Employer-mandated spending requirement challenged

August 1, 2009

The Golden Gate Restaurant Association argues that contributions to San Francisco's Health Access Program under a 2006 ordinance are preempted by ERISA

This case challenges the employer-mandated spending requirement in San Francisco's Health Care Security Ordinance on the basis that the Ordinance is preempted by ERISA. The employer-mandated spending requirement requires covered employers to contribute to their own programs for their employees' healthcare or to contribute required amounts to the city, which are used to finance San Francisco's Health Access Program or HRAs for employees of covered employers.

SPENDING REQUIREMENT

The court held that the funding requirement of the Ordinance was preempted by ERISA because it had an impermissible connection with employee welfare benefit plans.

After the federal district court decision was issued, the City of San Francisco appealed the decision to the Ninth Circuit Court of Appeals. In an opinion published on September 30, 2008, the Ninth Circuit overruled the lower-court decision holding that ERISA does not preempt the employer-mandated spending requirement contained in the Ordinance.

The restaurant association then filed a petition for rehearing en banc, which was ultimately denied. The dissent to the denial for the petition for rehearing, however, notes that the decision puts the Ninth Circuit in conflict with the Fourth Circuit decision, Retail Indus. Leaders Ass'n v. Fielder, 473 F. 3d 180 (4th Cir. 2007), which struck down a comparable law in Maryland in 2007 on the grounds that such law was preempted by ERISA.

Seeking to present the City of San Francisco from implementing the employer-mandated spending requirement, the restaurant association filed an emergency motion with the Supreme Court in March 2009, which was later denied, meaning that the employer spending requirement continues to be in effect. In response to the Ninth Circuit's decision, the restaurant association filed a Petition for Writ of Certiorari on June 8, 2009, asking the Supreme Court to overturn the Ninth Circuit's ruling holding that the Ordinance was not preempted by ERISA.

This column is written for informational purposes only and should not be construed as legal advice.

Barry Senterfitt is a managing shareholder at Greenberg Traurig, LLP, Austin, Texas.

Janet Farrer is an associate at Greenberg Traurig LLP, Austin, Texas.