Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-07-17370/USCOURTS-ca9-07-17370-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GOLDEN GATE RESTAURANT 

ASSOCIATION, an incorporated nonprofit trade association,

Plaintiff-Appellee,

v.

CITY AND COUNTY OF SAN

FRANCISCO, No. 07-17370

Defendant,  D.C. No.

and CV-06-06997-JSW

SAN FRANCISCO CENTRAL LABOR

COUNCIL; SERVICE EMPLOYEES

INTERNATIONAL UNION, HEALTHCARE

WORKERS-WEST; SERVICE

EMPLOYEES INTERNATIONAL UNION,

LOCAL 1021; UNITE HERE LOCAL 2,

Defendant-intervenors-Appellants. 

13909

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GOLDEN GATE RESTAURANT 

ASSOCIATION, an incorporated nonprofit trade association,

Plaintiff-Appellee,

v.

CITY AND COUNTY OF SAN

No. 07-17372 FRANCISCO,

Defendant-Appellant, D.C. No. 

and CV-06-06997-JSW

OPINION SAN FRANCISCO CENTRAL LABOR

COUNCIL; SERVICE EMPLOYEES

INTERNATIONAL UNION, HEALTHCARE

WORKERS-WEST; SERVICE

EMPLOYEES INTERNATIONAL UNION,

LOCAL 1021; UNITE HERE LOCAL 2,

Defendant-intervenors. 

Appeal from the United States District Court

for the Northern District of California

Jeffrey S. White, District Judge, Presiding

Argued and Submitted

April 17, 2008—Pasadena, California

Filed September 30, 2008

Before: Alfred T. Goodwin, Stephen Reinhardt, and

William A. Fletcher, Circuit Judges.

Opinion by Judge William A. Fletcher

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COUNSEL

Stephen P. Berzon, Scott A. Kronland and Stacey M. Leyton,

Altshuler Berzon, San Francisco, California, Vince Chhabria,

Office of the City Attorney, San Francisco, California, for the

appellants.

Curtis A. Cole and Joshua Traver, Cole Pedroza, LLP, Pasadena, California, Richard C. Rybicki, Dickenson, Peatman, &

Fogarty, Napa, California, Patrick Sutton, Dickenson, Peatman & Fogarty, Santa Rosa, California, for the appellee.

*****

Leslie Robert Stellman, Hodes, Pessin & Katz, Towson,

Maryland, for amicus National Federation of Independent

Business Legal Foundation.

Jon W. Breyfogle, Groom Law Group, Washington, D.C., for

amicus American Benefits Council.

James P. Baker, Jones Day, San Francisco, California, for

amicus Employers Group.

Jeffrey A. Berman, Sidley Austin, Los Angeles, California,

for amicus California Chamber of Commerce.

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Thomas L. Cubbage, Covington & Burling, Washington,

D.C., for amici ERISA Industry Committee and National

Business Group of California.

Edward D. Sieger, US Department of Labor, Washington,

D.C., for amicus Secretary of Labor.

Thomas M. Christina, Ogletree, Deakins, Nash, Smoak &

Stewart, Greenville, South Carolina, for amici International

Franchise Association, National Association of Manufacturers, and Society for Human Resource Management, Michael

D. Peterson, Washington, D.C., for amicus HP Policy Association.

Eugene Scalia, Gibson Dunn & Crutcher, Washington D.C.,

for amici Retail Industry Leaders Association and Chamber of

Commerce of the United States.

OPINION

W. FLETCHER, Circuit Judge: 

Plaintiff Golden Gate Restaurant Association (“the Association”) challenges the employer spending requirements of the

newly enacted San Francisco Health Care Security Ordinance

(“the Ordinance”). The Association argues that the federal

Employee Retirement Income Security Act of 1974

(“ERISA”) preempts the employer spending requirements of

the Ordinance either because those requirements create a

“plan” within the meaning of ERISA or because they “relate

to” employers’ ERISA plans. On December 26, 2007, the district court granted the Association’s motion for summary

judgment and enjoined the implementation of the employer

spending requirements. Golden Gate Rest. Ass’n v. City &

County of San Francisco, 535 F. Supp. 2d 968, 970 (N.D. Cal.

2007). On December 27, 2007, Defendant City and County of

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San Francisco (“the City”) and Defendant-Intervenor labor

unions requested that this court stay the judgment of the district court pending appeal. In an order filed January 9, 2008,

we granted the stay. Golden Gate Rest. Ass’n v. City &

County of San Francisco (“Golden Gate”), 512 F.3d 1112,

1114 (9th Cir. 2008). We now reach the merits of the appeal.

We hold that ERISA does not preempt the Ordinance.

I. Procedural History

In July 2006, the San Francisco Board of Supervisors unanimously passed the San Francisco Health Care Security Ordinance, and the mayor signed it into law. The Ordinance is

codified at Sections 14.1 to 14.8 of the City and County of

San Francisco Administrative Code. The Ordinance has two

primary components: the Health Access Plan (“HAP”), and

the employer spending requirements. The HAP1 is a Cityadministered health care program. It went into effect in the

summer of 2007. In funding the HAP, the City “prioritize[s]

services for low and moderate income persons.” S.F. Admin.

Code § 14.2(d) (2007). According to the City’s web page, as

of August 9, 2008, 27,395 persons had enrolled in the HAP.2

Persons who already have health insurance or who live outside of San Francisco are not eligible for the HAP. Instead,

such persons may be entitled to establish medical reimbursement accounts with the City. As we will explain in detail

below, the Ordinance also requires all covered employers to

make a certain level of health care expenditures on behalf of

their covered employees. The Association does not challenge

the HAP. It challenges only the employer spending requirements. 

The Association filed a complaint against the City on

November 8, 2006, asking the district court to declare that

1The HAP is now called “Healthy San Francisco.” 

2Healthy San Francisco, About Us, http://www.healthysanfrancisco.org/

about_us/Stats.aspx#. 

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ERISA preempts the employer spending requirements, and

seeking a permanent injunction against enforcement of the

provisions of the Ordinance relating to those requirements.

The San Francisco Central Labor Council, Service Employees

International Union (SEIU) Local 1021, SEIU United Healthcare Workers-West, and UNITE-HERE! Local 2 (collectively,

“Intervenors”), successfully moved to intervene as defendants. 

On April 2, 2007, the City deferred implementation of the

employer spending requirements until January 1, 2008. On

July 13, 2007, the parties filed cross-motions for summary

judgment. On December 26, 2007, the district court entered

judgment for the Association, concluding that ERISA preempts the employer spending requirements. See Golden Gate

Rest. Ass’n, 535 F. Supp. 2d at 979-80. 

On December 27, 2007, the City and Intervenors asked the

district court to stay its judgment pending appeal. The district

court denied the motion. On January 9, 2008, this court filed

a published order granting the City’s motion for a stay of the

district court’s judgment pending resolution of the City’s

appeal. Golden Gate, 512 F.3d at 1127. Since that date, covered employers have been required to make quarterly health

care expenditures. 

On February 7, 2008, the Association filed an application

with Justice Kennedy, as Circuit Justice for the Ninth Circuit,

for an order vacating our stay of the district court’s judgment.

On February 21, after receiving the City’s response, Justice

Kennedy denied the application. The United States Secretary

of Labor subsequently filed an amicus brief in this court in

support of the Association. 

On April 17, 2008, we heard oral argument on the merits

of the City’s appeal. We now reverse the judgment of the district court and remand with instructions to enter summary

judgment in favor of the City and Intervenors.

