Golden Gate Restaurant v. City and County of San Francisco
2008 WL 4401387, 546 F.3d 639 (2008)
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Rule of Law:
A municipal ordinance requiring employers to make minimum health care expenditures is not preempted by ERISA if it provides a meaningful, non-ERISA alternative for compliance, such as making payments to a government entity, and does not mandate the creation or administration of a specific type of employee benefit plan.
Facts:
- The City and County of San Francisco enacted the Health Care Security Ordinance.
- The Ordinance required covered employers (generally those with 20+ employees) to make a minimum level of health care expenditures for their covered employees.
- The required expenditure was calculated as a specific dollar amount per hour paid to a covered employee.
- Employers had several options to satisfy the expenditure requirement: contributing to their own employee health plans, reimbursing employees for health care services, or making payments directly to the City.
- If an employer chose the City-payment option, the funds were used to support the City's Health Access Program (HAP) for uninsured residents or to establish medical reimbursement accounts for the employees.
- The Ordinance did not require any employer to create an ERISA plan, nor did it dictate the specific benefits, eligibility rules, or administrative structure of any existing ERISA plan.
- The Golden Gate Restaurant Association, an organization of employers subject to the Ordinance, challenged the law.
Procedural Posture:
- The Golden Gate Restaurant Association filed a complaint against the City and County of San Francisco in the U.S. District Court for the Northern District of California, seeking to enjoin the Ordinance's employer spending requirements as preempted by ERISA.
- Several labor unions intervened as defendants in support of the City.
- On cross-motions for summary judgment, the district court granted summary judgment for the Association, concluding ERISA did preempt the Ordinance.
- The district court permanently enjoined the enforcement of the employer spending requirements.
- The City and Intervenors appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit and requested a stay of the injunction pending the appeal.
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Issue:
Does the Employee Retirement Income Security Act of 1974 (ERISA) preempt a municipal ordinance that requires covered employers to make minimum health care expenditures on behalf of their employees, where employers can satisfy this obligation by various means, including making payments to the city for use in a public health program?
Opinions:
Majority - William A. Fletcher
No. The Employee Retirement Income Security Act of 1974 (ERISA) does not preempt the San Francisco Health Care Security Ordinance because the Ordinance neither creates an ERISA plan nor impermissibly 'relates to' an employer's ERISA plan. First, the Ordinance does not create an ERISA plan. An employer's obligation to make payments to the City is a simple, mechanical requirement akin to paying taxes; it does not involve the ongoing, discretionary administrative scheme that is the hallmark of an ERISA plan. The employer's obligation ends with the payment, and the City's Health Access Program is a government entitlement program, not a plan 'established or maintained' by an employer. Second, the Ordinance does not 'relate to' existing ERISA plans. It lacks an impermissible 'connection with' ERISA plans because it does not regulate plan benefits, structure, or administration. While it may create an indirect economic influence on an employer's choices, it does not bind plan administrators to any particular course of action, which is permissible under New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. Furthermore, it does not make an impermissible 'reference to' ERISA plans because its operation is not premised on the existence of such plans; it functions equally for employers with or without them. Unlike the law in District of Columbia v. Greater Washington Board of Trade, the required expenditure is measured by hours worked, not by the level of benefits in an existing ERISA plan. Finally, unlike the statute in Retail Industry Leaders Association v. Fielder, the City-payment option is a meaningful alternative, not a coercive penalty, because the payments result in tangible health benefits for employees, allowing employers to comply without altering their ERISA plans.
Analysis:
This decision establishes a significant precedent allowing state and local governments to implement 'play or pay' health care mandates without being preempted by ERISA. The ruling provides a legal framework for such laws, requiring that they offer a viable, non-ERISA compliance mechanism, such as paying into a public fund. This opens the door for other municipalities to enact similar legislation to address health care access, potentially creating a complex patchwork of regulations for multi-state employers, contrary to ERISA's goal of national uniformity. The court's distinction of the Fourth Circuit's Fielder decision on the basis of a 'meaningful alternative' provides a key analytical point for future challenges to similar statutes.
