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January 18, 2007
Appeals Court Upholds Ruling that Struck Down 'Wal-Mart' Law

The U.S. Court of Appeals for the Fourth Circuit has upheld a ruling that prohibited Maryland from enforcing a law that would have required Wal-Mart to pay at least 8 percent of its payroll on healthcare benefits or pay the difference to the state.

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The U.S. Court of Appeals for the Fourth Circuit, which covers Maryland, North Carolina, South Carolina, Virginia, and West Virginia, agreed with the lower court that the Maryland law was preempted by the Employee Retirement Income Security Act of 1974 (ERISA). The courts said the Maryland law, called the Fair Share Act, conflicted with ERISA's goal of allowing uniform administration of healthcare plans.

"Because Maryland 's Fair Share Act effectively requires employers in Maryland covered by the act to restructure their employee health insurance plans, it conflicts with ERISA's goal of permitting uniform nationwide administration of these plans," the appeals court wrote. "We conclude therefore that the Maryland Act is preempted by ERISA and accordingly affirm."

The state's law would have required for-profit employers with more than 10,000 employees to spend at least 8 percent of payroll on healthcare benefits for employees or pay the difference into the state's health program for low-income families. Under the law, nonprofit organizations would have been subject to a 6-percent threshold.

The act would have permitted employers to exclude, for purposes of calculating the percentage of payroll spent on health care, compensation paid to its employees above the median household income in Maryland .

In effect, the law would have applied to Wal-Mart only. Four other nongovernmental employers in Maryland have more than 10,000 employees, but they would have met the law's requirements.

The court said that the state law and others like it would deny employers the uniform nationwide administration of their healthcare plans by requiring them to keep an eye on conflicting state and local minimum spending requirements and adjust their healthcare spending accordingly.

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