Compliance January 17, 2007

Appellate Ruling Affirms Maryland's 'Wal-Mart' Health Law Dismissal

January 17, 2007 (PLANSPONSOR.com) - A federal appellate court has handed a business lobbying group a legal victory by upholding a lower court ruling that threw out a Maryland law that would have forced large employers to spend a minimum on employee health coverage or face penalties.
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The 4 th  U.S. Circuit Court of Appeals, in a split two to one opinion, agreed with U.S. District Court Judge J. Frederick Motz of the U.S. District Court for the District of Maryland who ruled in July 2006 that the Maryland state statute was pre-empted by the federal Employee Retirement Income Security Act (ERISA) (See Judge: ERISA Trumps MD ‘Wal-Mart’ Health Care Law ).  

Maryland ‘s so-called Fair Share law, which state legislators passed over Governor Bob Ehrlich’s veto, required employers with more than 10,000 employees in the state to spend an amount equal to at least 8% of payroll on health care coverage or pay the difference into a state fund. The way the law was written, it only would have applied to retail giant Wal-Mart.

Circuit Judge Paul V. Niemeyer, writing for the appellate court, said the appellate panel had to respect ERISA’s goal of an orderly administration of employee benefits by larger employers with operations in more than one state.

“The Maryland General Assembly, in furtherance of its effort to require Wal-Mart to spend more money on employee health benefits and thus reduce Wal-Mart’s employees’ reliance on Medicaid, enacted the Fair Share Act,” Niemeyer wrote. “Not disguised wasMaryland’s purpose to require Wal-Mart to change, at least in Maryland, its employee benefit plans and how they are administered. This goal, however, directly clashes with ERISA’s preemption provision and ERISA’s purpose of authorizing Wal-Mart and others like it to provide uniform healthbenefits to its employees on a nationwide basis.”

Niemeyer continued in the majority opinion: “Were we to approveMaryland’s enactment solely for its noble purpose, we would be leading a charge against the foundational policy of ERISA, and surely other states and local governments would follow. As sensitive as we are to the right of Maryland and other states to enact laws of their own choosing, we are also bound to enforce ERISA as the ‘supreme Law of the Land’.”

The ruling was welcomed by the Retail Industry Leaders Assn., an Arlington, Virginia-based trade group, which challenged theMaryland law, according to a Business Insurance news report.

The 4th Circuit opinion is here .

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