Petition for Writ of Certiorari — District of Columbia v. Greater Washington Bd. of Trade

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* f FILED.

Ble Lsog fc’

No. 91- yy, YER 14 1992

OFFICE OF THE CLERK

In The

Supreme Court of the United States

OcroBerR TERM, 1991

Tue District or COLUMBIA

AND SHARON Prattr Ketiy, Mayor,

Petitioners,

THe GREATER WASHINGTON Boarpb or TRADE,

Respondent.

Petition for a Writ of Certiorari

to the United States Court of Appeals

for the District of Columbia Circuit

PETITION FOR A WRIT OF CERTIORARI

JOHN Payton,

Corporation Counsel

Cuarces L. REISCHEL,

Deputy Corporation Counsel

Appellate Division

*Donna M. Murasky,

Assistant Corporation Counsel

Counsel for Petitioners

Room 305, District Building

1350 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Telephone: (202) 727-6252

*Counsel of Record

STATEMENT OF THE ISSUE

PRESENTED FOR REVIEW

In Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), this

Court ruled that the federal Employee Retirement Income

Security Act (““ERISA”’) does not preempt state disability

insurance laws protecting employees insofar as these laws

permit employers to comply with them by establishing an

employee benefit plan that is separate from their ERISA-

covered employee benefit plans. The issue presented for

review concerns that central holding of Shaw: whether Shaw

sanctions ERISA preemption of a state workers’ compen-

sation law which requires employers, who provide health in-

surance to their employees, to provide equivalent benefits

to employees injured on the job when (1) ERISA treats

workers’ compensation laws just like disability insurance

laws and (2) the workers’ compensation law at issue permits

employers to comply with it by establishing an employee

benefit plan separate from their ERISA-covered employee

benefit plans.

TABLE OF CONTENTS

STATEMENT OF THE ISSUE PRESENTED FOR

REVIEW ....... renee | i

OPINIONS BELOW. 1

JURISDICTION | 2

STATUTORY PROVISIONS INVOLVED 2

STATEMENT OF THE CASE | 2

Il. THE DISTRICT OF COLUMBIA’S WORKERS’

COMPENSATION LAW.

Il. ERISA. .....

Ill. THE PROCEEDINGS BELOW.

REASONS FOR GRANTING THE WRIT

I. THE DECISION BELOW IS IN CONFLICT WITH

THIS COURT'S DECISION IN SHAW. 10

Il. THE DECISION BELOW CREATES A SQUARE

AND INTOLERABLE CONFLICT WITH THE

o or wS WW

SECOND CIRCUIT. | 16

CONCLUSION 18

APPENDIX

Opinion of the United States Court of Appeals for the

District of Columbia Circuit (November 15, 1991) la

Memorandum Opinion of the United States District Court

for the District of Columbia (March 27, 1991) 2la

Order of the United States District Court for the District of

Columbia (March 27, 1991) 30a

Order of the United States Court of Appeals for the District

of Columbia Circuit (January 10, 1992) 3la

Statutes Involved 32a

TABLE OF AUTHORITIES

Page

CASES

Alessi v. Raybestos-Manhattan, Inc., 451 U.S.

504 (1981) 15

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) «

R.R. Donnelley & Sons Co. v. Prevost, 915 F.2d 787 (2d Cir.

1990), cert. denied, 111 S. Ct. 1415 (1991) passim

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) passim

Standard Oil Co. v. Agsalud, 633 F.2d 760 (9th Cir. 1980),

affd mem., 454 U.S. 801 (1981) 8,15

Stone & Webster Eng’g Corp. v. Ilsley, 690 F.2d 323 (2d

Cir. 1982), aff'd mem. sub nom., Arcudi v. Stone &

Webster Eng'g Corp., 463 U.S. 1220 (1983) 16, 18

STATUTES

28 U.S.C. § 1254/1) 2

28 U.S.C. § 1291 ]

28 U.S.C. § 1331 6

Employee Retirement Income Security Act of 1974, 88

Stat. 829, as amended, 29 U.S.C. § 1001 et seg. 2

Section 3(1), 29 U.S.C. § 1002(1) 4,13

Section 3(10), 29 U.S.C. § 1002/10) 3

Section 4(a), 29 U.S.C. § 1003(a) 4

Section 4(b) (1), (2), (4), (5), 29 U.S.C. § 1003tb) (1),

(2), (4), (5) 5

Section 4(b)\(3), 29 U.S.C. § 1003(b\(3) passim

Section 51 4(a), 29 U.S.C. § 1144(a) passim

Section 514(b), 29 U.S.C. § 1144(b) 5, 6,7, 14

Section 514(bM2"A), 29 U.S.C. § 1144(bM2"A) 5

Section 514(b2B), 29 U.S.C. § 1144(bx2"B) 5

TABLE OF AUTHORITIES (continued)

Page

Section 514(d), 29 U.S.C. § 1144(d) 10

29 U.S.C. §$§ 1021-1031, 1101-1114 4

29 U.S.C. §§ 1051-1086 4

District of Columbia Workers’ Compensation Act, D.C.

Code Ann. § 36-301 et seq. (1981 ed. 1988 repl. 1991

supp.) 2

D.C. Code Ann. § 36-304 2

District of Columbia Workers’ Compensation Equity

Amendent Act of 1990, D.C. Law 8-198, 37 D.C. Reg.

6890 (1990), D.C. Code Ann. §§ 36-301 to -342-1 (1991

supp.) 2

D.C. Code Ann. § 36-307(a-1) (1991 supp.) 3

In The

Supreme Court of the United States

Ocroper Term, 1991

Tue District or CoL_uMBIA

AND SHARON Pratt Ketty, Mayor,

Petitioners,

Tue Greater WASHINGTON Boarp or TRADE

Respondent.

Petition for a Writ of Certiorari

to the United States Court of Appeals

for the District of Columbia Circuit

The District of Columbia and Sharon Pratt Kelly, its

Mayor, petition this Court for a writ of certiorari to review

a decision of the United States Court of Appeals for the

District of Columbia Circuit. '

OPINIONS BELOW

The November 15, 1991, decision of the United States

Court of Appeals for the District of Columbia Circuit is

reported at 948 F.2d 1317. App. la-20a. The March 27, 1991,

decision of United States District Court for the District of

Columbia in Civil Action No. 91-00511 is not reported.

App. 2la-29a.

The court of appeals had jurisdiction pursuant to 28 U.S.C.

§ 1291. Following its decision, petitioners filed a timely peti-

tion for rehearing. That petition was denied on January 10,

1992. App. 3la.

' At the time of the decision below, the Mayor's name was Sharon Pratt

Dixon; since that time, she has married and has changed her name to

Sharon Pratt Kelly.

JURISDICTION

This Court has jurisdiction pursuant to 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

The case involves both the Employee Retirement Income

Security Act of 1974 (““ERISA’’), 88 Stat. 829, as amended,

29 U.S.C. § 1001 et seg. and the District of Columbia

Workers’ Compensation Equity Amendment Act of 1990

(“Equity Amendment Act”’), D.C. Law 8-198, codified in scat-

tered sections of D.C. Code Ann. §§ 36-301 to -342.1 (1991

supp.). The relevant text of these provisions is reproduced

in the appendix. App. 32a-34a.

STATEMENT OF THE CASE

I. THE DISTRICT OF COLUMBIA'S WORKERS’

COMPENSATION LAW.

The District of Columbia's workers’ compensation law

requires employers in the District to compensate their

employees who suffer work-related injury or death for loss

of income and for disability; and it also requires employers

to provide medical services and supplies for any such injury.

See D.C. Code Ann. § 36-301 et seq. (1981 ed. 1988 repl. 1991

supp.). This law is the exclusive remedy available to

employees against their employers for work-related injury

or death. D.C. Code Ann. § 36-304.

In 1990, the Council of the District of Columbia amended

its workers’ compensation law by enacting the District of

Columbia Workers’ Compensation Equity Amendment Act

of 1990, D.C. Act 8-261. Following approval by the Mayor

on October 24, 1990, and the expiration of the Congressional

review period, the Equity Amendent Act became effective

on March 6, 1991. D.C. Law 8-198.

‘The Equity Amendment Act requires employers, who pro-

vide health insurance to their employees, to provide

equivalent health insurance, for up to 52 weeks, to employees

who are receiving, or who are eligible to receive, workers’

compensation under the District's workers’ compensation

law. D.C. Code Ann. § 36-307(a-1) (1991 supp.) states:

(1) Any employer who provides health insurance

coverage for an employee shall provide health in-

surance coverage equivalent to the —— health

insurance coverage of the employee while the

employee receives or is eligible to receive workers’

compensation benefits under this chapter. . . .

(3) The provision of health insurance coverage shall

not exceed 52 weeks and shall be at the same benefit

level that the employee had at the time the employee

received or was eligible to receive workers’ compen-

sation benefits.

Il. ERISA.

ERISA is a complex, comprehensive federal statute design-

ed to ensure that employees are not unfairly deprived of pen-

sion and other employment-related benefits promised by their

employers. To achieve this goal, ERISA imposes a number

of obligations on employers and, in exchange, preempts, with

important exceptions, state legislation relating to employee

benefit plans.*? For example, ERISA reserves to the states

the power to enact legislation governing subjects tradition-

ally within their purview, such as legislation providing

benefits to employees pursuant to workers’ compensation,

unemployment compensation, and disability insurance laws,

as well as legislation governing insurance, banking, a.

securities.

ERISA’s central provisions require employer-sponsored

employee welfare benefit plans — plans providing for medical

and similar benefits or for ‘benefits in the event of sickness,

accident, disability, death or unemployment’ — to comply

with federal standards governing reporting, disclosure, and

‘ Section 3(10) of ERISA, 29 U.S.C § 1002110), defines the term, ‘State,

as including the District of Columbia

fiduciary responsibility.’ 29 U.S.C. §§ 1021-1031, 1101-1114.

ERISA also requires employer-sponsored pension benefit

plans to comply with those standards; in addition, such pen-

sion plans must comply with federal standards regulating

participation, vesting, and funding (29 U.S.C. §§ 1051-1086).

ERISA does not mandate substantive benefit terms or levels,

but simply provides procedural protections for voluntary

employee benefit plans.

To ensure comprehensive federal regulation of employee

benefit plans, ERISA preempts state laws ‘‘relating to’ such

plans, subject to a number of important exceptions. Section

514(a) of ERISA, 29 U.S.C. § 1144(a), states, in pertinent

part, that ERISA

shall supersede any and all State laws insofar as they

may now or hereafter relate to any employee benefit

plan described in section 1003(a) 18 ATT of this title

= not exempt under section 1003(b) [§ 4(b)] of this

title.

(Emphasis added). Section 4(a), 29 U.S.C. § 1003(a), defining

“Coverage,” states in pertinent part: Except as provided in

subsection (b) of this section . . ., this subchapter shall apply

to any employee benefit plan if it is established or main-

tained —- (1) by any employer engaged in commerce or in any

industry or activity affecting commerce . . .."’ (Emphasis

added).

The exemptions from preemption of greatest importance

to this case are two. First, ERISA expressly contemplates

the continued existence of state workers’ compensation,

unemployment compensation, and disability insurance laws.

* Section 3(1) of ERISA, 29 U.S.C. § 1002(1), defines an employee wel-

fare benefit plan as including “any plan, fund, or program . . . estab-

lished or maintained by an employer . . . for the purpose of providing

for its participants or their beneficiaries, through the purchase of insur-

anee or otherwise, (A) medical, surgical, or hospital care or benefits,

or benefits in the event of sickness, accident, disability, death or unem-

ployment .. ..”’