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II. Standard of Review

“We review de novo the district court’s grant of summary

judgment and, viewing the evidence in the light most favorable to the non-moving party, determine whether there are any

genuine issues of material fact for trial.” In re Syncor ERISA

Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). “ERISA preemption is a question of law, which we also review de novo.”

Elliot v. Fortis Benefits Ins. Co., 337 F.3d 1138, 1141 (9th

Cir. 2003).

III. The Ordinance

The Ordinance mandates that covered employers make “required health care expenditures to or on behalf of” certain

employees each quarter. S.F. Admin. Code § 14.3(a). “Covered employers” are employers engaging in business within

the City that have an average of at least twenty employees

performing work for compensation during a quarter, and nonprofit corporations with an average of at least fifty employees

performing work for compensation during a quarter. Id.

§ 14.1(b)(3), (11), (12). “Covered employees” are individuals

who (1) work in the City, (2) work at least ten hours per

week, (3) have worked for the employer for at least ninety

days, and (4) are not excluded from coverage by other provisions of the Ordinance. Id. § 14.1(b)(2). 

The Ordinance sets the required health care expenditure for

employers based on the Ordinance’s “health care expenditure

rate.” Id. §§ 14.1(b)(8), 14.3(a). For-profit employers with

between twenty and ninety-nine employees and non-profit

employers with fifty or more employees must make health

care expenditures at a rate of $1.17 per hour. For-profit

employers with one hundred or more employees must make

expenditures at a rate of $1.76 per hour. See City & County

of San Francisco, Office of Labor Standards Enforcement,

Regulations Implementing the Employer Spending Requirement of the San Francisco Health Care Security Ordinance

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(“ESR”), Reg. 5.2(A) (2007).3

 Under the Ordinance, “[t]he

required health care expenditure for a covered employer shall

be calculated by multiplying the total number of hours paid

for each of its covered employees during the quarter . . . by

the applicable health care expenditure rate.” S.F. Admin.

Code § 14.3(a). 

Regulations implementing the Ordinance specify that “[a]

health care expenditure is any amount paid by a covered

employer to its covered employees or to a third party on

behalf of its covered employees for the purpose of providing

health care services for covered employees or reimbursing the

cost of such services for its covered employees.” ESR Reg.

4.1(A). A “covered employer has discretion as to the type of

health care expenditure it chooses to make for its covered

employees.” ESR Reg. 4.2(A). Section 14.1(b)(7) of the Ordinance specifies that the definition of health care expenditure

includ[es], but [is] not limited to 

(a) contributions by [a covered] employer

on behalf of its covered employees to a

health savings account as defined under

section 223 of the United States Internal

Revenue Code or to any other account having substantially the same purpose or effect

without regard to whether such contributions qualify for a tax deduction or are

excludable from employee income; 

3On June 16, 2008, the City issued revised ESR regulations. Those revisions do not pertain to any of the regulations discussed in this opinion. See

City & County of S.F. Office of Labor Standards Enforcement, Regulations Implementing the Employer Spending Requirement of the San Francisco Health Care Security Ordinance (June 16, 2008), available at http://

www.sfgov.org/site/uploadedfiles/olse/hcso/HCSO_Final_

Regulations.pdf. 

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(b) reimbursement by such covered

employer to its covered employees for

expenses incurred in the purchase of health

care services; 

(c) payments by a covered employer to a

third party for the purpose of providing

health care services for covered employees;

(d) costs incurred by a covered employer in

the direct delivery of health care services to

its covered employees; and 

(e) payments by a covered employer to the

City to be used on behalf of covered

employees. The City may use these payments to: 

(i) fund membership in the Health Access

Program for uninsured San Francisco residents; and 

(ii) establish and maintain reimbursement

accounts for covered employees, whether

or not those covered employees are San

Francisco residents. 

S.F. Admin. Code § 14.1(b)(7) (paragraphing added); see also

ESR Reg. 4.2(A). 

If an employer does not make required health care expenditures on behalf of employees in some other way, it may meet

its spending requirement by making payments directly to the

City under § 14.1(b)(7)(e). See ESR Reg. 4.2(A). We refer to

this option as the City-payment option. If an employer elects

the City-payment option, its covered employees who satisfy

age and income requirements and are “uninsured San Francisco residents” may enroll in the HAP, and its other covered

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employees will be eligible for medical reimbursement

accounts with the City. Covered employees may enroll in the

HAP free of charge or at reduced rates. The HAP provides

enrollees with “medical services with an emphasis on wellness, preventive care and innovative service delivery.” S.F.

Admin. Code § 14.2(f). A primary care provider at the enrollee’s “medical home” “develop[s] and direct[s] a plan of care

for each [HAP] participant.” Id. § 14.2(e). Enrollees pay

income-based “participation fees” and “point-of-service fees.”

Regulations Implementing Health San Francisco and Medical

Reimbursement Account Provisions of the San Francisco

Health Care Security Ordinance, Reg. 4(a) (2007). 

An employer is exempt from making payments to the City

if it makes health care expenditures under § 14.1(b)(7)(a)-(d)

of at least $1.17 or $1.76 per hour (depending on the nonprofit or for-profit status of the employer, and on the number

of employees), and it is partially exempt to the extent that it

makes lesser expenditures. 

The Ordinance requires covered employers to “maintain

accurate records of health care expenditures, required health

care expenditures, and proof of such expenditures made each

quarter each year,” but it does not require them “to maintain

such records in any particular form.” S.F. Admin. Code

§ 14.3(b)(i). Employers must provide the City with “reasonable access to such records.” Id. If an employer fails to comply with these requirements, the City will “presume[ ] that the

employer did not make the required health expenditures for

the quarter for which records are lacking, absent clear and

convincing evidence otherwise.” Id. § 14.3(b)(ii). 

The Ordinance includes a special provision for employers

with self-insured health plans. An employer providing “health

coverage to some or all of its covered employees through a

self-funded/self-insured plan” will “comply with the spending

requirement . . . if the preceding year’s average expenditure

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ture rate” for the employer. ESR Reg. 6.2(B)(2). Such

employers do not need to keep track of their actual expenditures for each employee. 

Relevant to our analysis, there are five categories of

employers under the Ordinance. First are employers that have

no ERISA plans (“No Coverage Employers”). Second are

employers that have ERISA plans for all employees, and that

spend at least as much as the Ordinance’s required health care

expenditure per employee (“Full High Coverage Employers”).

Third are employers that have ERISA plans for some, but not

all, employees, and that spend at least as much as the Ordinance’s required health care expenditure per employee for

employees under the ERISA plan (“Selective High Coverage

Employers”). Fourth are employers that have ERISA plans for

all employees, but that spend less than the Ordinance’s

required health care expenditure per employee (“Full Low

Coverage Employers”). Fifth are employers that have ERISA

plans for some, but not all, employees, and that spend less

than the Ordinance’s required health care expenditure per

employee for employees under the ERISA plan (“Selective

Low Coverage Employers”). 

No Coverage Employers may choose to continue without

any ERISA plans. In that event, they can make their required

health care expenditures directly to the City. See ESR Reg.

4.2(A)(6). If these employers choose, instead, to establish an

ERISA plan, the Ordinance requires only that they make the

required level of health care expenditures. They can do so by

paying the full amount to the plan, or by paying part to the

plan and part to the City. The Ordinance does not dictate

which employees must be eligible for the plan, or what benefits a plan must provide. See ESR Reg. 4.2(A)(1)-(5). 

Full High Coverage Employers may choose to leave their

ERISA plans intact and unaltered. So long as they maintain

records to show that they are making the required health care

expenditures, they comply with the Ordinance. 

