Golden Gate Restaurant Association v. City and County of San Francisco ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GOLDEN GATE RESTAURANT 
ASSOCIATION, an incorporated non-
profit trade association,
Plaintiff-Appellee,
v.
CITY AND COUNTY OF SAN
FRANCISCO, No. 07-17370
Defendant,
 D.C. No.
and CV-06-06997-JSW
SAN FRANCISCO CENTRAL LABOR
COUNCIL; SERVICE EMPLOYEES
INTERNATIONAL UNION, HEALTHCARE
WORKERS-WEST; SERVICE
EMPLOYEES INTERNATIONAL UNION,
LOCAL 1021; UNITE HERE LOCAL 2,
Defendant-intervenors-Appellants.

13909
13910 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
GOLDEN GATE RESTAURANT 
ASSOCIATION, an incorporated non-
profit trade association,
Plaintiff-Appellee,
v.
CITY AND COUNTY OF SAN
FRANCISCO, No. 07-17372
Defendant-Appellant,
 D.C. No.
CV-06-06997-JSW
and
SAN FRANCISCO CENTRAL LABOR OPINION
COUNCIL; SERVICE EMPLOYEES
INTERNATIONAL UNION, HEALTHCARE
WORKERS-WEST; SERVICE
EMPLOYEES INTERNATIONAL UNION,
LOCAL 1021; UNITE HERE LOCAL 2,
Defendant-intervenors.

Appeal from the United States District Court
for the Northern District of California
Jeffrey S. White, District Judge, Presiding
Argued and Submitted
April 17, 2008—Pasadena, California
Filed September 30, 2008
Before: Alfred T. Goodwin, Stephen Reinhardt, and
William A. Fletcher, Circuit Judges.
Opinion by Judge William A. Fletcher
13914 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
COUNSEL
Stephen P. Berzon, Scott A. Kronland and Stacey M. Leyton,
Altshuler Berzon, San Francisco, California, Vince Chhabria,
Office of the City Attorney, San Francisco, California, for the
appellants.
Curtis A. Cole and Joshua Traver, Cole Pedroza, LLP, Pasa-
dena, California, Richard C. Rybicki, Dickenson, Peatman, &
Fogarty, Napa, California, Patrick Sutton, Dickenson, Peat-
man & Fogarty, Santa Rosa, California, for the appellee.
*****
Leslie Robert Stellman, Hodes, Pessin & Katz, Towson,
Maryland, for amicus National Federation of Independent
Business Legal Foundation.
Jon W. Breyfogle, Groom Law Group, Washington, D.C., for
amicus American Benefits Council.
James P. Baker, Jones Day, San Francisco, California, for
amicus Employers Group.
Jeffrey A. Berman, Sidley Austin, Los Angeles, California,
for amicus California Chamber of Commerce.
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13915
Thomas L. Cubbage, Covington & Burling, Washington,
D.C., for amici ERISA Industry Committee and National
Business Group of California.
Edward D. Sieger, US Department of Labor, Washington,
D.C., for amicus Secretary of Labor.
Thomas M. Christina, Ogletree, Deakins, Nash, Smoak &
Stewart, Greenville, South Carolina, for amici International
Franchise Association, National Association of Manufactur-
ers, and Society for Human Resource Management, Michael
D. Peterson, Washington, D.C., for amicus HP Policy Associ-
ation.
Eugene Scalia, Gibson Dunn & Crutcher, Washington D.C.,
for amici Retail Industry Leaders Association and Chamber of
Commerce of the United States.
OPINION
W. FLETCHER, Circuit Judge:
Plaintiff Golden Gate Restaurant Association (“the Associ-
ation”) challenges the employer spending requirements of the
newly enacted San Francisco Health Care Security Ordinance
(“the Ordinance”). The Association argues that the federal
Employee Retirement Income Security Act of 1974
(“ERISA”) preempts the employer spending requirements of
the Ordinance either because those requirements create a
“plan” within the meaning of ERISA or because they “relate
to” employers’ ERISA plans. On December 26, 2007, the dis-
trict court granted the Association’s motion for summary
judgment and enjoined the implementation of the employer
spending requirements. Golden Gate Rest. Ass’n v. City &
County of San Francisco, 535 F. Supp. 2d 968, 970 (N.D. Cal.
2007). On December 27, 2007, Defendant City and County of
13916 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
San Francisco (“the City”) and Defendant-Intervenor labor
unions requested that this court stay the judgment of the dis-
trict court pending appeal. In an order filed January 9, 2008,
we granted the stay. Golden Gate Rest. Ass’n v. City &
County of San Francisco (“Golden Gate”), 512 F.3d 1112,
1114 (9th Cir. 2008). We now reach the merits of the appeal.
We hold that ERISA does not preempt the Ordinance.
I. Procedural History
In July 2006, the San Francisco Board of Supervisors unan-
imously passed the San Francisco Health Care Security Ordi-
nance, and the mayor signed it into law. The Ordinance is
codified at Sections 14.1 to 14.8 of the City and County of
San Francisco Administrative Code. The Ordinance has two
primary components: the Health Access Plan (“HAP”), and
the employer spending requirements. The HAP1 is a City-
administered health care program. It went into effect in the
summer of 2007. In funding the HAP, the City “prioritize[s]
services for low and moderate income persons.” S.F. Admin.
Code § 14.2(d) (2007). According to the City’s web page, as
of August 9, 2008, 27,395 persons had enrolled in the HAP.2
Persons who already have health insurance or who live out-
side of San Francisco are not eligible for the HAP. Instead,
such persons may be entitled to establish medical reimburse-
ment accounts with the City. As we will explain in detail
below, the Ordinance also requires all covered employers to
make a certain level of health care expenditures on behalf of
their covered employees. The Association does not challenge
the HAP. It challenges only the employer spending require-
ments.
The Association filed a complaint against the City on
November 8, 2006, asking the district court to declare that
1
The HAP is now called “Healthy San Francisco.”
2
Healthy San Francisco, About Us, http://www.healthysanfrancisco.org/
about_us/Stats.aspx#.
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13917
ERISA preempts the employer spending requirements, and
seeking a permanent injunction against enforcement of the
provisions of the Ordinance relating to those requirements.
The San Francisco Central Labor Council, Service Employees
International Union (SEIU) Local 1021, SEIU United Health-
care Workers-West, and UNITE-HERE! Local 2 (collectively,
“Intervenors”), successfully moved to intervene as defen-
dants.
On April 2, 2007, the City deferred implementation of the
employer spending requirements until January 1, 2008. On
July 13, 2007, the parties filed cross-motions for summary
judgment. On December 26, 2007, the district court entered
judgment for the Association, concluding that ERISA pre-
empts the employer spending requirements. See Golden Gate
Rest. Ass’n, 535 F. Supp. 2d at 979-80.
On December 27, 2007, the City and Intervenors asked the
district court to stay its judgment pending appeal. The district
court denied the motion. On January 9, 2008, this court filed
a published order granting the City’s motion for a stay of the
district court’s judgment pending resolution of the City’s
appeal. Golden Gate, 512 F.3d at 1127. Since that date, cov-
ered employers have been required to make quarterly health
care expenditures.
On February 7, 2008, the Association filed an application
with Justice Kennedy, as Circuit Justice for the Ninth Circuit,
for an order vacating our stay of the district court’s judgment.
On February 21, after receiving the City’s response, Justice
Kennedy denied the application. The United States Secretary
of Labor subsequently filed an amicus brief in this court in
support of the Association.
On April 17, 2008, we heard oral argument on the merits
of the City’s appeal. We now reverse the judgment of the dis-
trict court and remand with instructions to enter summary
judgment in favor of the City and Intervenors.
13918 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
II. Standard of Review
“We review de novo the district court’s grant of summary
judgment and, viewing the evidence in the light most favor-
able to the non-moving party, determine whether there are any
genuine issues of material fact for trial.” In re Syncor ERISA
Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). “ERISA preemp-
tion is a question of law, which we also review de novo.”
