Wednesday, October 1, 2008

9th Cir.: San Francisco Health Care Law Not ERISA Preempted

Sanfran In a first in the health care reform context, and in opposition to the 4th Circuits holding in the Wal-Mart Bill case of RILA v. Felder, the 9th Circuit has ruled in Golden Gate Rest. Ass'n v. San Francisco, No. 07-17372 (9th Cir. 9/30/08), that the San Francisco health care law is not preempted by ERISA.

From the BNA Daily Labor Report this morning:

The Employee Retirement Income Security Act does not preempt a San Francisco ordinance that requires 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, the Ninth Circuit holds . . . .

Writing for the court, Judge Fletcher says ERISA preemption is limited in areas that historically are matters of local concern, that employers subject to the city ordinance law lacked the sort of discretion that would render the program an ERISA plan, and that the ordinance does not "relate to" a benefit plan covered by ERISA.

The case has been watched closely by employer representatives and employee groups, which predicted the decision could have wide-ranging implications for the future of health care funding. San Francisco Mayor Gavin Newsom in a statement calls the ruling ''a huge victory for this city and the 46 million Americans who don't have health insurance.'' Business groups, however, call the decision "devastating" for small business owners.

Over the years following this issue, I have reluctantly agreed with the findings of ERISA preemption against these types of laws (see here for an example).

However, I am now persuaded that the 9th Circuit's ruling is consistent with the Travelers precedent from 1995 that unless a law is historically a matter of local concern, there should be a presumption against finding ERISA preemption. It seems to me that courts have read ERISA incorrectly in this regard in past cases.

My epiphany came in writing my new paper on the intersectionality of ERISA preemption and remedial provisions.  In order for many plaintiffs not to be deprived of the remedy that they deserve, the preemption provision must be strictly construed according to the language in Travelers.  This reading will ensure that defendant employers are not able to inappropriately use ERISA as a shield against meaningful health care reform or appropriate types of relief in ERISA cases.

BTW, I think it is pretty safe to assume that because this case has been characterized as "devastating" to small employers, and also considering the economic turmoil this country finds itself in, that there will be an en banc (and potentially Supreme Court challenge) to this ruling.


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