city's financing structure did not constitute an ERISA plan.  The court distinguished the San Francisco ordinance from a similar Maryland statute we discussed last year.  The Maryland statute, which was struck down due to ERISA preemption, did not provide anything to Wal-Mart, the sole employer subject to the law.  Instead, it required the employer to provide better benefits or to pay a fee to the state.  In contrast, the San Francisco ordinance offers a choice: provide better benefits or pay a fee for the City to provide benefits to your employees. 

The employers are likely to seek U.S. Supreme Court review.  We will see in Round 6 whether the Supreme Court agrees with the Ninth Circuit view of preemption.

Full post as published by Northwest Business Litigation Blog on September 30, 2008 (boomark / email).