(May 7, 2008) The California Chamber of Commerce recently filed a “friend of the court” brief urging the 9th Circuit Court of Appeal to uphold a district court decision finding the San Francisco Health  Care Security Ordinance is preempted by the Employee Retirement Income Security Act of 1974 (ERISA).

In the case of the Golden Gate Restaurant Association v. City and County of San Francisco, the CalChamber argues that the San Francisco ordinance violates ERISA’s most basic purpose -- encouraging the formation of employer-sponsored health benefit plans by establishing a uniform federal body of law governing the provision of employee benefits.

Read the brief.

If the district court’s decision is reversed by the circuit court, many California employers will be forced to comply with the ordinance as it ostensibly requires group health plan expenditures for any employee who works 10 or more hours per week in San Francisco during any calendar quarter.

The ordinance will establish a template for jurisdiction-by- jurisdiction regulation of employer-sponsored health plans. As a result, many group health plans will become subject to a hodgepodge of conflicting state and local mandates. Allowing local government entities to impose mandates on employers for health plan coverage will, no doubt, result in some employers withdrawing their business and jobs from these areas, the CalChamber argued in its brief.

The CalChamber said the ordinance is pre- empted by ERISA because it regulates ERISA plans in at least four different ways:

1. Virtually all covered employees will have to expand the roster of employees eligible for their ERISA-regulated health plan benefits in order to comply with the ordinance. 
2. The ordinance has a direct impact on funding and the operation of ERISA health plans as it requires covered employers to provide health plans benefits at a specified rate or pay the difference on behalf of the employee to a city-operated health plan. 
3. Onerous new rules for health plan administration are enforced by the ordinance’s penalty- laden recordkeeping and reporting requirements. 
4. The ordinance creates ERISA plans where none existed before.

The CalChamber concluded its brief by stating that the ordinance impermissibly mandates that ERISA-regulated health plans provide new health plan benefits to additional beneficiaries. It interferes with the administration of ERISA-regulated health plans and is enforced by its own rules and penalties.

As the district court recognized, ERISA was enacted to ensure that employers who choose to offer welfare benefits to their employees will be subject only to uniform federal regulation.

Allowing the ordinance to stand would run afoul of the express words of the ERISA statute and more than three decades of Supreme Court opinions preserving ERISA preemption, the CalChamber concluded.

Oral arguments in this case were heard on April 17.

Read the brief.

Staff Contact: Erika Frank

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