Pension & Benefits News ERIC says ERISA preempts Seattle’s new employer health care mandate
Wednesday, February 5, 2020

ERIC says ERISA preempts Seattle’s new employer health care mandate

By Pension and Benefits Editorial Staff

The ERISA Industry Committee (ERIC) has filed an amended complaint in the U.S. District Court for the Western District of Washington challenging Seattle’s Municipal Code (SMC) 14.28, on grounds that the new law is preempted by ERISA.

The Seattle City Council’s new law requires large hotel employers and employers of ancillary hotel businesses, such as restaurants within hotels, parking services, etc., to make health care payments to or on behalf of employees. Employers have three options to comply:

  1. Provide direct monthly payments to the employees in an amount set in the ordinance,
  2. Enroll the employees in group health insurance sponsored by the employers, where the employer’s premium expenditure matches or exceeds the amount set in the ordinance, or
  3. Cover the employees in the employer’s self-funded health plan, so that the average per-capita monthly expenditures for the individuals matches or exceeds the amount in the ordinance.

ERIC’s compliant indicates it believes the new law is preempted by ERISA, because its requirement that hotel employers make direct payments to employees or provide coverage under their group health plans has an impermissible reference to and connection with an ERISA plan.

“ERIC will continue to challenge any city or state that attempts to mandate or impose requirements on private health or retirement plans in violation of ERISA,” said Annette Guarisco Fildes, ERIC’s president and CEO. “We appreciate that the City of Seattle wants employees to have health coverage, but the City cannot impose mandates on employers that are already offering health coverage to their employees. ERISA is in place to give all employers the ability to administer their benefits plans uniformly, so they can provide benefits that best fit their multi-state workforce.”

In 2018, ERIC filed the original complaint, challenging Seattle’s earlier health care ordinance contained in Part 3 of the Seattle Hotel Employees Health and Safety Initiative – SMC 14.25, which would have mandated large hotels either offer a specific level of coverage in an employer-sponsored group health plan or provide additional compensation based, in part, on the cost of coverage. In 2019, the City repealed SMC 14.25 after ERIC briefed the ERISA preemption issues and the Washington state appellate court voided all aspects of the initiative on state constitutional grounds, replacing it with SMC 14.28. As ERIC charges in the amended complaint, the replacement law is also preempted by ERISA.

“It was imperative ERIC fight Seattle’s latest health care law as it is preempted by ERISA and could potentially be applied to more large employers in the hotel and ancillary industries,” said Guarisco Fildes. “ERIC appreciates the City working with us to continue the litigation and allowing ERIC to file this amended complaint. We are confident the judge will rule in favor of protecting ERISA and large employers’ ability to offer the best benefits to their individual workforces.”


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