Amicus Curiae Brief — District of Columbia v. Greater Washington Bd. of Trade

| Gupreme Court, U.S, |

FILED

fit) JUL

@ 1 1992

No. 91-1326 OFFICE OF THE CLERK

In The

Supreme Court of the United SHtates

OCTOBER TERM, 1991

THE DISTRICT OF COLUMBIA AND

SHARON PRATT KELLY, MAYOR,

Petitioners,

Vv.

THE GREATER WASHINGTON BOARD OF TRADE,

Respondent.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF OF THE

CONNECTICUT BUSINESS AND INDUSTRY ASSOCIATION

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

Daniel L. FitzMaurice

, Counsel of Record

: Thomas Z. Reicher

Glenn W. Dowd

Day, Berry & Howard

CityPlace

Hartford, CT 06103-3499

(203) 275-0100

Attorneys for the Connecticut

Business and Industry Association

No. 91-1326

In The

Hupreme Court of the United Htates

OCTOBER TERM, 1991

THE DISTRICT OF COLUMBIA AND

SHARON PRATT KELLY, MAYOR,

Petitioners,

Vv.

THE GREATER WASHINGTON BOARD OF TRADE,

Respondent.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

MOTION FOR LEAVE TO FILE BRIEF OF THE

CONNECTICUT BUSINESS AND INDUSTRY ASSOCIATION

Daniel L. FitzMaurice

Counsel of Record

Thomas Z. Reicher

Glenn W. Dowd

Day, Berry & Howard

CityPlace

Hartford, CT 06103-3499

(203) 275-0100

Attorneys for the Connecticut

Business and Industry Association

The Connecticut Business and Industry Association

(“CBIA”") respectfully moves for leave to file the accompanying brief

as amicus curiae in this case. Letters of consent from the Petitioners,

the District of Columbia and Sharon Pratt Kelly, and the

Respondent, the Greater Washington Board of Trade, have been

filed with this motion.

INTEREST OF AMICUS

The Connecticut Business and Industry Association is the

largest business and trade association in the State of Connecticut,

having approximately 7,000 members who employ a total work

force of over 700,000 employees. CBIA presents the views of its

members on public policy and legal issues to legislative and judicial

authontes.

CBIA's principal interest lies in having this Cour affirm the

ruling of the court below that the District of Columbia statute is

preempted by ERISA.! The District of Columbia statute was

modeled on a Connecticut statute that imposes significant financial

and administrative burdens on nearly all of CBIA’s members.

Furthermore, many of CBIA’s members sponsor multi-state benefit

plans which, despite ERISA’s express goal of national uniformity,

are now subject to disparate local regulations.

! The Employee Reurement Income Security Act of 1974, as amended

(“ERISA”), codified at 29 U.S.C. §§ 1001-1461 (1988).

2 No. 91-1326

For all the foregoing reasons, the Connecticut Business and In The

Industry Association respectfully moves for leave to file the Supreme Court of the United States

accompanying bret as amicus curnae OCTOBER TERM, 1991

Respecttully submitted,

THE DISTRICT OF COLUMBIA AND

SHARON PRATT KELLY, MAYOR,

Petutwoners,

Dame! L.. FitzvMaunce Vv.

