On November 21, 2022, the Supreme Court declined to review whether federal law preempts a Seattle Ordinance mandating that large hotels offer their employees health insurance coverage or increased pay.  This left the Ninth Circuit’s ruling, which found that the particular ordinance was not preempted, as the last word on the issue (at least for now).

Background Regarding the Seattle Ordinance

The Seattle Ordinance mandates that covered employers in the hotel sector make minimum monthly healthcare expenditures on behalf of their covered employees.  Employers can satisfy the Ordinance in one of three ways:

  1. by making the minimum monthly payments to a third party, such as an insurance carrier;
  2. by including covered employees in a self-funded healthcare plan offering average per-capita monthly expenditures for the covered employees that match or exceed the mandated minimums; or
  3. by making direct monthly payments to their covered employees that match or exceed the mandated minimums.

The Ninth Circuit’s Decision

In March 2021, the Ninth Circuit held that the Seattle Ordinance was not preempted by ERISA.  In so ruling, the Court reasoned that a local ordinance mandating that employers in the hotel industry offer workers certain minimum monetary payments for healthcare expenditures is not tantamount to a state or local law mandating the creation of an ERISA-covered benefit plan because an employer “may fully discharge its expenditure obligations by making the required level of employee health care expenditures, whether those expenditures are made in whole or in part to an ERISA plan, or in whole or in part to [a third party].”

Petitioner’s Arguments in Support of SCOTUS Review

The ERISA Industry Committee (“ERIC”), a trade association representing large employers who sponsor ERISA-covered plans, petitioned the Supreme Court to review the Ninth Circuit’s decision, urging that review was necessary to preserve “ERISA’s national uniformity” and to settle a circuit split between, on the one hand, the Ninth Circuit, which found that the Seattle Ordinance was not preempted by ERISA and, on the other hand, the First and Fourth Circuits, which found that similar local ordinances in Massachusetts and Maryland, respectively, were preempted by ERISA.

ERIC argued that the Seattle Ordinance makes “reference to” ERISA-covered plans and thus is preempted by ERISA.  ERIC explained that, even though the Seattle Ordinance had an “or pay” option, most covered employers—especially the large hotel employers targeted by the Ordinance —already “have pre-existing ERISA plans,” and, therefore, complying with the Seattle Ordinance will invariably necessitate amendments to employers’ existing ERISA plans.  As ERIC explained, that was precisely the reason the First and Fourth Circuits concluded that similar laws were preempted by ERISA:

  • In Retail Industry Leaders Ass’n v. Fielder, 475 F.3d 180 (2007), the Fourth Circuit held that a Maryland law that required a single employer (Wal-Mart) to spend 8% of total wages on state health insurance costs or else pay an equivalent shortfall to the state was preempted by ERISA, finding that despite the “or pay” option, the law offered employer no rational choice but to alter their ERISA plans in order to avoid paying a penalty.
  • Similarly, in Merit Construction Alliance v. City of Quincy, 759 F.3d 122 (2014), the First Circuit found a local ordinance preempted by ERISA, where it regulated apprenticeship programs, because “employers could comply only by using an existing ERISA apprentice plan or establishing a separate plan” —in this case, unlike with respect to the Seattle Ordinance, the law did not provide an “or pay” option.

ERIC further cautioned that, in the absence of preemption, state or local laws like the Seattle Ordinance will “impose burdensome, locality-specific obligations on employers” akin to “the pre-ERISA state of affairs” in which the nation lacked a uniform plan administration regulatory scheme.

Solicitor General’s Arguments Against Certiorari

At the invitation of the Supreme Court, the Solicitor General submitted a brief on behalf of the United States, requesting that the Court deny ERIC’s request for review.  The Solicitor argued that the Ordinance did not make an impermissible reference to, or have an impermissible connection with ERISA plans because “the Ordinance itself establishes specific expenditure amounts that apply to all covered employers and employees, regardless of whether the employer has an ERISA plan or the employee participates in it.”  Additionally, the Solicitor argued that the “or pay” option permits employers to comply without establishing an ERISA plan, and does not “single out ERISA plans or sponsors for differential treatment.”

The Solicitor also disagreed with ERIC’s assertion of a Circuit split “because the laws involved in the cases on which petitioner relies differed in material respects from the one in this case.” Namely, the Solicitor argued that First and Fourth Circuit cases are distinguishable because the regulations at issue in those cases did not provide meaningful non-ERISA alternatives for compliance—whereas here, employers could comply by making payments directly to employees.


In declining to review the Ninth Circuit’s decision, the Supreme Court leaves unanswered concerns raised by ERIC about plan uniformity and administration in the face of so called “play-or-pay” laws like Seattle’s Ordinance.  In the absence of future judicial intervention or federal legislation, and as ERIC explained in its petition to the Supreme Court, these state and local laws are likely to have a significant economic impact on employers providing benefits.

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Photo of Joshua Fox Joshua Fox

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several…

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several Major League Baseball Clubs in all aspects of the salary arbitration process, including the Miami Marlins, Boston Red Sox, Los Angeles Dodgers, Kansas City Royals, San Francisco Giants, Tampa Bay Rays and Toronto Blue Jays. In particular, Josh successfully represented the Miami Marlins in their case against All-Star Catcher J.T. Realmuto, which was a significant club victory in salary arbitration. Josh also represents Major League Baseball and its clubs in ongoing litigation brought by current and former minor league players who allege minimum wage and overtime violations. Josh participated on the team that successfully defended Major League Baseball in a wage-and-hour lawsuit brought by a former volunteer for the 2013 All-Star FanFest, who alleged minimum wage violations under federal and state law. The lawsuit was dismissed by the federal district court, and was affirmed by the U.S. Court of Appeals for the Second Circuit.

Josh also has extensive experience representing professional sports leagues and teams in grievance arbitration proceedings, including playing a vital role in all aspects of the grievance challenging the suspension for use of performance-enhancing drugs of then-New York Yankees third baseman Alex Rodriguez. Josh also has counseled NHL Clubs and served on the trial teams for grievances alleging violations of the collective bargaining agreement, including cases involving use of performance-enhancing substances, domestic violence issues, and supplementary discipline for on-ice conduct. He has played a key role in representing professional sports leagues in all aspects of their collective bargaining negotiations with players and officials, including the Major League Baseball, National Hockey League, the National Football League, Major League Soccer, the Professional Referee Organization, and the National Basketball Association,.

In addition, Josh has extensive experience representing clients in the performing arts industry, including the New York City Ballet, New York City Opera, Big Apple Circus, among many others, in collective bargaining negotiations with performers and musicians, the administration of their collective bargaining agreements, and in grievance arbitrations.

Josh also represents a diverse range of clients, including real estate developers and contractors, pipe line contractors, hospitals, hotels, manufacturers and public employers, in collective bargaining, counseling on general employment matters and proceedings before the National Labor Relations Board, New York State Public Employment Relations Board and arbitrators.

Josh has also recently served as an adjunct professor at Cornell University’s School of Industrial Labor Relations for the past two years, teaching a course regarding Major League Baseball salary arbitration.

Prior to joining Proskauer, Josh worked for a year and a half at the National Hockey League, where he was involved in all labor and employment matters, including preparations for collective bargaining, grievance arbitration, contract drafting and reviewing and employment counseling. Josh also interned in the labor relations department of Major League Baseball and at Region 2 of the National Labor Relations Board. He was a member of the Brooklyn Law Review and the Appellate Moot Court Honor Society and served as president of the Brooklyn Entertainment and Sports Law Society.