4/3/08 2:00 PM

SHRM Joins Brief Challenging Health Care Mandate

By Beth Mirza

The Society for Human Resource Management (SHRM) has joined two other associations in filing a friend of the court brief with the 9th U.S. Circuit Court of Appeals, supporting the challenge to the San Francisco Health Care Security Ordinance.

In effect since January 2008, even though it faces an appeal, the city ordinance requires most employers that do business in San Francisco to spend a minimum amount every three months on their San Francisco employees’ health care. SHRM, the International Franchise Association and the National Association of Manufacturers argue that the Employee Retirement Income Security Act of 1974 (ERISA) pre-empts the law.

A federal district court ruled in December 2007 that the mandate was not enforceable because it overstepped the city’s authority under ERISA, which regulates employer-provided health care coverage. On Jan. 9, the appeals court suspended the district court’s injunction and allowed the city to begin enforcing the law as the appeals court considers the case. The case is Golden State Restaurant Association v. San Francisco.

Under the ordinance, certain San Francisco employers must make required health care expenditures to or on behalf of their covered employees each quarter. Employees may waive their right to such payment if they receive health care benefits from another employer. Depending on the number of employees on their payrolls, employers may be required to pay between $1.17 and $1.76 for each hour an employee works.

“The District Court correctly ruled that ‘By mandating employee health benefit structures and administration, [the ordinance] interfere[s] with preserving employer autonomy over whether and how to provide employee health coverage, and ensuring uniform national regulation of such coverage,” wrote Tom Christina, an employee benefits lawyer at the firm of Ogletree Deakins, on behalf of SHRM and the other associations.

The brief notes that the city argues that the ordinance requires only a health care spending requirement that could be satisfied through “non-ERISA means,” including payments to the city—thus, the ordinance is not pre-empted by ERISA. However, the brief observes, ERISA pre-empts most state laws that relate to employer-sponsored benefit plans in the private sector and allows employers to offer benefits, such as health care, that fit their budgets and their employees’ needs.

“The 9th Circuit’s ruling on the stay pending appeal in the Golden Gate Restaurant Association is very significant. It could signal a major change in how courts decide whether state and local governments can mandate employer spending on benefits,” Christina said in a press release.

The press release also notes that in January 2007 the 4th U.S. Circuit Court of Appeals struck down Maryland’s Fair Share Health Care Fund Act, ruling that it could not be enforced because it is pre-empted by ERISA, which takes precedence over state law because it is a federal law.

“Industry groups, employers, and state and local governments will be watching the case closely because the 9th Circuit’s ruling could influence other courts when they consider similar legislation across the country,” added Doug Farmer, one of the founding shareholders in Ogletree Deakins’ San Francisco office.

Beth Mirza is senior editor for HR News. She can be reached at bmirza@shrm.org.

Related Article:

California: San Francisco’s Mandatory Health Care Ordinance Is Enforceable, SHRM Online Workplace Law Focus Area, Jan. 17, 2008