Opinion ID: 3050856
Heading Depth: 4
Heading Rank: 2

Heading: “Reference to” a Plan

Text: 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. It is highly unlikely that the Ordinance is preempted under the first part of the inquiry, as may be seen from Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825 (1988). 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 under state” law. Id. at 829-30. At the same time, however, the Court upheld those -23- 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. It is also highly unlikely that the Ordinance is preempted under the second part of the inquiry, as may be seen from two cases. The first is Ingersoll-Rand 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 that state 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. If there is no ERISA plan, covered employers 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, 506 U.S. 125 (1992). A local ordinance required employers to provide -24- 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 employee’s ERISA plan. The district court in this case relied on the Court’s opinion in Greater Washington in holding that the Ordinance is preempted. 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.” 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.” 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.” -25- 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 our case is not determined, in the words of § 514(a), by “reference to” an ERISA plan. The Ordinance in our 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 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, which had the effect of putting a cap on the amount the employer could be credited for payments for a benefit package. The employer was -26- 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. 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. 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, we have great difficulty in seeing how the law makes 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, respectively, is ultimately -27- 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.”).