ERIC revises its lawsuit challenging part of hotel-worker bill

When Initiative 124 passed, it attracted two lawsuits: one that tried to invalidate the entire bill, and another that attacked only one part: the requirement that hotel employers purchase health insurance for their employees.  Last summer, facing an almost certain loss  in the courts, Council member Mosqueda led an effort that repealed I-124 and replaced it with four separate, modified bills that she hoped would resolve the legal challenges in the two cases. But as expected today the plaintiff in the second case, ERIC, filed an updated complaint arguing that the rewritten bill requiring employers to provide healthcase, still violates federal law.

The legal underpinnings are still essentially the same: the federal ERISA law preempts state and local governments from regulating employee benefit plans, including health insurance. I-124 blatantly violated that by requiring employers to provide a gold-level health plan. But Mosqueda’s rewritten ordinance tries to wiggle around the law by instead requiring employers to pay additional compensation roughly equivalent to a gold-level plan (so employees can buy health insurance themselves), and exempting those employers who provide health insurance to their employees. The courts have interpreted ERISA to man that state and local laws may not either be “connected to” or “make reference to” an ERISA-covered employee benefit plan; and since the new ordinance doesn’t explicitly mention either and is centered on providing additional compensation (which the employees don’t actually have to spend on purchasing healthcare), it is neither connected to nor makes reference to a benefit plan. — or so the bill’s sponsors argue.

Not so fast, says ERIC. It points to case law that says that by making reference to the level of benefits provided in setting the amount of additional compensation that employers must pay employeers, the ordinance still impermissibly regulates benefit plans. It also argues that since the option to pay additional compensation to employees is more expensive than providing healthcare, the ordinance in effect restricts an employer’s viable options for providing benefits — another form of regulation.

All of this was expected, and the case will now start to move forward (it was on hold while the first challenge to I-124 worked its way through the courts). But now the issues are much closer calls, and it’s difficult to predict with certainty how the courts will ultimately rule. The city files its response brief on Fenruary 20, continuing the volleying back-and-forth of legal briefs that will wrap up in late May.

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