Edward A. Zelinsky, Benjamin N. Cardozo School of Law, comments on the Ninth Circuit’s recent decision sustaining the San Francisco health ordinance under an ERISA preemption challenge.  The paper is entitled “Employer Mandates and ERISA Preemption: A Critique of Golden Gate Restaurant Association v. San Francisco”.

(For a summary of the ordinance, see :: Ninth Circuit Panel Gives Go Ahead To S.F. Employer Spending Requirement)

The paper is available on SSRN.  Here is the abstract:

The Ninth Circuit’s recent decision in Golden Gate Restaurant Association v. San Francisco saves the employer mandate of the San Francisco ordinance from ERISA preemption by slighting the language of the statute and by misapplying the U.S. Supreme Court’s existing case law under ERISA Section 514(a). If (as is likely) the Supreme Court rules upon the ERISA status of employer mandates like San Francisco’s by adhering to its past decisions, the Court will strike such mandates as ERISA-preempted. Under current law, the Ninth Circuit’s opinion in Golden Gate II is not sustainable.

Professor Zelinsky has previously published on this issue in Golden Gate Restaurant Association: Employer Mandates and ERISA Preemption in the Ninth Circuit and in a different context, The New Massachusetts Health Law: Preemption and Experimentation.

Note:  Three important reasons the 9th Circuit panel erred are developed in the article:

  • employers’ ongoing payments to San Francisco constitute employee benefit plans for ERISA purposes precisely because such continuing payments purchase health care for the paying employers’ employees
  • the San Francisco statute refers to and has a connection with employers’ ERISA plans including employers’ ongoing payments to the City. (These references are integral to the ordinance’s minimum contribution mandate since a covered employer can only determine its compliance vel non with such mandate by referring to its ERISA plans including its ongoing contributions to the City.)
  • the San Francisco ordinance impairs national uniformity through its unique local health care contribution requirements

# 1 Note that in the first instance, Zelinsky is not saying that the HAP program is a plan, but the employer contributions under mandated structures are plans.  The distinction is often significant in the MEWA context.  The overall MEWA structure may not constitute an ERISA plan, as failing to meet requirements (developed by the DOL) for employer sponsorship.  Contributions are plan assets, however, and the DOL asserts jurisdiction based upon the individual employer plans operating under the MEWA umbrella.

Consider in this context ERISA Advisory Opinion 2008-07A (addressing a proposed arrangement offered by the Chamber of Commerce in Bend, Oregon would be a multiple employer welfare arrangement (MEWA) within the meaning of section 3(40) of ERISA, and whether such an arrangement would itself be an employee welfare benefit plan within the meaning of section 3(1) of ERISA).

#2  The artificial dichotomy between benefits and contributions maintained in the 9th Circuit opinion is deconstructed in the article.  Of course the ordinance refers to ERISA since employers cannot evaluate compliance without reference to their health care plans.  The specious nature of the contributions/benefits distinction reveals itself when other seminal preemption cases are evaluated under this analysis.  These observations are innovative and effective in shifting the burden of persuasion to ordinance proponents to show the distinction is not actually trivial upon close examination.

#3  The third point, that the ordinance impairs national uniformity of benefit administration, is self evident.

Cogent and timely, the Zelinsky critique should shape the contours of the debate which is undoubtedly far from over