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New York City’s Equal Benefits Law, which prohibits the city from contracting with vendors that offer employees with spouses better benefits than those with domestic partners, is invalid, an Appellate Division, 1st Department, panel has ruled. Called the “Equal Benefits Law,” Local Law 27 of 2004 barred the city from contracting with vendors that had more than $100,000 in city contracts over the preceding 12 months if the company’s employee benefits plan discriminated between spouses and domestic partners. The law impermissibly conflicted with both state and federal law, the panel held in Council of the City of N.Y. v. Bloomberg, 5595. The Equal Benefits Law applied to contracts entered into or renewed after Oct. 26, 2004, involving, for example, labor, supplies, real estate and construction services. Specific exceptions exempted contracts regarding the investment of assets or city monies. Mayor Michael R. Bloomberg opposed the law, contending it would prevent the city from selecting low bids, thereby driving up costs. The mayor also argued against using the procurement process to advance social policy. Proponents of the law, including City Council Speaker Gifford Miller, claimed the law would save the city money by ensuring it contracted with companies that retained better-qualified and more productive workers. The City Council passed the law in May 2004, only to see Bloomberg veto it soon after. The Council overrode the veto the next month by a vote of 41-4. When the law became effective on Oct. 26, the mayor unsuccessfully sought a restraining order to stay its implementation. In November, the Council filed a separate action, seeking to force the mayor to implement the law. On Dec. 1, Manhattan Supreme Court Justice Faviola A. Soto granted the Council’s motion, ordering Bloomberg to immediately implement and enforce the law. The mayor appealed to the Appellate Division the following day. Tuesday’s unanimous, unsigned ruling may be the final chapter in the law’s tortured life. The appellate panel focused on the preemptive effect of state and federal laws with which the Equal Benefits Law conflicted. “As we have previously noted, ‘the City Council cannot achieve even laudable goals by making illegal what is specifically allowed by state law,’” the panel ruled, quoting New York Health & Hosps. Corp. v. Council of City of N.Y., 303 AD 2d 69. Specifically, the local law conflicted with the state’s General Municipal Law, which prohibits the imposition of “additional restrictions” on rights under state law. The city law also “intrudes upon the ambit of the Federal Retirement Income Security Act (ERISA) … which provides for uniform national employee benefit plan administration,” the panel ruled. ERISA’s pre-emption provision directs that its coverage supersedes all state and municipal laws as they relate to employee benefit plans, the panel added; the Equal Benefits Law conflicted with ERISA’s goal of providing uniform plan administration. Citing decisions that have upheld similar laws in other cities, such as San Francisco and Seattle, the attorney for the City Council said the decision appears ripe for appeal. “The Court of Appeals made it very clear that local governments have the power to determine the conditions with which they will contract with people so long as they are consistent,” said Steven L. Holley, a partner at Sullivan & Cromwell. “Under ERISA, there’s a clear exception for municipalities when they are acting as a commercial actor,” he added. Senior Corporation Counsels June Buch and Alan G. Krams represented the mayor. The panel consisted of Justices Peter Tom, Richard T. Andrias, Milton L. Williams, Luis A. Gonzalez and James M. Catterson.

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