- The Washington Times - Wednesday, July 19, 2006

A federal judge yesterday overturned a Maryland law that required Wal-Mart Stores Inc. to spend at least 8 percent of its payroll costs on health care for its employees.

U.S. District Judge J. Frederick Motz ruled that the law violates the Employment Retirement Income Security Act (ERISA), a federal law that sets minimum standards for pensions and health plans. The U.S. Supreme Court has struck down similar state laws that conflict with the federal law, ruling that ERISA pre-empts any state law related to employee benefit plans.

Kevin Enright, a spokesman for the Maryland Attorney General’s Office, told the Associated Press the state would appeal to the 4th U.S. Circuit Court of Appeals in Richmond. He argued that the law is not pre-empted by ERISA because employers can choose to pay the health care fees in the form of a tax.

Yesterday’s ruling was the third time this month that the Maryland General Assembly has been rebuffed.

Moody’s Investors Service lowered Baltimore Gas and Electric Co.’s rating last week to nearly junk status, making it more difficult for the utility to borrow money as the General Assembly forces it to finance higher energy costs instead of passing along rising prices to consumers.

In addition, an appeals court judge blocked the legislature’s attempt to fire the entire Public Service Commission.

Moody’s called the mass firings “a highly unusual event in the modern history of the U.S. regulated utility industry.”

Judge Motz said in his opinion yesterday that the state’s health care law, which would go into effect Jan. 1, would hurt Wal-Mart.

“[T]he Act imposes legally cognizable injury upon Wal-Mart by requiring it to make a report to the secretary about the amount of its payroll and health care contributions,” and tracking Maryland costs separately from the rest of the country, the judge wrote.

The Retail Industry Leaders Association (RILA), the trade group that challenged the law, also argued that the law violated the equal protection clause of the U.S. Constitution because it targeted only Wal-Mart, but the judge ruled against RILA on this point.

Though Judge Motz said many times in his opinion that Wal-Mart was obviously targeted in the law, he said the court cannot rule on the motivations of the General Assembly and that the Supreme Court has applied the clause only to politically vulnerable groups, such as women and minorities.

The law, dubbed “the Wal-Mart health care bill” when voted on in the General Assembly, was aimed at Wal-Mart. Only four companies in the state met the first threshold of having more than 10,000 employees. Giant Food Inc., already paid more than 8 percent to employees, Johns Hopkins University only had to meet a 6 percent threshold as a nonprofit, and Northrop Grumman Corp., lobbied for and won exclusion for companies with employees earning more than the Maryland median household income.

Wal-Mart did not return calls for comment yesterday.

Maryland was the first state in the nation to pass legislation requiring Wal-Mart to pay a minimum amount on health care, over Republican Gov. Robert L. Ehrlich Jr.’s veto. But similar legislation has been proposed or discussed in 30 other states.

“The decision sends a clear signal that employer health plans are governed by federal law, not a patchwork of state and local laws,” RILA president Sandra L. Kennedy said. “It also is a clear message that similar bills under consideration in other states and municipalities violate federal law as well.”

Business groups and Mr. Ehrlich have said the law hurt the state’s business reputation.

“There’s a trend here. It’s overreaching, it’s irresponsible, and fortunately in this state we have the people and the courts available to combat and in many cases negate this overreaching by [House Speaker] Mike Busch and [Senate President] Mike Miller,” Mr. Ehrlich said yesterday.

During the International Council of Shopping Center’s annual retail convention in Las Vegas in May, Mr. Ehrlich said he fielded questions from retailers asking if the state was anti-business because of the law.

The General Assembly overturned his veto of the legislation in January. When asked if he felt vindicated by the court’s decision, which he said he had read an hour before, Mr. Ehrlich said, “Yes, I do.”

Wal-Mart had threatened to pull out of Somerset County, where it planned to open a distribution center with up to 1,000 employees.

“Hopefully that distribution center in Somerset County is back on the board,” said Mr. Ehrlich, a Republican running for re-election. “That’s a big economic initiative and it’s been in limbo because of this bill.”

The Maryland Chamber of Commerce also is pleased the law was overturned, spokesman William R. Burns said yesterday.

“The statement was that in Maryland, the state government is going to force itself into the boardroom,” he said. “It’s a terrible precedent to set.”

Delegate Anne Healey, Prince George’s County Democrat and the bill’s lead sponsor in the House, said she will wait to see what the Attorney General’s Office recommends as far as appealing or tweaking the law.

“I’m very disappointed,” she said yesterday. “Relying on what the Attorney General’s Office had told us, I believed the bill and the law is not in violation of anything. It’s a good law and it’s not an undue burden.”

“Judge Fred Motz is clearly more worried about Wal-Mart’s bottom line than the bottom line of average working families in Maryland,” said Terry Lierman, chairman of the Maryland Democratic Party. “He struck a terrible blow to the taxpayers of Maryland who will continue to pay for the health care of the massive Wal-Mart work force out of their hard-earned tax dollars.”

Shares of Wal-Mart rose $1.03 yesterday to close at $44.20 on the New York Stock Exchange.

Jon Ward contributed to this report.

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