Aug 17, 2017

Maryland’s “Fair Share” Statute Is Preempted by ERISA


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11/17/2008
Brian S. King
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Earlier this year the Maryland legislature passed a statute aimed at requiring Wal-Mart to provide more generous health benefits to its employees. The statute, called the “Fair Share” legislation, requires that employers over a certain size doing business in Maryland must spend a certain percentage of their compensation for employees on health benefits. The only employer who met the size criterion and fell below the threshold in Maryland was Wal-Mart. The bill’s backers acknowledged that business was the target of the legislation. All employee benefits provided by Wal-Mart are governed by ERISA. The first argument challenging the Fair Share Act was that the federal ERISA statute preempts all state regulations that “relate to” ERISA plans. The effect of preemption is that all state laws are wiped out and have no effect if those laws relate to an ERISA plan. Two days ago, in a decision you can read here, a federal judge agreed that the Maryland statute is superceded by ERISA. One of the odd things about the decision is that there is no discussion by the court of a significant carve out to ERISA’s preemptive scope: state laws regulating insurance. In all likelihood the court did not discuss this because Wal-Mart provides employee benefits through a self-funded, rather than fully insured, ERISA plan. In any event, the case will undoubtedly go up to the Fourth Circuit on appeal. Don’t count on the decision being reversed.

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