Counsel of Record

Thomas Z. Reicher THE GREATER WASHINGTON BOARD OF TRADE,

Glenn W. Dowd Respondeni

up. Siny Heews ON WRIT OF CERTIORARI

CityPlace lO THE UNITED STATES COURT OF APPEALS

Hartford, CT 06103-3499 — POR THE DISTRICT OF COLUMBIA CIRCUIT

(203) 275-0100

Attorneys for the Connecticut BRIEF OF THE CONNECTICUT

Business and Industry Association BUSINESS AND INDUSTRY ASSOCIATION

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

July 1992

Danie! L. kitzMaurice

Counsel of Record

Thomas Z. Reicher

Glenn W. Dowd

Day, Berry & Howard

CityPlace

Hartford, CT 06103-3499

(203) 275-0100

Attorneys for the Connecticut

Business and Industry Association

TABLE OF CONTENTS

Page

a Ee n

INTEREST OF THE AMICUS CURIAE......................... l

REASONS FOR AFFIRMING THE DECISION

ee l

ID iiccinhinnidie ninircindiinnpuapiininnannndaniinnndenainie l

PIB nce ccsescnsecencnsscnssetescstenssatinnsavinieintsennentetntie 3

1. The D. C. Statute Does Not Affect ERISA-Protected

Plans In So Tenuous, Remote, Or Peripheral A Manner

As To Avoid ERISA Preemption..........................605. 3

2. The Decision Below Promotes Congress’ Goal Of

National Uniformity Of Employee Benefit Plan Law

And Prevents States From Regulating ERISA-Covered

PD III cccencccesensdccccesccosesesesissnscsescosssees 6

3. The Financial And Administrative Burdens Imposed By

The D.C. And Connecticut Statutes Impel Employers To

Eliminate Existing ERISA Plans Or Forego Establishing

BE Fel cnssccccscedscctsnssnentnbbatssnesneseninetamitieneiin 10

IE cindnctveccdddneseiansnnndtdanimadieiensonsbauntenmmbata 13

APPENDIX

TABLE OF AUTHORITIES

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. SO4...............9

FMC Corp. v. Holliday, US. Jit

Bi, GR, GD Ge cbcccccevcccccccctccscsseseseccocsee d 3,5, 7, 10

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987)... 5, 7, 10

Gagnon v. Liberty Oil Equip., 7 Conn. Workers’

ees Gee, Gi BG Ci Pen cvccsssrecscccsscesccasencsessacves US

General Elec. Co. vy. New York State Department of

Labor, 891 F.2d 25 (2d Cir. 1989), cert. denied,

496 U.S. 912 (1990), aff'd in part & rev'd in

part, 936 F.2d 1448 (ID)... 0... cece cece ecceeeeeeeeeeeeeeeee D

Greater Washington Board of Trade v. District of

Columbia, 948 F.2d 1317 (D.C. Cir. 1991). passim

R R. Donnelley & Sons Co. v. Prevost, 918 F.2d 787

(2d Cir. 1990), cert. denied, =» ~US.

1 Se Sl OF eee passim

Ingersoll-Rand Co. v. McClendon, US. ; |

Ee Bk ees Se Pavcscaconsecscescocensasenceseessss _ passim

Mackey v. Lanier Collection Agency & Serv, Inc.,

Ins I i ced egendaneeion 3,5

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) ..00000 0 3

_——

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)............ 3, 7

Stone & Webster Eng g. Corp. v. Isley, 6 F.2d 323

(2d Cir. 1982) aff d mem. sub nom. Arcudi v. Stone

& Webster Engg. Corp., 463 U.S. 1220 (1983)..00000...... s

-Ill-

Statutes Page

ee ee ee Ci icticntndtsdvcccosiseséisddcotsodvedeus 7

29 U.S.C. §§ 1001-1461 (1988) ..................ccccceecececeess l

ee nie We Pe I aii ih de ceciiiessiieihdidesciciatndatadiia 4

Fee FP Gi iccccniciscscccscuveishoteredccncennct 3,6

BP UB. OB FIGS 0 OGG CODGS) 2. ccccccccccccvccccccecscvsceseces 7

29 U.S.C. § FIGZ(Z) CIDBB).........ccccerccccvccsccverscreveccevees 7

Conn. Gen. Stat. § 31-Sth (1981)... %

Conn. Gen. Stat. § 31-284b (1991) 000, passim

Conn. Gen. Stat. § 31-3084 (1991) 200. 12

Conn. Gen. Stat. § 31-308(a) (1991). 12

Alaska Stat. § 23.45.010........ iciaeidabbibeideddanbesasedanes 10

D.C. Code § 36-307 (a-1) (1991 Supp.).......0.000...... passim

Kan. Stat. Ann. § 44-511 (2), (3).....0...ccccccccc cece cceeen eee i)

Other Authorities

Conn. Dept. of Labor, Connecticut Occupational Injuries

and Ilinesses Report V99D) o.oo ooo ooo cee 1}

1984 Conn. Op. Att'y Gen. 357, 361 No. 87-93... %

Diane Levick, Employer Health Costs Up, Hartford Courant,

January 28, 1991 (reporting on the Health Care Benefits

Survey prepared by A. Fosier Higgins & Co.)........... 10, 11

Lewin/ICF, Blue Ribbon Comm'n on State Health

Insurance Proposal to Expand Access to Health

Care in Connecticut, (March 1, 1990)....0000000 11

INTEREST OF THE

AMICUS CURIAE

The interest of the Connecticut Business and Industry

Association in this case is set forth in the accompanying Motion for

Leave To File Brief as Amicus Cunae.