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Selective High Coverage Employers may choose to leave

their ERISA plans intact and unaltered. In that event, for

employees not covered by their ERISA plans, they can comply with the Ordinance by making the required health care

expenditures to the City. See ESR Reg. 6.2(C) (“An employer

may . . . choose to purchase health insurance for its full-time

employees, but make payment to the City to fund part-time

employees’ membership in the Health Access Program[.]”). 

Full Low Coverage Employers may choose to leave their

ERISA plans intact and unaltered. In that event, they can

comply with the Ordinance by making payments to the City

in an amount equal to the difference between their expenditures for the ERISA plans and the required health care expenditures under the Ordinance. See ESR Reg. 6.2(D) (“[A]n

employer who purchases a health insurance program with premiums that are less than the required expenditure . . . may

choose to pay the remainder to the City to establish and maintain medical reimbursement accounts for such employees.”).

Selective Low Coverage Employers may choose to leave

their ERISA plans intact and unaltered. In that event, they can

comply with the Ordinance for employees enrolled in their

ERISA plans by paying to the City the difference between

their expenditures for the plans and the required health care

expenditures under the Ordinance, and for employees not

enrolled in their ERISA plans by paying to the City the full

amount of the required health care expenditures. 

We make two observations about the Ordinance. First, the

Ordinance does not require employers to establish their own

ERISA plans or to make any changes to any existing ERISA

plans. Employers may choose to make up the difference

between their existing health care expenditures and the minimum expenditures required by the Ordinance either by altering existing ERISA plans or by establishing new ERISA

plans. However, they need not do so. The City-payment

option allows employers to make payments directly to the

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City, if they so choose, without requiring them to establish, or

to alter existing, ERISA plans. If employers choose to pay the

City, the employees for whom those payments are made are

entitled to receive either discounted enrollment in the HAP or

medical reimbursement accounts with the City. 

Second, the Ordinance is not concerned with the nature of

the health care benefits an employer provides its employees.

It is only concerned with the dollar amount of the payments

an employer makes toward the provision of such benefits. An

employer can satisfy its spending requirements by paying the

City; it can satisfy those requirements by funding exclusively

preventive care; it can satisfy those requirements by setting up

an on-site clinic and reimbursing employees for the purchase

of over-the-counter medications; or it can satisfy those

requirements in some other manner, such as funding a traditional ERISA plan. The Ordinance does not look beyond the

dollar amount spent, and it does not evaluate benefits derived

from those dollars.

IV. Discussion

The Association argues that ERISA preempts the Ordinance either because it creates a “plan” within the meaning of

ERISA or because it “relates to” employers’ ERISA plans

within the meaning of ERISA. For the reasons that follow, we

disagree. 

Crafted as a compromise between employers and employees, ERISA has two primary purposes. First, from the perspective of employees and other beneficiaries of ERISA

plans, “ERISA was passed by Congress in 1974 to safeguard

employees from the abuse and mismanagement of funds that

had been accumulated to finance various types of employee

benefits.” Massachusetts v. Morash, 490 U.S. 107, 112

(1989). “In enacting ERISA, Congress’ primary concern was

with the mismanagement of funds accumulated to finance

employee benefits and the failure to pay employees benefits

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from accumulated funds. To that end, it established extensive

reporting, disclosure, and fiduciary duty requirements to

insure against the possibility that the employee’s expectation

of the benefit would be defeated through poor management by

the plan administrator.” Id. at 115 (citation and footnote omitted). Second, from the perspective of employers, “[t]he purpose of ERISA is to provide a uniform regulatory regime over

employee benefit plans.” Aetna Health Inc. v. Davila, 542

U.S. 200, 208 (2004). Uniformity of regulation eases the

administrative burdens on employers and plan administrators,

thereby reducing costs to employers. 

A. Presumption Against Preemption

[1] We begin by noting that state and local laws enjoy a

presumption against preemption when they “clearly operate[ ]

in a field that has been traditionally occupied by the States.”

De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520

U.S. 806, 814 (1997) (internal quotation marks omitted). This

presumption informs our preemption analysis. See Boggs v.

Boggs, 520 U.S. 833, 840 (1997) (the fact that a state law

“implement[s] policies and values lying within the traditional

domain of the States . . . inform[s] [a] preemption analysis”).

The presumption against preemption applies in ERISA cases.

“[N]othing in the language of [ERISA] or the context of its

passage indicates that Congress chose to displace general

health care regulation, which historically has been a matter of

local concern.” N.Y. State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 661 (1995).

“[T]he Court has established a presumption that Congress did

not intend ERISA to preempt areas of traditional state regulation that are quite remote from the areas with which ERISA

is expressly concerned — reporting, disclosure, fiduciary

responsibility, and the like.” Rutledge v. Seyfarth, Shaw, Fairweather & Geraldson, 201 F.3d 1212, 1217 (9th Cir. 2000)

(emphasis in original; internal quotation marks omitted). Further, “ERISA pre-emption must have limits when it enters

areas traditionally left to state regulation — such as the state’s

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. . . regulation of health . . . matters.” Operating Eng’rs

Health & Welfare Trust Fund v. JWJ Contracting Co., 135

F.3d 671, 677 (9th Cir. 1998). 

[2] The field in which the Ordinance operates is the provision of health care services to persons with low or moderate

incomes. State and local governments have traditionally provided health care services to such persons. See Paul Star, The

Social Transformation of American Medicine 185 (1982)

(noting that other than the four-year period from 1879 to

1883, when there was a National Board of Health, “public

health remained almost entirely a state and local responsibility”); id. at 181-82 (describing “the role of public dispensaries

in treating the sick poor”); id. at 169 (describing the first

phase of the hospital system in the United States, spanning

1751 to 1850, in which there were charitable hospitals “and

public hospitals, descended from almshouses and operated by

municipalities [and] by counties”); id. at 171 (noting that

“[p]ublic hospitals generally treated the poor [and] relied on

government appropriations rather than fees”). The Ordinance

uses a novel approach to the provision of health services to

such persons, but operates in a field that has long been the

province of state and local governments, thereby “implement[ing] policies and values lying within the traditional

domain of the States.” Boggs, 520 U.S. at 840. 

B. Preemption Under ERISA

ERISA governs “employee benefit plans,” including “employee welfare benefit plans.” 29 U.S.C. § 1002(3). Section

514(a) of ERISA states that ERISA preempts “any and all

State laws insofar as they . . . relate to any employee benefit

plan” governed by ERISA. 29 U.S.C. § 1144(a). “A law

‘relate[s] to’ a covered employee benefit plan for purposes of

§ 514(a) if it [1] has a connection with or [2] reference to such

a plan.” Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc. (“Dillingham”), 519 U.S. 316, 324

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(1997) (alterations in original; some internal quotation marks

omitted). 

The Association and the amicus, the Secretary of Labor,

make two central arguments. First, they argue that the Citypayment option under the Ordinance creates an ERISA plan.

This argument takes two forms. The Association argues in its

brief that the Ordinance’s administrative obligations on

employers, in combination with a reasonable person’s ability

to ascertain “benefits, beneficiaries, source of financing, and

procedures for receiving benefits,” creates an ERISA plan.

The Secretary of Labor argues as amicus that the HAP itself

is an ERISA plan. If either argument is correct, the Ordinance

almost certainly makes an impermissible “reference to” an

ERISA plan. Second, they argue that even if the City-payment

option does not establish an ERISA plan, an employer’s obligation to make payments at a certain level — whether or not

the payments are made to the City — “relates to” the ERISA

plans of covered employers and is thus preempted. We

address these arguments in turn. 

