Maryland Conservatarian

This just in: Judge Rejects Md.'s Wal-Mart Health Care Law.

My first post ever was on this very subject - Maryland's bid to get business to move....to Delaware, Virginia, Pennsylvania.... – so the matter has long held my interest. Federal District Court Judge Frederick Motz issued his opinion and order today, declaring:

“... that the Maryland Fair Share Health Care Fund Act, Md.
Code Ann., Lab. & Empl. § 8.5-101 et seq., is preempted by the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq.”

The first part of the opinion addresses the State’s challenge to the Retail industry Leaders Association’s (RILA) standing to seek a declaratory judgment that the Wal-Mart bill was pre-empted by the federal Employment Retirement Income Security Act of 1974 (ERISA). The basis of the challenge comes across as rather perfunctory and Judge Motz easily dismisses it.

A more interesting aspect of the decision is when he reviews whether the bill’s requirements are of a tax or fee basis.

“The Secretary next argues that the Act imposes a "payroll tax" upon covered employers and that the Tax Injunction Act ("TIA") therefore strips this court of jurisdiction to hear the case”

Judge Motz reviews appropriate previous Federal court decisions, including those from our own Fourth Circuit, and concludes that this is a fee.

“The Fourth Circuit adopted this test in Valero Terrestrial Corp. v. Caffrey, stating:
To determine whether a particular charge is a “fee” or a “tax,” the general inquiry is
to assess whether the charge is for revenue raising purposes, making it a “tax,” or for
regulatory or punitive purposes, making it a “fee.”…

“The record makes clear the purpose of the Act is not to raise revenue but to require Wal-
Mart to spend an amount equal to at least 8% of its Maryland payroll on health care benefits for its Maryland employees.

Now all that was left to determine was whether or not the Wal-Mart bill was preempted by ERISA. This Judge Motz gets to fairly quickly:

“In order to provide discipline to the ERISA preemption inquiry, the Court has held that a law “relates to” an ERISA plan if it has either a “reference to” or “connection with” such a plan…

“Because I find that the Fair Share Act has a “connection with” an ERISA plan and is preempted on that ground, I do not reach the “reference to” issue…

“…the intended effect of the Act is to force Wal-Mart to increase its contribution to its health benefit plan, which is an ERISA plan, and the actual effect of the Act will be to coerce Wal-Mart into doing so.”

End result: ERISA does indeed preempt the Maryland bill and a summary judgement for RILA declaring just that. Judge Motz spends the last third of his decision declining to find “that the Act violates the Equal Protection Clause of the U.S. Constitution” but I think RILA is more than happy with their results. At first blush, then, this is a well-written and reasoned decision that gets it right.

Obviously, I think the Wal-Mart bill was an incredibly moronic attempt to curry union favor all the while getting the rest of to pay for it. But my animosity to the Wal-Mart bill notwithstanding, I am not convinced that ERISA should preempt state law in this matter. I think it can preempt and clearly does preempt - I’m just not convinced it should. I would prefer to see the States permitted to screw it up on their own before we are tempted to apply such idiocy on a national level. Judge Motz hints accordingly in Note 15:

“In light of what is generally perceived as a national health care crisis, it would seem that to the extent ERISA allows, it is strongly in the public interest to permit states to perform their traditional role of serving as laboratories for experiment in controlling the costs and increasing the quality of health care for all citizens.”

In other words, I think the Wal-Mart bill was a bad idea but I’m not real comfortable with the idea that we have to rely on federal courts to rescue us from ourselves.