Appellate Court Clears Roadblock to SF Health Care Law

January 10, 2008 ( - By a federal appellate court ruling the city of San Francisco won the right to implement its new law requiring employers to contribute to their employee's health care coverage costs.

The 9 th  U.S. Circuit Court of Appeals on Wednesday blocked an injunction barring the law’s implementation that had been imposed by U.S. District Judge Jeffrey S. White in an earlier ruling in favor of employer groups fighting the ordinance (See San Francisco Appeals Ruling on Health Care Ordinance ).

Circuit Judge William A. Fletcher, writing for the 9 th  Circuit, said the city had made a strong enough showing it would ultimately prevail and that a balancing of the interests for and against the San Francisco ordinance led the appellate panel to its holding there should be a delay in implementing White’s injunction.

The key issue in the legal battle over the ordinance is whether it is pre-empted by the Employee Retirement Income Security Act (ERISA). White declared that it was pre-empted, but Fletcher asserted that it was not.

White accepted the ERISA pre-emption argument after finding the ordinance was “related to” an ERISA plan because its “requirements directly and indirectly affect the relationship between private employers and the provision of health care coverage, a relationship that has traditionally been governed by ERISA.” White also said the ordinance was “connected to” an ERISA benefit plan, because it: regulated the same types of benefits that fell within ERISA plans; imposed reporting, disclosure, funding, or vesting requirements for ERISA plans; and, regulated certain ERISA relationships, such as employer/plan and employer/employee relationships.

However, the appellate judges concluded the ordinance does not require employers to establish ERISA plans or to make changes to any existing ERISA plans and does not require that employers provide certain health care benefits to their employees, through an ERISA plan or in any other way.

“Where a law is fully functional even in the absence of a single ERISA plan, … we have great difficulty in seeing how the law makes an impermissible reference to ERISA plans,” Fletcher wrote.

Leading the campaign against the Health San Francisco law has been the Golden Gate Restaurant Association (GGRA), which filed its legal challenge in November 2006.

The ordinance mandates that covered employers make required health care expenditures to or on behalf of covered employees. Covered employers are for-profit companies that have at least 20 employees and non-profit corporations that employ at least 50 employees. Covered employees are those who work in the city for at least 10 hours per week, have worked for the employer for at least 90 days, and are not otherwise excluded from coverage.

The ordinance sets the rates for the required expenditures, specifies the qualifying expenditures, and imposes on employers certain administration duties related to the expenditures .

White’s lower court ruling is here .

Fletcher’s 9th Circuit decision is here .