Outten & Golden: Empowering Employees in the Workplace

Will Wal-Mart Ever Pay its Fair Share?

July 25th, 2006 | Paula Brantner

Those seeking to hold Wal-Mart just a little bit more accountable to its workers and the rest of its taxpayers were dealt a blow this week, as a federal judge in Maryland threw out the state’s Fair Share law. The court ruled that efforts to make Wal-Mart either pay more for health care or make a commensurate payment to the state treasury violated ERISA, a federal law regulating employer benefits. Will this development stop the state “Fair Share” movement in its tracks? Or will Wal-Mart’s argument eventually prove to be a loser before a higher court? One thing we can probably count on in these uncertain times is that Wal-Mart will employ some PR maneuver to make America think it’s paying its fair share, even when those in the know….know better.

The mood was jubilant in January when the Maryland legislature overturned the governor’s veto to pass the nation’s first fair share law. Although it was dubbed the Wal-Mart bill, it was only slightly less transparent: any private employer in Maryland who employs 10,000 employees in the state would be required to spend 8% of its payroll on employee health benefits or make a contribution to the state’s insurance program for the poor. While the bill’s application appears straightforward, it was admittedly designed in a way that would target Wal-Mart. Four employers in Maryland, Johns Hopkins University, Giant Food, Northrup Grumman, and Wal-Mart, employ over 10,000 workers in the state, but among those four employers, Wal-Mart was the only one that was not spending the amount required by the bill for its employees’ health benefits. See Maryland Leading the Way in States’ Fights Against Wal-Mart.

It was predicted at the time that many states would follow suit, and there were meaningful campaigns in several other states, including Washington, Colorado, and New Hampshire. (See February 28 Stateside Dispatch.) Other states rejected the Fair Share model, and undertook more ambitious plans to reform health care at the state and local level. (See July 24 Stateside Dispatch). San Francisco, attempting to lead the way as it did with gay marriage, is in the process of passing an ordinance guaranteeing health care to the city’s uninsured residents. (See SF Chronicle article.) Vermont and Massachusetts have also enacted plans that significantly expand coverage for the uninsured. (See July 24 Stateside Dispatch).

But comprehensive health care solutions, even though they’re more sound from a policy perspective, and are more likely to involve rather than alienate the corporate world and even conservative policy makers, lack the gotcha of whacking the world’s largest retailer. Inaugurated by a wave of anti-Wal-Mart sentiment generated by such work as the movie Wal-Mart: the High Cost of Low Price, and the activities of advocacy groups such as Wal-Mart Watch and Wake Up Wal-Mart, the Fair Share bills were admittedly a piecemeal solution, but one that made a statement. Wal-Mart scrambled to fix the PR damage from being unable to stop the Maryland effort, even as its attorneys were planning to file suit against the Maryland law. (See AP article.)

For the moment at least, the lawsuit has been successful in preventing the Fair Share bill from going into effect next January. (See Baltimore Sun article.) In his ruling, federal district judge J. Frederick Motz said that the Maryland law conflicts with ERISA, the federal law governing employee benefits. Under ERISA, state laws regulating benefit plans that conflict with federal law in a way that would require employers to follow different rules in different states are generally considered to be preempted, so as to bring some uniformity to benefit plans adopted by national corporations with employees in multiple states. The opinion noted that

…[T]the economic effect of the Fair Share Act upon Wal-Mart’s ERISA plan could not be more direct: it would require Wal-Mart to increase its health care benefits for Maryland employees and to administer its plan in such a fashion as to ensure that the statutory spending required by the Act is met. Thus, the Act violates ERISA’s fundamental purpose of permitting multi-state employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits and permitting uniform national administration.

Wal-Mart’s opponents (here, the State of Maryland defending the new law) had argued that since Wal-Mart has the option of paying money to the state treasury instead of changing its health care benefit plan, that the law does not regulate the plan. This argument was rejected by the judge, who wrote, “If employers are faced with the choice of paying a sum of money to the State or offering an equal sum of money to their employees in the form of health care, no rational employer would choose to pay the State….The “choice” here is a Hobson’s choice. ” (RILA v. Fielder).

The decision will most certainly be appealed to the 4th Circuit Court of Appeals, known as one of the most conservative courts in the country, and it’s even possible there could be a ruling before the law is scheduled to go into effect in January (although that’s less likely now that the law has been struck down and things return to the status quo.) In the meantime, it’s too soon to tell whether we will see bills in other states stall as a result of this ruling, although it’s reasonable that the spectre of expensive legal fees will intimidate some state legislators who might otherwise push hard for this type of legislation.

In the meantime, let’s hope we see some inroads in confronting our growing national health care dilemma. We need more states and cities grappling with comprehensive health care plans. We need more employers recognizing the ultimate solution lies with government action, as profits are unlikely to keep up with rising health care costs for very much longer (in the few circumstances where they still are already). We need more employees, as taxpayers and citizens, demanding health care as a right, not a benefit that employers can decide to cut back on. We need more pressure on Wal-Mart, for oh so many reasons other than just health care. With all of these things happening simultaneously, maybe — just maybe — we’ll start to see more progress than the glimmer here and there we see now, and we won’t have to worry so much about Wal-Mart’s status as a health care provider.

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