Elliot v. Fortis Benefits Ins. Co., 337 F.3d 1138, 1141 (9th
Cir. 2003).
III. The Ordinance
The Ordinance mandates that covered employers make “re-
quired health care expenditures to or on behalf of” certain
employees each quarter. S.F. Admin. Code § 14.3(a). “Cov-
ered employers” are employers engaging in business within
the City that have an average of at least twenty employees
performing work for compensation during a quarter, and non-
profit corporations with an average of at least fifty employees
performing work for compensation during a quarter. Id.
§ 14.1(b)(3), (11), (12). “Covered employees” are individuals
who (1) work in the City, (2) work at least ten hours per
week, (3) have worked for the employer for at least ninety
days, and (4) are not excluded from coverage by other provi-
sions of the Ordinance. Id. § 14.1(b)(2).
The Ordinance sets the required health care expenditure for
employers based on the Ordinance’s “health care expenditure
rate.” Id. §§ 14.1(b)(8), 14.3(a). For-profit employers with
between twenty and ninety-nine employees and non-profit
employers with fifty or more employees must make health
care expenditures at a rate of $1.17 per hour. For-profit
employers with one hundred or more employees must make
expenditures at a rate of $1.76 per hour. See City & County
of San Francisco, Office of Labor Standards Enforcement,
Regulations Implementing the Employer Spending Require-
ment of the San Francisco Health Care Security Ordinance
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13919
(“ESR”), Reg. 5.2(A) (2007).3 Under the Ordinance, “[t]he
required health care expenditure for a covered employer shall
be calculated by multiplying the total number of hours paid
for each of its covered employees during the quarter . . . by
the applicable health care expenditure rate.” S.F. Admin.
Code § 14.3(a).
Regulations implementing the Ordinance specify that “[a]
health care expenditure is any amount paid by a covered
employer to its covered employees or to a third party on
behalf of its covered employees for the purpose of providing
health care services for covered employees or reimbursing the
cost of such services for its covered employees.” ESR Reg.
4.1(A). A “covered employer has discretion as to the type of
health care expenditure it chooses to make for its covered
employees.” ESR Reg. 4.2(A). Section 14.1(b)(7) of the Ordi-
nance specifies that the definition of health care expenditure
includ[es], but [is] not limited to
(a) contributions by [a covered] employer
on behalf of its covered employees to a
health savings account as defined under
section 223 of the United States Internal
Revenue Code or to any other account hav-
ing substantially the same purpose or effect
without regard to whether such contribu-
tions qualify for a tax deduction or are
excludable from employee income;
3
On June 16, 2008, the City issued revised ESR regulations. Those revi-
sions do not pertain to any of the regulations discussed in this opinion. See
City & County of S.F. Office of Labor Standards Enforcement, Regula-
tions Implementing the Employer Spending Requirement of the San Fran-
cisco Health Care Security Ordinance (June 16, 2008), available at http://
www.sfgov.org/site/uploadedfiles/olse/hcso/HCSO_Final_
Regulations.pdf.
13920 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
(b) reimbursement by such covered
employer to its covered employees for
expenses incurred in the purchase of health
care services;
(c) payments by a covered employer to a
third party for the purpose of providing
health care services for covered employees;
(d) costs incurred by a covered employer in
the direct delivery of health care services to
its covered employees; and
(e) payments by a covered employer to the
City to be used on behalf of covered
employees. The City may use these pay-
ments to:
(i) fund membership in the Health Access
Program for uninsured San Francisco res-
idents; and
(ii) establish and maintain reimbursement
accounts for covered employees, whether
or not those covered employees are San
Francisco residents.
S.F. Admin. Code § 14.1(b)(7) (paragraphing added); see also
ESR Reg. 4.2(A).
If an employer does not make required health care expendi-
tures on behalf of employees in some other way, it may meet
its spending requirement by making payments directly to the
City under § 14.1(b)(7)(e). See ESR Reg. 4.2(A). We refer to
this option as the City-payment option. If an employer elects
the City-payment option, its covered employees who satisfy
age and income requirements and are “uninsured San Fran-
cisco residents” may enroll in the HAP, and its other covered
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13921
employees will be eligible for medical reimbursement
accounts with the City. Covered employees may enroll in the
HAP free of charge or at reduced rates. The HAP provides
enrollees with “medical services with an emphasis on well-
ness, preventive care and innovative service delivery.” S.F.
Admin. Code § 14.2(f). A primary care provider at the enroll-
ee’s “medical home” “develop[s] and direct[s] a plan of care
for each [HAP] participant.” Id. § 14.2(e). Enrollees pay
income-based “participation fees” and “point-of-service fees.”
Regulations Implementing Health San Francisco and Medical
Reimbursement Account Provisions of the San Francisco
Health Care Security Ordinance, Reg. 4(a) (2007).
An employer is exempt from making payments to the City
if it makes health care expenditures under § 14.1(b)(7)(a)-(d)
of at least $1.17 or $1.76 per hour (depending on the non-
profit or for-profit status of the employer, and on the number
of employees), and it is partially exempt to the extent that it
makes lesser expenditures.
The Ordinance requires covered employers to “maintain
accurate records of health care expenditures, required health
care expenditures, and proof of such expenditures made each
quarter each year,” but it does not require them “to maintain
such records in any particular form.” S.F. Admin. Code
§ 14.3(b)(i). Employers must provide the City with “reason-
able access to such records.” Id. If an employer fails to com-
ply with these requirements, the City will “presume[ ] that the
employer did not make the required health expenditures for
the quarter for which records are lacking, absent clear and
convincing evidence otherwise.” Id. § 14.3(b)(ii).
The Ordinance includes a special provision for employers
with self-insured health plans. An employer providing “health
coverage to some or all of its covered employees through a
self-funded/self-insured plan” will “comply with the spending
requirement . . . if the preceding year’s average expenditure
rate per employee meets or exceeds the applicable expendi-
13922 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
ture rate” for the employer. ESR Reg. 6.2(B)(2). Such
employers do not need to keep track of their actual expendi-
tures for each employee.
Relevant to our analysis, there are five categories of
employers under the Ordinance. First are employers that have
no ERISA plans (“No Coverage Employers”). Second are
employers that have ERISA plans for all employees, and that
spend at least as much as the Ordinance’s required health care
expenditure per employee (“Full High Coverage Employers”).
Third are employers that have ERISA plans for some, but not
all, employees, and that spend at least as much as the Ordi-
nance’s required health care expenditure per employee for
employees under the ERISA plan (“Selective High Coverage
Employers”). Fourth are employers that have ERISA plans for
all employees, but that spend less than the Ordinance’s
required health care expenditure per employee (“Full Low
Coverage Employers”). Fifth are employers that have ERISA
plans for some, but not all, employees, and that spend less
than the Ordinance’s required health care expenditure per
employee for employees under the ERISA plan (“Selective
Low Coverage Employers”).
No Coverage Employers may choose to continue without
any ERISA plans. In that event, they can make their required
health care expenditures directly to the City. See ESR Reg.
4.2(A)(6). If these employers choose, instead, to establish an
ERISA plan, the Ordinance requires only that they make the
required level of health care expenditures. They can do so by
paying the full amount to the plan, or by paying part to the
plan and part to the City. The Ordinance does not dictate
which employees must be eligible for the plan, or what bene-
fits a plan must provide. See ESR Reg. 4.2(A)(1)-(5).
Full High Coverage Employers may choose to leave their
ERISA plans intact and unaltered. So long as they maintain
records to show that they are making the required health care
expenditures, they comply with the Ordinance.