Employee benefit plans maintained solely for the purpose

of complying with such laws are exempt from ERISA's

disclosure, reporting, and fiduciary requirements and are sub-

ject to state regulation. Thus, section 4(b)(3) of ERISA, 29

U.S.C. § 1003(b)(3), provides:

(b) The provisions of this subchapter shall not apply

to any employee benefit plan if —

(3) such plan is maintained solely for the purpose

of complying with applicable workmen's compensa-

tion laws or unemployment compensation or disabili-

ty insurance laws .. ..*

Second, ERISA contains an exemption from preemption

for state laws regulating insurance, banking, and securities.

Section 514(a), 29 U.S.C. § 1144(a), states that ERISA

supersedes state laws relating to employee benefit plans

‘‘le]xcept as provided in susection (b) of this section.’ Sub-

section 514(b), one of the ‘‘savings”’ provisions of the ERISA

preemption clause, provides in paragraph (2)(A): ‘Except as

provided in subparagraph (B), nothing in this subchapter

shall be construed to exempt or relieve any person from any

law of any State which regulates insurance, banking, or

securities.’’ 29 U.S.C. § 1144(b\(2)/A). Subparagraph (B), 29

U.S.C. § 1144(b)(2)(B), the “‘deemer”’ provision, prohibits

states from, inter alia, characterizing employee benefit plans

as insurance and thus as subject to state regulation.

Ill. THE PROCEEDINGS BELOW.

The District Court.

Almost immediately after the District's Equity Amend-

ment Act became effective, the Greater Washington Board

of Trade, a not-for-profit corporation that provides health

insurance to its employees, brought an action in the United

‘(Emphasis added). Subsection 4(b), 29 U.S.C. § 1003(b), also renders

ERISA not applicable to employee benefit plans that are government

plans ((b\1)); church plans ((b(2)); plans maintained outside the United

States for nonresident aliens ((b)(4)); and unfunded excess benefit plans

((bM5)).

States District Court for the District of Columbia pursuant

to 28 U.S.C. § 1331. The Board of Trade sought a declara-

tion that the Equity Amendment Act is preempted by

ERISA and an injunction against its enforcement; the

District responded by moving to dismiss the complaint for

failure to state a claim.

The Honorable Louis F. Oberdorfer ruled that ERISA did

not preempt the District's amendment of its workers’ com-

pensation law. In so ruling, Judge Oberdorfer relied prin-

cipally upon two cases: (1) Shaw v. Delta Air Lines, Inc., 463

U.S. 85 (1983), in which this Court held that a state disability

benefits law, requiring employers to provide monetary bene-

fits to women disabled from working because of pregnancy,

was not preempted by ERISA; and (2) R.R. Donnelley & Sons

Co. v. Prevost, 915 F.2d 787 (2d Cir. 1990), cert. denied, 111

S. Ct. 1415 (1991), in which the Second Circuit, interpreting

Shaw, ruled not preempted a state workers’ compensation

statute on which the District's Equity Amendment Act was

modeled. App. 22a-26a. In Judge Oberdorfer’s view, the

Equity Amendment Act, like the disability benefits law in

Shaw, and the workers’ compensation law in Donnelley,

‘related to" employee welfare benefit plans covered by

ERISA. App. 22a-23a & 25a. However, the Equity Amend-

ment Act was not totally preempted for that reason, because

that Act, like the statutes in Shaw and Donnelley, permits

employers to comply by establishing an employee benefit

plan, separate from their ERISA-covered plans, solely for

the purpose of complying with a state statute protected by

section 4(b)(3) of ERISA, 29 U.S.C. § 1003(b\(3). App. 25a-26a.

As a consequence, Judge Oberdorfer denied the Board of

Trade’s motion for declaratory and injunctive relief and

granted the District’s motion to dismiss. App. 30a.

The Court of Appeals.

The United States Court of Appeals for the District of

Columbia Circuit reversed. App. la. According to the court

of appeals, if a state law “relates to’’ an ERISA-covered plan,

it can be saved from preemption only if it is a law, such as

a law governing insurance, saved by section 514(b) of ERISA,

29 U.S.C. § 1144(b). App. 10a, 13a. Here, the Equity Amend-

ment Act relates to ERISA-covered plans by tying the Act's

coverage and benefit levels to those established by

employers’ ERISA-covered plans; and the Equity Amend-

ment Act is not a law encompassed by the savings clause

of section 514({b). App. lla-13a. The Equity Amendment

Act is therefore preempted even though employers can com-

ply with the Act by establishing and maintaining a plan

separate from their ERISA-covered plans. App. 15a. In so

ruling, the court acknowledged that Shaw ‘‘found that where

the [state] law gives employers the option of establishing a

separate benefit plan that is exempt from ERISA coverage

under section 4(b), such a law would not be preempted.’’ App.

lla-12a. The court ruled, however, that Shaw was

distinguishable because, in its view, ‘‘the state law in Shaw

related only to an employee disability insurance plan’’

exempt from ERISA, and not “to an ERISA-covered plan.’

App. 12a (emphasis supplied by court). Thus, ‘‘(t}he plan to

which the . . . Disability Benefits Law related was exempt,

so the law did not even qualify at the threshold for preemp-

tion.’’ App. 12a-13a (emphasis supplied by court). Accord-

ing to the court, ‘‘[hjad the Equity Amendment Act related

only to the workers’ compensation plan — had it, for exam-

ple, made no reference to existing ERISA-covered plans and

simply required all employers to provide specified minimum

health benefits for employees receiving workers’ compensa-

tion — it would clearly have survived preemption under the

principles announced in Shaw."’ App. 12a.

In its opinion, the court of appeals expressly declined to

follow the Second Circuit's decision in Donnelley even though

it recognized that ‘t]he statute at issue in Donnelley is

indistinguishable from the Equity Amendment Act” and that

the Second Circuit in Donnelley had ruled, based on Shaw,

that the state statute, on which the District had modeled its

Equity Amendment Act, was not preempted by ERISA. App.

15a.

Finally, the court of appeals examined the policy and pur-

pose of ERISA. Thus, Congress, in enacting ERISA, was

concerned that ‘‘ ‘[a] patchwork scheme of regulation would

introduce considerable inefficiencies in benefit program

operation, which might lead those employers with existing

plans to reduce benefits, and those without such plans to

refrain from adopting them.’’’ App. 16a, quoting Fort

Halifax Packing Co. v. Coyne, 482 US. 1,11 (1987). By way

of illustration, and in express contradiction of its earlier rul-

ing that the law in Shaw had not related to ERISA-covered

plans, the court of appeals explained that Congress

oncern for minimizing the burden on _ the ad-

minioteetion of ERISA-covered plans is reflected in

the decision of the [Supreme] Court in Shaw, where

it held that the Disability Benefits Law was pre-

empted to the extent that it applied to benefits pro-

vided under a multibenefit plan: ‘An employer with

employees in several States would find its plan sub-

ject to a different jurisdictional pattern of regula-

tion in each State, depending on what benefits the

State mandated under disability, work[ers’] compen-

sation, and unemployment compensation laws.

_ 16a (emphasis added), quoting Shaw, supra, 463 U.S. at

4 In the a of the Equity Amendment Act, the court of

appeals determined that it ‘could have a serious impact on the

administration and content of the ERISA-covered plan.” App.

17a. The court failed to identify, however, what potential bur-

den the Equity Amendment Act places on the administration

of ERISA-covered plans and held that preemption would be

required even if there were no such impact because the Act

could have an impact on employer decisions whether to pro-

vide health insurance benefits to employees and the level of

such benefits. App. 18a, citing Standard Oil Co. v. Agsalud,

633 F.2d 760 (9th Cir. 1980), aff'd mem., 454 U.S. 801 (1981).

This potential impact, according to the court, meant that the

District was impermissibly attempting “to regulate indirect-

ly” what it was ‘forbidden to regulate directly — the provi-

sion of health insurance benefits to employees pursuant to

plans covered by ERISA. App. 18a.

REASONS FOR GRANTING THE WRIT

This case raises important issues about the extent to which

ERISA restricts the power of the States and the District

of Columbia to require employers to provide benefits to

employees, including health insurance, as part of workers’

compensation, unemployment compensation, and disability

insurance laws. The court below has held that ERISA

precludes states from requiring health insurance, as part of

workers’ compensation for employees who suffer on-the-job

injuries, whenever these benefits are set by reference to what

employers otherwise provide their employees. It has done

so even though workers’ compensation laws typically set

benefits by reference to such employer decisions.

The decision below conflicts with this Court's decision in

Shaw, which found that ERISA permits states to enact

disability insurance and similar laws requiring employers to

provide benefits to employees so long as employers are given

the option of complying with such state laws by establishing

a plan separate from their ERISA-covered plans. The deci-

sion also conflicts with the Second Circuit's decision in Don-

nelley, which found that ERISA permits states to enact

workers’ compensation laws like the District's Equity

Amendment Act. Review by this Court is necessary to

resolve these conflicts in order to ensure a consistent inter-

pretation of an important federal statute in a manner that

properly preserves the power of the States and the District

to enact legislation in areas of traditional local concern and

on the important matter of employer-provided health in-

surance benefits. Review is particularly necessary now

because, only last year, this Court declined to review Don-

nelley. The States and the District of Columbia thus need

to have their powers clarified; and state and federal courts

need guidance in determining the extent to which ERISA

preempts local laws — workers’ compensation, unemploy-

ment compensation, and disability insurance laws — that

ERISA expressly preserves.

I. THE DECISION BELOW IS IN CONFLICT WITH

THIS COURT’S DECISION IN SHAW.

In Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), this

Court unanimously ruled that ERISA does not preempt state

legislation requiring employers to provide disability benefits

to employees to the extent that such legislation permits

employers to comply by establishing employee benefit plans

administratively separate from their ERISA-covered plans.

At issue in Shaw was a state law requiring employers to pay

monetary benefits for up to 26 weeks in any one-year period

to employees unable to work because of pregnancy or other

non-occupational disability. The disability benefits law was

challenged by employers who had employee benefit plans

subject to ERISA which did not include all the benefits man-

dated by the state law.

In Shaw, this Court took a two-step approach in determin-

ing whether the state law was preempted by ERISA: ‘The

issues are whether the [state laws] . . . ‘relate to’ employee

benefit plans within the meaning of § 514(a), . . . and,

if so, whether any exception in ERISA saves them from pre-

emption.”’ Jd. at 96.° According to this Court, “‘[a] law

‘relates to’ an employee benefit plan, in the normal sense of

the phrase, if it has a connection with or reference to such

a plan.’ Jd. at 96-97.

This Court ruled that ‘‘the Disability Benefits Law plainly

is a state law relating to employee benefit plans,’’ and that,

as a consequence, whether the law was preempted depended

on whether “‘the plans to which it relates are exempt from

>» Shaw also involved the validity of a state human rights law prohibiting

employment discrimination, including discrimination in employee benefit

4lans, on the basis of pregnancy. This Court ruled that this law was

preempted insofar as it prohibited practices by ERISA-covered benefit

plans that were lawful under federal law; this Court also ruled, pursuant

to section 514(d) of ERISA, 29 U.S.C. § 1144(d)(4), a provision which saves

other federal laws from preemption, that the state human rights law was

not preempted to the extent that it prohibited practices that were also

prohibited by federal law.

ERISA under § 4(b).”" Jd. at 106. More specifically, because

the state law at issue was an employment-related disability

insurance law, preemption turned on the meaning of section

4(b\(3) of ERISA, which exempts from ERISA coverage

employee benefit plans “ ‘maintained solely for the purpose

of complying with applicable [workmen's compensation laws

or unemployment compensation or] disability insurance

laws.’ "’ Jd., quoting 29 U.S.C. § 1003(b)(3).

This Court identified two problems in resolving this issue.