1. The City-Payment Option Does Not Create an ERISA

“Plan”

If the City-payment option does not create an “employee

welfare benefit plan” within the meaning of ERISA, the first

argument fails. The district court concluded that employers’

payments to the City do not create an ERISA plan. See Golden Gate Rest. Ass’n, 535 F. Supp. 2d at 976 (Ordinance does

not “create[ ] a separate de facto ERISA plan”). For the reasons that follow, we agree with the district court and hold that

the City-payment option does not create an ERISA plan, de

facto or otherwise. We first address the Association’s argument. We then address the Secretary’s argument.

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a. Employers’ Administrative Obligations, and the Ability

to Ascertain Benefits, Beneficiaries, Financing and

Procedures

[3] The first element of an employee welfare benefit plan

is the existence of a “plan, fund or program.” Patelco Credit

Union v. Sahni, 262 F.3d 897, 907 (9th Cir. 2001). In the context of ERISA, the phrase “plan, fund or program” is a term

of art. As relevant to this case, an ERISA “plan” is an “employee welfare benefit plan,” defined as 

[a]ny plan, fund, or program which . . . is . . . established or maintained by an employer or by an

employee organization, or by both, to the extent that

such plan, fund, or program was established or is

maintained for the purpose of providing for its participants . . . , through the purchase of insurance or

otherwise, . . . medical, surgical, or hospital care or

benefits, or benefits in the event of sickness, accident, disability, death or unemployment . . . . 

29 U.S.C. § 1002(1); see also § 1002(3); Patelco Credit

Union, 262 F.3d at 907. 

[4] The Supreme Court has emphasized that ERISA is concerned with “benefit plans,” rather than simply “benefits,”

because “[o]nly ‘plans’ involve administrative activity potentially subject to employer abuse.” Fort Halifax Packing Co.

v. Coyne, 482 U.S. 1, 16 (1987). This focus on “benefit plans”

is consistent with the first underlying purpose of ERISA —

protecting employees against the abuse and mismanagement

of funds. If an employee’s expectation of a “benefit” presents

“a danger of defeated expectations [that] is no different from

the danger of defeated expectations of wages for services performed,” then the employer’s actions giving rise to that

expectation do not amount to a “benefit plan” because such

danger is one “Congress chose not to regulate in ERISA.”

Morash, 490 U.S. at 115. 

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[5] Two Supreme Court cases tell us that an employer’s

obligation to make monetary payments based on the amount

of time worked by an employee, over and above ordinary

wages, does not necessarily create an ERISA plan. This is so

even if the payments are made by the employer directly to the

employees who are the beneficiaries of the putative “plan.”

First, in Fort Halifax, a Maine statute required an employer

to pay employees one week’s pay for every year worked if the

employees were terminated because of a plant closing. The

Court held that the statute did not create a “plan” within the

meaning of ERISA: “The Maine statute neither establishes,

nor requires an employer to maintain, an employee benefit

plan. The requirement of a one-time, lump-sum payment triggered by a single event requires no administrative scheme

whatsoever to meet the employer’s obligation.” Id. at 12. 

Second, in Massachusetts v. Morash, 490 U.S. 107, 109

(1989), a Massachusetts statute required employers to pay discharged employees their “full wages, including holiday or

vacation payments, on the date of discharge.” The Court held

that the statute was not preempted by ERISA. The Court

wrote, “It is unlikely that Congress intended to subject to

ERISA’s reporting and disclosure requirements those vacation

benefits which by their nature are payable on a regular basis

from the general assets of the employer and are accumulated

over time only at the election of the employee.” Id. at 116.

The Court in Morash emphasized the importance of the fact

that the employer made the payments out of its general assets:

An entirely different situation would be presented if

a separate fund had been created by a group of

employers to guarantee the payment of vacation benefits to laborers who regularly shift their jobs from

one employer to another. Employees who are beneficiaries of such a trust face far different risks and

have far greater need for the reporting and disclosure

requirements that the federal law imposes than those

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whose vacation benefits come from the same fund

from which they receive their paychecks. 

Id. at 120. 

[6] The employer payments at issue under the San Francisco Ordinance, which the Association contends create an

ERISA plan, are not made directly to employees. Rather, they

are made to the City. But even if the employers made the payments directly to the employees, Fort Halifax and Morash

indicate that those payments would not be enough to create an

ERISA plan. Under the Ordinance, employers make the payments on a regular periodic basis and calculate those payments based on the number of hours worked by the employee.

Further, as in Morash, employers make the payments “on a

regular basis from [their] general assets.” If employers made

the payments directly to the employees, there would be little

to differentiate those payments from wages paid to employees. Indeed, the City allows employers to pay the City on a

weekly, bi-weekly, or monthly basis, so that employers may

coordinate their payments under the Ordinance with their

employees’ regular pay periods. See ESR Reg. 6.2(A)(2). 

[7] The fact that an employer makes its payments to the

City rather than to the employees confirms, if confirmation

were needed, that the employer’s administrative obligations

under the City-payment option do not create an ERISA plan.

Under the Ordinance, an employer has no responsibility other

than to make the required payments for covered employees,

and to retain records to show that it has done so. The payments are made for a specific purpose, but the employer has

no responsibility for ensuring that the payments are actually

used for that purpose. The Association points to the burden

entailed in keeping track of which workers perform qualifying

work in San Francisco, keeping track of the hours those

employees work, and keeping track of the credit (if any) an

employer should get for health care payments made to nonCity entities. This burden is not enough, in itself, to make the

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payment obligation an ERISA plan. Many federal, state and

local laws, such as income tax withholding, social security,

and minimum wage laws, impose similar administrative obligations on employers; yet none of these obligations constitutes an ERISA plan. 

We have emphasized that an employer’s administrative

duties must involve the application of more than a modicum

of discretion in order for those administrative duties to

amount to an ERISA plan. It is within the exercise of that discretion that an employer has the opportunity to engage in the

mismanagement of funds and other abuses with which Congress was concerned when it enacted ERISA. In Bogue v.

Ampex Corp., 976 F.2d 1319, 1323 (9th Cir. 1992), we concluded that the employer, in determining whether an

employee was eligible for severance pursuant to an employment agreement, “was obligated to apply enough ongoing,

particularized, administrative, discretionary analysis to make

the [severance] program in this case a ‘plan.’ ” In Velarde v.

Pace Membership Warehouse, Inc., 105 F.3d 1313, 1317 (9th

Cir. 1997), we emphasized that in order to amount to a “plan,”

the agreement must require the employer to apply more than

“some modicum of discretion.” There must be “enough ongoing, particularized, administrative, discretionary analysis to

make the plan an ongoing administrative scheme.” Id.

(emphasis in original; citation and internal quotation marks

omitted). 

[8] An employer’s administrative obligations under the

City-payment option do not run the risk of mismanagement of

funds or other abuse. To be sure, employers must keep track

of the number of hours their employees work and whether

those hours are worked in San Francisco or elsewhere.

Employers must also determine whether particular employees

are “supervisorial” or “managerial,” and thereby not covered

employees. S.F. Admin. Code § 14.1(b)(2)(d). An employer

may have some incentive to minimize the number of covered

employees or the number of reported hours worked in San

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Francisco, but the employer has no discretion under the Ordinance to alter its books to reduce its quarterly spending obligation. Rather, the employer’s administrative obligations

involve mechanical record-keeping, and the employer’s payments to the City “are typically fixed, due at known times,

and do not depend on contingencies outside the employee’s

control.” Morash, 490 U.S. at 115. Any potentially subjective

judgments involved with making these calculations and maintaining these records amount to nothing more than the exercise of “a modicum of discretion.” 

