Thanks to Benefitslink for the tip about a very important case, Golden Gate Restaurant Association v. City and County of San Francisco, et al., from the Ninth Circuit upholding the San Francisco mandatory healthcare expenditure law. A lot of folks weighed in on that case including the DOL, the American Benefits Council, the U.S. Chamber of Commerce, ERIC, and many others, knowing how important the result in the case would be due to the healthcare initiatives being proposed across the country. (You can read the DOL’s Amicus Brief filed in the case here.)
In the Golden Gate case, the district court had enjoined the employer spending requirements of the San Francisco Health Care Security Ordinance, holding that ERISA preempted the spending requirement. The Ordinance requires all covered employers to make a certain level of health care expenditures on behalf of their covered employees. However, the Ninth Circuit reversed, holding that the Ordinance is not preempted by ERISA.
Many will probably think that this case now creates a split in the Circuits due to the Fourth Circuit opinion in the Retail Industry Leaders Association v. Fielder case (noted below). That case dealt with Maryland’s Fair Share Health Care Fund Act (discussed in previous posts which you can access here). However, the Ninth Circuit in its opinion distinguishes that case and states its belief that a split will not be created.
The Ninth Circuit’s key holdings in the case:
(1) “The fact that an employer makes its payments to the City rather than to the employees confirms, if confirmation were needed, that the employer’s administrative obligations under the City-payment option do not create an ERISA plan. Under the Ordinance, an employer has no responsibility other than to make the required payments for covered employees, and to retain records to show that it has done so. The payments are made for a specific purpose, but the employer has no responsibility for ensuring that the payments are actually used for that purpose.”
(2) “The HAP, administered by the City, is not an ERISA plan. Rather, the HAP is a government entitlement program available to low- and moderate-income residents of San Francisco, regardless of employment status.”
(3) “The Ordinance in this case stands in stark contrast to the laws struck down in Egelhoff, Shaw and Agsalud. The Ordinance does not require any employer to adopt an ERISA plan or other health plan. Nor does it require any employer to provide specific benefits through an existing ERISA plan or other health plan. Any employer covered by the Ordinance may fully discharge its expenditure obligations by making the required level of employee health care expenditures, whether those expenditures are made in whole or in part to an ERISA plan, or in whole or in part to the City. The Ordinance thus preserves ERISA’s “uniform regulatory regime.” See Davila, 542 U.S. at 208. The Ordinance also has no effect on “the administrative practices of a benefit plan,” Fort Halifax Packing Co., 482 U.S. at 11, unless an employer voluntarily elects to change those practices.”
(4) “There is a critical distinction between the ordinance in Greater Washington and the Ordinance in this case. Under the ordinance in Greater Washington, obligations were measured by reference to the level of benefits provided by the ERISA plan to the employee. Under the Ordinance in our case, by contrast, an employer’s obligations to the City are measured by reference to the payments provided by the employer to an ERISA plan or to another entity specified in the Ordinance, including the City. The employer calculates its required payments based on the hours worked by its employees, rather than on the value or nature of the benefits available to ERISA plan participants. Thus, unlike the ordinance in Greater Washington, the Ordinance in this case is not determined, in the words of § 514(a), by “reference to” an ERISA plan.”
(5) “Finally, the Association contends that the Ordinance is preempted under the analysis set forth in Retail Industry Leaders Association v. Fielder, 475 F.3d 180, 183 (4th Cir. 2007). The Association contends that we will create a circuit split if we uphold the Ordinance. We disagree. We see no inconsistency between the Fourth Circuit’s holding in Fielder and our holding in this case.”
The court held that the San Francisco ordinance was distinguishable from the Maryland statute in the Fielder case in that the Ordinance does not “effectively mandate that employers structure their employee healthcare plans to provide a certain level of benefits.”
(By the way, the court cites this article in their opinion: Preemption and Civic Democracy in the Battle Over Wal-Mart by Catherine Fisk, University of California, Irvine Law School, and Michael M. Oswalt.)
UPDATE: From the San Francisco Sentinel:
A restaurant association spokesman said today the group will appeal a federal circuit court ruling that upheld an employer spending mandate in the city of San Francisco