First, some of the employers affected by the state law had

multibenefit plans governed by ERISA that provided

benefits not required by the state law; this was problematic

because the plans exempted from ERISA under section

4(b)(3) encompass only plans ‘‘maintained solely’’ to comply

with the designated state laws. Jd. at 106-07. ‘The test”’

for determining this matter, this Court ruled, is “‘whether

the plan, as an administrative unit, provides only those

benefits required by the applicable state law."’ Jd. at 107.

Thus, because there cannot be mutually exclusive pockets

of federal and state jurisdiction within a plan, “‘{o|nly

separately administered disability plans maintained solely

to comply with the Disability Benefits Law are exempt from

ERISA coverage under § 4(b\(3)."’ Jd. at 108.

The second problem confronting this Court in Shaw was

to prevent employers from evading lawful state regulation

of employee welfare benefits pursuant to workers’ compen-

sation, unemployment compensation, and disability

insurance laws by the expedient of adopting multibenefit

plans subject to ERISA that combine benefits inferior to

those required by state law with other benefits. To keep from

making enforcement of these state laws ‘‘impossible,”’ a

result ‘‘Congress surely did not intend,” this Court held in

Shaw that such laws are not preempted by ERISA so long

as they give employers the option of complying with them

by establishing plans that are administratively separate from

their ERISA-covered plans. /d. at 108. In a key passage,

this Court articulated the central principle governing ERISA

preemption of state workers’ compensation, unemployment

compensation, and disability insurance laws as follows:

A State may require an employer to maintain a

disability plan complying with state law as a sepa-

rate administrative unit. Such a plan would be

exempt under § 4(b)(3). The fact that state law per-

mits employers to meet their state-law obligations

by including disability insurance benefits in a

multibenefit ERISA plan . . . does not make the

state law wholly unenforceable as to employers who

choose that option.

In other words, while the State may not require

an employer to alter its ERISA plan, it may pee

the employer to choose between providing disability

benefits in a separately administered plan and includ-

ing the state-mandated benefits in its ERISA plan.

If the State is not satisfied that the ERISA plan

comports with the requirements of its disability

insurance law, it may compel the employer to main-

tain a separate plan that does comply.

Id. at 108 (emphasis added). As applied to the case before

it, this Court held that the state disability benefits law was

preempted to the extent that it would permit enforcement

by requiring employers to alter their ERISA-covered plans.

This Court also held that the law was not preempted to the

extent that it gave employers the option of establishing a

separate administrative unit to comply with its terms.

Given this Court's rulings in Shaw that the disability

benefits law was preempted in part and not preempted in

part, it is apparent that Shaw rests on two fundamental prin-

ciples. First, Shaw recognizes that benefits required by

workers’ compensation, unemployment compensation, or

disability insurance laws are, by definitic», employee welfare

benefits, that is, ‘‘benefits in the event of sickness, accident,

disability . . . or unemployment”’ within the meaning of

section 3(1) of ERISA, 29 U.S.C. § 1002(1). As a conse-

quence, such state laws necessarily will “relate to” ERISA-

covered employee welfare benefit plans. Second. to avoid pre

emption of all state laws governing workers’ compensation,

unemployment compensation, and disability — a result Con-

gress plainly did not intend in view of ERISA’s express

exemption for plans maintained solely to comply with such

laws — Shaw allows states to enact such laws so long as these

laws permit employers to comply by establishing an em-

ployee benefit plan separate from their ERISA-covered plans.

lo rule otherwise would allow employers to evade compliance

with workers’ compensation, unemployment compensation,

and disability insurance laws by establishing an ERISA-

covered employee welfare benefit plan combining benefits

not required by state law with benefits inferior to those

required by state law.

The decision of the court of appeals here thus squarely con-

flicts with Shaw in a number of respects:

l. The court of appeals ignored Shaw's holding that state

legislation encompassed by section 4(b)(3) of ERISA is not

preempted, even if it ‘‘relates to’ an ERISA-covered plan,

insofar as it governs plans maintained solely for the purpose

of complying with such state legislation. Instead, it errone-

ously interpreted Shaw as merely ruling that the New York

disability insurance law was not preempted because the law

did not ‘‘relate to'’ ERISA-covered plans. This was an error

the court of appeals acknowledged elsewhere in its opinion

when it described Shaw as holding that “the Disability

Benefits Law was preempted to the extent that it applied

to benefits provided under a multibenefit plan” subject to

ERISA. App. 16a. Plainly, if the New York law had not

related to ERISA-covered plans, it would not have been

preempted by ERISA to any extent. Thus, as this Court

ruled in Shaw, *|t}he court of appeals erred . . . in holding

that New York was not at all free to enforce the Disability

Benefits Law against those’’ employers “that provide

disability benefits as part of multibenefit plans.” Shaw.

supra, 463 U.S. at 108. Here, too, the court of appeals erred

in holding that the District of Columbia is not at all free to

enforce its Equity Amendment Act against those employers

that provide health insurance as part of ERISA-covered

multibenefit plans.

2. The court of appeals erroneously ruled that, because

ERISA does not list workers’ compensation laws in its “‘sav-

ings” clause ( § 514(b)), along with insurance and similar laws,

workers’ compensation laws are preempted whenever they

‘relate to’’ ERISA-covered plans by expressly referring to

such plans. The fact that the preemption provision of

ERISA, section 51 4(a), incorporates a savings clause for state

insurance and similar laws, does not negate the statutory

exemption from preemption in section 51 4(a) for laws, such

as workers’ compensation and disability insurance laws, that

relate to plans which are exempt from ERISA coverage by

virtue of section 4(b¥3). Indeed, this Court in Shaw described

both “[sjections 4(b)(3) and 51 4(b)"’ as provisions “‘which list

specific exceptions’ to preemption. 463 U.S. at 104.

3. The court of appeals erred in ruling that the District's

Equity Amendment Act runs afoul of ERISA because it

“relates to’ ERISA-covered plans by expressly referencing

such plans in establishing health insurance coverage and

benefit levels. ERISA itself makes no distinction based on

the manner in which a workers’ compensation or similar law

“relates to’ an ERISA-covered plan so long as the law does

not require employers to alter their ERISA-covered plans.

As this Court ruled in Shaw, the term “relates to” means

having ‘‘a connection with or reference to such a plan.’ 463

U.S. at 97 (emphasis added). Furthermore, there are no

policy reasons underlying ERISA that would support dis-

parate treatment of a law, such as that in Shaw, which has

a connection with ERISA-covered plans, and a law, such as

that in Donnelley and in this case, which has a reference to,

and thus a connection with, such plans. Under this Court's

analysis in Shaw, the District's Equity Amendment Act is

just like New York's Disability Benefits Law: it “relates to’

ERISA-covered plans, voluntary employer-sponsored em-

ployee welfare benefit plans providing various benefits. but

an employer may comply with the Act by establishing a plan

separate from its ERISA-covered plan.

4. The court of appeals erred in stating that the District

has impermissibly “tried to regulate indirectly what”’ it is

forbidden to regulate directly.” App. 18a. To the contrary,

the Equity Amendment Act does not require employers to

provide health insurance benefits to employees under their

ERISA-covered plans and it does not purport to regulate the

terms or the administration of such plans. Under the Equity

Amendment Act, employers remain free to alter their ERISA-

covered plans as they deem appropriate. All that the Act

does 1s Lo require employers, who provide health insurance

to their employees pursuant to their ERISA-covered plans,

to provide equivalent health insurance to their employees

entitled to workers’ compensation. Employers may comply

with chis Act by establishing plans that are separate from

their ERISA-covered plans, ie., plans established solely for

the purpose of complying with the Equity Amendment Act.“

* This Court's other decisions involving workers’ compensation laws

or health insurance benefits in which preemption was found are very dif.

ferent from the iaw at issue here. Thus, Alessi». Raybestos-Manhattan

Inc, 451 US. 504 (1981). involved a state statute forbidding employers

from integrating employee benefits payable pursuant to ERISA-covered

pension plans with employee benefits payable pursuant to workers com.

pensation laws. That state statute not only precluded employers from

establishing a plan separate from their EK KISA-covered plans in order to

comply with it, but alse conflicted with federal law permitting integra

tion of such benefits. Standard Oil Co + Agsalud, 633 F 2d 760 (9th Cir

1980), aff'd mem, 454 US. 801 (1981), involved a state law which required

employers to provide their employees with a comprehensive health-care

plan. and thus required employers to alter their EKISA-covered plans

In Standard Onl, the court of appeals also ruled that the state law was

not a disability insurance law, and thus protected by section 4b)

of ERISA, 29 U.S.C. § 1003(bW3), because the state required benefits

to be paid without regard to a disabling injury. 633 F 2d at 764 By

[Footnote continued on next page} .

5. The court of appeals erred in ruling that the Equity

Amendment Act is different, for ERISA purposes, from a

workers’ compensation law that sets health insurance bene-

fits for injured employees without reference to health insur-

ance benefits provided by employers pursuant to their

ERISA-covered plans. Even a statute of the latter type

would have a connection with, and thus ‘relate to,” ERISA-

covered plans, whether such plans provided no health insur-

ance benefits to injured workers, 30 days of such benefits,

or even 104 weeks of such benefits. See infra note 7. Such

a statute might also cause employers to modify benefits

provided by their ERISA-covered plans and result in admin-

istrative difficulties, particularly where the benefits required

by law for injured workers differ from those provided by an

ERISA-covered plan. This statute would not, of course, be

preempted by ERISA so long as employers could comply

with it by establishing an employee benefit plan separate

from their ERISA-covered plans.

Il. THE DECISION BELOW CREATES A SQUARE

AND INTOLERABLE CONFLICT WITH THE

SECOND CIRCUIT.

The court of appeals expressly acknowledged that the Dis-

trict’s Equity Amendment Act is ‘‘indistinguishable” from

the state workers’ compensation legislation that withstood

an ERISA-based attack in R.R. Donnelley & Sons Co. v. Pre-

vost, supra. App. 15a. The court of appeals also expressly ac-

knowledged that its decision squarely conflicts with Donnelley:

{Footnote continued from the previous page| )

contrast, the Equity Amendment Act requires health insurance to be pro-

vided only to employees who are receiving or who are eligible to receive

workers’ compensation, a law that does not require employers to alter

their ERISA-covered plans. Finally, Stone & Webster Engg Corp t

lisley. 690 F.2d 323 (2d Cir. 1982), aff'd mem. sub nom., Arcudi v. Stone

& Webster Eng'g Corp., 463 U.S. 1220 (1983), involved a state workers

compensation law that required employers to alter their ERISA-covered

multibenefit plans to provide health insurance to injured workers, a law

that Shaw mede clear is preempted by ERISA. See also infra at 1%

[W]e disagree with the conclusion of the Second Circuit in

Donnelley and conclude that the district court in this case

erred in holding that the Equity Amendment Act was not

preempted.” App. |6a.

The court of appeals is correct that its decision cannot be

reconciled with the Second Circuit's decision in Donnelley.

In Donnelley, the Second Circuit ruled that ERISA does not

preempt a workers’ compensation law requiring employers,

who provide health insurance to their employees, also to pro-

vide equivalent benefits to employees eligible to receive

workers’ compensation. In so ruling, the Second Circuit

recognized that, under Shaw, the statute ‘‘related to’ an

ERISA-covered employee welfare benefit plan.’ However.

the statute was not preempted pursuant to Shaw's inter-

pretation of the exemption from preemption for state laws

governing employee benefit plans maintained solely for the

purpose of complying with state workers’ compensation,

unemployment compensation, or disability insurance stat-

utes. Thus, the Second Circuit found significant the “caveat”

in Shaw that ERISA should not be construed to allow

employers to circumvent such state laws by establishing

ERISA-covered employee benefit plans combining benefits

inferior to those required by state law with other benefits

not required by state law. 915 F.2d at 793. In applying

Shaw to the case before it, the Second Circuit observed that

the state statute permitted an employer to comply with its

requirements by establishing an administrative unit separate

from the unit administering its ERISA plan. The fact that

the statute also afforded an employer alternative avenues

by which to comply with its requirements did not require

the conclusion that it was preempted by ERISA. Thus, “‘if

Shaw allows a state to authorize alternatives to a separate

plan within an ERISA plan without losing the benefit of the

Indeed, in Donnelley, the employer who challenged the state statute

had provided for up to 104 weeks of health insurance in its ERISA plan

for employees receiving workers’ compensation. 915 F.2d at 790.

section 1003(b)\(3) exemption, it may surely authorize such

alternatives outside the confines of an ERISA plan without

doing so."' Jd. at 793-94 (emphasis in original).