[9] The Association contends that the administrative burden

on the covered employers, combined with the reasonable

ascertainability of benefits to employees, creates an ERISA

plan. The Association contends that the employer’s obligation

to make payments to the City satisfies the criteria for a plan

set forth in Donovan v. Dillingham, 688 F.2d 1367, 1370-73

(11th Cir. 1982) (en banc). Quoting Donovan, the Association

argues, “Plan creation requires only that ‘a reasonable person

could ascertain the intended benefits, beneficiaries, source of

financing, and procedures for receiving benefits.’ Donovan,

688 F.2d at 1373.” We have relied on these criteria from Donovan in three primary circumstances in this circuit: in Scott v.

Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985), in Modzelewski v. Resolution Trust Corp., 14 F.3d 1374 (9th Cir.

1994), and in Winterrowd v. American General Annuity Ins.

Co., 321 F.3d 933 (9th Cir. 2003). 

In Scott, we relied on the criteria set forth in Donovan to

hold that an agreement to provide severance pay to terminated

employees at a rate of two weeks’ salary for each year of

employment was sufficient to establish an ERISA plan. 754

F.2d at 1503-04. The outcome of Scott is almost certainly no

longer good law in light of the Supreme Court’s subsequent

decisions in Fort Halifax and Morash. 

In Modzelewski, we set forth the Donovan factors in determining whether an employer’s promise to pay its employees

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monthly installments upon retirement amounted to a de facto

pension plan. 14 F.3d at 1376. We concluded that “[b]ecause

ERISA’s definition of a pension plan is so broad, virtually

any contract that provides for some type of deferred compensation will also establish a de facto pension plan.” 14 F.3d at

1377. Because ERISA’s definition of “employee pension benefit plan” is distinct from its definition of “employee welfare

benefit plan,” Modzelewski is not relevant to our analysis

here. See 29 U.S.C. § 1002(1), (2)(A); see also Carver v.

Westinghouse Hanford Co., 951 F.2d 1083, 1086 (9th Cir.

1991). 

In Winterrowd, we held that an accepted offer to provide

termination benefits was not sufficiently specific in describing

benefits to satisfy the Donovan criteria, and that the offer

therefore did not constitute an ERISA plan. 321 F.3d at 939.

We did not hold in Winterrowd that an agreement satisfying

the Donovan criteria, without more, constituted an ERISA

plan. Rather, we held that an agreement not satisfying the

Donovan criteria did not constitute an ERISA plan. In other

words, satisfying the Donovan criteria was a necessary but not

sufficient condition for the creation of an ERISA plan. See

Curtis v. Nev. Bonding Corp., 53 F.3d 1023, 1028 (9th Cir.

1995) (concluding that the Donovan criteria were not satisfied, and noting that “our court has not yet determined the

minimum requirements for establishing the existence of an

ERISA plan”); see also Cinelli v. Sec. Pac. Corp., 61 F.3d

1437, 1442-44 (9th Cir. 1995) (concluding that because the

Donovan criteria were not present there was no de facto

employee welfare benefit plan). 

[10] The Association has not cited, and we have not discovered, any cases in which this court has applied the Donovan

criteria to an employer’s administrative obligations imposed

by a state or local law. All of the cases applying the Donovan

criteria address the question whether an informal, or de facto,

ERISA plan has been established, and all involve some type

of unwritten or informal promise made by an employer to its

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employees. We would be very hesitant to hold that the Donovan criteria apply to statutory administrative burdens imposed

on an employer where, as here, that employer has made no

promises whatsoever to its employees, which is what the

Association urges us to do. We share the view expressed by

the Seventh Circuit in Sandstrom v. Cultor Food Science,

Inc., 214 F.3d 795 (7th Cir. 2000): 

It is not clear that the approach taken in [Donovan]

is compatible with more recent decisions of the

Supreme Court, which emphasize different considerations when asking whether an informal policy or

arrangement is a “plan.” Both Morash and Ft. Halifax evince reluctance to find that regular and predictable awards of severance or vacation payments

establish a “plan,” given the frequency with which

these benefits are the subject of bilateral negotiations

between employers and departing employees. 

Id. at 797 (citations omitted). 

But we need not reach the question whether Donovan

applies, for, in any event, its criteria are not satisfied. For

employers who choose to make payments to the City, their

obligation ceases as soon as they make the required payments.

If an employer has made such payments to the City under the

Ordinance, covered employees may enroll in the HAP free of

charge or at a discounted rate. But as we will explain in more

detail in a moment, there is nothing in the Ordinance that

guarantees that a certain level or kind of “intended benefits”

will be provided by the HAP, or that a particular group of “intended . . . beneficiaries” will be included in the HAP. 

b. The HAP as an ERISA Plan

The Association expressly stated in its complaint that it

“wholeheartedly supports the San Francisco Health Access

Program and its laudable goals.” It requested that the district

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court “issue declaratory and injunctive relief without disturbing all other lawful parts of the Ordinance unrelated to” the

employer spending requirement. (Emphasis in original.) The

Secretary of Labor, as amicus curiae, argues that the HAP

itself is an ERISA plan. If the Secretary is right, ERISA preempts not merely the employer spending requirements, but

the HAP itself. We need not consider arguments raised solely

by an amicus, particularly when they were not raised before

the district court and when they are in tension with the strategic positions taken by the litigants. See Russian River Watershed Prot. Comm. v. City of Santa Rosa, 142 F.3d 1136, 1141

n.1 (9th Cir. 1998). Further, we need not consider arguments

raised for the first time on appeal. Choe v. Torres, 525 F.3d

733, 740 n.9 (9th Cir. 2008). We address the Secretary’s argument to indicate our disagreement with it, but we do not concede the correctness of the Secretary’s implicit assumption

that the argument is properly before us. 

[11] As described in greater detail above, the first element

of an employee welfare benefit plan is the existence of a

“plan, fund or program.” Patelco Credit Union, 262 F.3d at

907. The HAP, administered by the City, is not an ERISA

plan. Rather, the HAP is a government entitlement program

available to low- and moderate-income residents of San Francisco, regardless of employment status.4

 It is funded primarily

4The Secretary also argues that the HAP operates as “a government-run

program for private employers,” and therefore it is not entitled to the

exemption under 29 U.S.C. § 1003(b)(1) from ERISA regulations. The

ERISA exemption to which the Secretary refers applies when a government establishes and maintains an employee welfare benefit plan for its

own employees. See id.; see also 29 U.S.C. § 1002(32). As the Secretary

correctly notes, a government plan of that type loses its exemption when

it opens up its plan to employees of private employers. The Secretary’s

argument is that the City has opened its exempt plan for its own employees to private employees and has thus forfeited its exemption. The Secretary’s argument is without foundation. The City does maintain an exempt

employee welfare benefit plan for its own employees. The HAP, however,

is not that plan. The City has never argued that the HAP is exempt from

ERISA as a government-run plan for the City’s own employees. 

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by taxpayer dollars. Employer payments under the Ordinance

provide only a small portion of the HAP’s funding, and,

although we do not know the precise numbers, employees

covered under the Ordinance comprise substantially less than

half of all HAP enrollees. The fact that a minority of HAP

enrollees pay a discounted enrollment fee because their

employers participate in the City-payment option is not

enough to make the HAP a “plan, fund or program” within the

meaning of ERISA. See Waks v. Empire Blue Cross/Blue

Shield, 263 F.3d 872, 875 (9th Cir. 2001) (concluding that a

converted individual policy was not itself an ERISA plan

because the policy “covered [the plaintiff] as an individual

and not as an employee of . . . any . . . employer”). 

