Ninth Circuit Rules That ERISA Does Not Preempt Seattle “Fair Share” Law

An ERISA trade association appealed a lower court’s ruling that ERISA does not preempt a Seattle ordinance requiring hotel employers and ancillary businesses to make specified monthly health care expenditures. Employers can satisfy their obligation by either paying additional compensation directly to designated employees or including those employees in the employers’ health plans. Asserting that ERISA preempts the Seattle ordinance due to its relationship to the employers’ health plans, the trade association cited the Supreme Court’s Gobeille decision, which held that ERISA preempted a Vermont law that required health plans to report claims and other information to a state database (see our Checkpoint article).

The Ninth Circuit distinguished the Seattle ordinance from the Vermont law because the ordinance does not address a “fundamental” area of ERISA regulation such as reporting or disclosure. The court determined that this case was controlled by its Golden Gate decision, which held that ERISA did not preempt a San Francisco ordinance requiring businesses to make certain minimum health care expenditures on behalf of covered employees and providing a non-exhaustive list of options for employers to satisfy the requirement (see our Checkpoint article). The trade association argued that the Seattle ordinance was distinguishable from the San Francisco ordinance because the San Francisco ordinance did not include an option for direct payments from employers to employees. The court disagreed, noting that Golden Gate explicitly said there would be no preemption “even if the payments are made by the employer directly to the employees who are the beneficiaries of the putative plan.” Therefore, the court concluded that the Seattle ordinance was not preempted, and the case was dismissed.

EBIA Comment: While the holding is not surprising given the precedent in Golden Gate, it is worth noting that the court rendered its opinion in five short paragraphs, perhaps signaling its desire to end these types of preemption challenges. Challengers may find more success in other jurisdictions. For more information, see EBIA’s ERISA Compliance manual at Section XXXIX.H.25 (“Preemption Analysis Applied to Specific State Laws: State and Municipal Fair Share Laws”), EBIA’s Self-Insured Health Plans manual at Section V.E (“ERISA Preemption and the Application of State Mandates”), and EBIA’s HIPAA Portability, Privacy & Security manual at Section XXI.E (“Impact of ERISA Preemption for Health Plans Subject to ERISA”).

Contributing Editors: EBIA Staff.