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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1992
- **Citation:** 506 U.S. 125

## Text

| 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
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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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0245%3A15. Public record. Not legal advice.