Benefits & ERISA Law

ERISA Preempts Another One: Striking Down the San Francisco Ordinance

Well, I have talked before about dog bites man stories, and here’s another one. The United States District Court for the District of Northern California has now ruled that San Francisco’s ordinance requiring certain health care expenditures by employers was preempted by ERISA. The Workplace Prof sums up the ruling here, although he is wrong that there is any disjunct between the court’s recognition that ERISA protects plan participants and the court’s finding that the ordinance is preempted; ERISA does impose certain statutorily created protections for plan participants, as the court recognized in finding the ordinance preempted, but simultaneously imposes certain corresponding protections for those who sponsor plans, such as employers, including that the federal statute alone is to govern their obligations, which is the whole point of the statute’s express and broad preemption provision.

Anyway, the ruling is here, and don’t say I didn’t warn you, as I did here, that this statute was doomed to be preempted. These first generation attempts to impose health insurance mandates on the business communities, such as this San Francisco ordinance, and the New York local ordinance discussed here, and the Maryland statute struck down by the Fourth Circuit, simply universally run afoul of the preemption provisions of ERISA. Maybe states will do better when they move onto some sort of health insurance 2.0 approach that accomplishes the same goals in a framework that does not impose administrative and fee obligations on employers - which are the consistent failings of all of the statutes and ordinances to date that have been struck down or eventually will be on grounds of ERISA preemption - but I will believe that when I see it.

One thing of particular note that caught my attention in the court’s ruling in this case, by the way, was its discussion of how the statute ran afoul of ERISA preemption in light of the Fourth Circuit’s ruling in Fielder, which struck down Maryland’s Fair Share act as preempted. As I have discussed before, I believe that the Maryland legislature enacted in that instance about as bad a statute for purposes of trying to avoid ERISA preemption as any advocate of state fair share and health insurance acts could have envisioned, and thereby created a leading ruling that could not help but lead to the preemption of many subsequent state and local health insurance ordinances. This case out of the Northern District of California is a perfect example proving my thesis; while the San Francisco ordinance would likely have been struck down as preempted on its own accord in any event, having the Fielder ruling in play made doing so easy for the court.

You know, much of the progressive legal developments of the last forty years, from civil rights to the environment, was driven by pressing test cases that were carefully selected to move the ball forward; allowing the Maryland statute to have become the bellwether on this topic was, for those clamoring for state regulation of employer provided health insurance, the exact opposite of those historical examples.

Full post as published by Boston ERISA Law Blog on December 28, 2007 (boomark / email).