The Second Circuit also distinguished its earlier decision

in Stone & Webster Eng'g Corp. v. Ilsley, 699 F.2d 323 (1982),

aff'd mem. sub nom., Arcudi v. Stone & Webster Eng’g Corp.,

463 U.S. 1220 (1983), in which it had ruled preempted a state

statute requiring employers who provide health insurance

to their employees also to provide health insurance to injured

workers. That earlier statute had required employers to pro-

vide such benefits by altering their ERISA-covered plans

and did not give them the option, found critical in Shaw, of

establishing a plan solely for the purpose of complying with

the workers’ compensation law.

Like the law held not preempted in Donnelley, the Dis-

trict’s Equity Amendment Act does not require an employer

to alter its ERISA-covered employee welfare benefit plan,

but simply provides that an employer, otherwise subject to

the District's workers’ compensation law, shall provide

health insurance in addition to benefits already required to

be provided to employees who receive or who are eligible to

receive workers’ compensation. Furthermore, the Equity

Amendment Act permits an employer to comply with its

terms by establishing an administrative unit that is separate

from its ERISA-covered plan. As the Second Circuit ruled

in Donnelley, under Shaw, there is no preemption bar to this

Act. Instead, the Act is well within the workers’ compen-

sation laws that Congress expressly declined to preempt in

ERISA.

CONCLUSION

The decision of the court of appeals in this case, inter-

preting an important federal statute in a manner that

restricts the powers of the States and the District of Co-

lumbia to enact workers’ compensation, unemployment com-

pensation, and disability insurance laws, is in direct conflict

—-— comme «eee

with a decision of this Court and a decision of the Second

Circuit. This petition should be granted to resolve these con-

flicts, both to ensure uniform application of ERISA and to

restore to the States and the District the powers reserved

to them by ERISA in the important areas of workers’ com-

pensation, unemployment compensation, and disability in-

surance laws.

Respectfully submitted,

JOUN Payton,

Corporation Counsel,

Cuarces L. Reiscuer,

Deputy Corporation Counsel

Appellate Division

Donna M. Murasky,

Assistant Corporation Counsel

Counsel of Record

Office of the Corporation Counsel

District Building Room 305

1350 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Telephone: (202) 727-6252

APPENDIX A

Notice: This opinion is subject to formal revision before publication in

the Federal Reporter or U.S.App.D.C. Reports. Users are requested to

notify the Clerk of any formal errors in order that corrections may be

made before the bound volumes go to press.

Gnited States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 22, 1991 Decided November 15, 1991

No. 91-7061

GREATER WASHINGTON BoaRD OF TRADE, APPELLANT

District OF COLUMBIA

and SHARON Pratt DIXON, APPELLEES

Appeal from the United States District Court

for the District of Columbia

(Civil Action No. 91-00511)

Lawrence P. Postol for appellant.

Donna M. Murasky, Assistant Corporation Counsel,

Office of the Corporation Counsel, with whom John

Payton, Corporation Counsel, and Charles L. Reischel,

Deputy Corporation Counsel, were on the brief for appel-

lees. Martin B. White, Counsel, Office of the Corporation

Counsel, also entered an appearance for appellees.

Bills of costs must be filed within 14 days after entry of judgment. The

court looks with disfavor upon motions to file bills of costs out of time.

Before Mikva, Chief Judge, Watp and Buck.ey, Circuit

Judges.

Opinion for the Court filed by Circuit Judge WALD».

Wap, Circuit Judge: Appellant Greater Washington

Board of Trade (“Board”) is a nonprofit corporation that

provides health insurance to its employees. The Board

brought suit against appellees District of Columbia

(“District”) and Mayor Sharon Pratt Dixon seeking an

injunction against the enforcement of a provision of the

District of Columbia Workers’ Compensation Equity

Amendment Act of 1990 (D.C. Act 8-261) (“Equity Amend-

ment Act” or “Act”), 37 D.C. Reg. 6890 (1990) (codified in

scattered sections of D.C. Copr ANN. §§ 36-301 to -342.1

(Supp. 1991)). The Board claimed that section 2(c)(2) of

the Equity Amendment Act was preempted by the

Employee Retirement Income Security Act of 1974

(“ERISA”), § 514(a), 29 U.S.C. § 1144(a) (1988).' Appeliees

filed a motion to dismiss the complaint, arguing that the

Act was not preempted by ERISA. On March 27, 1991, the

district court granted appellees’ motion to dismiss and

denied the Board’s motion for a preliminary injunction.

See Greater Wash. Bd. of Trade v. District of Columbia,

‘Appellant conceded at oral argument that it was no longer

pressing the alternative argument that Congress never contem-

plated in 1974, when exempting workers’ compensation plans

from ERISA coverage, see 29 U.S.C. § 1003(bX3) (1988), that such

plans would include mandated health benefits. The Supreme

Court found a similar argument with respect to “innovative”

insurance contracts unpersuasive:

The presumption is against pre-emption, and we are not

inclined to read limitations into federal statutes in order to

enlarge their preemptive scope. Further, there is no indica-

tion in the legislative history that Congress had such a dis-

tinction [between traditional and innovative insurance laws}

in mind. —

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 741

(1985). We agree that “innovative” workers’ compensation plans

should be treated the same as other “workers’ compensation

plans” within the meaning of ERISA.

No. 91-00511 (D.D.C. Mar. 27, 1991) (“Memorandum

Opinion”) at 2. Because we find that the plain meaning

of ERISA’s preemption provision as well as the policies

and purposes furthered by ERISA preemption compel the

conclusion that section 2(c)\(2) of the Equity Amendment

Act is preempted, we reverse.

I. BackGRouND

A. The Equity Amendment Act

The Equity Amendment Act became effective on March

6, 1991." The Act amended portions of the District's work-

ers compensation law, D.C. Cope ANN. §§ 36-301 to -345

(1981 & Supp. 1991), “in order to promote a fairer system

of compensation, facilitate a more expeditious processing

of claims, and establish a Commission to study the proce-

dure and method of ratemaking for workers’ compensation

insurance,” Equity Amendment Act preamble. Although

the Act amended several sections of the workers’ compen-

sation law, the only relevant provision on this appeal is

the following:

(1) Any employer who provides health insurance

coverage for an employee shall provide health insur-

ance coverage equivalent to the existing health insur-

ance coverage of the employee while the employee

receives or is eligible to receive workers’ compensa-

tion benefits under this act.

“Pursuant to the District of Columbia Self-Government and

Governmental Reorganization Act, Pub. L. No. 93-198, § 602(c)1)

87 Stat. 774, 814 (1973) (codified as amended at D.C. Cope ANN.

§ 1-2331e%1) (1981)), the Council of the District of Columbia

(“Council”) is required to transmit an act, once it has been signed

by the mayor, to Congress. The act will become law within thirty

days unless Congress adopts a concurrent resolution disapproving

it. The Council transmitted the Equity Amendment Act to Con-

gress on January 11, 1991; no concurrent resolution having been

passed, the Act became D.C. Law 8-198 on March 6, 1991. See

Notice, 38 D.C. Reg. 1752 (1991).

(3) The provision of health insurance coverage shall

not exceed 52 weeks and shall be at the same benefit

level that the employee had at the time the employee

received or was eligible to receive workers’ compensa-

tion benefits.

Equity Amendment Act § 2(c)(2) (codified at D.C. Copr

Ann. § 36-307(a-1)(1), (3) (Supp. 1991)). By its terms, the

Act requires employers to provide health benefits to

employees eligible for workers’ compensation benefits only

if the employers already provide health benefits under a

different plan.

The original version of the bill did not require employ-

ers to provide benefits to employees receiving workers’

compensation; however, a substitute bill containing the

provision for health benefits was passed by the Committee

on Housing and Economic Development on July 6, 1990.”

Section 2(c)(2) of the substitute bill read as follows:

Any employer who provides health insurance cover-

age for an employee shall maintain the health insur-

ance coverage of the employee while the employee

receives or is eligible to receive workers’ compensa-

tion benefits under this act.

D.C. Bill 8-74 (as amended), § 2(c2) (1990) (emphasis

added).* The Council amended the bill once again before

it was passed. The portion of the substitute bill italicized

above was replaced by the language eventually included

in the Act:

Any employer who provides health insurance cover-

age for an employee shall provide health insurance

coverage equivalent to the existing health insurance

coverage of the employee while the employee receives

‘For the legislative history of the Act up to the point that it was

reported to the Council, see Comm. oN Hous, anp Economic Dev,

Report To THE Counc. oF THE District oF COLUMBIA ON THE “DisTRICT

or CotumBiA Workers’ Compensation Equity AMENDMENT ACT OF

1990,” Bus. 8-74 (July 6, 1990) (“Report on Bit, 8-74”).

‘The substitute bill is reprinted as Attachment F in Report on

Bit. 8-74, id.

or is eligible to receive workers’ compensation bene-

fits under this act.

Equity Amendment Act § 2(c)(2) (codified at D.C. Cope

ANN. § 36-307(a-11) (Supp. 1991)) (emphasis added).

B. ERISA

ERISA was enacted in 1974 as a statutory scheme the

primary purpose of which was to protect

the interests of participants in employee benefit

plans and their beneficiaries, by requiring the disclo-

sure and reporting to participants and beneficiaries

of financial and other information with respect

thereto, by establishing standards of conduct, respon-

sibility, and obligation for fiduciaries of employee

benefit plans, and by providing for appropriate reme-

peers sanctions, and ready access to the Federal

courts.

ERISA § 2(b) (codified at 29 U.S.C. § 1001(b) (1988)).

ERISA defines an “employee benefit plan” as either an

employee welfare benefit plan—which generally provides

for some combination of medical, health, sickness, acci-

dent, disability, death, or unemployment benefits—or an

employee pension benefit plan—which generally provides

for retirement income. Jd. § 3(1)-(3) (codified at 29 U.S.C.

§ 1002(1)-(3) (1988)).

Section 514(a) of ERISA expressly provides for the pre-

emption of state law:

Except as provided in subsection (b) of this section,

the provisions of this title and title IV shall supersede

any and all State laws insofar as they may now or

hereafter relate to any employee benefit plan

described in section 4(a) and not exempt under sec-

tion 4(b).

Id. § 514(a) (codified at 29 U.S.C. § 1144(a) (1988)).°

Subsection (b) of section 514 provides for various exceptions to

the general preemption provision, the most significant of which

is the so-called “saving” clause: “Except as provided in subpara-

The scope of ERISA’s coverage, and the exceptions to

that coverage, are defined in section 4:

(a) Except as provided in subsection (b) and in sec-

tions 201, 301, and 401 [provisions defining coverage

more narrowly for certain purposes], this title shall

apply to any employee benefit plan if it is established

or maintained—

(1) by any employer engaged in commerce or in

any industry or activity affecting commerce; or

(2) by any employee organization or organiza-

tions representing employees engaged in com-

merce or in any industry or activity affecting

commerce; or

(3) by both.

