Wal-Mart "Fair Share" Law Overturned

By John Walch
July 25, 2006

Wal-mart and its allies won a victory as a federal District Court overturned a Maryland statute that required employers with over 10,000 employees to spend at least 8% of in-state payroll on health care.  The court ruled that ERISA preempted the state statute, in accordance with ERISA's stated objective of permitting multi-state employers to provide nationwide benefits.  Otherwise, the court held, nationwide employers could possibly face 50 different state rules plus a nearly unlimited number of local benefit rules.  The decision is available here: https://www.retail-leaders.org/new/resources/RULING.pdf

Maryland's Attorney General intends to appeal the decision.  One argument against preemption likely to arise on appeal is that ERISA preempts laws requiring mandatory benefits but not taxes or other statutes of general application.  The statutory language appears to require the employer, not the employer's benefit plan, to comply.  ERISA preemption issues have made frequent appearances in federal Courts of Appeal and the Supreme Court.  This case is likely to provide additional guidance on the breadth of ERISA's preemptive reach. 

Approximately 30 states have enacted or are considering "Fair Share" statutes, including Oregon.  Generally, these statutes require large employers to provide health benefits that exceed a specified percentage of in-state payroll.  In Oregon, the AFL-CIO filed an initiative that requires employers with more than 4,500 employees in Oregon to spend at least 9% of payroll on employee health care.  Currently, 12 employers have that threshold number of employees, including Wal-Mart.  The initiative did not receive court approval in time for the 2006 ballot. 

The Maryland statute had particular language that the court criticized as violating ERISA.  However, the decision expressly recognizes that other states enacting these statutes may do so in a manner that complies with ERISA.  In other words, the court concluded the concept of Fair Share might be lawful, but Maryland's statute failed to properly address ERISA.  That suggests Fair Share proponents will continue their efforts to enact these statutes.

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