San Francisco, California, recently adopted an ordinance generally requiring local employers with at least 20 employees (50 employees for a non-profit) to pay at least a certain sum of money for employee health coverage or pay the same sum to the City. On December 27, 2007, the federal district court sitting in San Franciso ruled that the Employee Retirement Income Security Act of 1974, as amended (ERISA), preempts the San Francisco ordinance because it mandates that employers adopted ERISA governed health care plans for their employees.

I did not find that ruling particularly noteworthy. The U.S. Court of Appeals for the Fourth Circuit had reached a similar result in a case involving a Maryland law that required Wal-Mart to provide health care coverage for its employees. However, today, the U.S. Court of Appeals for the Ninth Circuit stayed that district court order and permitted San Francisco to enforce its ordinance. The San Francisco Chronicle summarized the opinion as follows:

[I]n today’s ruling, the appeals court said San Francisco has not required any employer to adopt a health plan or provide specific benefits, as long as the company complies with the ordinance by paying a fee. To comply, “employers need not have any (health) plan at all; and if they do have such a plan, they need not make any changes in it,” Judge William Fletcher said in the 3-0 ruling. He also said the hardships that the city and its residents would suffer from a delay in implementation would be far greater than the harm to restaurant owners from having to abide by the ordinance during the appeal process. “Otherwise-avoidable human suffering, illness and possibly death will result if a stay (of White’s ruling) is denied,” Fletcher said.

This issue is destined for U.S. Supreme Court review.