[12] The second element of an employee welfare benefit

plan requires that the plan be “established or maintained by an

employer through the purchase of insurance or otherwise.”

Patelco Credit Union, 262 F.3d at 907. An employer electing

the City-payment option does not “establish[ ] or maintain[ ]”

the HAP through its payments. The HAP exists, and will continue to exist, whether or not any covered employer makes a

payment to the City under the Ordinance. Further, the

employer has no control over whether its employees are eligible for the HAP. Under the terms of the ordinance, HAP eligibility is based on income level, age, uninsured status, and City

residence, but the City is free to change the conditions of eligibility for HAP enrollment as it sees fit simply by amending

the Ordinance. Finally, neither the employer nor the covered

employee has any control over the kind and level of benefits

provided by the HAP. The employer never negotiates or signs

a contract with the City, and the employer has no control over

the City’s coverage decisions. When the City administers the

HAP, it does not act as the employer’s agent entrusted to fulfill the benefits promises the employer made to its employees.

An employer can make no promises to its employees with

regard to the HAP or its coverage. In short, the City, rather

than the employer, establishes and maintains the HAP, and

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the City is free to change the kind and level of benefits as it

sees fit. 

2. “Relates to” Employers’ ERISA Plans

The Association’s and the Secretary of Labor’s second

argument is that, even if the City-payment option does not

create an ERISA plan, the Ordinance is preempted because it

“relates to” employers’ ERISA plans. 29 U.S.C. § 1144(a). 

[13] Section 514(a) of ERISA states that ERISA preempts

“any and all State laws insofar as they . . . relate to any

employee benefit plan” governed by ERISA. 29 U.S.C.

§ 1144(a). The Supreme Court has established a two-part

inquiry to interpret § 514(a): “A law ‘relate[s] to’ a covered

employee benefit plan for purposes of § 514(a) if it [1] has a

connection with or [2] reference to such a plan.” Dillingham,

519 U.S. at 324 (alterations in original) (some internal quotation marks omitted). We consider these two inquiries in turn.

a. “Connection with” a Plan

In New York State Conference of Blue Cross & Blue Shield

Plans v. Travelers Insurance Co., 514 U.S. 645, 655 (1995),

the Court acknowledged the difficulty of interpreting

§ 514(a):

If “relate to” were taken to extend to the furthest

stretch of its indeterminacy, then for all practical

purposes pre-emption would never run its course

. . . . But that, of course, would be to read Congress’s

words of limitation as mere sham, and to read the

presumption against pre-emption out of the law

whenever Congress speaks to the matter with generality. 

Likewise, the Court recognized that the two-part inquiry it

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tional guidance in cases hinging on a law’s “connection with”

an employee benefit plan. “For the same reasons that infinite

relations cannot be the measure of pre-emption, neither can

infinite connections.” Id. at 656. 

We read Travelers as narrowing the Court’s interpretation

of the scope of § 514(a). The Court reasoned it had to “go

beyond the unhelpful text and the frustrating difficulty of

defining [§ 514(a)’s] key term, and look instead to the objectives of the ERISA statute as a guide to the scope of the state

law that Congress understood would survive.” Id.; see also

Gerosa v. Savasta & Co., 329 F.3d 317, 327 (2d Cir. 2003)

(discussing how, among the circuits, the Travelers decision

“occasioned a significant change in preemption analysis, and

required careful reconsideration of any preexisting precedent

dependent on the expansive view of ‘related to’ that held

sway before it”). In this light, we employ a “holistic analysis

guided by congressional intent.” Dishman v. UNUM Life Ins.

Co. of Am., 269 F.3d 974, 981 n.15 (9th Cir. 2001); see e.g.,

Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001). 

As noted above, one “purpose of ERISA is to provide a

uniform regulatory regime over employee benefit plans.”

Davila, 542 U.S. at 208. The purpose of ERISA’s preemption

provision is to “ensure[ ] that the administrative practices of

a benefit plan will be governed by only a single set of regulations.” Fort Halifax Packing Co., 482 U.S. at 11. In IngersollRand Co. v. McClendon, 498 U.S. 133, 142 (1990), the Court

explained that

Section 514(a) was intended to ensure that plans and

plan sponsors would be subject to a uniform body of

benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States

and the Federal Government. Otherwise, the inefficiencies created could work to the detriment of plan

beneficiaries. 

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[14] In furtherance of ERISA’s goal of ensuring that “plans

and plan sponsors [are] subject to a uniform body of benefits

laws,” the Court in Egelhoff v. Egelhoff, 532 U.S. 141 (2001),

struck down a Washington State law that directed a choice of

beneficiary that conflicted with the choice provided in an

ERISA plan. The Court held that a state or local law has an

impermissible “connection with” ERISA plans where it

“binds ERISA plan administrators to a particular choice of

rules for determining beneficiary status[,] . . . rather than

[allowing administrators to pay the benefits] to those identified in the plan documents.” Id. at 147. Similarly, in Shaw v.

Delta Air Lines, 463 U.S. 85, 97-100 (1983), the Court held

that ERISA preempts state laws “which prohibit[ ] employers

from structuring their employee benefit plans” in a particular

manner or “which require[ ] employers to pay employees specific benefits.” 

Consistent with these later-decided cases, in Standard Oil

Co. v. Agsalud, 633 F.2d 760, 763 (9th Cir. 1980), aff’d mem.,

454 U.S. 801 (1981), we struck down a Hawaii statute that

“require[d] employers in that state to provide their employees

with a comprehensive prepaid health care plan.” As the district court noted, the statute required that plan benefits include

“a combination of features,” and specifically “require[d] that

the plans cover diagnosis and treatment of alcohol and drug

abuse.” Standard Oil Co. v. Agsalud, 442 F. Supp. 695, 696,

704 (N.D. Cal. 1977). The statute also imposed “certain

reporting requirements which differ[ed] from those of

ERISA.” Id. at 696. In affirming the district court’s opinion

holding the Hawaii statute preempted under ERISA, we

emphasized that the statute “directly and expressly regulate[d]

employers and the type of benefits they provide employees,”

and that it therefore “related to” ERISA plans under § 514(a).

Agsalud, 633 F.2d at 766 (emphasis added). That is, the

Hawaii statute was preempted because it required employers

to have health plans, and it dictated the specific benefits

employers were to provide through those plans. Id. The statute thereby impeded ERISA’s goal of ensuring that “plans

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and plan sponsors would be subject to a uniform body of benefits law.” Ingersoll-Rand Co., 498 U.S. at 142. 

[15] The Ordinance in this case stands in stark contrast to

the laws struck down in Egelhoff, Shaw and Agsalud. The

Ordinance does not require any employer to adopt an ERISA

plan or other health plan. Nor does it require any employer to

provide specific benefits through an existing ERISA plan or

other health plan. Any employer covered by the Ordinance

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 the City. The Ordinance thus

preserves ERISA’s “uniform regulatory regime.” See Davila,

542 U.S. at 208. The Ordinance also has no effect on “the

administrative practices of a benefit plan,” Fort Halifax Packing Co., 482 U.S. at 11, unless an employer voluntarily elects

to change those practices. 

A covered employer may choose to adopt or to change an

ERISA plan in lieu of making the required health care expenditures to the City. An employer may be influenced by the

Ordinance to do so because, when faced with an unavoidable

obligation to make a payment at a certain level, it may prefer

to make that payment to an ERISA plan. However, as Travelers makes clear, such influence is entirely permissible. 