REASONS FOR AFFIRMING THE

DECISION OF THE D.C. CIRCUIT

Summary of Argument

The decision below should be affirmed to promote the

important policy objectives underlying ERISA! preemption. The

goal of ERISA’s preemption provision “was to minimize the

administrative and financial burden of complying with conflicting

directives among States... .” /ngersoll-Rand Co. v. McClendon,

_ US. _, 111 S. Ct. 478, 484 (1990) (citations omitted). The

D.C. statute? at issue in this case, and the Connecticut statute? upon

which it was modeled, explicitly refer to and specifically target

ERISA-covered plans and their sponsors. These statutes require

employers who provide benefits to their active employees through

ERISA-covered plans to provide the same level of benefits to

employees eligible to receive workers’ compensation. The D.C.

statute and its Connecticut counterpart undermine the Congressional

| The Employee Retirement Income Security Act of 1974, as amended

(“ERISA”), codified at 29 U.S.C. §§ 1001-1461 (1988).

2 Workers’ Compensation Equity Amendment Act of 1990 (D.C. Act 8-261)

(“Equity Amendment Act” or “D.C. statute”) (the relevant portion of which is

codified at D.C. Code § 36-307 (a-1) (1991 Supp.) (App. A1)).

3 Conn. Gen. Stat. § 31-284b (1991) (“Connecticut statute”) (App. A3).

intent of “ensur{ing] that plans and plan sponsors would be subject

to a uniform body of benefit law ....” /d. (citations omitted).

The D.C. and Connecticut statutes exemplify how states,

through statutory sleight of hand, seck to regulate ERISA-protected

plans in ways that Congress sought to foreclose through ERISA’s

broad preemption provisions. Indeed, this Court’s failure to affirm

the decision below would create a new and gaping hole in ERISA

preemption. As illustrated by the decision of the Second Circuit with

respect to the Connecticut statute,’ a state statute previously held by

this Court to be preempted by ERISA could be resurrected and made

“preemption-proof” by recodifying it in the state’s workers’

compensation, disability or unemployment compensation laws and

providing a nominal option for compliance through a “separately

administered” plan.

For employers subject to the burdensome and often

inconsistent requirements of state laws like the D.C and Connecticut

Statutes, the administrative and financial costs are real. CBIA

estimates that Connecticut employers who provide health insurance

benefits to their active employees must pay an additional

$20,315,000 each year to provide “equivalent” benefits to employees

eligible for workers’ compensation. Employers who change their

ERISA plans face the administrative burdens of tracking subclasses

of employees whose benefit levels were set based on the plan in

effect when they first became eligible to receive workers’

compensation. The easiest way for employers to avoid these added

costs is to eliminate employee benefits altogether, which cures the

problem but kills the patient’ Yet for employers in the Distnct of

Columbia and Connecticut, eliminating or reducing benefits to active

4 RR. Donnelley & Sons Co. v. Prevost, 918 F.2d 787 (2d Cir. 1990), cert

denied, _ U.S. __, 111 S. Ct. 1415 (1991).

employees may well be the only viable alternative — unless this

Court affirms the decision below.

Argument

1. The D.C. Statute Does Not Affect ERISA-Protected

Plans In So Tenuous, Remote, Or Peripheral A

Manner As To Avoid ERISA Preemption.

ERISA explicitly “supersede[s} any and all State laws

insofar as they may now or hereafter relate to any employee benefit

plan... .” ERISA § 514(a), 29 U.S.C. § 1144(a). “A law ‘relates

to’ an employee benefit plan, in the normal sense of the phrase, if it

has connection with or reference to such a plan.” Shaw vy. Delta

Airlines, Inc., 463 U.S. 85, 96-97 (1983). The “express

preemption provisions of ERISA are deliberately expansive. .

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987), and

“Congress used the words ‘relate to’ in § 514(a) [the preemption

provision] in their broad sense.” FMC Corp. v. Holliday, __ U.S.

__, 111 S. Ct. 403, 408 (1990) (citation omitted). Thus, ERISA

preempts state laws that “relate to” employee benefit plans “even if

the law is not specifically designed to affect such plans, or if the

effect is only indirect.” /ngersoll-Rand, 111 S. Ct. at 483 (citing

Pilot Life, 481 U.S. at 47).

Notwithstanding the extraordinary breadth of ERISA

preemption, this Court has recognized a narrow exception for laws

of general applicability that “affect employee benefit plans in too

tenuous, remote, or peripheral a manner to warrant a finding that the

law ‘relates to’ the plan.” Shaw, 463 U.S. at 100 n.21. See also

Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825

(1988) (Georgia's general garmmishment statute not preempted by

ERISA). The Amici inappropriately seize upon this exception to

justify the D.C. statute, which specifically applies to ERISA plans.

