On September 30, 2008, the Ninth Circuit issued its long-awaited decision in the Golden Gate Restaurant Association v. San Francisco, holding the employer spending requirement of the San Francisco Health Care Security Ordinance is not preempted by the Employee Retirement Income Security Act, as amended ("ERISA"), 20. U.S.C. § 1001 et seq.
In July 2006, the City and County of San Francisco unanimously passed the San Francisco Health Care Security Ordinance, codified at Sections 14.1 to 14.8 of the City and County of San Francisco Administrative Code. The San Francisco Ordinance has two components: the Health Access Program ("HAP"), a city-administered health care program known as Healthy San Francisco, and the Employer Spending Requirement ("ESR") which will fund a portion of the health care program. The San Francisco program is intended to provide access to care for uninsured adults living within the city limits who do not qualify for coverage under Medicaid. Once fully implemented, the program will be funded through taxpayer contributions, participant co-payments and monthly premiums based on a sliding scale, and the ESR. Under the ESR, for-profit employers with more than 20 employees and non-profit employers with more than 50 employees will contribute $1.17 to $1.76 per hour per employee towards: (1) employer-provided insurance; (2) health savings accounts; (3) direct payment of medical bills; or (4) payment towards the city program, Healthy San Francisco.
In 2006, the Golden Gate Restaurant Association ("GGRA"), a group that includes many employers within the San Francisco area, filed an action seeking a determination that the Ordinance is preempted by ERISA. The U.S. District Court for the Northern District of California granted GGRA's motion for summary judgment holding that the Ordinance fails to withstand the expansive test of ERISA preemption in that it has both an impermissible "connection to" ERISA plans and makes an unlawful "reference to" such benefits plans. See GGRA v. City and County of San Francisco, 535 F.Supp.2d 968, 980 (N.D.Ca. 2007). The city appealed and immediately sought a stay of an injunction that prohibited it from implementing the payment provisions. In January 2008, the Ninth Circuit granted the stay, allowing the program to go forward pending appeal. Since that date, employers have been required to make quarterly health expenditures. On September 30, 2008, the Ninth Circuit reversed the District Court, and held that ERISA does not preempt the employer spending provisions of the Ordinance. See GGRA v. City and County of San Francisco, 2008 WL 4401387 (9th Cir. Sept. 30, 2008).
The issue presented in this case is of exceptional importance to employers and other stakeholders across the country. Notably, eleven entities filed amicus briefs in support of the GGRA and, on the other side, the City was joined by numerous intervenor-defendants, and the California Attorney General, among others, filed amicus briefs in support of the City. The extraordinary national interest in this case is justified. San Francisco stands at the leading edge of a growing national phenomenon – dozens of states, counties and cities have proposed or adopted similar laws mandating employer-provided health care, or health care contributions in the past few years, many of which were held in abeyance pending the Ninth Circuit's decision in Golden Gate. In addition, the Ninth Circuit's decision arguably creates a circuit split with the Fourth Circuit Court of Appeals decision in Retail Industry Leaders Assn. v. Fiedler, 475 F.3d. 180 (4th Cir. 2007). As expected, on October 21, 2008 the GGRA filed a petition for rehearing en banc to the Ninth Circuit asking the court to review the decision based upon the national importance of the case and the arguable conflict with previous rulings in the Fourth Circuit, Ninth Circuit and the U.S. Supreme Court.