San Francisco ‘Pay or Play’ Law Allowed to Proceed

U.S. Supreme Court Associate Justice Anthony Kennedy on Thursday, February 21, denied a request by a California restaurant association that sought to prevent San Francisco from enforcing its new health care spending measure.

The Golden Gate Restaurant Association sought an order to prevent enforcement of the 2006 ordinance while a federal appeals court decides whether provisions that require employers to either spend a certain amount of money on health care coverage or pay a fee to the city to help fund coverage for uninsured city residents is pre-empted by federal law.

Justice Kennedy denied the request without comment.

Thursday’s development is the latest legal twist involving the measure, which went into effect last month.

Late last year, a federal judge ruled that the ordinance ran afoul of a provision in the Employee Retirement Income Security Act that pre-empts state and local laws related to employee benefit plans.

But last month, a three-judge panel of the 9th U.S. Circuit Court of Appeals said San Francisco can enforce the measure while the court considers the pre-emption issue.

With Justice Kennedy’s refusal to intervene, implementation of the measure can proceed, with the first employer payments due in April.

Under the ordinance, employers with at least 100 employees must make health care expenditures of $1.76 per hour per eligible employee. The expenditure can be satisfied in one of several ways, such as paying for employees’ health insurance coverage, contributing to employees’ health savings accounts or making a contribution to the city.

Benefit experts worry that if the San Francisco ordinance is allowed to stand, other cities and states will try to do the same, making it impossible for national employers to offer uniform benefit plans and significantly increasing their administration costs incurred in tracking and complying with those laws.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.