Today, the Ninth Circuit Court of Appeals upheld the San Francisco Health Care Security Ordinance’s (“HCSO”) Employer Spending Requirement (“ESR”). The HCSO, which had been signed into law by Mayor Gavin Newsom in July 2006, required employers of non-profit companies with fifty or more employees, and for-profit employers with between twenty and ninety-nine employees, to make health care expenditures for covered employees at a rate of $1.17 per hour. It further required for-profit employers with 100 or more employees to make health care expenditures for covered employees at a rate of $1.76 per hour.
The Golden Gate Restaurant Association (“GGRA”) had challenged the ESR portion of the HCSO in a suit filed in district court in November 2006, claiming that it was preempted by the federal Employee Retirement Income Security Act of 1974 (“ERISA”). On December 26, 2007, the district court granted summary judgment in favor of GGRA and enjoined the implementation and enforcement of the disputed ESR provisions, which were scheduled to go into effect on January 1, 2008. The City and County of San Francisco and labor unions appealed the district court’s judgment, and sought a stay of that judgment pending a decision on appeal so that the ESR could become effective as scheduled. The Ninth Circuit granted the stay and the ESR went into effect on January 9, 2008 for non-profit employers and on April 1, 2008 for for-profit employers.
Oral argument on the appeal took place on April 17, 2008, and the Ninth Circuit issued its decision today. Because the Court found that the spending requirements of the HCSO do not establish an ERISA plan and further do not have an impermissible connection with employers’ ERISA plans or make an impermissible reference to such plans, it held that they are not preempted by ERISA.
A copy of the Ninth Circuit’s ruling can be accessed here.
Keesal, Young & Logan Employment Group