(b) The provisions of this title shall not apply to any

employee benefit plan if—

(3) such plan is maintained solely for the pur-

pose of complying with applicable work(ers’) com-

pensation laws or unemployment compensation

or disability insurance laws.

Id. § 4 (codified at 29 U.S.C. § 1003 (1988)).

h (B), nothing in this subchapter shall be construed to

al or relieve Po person from any law of any State which

regulates insurance, banking, or securities.” ERISA § 514(bx 2K A)

(codified at 29 U.S.C. § 1144(b\(2A) (1988)). Subparagraph (B) is

the so-called “deemer” clause, and it provides that no covered plan

or trust created under such plan shall be deemed to be an insur-

ance or banking company for purposes of any law of any state

purporting to regulate insurance companies, insurance contracts,

banks, trust companies, or investment companies. See id.

§ 514(b\ 2B) (codified at 29 U.S.C. § 1144(bX2xB) (1988)); Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45 (1987).

Il. Discussion

A. Preemption

Although the Supremacy Clause* invalidates state laws

that “interfere with, or are contrary to the laws of

Congress,” Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 211

(1824), the exercise of federal supremacy is not lightly to

be presumed. See Alessi v. Raybestos-Manhattan, Inc., 451

U.S. 504, 522 (1981); New York State Dep't of Social

Servs. v. Dublino, 413 U.S. 405, 413 (1973). In deciding

whether a federal law preempts a state statute, the

court’s task “is to ascertain Congress’ intent in enacting

the federal statute at issue.” Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 95 (1983). Preemption “may be either express

or implied, and [it] ‘is compelled whether Congress’ com-

mand is explicitly stated in the statute’s language or

implicitly contained in its structure and purpose.’”

Fidelity Fed. Sav. & Loan Ass'n v. De la Cuesta, 458 U.S.

141, 152-53 (1982) (quoting Jones v. Rath Packing Co.,

430 U.S. 519, 525 (1977)).

1. Legislative History

Congress expressly provided in section 514(a) of ERISA

for federal preemption of all state laws that “relate to”

ERISA-covered plans. In favorably reporting the bill to

the full Senate, the Committee on Labor and Public Wel-

fare explained that

[blecause of the interstate character of employee ben-

efit plans, the Committee believes it essential to pro-

vide for a uniform source of law in the areas of

vesting, funding, insurance and portability stan-

dards, for evaluating fiduciary conduct, and for creat-

ing a single reporting and disclosure system in lieu

of burdensome multiple reports.

S. Rep. No. 127, 93d Cong., Ist Sess. 35 (1973), reprinted

in 1974 U.S.C.C.A.N. 4838, 4871.’ Similarly, the House

*U.S. Const. art. VI, cl. 2.

"The legislative history of ERISA has been compiled and pub-

lished in a three-volume set. Senate Report No. 127 is reprinted

in 1 Suncomm, on Lanor or tue Senate Comm. on Lanor anp Pun.

Weirare, 94th Conc., 2d Sess., Lecistative History oF THE

Emptover Retirement Income Securrry Act or 1974, at 587, 621

(Comm. Print 1976) (“ERISA Leaisiative History”).

Committee on Education and Labor observed that “it is

evident that the operations of employee benefit plans are

increasingly interstate. The uniformity of decision which

the Act is designed to foster will help administrators, fidu-

ciaries and participants to predict the legality of proposed

actions without the necessity of reference to varying

laws.” H.R. Rep. No. 533, 93d Cong., Ist Sess. 12 (1973),

reprinted in 1974 U.S.C.C.A.N. 4639, 4650."

Although both the House and Senate recognized the

need for broad federal preemption in the area of employee

benefit plans, the original bills contained preemption lan-

guage significantly narrower than the version ultimately

adopted by Congress. The earlier Senate version provided

only for the preemption of all state laws that “relate to

the subject matters regulated by this Act or the Welfare

and Pension Plans Disclosure Act.” H.R. 2 (Senate ver-

sion), 93d Cong., 2d Sess. § 699(a) (1974).” The House ver-

sion preempted only those laws that “relate to the

reporting and disclosure responsibilities, and fiduciary

responsibilities, of persons acting on behalf of any

employee benefit plan to which part 1 applies.” H.R. 2

(House version), 93d Cong., 2d Sess. § 514(a) (1974)."°

The Conference Committee rejected both the House and

Senate formulations in favor of the broader preemption

language contained in the present statute, explaining that

(uJnder the substitute, the provisions of title I are to

supersede all State laws that relate to any employee

benefit plan that is established by an employer

engaged in or affecting interstate commerce or by an

employee organization that represents employees

engaged in or affecting interstate commerce. (How-

ever, following title I generally, preemption will not

apply to government plans, church plans

“The House Report is also reprinted in 2 id. at 2348, 2359.

“The Senate bill is reprinted in 3 ERISA Lraisiative History,

supra note 7, at 3599, 3820.

“The House bill is reprinted in 3 ERISA Lecisiative History,

supra note 7, at 3898, 4057-58.

work(ers’) compensation plans, non-U.S. plans pri-

marily for nonresident aliens, and so called “excess

benefit plans.”).

H.R. Conf. Rep. No. 1280, 93rd Cong., 2d Sess. 383 (1974),

reprinted in 1974 U.S.C.C.A.N. 5038, 5162.'' Representa-

tive Dent, ERISA’s principal sponsor in the House, spoke

in support of the Conference version of the bill:

Finally, I wish to make note of what is to many the

crowning achievement of this legislation, the reserva-

tion to Federal authority [of] the sole power to regu-

late the field of employee benefit plans. With the

preemption of the field, we round out the protection

afforded participants by eliminating the threat of

crates and inconsistent State and local regula-

on.

120 Conc. Rec. 29,197 (1974)."*

2. Judicial Interpretation

| Section 514(a) “is conspicuous for its breadth. It estab-

lishes as an area of exclusive federal concern the subject

of every state law that ‘relate{s] to’ an employee benefit

plan governed by ERISA.” FMC Corp. v. Holliday, 111 S.

Ct. 403, 407 (1990). A law relates to an employee benefit

plan, “in the normal sense of the phrase, if it has a con-

nection with or reference to such a plan.” Shaw v. Delta

Air Lines, Inc., 463 U.S. 85, 97 (1983); Metropolitan Life

Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985). Under

this common-sense meaning of the words, “a state law

may ‘relate to’ a benefit plan, and thereby be pre-empted,

even if the law is not specifically designed to affect such

plans, or the effect is only indirect.” Ingersoll-Rand Co. v.

McClendon, 111 S. Ct. 478, 483 (1990). While it is true

''The Conference Report is also reprinted in 3 ERISA

Lecisiative. History, supra note 7, at 4277, 4650.

'’The House floor debates are reprinted in 3 ERISA Lecistative

History, supra note 7, at 4657, 4670; see also 120 Conc. Rec.

29,933 (1974) (remarks of Senator Williams, principal sponsor of

bill in Senate), reprinted in 3 ERISA Lecisiative History, supra

note 7, at 4731, 4745-46.

10a

that “[slome state actions may affect employee benefit

plans in too tenuous, remote, or peripheral a manner to

warrant a finding that the !aw ‘relates to’ the plan,

Shaw, 463 U.S. at 100 n.21, the Supreme Court has con-

cluded “that state laws which make ‘reference to’ ERISA

plans are laws that ‘relate to’ those plans within the

meaning of § 514(a).” Mackey v. Lanier Collection Agency

& Serv., Inc., 486 U.S. 825, 829 (1988) (holding that state

law relates to ERISA-covered plan when it provides that

plans subject to the provisions of ERISA shall not be sub-

ject to the process of garnishment); Metropolitan Life, 471

U.S. at 739 (holding that state law relates to ERISA-

covered plan when it requires all benefit plans to pur-

chase specified mental-health benefits when they pur-

chase a certain common insurance policy).'*

A conclusion that a law “relates to” an ERISA-covered

plan does not end the preemption inquiry, however. Once

a court determines that section 514(a) has been satisfied,

it must then check to see whether the law is nonetheless

exempt from preemption under section 514(b). See Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 35, 48 (1987). Only if

the law does not qualify for an exemption from preemp-

tion under section 514(b) is it correct to conclude that the

law which “relates to” an ERISA plan is preempted."

B. The District Court’s Decision

The district court in this case concluded that the Equity

Amendment Act “relates to” an ERISA-covered employee

benefit plan “because benefits under the Act are set by

Sw with the Fifth Circuit that the “Shaw ‘exception’—

that ERISA does not preempt state laws which affect benefit

plans in a tenuous or peripheral manner—applies only to laws of

general application; it does not protect state laws which specifi-

cally refer to ERISA benefit plans.” Jn re Dyke, 943 F.2d 1435,

1448 (5th Cir. 1991). ar

The categories of exempted laws under section 514(b) inclu

state criminal laws and laws regulating insurance, banking, and

securities. See supra note 5 (discussing “saving” clause), see also

infra note 27 (discussing exemption for Hawaii's Prepaid Health

Care Act).

lla

reference to covered employee benefit plans.” Memoran-

dum Opinion at 3. Indeed, appellees do not dispute that

the Equity Amendment Act “relates to” an ERISA-covered

employee benefit plan.'®

The district court implicitly recognized that the Equity

Amendment Act relates, in fact, to two different plans:

First, the Act “relates to” an ERISA-covered plan by

requiring that the new benefits be “equivalent” to those

already provided under an existing covered plan and by

defining the employers who are obliged to provide the new

benefits as those who already provide benefits under a

covered plan. Second, by requiring new benefits to be pro-

vided to employees who have been injured on the job, the

Act “relates to” a workers’ compensation plan that is, by

virtue of the exemption for such plans under section

4(b\(3), exempt from ERISA coverage. So, the Act relates

both to an ERISA-covered plan and to a plan that is

exempt from ERISA coverage.

The district court relied on Shaw v. Delta Air Lines,

Inc., 463 U.S. 85 (1983), for the argument that because

the Act related to a plan that was exempt from ERISA

coverage, it was saved from preemption. In Shaw, the

Court considered whether New York's Disability Benefits

Law was preempted by ERISA." The Court found that

‘See Brief for Appellees (filed Sept. 6, 1991) at 19-20.

'*The 1983 version of the Disability Benefits Law provided, in

pertinent part, that

|tlhe weekly benefit which the disabled employee is entitled

to receive for disability commencing on or after July first,

nineteen hundred seventy-four shall be one-half of the

employee's average weekly wage, but in no case shall such

benefit exceed ninety-five dollars nor be less than twenty-

dollars ....

N.Y. Work. Comp. § 204.2 (McKinney 1982-83); see Shaw, 463 U.S.

at 90 n.4. The Court also faced the question of whether ERISA

preempted New York’s Human Rights Law. The Court held that

the Human Rights Law was preempted only insofar as it prohib-

ited practices that were lawful under federal law. This aspect of

the Shaw decision is not relevant to our consideration of the

issues now before us.

l2a

where the law gives employers the option of establishing

a separate benefit plan that is exempt from ERISA cover-

age under section 4(b), such a law would not be preempted.

But the state law in Shaw related only to an employee

disability insurance plan. Relying on the earlier case of

Alessi v. Raybestos-Manhattan, Inc., 451-U.S. 504, 523

n.20 (1981), the Court in Shaw concluded that where a

law relates to a plan that is explicitly exempt from ERISA

coverage under section 4(b)—as are all plans maintained

solely to comply with disability insurance (and workers

compensation) laws—that law is not preempted. But in

our case, as we have already observed, the Equity Amend-

ment Act relates to two plans—ore that is ERISA covered

and one that is exempt from ERISA coverage. Had the

Equity Amendment Act related only to the workers’ com-

pensation plan—had it, for example, made no reference to

existing ERISA-covered plans and simply required all

employers to provide specified minimum health benefits

for employees receiving workers’ compensation—it would

clearly have survived preemption under the principles

announced in Shaw.