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13923
Selective High Coverage Employers may choose to leave
their ERISA plans intact and unaltered. In that event, for
employees not covered by their ERISA plans, they can com-
ply with the Ordinance by making the required health care
expenditures to the City. See ESR Reg. 6.2(C) (“An employer
may . . . choose to purchase health insurance for its full-time
employees, but make payment to the City to fund part-time
employees’ membership in the Health Access Program[.]”).
Full Low Coverage Employers may choose to leave their
ERISA plans intact and unaltered. In that event, they can
comply with the Ordinance by making payments to the City
in an amount equal to the difference between their expendi-
tures for the ERISA plans and the required health care expen-
ditures under the Ordinance. See ESR Reg. 6.2(D) (“[A]n
employer who purchases a health insurance program with pre-
miums that are less than the required expenditure . . . may
choose to pay the remainder to the City to establish and main-
tain medical reimbursement accounts for such employees.”).
Selective Low Coverage Employers may choose to leave
their ERISA plans intact and unaltered. In that event, they can
comply with the Ordinance for employees enrolled in their
ERISA plans by paying to the City the difference between
their expenditures for the plans and the required health care
expenditures under the Ordinance, and for employees not
enrolled in their ERISA plans by paying to the City the full
amount of the required health care expenditures.
We make two observations about the Ordinance. First, the
Ordinance does not require employers to establish their own
ERISA plans or to make any changes to any existing ERISA
plans. Employers may choose to make up the difference
between their existing health care expenditures and the mini-
mum expenditures required by the Ordinance either by alter-
ing existing ERISA plans or by establishing new ERISA
plans. However, they need not do so. The City-payment
option allows employers to make payments directly to the
13924 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
City, if they so choose, without requiring them to establish, or
to alter existing, ERISA plans. If employers choose to pay the
City, the employees for whom those payments are made are
entitled to receive either discounted enrollment in the HAP or
medical reimbursement accounts with the City.
Second, the Ordinance is not concerned with the nature of
the health care benefits an employer provides its employees.
It is only concerned with the dollar amount of the payments
an employer makes toward the provision of such benefits. An
employer can satisfy its spending requirements by paying the
City; it can satisfy those requirements by funding exclusively
preventive care; it can satisfy those requirements by setting up
an on-site clinic and reimbursing employees for the purchase
of over-the-counter medications; or it can satisfy those
requirements in some other manner, such as funding a tradi-
tional ERISA plan. The Ordinance does not look beyond the
dollar amount spent, and it does not evaluate benefits derived
from those dollars.
IV. Discussion
The Association argues that ERISA preempts the Ordi-
nance either because it creates a “plan” within the meaning of
ERISA or because it “relates to” employers’ ERISA plans
within the meaning of ERISA. For the reasons that follow, we
disagree.
Crafted as a compromise between employers and employ-
ees, ERISA has two primary purposes. First, from the per-
spective of employees and other beneficiaries of ERISA
plans, “ERISA was passed by Congress in 1974 to safeguard
employees from the abuse and mismanagement of funds that
had been accumulated to finance various types of employee
benefits.” Massachusetts v. Morash, 490 U.S. 107, 112
(1989). “In enacting ERISA, Congress’ primary concern was
with the mismanagement of funds accumulated to finance
employee benefits and the failure to pay employees benefits
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13925
from accumulated funds. To that end, it established extensive
reporting, disclosure, and fiduciary duty requirements to
insure against the possibility that the employee’s expectation
of the benefit would be defeated through poor management by
the plan administrator.” Id. at 115 (citation and footnote omit-
ted). Second, from the perspective of employers, “[t]he pur-
pose of ERISA is to provide a uniform regulatory regime over
employee benefit plans.” Aetna Health Inc. v. Davila, 542
U.S. 200, 208 (2004). Uniformity of regulation eases the
administrative burdens on employers and plan administrators,
thereby reducing costs to employers.
A. Presumption Against Preemption
[1] We begin by noting that state and local laws enjoy a
presumption against preemption when they “clearly operate[ ]
in a field that has been traditionally occupied by the States.”
De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520
U.S. 806, 814 (1997) (internal quotation marks omitted). This
presumption informs our preemption analysis. See Boggs v.
Boggs, 520 U.S. 833, 840 (1997) (the fact that a state law
“implement[s] policies and values lying within the traditional
domain of the States . . . inform[s] [a] preemption analysis”).
The presumption against preemption applies in ERISA cases.
“[N]othing in the language of [ERISA] or the context of its
passage indicates that Congress chose to displace general
health care regulation, which historically has been a matter of
local concern.” N.Y. State Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 661 (1995).
“[T]he Court has established a presumption that Congress did
not intend ERISA to preempt areas of traditional state regula-
tion that are quite remote from the areas with which ERISA
is expressly concerned — reporting, disclosure, fiduciary
responsibility, and the like.” Rutledge v. Seyfarth, Shaw, Fair-
weather & Geraldson, 201 F.3d 1212, 1217 (9th Cir. 2000)
(emphasis in original; internal quotation marks omitted). Fur-
ther, “ERISA pre-emption must have limits when it enters
areas traditionally left to state regulation — such as the state’s
13926 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
. . . regulation of health . . . matters.” Operating Eng’rs
Health & Welfare Trust Fund v. JWJ Contracting Co., 135
F.3d 671, 677 (9th Cir. 1998).
[2] The field in which the Ordinance operates is the provi-
sion of health care services to persons with low or moderate
incomes. State and local governments have traditionally pro-
vided health care services to such persons. See Paul Star, The
Social Transformation of American Medicine 185 (1982)
(noting that other than the four-year period from 1879 to
1883, when there was a National Board of Health, “public
health remained almost entirely a state and local responsibili-
ty”); id. at 181-82 (describing “the role of public dispensaries
in treating the sick poor”); id. at 169 (describing the first
phase of the hospital system in the United States, spanning
1751 to 1850, in which there were charitable hospitals “and
public hospitals, descended from almshouses and operated by
municipalities [and] by counties”); id. at 171 (noting that
“[p]ublic hospitals generally treated the poor [and] relied on
government appropriations rather than fees”). The Ordinance
uses a novel approach to the provision of health services to
such persons, but operates in a field that has long been the
province of state and local governments, thereby “imple-
ment[ing] policies and values lying within the traditional
domain of the States.” Boggs, 520 U.S. at 840.
B. Preemption Under ERISA
ERISA governs “employee benefit plans,” including “em-
ployee welfare benefit plans.” 29 U.S.C. § 1002(3). Section
514(a) of ERISA states that ERISA preempts “any and all
State laws insofar as they . . . relate to any employee benefit
plan” governed by ERISA. 29 U.S.C. § 1144(a). “A law
‘relate[s] to’ a covered employee benefit plan for purposes of
§ 514(a) if it [1] has a connection with or [2] reference to such
a plan.” Cal. Div. of Labor Standards Enforcement v. Dil-
lingham Constr., N.A., Inc. (“Dillingham”), 519 U.S. 316, 324
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13927
(1997) (alterations in original; some internal quotation marks
omitted).
The Association and the amicus, the Secretary of Labor,
make two central arguments. First, they argue that the City-
payment option under the Ordinance creates an ERISA plan.
This argument takes two forms. The Association argues in its
brief that the Ordinance’s administrative obligations on
employers, in combination with a reasonable person’s ability
to ascertain “benefits, beneficiaries, source of financing, and
procedures for receiving benefits,” creates an ERISA plan.
The Secretary of Labor argues as amicus that the HAP itself
is an ERISA plan. If either argument is correct, the Ordinance
almost certainly makes an impermissible “reference to” an
ERISA plan. Second, they argue that even if the City-payment
option does not establish an ERISA plan, an employer’s obli-
gation to make payments at a certain level — whether or not
the payments are made to the City — “relates to” the ERISA
plans of covered employers and is thus preempted. We
address these arguments in turn.
