The ordinance allows employers to comply with the rules by making payments through the ERISA health benefit plans or by paying additional compensation to workers. (Photo: Shutterstock)
State or federal? That is a debate playing out in the streets as people protest a leaked ruling from the United States Supreme Court. But not all such jurisdictional debates are that contentious.
The Supreme Court is being asked to look at a disagreement now playing out between federal appellate courts. The issue: What takes precedent on pay-to-play laws that require employers to make minimum monthly health care payments; state laws or the Employee Retirement Income Security Act (ERISA)?
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The case, ERISA Industry Committee v. Seattle addresses whether the city had the authority to enact an ordinance requiring hotels and related businesses to offer certain employees health insurance or pay them additional compensation. The ordinance allows employers to comply with the rules by making payments through the ERISA health benefit plans rather than paying cash to the workers.
The ERISA Industry Committee (ERIC), which is an advocacy group for employers, is arguing that the ordinance is preempted by ERISA. Last spring, the 9th U.S. Circuit Court of Appeals sided with Seattle and held that ERISA does not preempt the ordinance because "an employer can satisfy the law through direct cash payments to employees, regardless of whether it has an ERISA plan and without changing a word in its plan if it does have one."
ERIC appealed the decision to the Supreme Court, writing at the time, "presents an excellent vehicle to resolve an entrenched and increasingly relevant split of authority over whether ERISA preempts state and local efforts to regulate employee-benefit plans through play-or-pay laws."
The Society for Human Resource Management (SHRM) has also joined a friend-of-the-court brief supporting ERISA preemption in the case. According to SHRM, If the Supreme Court grants ERIC's petition and addresses the disagreement among federal appellate courts over whether state and local play-or-pay rules are preempted by ERISA's broad preemption provision, the resulting decision may well "sound the death knell" for these laws, said Alex Lakatos an attorney with Mayer Brown in Washington, D.C.
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