The key issue in distinguishing Shaw from this case is

that the Court in Shaw never found that the New York

Disability Benefits Law related to an ERISA-covered plan.

The Court did find that the Disability Benefits Law

plainly related to an “employee benefit plan,” Shaw, 463

U.S. at 106, but a law is preempted under section 514 a)

only if it relates to an employee benefit plan that is not

exempt. The plan to which the New York Disability Bene-

"The Court in Shaw recognized that “Congress surely did not

intend, at the same time it preserved the ‘e of state disability

laws, to make enforcement of those laws impossible. A State may

require an employer to maintain a disability plan complying with

state law as a separate administrative unit.” Shaw, 463 U.S. at

108. The Court explained further that “while the State may not

require an employer to alter its ERISA plan, it may force the

employer to choose between providing disability benefits in a sep-_

arately administered plan and including the state-mandated ben-

efits in its ERISA plan.” /d.

l3a

fits Law related was exempt, so the law did not even qual-

ify at the threshold for preemption.

Shaw would have governed this case had the Equity

Amendment Act related only to the exempt plan; in that

case, the Act would not have been preempted. But Shaw

does not tell us why an Act that relates to an ERISA-

covered plan can avoid preemption simply because it also

relates to a plan exempt from ERISA coverage. Not only

is there no authority in Shaw for this proposition, but it

is entirely at odds with ERISA’s statutory structure.

Once it is determined that a state law “relates to” an

employee benefit plan covered by ERISA, the only escape

from preemption is by way of the exemption provisions

contained in section 514(b). But no one suggests that the

Equity Amendment Act is a criminal law or one regulat-

ing insurance, banking, or securities. In purporting to find

the source of the exemption to preemption in section 4(b),

the district court has misconstrued the statutory scheme.

Section 514(a) preempts all state laws that “relate to any

employee benefit plan described in section 4(a) and not

exempt under section 4(b),” ERISA § 514(a) (codified at 29

U.S.C, § 1144(a) (1988)). Section 4 is the section defining

the scope of ERISA coverage. ERISA covers all employee

benefit plans (as they are broadly defined in section 4(a))

with the limited exception of the plans explicitly enumer-

ated in section 4(b), The phrase “and not exempt under

section 4(b)” is not like the laws described in section

514(b); it is not an exemption to preemption but rather

part of the definition of an ERISA-covered plan. In other

words, when section 514(a) preempts all laws relating to

“employee benefit plans described in section 4(a) and not

exempt under section 4(b),” it means that it is preempting

all laws relating to employee benefit plans covered by

ERISA,"

‘The phrase “employee benefit plan described in section 4(a)

and not exempt under section 4(b)” is not unique to the preemp-

tion provision. Indeed, a variation of this phrase is used through-

out ERISA whenever it defines with greater precision the scope

l4a

In upholding the Equity Amendment Act, the district

court reached the same conclusion as that of the Second

Circuit in R.R. Donnelley & Sons Co. v. Prevost, 915 F.2d

787 (2d Cir. 1990), cert. denied, 111 S. Ct. 1415 (1991).

In Donnelley, the court considered the question of whether

a virtually identica! state workers’ compensation law was

preempted under ERISA, and it held that the statute was

not preempted.'* The Donnelley court distinguished its

prior decision in Stone & Webster Engineering Corp. v. Ils-

ley, 690 F.2d 323 (2d Cir. 1982), affd mem. sub nom.

Arcudi v. Stone & Webster Fngineering Corp., 463 U.S.

1220 (1983), which had held that an earlier statute was

preempted because it had required employers to extend

coverage under their existing health plan to employees

receiving workers’ compensation payments.”’ In contrast,

of coverage for a particular part. See, e.g., ERISA § 201 ( codified

at 29 U.S.C. § 1051 (1988)) (“This part [concerning participation

and vesting of pension plans] shall apply to any employee benefit

plan described in section 4(a) (and not exempted under section

4(b))”); see also ERISA § 301(a) (codified at 29 U.S.C. § 1081(a)

(1988)) (concerning funding of pension plans); ERISA § 401(a)

(codified at 29 U.S.C. §1101(a) (1988)) (concerning fiduciary

responsibility of plan administrators). |

At issue in Donnelley was a Connecticut statute that required

any employer

who provides accident and health insurance or life insurance

coverage for any employee or makes payments or contribu-

tions at the regular hourly or weekly rate for full-time

employees to an employee welfare fund ... |to! provide to

such employee equivalent insurance coverage or welfare fund

payments or contributions while the employee is eligible to

receive or is receiving workers’ compensation payments pur-

suant to this chapter .... -

Conn. Gen. Stat. § 31-284b(a) (1987); see Donnelley, 915 F.2d at

788 n.1. |

The statute held to be preempted in Stone & Webster provided

that no employer

shall cancel or withhold accident and health insurance or life

insurance coverage of any employee or his dependents or

l5a

the statute held not to be preempted in Donneliey

permitted employers to provide the new coverage through

separate plans administered independently from existing

ERISA plans. In distinguishing Stone & Webster, the

Donnelley court relied on Shaw.

But the Second Circuit focused on only half the story.

By concentrating on how and in what ways the new work-

ers’ compensation plans would be exempt from ERISA

coverage, the court failed to appreciate the fact that the

Connecticut statute (like the Equity Amendment Act in

this case) related to an ERISA-covered plan by tying the

new benefits to existing benefits and by limiting the law’s

applicability to employers already providing benefits

through ERISA plans.*' The statute at issue in Donnelley

is indistinguishable from the Equity Amendment Act.”*

cease to make payments or contributions at the regular

hourly or weekly rate for full-time employees for each week

of disability to an employee’s welfare fund ... while the

employee is eligible to receive or is receiving workers’ com-

pensation payments ....

Conn. Gen. Stat. § 31-51h(a) (1981) (repealed 1982); see Stone &

Webster, 690 F.2d at 324 n.1; see also Fixx v. United Mine Work-

ers, 645 F. Supp. 352 (S.D. W. Va. 1986) (relying on Stone & Web-

ster for conclusion that similar West Virginia disability medical

insurance provision was preempted).

*'According to appellant’s counsel, there is a question as to

whether or not this argument was ever made to the Second Cir-

cuit in Donnelley. It does appear to have been raised in the peti-

tion for certiorari, which was denied on April 1, 1991, 111 S. Ct.

1415 (1991). See Transcript of Hearing on Pending Motions

(D.D.C. Mar. 26, 1991) (“Transcript”) at 14-16.

“The record reflects the fact that the District modelled the

Equity Amendment Act on the Connecticut statute which was

held not to be preempted in Donnelley:

By the time the statute was passed in October, the Council

—and you can see it in their records—was aware of

Donnelley, at least the district court opinion in Donnelley,

and changed the language from “maintaining benefits under

the old plan,” which would clearly have been pre-empted, to

“providing benefits that are equal to the old plan.”

See Transcript, supra note 21, at 9.

16a

Based on a plain reading of ERISA, we disagree wih the

conclusion of the Second Circuit in Donnelley and con-

clude that the district court in this case erred in holding

that the Equity Amendment Act was not preempted.

C. Policy and Purpose

Not only do the plain meaning and structure of ERISA

itself require the conclusion that the Equity Amendment

Act is preempted, but this result also furthers the broad

purposes of ERISA preemption. As the Supreme Court

has explained,

ERISA’s pre-emption provision was prompted by rec-

ognition that employers establishing and maintaining

employee benefit plans are faced with the task of

coordinating complex administrative activities. A

patchwork scheme of regulation would introduce con-

siderable inefficiencies in benefit program operation,

which might lead those employers with existing plans

to reduce benefits, and those without such plans to

refrain from adopting them.

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11 (1987).*

This concern for minimizing the burden on the admini-

stration of ERISA-covered plans is reflected in the deci-

sion of the Court in Shaw, where it held that the Disabil-

ity Benefits Law was preempted to the extent that it

applied to benefits provided under a multibenefit plan:

“An employer with employees in several States would find

its plan subject to a different jurisdictional pattern of reg-

ulation in each State, depending on what benefits the

State mandated under disability, work(ers’] compensation,

and unemployment compensation laws.” Shaw, 463 U.S.

at 107.

23Fort Halifax held that a Maine severance-pay statute was not

preempted because it did not relate to an employee benefit plan.

The Court determined that the Maine statute did not relate to

a plan as described in section 4(a). It never reached the alterna-

tive argument that the plan was exempt from ERISA coverage

under section 4(b). See Fort Halifax, 482 U.S. at 6 n.4.

17a

Appellees insist that the Equity Amendment Act would

not impose any of these administrative burdens because

it allows for the provision of health benefits through a

separate plan that employers could administer indepen-

dently of their ERISA-covered plans. But appellees may

underestimate the burden imposed. While it is certainly

true that the Equity Amendment Act does not require

employers to alter ERISA-covered plans, it explicitly ties

the benefit levels of the workers’ compensation plan to

those of the ERISA-covered plan. In contrast to general

state statutes that have only an incidental effect on the

administration of ERISA plans, see, e.g., Mackey v. Lanier

Collection Agency & Serv., Inc., 486 U.S. 825 (1988) (hold-

ing that state’s garnishment statute is not preempted by

ERISA),** the Equity Amendment Act could have a seri-

ous impact on the administration and content of the

ERISA-covered plan. The fact that the benefits to be pro-

vided to an employee receiving workers’ compensation will

be equivalent to the benefit levels provided while the

employee is fully employed means that every time an

employer considers changing the benefits under its

ERISA-covered plan, it would have to consider the effect

that such a change would have on its unique obligations

to its District employees receiving workers’ compensation.”°

In light of the additional financial burden associated with

an increase in ERISA health benefits, an employer might

choose to forego such an increase altogether. This could

have a substantial effect on the administration of an

ERISA-covered plan.

As the Court emphasized in Fort Halifax, the central

concern of the ERISA preemption provision is to avoid

“4Mackey stands for the proposition that “|t|he fact that collec-

tion might burden the administration of a plan |does| not, by

itself, compel pre-emption,” Ingersoll-Rand Co. v. McClendon, 111

S. Ct. 478, 483 (1990).

*°For the purposes of the District’s workers’ compensation law,

an “employer” is defined as “any individual, firm, association, or

corporation ... using the service of another for pay within the

District of Columbia.” D.C. Cope Ann. § 36-301(10) (1981).

18a

subjecting ERISA-covered plans to various and differing

state regulations. Fort Halifax, 482 U.S. at 9. In trying

to avoid the obvious preemption problem with requiring

employers to extend their existing ERISA plans to

employees receiving workers’ compensation, see Stone &

Webster Engineering Corp. v. Ilsley, 690 F.2d 323 (2d Cir.

1982), affd mem. sub nom. Arcudi v. Stone & Webster

Engineering Corp., 463 U.S. 1220 (1983), appellees have

now tried to regulate indirectly what they were forbidden

to regulate directly. By requiring employers to take into

account the effects that any general decisions about

ERISA benefits would have on their responsibilities to

their injured employees in the District of Columbia, the

District has inevitably affected the administration of an

ERISA plan.

