Jottings By An Employer's Lawyer

Thursday, January 18, 2007

4th Circuit Upholds Striking Down Wal-mart Benefits Law


Here's the link to the 2-1 opinion by the 4th Circuit affirming the district court's finding that Maryland's law requiring certain employers, tailored to impact only Wal-mart, were required to provide health benefits or pay a tax, was pre-empted by ERISA. Retail Industry Leaders Association v. Fielder (4th Cir. 1/17/07) [pdf].

The two sides of the arguments are succinctly summed up by the majority and dissenting opinions:

From the majority:

In effect, the only rational choice employers have under the Fair Share Act is to structure their ERISA healthcare benefit plans so as to meet the minimum pending threshold. The Act thus falls squarely under [Shaw v. Delta Airlines'] prohibition of state mandates on how employers structure their ERISA plans. See Shaw, 463 U.S. at 96-97. Because the Fair Share Act effectively mandates that employers structure their employee healthcare plans to provide a certain level of benefits, the Act has an obvious "connection with" employee benefit plans and so is preempted by ERISA.

And the dissent:

I respectfully dissent on the issue of ERISA preemption because the Act does not force a covered employer to make a choice that impacts an employee benefit plan. An employer can comply with the Act either by paying assessments into the special fund or by increasing spending on employee health insurance. The Act expresses no preference for one method of Medicaid support or the other. As a result, the Act is not preempted by ERISA.

Given the split, the importance of the issue, at least politically, we will no doubt see a request for en banc consideration and a cert. petition regardless of how the en banc request turns out.

You should check out the "Law School Professor of today" Paul Secunda's comments including his earlier ERISA analysis at Workplace Prof Blog. His quick analysis and reporting earned him the title in the WSJ Law Blog story, Fourth Circuit Puts Another Nail in Wal-Mart Bill’s Coffin. For the record, he predicted the majority opinion but as a policy matter would prefer to see the statute allow such legislation.

Update: A different view from the academic side comes from Professor Ross Runkel at his Employment Law Blog, his view — the dissent got it right.

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