FEDERAL COURT to hear lawsuit on employer right to determine employee benefits

A federal judge will hear competing arguments on August 31 on the fate of a restaurant owners’ lawsuit challenging City intervention in employer right to determine employee benefits.

The Golden Gate Restaurant Association (GGRA) has asked U.S. District Judge Jeffrey White to overturn the plan’s requirement for employer contributions on the ground that it conflicts with federal law protecting employer right to determine the level and administration of benefits.

Restaurant owners filled the San Francisco Board of Supervisors Chamber during initial hearings on the plan, testifying they had not been consulted on the proposed owner mandate.

Most testified the imposed measure would cause restaurant closures due to industry thin profit margin.

The city, meanwhile, contends there is no conflict with the U.S. law and has asked the judge to dismiss the lawsuit.

The two sides filed their competing motions on Friday.

White will consider the two bids at the August 31 hearing in his Federal Building courtroom in San Francisco and is expected to issue a written ruling within two weeks after that.

The law passed last year establishes a program known as Healthy San Francisco and is intended to provide health care to the city’s 82,000 uninsured residents.

Beginning in January, employers will be required to contribute either by spending a set amount per employee or by giving a similar amount to the city program for uninsured people.

The amount is $1.17 per hour per employee for medium-sized businesses with 20 to 99 workers and $1.76 per hour for large businesses with staffs of more than 100.

The GGRA contends that provision conflicts with the federal Employee Retirement Income Security Act, or ERISA, because the U.S. law is the exclusive regulator of employer health plans.

The group’s attorneys wrote in their brief that the city’s requirements conflict with ERISA “because they interfere with employers’ freedom to choose the level and administration of benefits provided to employees.”

“This is an area reserved for purely federal regulation,” the association said.

But City Attorney Dennis Herrera said the San Francisco plan doesn’t conflict with the law because employers are free either to keep or modify an existing ERISA plan or to simply make payments to the city.

The city’s brief argues the program was crafted to avoid giving employers an incentive to drop health coverage and instead give them credit for dollars they already spend.

Herrera said, “The creators of this ordinance were careful to avoid ERISA preemption and we are confident the court will recognize that.”

White’s future summary judgment ruling is expected to decide the case because both sides have told the judge that there is no dispute over facts that would need to be resolved at a trial.

See Related: HEALTH CARE

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