Wednesday, July 19, 2006

Maryland District Court Declares Wal-Mart Law Preempted (and therefore Unenforceable)

In January 2006, the Maryland General Assembly enacted a bill (over Governor Ehrlich's veto) that requires employers with 10,000 or more employees to spend 8% of their total wages on health insurance. The bill was deemed "the Wal-Mart Lill" because the only qualifying employer in this State is Wal-Mart. (Johns Hopkins, Giant, and Northrop Grumman are either exempt or paid the 8%).

A trade association, which includes Wal-Mart as a member, sued the State to stop it from enforcing the Wal-Mart law. The trade association claimed that law related to employee benefit plans was therefore preempted by the federal law governing such plans: ERISA.

The Court agreed with Wal-Mart and its trade association. At bottom, Congress has decided that it is the only body that can regulate employee benefit plans. As such, States are completely preempted from legislating in this area. Hence, the Court effectively stopped Maryland from enforcing the Wal-Mart law.

The trade association also claimed that the law violated equal protection. The Court rejected that argument.

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