1. The City-Payment Option Does Not Create an ERISA
“Plan”
If the City-payment option does not create an “employee
welfare benefit plan” within the meaning of ERISA, the first
argument fails. The district court concluded that employers’
payments to the City do not create an ERISA plan. See Gol-
den Gate Rest. Ass’n, 535 F. Supp. 2d at 976 (Ordinance does
not “create[ ] a separate de facto ERISA plan”). For the rea-
sons that follow, we agree with the district court and hold that
the City-payment option does not create an ERISA plan, de
facto or otherwise. We first address the Association’s argu-
ment. We then address the Secretary’s argument.
13928 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
a. Employers’ Administrative Obligations, and the Ability
to Ascertain Benefits, Beneficiaries, Financing and
Procedures
[3] The first element of an employee welfare benefit plan
is the existence of a “plan, fund or program.” Patelco Credit
Union v. Sahni, 262 F.3d 897, 907 (9th Cir. 2001). In the con-
text of ERISA, the phrase “plan, fund or program” is a term
of art. As relevant to this case, an ERISA “plan” is an “em-
ployee welfare benefit plan,” defined as
[a]ny plan, fund, or program which . . . is . . . estab-
lished or maintained by an employer or by an
employee organization, or by both, to the extent that
such plan, fund, or program was established or is
maintained for the purpose of providing for its par-
ticipants . . . , through the purchase of insurance or
otherwise, . . . medical, surgical, or hospital care or
benefits, or benefits in the event of sickness, acci-
dent, disability, death or unemployment . . . .
29 U.S.C. § 1002(1); see also § 1002(3); Patelco Credit
Union, 262 F.3d at 907.
[4] The Supreme Court has emphasized that ERISA is con-
cerned with “benefit plans,” rather than simply “benefits,”
because “[o]nly ‘plans’ involve administrative activity poten-
tially subject to employer abuse.” Fort Halifax Packing Co.
v. Coyne, 482 U.S. 1, 16 (1987). This focus on “benefit plans”
is consistent with the first underlying purpose of ERISA —
protecting employees against the abuse and mismanagement
of funds. If an employee’s expectation of a “benefit” presents
“a danger of defeated expectations [that] is no different from
the danger of defeated expectations of wages for services per-
formed,” then the employer’s actions giving rise to that
expectation do not amount to a “benefit plan” because such
danger is one “Congress chose not to regulate in ERISA.”
Morash, 490 U.S. at 115.
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13929
[5] Two Supreme Court cases tell us that an employer’s
obligation to make monetary payments based on the amount
of time worked by an employee, over and above ordinary
wages, does not necessarily create an ERISA plan. This is so
even if the payments are made by the employer directly to the
employees who are the beneficiaries of the putative “plan.”
First, in Fort Halifax, a Maine statute required an employer
to pay employees one week’s pay for every year worked if the
employees were terminated because of a plant closing. The
Court held that the statute did not create a “plan” within the
meaning of ERISA: “The Maine statute neither establishes,
nor requires an employer to maintain, an employee benefit
plan. The requirement of a one-time, lump-sum payment trig-
gered by a single event requires no administrative scheme
whatsoever to meet the employer’s obligation.” Id. at 12.
Second, in Massachusetts v. Morash, 490 U.S. 107, 109
(1989), a Massachusetts statute required employers to pay dis-
charged employees their “full wages, including holiday or
vacation payments, on the date of discharge.” The Court held
that the statute was not preempted by ERISA. The Court
wrote, “It is unlikely that Congress intended to subject to
ERISA’s reporting and disclosure requirements those vacation
benefits which by their nature are payable on a regular basis
from the general assets of the employer and are accumulated
over time only at the election of the employee.” Id. at 116.
The Court in Morash emphasized the importance of the fact
that the employer made the payments out of its general assets:
An entirely different situation would be presented if
a separate fund had been created by a group of
employers to guarantee the payment of vacation ben-
efits to laborers who regularly shift their jobs from
one employer to another. Employees who are benefi-
ciaries of such a trust face far different risks and
have far greater need for the reporting and disclosure
requirements that the federal law imposes than those
13930 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
whose vacation benefits come from the same fund
from which they receive their paychecks.
Id. at 120.
[6] The employer payments at issue under the San Fran-
cisco Ordinance, which the Association contends create an
ERISA plan, are not made directly to employees. Rather, they
are made to the City. But even if the employers made the pay-
ments directly to the employees, Fort Halifax and Morash
indicate that those payments would not be enough to create an
ERISA plan. Under the Ordinance, employers make the pay-
ments on a regular periodic basis and calculate those pay-
ments based on the number of hours worked by the employee.
Further, as in Morash, employers make the payments “on a
regular basis from [their] general assets.” If employers made
the payments directly to the employees, there would be little
to differentiate those payments from wages paid to employ-
ees. Indeed, the City allows employers to pay the City on a
weekly, bi-weekly, or monthly basis, so that employers may
coordinate their payments under the Ordinance with their
employees’ regular pay periods. See ESR Reg. 6.2(A)(2).
[7] The fact that an employer makes its payments to the
City rather than to the employees confirms, if confirmation
were needed, that the employer’s administrative obligations
under the City-payment option do not create an ERISA plan.
Under the Ordinance, an employer has no responsibility other
than to make the required payments for covered employees,
and to retain records to show that it has done so. The pay-
ments are made for a specific purpose, but the employer has
no responsibility for ensuring that the payments are actually
used for that purpose. The Association points to the burden
entailed in keeping track of which workers perform qualifying
work in San Francisco, keeping track of the hours those
employees work, and keeping track of the credit (if any) an
employer should get for health care payments made to non-
City entities. This burden is not enough, in itself, to make the
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13931
payment obligation an ERISA plan. Many federal, state and
local laws, such as income tax withholding, social security,
and minimum wage laws, impose similar administrative obli-
gations on employers; yet none of these obligations consti-
tutes an ERISA plan.
We have emphasized that an employer’s administrative
duties must involve the application of more than a modicum
of discretion in order for those administrative duties to
amount to an ERISA plan. It is within the exercise of that dis-
cretion that an employer has the opportunity to engage in the
mismanagement of funds and other abuses with which Con-
gress was concerned when it enacted ERISA. In Bogue v.
Ampex Corp., 976 F.2d 1319, 1323 (9th Cir. 1992), we con-
cluded that the employer, in determining whether an
employee was eligible for severance pursuant to an employ-
ment agreement, “was obligated to apply enough ongoing,
particularized, administrative, discretionary analysis to make
the [severance] program in this case a ‘plan.’ ” In Velarde v.
Pace Membership Warehouse, Inc., 105 F.3d 1313, 1317 (9th
Cir. 1997), we emphasized that in order to amount to a “plan,”
the agreement must require the employer to apply more than
“some modicum of discretion.” There must be “enough ongo-
ing, particularized, administrative, discretionary analysis to
make the plan an ongoing administrative scheme.” Id.(emphasis in original; citation and internal quotation marks
omitted).
[8] An employer’s administrative obligations under the
City-payment option do not run the risk of mismanagement of
funds or other abuse. To be sure, employers must keep track
of the number of hours their employees work and whether
those hours are worked in San Francisco or elsewhere.
Employers must also determine whether particular employees
are “supervisorial” or “managerial,” and thereby not covered
employees. S.F. Admin. Code § 14.1(b)(2)(d). An employer
may have some incentive to minimize the number of covered
employees or the number of reported hours worked in San
13932 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
Francisco, but the employer has no discretion under the Ordi-
nance to alter its books to reduce its quarterly spending obli-
gation. Rather, the employer’s administrative obligations
involve mechanical record-keeping, and the employer’s pay-
ments to the City “are typically fixed, due at known times,
and do not depend on contingencies outside the employee’s
control.” Morash, 490 U.S. at 115. Any potentially subjective
judgments involved with making these calculations and main-
taining these records amount to nothing more than the exer-
cise of “a modicum of discretion.”
