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We have a message for Martin O'Malley, Maryland's new governor: If you want to save state taxpayers some money and better deploy the resources of legal staff, don't spend any more time appealing court rulings that strike down Maryland's so-called "Wal-Mart" law.
That law, which Maryland lawmakers approved last year after overcoming a veto by former Gov. Bob Ehrlich, required any employer with at least 10,000 employees in the state to spend at least 8% of payroll on health care benefits or pay the difference into a state fund.
The numbers in the law did not appear out of nowhere; they were used to target only Wal-Mart Stores Inc., a huge, nonunion employer that a chunk of organized labor--a powerful force in Maryland--despises.
The law was soon challenged by a retail group, which said it violated a key provision of the Employee Retirement Income Security Act, which pre-empts state rules and laws that relate to employee benefit plans.
Two courts--first a U.S. District Court in Baltimore and last week the 4th U.S. Circuit Court of Appeals in Richmond, Va.--affirmed that the Maryland law royally flunked the ERISA pre-emption test.
As the appeals court put it so well, a key purpose of ERISA pre-emption was to prevent regulatory "balkanization." If one state were allowed to impose its own requirements on employee benefit plans, then others would do the same, making it very expensive for a multistate employer to offer a uniform benefits program. The drafters of ERISA, who wanted to encourage and not discourage employers to offer health care plans, understood that in including pre-emption.
The Maryland Wal-Mart law is a classic example of what ERISA pre-emption was designed to prevent and why it was such a slam-dunk for courts to strike it down.
Rather than wasting any more time and money defending a clearly illegal law, Maryland lawmakers should focus on crafting measures that truly expand coverage without interfering in the way corporations design their benefit programs.