Appellate Court Declares San Fran Health Law not ERISA Pre-Empted

September 30, 2008 ( - A federal appellate court has rejected claims that a San Francisco law requiring employers to pay a certain amount of employees' health care costs is pre-empted by federal labor law.

The 9th U.S. Circuit Court of Appeals ruled that the San Francisco law does not require the creation of an “employee welfare benefit plan” as recognized by the Employee Retirement Income Security Act (ERISA).

ERISA lawyers told Business Insurance that the ERISA pre-emption issue may ultimately end up before the U.S. Supreme Court because the ruling in Golden Gate Restaurant Assn. vs. City and County of San Francisco  contradicts a decision by a sister appellate court in a challenge to a similar law by the state of Maryland (See Appellate Ruling Affirms Maryland’s ‘Wal-Mart’ Health Law Dismissal ).

The restaurant group mounted a legal challenge to the 2006 San Francisco law, based on its contention that it would be a moot point because of ERISA, which precludes state and local governments from enacting laws dictating the contents of employee benefit plans (See  San Francisco Appeals Ruling on Health Care Ordinance ). A lower court ruled for the restaurant owners, but the case went to the 9 th Circuit on appeal.

Under the San Francisco law, employers with 100 or more employees have to make health care expenditures of at least $1.76 per hour for every eligible employee working in the city for at 10 or more hours per week. For-profit employers with between 20 and 99 employees and nonprofit employers with 50 or more employees have to spend $1.17 per hour for eligible workers.

One benefits trade group released a sharply critical statement following the appellate decision. “The decision by the U.S. Ninth Circuit Court of Appeals threatens to erode the essential federal framework for employer-sponsored health plans,” said American Benefits Council President James A. Klein, according to Business Insurance.  “This decision opens the floodgates to every state and locality seeking to develop its own version of health reform, creating an impossible environment for major employers — and the millions of American workers who value their employer-sponsored health plans.”

The 9 th  Circuit ruling is available here .