But even if it were true that the administration of the

ERISA plan would be unaffected by the operation of the

Equity Amendment Act, ERISA does not only preempt

laws which have such an administrative effect. In

Standard Oil Co. v. Agsalud, 633 F.2d 760 (9th Cir. 1980),

affd mem., 454 U.S. 801 (1981), the court affirmed the

district court’s holding that Hawaii's Prepaid Health Care

Act (“Hawaii Act”), Haw. Rev. Strat. §§ 393-1 to -51 (1976),

was preempted by ERISA:

26The Hawaii Act requires employers in that state to provide

their employees with a comprehensive health care plan. The state

argued that ERISA only preempts laws purporting to regulate

private voluntary benefit plans. Because the Hawaii Act required

employers to provide benefits, the state contended that the plans

were beyond ERISA’s scope. The Ninth Circuit rejected this argu-

ment, holding that “|t|he plans envisioned under the Hawaii stat-

ute are ... not rendered outside the definition of employee

welfare benefit plans simply because Hawaii has attempted to

make them mandatory.” Agsalud, 633 F.2d at 764. The court also

rejected the state’s- contention that the Hawaii Act was a

“disability insurance law” and therefore exempt from ERISA cov-

erage under section 4(b\3). The Hawaii Act was concerned with

providing benefits “regardless of any relationship to a disabling

condition,” id.

19a

Appellants in the district court argued that since

ERISA was concerned primarily with the administra-

tion of benefit plans, its provisions were not intended

to prevent the operation of laws like the Hawaii Act

pertaining principally to benefits rather than admin-

istration. There is, however, nothing in the statute to

support such a distinction between the state laws

relating to benefits as opposed to administration.

Agsalud, 633 F.2d at 765.*’ The Court made the same

observation in Fort Halifax:

[Sjtate laws requiring the payment of benefits also

“relate to aln] employee benefit plan” if they attempt

to dictate what benefits shall be paid under a plan.

To hold otherwise would create the prospect that

plan administration would be subject to differing

requirements regarding benefit eligibility and benefit

levels—precisely the type of conflict that ERISA’s

pre-emption provision was intended to prevent.

Fort Halifax, 482 U.S. at 13 n.8.

It is, of course, evident that many different kinds of

state laws may affect an employer's decisions concerning

the scope and content of its benefit plans. Congress could

have decided to preempt all state laws that “might con-

ceivably have an effect upon” ERISA-covered employee

benefit plans, but. it chose to draw the line elsewhere. It

required that the law specifically “relate to” the ERISA-

covered plan—i.e., that it have “a connection with or refer-

ence to such a plan.” Shaw, 463 U.S. at 97. This provision

may preempt more than appellees would like, but to the

extent that it does, their argument is with Congress and

not with us.

“‘Congress amended section 514(b) of ERISA in response to

Agsalud by explicitly exempting Hawaii's Prepaid Health Care

Act from ERISA preemption. See Act of Jan. 14, 1983, Pub. L. No.

97-473, 9 301(a), 96 Stat. 2605, 2611-12 (codified at 29 U.S.C.

§ 1144( bX 5) (1988)).

20a

III. CoNncLusion

For the reasons stated above, the decision of the district

court is reversed, and the case is remanded to the district

court for further proceedings.

It is so ordered.

2la

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

Civil Action No. 91-0511-LFO

Tue Greater WasHInGcTon Boarp or Trape.

Plaintiff.

District or COLUMBIA AND

SHARON Pratt Dixon,

Defendants.

MEMORANDUM

On October 24, 1990, Mayor Barry signed into law the

District of Columbia Worker's Compensation Equity Amend-

ment Act of 1990 (the ‘‘Act’’). See Act of October 24, 1990,

D.C. Act 8-261 (to be codified as D.C. Code § 36-307(a-1)),

reprinted in District of Columbia Register, November 2, 1990.

at 6890. After a period of congressional review, the Act

became effective on March 6, 1991, though regulations im-

plementing it have yet to be promulgated. The pertinent sec-

tion of the Act requires employers to extend ‘‘equivalent”™

health insurance coverage to employees eligible to receive

workers’ compensation benefits:

Any employer who provides health insurance

coverage for an employee shall provide health in-

surance coverage equivalent to the existing health

insurance coverage of the employee while the em-

ployee receives or is eligible to receive workers’ com-

pensation benefits under this act.

Act § 2(c)(2) (to be codified at D.C. Code § 36-307(a-1)(1)). This

coverage is to extend for no more than 52 weeks and is to

“be at the same benefit level that the employee had at the

time the employee received or was eligible to receive workers’

compensation benefits.’ /d. (to be codified at D.C. Code

§ 36-307(a-1)3)).

22a

Plaintiff Greater Washington Board of Trade ("Board of

Trade’), a non-profit corporation that provides health in-

surance to its employees, now sues to enjoin enforcement

of this statute on the grounds that the Act is preempted by

the Employee Retirement Income Security Act of 1974

(ERISA). See 29 U.S.C. § 1001 et seg. (1988). Currently

before the Court is the Board of Trade’s application for a

preliminary injunction and the District of Columbia's mo-

tion to dismiss. Although the Board had only four days in

which to respond to the District's quite through briefings,

at oral argument on March 26, 1991 the Board asked the

Court to render judgment in order to expedite consideration

of this matter. For the reasons stated below, the District's

motion will be granted and the Board's application for a tem-

porary restraining order denied.

ERISA’s preemption clause provides:

Except as provided in subsection (b) of this section,

- isions of this subce and subchapter II]

is chapter shall any and all State laws

eae now or hereafter relate to any

employee benefit plan described in section 1003(a)

_ + — and not exempt under section 1003(b)

of this tit

29 U.S.C. § 1144(a). This preemption clause ‘is conspicuous

for its breadth.’’ FMC Corp. v. Holliday, 111 S.Ct. 403, 407

(1990). ‘Its deliberately expansive language was designed

to establish pension plan regulation as exclusively a federal

concern.” Ingersoll-Rand Co. v. McClendon, 111 S.Ct. 478,

482 (1990) (quotations and quotation marks omitted). The

Board contends, and D.C. concedes, that the Act falls within

the broad coverage of this clause because benefits under

the Act are set by reference to covered employee benefit

plans. See, e.g., Shaw v. Delta Air Lines, Inc., 463 U.S. 85,

86-87 (1983) (A law ‘relates to’ an employee benefit plan,

in the normal sense of the phrase, if it has a connection with

23a

or reference to such a plan.’’) (footnote omitted). The ques-

tion then is whether the Act falls within one of the preemp-

tion clause’s exemptions.

One of those exemptions involves laws relating to plans

covered by section 1003(b).* See 29 U.S.C. § 1144(a) (preemp-

ting state laws relating to covered plans only if such plans are

“not exempt under section 1003(b)'’) (emphasis added). The

pertinent subsection covers plans ‘maintained solely for the

purpose of complying with applicable workjers'] compensation

laws or unemployment compensation or disability insurance

laws." Id. § 1003(b\(3). The test for determining whether a

plan is “maintained solely" for the purpose of complying with

a workers’ compensation law is ‘whether the plan, as an ad-

ministrative unit, provides only those benefits required by

the applicable state law.’’ Shaw v. Delta Air Lines, Inc., 463

U.S. at 107. Thus, states cannot directly regulate existing

pension plans through workers’ compensation laws: Plans

which are voluntarily negotiated and ‘‘more broadly serve

employee needs as a result of collective bargaining” are not

covered by section 1003(b). Alessi v. Raybestos-Manhattan,

* That section provides in full:

The provisions of this subchapter shall not apply to any employee

benefit plan if —

(1) such plan is a governmental plan (as defined in section 1002(32)

of this title);

(2) such plan is a church plan (as defined in section 1002(33) of

this title) with respect to which no election has been made under

section 410id) of Title 26;

(3) such plan is maintained solely for the purpose of complying

with applicable workmen's compensation laws or unemployment

compensation or disability insurance laws,

(4) such plan is maintained outside of the United States primarily

for the benefit of persons substantially all of whom are nonresi-

dent aliens; or -

(5) such plan is an excess benefit plan (as defined in section

1002136) of this title) and is unfunded.

29 U.S.C. § 1003%b).

24a

Inc., 451 U.S. 504, 523 n.20 (1981). However, a state workers’

compensation law need not require employers to create inde-

pendent plans. It is enough if the law gives employers the

option of doing so:

The fact that state law permits employers to meet

their state law obligations by including disability

benefits in a multibenefit plan does not make the

state law wholly unenforceable as to employers who

choose that option.

In other words, while the State may not require

an employer to alter its ERISA plan, it may force

the employer to choose between providi isabili-

ty benefits in a separately administered and in-

= the state-mandated benefits in its ERISA

plan.

Shaw v. Delta Air Lines, Inc., 463 U.S. at 108 (citations

omitted).

The Act falls squarely within this exemption. Although

the Board has not specified how it plans to comply with the

Act, it is clear from the Act that it could do so by creating

a ‘separate administrative unit’ to administer the required

benefits. The Act only instructs employers to ‘‘provide health

insurance coverage equivalent to the existing health in-

surance coverage.’ Act § 2(c)(2). It does not specify how

they are to do so. To the contrary, when first introduced

the Act required employers to ‘maintain’ existing health

care coverage; the D.C. City Council then amended the Act

to only require the provision of ‘‘equivalent’’ health insurance

coverage. See Defendant's Exhibit 1. As a consequence,

under Shaw, the Board's plan for complying with the Act

would be one maintained solely to comply with a state

workers’ compensation law.

A recent decision from another circuit involving a nearly

identical statute reached the same result. In 2.R. Donnelley

& Sons Co. v. Prevost, 915 F.2d 787 (2d. Cir. 1990), the

Second Circuit considered a Connecticut statute requiring

25a

employers who provide health insurance to an employee to

‘provide such employee equivalent insurance coverage or

welfare fund payments or contributions while the employee

is eligible to receive or is receiving workers’ compensation

payments... ."’ Conn. Gen. Stat. § 31-284b(a) (1989) (em-

phasis added). The Second Circuit found that, although the

Connecticut law was subject to ERISA’s preemption clause,

see Donnelley, 915 F.2d at 791-92, it fell under section

1003(b)(3)'s exemption for plans maintained solely to comp-

ly with workers’ compensation laws:

In keeping with, and in apparent reliance upon, the

above langu in Shaw, the State of Connecticut

allows an employer under the second option in section

31-284b(b) to ‘‘creatie] an injured employee's plan as

an extension of any existing plan for working

employees." Such a would constitute a * ate

ee. + - — the pe of —_

esigned * y for the purpose of complying wit

|the] applicable workmen's compensation law{]"’ within

the meaning of section 1003(b)(3).

Id. at 793.

The Board contends that Donnelley was wrongly decided

because the plan in Donnelley, like the one at issue here,

relates to another ERISA plan. It is not entirely clear what

the Board means by this. It might mean that the applicable

workers’ compensation law is preempted whenever [it] relates

to a covered plan regardless of whether the plan is exempt

under section 1003(b)\(3). Or it might mean that the Board's

plan does not qualify for the exemption under section

1003(b\3) because that plan is itself related to another

ERISA plan. It is not, however, necessary to clarify the

Board's position because neither contention is persuasive.

The plain language of the statute and the clear holdings

of the Supreme Court establish that a workers’ compensa-

tion law related to an ERISA plan is not preempted if that

plan is maintained solely to comply with that law. The

26a

preemption clause contemplates that laws saved by this

exemption will relate to ERISA plans: It preempts state laws

relating to plans ‘described in section 1003(a) of this title

and not exempt under section 1003(b)."’ 29 U.S.C. § 1144(a)

(emphasis added). Thus, laws related to plans covered by

ERISA, but exempt under section 1003(b) are not preempted.

As the Supreme Court characterized it in Alessi, section

1003(b)(3) is an ‘‘exemption” to the preemption clause. See

Alessi, 451 U.S. at 523 n. 21. Under the Board's interpreta-

tion, section 1003(b\(3) would not be an exemption to the

preemption clause. It would be irrelevant because any law

not relating to a covered plan would not be subject to pi 2emp-

tion in the first place. Moreover, the Board's interpretation

is clearly contradicted by the Supreme Court's decision in

Shaw. In that case, the Court found that while New York's

Disability Benefits Law was ‘‘a state law relating to

employee benefits plans,’ it was not preempted because it

related to plans exempt from ERISA under section

1003(bi3). See Shaw, 463 U.S. at 106-109.