[9] The Association contends that the administrative burden
on the covered employers, combined with the reasonable
ascertainability of benefits to employees, creates an ERISA
plan. The Association contends that the employer’s obligation
to make payments to the City satisfies the criteria for a plan
set forth in Donovan v. Dillingham, 688 F.2d 1367, 1370-73
(11th Cir. 1982) (en banc). Quoting Donovan, the Association
argues, “Plan creation requires only that ‘a reasonable person
could ascertain the intended benefits, beneficiaries, source of
financing, and procedures for receiving benefits.’ Donovan,
688 F.2d at 1373.” We have relied on these criteria from Don-
ovan in three primary circumstances in this circuit: in Scott v.
Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985), in Mod-
zelewski v. Resolution Trust Corp., 14 F.3d 1374 (9th Cir.
1994), and in Winterrowd v. American General Annuity Ins.
Co., 321 F.3d 933 (9th Cir. 2003).
In Scott, we relied on the criteria set forth in Donovan to
hold that an agreement to provide severance pay to terminated
employees at a rate of two weeks’ salary for each year of
employment was sufficient to establish an ERISA plan. 754
F.2d at 1503-04. The outcome of Scott is almost certainly no
longer good law in light of the Supreme Court’s subsequent
decisions in Fort Halifax and Morash.
In Modzelewski, we set forth the Donovan factors in deter-
mining whether an employer’s promise to pay its employees
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13933
monthly installments upon retirement amounted to a de facto
pension plan. 14 F.3d at 1376. We concluded that “[b]ecause
ERISA’s definition of a pension plan is so broad, virtually
any contract that provides for some type of deferred compen-
sation will also establish a de facto pension plan.” 14 F.3d at
1377. Because ERISA’s definition of “employee pension ben-
efit plan” is distinct from its definition of “employee welfare
benefit plan,” Modzelewski is not relevant to our analysis
here. See 29 U.S.C. § 1002(1), (2)(A); see also Carver v.
Westinghouse Hanford Co., 951 F.2d 1083, 1086 (9th Cir.
1991).
In Winterrowd, we held that an accepted offer to provide
termination benefits was not sufficiently specific in describing
benefits to satisfy the Donovan criteria, and that the offer
therefore did not constitute an ERISA plan. 321 F.3d at 939.
We did not hold in Winterrowd that an agreement satisfying
the Donovan criteria, without more, constituted an ERISA
plan. Rather, we held that an agreement not satisfying the
Donovan criteria did not constitute an ERISA plan. In other
words, satisfying the Donovan criteria was a necessary but not
sufficient condition for the creation of an ERISA plan. See
Curtis v. Nev. Bonding Corp., 53 F.3d 1023, 1028 (9th Cir.
1995) (concluding that the Donovan criteria were not satis-
fied, and noting that “our court has not yet determined the
minimum requirements for establishing the existence of an
ERISA plan”); see also Cinelli v. Sec. Pac. Corp., 61 F.3d
1437, 1442-44 (9th Cir. 1995) (concluding that because the
Donovan criteria were not present there was no de facto
employee welfare benefit plan).
[10] The Association has not cited, and we have not discov-
ered, any cases in which this court has applied the Donovan
criteria to an employer’s administrative obligations imposed
by a state or local law. All of the cases applying the Donovan
criteria address the question whether an informal, or de facto,
ERISA plan has been established, and all involve some type
of unwritten or informal promise made by an employer to its
13934 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
employees. We would be very hesitant to hold that the Dono-
van criteria apply to statutory administrative burdens imposed
on an employer where, as here, that employer has made no
promises whatsoever to its employees, which is what the
Association urges us to do. We share the view expressed by
the Seventh Circuit in Sandstrom v. Cultor Food Science,
Inc., 214 F.3d 795 (7th Cir. 2000):
It is not clear that the approach taken in [Donovan]
is compatible with more recent decisions of the
Supreme Court, which emphasize different consider-
ations when asking whether an informal policy or
arrangement is a “plan.” Both Morash and Ft. Hali-
fax evince reluctance to find that regular and predict-
able awards of severance or vacation payments
establish a “plan,” given the frequency with which
these benefits are the subject of bilateral negotiations
between employers and departing employees.
Id. at 797 (citations omitted).
But we need not reach the question whether Donovan
applies, for, in any event, its criteria are not satisfied. For
employers who choose to make payments to the City, their
obligation ceases as soon as they make the required payments.
If an employer has made such payments to the City under the
Ordinance, covered employees may enroll in the HAP free of
charge or at a discounted rate. But as we will explain in more
detail in a moment, there is nothing in the Ordinance that
guarantees that a certain level or kind of “intended benefits”
will be provided by the HAP, or that a particular group of “in-
tended . . . beneficiaries” will be included in the HAP.
b. The HAP as an ERISA Plan
The Association expressly stated in its complaint that it
“wholeheartedly supports the San Francisco Health Access
Program and its laudable goals.” It requested that the district
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13935
court “issue declaratory and injunctive relief without disturb-
ing all other lawful parts of the Ordinance unrelated to” the
employer spending requirement. (Emphasis in original.) The
Secretary of Labor, as amicus curiae, argues that the HAP
itself is an ERISA plan. If the Secretary is right, ERISA pre-
empts not merely the employer spending requirements, but
the HAP itself. We need not consider arguments raised solely
by an amicus, particularly when they were not raised before
the district court and when they are in tension with the strate-
gic positions taken by the litigants. See Russian River Water-
shed Prot. Comm. v. City of Santa Rosa, 142 F.3d 1136, 1141
n.1 (9th Cir. 1998). Further, we need not consider arguments
raised for the first time on appeal. Choe v. Torres, 525 F.3d
733, 740 n.9 (9th Cir. 2008). We address the Secretary’s argu-
ment to indicate our disagreement with it, but we do not con-
cede the correctness of the Secretary’s implicit assumption
that the argument is properly before us.
[11] As described in greater detail above, the first element
of an employee welfare benefit plan is the existence of a
“plan, fund or program.” Patelco Credit Union, 262 F.3d at
907. The HAP, administered by the City, is not an ERISA
plan. Rather, the HAP is a government entitlement program
available to low- and moderate-income residents of San Fran-
cisco, regardless of employment status.4 It is funded primarily
4
The Secretary also argues that the HAP operates as “a government-run
program for private employers,” and therefore it is not entitled to the
exemption under 29 U.S.C. § 1003(b)(1) from ERISA regulations. The
ERISA exemption to which the Secretary refers applies when a govern-
ment establishes and maintains an employee welfare benefit plan for its
own employees. See id.; see also 29 U.S.C. § 1002(32). As the Secretary
correctly notes, a government plan of that type loses its exemption when
it opens up its plan to employees of private employers. The Secretary’s
argument is that the City has opened its exempt plan for its own employ-
ees to private employees and has thus forfeited its exemption. The Secre-
tary’s argument is without foundation. The City does maintain an exempt
employee welfare benefit plan for its own employees. The HAP, however,
is not that plan. The City has never argued that the HAP is exempt from
ERISA as a government-run plan for the City’s own employees.
13936 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
by taxpayer dollars. Employer payments under the Ordinance
provide only a small portion of the HAP’s funding, and,
although we do not know the precise numbers, employees
covered under the Ordinance comprise substantially less than
half of all HAP enrollees. The fact that a minority of HAP
enrollees pay a discounted enrollment fee because their
employers participate in the City-payment option is not
enough to make the HAP a “plan, fund or program” within the
meaning of ERISA. See Waks v. Empire Blue Cross/Blue
Shield, 263 F.3d 872, 875 (9th Cir. 2001) (concluding that a
converted individual policy was not itself an ERISA plan
because the policy “covered [the plaintiff] as an individual
and not as an employee of . . . any . . . employer”).
[12] The second element of an employee welfare benefit
plan requires that the plan be “established or maintained by an
employer through the purchase of insurance or otherwise.”
