On December 26, 2007, United States District Judge Jeffery White granted summary judgment in favor of the Golden Gate Restaurant Association's challenge to the San Francisco Health Care Security Ordinance. The judge held that the Ordinance is invalid because it is preempted by the Employee Retirement Income Security Act of 1974 (ERISA). The City is expected to request a stay pending appeal.
The judge noted that the Ordinance's goal of providing health care for the people of San Francisco, as well as the nation, is a laudable one, but recognized that "Congress has evinced its intent to preclude state or local governments from passing any legislation that relate to ERISA plans so as to avoid a patchwork of state and local health care programs across the nation." The judge suggested that other alternatives for creating a program for providing public health care, such as an increased general tax requirement with a corresponding tax credit for health care expenditures, might be viable.
As we noted in our December 12, 2007 Client Alert, " New Guidance on San Francisco Health Care Ordinance," the Ordinance is an example of state and local laws known as "pay or play laws." These laws impose fees on that do not provide certain minimum levels of health coverage. Maryland, Massachusetts and Vermont enacted similar laws in 2006, requiring employers either to pay an assessment to the state or to contribute to employee health premiums. In 2007, several states are considering imposing fees or taxes on employers that do not finance employee health care. This December 26th decision is consistent with a Fourth Circuit decision earlier this year in which the Fourth Circuit held that the Maryland "Fair Share Health Care Fund Act" is preempted by ERISA because it would have frustrated "ERISA's goal of permitting uniform nationwide administration" of ERISA plans. For more information on the Fourth Circuit Case see our January 19, 2007 article, " 'Wal-Mart' Health Care Law Pre-Empted by ERISA, Fourth Circuit Holds."
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