Jan. 8, 2008 Court Lifts Hold On San Francisco's Health Care Security Ordinance - New Law To Take Effect Immediately

January 9, 2008

A ruling today from the Ninth Circuit Court of Appeals allows the employer funding provisions of San Francisco's Health Care Security Ordinance (HCSO) to go into effect, pending resolution of an appeal involving a local restaurant association and the City and County of San Francisco.  [Click here for decision]  This ruling means that employers subject to the Ordinance will be required to make health care expenditures on behalf of covered employees while the appeal is pending.

The Court of Appeals' decision comes after a United States District Court Judge granted summary judgment on December 26, 2007, in favor of the Golden Gate Restaurant Association, finding that the employer funding provisions of the HCSO were preempted by ERISA (the Employee Retirement Income Security Act). The City and County of San Francisco immediately appealed the decision and filed an Emergency Motion for a Stay Pending Appeal, asking the Court of Appeals to allow the employer funding provisions to go into effect while the appeal is pending. After hearing oral argument on January 3, 2008, the Court of Appeals issued its decision today, finding that the City and County of San Francisco have a "strong likelihood" of success in their argument that the HCSO is not preempted by ERISA. In weighing the factors underlying its decision, the Court of Appeals also noted that the general public has an interest in the health of San Francisco residents and the HCSO will likely decrease overall healthcare expenses.

In light of this decision, Employers must take immediate steps to comply with the employer funding provisions of the HCSO, which were originally set to take effect on January 1, 2008. Those provisions require covered employers (those with 20 or more employees on average working each week) to make minimum healthcare expenditures on behalf of most employees working 10 or more hours a week within the City and County of San Francisco. Employers must pay up to an additional $1.76 for each hour a covered employee receives compensation, including wages, vacation pay and sick pay, up to a cap of 172 hours per month or 516 hours per quarter. Payments may be made in a variety of forms, including directly purchasing health insurance for covered employees, making contributions to health savings accounts, providing direct reimbursement to employees for some of the expenses incurred in the purchase of healthcare services, making payments to third parties for the purpose of providing healthcare services, or making payments directly to the City.

If you have employees in San Francisco and need more detailed information on how to comply with this new law, please contact us.

This E-Update was authored by Brenda Kasper. For more information, please contact Ms. Kasper or any Paul Plevin attorney at (619) 237-5200.

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