Patelco Credit Union, 262 F.3d at 907. An employer electing
the City-payment option does not “establish[ ] or maintain[ ]”
the HAP through its payments. The HAP exists, and will con-
tinue to exist, whether or not any covered employer makes a
payment to the City under the Ordinance. Further, the
employer has no control over whether its employees are eligi-
ble for the HAP. Under the terms of the ordinance, HAP eligi-
bility is based on income level, age, uninsured status, and City
residence, but the City is free to change the conditions of eli-
gibility for HAP enrollment as it sees fit simply by amending
the Ordinance. Finally, neither the employer nor the covered
employee has any control over the kind and level of benefits
provided by the HAP. The employer never negotiates or signs
a contract with the City, and the employer has no control over
the City’s coverage decisions. When the City administers the
HAP, it does not act as the employer’s agent entrusted to ful-
fill the benefits promises the employer made to its employees.
An employer can make no promises to its employees with
regard to the HAP or its coverage. In short, the City, rather
than the employer, establishes and maintains the HAP, and
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13937
the City is free to change the kind and level of benefits as it
sees fit.
2. “Relates to” Employers’ ERISA Plans
The Association’s and the Secretary of Labor’s second
argument is that, even if the City-payment option does not
create an ERISA plan, the Ordinance is preempted because it
“relates to” employers’ ERISA plans. 29 U.S.C. § 1144(a).
[13] Section 514(a) of ERISA states that ERISA preempts
“any and all State laws insofar as they . . . relate to any
employee benefit plan” governed by ERISA. 29 U.S.C.
§ 1144(a). The Supreme Court has established a two-part
inquiry to interpret § 514(a): “A law ‘relate[s] to’ a covered
employee benefit plan for purposes of § 514(a) if it [1] has a
connection with or [2] reference to such a plan.” Dillingham,
519 U.S. at 324 (alterations in original) (some internal quota-
tion marks omitted). We consider these two inquiries in turn.
a. “Connection with” a Plan
In New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Insurance Co., 514 U.S. 645, 655 (1995),
the Court acknowledged the difficulty of interpreting
§ 514(a):
If “relate to” were taken to extend to the furthest
stretch of its indeterminacy, then for all practical
purposes pre-emption would never run its course
. . . . But that, of course, would be to read Congress’s
words of limitation as mere sham, and to read the
presumption against pre-emption out of the law
whenever Congress speaks to the matter with gener-
ality.
Likewise, the Court recognized that the two-part inquiry it
had adopted to interpret § 514(a) did not provide much addi-
13938 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
tional guidance in cases hinging on a law’s “connection with”
an employee benefit plan. “For the same reasons that infinite
relations cannot be the measure of pre-emption, neither can
infinite connections.” Id. at 656.
We read Travelers as narrowing the Court’s interpretation
of the scope of § 514(a). The Court reasoned it had to “go
beyond the unhelpful text and the frustrating difficulty of
defining [§ 514(a)’s] key term, and look instead to the objec-
tives of the ERISA statute as a guide to the scope of the state
law that Congress understood would survive.” Id.; see also
Gerosa v. Savasta & Co., 329 F.3d 317, 327 (2d Cir. 2003)
(discussing how, among the circuits, the Travelers decision
“occasioned a significant change in preemption analysis, and
required careful reconsideration of any preexisting precedent
dependent on the expansive view of ‘related to’ that held
sway before it”). In this light, we employ a “holistic analysis
guided by congressional intent.” Dishman v. UNUM Life Ins.
Co. of Am., 269 F.3d 974, 981 n.15 (9th Cir. 2001); see e.g.,
Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001).
As noted above, one “purpose of ERISA is to provide a
uniform regulatory regime over employee benefit plans.”
Davila, 542 U.S. at 208. The purpose of ERISA’s preemption
provision is to “ensure[ ] that the administrative practices of
a benefit plan will be governed by only a single set of regula-
tions.” Fort Halifax Packing Co., 482 U.S. at 11. In Ingersoll-
Rand Co. v. McClendon, 498 U.S. 133, 142 (1990), the Court
explained that
Section 514(a) was intended to ensure that plans and
plan sponsors would be subject to a uniform body of
benefits law; the goal was to minimize the adminis-
trative and financial burden of complying with con-
flicting directives among States or between States
and the Federal Government. Otherwise, the ineffi-
ciencies created could work to the detriment of plan
beneficiaries.
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13939
[14] In furtherance of ERISA’s goal of ensuring that “plans
and plan sponsors [are] subject to a uniform body of benefits
laws,” the Court in Egelhoff v. Egelhoff, 532 U.S. 141 (2001),
struck down a Washington State law that directed a choice of
beneficiary that conflicted with the choice provided in an
ERISA plan. The Court held that a state or local law has an
impermissible “connection with” ERISA plans where it
“binds ERISA plan administrators to a particular choice of
rules for determining beneficiary status[,] . . . rather than
[allowing administrators to pay the benefits] to those identi-
fied in the plan documents.” Id. at 147. Similarly, in Shaw v.
Delta Air Lines, 463 U.S. 85, 97-100 (1983), the Court held
that ERISA preempts state laws “which prohibit[ ] employers
from structuring their employee benefit plans” in a particular
manner or “which require[ ] employers to pay employees spe-
cific benefits.”
Consistent with these later-decided cases, in Standard Oil
Co. v. Agsalud, 633 F.2d 760, 763 (9th Cir. 1980), aff’d mem.,
454 U.S. 801 (1981), we struck down a Hawaii statute that
“require[d] employers in that state to provide their employees
with a comprehensive prepaid health care plan.” As the dis-
trict court noted, the statute required that plan benefits include
“a combination of features,” and specifically “require[d] that
the plans cover diagnosis and treatment of alcohol and drug
abuse.” Standard Oil Co. v. Agsalud, 442 F. Supp. 695, 696,
704 (N.D. Cal. 1977). The statute also imposed “certain
reporting requirements which differ[ed] from those of
ERISA.” Id. at 696. In affirming the district court’s opinion
holding the Hawaii statute preempted under ERISA, we
emphasized that the statute “directly and expressly regulate[d]
employers and the type of benefits they provide employees,”
and that it therefore “related to” ERISA plans under § 514(a).
Agsalud, 633 F.2d at 766 (emphasis added). That is, the
Hawaii statute was preempted because it required employers
to have health plans, and it dictated the specific benefits
employers were to provide through those plans. Id. The stat-
ute thereby impeded ERISA’s goal of ensuring that “plans
13940 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
and plan sponsors would be subject to a uniform body of ben-
efits law.” Ingersoll-Rand Co., 498 U.S. at 142.
[15] The Ordinance in this case stands in stark contrast to
the laws struck down in Egelhoff, Shaw and Agsalud. The
Ordinance does not require any employer to adopt an ERISA
plan or other health plan. Nor does it require any employer to
provide specific benefits through an existing ERISA plan or
other health plan. Any employer covered by the Ordinance
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 the City. The Ordinance thus
preserves ERISA’s “uniform regulatory regime.” See Davila,
542 U.S. at 208. The Ordinance also has no effect on “the
administrative practices of a benefit plan,” Fort Halifax Pack-
ing Co., 482 U.S. at 11, unless an employer voluntarily elects
to change those practices.
A covered employer may choose to adopt or to change an
ERISA plan in lieu of making the required health care expen-
ditures to the City. An employer may be influenced by the
Ordinance to do so because, when faced with an unavoidable
obligation to make a payment at a certain level, it may prefer
to make that payment to an ERISA plan. However, as Travel-
ers makes clear, such influence is entirely permissible.
