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ERIC
Judiciary

THE ERISA COMMITTEE

<nobr>Jan 10, 2008</nobr>

Ninth Circuit Issues Stay in San Franciscos Pay-or-Play Health Ordinance

The Ninth Circuit Court of Appeals January 9 stayed a lower court decision invalidating a San Francisco Pay-or-Play health care ordinance that was to take effect on January 1, 2008. This means that, pending an appeal, the new mandate, called the San Francisco Health Security Ordinance, is in force. It requires employers, who meet a certain employee threshold, to spend at least $1.17 or $1.76 (depending on size of workforce) on employee health benefits per worker, per hour.

ERIC is troubled by the stay, as we strongly support the findings of the lower court, which ruled on December 26, 2007, that the ordinance violated section 514 of the Employee Retirement Income Security Act (ERISA) -- the "Preemption Clause." In the District Court for Northern California, Judge Jeffrey White analyzed the mandate as having "an impermissible connection with employee welfare benefit plans" and "interfer[ing] . . . with employer autonomy over whether and how to provide employee health coverage, and ensuring uniform national regulation of such coverage."

The stay order issued by the Ninth Circuit Court is alarming, as the circuit judge who authored the order wrote that there was a "strong likelihood" the City of San Francisco would prevail when the full appeal is heard, and the ordinance will eventually be found not preempted by ERISA.

In its initial finding that the ordinance was preempted, the District Court also held that the obligation the ordinance imposes on employers to keep records of health care expenditures further undermines the lawmakers intent in drafting ERISA 30 years ago. Judge White wrote, "The Ordinance requires employers to maintain accurate records of all health care expenditures, allow the City access to all such records, and provide information regarding health care expenditures to the City on an on-going basis." According to the Judge, this contradicts the purpose of ERISA, which is "to establish a [nationally] uniform administrative scheme, which provides a set of claims and disbursements of benefits."

In issuing the stay, the Appeals Court held that because the Ordinance did not require employers to form an ERISA plan or define the scope of benefits that must be granted within that plan, it passed the preemption test. With respect to the reporting requirements, the court determined the ordinance did not require any specific manner of administrative record keeping, and therefore did not relate to the administration of an ERISA plan so as to fall afoul of section 514.

For additional information on ERIC's efforts to preserve ERISA preemption and how to get involved, click the ERISA Preemption Watch link below and/or contact Edwina Rogers, erogers@eric.org, Joe Grundy, jgrundy@eric.org, or Rohan Beesla, rbeesla@eric.org.


Websites:

ERISA Preemption Watch

Order of Stay in Golden Gate Restaurant Association v. City and County of San Francisco


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