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Maryland’s first-of-a-kind law requiring large companies to spend a certain amount on health care has triggered a debate over its legality, as well as concerns that it could fuel workplace discrimination as employers seek to cut health-care costs. The Maryland Legislature recently overrode a gubernatorial veto of a bill that requires companies with more than 10,000 employees to spend at least 8 percent of their payrolls on health benefits, or pay the difference in taxes. Wal-Mart is the only company in Maryland affected by the bill, because it is the only business in the state that meets the employee threshold and does not spend at least 8 percent of its payroll on employee health care. Several other states are expected to follow suit, according to labor unions, which lobbied heavily for the Maryland legislation and have vowed to press for similar measures across the country. “I guarantee you this will get challenged,” says James F. Hendricks Jr. of the Chicago office of Fisher & Phillips, an Atlanta-based national labor and employment law firm. “This just tramples on the rights of employers to establish benefits for their employees. It’s still called a “private sector.’” Hendricks says that the Maryland measure is pre-empted by federal law under the Employee Retirement Income Security Act, which sets minimum standards for pension plans, but leaves the level of funding of benefit plans up to employers. “You can’t go around saying this is what you’ll do with benefit plans. It flies in the face of ERISA,” Hendricks says. Wal-Mart spokesman Dan Fogleman declines comment on whether Wal-Mart will challenge the new state law, saying only that the company’s attorneys are looking into whether the state law violates any federal laws that govern health insurance benefits. The bill takes effect Feb. 12. Fogleman defends Wal-Mart’s health-care offerings, saying more than three-fourths of its 1.3 million employees have health insurance, either through the company, a spouse or a government program. A specific breakdown of how each employee is covered was not available. Some Fears Linn Hynds, a labor and employment partner in Honigman Miller Schwartz and Cohn in Detroit, says he fears that the Maryland bill will wreak havoc on corporate America, should it spread elsewhere in the country. According to the National Conference of State Legislatures, 10 states are considering bills similar to Maryland’s. Another five states killed such measures in the last year. Hynds says he believes the Maryland law amounts to a new tax that is “being heaped on business,” and will ultimately force companies to take their business elsewhere, to another state or country. “It’s just a tax in thinly disguised form,” says Hynds, who says he believes the government is unfairly shifting the burden of health care onto companies. But unfortunately for businesses, he says, there might not be much they can do to fight measures like the Maryland bill. “There may be an argument for pre-emption,” Hynds says. “But at the end of the day, I have a haunting feeling that probably there isn’t a whole lot that can be done legally about it.” Marc Katz, a labor and employment shareholder in Jenkens & Gilchrist’s Dallas office, has similar doubts, saying, “I don’t see any challenges to the act.” But what Katz says he does foresee is more potential discrimination problems in the workplace, because of mandates such as the Maryland bill. For example, he says, companies already struggling to keep health-care costs down might unintentionally start scrutinizing employees who appear to pose health risks. “The concern that I have is [that] it’s going to make employers more sensitive about reducing health-care costs,” Katz says. “And you can very easily cross the line between promoting healthiness to taking action against people because they are not healthy.” Meanwhile, Katz doesn’t believe Maryland’s bill would fly in Texas. “Texas has always been reluctant to tell employers what to do. That would generate a lot of controversy if that were to be done here,” Katz says.
Pay or Play * States considering “pay or play” bills similar to Maryland’s: Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New York, Washington and Wisconsin. * States that considered bills in 2005 that died: Arizona, California, Connecticut, New Hampshire and Tennessee. * The Vermont Legislature passed a similar bill, but the governor vetoed it. Source: National Conference of State Legislatures Tresa Baldas is a staff reporter for The National Law Journal , aTexas Lawyer affiliate , where this article first appeared.

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