The ERISA Industry Committee v. City of Seattle, U.S. Supreme Court, No. 21-1019

NELF Files Amicus Brief Urging the Supreme Court to Review “Play or Pay” Laws as Threat to ERISA Plans

The ERISA Industry Committee v. City of Seattle, U.S. Supreme Court, No. 21-1019

This case challenges Seattle’s “play or pay” ordinance, by which the city seeks to do an end-run around federal law.  The federal Employee Retirement Income Security Act (ERISA) expressly pre-empts all state and local laws that relate to employer-offered benefit plans covered by the Act.  This prohibition on non-federal laws minimizes the costs and inefficiencies that would arise if employers had to comply with a nationwide patchwork of local requirements.

State and local governments sometimes try to circumvent pre-emption by enacting “play or pay” laws.  Here, the Seattle ordinance imposes on employers in the hotel business the choice of three ways to provide health care benefits; two options assume an ERISA plan (“play”), but the third, i.e., making direct payments to the employees (“pay”), supposedly does not and supposedly does not relate to an ERISA plan, either.

The U.S. Court of Appeals for the Ninth Circuit upheld the “play or pay” ordinance, finding that ERISA did not pre-empt it because of the third option is supposedly unrelated to ERISA.  That decision is one of many, both in ERISA cases and outside ERISA, in which a court adopts a presumption against pre-emption when the local or state law in question deals with a subject (such as health care) traditionally regulated under the state’s police power.  The use of the presumption has been raised as a key issue in this appeal because pre-emption is expressly written into ERISA.  Along with briefs from others such as the U.S. Chamber of Commerce, National Retail Federation, the Silicon Valley Employers Forum, and twenty-nine hotel associations spread throughout the country, NELF has filed an amicus brief urging the Court to review this pressing, recurrent legal issue.

In its brief NELF cautions that if the Seattle ordinance is not invalidated, it will become a model for other local governments to enact similar laws, thereby undermining Congress’s goals of uniformity and cost-effectiveness in ERISA plans.  Indeed,  in an amicus brief filed below eight other cities have already proclaimed their eagerness to use the ordinance as a model.  NELF points out that not only can the effects of the decision not be contained geographically, they also cannot be confined to the hotel industry.  Moreover, proliferation of such costly local laws would come at an especially bad time for an economy battered by restrictive covid protocols.  For that reason, local laws like the Seattle ordinance should not be imposed on businesses unless the Court has first pronounced on their lawfulness.  As NELF recalls to the Court, in the past, even in the absence a circuit split, the Court has not hesitated to grant certiorari in order to clarify the lawfulness of a state law under ERISA.

Turning its attention the presumption against pre-emption, NELF treats this important legal question at greater length than do other amici.  NELF argues that the decision below erred in relying on the presumption against pre-emption because ERISA contains an express pre-emption requirement.  There is therefore no need to presume anything.  NELF notes that in the 1947 case in which the Supreme Court first acknowledged the presumption, it limited its examples of earlier uses to cases of implied pre-emption, a distinction that came to be forgotten in the course of time.  Yet the Court has also continued to endorse the idea that the presumption has no place in a court’s reasoning when pre-emption is express.  NELF cautions that use of the presumption in such circumstances risks thwarting congressional intent; it also risks giving an excess, “double weight” to federalism.  When the fact of pre-emption is expressly written into the law, as it is in ERISA, the scope of the pre-emption should then be determined by ordinary principles of textual interpretation applied to the actual words of the statute itself.  Misuse of the presumption has remained so ingrained in many lower courts, NELF tells the Court, that only the clearest statement of Court itself now can end it.


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