Retail Group Sues to Block Laws Targeting Wal-Mart

The Retail Industry Leaders Association has filed two lawsuits in federal courts in Baltimore and Brooklyn, N.Y., challenging laws aimed at pressuring Wal-Mart and other large companies to spend more on employee health care.

Both actions seek injunctive and declaratory relief with respect to laws enacted in Maryland and in Suffolk County, N.Y., with the stated purpose of getting companies to contribute their "fair share" of health care costs where they do business.

The RILA claims the laws are unconstitutional because they single out specific companies for significantly different financial burdens and thus threaten the retail industry as a whole.

According to the RILA complaint filed in the U.S. District Court for the District of Maryland, the Fair Share Health Care Fund Act enacted Jan. 12 requires for-profit companies with 10,000 or more employees to spend at least 8 percent of the "total compensation" they provide Maryland workers on health care.

Nonprofit employers covered by the law are required to devote 6 percent of compensation to employee health insurance costs, the complaint says.

An employer that fails to meet the applicable threshold is required to pay the shortfall to the Maryland secretary of labor, and failure to comply results in a mandatory penalty of $250,000. Employers may not reduce employee wages to comply with the terms of the statute, the complaint says.

An "employee" under the law includes part-time employees, and "health insurance costs" include "payments for medical care, prescription drugs, vision care, medical savings accounts" and other costs to provide health care as defined in the Internal Revenue Code, RILA says.

According to the complaint, it is "widely recognized" that the law was enacted at least in part to target Wal-Mart, and there are only three other employers in Maryland with more than 10,000 workers. RILA says Wal-Mart is the only employer expected to have to make additional payments, either toward health care costs or to the state, as a result of the law.

RILA's complaint alleges that the Fair Share Health Care Fund Act conflicts with the federal Employee Retirement Income Security Act, which is intended to "eliminate inconsistent state or local regulation of employee benefits plans." ERISA preempts the Maryland law in the case of such a conflict, the complaint says.

In addition, RILA says the law violates the Equal Protection Clause of the U.S. Constitution, as well as Maryland Constitution's prohibition on special laws.

The Suffolk County Fair Share for Health Care Act was signed in October and requires large retail grocery stores in the county to pay at least $3 per hour worked per employee toward health care costs.

The RILA lawsuit, filed in the U.S. District Court for the Eastern District of New York, notes that under the Suffolk County law, an "employee" includes part-time workers but not managerial employees.

As is the case in Maryland, the Suffolk County law requires employers whose minimum health care expenditures fall short to pay the difference to the county within 90 days. Failure to correct the violation within 90 days means an employer must pay an additional civil penalty of $15 per employee for each day of continued violation.

According to the RILA complaint, the county law is intended to target large, out-of-state grocers whose employees are not represented by labor unions. The statute applies even to those employers that provide health care through ERISA-covered group health plans, the lawsuit says.

The complaint also says Suffolk County has extensive enforcement powers under the law, so employers have no choice but to comply.

The complaint argues that the county law is preempted by ERISA and by the National Labor Relations Act. In addition, the RILA alleges, the law violates 42 U.S.C. § 1983 by imposing substantial economic costs on companies that have not been organized by labor unions and have not entered into a collective bargaining agreement, while exempting unionized employers.

Section 1983 provides a civil right of action for damages for deprivation of civil rights.

The Suffolk County law also violates the Commerce Clause and the Equal Protection Clause of the U.S. Constitution, as well as New York's wage-and-hour law, the complaint alleges.