Amici also attempt to analogize the ongoing and intrusive burdens of

the D.C. statute to an employer's one-time obligation to pay a

general tort award measured, in part, by an employee's lost

benefits. These arguments are straned and unpersuasive

The D.C. statute requires only those employers who provide

benefits through ERISA-covered plans to their active employees to

provide “equivalent” benefits to employees who are cligible to

receive workers’ compensation.© Thus, the D.C. statute specifically

refers to and explicitly targets ERISA-covered plans and their

sponsors. Like the Texas cause of action held preempted in

Ingersoll-Rand, “|wie are not dealing here with a generally

applicable statute that makes no reference to, or indeed functions

irrespective of, the existence of an ERISA plan.” Ingersoll-Rand,

111 S.Ct at 483. “| Tyhere simply is ne [obligation] if there ts no

plan.” /d. at 484. Moreover, as held by the court below, 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

specifically reter to ERISA benefit plans.” Greater Washington Bd

of Trade vy District of Columbia, 948 F.2d 1317, 1322 n.13 (DC

Cir. 1991), cert. granted, US. 112 S. Ct. 1584 (1992)

(quoting /n re Dyke, 943 F.2d 1435, 1448 (Sth Cir, 1991)). The

D.C. statute, which directly targets ERISA-covered plans, ts not a

law of general application and cannot avoid ERISA preemption

under the exception articulated in Shaw

S See Bnet of the American Federation of Labor and Congress of Industral

: . : VQ- :

Organizations as Amicus Curiae in Support of Petuoners at 29; Brief of

Amicus Curiae of the American Association of Retred Persons in Support of

Petitioners at 11-12

® There are, however, two categories of plans providing benefits to employees

generally that fall within the D.C. statute but aze exempt from ERISA coverage

namely, governmental and church plans. ERISA § 4(b)(1), (2), 29 USC

$§ 1003(b 1), (2) (App. AS)

Indeed, this Court has “virtually taken it for granted that

state laws which are ‘specifically designed to affect employee benefit

plans’ are preempted under § 514(a).” Ingersoll-Rand, 111 S. Ct. at

483 (quoting Mackey, 486 U.S. at 829). Like the Pennsylvania

anti-subrogation law found preempted in FMC Corp., the D.C

statute makes reference to, and therefore is specifically designed to

affect, benefit plans governed by ERISA.’ Accordingly, in text and

application, the D.C. statute “relates to” benefit plans protected from

State regulation by ERISA.

Nor can the D.C. statute be saved by analogy to generalized

tort damage awards. Unlike the D.C. statute, damage awards that

refer to benefit levels in ERISA plans do not saddle such plans and

their sponsors with substantial and continuous administrative

obligations. These damage awards can be discharged by a single

cash payment by the employer outside of an ERISA-covered plan.

Thus, like the state imposed severance obligations upheld in Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987), these awards

can be satisfied without the establishment or maintenance of an on-

going plan. In contrast, the obligations imposed by the D.C. statute

directly target and affect the operation of ERISA plans. See General

Elec. Co. v. New York State Department of Labor, 891 F.2d 25, 29

(2d Cir. 1989), cert. denied, 496 U.S. 912 (1990), aff d in part &

rev din part, 936 F.2d 1448 (1991) (New York prevailing wage law

which imposed additional obligations on employers based on the

degree to which their ERISA-covered plans failed to conform to locai

? The Pennsylvania ants subrogation law held preempted in FMC Corp

applied to “[a|]ny program, group contract or other arrangement for payment of

benefits” and these terms “includje}, but are not limited to, benefits payable by

a hospital plan corporation or a professional health service corporation.”

FMC Corp, 111 S. Ct. at 468 (citation omitted). The D.C. statute simply, but

no less broadly, refers to “health insurance coverage.” While neither statute

makes an explicit reference to ERISA, both statutes obviously refer to benefits

provided under plans covered by ERISA

benefit standards is preempted, in part, because the benefit

obligations imposed by the statute cannot be eliminated by a single

cash payment). Moreover, the nominal option to create a separate

plan to administer benefits under the D.C. statute does not sever the

continuing link between the “separate” plan and the ERISA plan

upon which it is premised. Thus, the link between ERISA-covered

plans and the D.C. statute is far more substantial than the one-time

obligation to pay a damage award.