In Travelers, a New York statute required hospitals to collect surcharges from patients covered by commercial insurance companies, including those administering ERISA plans,

but not from patients covered by Blue Cross/Blue Shield

plans. The difference in treatment was justified on the ground

that “the Blues pay the hospitals promptly and efficiently and,

more importantly, provide coverage for many subscribers

whom the commercial insurers would reject as unacceptable

risks.” Travelers, 514 U.S. at 658. The Court recognized that

the surcharge might influence “choices made by insurance

buyers, including ERISA plans.” Id. at 659. But such an influ13940 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.

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ence was not fatal to the New York statute: “An indirect economic influence . . . does not bind plan administrators to any

particular choice and thus function as a regulation of an

ERISA plan itself[.] . . . Nor does the indirect influence of the

surcharges preclude uniform administrative practice[.]” Id. at

659-60. 

In this case, the influence exerted by the Ordinance is even

less direct than the influence in Travelers. In Travelers, the

required surcharge on benefits provided under ERISA plans

administered by commercial insurers inescapably changed the

cost structure for those plans’ health care benefits and thereby

exerted economic pressure on the manner in which the plans

would be administered. Here, by contrast, the Ordinance does

not regulate benefits or charges for benefits provided by

ERISA plans. Its only influence is on the employer who,

because of the Ordinance, may choose to make its required

health care expenditures to an ERISA plan rather than to the

City. 

Further, the Ordinance does not “bind[ ] ERISA plan

administrators to a particular choice of rules” for determining

plan eligibility or entitlement to particular benefits. See Egelhoff, 532 U.S. at 147. Employers may “structur[e] their

employee benefit plans” in a variety of ways and need not

“pay employees specific benefits.” See Shaw, 463 U.S. at 97.

The Ordinance affects employers, but it “leave[s] plan administrators right where they would be in any case.” Travelers

Ins. Co., 514 U.S. at 662. See also WSB Elec., Inc. v. Curry,

88 F.3d 788, 793 (9th Cir. 1996) (“The scheme does not force

employers to provide any particular employee benefits or

plans, to alter their existing plans, or to even provide ERISA

plans or employee benefits at all.”); Keystone Chapter, Associated Builders & Contractors, Inc. v. Foley, 37 F.3d 945, 960

(3d Cir. 1994) (“Where a legal requirement may be easily satisfied through means unconnected to ERISA plans, and only

relates to ERISA plans at the election of an employer, it

affects employee benefit plans in too tenuous, remote, or

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peripheral a manner to warrant a finding that the law ‘relates

to’ the plan.”) (some internal quotation marks omitted). 

[16] Finally, the Ordinance does not impose on plan administrators any “administrative [or] financial burden of complying with conflicting directives” relating to benefits law.

Ingersoll-Rand Co., 498 U.S. at 142. The Ordinance does

impose an administrative burden on covered employers, for

they must keep track of their obligations to make expenditures

on behalf of covered employees and must maintain records to

show that they have complied with the Ordinance. But these

burdens exist whether or not a covered employer has an

ERISA plan. Thus, they are burdens on the employer rather

than on an ERISA plan. See WSB Elec., Inc., 88 F.3d at 795

(rejecting the argument that a law “is preempted because it

imposes additional administrative burdens regarding benefits

contributions on the employer,” where it did “not impose any

additional burden on ERISA plans or require the employer to

take any action with regard to those plans”) (emphasis in original). 

b. “Reference to” a Plan

To determine whether a law has a forbidden “reference to”

ERISA plans, we ask whether (1) the law “acts immediately

and exclusively upon ERISA plans,” or (2) “the existence of

ERISA plans is essential to the law’s operation.” Dillingham,

519 U.S. at 325. 

Mackey v. Lanier Collection Agency & Service, Inc., 486

U.S. 825 (1988), demonstrates that the Ordinance is not preempted under the first part of the inquiry. In Mackey, the

Court held that ERISA preempted a provision of a state garnishment statute that specifically exempted ERISA benefits

from the operation of the statute, even while the statute subjected other assets to garnishment. Id. at 828-29. The Court

noted that the provision “solely applie[d] to” ERISA plans,

and “single[d] out ERISA . . . plans for different treatment

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under state” law. Id. at 829-30. At the same time, however,

the Court upheld those aspects of the state statute that did “not

single out or specially mention ERISA plans of any kind,”

even though they would potentially subject ERISA plans to

“substantial administrative burdens and costs.” Id. at 831. In

Dillingham, the Court characterized the preempted statute in

Mackey as “act[ing] immediately and exclusively upon

ERISA plans.” Dillingham, 519 U.S. at 325. Here, unlike the

preempted statute in Mackey, the Ordinance does not act on

ERISA plans at all, let alone immediately and exclusively. 

Two cases demonstrate that the Ordinance is not preempted

under the second part of the inquiry. The first is IngersollRand Co. v. McClendon, 498 U.S. 133, 140 (1990), in which

the Court held that ERISA preempted a state law that “ma[de]

specific reference to, and indeed [wa]s premised on, the existence of” an ERISA plan. In order for a party to bring a claim

under the challenged law, “a plaintiff must plead, and the

court must find, that an ERISA plan exists.” Id. Here, by contrast, the Ordinance can have its full force and effect even if

no employer in the City has an ERISA plan. Covered employers without ERISA plans can discharge their obligation under

the Ordinance simply by making their required health care

expenditures to the City. 

The second case is District of Columbia v. Greater Washington Board of Trade (“Greater Washington”), 506 U.S. 125

(1992). A local ordinance required employers to provide

workers’ compensation benefits “measured by reference to

‘the existing health insurance coverage’ provided by the

employer,” and required that the coverage “ ‘be at the same

benefit level’ ” as the existing coverage. Id. at 130. The Court

held that the ordinance contained an impermissible “reference

to” an ERISA plan because its requirement was measured by

reference to the level of benefits provided by the employer’s

ERISA plan. 

The district court in this case relied on the Court’s opinion

in Greater Washington in holding that the Ordinance is preGOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13943

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empted. The district court wrote, “By mandating employee

health benefit structures and administration, [the Ordinance’s

health care expenditure] requirements interfere with preserving employer autonomy over whether and how to provide

employee health coverage, and ensuring uniform national regulation of such coverage.” Golden Gate Rest. Ass’n, 535 F.

Supp. 2d at 975. Further, according to the district court, “The

provisions [of the Ordinance] require private employers to

meet a certain level of benefits; and those benefits are the type

regularly provided by employer ERISA plans.” Id. at 976. The

district court concluded, “This Court finds that [the structure

of the Ordinance] is akin to the statute the Supreme Court

found preempted in District of Columbia v. Greater Washington Board of Trade which required the employer to provide

the same amount of health care coverage for workers eligible

for workers compensation.” Id. at 978. 

[17] There is a critical distinction between the ordinance in

Greater Washington and the Ordinance in this case. Under the

ordinance in Greater Washington, obligations were measured

by reference to the level of benefits provided by the ERISA

plan to the employee. Under the Ordinance in our case, by

contrast, an employer’s obligations to the City are measured

by reference to the payments provided by the employer to an

ERISA plan or to another entity specified in the Ordinance,

including the City. The employer calculates its required payments based on the hours worked by its employees, rather

than on the value or nature of the benefits available to ERISA

plan participants. Thus, unlike the ordinance in Greater

Washington, the Ordinance in this case is not determined, in

the words of § 514(a), by “reference to” an ERISA plan. 

