Ruling on a suit by the Retail Industry
Leaders Association (RILA) on July 19, 2006, U.S. District
Judge J. Fredrick Motz struck down Maryland’s “Wal-Mart” Bill,
declaring the measure was pre-empted by ERISA and was
therefore invalid.
In the judgment, the judge affirmed that
regulation of employee benefits resides with the federal
government since the passage of the Employment Retirement
Income Security Act (ERISA) in 1974. Therefore, states are
pre-empted by federal law to regulate benefits.
At issue in the Maryland case was whether
Maryland’s Fair Share in Health Care Act, also known as the
“Wal-Mart Bill” (S.B. 790/ H.B 1284), was a regulatory burden
pre-empted by ERISA or whether the legislation imposed a
payroll tax. In the past, states have been given broad
discretion to tax. The court held that the purpose behind the
law was not to raise revenue but to force employers to
increase contributions to ERISA health plans and hence was
pre-empted by federal law.
At the same time, the judge rejected the
argument that the legislation violated the equal protection
clause. The Maryland General Assembly had rational public
policy goals in defining large and small employers and “equal
protection is not a license for courts to judge the wisdom,
fairness, or logic of legislative choices.”
Background: On January 12, 2006, the
Maryland General Assembly over-rode Governor Robert Ehrlich’s
(R) veto of a bill, passed during the 2005 legislative
session, requiring private-sector for-profit employers with
10,000 or more employees in the state to spend at least eight
percent of their payroll (or six percent in the case of a
nonprofit employer) on health care. According to the bill,
those employers that fell below the requirement would be
required to pay the difference between their health insurance
expenses and the percentage threshold into a new Fair Share
Health Care Fund, which would direct the funds into the
state’s Medicaid program.
The bill made Maryland the first state to
require an employer to spend a defined percentage on health
care for its employees. Because the only employer in the state
with more than 10,000 employees that did not meet the
required threshold was Wal-Mart, the bill quickly took on the
“Wal-Mart Bill” moniker. The unusual solution, catchy
nickname, and brewing controversy put Maryland’s new bill
squarely on the national news radar.
In February 2006, the Retail Industry Leaders
Association (RILA) filed suit in U.S. District Court for the
District of Maryland seeking to invalidate Maryland’s Fair
Share in Health Care Act. RILA argued that the legislation was
invalid because:
- It violated the express purpose of the
Employment Retirement Income Security Act (ERISA) of 1974 by
subjecting a multi-state business to differing state and
local laws governing employee benefits. ERISA permits
multi-state employers “to avoid a multiplicity of regulation
in order to permit the nationally uniform administration of
employee benefits… Uniformity is impossible, however, if
plans are subject to different legal obligations in
different states…”
- The legislation, by singling out Wal-Mart
and creating a narrow classification, violated the equal
protection clause of the Constitution.
What’s Next?: Maryland Attorney
General J. Joseph Curran has said that the state expects to
appeal the Motz decision to the 4th Circuit Court of Appeals
in Richmond, Virginia. In addition, Democratic legislative
leaders also noted that they would modify the bill and
reintroduce it to respond to the court's objections.
For the full court ruling, please visit:
http://www.mdd.uscourts.gov/Opinions152/Opinions/Walmartopinion.pdf