As elaborated below, by imposing continuing economic and

administrative burdens on ERISA-covered plans, the D.C. statute

effectively regulates protected plans because the power to tax or

burden ERISA plans truly is the power to regulate them.

Accordingly, the D.C. statute clearly, specifically and directly

“relates to” ERISA-covered plans and should be preempted by the

express terms of ERISA § $14(a), 29 U.S.C. § 1144(a).

iv

The Decision Below Promotes Congress’ Goal Of

National Uniformity Of Employee Benefit Plan Law

And Prevents States From Regulating ERISA-

Covered Plans Inconsistently.

Unless this Court affirms the decision below, state laws like

the D.C. and Connecticut statutes will create particularly burdensome

and inconsistent requirements for employers who sponsor ERISA-

covered plans for employees in several states. Indeed, the

Connecucut and D.C. statutes, while similar in concept, are different

in several respects. Moreover, the disparate requirements imposed

on multi-state plans and their sponsors may grow: other states may

mandate benefits at levels that differ from the Distnct of Columbia's

and Connecticut's requirements (¢.g., 80% of the coverage provided

to active employees); they may set different mandatory time penods

for providing these benefits (¢.g., for up to one year of workers’

compensation eligibility, as in the District of Columbia, or for the

entire period of workers’ compensation eligibility, as in

Connecticut); or they may require employers to pay the same portion

of the cost of coverage as they did when the employee was active (as

in Connecticut) or to pay the entire cost of the mandated coverage (as

in the District of Columbia). Furthermore, states may target other

ERISA plan benefits (e.g., pension benefits) as the basis for benefits

mandated by statute. Thus, employers who sponsor multi-state

benefit plans will not only be burdened by state-imposed obligations

because of their ERISA-covered plans; they also may be burdened

inconsistently by such obligations.

“Section 514(a) [of ERISA] was intended to ensure that

plans and plan sponsors would be subject to a uniform body of

benefit law; the goal was to minimize the administrative and financial

burden of complying with conflicting directives among States or

between States and the Federal Government.” /ngersoll-Rand, 111

S. Ct. at 484 (citing FMC Corp., 111 S. Ct. at 409; Fort Halifax,

482 US. at 10-11 (1987); Shaw, 463 U.S. at 105, and n.25). By

imposing an additional statutory requirement based upon the

existence and terms of ERISA-covered plans, the D.C. and

Connecticut statutes “subject plans and plan sponsors to burdens not

unlike those Congress sought to foreclose through [ERISA]

§ $14(a).” Ingersoll-Rand, 111 S. Ct. at 484.8

* The enactment of COBRA (codified at §§ 601-608 of ERISA, 29 U.S.C.

$§ 1161-1168 (1988), and § 4980B of the Internal Revenue Code of 1986, as

amended, 26 U.S.C. § 4980B (1988)) further supports ERISA’s broad

preemption of this area. COBRA requires employers maintaining certain group

health plans to offer covered employees and their dependents the opportunity

to extend coverage, at the employee's cost, upon the occurrence of certain

events. Unlike the D.C. and Connecticut statutes, COBRA is a comprehensive

and procedurally complete statute. For example, COBRA coverage terminates

when the employer discontinues health benefits to active employees and when

the COBRA beneficiary becomes covered under any other group health plan or

entitled to Medicare benefits. ERISA, § 602(2), 29 U.S.C. § 1162(2) (1988)

The enacunent of COBRA illustrates the role of ERISA’s preemption provision

in reserving to Congress the exclusive authority to regulate employee benefit

plans

The saga of the Connecticut and D.C. statutes tells a

cautionary tale about states’ desires to regulate ERISA-covered

plans. Initially, Connecticut ordered employers to allow

compensation-cligible employees to continue to participate in the

employers’ ERISA pians. When federal courts held that ERISA

preempted Connecticut's forced inclusion of compensation-eligible

employees,” the state enacted the current version of the statute,

Section 31-284b, which simply moved the same substantive

requirement to another section of the Connecticut statutes and gave

employers various options for compliance.!° The District of

Columbia, following the district cour ruling in Donnelley, enacted

the Equity Amendment Act modeled on the Connecticut statute.

