Human Capital & Careers

Court Ruling Brings Wal-Mart Relief

Decision says that the Maryland law violates several of ERISA's fundamental purposes.
Stephen TaubJuly 19, 2006

A judge overturned a Maryland law designed only to penalize Wal-Mart Stores.

Under the law—Maryland Fair Share Health Care Fund Act—private companies in Maryland with more than 10,000 employees are required to shell out at least 8 percent of their payroll on employee health benefits, or contribute to the state’s insurance program for the poor. Wal-Mart, which employs about 17,000 Marylanders, is the only company that was expected to be affected by the requirement since it is the only corporation of its size that does not meet the 8 percent spending threshold.

Critics assert that Wal-Mart’s health care benefits are too skimpy, thus forcing some employees to rely on state-funded plans. However, opponents of the law argue that employees were aware of what their benefits package contained when they accepted the job.

In the decision, U.S. District Judge J. Frederick Motz ruled that the new law “imposes legally cognizable injury upon Wal-Mart,” explaining that the statute would have hurt the retailer by requiring it to track and allocate benefits for its Maryland employees in a different way from how it keeps track of employee benefits in other states, according to the Associated Press. Motz also reportedly cited the federal Employee Retirement Income Security Act (ERISA), which he said pre-empts “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.”

The Maryland law is “pre-empted is in accordance with long established Supreme Court law that state laws which impose health or welfare mandates on employers are invalid under ERISA,” Motz wrote in his 32-page opinion, according to the AP. He continued that the act violates several of ERISA’s fundamental purposes, including permitting multi-state employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits, and permitting uniform national administration, reported Reuters.

The state plans to appeal the ruling, noted AP, citing Kevin Enright, a spokesman for the Maryland attorney general’s office. Enright told the wire service that the state disagreed with Motz on several counts, especially his finding that the law is pre-empted by ERISA. “Supreme Court precedent makes it clear that this law does not impermissibly impact health benefit plans,” Enright told the AP. “Employers may choose to pay the tax or avoid paying the tax in several ways.”

In January, the National Conference of State Legislators said that 13 state legislatures had worked up bills that were similar to the Maryland act. Reportedly, none have made it into law.