Blogging Employee Benefits

February 15, 2006

NYC’s Equal Benefits Law Preempted

Filed under: ERISA Preemption, Litigation — Fuguerre @ 4:55 pm

The Equal Benefits Law seemingly seeks to do exactly what ERISA, as interpreted in Shaw, prohibits — to prescribe the terms of benefit plans.

From via Workplace Prof Blog comes word that lower state court dismissal of New York City’s Equal Benefit Law has been upheld by the New York Court of Appeals. [Council of the City of New York v. Bloomberg] The city’s Equal Benefits Law, enacted in 2004 over Mayor Bloomberg’s veto, provided that city agencies could not enter into contracts valued at least $100,000 annually with any firm that fails to provide employee benefits to domestic partners that are equal to benefits provided to spouses. Employee benefits covered under the Equal Benefits Law were to include health insurance, pensions, disability and life insurance, and dependent care insurance, among other employer-sponsored programs. The state’s highest court has now agreed with a lower state court finding that the Equal Benefits Law is preempted by both General Municipal Law and ERISA.

After addressing preemption under General Municipal Law, the court states, “The Equal Benefits Law is also preempted by ERISA, except to the extent that it governs benefits that are outside ERISA’s scope.” The city council argued that the Equal Benefits Law did not impermissibly compel any employer to offer domestic partner benefits; rather, the law merely provided that the city could not contract with firms that fail to do so. The court rejected that “market participant” argument as inconsistent with U.S. Supreme Court precedent in non-ERISA federal law preemption case law. “In enacting the Equal Benefits Law,” opines the court, “the Council was obviously ‘setting policy.'” Thus the market participant exception is inapplicable, leaving the law preempted by ERISA except to the extent of non-ERISA benefits.

Dissenting opinion questioned the judicial process for challenge of the law, without directly addressing the ERISA preemption issue.

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