Greater Washington Bd. of Trade, 948 F.2d at 1324, n.22. This

Court may write the final chapter of this tale by affirming the

decision below. Absent such a concluding chapter, the states will

have a road map for circumventing ERISA preemption in the areas

4% Stone & Webster Eng'g Corp. v. Isley, 690 F.2d 323 (2d Cir. 1982), aff'd

mem sub nom, Arcudi v. Stone & Webster Eng'g Corp., 463 U.S. 1220

(1983) held that Conn. Gen. Stat. § 31-Slh (1981), the statutory predecessor

to the Connecticul statute, was preempted by ERISA. The current Connecticut

statute differs from its preempted predecessor in only one respect: the old law

prohibited an employer from removing from its ERISA plan those employees

who were eligible for workers’ compensation, while the new statute gives the

employer the option of keeping such employees in the plan or providing

“equivalent” coverage through a separately administered plan.

10 The Connecticut Attorney General aptly summarized the legislative history

of the Connecticut statute as follows:

Section 31-284b was enacted for the purpose of bringing

the requirements of section 31-Slh into the Workers

Compensation Act without substantive change, in

response to the District Court decision mm Stone &

Webster, [518 F. Supp. 1297 (D. Conn. 1981)}.

1984 Conn. Op. Att'y Gen. 357, 361 No. 87-93 (emphasis added)

mentioned in ERISA § 4(b)(3): workers’ compensation, disability

benefits, and unemployment compensation. States would then be

permitted to enact such laws that premised and measured employers’

obligations to provide these kinds of benefits based upon the terms

of each employer's ERISA-covered plan.

Indeed, this Court's failure to affirm the decision below

would create a new and gaping hole in ERISA preemption through

which states can resurrect previously preempted laws. For example,

in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981), this

Coun struck down a New Jersey workers’ compensation statute.

The New Jersey law provided that the injured employee's right to

compensation payments “shall not be set off against [his or her}

retirement pension benefits or payments.” 451 U.S. at 508 (quoting

N.J. Stat. Ann. § 34:15-29 (West Supp. 1980-1981) (as amended

by 1977 NJ. Laws, Ch. 156)). Absent an affirmance of the

decision below, however, New Jersey could achieve the same result:

the state could mandate that, if a pension plan reduced the level of

payments based on receipt of workers’ compensation benefits, the

employer must reimburse the employee for the lost pension income

through a separately administered plan.!!

1] This example and the Second Circuit's decision in Donnelley illustrate the

apparent ease with which states can regulate ERISA plans by imposing

obligations on plan sponsors. Connecticut has decided that employers ought

to continue accident, health and life plan benefits on behalf of inactive

employees who are eligible to receive workers’ compensation,

notwithstanding the employers’ right under ERISA to limit plan participation

to active employees. Because it cannot order an employer to change the terms

of its ERISA plan, the State imposes a cost on employers whose plans it finds

deficient. Under the Connecticut statute, the fee matches the “deficiency” in

the ERISA-covered plan: the employer must provide “equivalent” coverage

within or outside of the plan. Indeed, other states impose such costs using a

slightly different method: including the value of employer-provided benefits in

an employee's wages that form the basis for workers’ compensation awards.

See, eg. Kan. Stat. Ann. § 44-511(2), (3) (*wages” defined to include the

value of employer-paid life, health and accident insurance and employer

( Continued )

-10-

By affirming the decision below, this Court will prevent this

blatant circumvention of ERISA preemption and promote Congress’

goal of national uniformity in the regulation of ERISA-covered

plans. In the absence of an affirmance by this Coun, the obvious

option for employers to avoid state laws like the D.C. and

Connecticut statutes is simply to avoid establishing ERISA-covered

plans altogether. FMC Corp., 111 S. Ct. at 408; Fort Halifax, 482

U.S. at 11. Ultimately, this will harm the very employees that

Congress intended to protect.

3. The Financial And Administrative Burdens Imposed

By The D.C. And Connecticut Statutes Impel

Employers To Eliminate Existing ERISA Plans Or

Forego Establishing New Plans.

The D.C. statute and its Connecticut counterpart impose

significant and direct financial burdens on employers who sponsor

ERISA-covered employee benefit plans. CBIA estimates that in

1991 the cost to Connecticut employers of providing just the health

insurance coverage mandated by the Connecticut statute was

approximately $20,315,000.'2 While some employers might

( Continued )

contributions to pension and profit sharing plans); Alaska Stat. § 23.45.010

(“wages” defined to include employer contributions for medical care and other

fringe benefits). In each case, the result is the same as under the D.C. and

Connecucut statutes: only employers who sponsor ERISA-covered plans are

subject to the statutorily mmposed burdens.

