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The Ninth Circuit Court of Appeals has also ruled that San Francisco’s groundbreaking Health Care Security Ordinance, in effect requiring employers in the City to either provide employee health care benefits or make substantial in-lieu payments to the City, appears not to be preempted by federal ERISA benefits law and will be allowed to go into effect.  The City’s Ordinance requires employers with an average of at least 20 employees during a quarter, to fund health care benefits for employees.  To satisfy the Ordinance, the employer’s health care expenditures must be at least $1.17 per hour of employee work ($1.76 for employers with 100 or more employees); or else they must pay such amounts in cash directly to the City to cover public benefit programs. 

Despite the broad federal ERISA preemption of state and local regulation of employee benefit plans, the Ninth Circuit found that San Francisco’s ordinance appears not to be preempted.  The Court’s logic is that the City ordinance does not mandate the adoption of ERISA-covered health benefit plans by employers, nor does it specify the content of such plans, rather it simply requires employers to pay a minimum funding level to the City if they do not offer such benefits to local employees.  Thus the Ninth Circuit somehow finds that the City’s ordinance is not “related to” or “connected with” ERISA-covered employee benefit plans, and hence escapes the federal statutory preemption of “any and all State laws insofar as they . . . relate to any employee benefit plan” governed by federal law. 

The Ninth Circuit’s ruling only decides the interim step of dissolving a trial corrt injunction against enforcement of the City’s ordinance, pending a final Ninth Circuit decision on whether the ordinance is preempted.  However the Ninth Circuit’s final decision is strongly foreshadowed by its current finding that the City has shown not only a probability of success, but a “strong likelihood of success” in upholding its ordinance, such that the injunction is dissolved and the ordinance can now be enforced pending final outcome of the case.  We expect the final ruling to be appealed, especially on the vague finding that the San Francisco Health Care Ordinance is a matter of traditional local police-power regulation of health and safety matters.  (Golden Gate Restaurant Association v. City and County of San Francisco, Ninth Circuit No. 07-17370, published October 1, 2008)

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