News & Information

DISABILITY DISCRIMINATION — 8/09/07

A second local healthcare measure is struck down by ERISA preemption

A federal district court has invalidated legislation in Suffolk County, New York that would have mandated certain employers--i.e., Wal-Mart--to provide healthcare coverage for their employees. The decision, issued July 15, marks another blow for the nascent movement to secure expanded healthcare coverage state-by-state (or county-by-county as the case may be) in the face of persistent inaction at the national level--or at minimum, to get Wal-Mart to pay a larger share of the healthcare bill (Retail Industry Leaders Association v Suffolk County, EDNY, 06 CV 00531, July 15, 2007).

According to the Retail Industry Leaders Association (RILA), the trade association that successfully challenged the measure, Suffolk County’s "Fair Share for Health Care Act," as amended, would have required certain large retail stores selling groceries to make healthcare expenditures for most non-managerial full-time, part-time and seasonal employees equivalent to a "public health cost rate" to be determined by the county. (The original bill would have imposed these requirements only on employers who declined to enter into collective bargaining agreements. However, after arguments that this provision would violate the National Labor Relations Act, the unionized-employer exemption ended up on the cutting-room floor.)

RILA sought and obtained a declaratory judgment that the legislation is preempted by the Employee Retirement Income Security Act. In issuing its ruling, the court embraced arguments made in a legal challenge initiated by RILA in February 2006.

This is the second mandated health care law to be invalidated as the result of a legal challenge initiated by RILA. The first came last year, in a July 2006 ruling that invalidated Maryland's "Fair Share Health Care" legislation. The district court's decision was then upheld on appeal to the United States Court of Appeals for the Fourth Circuit in a ruling handed down in January, 2007.

As in the Maryland case, Wal-Mart and its big-box stores were the primary targets of the legislation. Wal-Mart operates stores in Suffolk County in which groceries and other foods are sold for off-site consumption and it has total annual revenues of more than $1 billion with at least 20% of the revenue produced by the sale of groceries.

RILA contended that Wal-Mart provides health benefits to its Suffolk County employees through a nationally administered ERISA plan. It argued that in order to comply with the law, the retailer would be required to establish a separate Suffolk County-based health benefits plan administered separately from its ERISA plan. As a result, the Suffolk County measure would disrupt employers' uniform administration of employee benefit plans on a nationwide basis. Accordingly, it was preempted by ERISA.

Next up: A local food industry association will take on San Francisco's "Health Care Security Ordinance." That measure would cast a wider net, applying not solely to big-box stores, but to all medium and large businesses in the city. It provides that companies with 20 or more employees would be required to spend anywhere from $1.17 to $1.76 (depending on company size) on healthcare for each hour its employees work. The city contends its version differs from the failed laws in New York and Maryland, and that it will escape ERISA preemption.

Source: Retail Industry Leaders Association

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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