News   /   March 19, 2021   /   

Ninth Circuit Court of Appeals Rules Insurance Mandate and ERISA Can Co-Exist

The Ninth Circuit Court of Appeals ruled this week that a Seattle law, supported by other cities including San Francisco, Chicago, and Austin, requiring large hotels (100+ rooms) to provide its workers with health care coverage is constitutional. The law was challenged by trade group ERISA Industry Committee (ERIC), which represents large employers with ERISA-governed benefit plans. ERIC claimed that the law’s “direct payment” option establishes an ERISA-governed health plan and cannot co-exist with the current ERISA (Employee Retirement Income Security Act of 1974) statute. The case is ERISA Indus. Comm. v. Seattle, 9th Cir., No. 20-35472, unpublished 3/17/21.

The Seattle law mandates large hotels to provide full-time workers with benefits equal to a state health exchange “Gold Policy,” or directly remunerate the dollar equivalent to the employee. U.S. District Judge Thomas Zilly dismissed the suit, ruling that monthly payments of $420 for single employees, $714 for employees with dependents only, $840 for employees with only a spouse or domestic partner, and $1,260 for employees with a spouse or domestic partner and dependents, equate to “regular wages,” and do not require an administrative plan.

The three judge panel wrote: “As in Golden Gate, SMC §14.28 does not ‘relate to’ employers’ ERISA plans because an employer ‘may fully discharge its expenditure obligations by making the required level of employee health care expenditures, whether those expenditures are made in whole or in part to an ERISA plan, or in whole or in part to [a third party],” referring to 2008’s Golden Gate Rest. Ass’n v. San Francisco, which controls the outcome of this case, the Ninth Circuit said.

Seattle’s voters approved the law in late 2016 and it was added to the City’s Municipal Code.

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