In Travelers, a New York statute required hospitals to col-
lect surcharges from patients covered by commercial insur-
ance companies, including those administering ERISA plans,
but not from patients covered by Blue Cross/Blue Shield
plans. The difference in treatment was justified on the ground
that “the Blues pay the hospitals promptly and efficiently and,
more importantly, provide coverage for many subscribers
whom the commercial insurers would reject as unacceptable
risks.” Travelers, 514 U.S. at 658. The Court recognized that
the surcharge might influence “choices made by insurance
buyers, including ERISA plans.” Id. at 659. But such an influ-
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13941
ence was not fatal to the New York statute: “An indirect eco-
nomic influence . . . does not bind plan administrators to any
particular choice and thus function as a regulation of an
ERISA plan itself[.] . . . Nor does the indirect influence of the
surcharges preclude uniform administrative practice[.]” Id. at
659-60.
In this case, the influence exerted by the Ordinance is even
less direct than the influence in Travelers. In Travelers, the
required surcharge on benefits provided under ERISA plans
administered by commercial insurers inescapably changed the
cost structure for those plans’ health care benefits and thereby
exerted economic pressure on the manner in which the plans
would be administered. Here, by contrast, the Ordinance does
not regulate benefits or charges for benefits provided by
ERISA plans. Its only influence is on the employer who,
because of the Ordinance, may choose to make its required
health care expenditures to an ERISA plan rather than to the
City.
Further, the Ordinance does not “bind[ ] ERISA plan
administrators to a particular choice of rules” for determining
plan eligibility or entitlement to particular benefits. See Egel-
hoff, 532 U.S. at 147. Employers may “structur[e] their
employee benefit plans” in a variety of ways and need not
“pay employees specific benefits.” See Shaw, 463 U.S. at 97.
The Ordinance affects employers, but it “leave[s] plan admin-
istrators right where they would be in any case.” Travelers
Ins. Co., 514 U.S. at 662. See also WSB Elec., Inc. v. Curry,
88 F.3d 788, 793 (9th Cir. 1996) (“The scheme does not force
employers to provide any particular employee benefits or
plans, to alter their existing plans, or to even provide ERISA
plans or employee benefits at all.”); Keystone Chapter, Asso-
ciated Builders & Contractors, Inc. v. Foley, 37 F.3d 945, 960
(3d Cir. 1994) (“Where a legal requirement may be easily sat-
isfied through means unconnected to ERISA plans, and only
relates to ERISA plans at the election of an employer, it
affects employee benefit plans in too tenuous, remote, or
13942 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
peripheral a manner to warrant a finding that the law ‘relates
to’ the plan.”) (some internal quotation marks omitted).
[16] Finally, the Ordinance does not impose on plan admin-
istrators any “administrative [or] financial burden of comply-
ing with conflicting directives” relating to benefits law.
Ingersoll-Rand Co., 498 U.S. at 142. The Ordinance does
impose an administrative burden on covered employers, for
they must keep track of their obligations to make expenditures
on behalf of covered employees and must maintain records to
show that they have complied with the Ordinance. But these
burdens exist whether or not a covered employer has an
ERISA plan. Thus, they are burdens on the employer rather
than on an ERISA plan. See WSB Elec., Inc., 88 F.3d at 795(rejecting the argument that a law “is preempted because it
imposes additional administrative burdens regarding benefits
contributions on the employer,” where it did “not impose any
additional burden on ERISA plans or require the employer to
take any action with regard to those plans”) (emphasis in orig-
inal).
b. “Reference to” a Plan
To determine whether a law has a forbidden “reference to”
ERISA plans, we ask whether (1) the law “acts immediately
and exclusively upon ERISA plans,” or (2) “the existence of
ERISA plans is essential to the law’s operation.” Dillingham,
519 U.S. at 325.
Mackey v. Lanier Collection Agency & Service, Inc., 486
U.S. 825 (1988), demonstrates that the Ordinance is not pre-
empted under the first part of the inquiry. In Mackey, the
Court held that ERISA preempted a provision of a state gar-
nishment statute that specifically exempted ERISA benefits
from the operation of the statute, even while the statute sub-
jected other assets to garnishment. Id. at 828-29. The Court
noted that the provision “solely applie[d] to” ERISA plans,
and “single[d] out ERISA . . . plans for different treatment
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13943
under state” law. Id. at 829-30. At the same time, however,
the Court upheld those aspects of the state statute that did “not
single out or specially mention ERISA plans of any kind,”
even though they would potentially subject ERISA plans to
“substantial administrative burdens and costs.” Id. at 831. In
Dillingham, the Court characterized the preempted statute in
Mackey as “act[ing] immediately and exclusively upon
ERISA plans.” Dillingham, 519 U.S. at 325. Here, unlike the
preempted statute in Mackey, the Ordinance does not act on
ERISA plans at all, let alone immediately and exclusively.
Two cases demonstrate that the Ordinance is not preempted
under the second part of the inquiry. The first is Ingersoll-
Rand Co. v. McClendon, 498 U.S. 133, 140 (1990), in which
the Court held that ERISA preempted a state law that “ma[de]
specific reference to, and indeed [wa]s premised on, the exis-
tence of” an ERISA plan. In order for a party to bring a claim
under the challenged law, “a plaintiff must plead, and the
court must find, that an ERISA plan exists.” Id. Here, by con-
trast, the Ordinance can have its full force and effect even if
no employer in the City has an ERISA plan. Covered employ-
ers without ERISA plans can discharge their obligation under
the Ordinance simply by making their required health care
expenditures to the City.
The second case is District of Columbia v. Greater Wash-
ington Board of Trade (“Greater Washington”), 506 U.S. 125(1992). A local ordinance required employers to provide
workers’ compensation benefits “measured by reference to
‘the existing health insurance coverage’ provided by the
employer,” and required that the coverage “ ‘be at the same
benefit level’ ” as the existing coverage. Id. at 130. The Court
held that the ordinance contained an impermissible “reference
to” an ERISA plan because its requirement was measured by
reference to the level of benefits provided by the employer’s
ERISA plan.
The district court in this case relied on the Court’s opinion
in Greater Washington in holding that the Ordinance is pre-
13944 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
empted. The district court wrote, “By mandating employee
health benefit structures and administration, [the Ordinance’s
health care expenditure] requirements interfere with preserv-
ing employer autonomy over whether and how to provide
employee health coverage, and ensuring uniform national reg-
ulation of such coverage.” Golden Gate Rest. Ass’n, 535 F.
Supp. 2d at 975. Further, according to the district court, “The
provisions [of the Ordinance] require private employers to
meet a certain level of benefits; and those benefits are the type
regularly provided by employer ERISA plans.” Id. at 976. The
district court concluded, “This Court finds that [the structure
of the Ordinance] is akin to the statute the Supreme Court
found preempted in District of Columbia v. Greater Washing-
ton Board of Trade which required the employer to provide
the same amount of health care coverage for workers eligible
for workers compensation.” Id. at 978.
[17] There is a critical distinction between the ordinance in
Greater Washington and the Ordinance in this case. Under the
ordinance in Greater Washington, obligations were measured
by reference to the level of benefits provided by the ERISA
plan to the employee. Under the Ordinance in our case, by
contrast, an employer’s obligations to the City are measured
by reference to the payments provided by the employer to an
ERISA plan or to another entity specified in the Ordinance,
including the City. The employer calculates its required pay-
ments based on the hours worked by its employees, rather
than on the value or nature of the benefits available to ERISA
plan participants. Thus, unlike the ordinance in Greater
Washington, the Ordinance in this case is not determined, in
the words of § 514(a), by “reference to” an ERISA plan.
The Ordinance in this case is conceptually similar to a Cali-
fornia prevailing wage statute challenged in WSB Electric,
Inc. v. Curry, 88 F.3d 788 (9th Cir. 1996). In that case, the
California statute required an employer to pay the prevailing
wage, consisting of a combination of cash and benefits. To
calculate the total wage, the employer added the hourly cash
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13945
wage to its hourly contribution to the employee’s benefit
package. However, the statute required that a certain mini-
mum amount be paid as a cash wage, a requirement which
had the effect of putting a cap on the amount the employer
could be credited for payments made to fund a benefit pack-
age. The employer was free to contribute more than the cap
amount to a benefit package, but any amount above the cap
was not counted toward satisfaction of the prevailing wage
requirement. Id. at 790-91.
