Retailers challenge `Wal-Mart' law in Md.

Trade group sues over health care

General Assembly

February 08, 2006|By ANDREW A. GREEN AND JILL ROSEN | ANDREW A. GREEN AND JILL ROSEN,SUN REPORTERS

A retail trade group filed suit yesterday to strike down a Maryland law requiring Wal-Mart to pay more for employee health care, saying federal regulations don't allow states to set worker benefits.

The Retail Industry Leaders Association, a Virginia-based organization that counts Wal-Mart as a member, says Maryland's Fair Share Health Act is illegal under the Employee Retirement Income Security Act of 1974.

That law, known as ERISA, is designed in part to make sure that large employers are subject to national standards for their benefit plans and not a tangle of conflicting state rules.

FOR THE RECORD - An article yesterday incorrectly stated the effective date of a state law requiring large corporations -- in practice just Wal-Mart -- to pay a certain amount in employee health care or pay a tax to the state. The effective date is Jan. 1, 2007.
The Sun regrets the errors.

Association President Sandy Kennedy said the Maryland law and a similar statute in Suffolk County, N.Y., are a "political gimmick" and "hollow gestures that are inconsistent with federal policy."

"These laws discourage business development and stunt growth," Kennedy said.

The group filed federal suits yesterday in Baltimore and New York.

The complaint seeks an injunction preventing the statute - the first of its kind in the nation - from being enforced.

The Maryland law is due to go into effect Saturday, 30 days after a Jan. 12 General Assembly vote to override Gov. Robert L. Ehrlich Jr.'s veto of the measure.

Backers of the bill said they saw the suit as a desperation tactic by Wal-Mart and its allies.

"If they spent as much on health care as they do on lawyers, we wouldn't have anything to worry about," said Tom Hucker, executive director of Progressive Maryland, a liberal advocacy group that was part of a coalition that pushed for the bill.

"They're trying to intimidate other states out of doing the right thing. Their political strategy is based on fear and intimidation."

Wal-Mart spokesman Dan Fogelman said the retailer supports the lawsuit but is not directly involved in the legal action beyond its membership in the trade group. He said he didn't know whether the company will file friend-of-the-court briefs or take action on its own.

"We share RILA's opinion that existing law states that employee benefits plans are regulated by the federal government and not by the states," Fogelman said. "We believe that the challenges facing our country's health system are national problems that require national solutions."

A Wal-Mart executive serves on the association's board, which voted unanimously to file the complaint. The association's Web site says the group has more than 400 members, including other major retailers such as Target and Home Depot.

"The brunt of these laws falls on the retail sector," Kennedy said. "The retail industry needs the flexibility to meet the insurance needs of their diverse work force."

The company's membership in the group is a key part of the legal complaint, though. The suit argues that one of the group's members, Wal-Mart, would suffer irreparable damage from the law, thus giving it standing to sue.

Vincent DeMarco, who as president of the Maryland Citizens Health Initiative helped lobby for the bill, said the lawsuit is the result of mounting pressure on the discount giant, which has come under national assault for its employment practices.

In the days before the veto override vote, the AFL-CIO announced it was undertaking an effort in at least 30 more states to enact similar laws.

"The best thing for them and all these companies to do is just do their fair share," DeMarco said. "They're worried this law is sweeping the nation, and it is sweeping the nation."

Kennedy said she hopes the legal action serves as a warning to the 30 other states considering similar laws.

"We certainly hope other states will pause and look at what we've done in Maryland and in Suffolk County," she said.

The General Assembly sided with labor unions, supermarkets and other businesses a year ago in passing the measure requiring companies with more than 10,000 workers to pay 8 percent of their payroll in employee health care or pay the difference to the state. After Ehrlich vetoed the bill last spring, lawmakers restored it last month.

Of the four largest employers in Maryland, only Wal-Mart does not meet the law's threshold, advocates say. The others are Northrop Grumman, Giant supermarkets and Johns Hopkins - which as a nonprofit has a lower, 6 percent requirement.

Unions and other critics say that Wal-Mart skirts its civic responsibility by not offering affordable health care to its workers, forcing them and their families into taxpayer-financed health programs. The health premiums of other companies rise to make up the difference, they argue.

Wal-Mart counters that it offers a range of plans to workers and that its successful business model would be distorted by government intervention.

The retail group's lawsuit follows a similar argument advanced by the Maryland Chamber of Commerce early last month, just before the legislature was set to vote on overriding Ehrlich's veto. The chamber hired a Baltimore attorney and benefits law specialist, Henry A. Smith III, who concluded that ERISA pre-empted the Wal-Mart bill.

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