‘Wal-Mart Law’ Overturned in Maryland

Published September 1, 2006

On July 19, a federal district court ruled Maryland’s “Fair Share Health Care Fund Act”–more popularly known as the “Wal-Mart law”–cannot be implemented because it violates a 32-year-old federal law.

The Maryland law would have required companies with 10,000 or more employees to spend at least 8 percent of their payroll on health benefits or pay into a state Medicaid fund the difference between 8 percent and the percentage actually spent on health benefits. Wal-Mart is the only private-sector employer statewide with that many employees that did not meet the 8 percent threshold.

In finding the law violated the federal Employee Retirement Income Security Act (ERISA) of 1974, U.S. District Judge J. Frederick Motz ruled the Fair Share law sought not to generate revenue for the state, but to force employers to provide a specific level of health care coverage for their employees, an area under the purview of ERISA.

In his decision, Motz found the Fair Share law “violates ERISA’s fundamental purpose of permitting multistate employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits and permitting uniform national administration.”

Following Suit

The Fair Share Health Care Fund Act was widely perceived as a significant test case because it served as a catalyst for similar bills in more than 30 other states this year. The laws were lobbied for or received support from the AFL-CIO and other labor unions. According to the National Retail Federation, 23 such bills have already been defeated by legislators, and none has been passed into law. A similar measure, however, was adopted in August by the City Council of Chicago. At press time, Mayor Richard M. Daley was considering a veto of the ordinance.

Maryland Attorney General Joseph Curran told The New York Times in late July the state plans to appeal Motz’s decision, and in a July 19 statement, AFL-CIO President John Sweeney called it an “affront to working people.”

“The District Court’s decision, unfortunately, ignores the strong public support for requiring large, profitable corporations to pay their fair share for health care,” said Paul Blank, campaign director for the union-backed watchdog group WakeUpWalMart.com.

Challenging Decision

Andrew Grossman, executive director of Wal-Mart Watch, a similar union-supported group, agreed with Blank.

“Today’s decision is not the final word on this piece of legislation,” Grossman said in a July 19 statement. “A recent Washington Post survey found that 77 percent of Marylanders support the legislation, and this issue will remain at the forefront of the public debate in this election year.”

Mandating Expenditures

The Fair Share Act was passed in January over the veto of Maryland’s Republican governor, Robert L. Ehrlich Jr., who said the bill unfairly targeted Wal-Mart. In February, the Retail Industry Leaders Association (RILA), a trade association of retailers, product manufacturers, and service suppliers based in Arlington, Virginia, which includes Wal-Mart as a member, sued the state of Maryland to overturn the act.

“When Congress enacted ERISA,” explained Paul Kelly, RILA’s senior vice president for government affairs, “it specifically made the law preemptive in order to create an incentive for employers to follow, regardless of whether a company’s employees work in Newark or Nebraska.

“We stand firmly against any type of mandate that forces companies to fund arbitrary health care expenditures and does nothing to address the serious health care challenges in this country,” Kelly said. “If the court had upheld Maryland’s law, it’s likely that employers everywhere would have faced a costly patchwork of state and local laws regulating health plans.”

In an appearance on the Rev. Al Sharpton’s radio program on July 19, Wal-Mart Chief Executive Officer H. Lee Scott Jr.said, “The thing that we find encouraging is that there is going to be consistency, and that the federal government is going to be the control point on health insurance and these kinds of issues.”

Charlotte LoBuono ([email protected]) is a freelance journalist and writer in Hoboken, New Jersey.

For more information …

U.S. District Judge J. Frederick Motz’s July 19 ruling in Retail Industry Leaders Association v. James D. Fielder Jr. is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to http://www.heartland.org, click on the PolicyBot™ button, and search for document #19549.

“‘Fair Share’ Bills Aimed at Wal-Mart Move through State Legislatures,” by Michael Coulter, Health Care News, August 2006, http://www.heartland.org/Article.cfm?artId=19455