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Federal Updates

9th Circuit Rules that Local Ordinance not Preempted by ERISA

In March, the US Court of Appeals for the Ninth Circuit (the appellate court) ruled in The ERISA Industry Committee v. City of Seattle that a Seattle local ordinance was not preempted by ERISA. At issue was Seattle Municipal Code (SMC) Section 14.28, which is a health benefits ordinance that requires hotel employers (and other hotel businesses) to either provide money directly to certain employees, or to include such employees in their health benefit plan. The court agreed with the district court that the Seattle ordinance does not relate to employee benefit plan operations in a way that triggers an ERISA preemption.

ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” However, the district court found that the Seattle ordinance does not apply to employee benefits such that would trigger ERISA as it is not a fundamental area of ERISA regulation (e.g., reporting and disclosures). Instead, the district court relied on precedent that provides that an ordinance requiring businesses to make certain minimum healthcare expenditures on behalf of covered employees was not preempted by ERISA. The appellate court agreed, emphasizing that local laws have a presumption against ERISA preemption when operating in an area generally occupied by the states. 

The outcome of this case serves as a reminder of ERISA preemption and the extent of its application. 

The ERISA Industry Committee v. City of Seattle »

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