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No ERISA Preemption of San Francisco Health Care Law

November 11, 2008
In July 2006, the San Francisco Board of Supervisors passed the San Francisco Health Care Security Ordinance to "prioritize services for low and moderate income persons," requiring all medium and large employers in the city to make minimum health care expenditures on behalf of covered employees, either by paying into their own employee benefits plans or into a fund maintained and administered by the city.

    Covered employers are those that have an average of at least 20 employees performing work for pay during a quarter and nonprofit companies with an average of at least 50 employees performing work for pay during a quarter. Under the ordinance, for-profit employers with 20 to 99 employees and nonprofit employers with 50 or more employees must make health care expenditures at a rate of $1.17 per hour. For-profit employers with 100 or more employees must make health care expenditures at a rate of $1.76 per hour.

    The Golden Gate Restaurant Association sued the city in the U.S. District Court for the Northern District of California, asking the district court to declare that ERISA pre-empts the employer spending requirements, and seeking a permanent injunction against enforcement of the provisions relating to those requirements. The district court entered judgment for Golden Gate, and the city appealed.

    The U.S. Court of Appeals for the 9th Circuit in Pasadena, California, reversed and held that ERISA does not pre-empt the ordinance. "An employer’s obligation to make monetary payments based on the amount of time worked by an employee, over and above ordinary wages, does not necessarily create an ERISA plan." Golden Gate Rest. Ass’n v. San Francisco, 9th Cir., No. 07-17372 (9/30/08).

    Impact: As the issue of health care coverage and availability continues, employers should anticipate further efforts by state and local governments to mandate such matters.

Workforce Management, November 3, 2008, p. 11 -- Subscribe Now!