Ninth Circuit Declines En Banc Review of San Francisco Mandated Health Care Law; Supreme Court Review Possible

March 9, 2009

Today, the full Ninth Circuit Court of Appeals declined to reconsider an earlier, 3-judge panel decision that upheld a San Francisco ordinance requiring employers to make health care expenditures on behalf of employees.  The Ninth Circuit’s ruling in Golden Gate Restaurant Ass’n v. City and County of San Francisco, No. 07-17370, conflicts with the Fourth Circuit’s decision in Retail Indus. Leaders Ass‘n v. Fielder,  475 F.3d 180 (4th Cir. 2007), increasing the possibility of review by the Supreme Court. 

The San Francisco ordinance requires city employers to make health care expenditures for employees that range from $1.17 to $1.76 per hour worked.  Virtually all employers that make expenditures on employee health care do so through plans covered by ERISA, but the San Francisco ordinance purported to provide certain "non-ERISA" alternatives for making payments, including making payment directly to a special health care program run by the City. 

ERISA preempts state and local laws that have an impermissible "connection with" or "reference to" an ERISA plan.  In its September 2008 panel decision, the Ninth Circuit ruled that the San Francisco ordinance was not preempted because the ordinance does not require any particular type of health benefit or plan and because, the panel said, ERISA plans are not essential to the ordinance’s operation. 

In a strongly-worded opinion by Judge Milan Smith, eight judges dissented from today’s decision not to reconsider the case en banc.  The dissenters argued that the panel decision creates a circuit split with the Fourth Circuit, "renders meaningless" the current Supreme Court test for identifying ERISA preemption, and "flouts the mandate of national uniformity in the area of employer-provided healthcare that underlies the enactment of ERISA."  Slip op. at 2824. 

The ordinance creates an impermissible "connection with" ERISA plans, the dissenters explained, because practically all employers that provide employee health care do so through ERISA plans, and the ordinance will require those employers to "coordinate" their ERISA-covered payments with any additional payments they must make to satisfy San Francisco’s minimum spending requirements–even if those additional payments are not themselves made through an ERISA plan.  Slip op. at 2828.  The ordinance has an impermissible "reference to" ERISA plans, the dissenters added, because employers will have to  "refer to"  their existing plans to determine what additional payments are required.  Id. at 2831.  "[M]ost importantly," the dissenters stated, the panel’s decision erred on a matter "of exceptional national importance, i.e., national uniformity in the area of employer-provided healthcare."  Id. at 2832.  Employers with employees in different states or even different cities will be subjected to "[t]he burden of conflicting obligations . . . in multiple jurisdictions," "exactly the burden that ERISA seeks to eliminate."  Id. at 2829.  If allowed to stand, the decision "will undoubtedly serve as a roadmap in jurisdictions across the country on how to design and enact a labyrinth of laws requiring employer compliance on health care expenditures, thereby creating the very kind of health care expenditure balkanization ERISA was intended to avoid."  Id. at 2834. 

The Ninth Circuit is the first federal court to uphold such a mandated health care law.  As the dissent observed, federal courts have struck down two similar laws—the Fourth Circuit in Fielder and the Eastern District of New York in Retail IndusLeaders Ass’n v. Suffolk County, 497 F.Supp.2d 403 (E.D. N.Y. 2007).  Gibson, Dunn & Crutcher LLP represented the Retail Industry Leaders Association (RILA) in both those cases, and filed amicus briefs on behalf of RILA and the U.S. Chamber of Commerce in Golden Gate

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For more information, please contact the Gibson Dunn attorney with whom you work or any of the following members of the Labor and Employment Practice:

Washington, D.C.
Eugene Scalia – Practice Chair (202-955-8206, [email protected])
William J. Kilberg P.C. (202-955-8573, [email protected])

Orange County
Joseph P. Busch III (949-451-3898, [email protected])

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