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July 20, 2006
Judge Strikes Down Healthcare Law Targeted at Wal-Mart

A federal judge has struck down a Maryland law that would have required Wal-Mart to pay at least 8 percent of its payroll on healthcare benefits, ruling that the Employee Retirement Income Security Act of 1974 (ERISA) preempts the law.

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The Retail Industry Leaders Association had filed a lawsuit challenging a Maryland law that 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, which is called the Fair Share Act, non-profit organizations would have been subject to a 6-percent threshold.

The Fair Share Act 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 affected only Wal-Mart. Four other nongovernmental employers in Maryland have more than 10,000 employees, but they meet the law's requirements.

In striking down the law, Judge J. Frederick Motz of the U.S. District Court in Maryland said ERISA preempts Maryland's Fair Share Act.

"The main objective of ERISA's preemption clause is 'to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans'" wrote Motz . "Uniformity is impossible, however, if plans are subject to different legal obligations in different States. The Fair Share Act creates health care spending requirements that are not applicable in most other jurisdictions. Moreover, its requirements directly conflict with the requirements of at least two other jurisdictions ( New York City and Suffolk County , New York )."

Motz said the Fair Share Act violates ERISA's purpose of permitting uniform administration of health plans.

"The economic effect of the Fair Share Act upon Wal-Mart's ERISA plan could not be more direct: it would require Wal-Mart to increase its health care benefits for Maryland employees and to administer its plan in such a fashion as to ensure that the statutory spending required by the act is met. Thus, the Act violates ERISA's fundamental purpose of permitting multi-state employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits and permitting uniform national administration."

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