Labor & Employment Law

9th Circuit grants stay of injunction against San Francisco Health Care Security Ordinance

Golden Gate Restaurant Assoc v. San Francisco (9th Cir 01/09/2008)
Trial court opinion: http://www.lawmemo.com/docs/ca-nd/GoldenGate_order.pdf

The 9th Circuit issued a 34 page decision staying an injunction that had been entered by a district court. The effect of the stay is to allow San Francisco to implement its Health Care Security Ordinance pending appeal of the district court's order. The lower court had concluded that the Ordinance is preempted by the Employee Retirement Income Security Act (ERISA).

The Ordinance's effective date is January 1, 2008. It requires private employers with 20 or more employees to make heath care expenditures of specific amounts per hour of work. The Ordinance sets out a number of non-exclusive qualifying health care expenditures, such as contributions to health savings accounts, direct reimbursement to employees for some of the expenses incurred in the purchase of health care services, payments to third parties for the purpose of provided health care services, costs incurred in the direct delivery of health care services, or payments by the employer to the City ?to be used on behalf of covered employees.?

United States District Court for the Northern District of California held that the Ordinance is preempted by ERISA because it (1) it has an impermissible connection with employee benefit plans and (2) its expenditure requirements make unlawful reference to employee benefit plans.

The 9th Circuit gave three primary reasons for allowing San Francisco to enforce the Ordinance during the appeals process: (1) The City showed not only a probability of success on the merits, but also a "strong likelihood of success on the merits." (2) "The balance of hardships tips sharply in favor of the City." (3) "The public interest is served by granting a stay."

My view: The 9th Circuit is correct. It's not a question of whether the Ordinance is a wise one. It's a question of whether ERISA strips local governments of their ordinary powers. Employers who have ERISA plans can comply with the Ordinance without making any changes to their ERISA plans.

Other bloggers have their say:

• What's New in Employment Law: Ninth Circuit STAYS Injunction, Allowing SF Health Care Ordinance to Go Forward.
• Workplace Prof Blog: Flash: 9th Cir. Overturns San Francisco ERISA Preemption Decision. (Paul Secunda, of course, opines that the 9th Circuit was wrong. And, of course, I think he's wrong.)

Full post as published by Ross' Employment Law Blog on January 09, 2008 (boomark / email).