The Ordinance in this case is conceptually similar to a California prevailing wage statute challenged in WSB Electric,

Inc. v. Curry, 88 F.3d 788 (9th Cir. 1996). In that case, the

California statute required an employer to pay the prevailing

wage, consisting of a combination of cash and benefits. To

calculate the total wage, the employer added the hourly cash

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wage to its hourly contribution to the employee’s benefit

package. However, the statute required that a certain minimum amount be paid as a cash wage, a requirement which

had the effect of putting a cap on the amount the employer

could be credited for payments made to fund a benefit package. The employer was free to contribute more than the cap

amount to a benefit package, but any amount above the cap

was not counted toward satisfaction of the prevailing wage

requirement. Id. at 790-91. 

[18] The plaintiffs in WSB Electric contended that the California statute was preempted by ERISA, pointing out that

some of the employers were making payments to ERISA

plans, and that benefits were paid out to the employees under

these plans. Id. at 792-93. We held, however, that the statute

was not preempted. We wrote:

At most, this scheme provides examples of the types

of employer contributions to benefits that are

included in the wage calculation. The scheme does

not force employers to provide any particular

employee benefits or plans, to alter their existing

plans, or to even provide ERISA plans or employee

benefits at all. These provisions are enforced regardless of whether the individual employer provides

benefits through ERISA plans, or whether the benefit

contributions in a given locality are paid to ERISA

plans. 

Id. at 793-94 (citation and footnote omitted). Here, as in WSB

Electric, employers need not have any ERISA plan at all; and

if they do have such a plan, they need not make any changes

to it. Where a law is fully functional even in the absence of

a single ERISA plan, as it was in WSB Electric and as it is in

this case, it does not make an impermissible reference to

ERISA plans. Cf. Travelers Ins. Co., 514 U.S. at 656 (“The

surcharges are imposed upon patients and HMO’s, regardless

of whether the commercial coverage or membership, respecGOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13945

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tively, is ultimately secured by an ERISA plan, private purchase, or otherwise, with the consequence that the surcharge

statutes cannot be said to make ‘reference to’ ERISA plans in

any manner.”).

C. Retail Industry Leaders Association v. Fielder

Finally, the Association contends that the Ordinance is preempted under the analysis set forth in Retail Industry Leaders

Association v. Fielder, 475 F.3d 180, 183 (4th Cir. 2007). The

Association contends that we will create a circuit split if we

uphold the Ordinance. We disagree. We see no inconsistency

between the Fourth Circuit’s holding in Fielder and our holding in this case. 

We neither adopt nor reject the analysis of the Fourth Circuit in Fielder. The panel majority in that case held a Maryland law preempted over a forceful dissent. Id. at 201-04

(Michael, J., dissenting); see also Catherine L. Fisk &

Michael M. Oswalt, Preemption and Civic Democracy in the

Battle over Wal-Mart, 92 Minn. L. Rev. 1502, 1514-20

(2008). For purposes of argument, however, we assume that

the panel majority in Fielder was correct. But even under the

reasoning of the panel majority, San Francisco’s Ordinance is

valid.

The Maryland law at issue in Fielder required “employers

with 10,000 or more Maryland employees to spend at least

8% of their total payrolls on employees’ health insurance

costs or pay the amount their spending falls short to the State

of Maryland.” Fielder, 475 F.3d at 183 (majority opinion).

The Maryland law gave nothing in return — either to an

employer or its employees — for the employer’s payment to

the State. 

Wal-Mart was the only employer in Maryland affected by

the law’s minimum spending requirements. On the face of the

law, Wal-Mart appeared to have two options. To reach the

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required spending level of 8%, it could either increase contributions to its own ERISA plan, or it could pay money to the

State of Maryland. But the Fourth Circuit concluded that, in

practical fact, Wal-Mart had no choice. The court wrote that

Wal-Mart had “noted by way of affidavit [that] it would not

pay the State a sum of money that it could instead spend on

its employees’ healthcare.” Id. at 193. The Fourth Circuit

wrote in Fielder:

This would be the decision of any reasonable

employer. Healthcare benefits are a part of the total

package of employee compensation an employer

gives in consideration for an employee’s services.

An employer would gain from increasing the compensation it offers employees through improved

retention and performance of present employees and

the ability to attract more and better new employees.

In contrast, an employer would gain nothing in consideration of paying a greater sum of money to the

State. Indeed, it might suffer from lower employee

morale and increased public condemnation. 

In effect, the only rational choice employers have

under the [Maryland law] is to structure their ERISA

healthcare benefit plans so as to meet the minimum

spending threshold. 

Id. The court wrote further: “[T]he amount that the [Maryland

law] prescribes for payment to the State is actually a fee or a

penalty that gives the employer an irresistible incentive to

provide its employees with a greater level of health benefits.”

Id. at 194. Therefore, the court concluded, “the choices given

in the [Maryland law] . . . are not meaningful alternatives by

which an employer can increase its healthcare spending to

comply with the [law] without affecting its ERISA plans.” Id.

at 196. 

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In stark contrast to the Maryland law in Fielder, the Citypayment option under the San Francisco Ordinance offers

employers a meaningful alternative that allows them to preserve the existing structure of their ERISA plans. If an

employer elects to pay the City, that employer’s employees

are eligible for free or discounted enrollment in the HAP, or

for medical reimbursement accounts. In contrast to the Maryland law, the San Francisco Ordinance provides tangible benefits to employees when their employers choose to pay the

City rather than to establish or alter ERISA plans. In its

motion for summary judgment, the Association provided no

evidence to demonstrate that San Francisco employers are, in

practical fact, compelled to alter or establish ERISA plans

rather than to make payments to the City.5

[19] Because the City-payment option offers San Francisco

employers a realistic alternative to creating or altering ERISA

plans, the Ordinance does not “effectively mandate[ ] that

employers structure their employee healthcare plans to provide a certain level of benefits.” See Fielder, 475 F.3d at 193.

In the view of the Fielder court, Maryland legislators intended

to “force Wal-Mart to increase its spending on healthcare benefits rather than to pay monies to the State.” Id. at 185. Unlike

the Maryland law, the San Francisco Ordinance provides

employers with a legitimate alternative to establishing or

altering ERISA plans. See Travelers Ins. Co., 514 U.S. at 664

(stating that if the New York surcharges had been “an exorbitant tax,” they might leave ERISA plan purchasers “with a

Hobson’s choice,” thereby amounting to an impermissible

5We do not rely on the following to support our decision, but we note

that San Francisco has reported that as of May 1, 2008, more than seven

hundred San Francisco employers have elected to comply with the Ordinance by making their health care expenditures directly to the City. Office

of the Mayor, City & County of S.F., Mayor Newsom Announces Hundreds of Employers Signing Up for Healthy San Francisco Program, May

1, 2008, http://www.healthysanfrancisco.org/files/PDF/HSF_Release_

5.1.2008.pdf. This document indicates that 734 employers had elected to

make payments to the City on behalf of 12,900 employees. Id.

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substantive mandate, but concluding that there was no evidence “that the surcharges are so prohibitive as to force all

health insurance consumers to contract with the Blues”). We

therefore conclude that the San Francisco Ordinance does not

compel covered employers to establish or to alter ERISA

plans. Cf. Fielder, 475 F.3d at 193.

Conclusion

[20] There may be better ways to provide health care than

to require employers in the City of San Francisco to foot the

bill. But our task is a narrow one, and it is beyond our province to evaluate the wisdom of the Ordinance now before us.

We are asked only to decide whether § 514(a) of ERISA preempts the employer spending requirements of the Ordinance.

We hold that it does not. The spending requirements do not

establish an ERISA plan; nor do they have an impermissible

connection with employers’ ERISA plans, or make an impermissible reference to such plans. 

We therefore REVERSE the judgment of the district court

and REMAND with instructions to enter summary judgment

in favor of the City and Intervenors. 

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