The Board attempts to distinguish Shaw on the ground

that the plan at issue in that case did not, as here, incorporate

the provisions of another ERISA covered plan. It is difficult

to see how this distinction makes a difference. The logic

seems to be that there is an implied exception in the section

1003(b\3) exemption for plans which, though maintained

solely to comply with a state workers’ compensation law,

refer directly to unexempted plans. The problem with this

interpretation is that there is no support for it in the statute.

Nothing in section 1003(b)(3) indicates that plans relating

to other plans are, as it were, exempted from the exemption.

It merely states that plans ‘maintained solely for the pur-

pose of complying with workjers'] compensation laws’’ are

exempt. Because the ‘exercise of federal supremacy is not

lightly to be presumed,’’ state statutes are not to be preempted

‘in the absence of persuasive reasons.’ Alessi, 451 U.S. at

522 (quotations and quotation marks omitted). As a conse-

quence, the Board's contention must be rejected.

27a

At points, the Board suggests that an exception to the

exemption can be inferred from Alessi, but upon analysis that

argument must be rejected well. In the first place, Alessi

only discusses section 1003(b\(3) in a single footnote. The

issue in front of the Supreme Court in Alessi was whether

a New Jersey law prohibiting pension plans from offsetting

workers’ compensation benefits against pension plan benefits

was preempted. Although no plan was maintained solely to

comply with this law, the Court nevertheless addressed sec-

tion 1003(b)\(3) in a footnote because the appellants in that

case had argued that

if a plan which is designed to comply with [an] appli-

cable workmen's compensation law is not preempted

by ERISA, then a fortiori the underlying statute

with which such plan is permitted to comply equally

escapes coverage.

Alessi, 451 U.S. at 523 n. 20 (quotation and quotation marks

omitted), The Court rejected this attempt to exempt all

workers’ compensation laws by noting that the focus of sec-

tion 1003(b\3) is not upon the state law, but rather upon the

plans affected by that law. See id. (‘‘The only relevant state

laws, or portions thereof, that survive this preemption pro-

vision are those related to plans that are themselves exempt

from ERISA’s scope."’). The Board seems to infer from this

focus upon the plan a requirement that the plan not in any

way refer to another ERISA plan. Here again, there is

no basis for the inference: The statute only requires that

the plan be ‘maintained solely for the purpose of comply-

ing with applicable work[ers'| compensation laws or unem-

ployment compensation or disability insurance laws.'’ 29

U.S.C. § 1003(b)(3).

The Board also contends that its interpretation is sup-

ported by the policy underlying ERISA. Specifically, it

argues that ERISA intended to insulate employer decisions _

concerning the provision of ‘health benefits under an ERISA

plan, what level of benefits to provide, and how often to

28a

change the benefits” from the influence of state laws. Ap-

plication for a Preliminary Injunction at 10. In Alessi,

however, the Supreme Court held that employers could off-

set unemployment compensation benefits paid to workers

against the amounts owed under an ERISA covered plan.

See Alessi, 451 U.S. at 521. The Court reasoned that this

practice of offsetting was similar to the practice of actually

integrating benefits from pension funds with benefits from

other sources like social security, a practice that Congress

recognized in the legislative history but did not prohibit. See

H.R. Rep. No. 807, 93d. Cong., 2d Sess. 69 (1974) (noting

that ERISA would “not affect the ability of plans to use

integration procedures”). Thus, in Alessi the Court found

that, far from erecting a Chinese wall between ordinary

ERISA plans and plans maintained solely to comply with

workers’ compensation laws, Congress had ‘‘acknowledged

and accepted"’ the practice of determining the benefits levels

of ERISA plans with reference to workers’ compensation

benefits. Alessi, 451 U.S. at 521.

In sum, to the extent that the Board argues that the

workers’ compensation law exemption does not apply to laws

relating to ERISA plans, it contradicts the plain language

of the statute and the holding in Shaw. To the extent that

the Board seeks to imply a limitation into section 1003(b)(3)

for plans referring to other ERISA plans, the Board has fail-

ed to show any basis for it in the text of the exemption, in

the Supreme Court's decision in Alessi, or in the policies

underlying the statute.

The Board also contends that the Act is not a workers’

compensation law within the meaning of section 1003(b)(3).

According to the Board, when Congress passed ERISA in

1974, no workers’ compensation laws included health insur-

ance benefits. Ostensibly, the laws at that time only pro-

vided for lump sum payments. Because the Act requires

employers to provide health insurance, the Board concludes

29a

that the Act is not covered by section 1003(b\(3). The Board

has not, however, explained why Congress would have

wanted to adopt a static definition of workers’ compensa-

tion statutes. Furthermore, ERISA contains an extensive

set of definitions. See 29 U.S.C. § 1002. It is unlikely that

in such a highly reticulated statute Congress simply forget

to define workers’ compensation (or for that matter

unemployment compensation and disability insurance). It

is much more likely that it intended to incorporate state law

definitions. This conclusion is supported by the fact that

section 1003(b)(3) refers to workers’ compensation laws not

workers’ compensation.

Finally, in a footnote, the Board of Trade suggests that

the Act is preempted by the Consolidated Omnibus Budget

Reconciliation Act of 1985, 29 U.S.C. § 1161 et seq. By itself,

such a suggestion is not sufficient to warrant interference

with the duly enacted laws of the District of Columbia. See

supra at 8[26a].

III.

Accordingly, an accompanying order will grant defendants’

motion to dismiss, deny plaintiff's application for a

preliminary injunction, and dismiss the complaint.

's) Louis F. Oberdorfer

Unitep States District Jupce

Date: March 27, 1991

30a

3la

UNITED STATES DISTRICT COURT ;

FOR THE DISTRICT OF COLUMBIA United States Court of Appeals

Civil Action No. 91-0511-LFO FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1

Tue GREATER WASHINGTON Boarpb oF TRADE, » 1901

Plaintiff, Civit Action No. 91-00511

Vv.

No. 91-7061

District oF COLUMBIA AND

SHARON Pratt Dixon, THe Greater WasHinctTon, Boarp or TRADE

Defendants. Appellant

ORDER

Tue District or Coiu

| | > Dis )LUMBIA, et al.

For the reasons stated in the accompanying memorandum, "

A s

it is this 27th day of March, 1991 hereby nanan

ORDERED: that plaintiff's Application for a Preliminary Before: Mikva, Chief Judge; WALv anv Buck ey, Circuit

Injunction should be, and is hereby, denied; and it is further Judges.

ORDERED: that defendant District of Columbia's Motion ORDER

to Dismiss the Complaint for Preliminary and Permanent Upon consideration of appellees’ Petiti |

Injunction and Declaratory Judgment should be, and is filed December 16. } ppellees’ Petition for Rehearing,

hereby, granted; and it is further r 16, 1991, it is

ORDERED: that the complaint should be, and is hereby, ORDERED, by the Court, that the petition is denied.

dismissed. Per Curiam

For The Court:

's) Louis F. Oberdorfer _

Unirep States District JuDGE Constance L. Dupre, Clerk

‘'s) By: Robert A. Bonner

Ropert A. Bonner

Deputy Clerk

Filed: March 27, 1991

Filed: January 10, 1992

32a 33a

STATUTES INVOLVED Il. The Employee Retirement Income Security Act of

I. The District of Columbia Workers’ Compensation Equity 1974, 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq.,

Amendment Act of 1990, D.C. Law 8-198, 37 D.C. Reg. provides in pertinent part:

6890 (1990), codified in scattered sections of D.C. Code Ann.

§§ 36-301 to -342.1 (Supp. 1991), provides in pertinent part

(D.C. Code Ann. § 36-307 (a-1)):

Section 3(1), 29 U.S.C. § 1002(1):

The terms ‘‘employee welfare benefit plan’ and

(1) Any employer who provides health insurance

coverage for an employee shall provide health in-

surance coverage equivalent to the existing health

insurance coverage of the employee while the em-

ployee receives or is eligible to receive workers’ com-

pensation benefits under this chapter.

(2) For purposes of this subsection the phrase

“eligible to receive’ means:

(A) An employee is away from work due to a

job-related injury for which the employee has filed

a claim for workers’ compensation benefits under

this chapter; or

(B) An employer has knowledge of a job-

related injury of an employee who is away from work

due to the job-related injury pursuant to which

workers’ compensation benefits may become due

under § 36-315.

(3) The provision of health insurance coverage

shall not exceed 52 weeks and shall be at the same

benefit level that the employee had at the time the

employee received or was eligible to receive workers’

compensation benefits.

(4) Except as provided in paragraph (3) of this

subsection, an employer shall pay the total cost for

the provision of health insurance coverage during

the time that the employee receives or is eligible to

receive workers’ compensation benefits under this

chapter, including any contribution that the

employee would have made if the employee had not

received or been eligible to receive workers’ compen-

sation benefits.

“welfare plan” mean any plan, fund, or program

which was heretofore or is hereafter established or

maintained by an employer or by an employee

organization, or by both, for the purpose of providing

for its participants or their beneficiaries, through the

purchase of insurance or otherwise, (A) medical,

surgical, or hospital care or benefits, or benefits in

the event of sickness, accident, disability, death or

unemployment, or vacation benefits, apprenticeship

or other training programs, or day care centers,

scholarship funds, or prepaid legal services, or (B)

any benefit described in section 186(c) of this title

(other than pensions on retirement or death, and

insurance to provide such pensions).

Section 4, 29 U.S.C. § 1003:

(a) Except as provided in subsection (b) of this sec-

tion and in sections 1051, 1081, and 1101 of this title,

this subchapter shall apply to any employee benefit

plan if it is established or maintained —

(1) by any employer engaged in commerce or in

any industry or activity affecting commerce; or

(2) by any employee organization or organizations

representing employees engaged in commerce or in

any industry or activity affecting commerce; or

(3) by both.

(b) The provisions of this subchapter shall not apply

to any employee benefit plan if —

(1) such plan is a governmental plan (as defined in

section 1002(32) of this title);

(2) such plan is a church plan (as defined in section

1002(33) of this title) with respect to which no elec-

tion has been made under section 410(d) of Title 26:

34a

(3) such plan is maintained solely for the purpose

of complying with applicable workmen's compensa-

tion laws or unemployment compensation or disa-

bility insurance laws;

(4) such plan is maintained outside of the United

States primarily for the benefit of persons substan-

tially all of whom are nonresident aliens; or

(5) such plan is an excess benefit plan (as defined

in section 1002(36) of this title) and is unfunded.

Section 514(a) & (b), 29 U.S.C. § 1144 (a) & (b):

(a) Except as provided in subsection (b) of this

section, the provisions of this subchapter and sub-

chapter III of this chapter shall supersede any and

all State laws insofar as they may now or hereafter

relate to any employee benefit plan described in

section 1003(a) of this title and not exempt under

section 1003(b) of this title. This section shall take

effect on January 1, 1975.

(b)(1) This section shall not apply with respect to

any cause of action which arose, or any act or omis-

sion which occurred, before January 1, 1975.

(2(A) Except as provided in subparagraph (B),

nothing in this subchapter shall be construed to

exempt or relieve any person from any law of any

State which regulates insurance, banking, or securi-

ties.

(B) Neither an employee benefit plan described

in section 1003(a) of this title [section 4(a)], which

is not exempt under section 1003(b) [section 4(b)} of

this title . . ., nor any trust established under such

a plan, shall be deemed to be an insurance company

or other insurer, bank, trust company, or investment

company or to be engaged in the business of insur-

ance or banking for purposes of any law of any State

purporting to regulate insurance companies, insur-

ance contracts, banks, trust companies, or invest-

ment companies.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.