[18] The plaintiffs in WSB Electric contended that the Cali-
fornia statute was preempted by ERISA, pointing out that
some of the employers were making payments to ERISA
plans, and that benefits were paid out to the employees under
these plans. Id. at 792-93. We held, however, that the statute
was not preempted. We wrote:
At most, this scheme provides examples of the types
of employer contributions to benefits that are
included in the wage calculation. The scheme does
not force employers to provide any particular
employee benefits or plans, to alter their existing
plans, or to even provide ERISA plans or employee
benefits at all. These provisions are enforced regard-
less of whether the individual employer provides
benefits through ERISA plans, or whether the benefit
contributions in a given locality are paid to ERISA
plans.
Id. at 793-94 (citation and footnote omitted). Here, as in WSB
Electric, employers need not have any ERISA plan at all; and
if they do have such a plan, they need not make any changes
to it. Where a law is fully functional even in the absence of
a single ERISA plan, as it was in WSB Electric and as it is in
this case, it does not make an impermissible reference to
ERISA plans. Cf. Travelers Ins. Co., 514 U.S. at 656 (“The
surcharges are imposed upon patients and HMO’s, regardless
of whether the commercial coverage or membership, respec-
13946 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
tively, is ultimately secured by an ERISA plan, private pur-
chase, or otherwise, with the consequence that the surcharge
statutes cannot be said to make ‘reference to’ ERISA plans in
any manner.”).
C. Retail Industry Leaders Association v. Fielder
Finally, the Association contends that the Ordinance is pre-
empted under the analysis set forth in Retail Industry Leaders
Association v. Fielder, 475 F.3d 180, 183 (4th Cir. 2007). The
Association contends that we will create a circuit split if we
uphold the Ordinance. We disagree. We see no inconsistency
between the Fourth Circuit’s holding in Fielder and our hold-
ing in this case.
We neither adopt nor reject the analysis of the Fourth Cir-
cuit in Fielder. The panel majority in that case held a Mary-
land law preempted over a forceful dissent. Id. at 201-04(Michael, J., dissenting); see also Catherine L. Fisk &
Michael M. Oswalt, Preemption and Civic Democracy in the
Battle over Wal-Mart, 92 Minn. L. Rev. 1502, 1514-20
(2008). For purposes of argument, however, we assume that
the panel majority in Fielder was correct. But even under the
reasoning of the panel majority, San Francisco’s Ordinance is
valid.
The Maryland law at issue in Fielder required “employers
with 10,000 or more Maryland employees to spend at least
8% of their total payrolls on employees’ health insurance
costs or pay the amount their spending falls short to the State
of Maryland.” Fielder, 475 F.3d at 183 (majority opinion).
The Maryland law gave nothing in return — either to an
employer or its employees — for the employer’s payment to
the State.
Wal-Mart was the only employer in Maryland affected by
the law’s minimum spending requirements. On the face of the
law, Wal-Mart appeared to have two options. To reach the
GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13947
required spending level of 8%, it could either increase contri-
butions to its own ERISA plan, or it could pay money to the
State of Maryland. But the Fourth Circuit concluded that, in
practical fact, Wal-Mart had no choice. The court wrote that
Wal-Mart had “noted by way of affidavit [that] it would not
pay the State a sum of money that it could instead spend on
its employees’ healthcare.” Id. at 193. The Fourth Circuit
wrote in Fielder:
This would be the decision of any reasonable
employer. Healthcare benefits are a part of the total
package of employee compensation an employer
gives in consideration for an employee’s services.
An employer would gain from increasing the com-
pensation it offers employees through improved
retention and performance of present employees and
the ability to attract more and better new employees.
In contrast, an employer would gain nothing in con-
sideration of paying a greater sum of money to the
State. Indeed, it might suffer from lower employee
morale and increased public condemnation.
In effect, the only rational choice employers have
under the [Maryland law] is to structure their ERISA
healthcare benefit plans so as to meet the minimum
spending threshold.
Id. The court wrote further: “[T]he amount that the [Maryland
law] prescribes for payment to the State is actually a fee or a
penalty that gives the employer an irresistible incentive to
provide its employees with a greater level of health benefits.”
Id. at 194. Therefore, the court concluded, “the choices given
in the [Maryland law] . . . are not meaningful alternatives by
which an employer can increase its healthcare spending to
comply with the [law] without affecting its ERISA plans.” Id.
at 196.
13948 GOLDEN GATE REST. v. CITY AND COUNTY OF S.F.
In stark contrast to the Maryland law in Fielder, the City-
payment option under the San Francisco Ordinance offers
employers a meaningful alternative that allows them to pre-
serve the existing structure of their ERISA plans. If an
employer elects to pay the City, that employer’s employees
are eligible for free or discounted enrollment in the HAP, or
for medical reimbursement accounts. In contrast to the Mary-
land law, the San Francisco Ordinance provides tangible ben-
efits to employees when their employers choose to pay the
City rather than to establish or alter ERISA plans. In its
motion for summary judgment, the Association provided no
evidence to demonstrate that San Francisco employers are, in
practical fact, compelled to alter or establish ERISA plans
rather than to make payments to the City.5
[19] Because the City-payment option offers San Francisco
employers a realistic alternative to creating or altering ERISA
plans, the Ordinance does not “effectively mandate[ ] that
employers structure their employee healthcare plans to pro-
vide a certain level of benefits.” See Fielder, 475 F.3d at 193.
In the view of the Fielder court, Maryland legislators intended
to “force Wal-Mart to increase its spending on healthcare ben-
efits rather than to pay monies to the State.” Id. at 185. Unlike
the Maryland law, the San Francisco Ordinance provides
employers with a legitimate alternative to establishing or
altering ERISA plans. See Travelers Ins. Co., 514 U.S. at 664(stating that if the New York surcharges had been “an exorbi-
tant tax,” they might leave ERISA plan purchasers “with a
Hobson’s choice,” thereby amounting to an impermissible
5
We do not rely on the following to support our decision, but we note
that San Francisco has reported that as of May 1, 2008, more than seven
hundred San Francisco employers have elected to comply with the Ordi-
nance by making their health care expenditures directly to the City. Office
of the Mayor, City & County of S.F., Mayor Newsom Announces Hun-
dreds of Employers Signing Up for Healthy San Francisco Program, May
1, 2008, http://www.healthysanfrancisco.org/files/PDF/HSF_Release_
5.1.2008.pdf. This document indicates that 734 employers had elected to
make payments to the City on behalf of 12,900 employees. Id.GOLDEN GATE REST. v. CITY AND COUNTY OF S.F. 13949
substantive mandate, but concluding that there was no evi-
dence “that the surcharges are so prohibitive as to force all
health insurance consumers to contract with the Blues”). We
therefore conclude that the San Francisco Ordinance does not
compel covered employers to establish or to alter ERISA
plans. Cf. Fielder, 475 F.3d at 193.
Conclusion
[20] There may be better ways to provide health care than
to require employers in the City of San Francisco to foot the
bill. But our task is a narrow one, and it is beyond our prov-
ince to evaluate the wisdom of the Ordinance now before us.
We are asked only to decide whether § 514(a) of ERISA pre-
empts the employer spending requirements of the Ordinance.
We hold that it does not. The spending requirements do not
establish an ERISA plan; nor do they have an impermissible
connection with employers’ ERISA plans, or make an imper-
missible reference to such plans.
We therefore REVERSE the judgment of the district court
and REMAND with instructions to enter summary judgment
in favor of the City and Intervenors.