12

This cost estumate 1s computed as follows:

a In 1991, the average per employee annual cost to Connecticut

employers of providing health insurance was $4,232. Diane Levick,

Employer Health Costs Up, Hartford Courant, January 28, 1992, at

( Continued )

voluntarily bear part of this expense (particularly for short-term

absences), Connecticut allows for no choice in the matter. Absent

contrary guidance from this Court, the potential targets for state-

generated burdens like the D.C. and Connecticut statutes will not be

limited to health and life insurance plans and their sponsors. Indeed,

states could require employers to make pension plan contributions on

behalf of compensation-eligible employees that are “equivalent” to

( Continued )

Bl (reporting on the Health Care Benefits Survey prepared by A.

Foster Higgins & Co.).

b. The Connecticut Department of Labor estimates that the average

Connecucut employee works 1,620 hours per year which, assuming a

7.5 hour workday, translates into 216 workdays per year. Thus, the

cost to Connecticut employers of providing health insurance to

employees in 1991 was approximately $20 per work day ($4,232 /

216 days).

¢. Connecticut workers who were eligible for workers’ compensation

benefits experienced 1,231,200 days of absence from work in 1990

(the latest year for which such figures are available). See Conn. Dept.

of Labor, Connecticut Occupational Injuries and Illnesses Report

(1990).

d. 82.5% of Connecticut workers are covered by employer-provided

group health insurance. Lewin/ICF, Blue Ribbon Comm'n on Siate

Health Insurance Proposal to Expand Access to Health Care in

Connecticut (March 1, 1990). Thus, it can be inferred that 82.5% of

the days of absence described in c. above were incurred with respect to

such employees. Accordingly, approximately 1,015,740 days

(1,231,200 days X 82.5%) of emplover-provided coverage were

mandated by the Connecticut statute in 1991.

e. Therefore, in 1991, the approximate cost to Connecticut employers

of providing the health care benefits required by the Connecticut

statute was $20,315,000. (1,015,740 days X $20).

those made while the employee was active. Similarly, states could

require employers to provide pension, medical and other benefits as

unemployment “compensation.”

In addition to the direct costs of the additional benefits, the

D.C. and Connecticut statutes impose several administrative burdens

on sponsors of ERISA-protected plans. For example, both the D.C.

and Connecticut statutes set the required benefits at the level

provided when the employee first became eligible to receive

workers’ compensation. D.C. Code § 36-307(a-1)(3) (App. Al);

Gagnon v. Liberty Oul Equip., 7 Conn. Workers’ Comp. Rev. Op.

81 (1989). Thus, each time an employer amends a benefit plan, it

may create another subclass of employees with benefits that differ

from those in the current plan. Over time in the volatile world of

employee benefits, these subclasses may grow in number and range.

Indeed, even after an employer terminates a plan or can no longer

obtain coverage, it will remain liable to provide benefits defined by

earlier plans to all of the subclasses of employees receiving workers’

compensation. Furthermore, an employer must not only keep track

of all of the subclasses of employees, it may have to self-insure the

inactive employees because their benefit levels differ from the

employer's current plan.

The administrative problems of tracking subclasses of

employees are exacerbated in Connecticut, which sets no time limit

on the employer's obligation to compensation-eligible employees.

Unlike the D.C. statute, which caps the employer's obligation at

fifty-two weeks, Connecticut ties the requirement to provide

equivalent benefits solely to the employee's eligibility for workers’

compensation. Conn. Gen. Stat. § 31-284b(a) (1991) (App. A3).

Since an employee who suffers a “partial permanent disability” may

be cligible for compensation indefinitely, an employer's ¢ — gation

under the Connecticut statute can continue for many years. See

Conn; Gen. Stat. §§ 31-308(a), 31-308a (1991).

With the cost of providing health insurance benefits to

employees rising at an alarming rate, employers are compelled to

-]3-

search for ways to reduce their health insurance expenditures. All

too often the only viable alternative for employers is to reduce or

even climinate the health insurance benefits that they provide to

employees. Since only employers who do not sponsor ERISA-

covered plans are beyond the reach of the D.C. and Connecticut

statutes, the statutes provide an additional incentive for employers to

forgo creating or maintaining health plans. Moreover, since both

statutes refer explicitly to the benefit levels in ERISA-covered plans,

employers who might otherwise provide generous benefits to active

employees are unwilling — or financially unable — to do so.

Thus, these statutes burden not only ERISA plan sponsors but also

their active employee participants and dependents.

Accordingly, this Court should affirm the decision below

because of the substantial burdens imposed on ERISA plans by

state-imposed regulations like the D.C. and Connecticut statutes.

CONCLUSION

For the reasons set forth above, CBIA respecttully requests

that this Court affirm the decision of the D.C. Circuit.

Respectfully submitted,

Daniel L. FitzMaurice

Counsel of Record

Thomas Z. Reicher

Glenn W. Dowd

Day, Berry & Howard

CityPlace

Hartford, CT 06103-3499

Attorneys for the Connecticut

Business and Industry Association

July 1992

APPENDIX

CONTENTS OF APPENDIX

Page

I a ee Al

I aa a een ER ad oe AB

ee se OF I hla scicarind vc incccesntdaisedeninadtod AS

Al

D.C. Code § 36-307(a-1)

§ 36-307. Medical services, supplies, and insurance.

*kek KK *

(a-1)(1) Any employer who provides health insurance

coverage for an employee shall provide heath insurance coverage

equivalent to the existing health insurance coverage of the employee

while the employee receives or is eligible to receive worker's

compensation benefits under this chapter.

(2) For purposes of this subsection, the phrase “eligible

lo 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 reccived 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 cligible 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’ compensation benefits.

A2

(S) An employer shall be reimbursed for the provision

of health insurance coverage required by this subsection from the

special fund established in § 36-340. If an cmployer fails to provide

health insurance coverage and an employce subsequently procures

the insurance coverage and receives reimbursement for the

procurement of insurance coverage from the employer pursuant to

subsection (d) of this section, the employer shall be reimbursed from

the special fund only for the amount that the employer would have

paid for the coverage if the employer had provided the coverage.

A3

Conn. Gen. Stat. Ann. § 31-284b

(West 1987 & Supp. 1992)

Sec. 31-284b. Employer to continue insurance coverage or

welfare fund payments for employees cligible to receive workers’

compensation. Use of second injury fund

(a) In order to maintain, as nearly as possible, the

income of employees who suffer employment-related injuries, any

employer who provides accident and health insurance or life

insurance coverage for any employee or makes payments or

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

employees to an employee welfare plan shall provide to such

employee equivalent insurance coverage or welfare plan payments or

contributions while the employee is eligible to receive or is receiving

workers’ compensation payments pursuant to this chapter, or while

the employee is receiving wages under a provision for sick leave

payments for time lost due to an employment-related injury. As used

in this section, “income” means all forms of remuneration to an

individual from his employment, including wages, accident and

health insurance coverage, life insurance coverage and employee

welfare plan contributions and “employee welfare plan” means any

plan established or maintained for employees or their families or

dependents, or for both, for medical, surgical or hospital care

benefits.

(b) An employer may provide such equivalent accident

and health or life insurance coverage or welfare plan payments or

contributions by: (1) Insuring his full liability under this section in

any stock or mutual companies or associations that are or may be

authorized to take such risks in this state; (2) creating an injured

employee's plan as an extension of any cxisting plan for working

employees; (3) self-insurance; or (4) by any combination of the

methods provided in subdivisions (1) to (3), inclusive, of this

subsection that he may choose.

A4

(c) In the case of an employee welfare plan, an

employer may provide such equivalent protection by making

payments or contributions for such hours of contributions

established by the trustees of the employee welfare plan as necessary

to maintain continuation of such insurance coverage when the

amount is less than the amount of regular hourly or weekly

contributions for full-time employees.

(d) In the case where compensation payments to an

individual for total incapacity under the provision of section 31-307,

as amended by section 23 of public act 91-32 and section 26 of this

act, comtinue for more than one hundred four weeks, the cost of

accident and health insurance or life insurance coverage after the one

hundred fourth week shall be paid out of the second injury fund in

accordance with the provisions of section 31-349, as amended by

section 35 of public act 91-32 and section 36 of this act.

(Cc) Accident and health insurance coverage may include

but shall not be limited to coverage provided by insurance or directly

by the employer for the following health care services: Medical,

surgical, dental, nursing and hospital care and treatment, drugs,

diagnosis or treatment of mental conditions or alcoholism, and

pregnancy and child care.

AS

ERISA § 4, 29 U.S.C. § 1003 (1988)

§1003. COVERAGE.

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

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 cngaged in commerce or in

any industry Or activity affecting commerce; or

(2) by any employee organization or

organizations representing employces 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 secuions 1002(32) of this title);

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

section 1002(33) of this utle) with respect to which no

clecuon has been made under sections 410(d) 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 nonresident aliens; or

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

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