Seattle Faces Legal Test Over Hotel Worker Insurance Mandate

Seattle is facing a new lawsuit over its initiative that requires large hotels in the city to pay workers additional compensation if they don’t get a specified level of health insurance coverage.

The lawsuit, filed Aug. 14 by the ERISA Industry Committee, seeks to bar the city from enforcing the health insurance sections of Seattle’s Hotel Employees Health & Safety Initiative, a labor regulation voters approved in 2016 that seeks to protect the health and safety of hotel employees.

The section at issue requires hotels with at least 100 rooms to offer a specified level of health insurance coverage to their employees or provide them additional compensation, starting at $275 per month per worker. The law, which became effective July 12, also requires large hotels to maintain detailed records for workers for three years, including their pay rate and any additional compensation.

Seattle’s largest hotel employers include Sheraton, Westin, and Renaissance, all owned by Marriott International, as well as other hotels under the brands of Hilton Hotels and Intercontinental Hotels.

Seattle appears to be the only city with this sort of health insurance initiative for hotel workers. The case is likely to draw attention from other cities and municipalities that may be exploring similar regulations.

This is the only measure of its kind across the country, but cities and municipalities interested in implementing similar ordinances will be paying attention to this challenge, Annette Guarisco Fildes, ERIC’s president and chief executive officer, told Bloomberg Law.

ERIC alleges that its members will suffer immediate and irreparable damage because from July 1 they would have to provide health-insurance benefits, or no later than Aug. 15 start making direct payments for the prior calendar month they didn’t offer coverage. The group members also would suffer a competitive disadvantage to the hotels that have fewer than 100 guest rooms, the lawsuit said.

ERIC, a nonprofit trade association that represents the interest of large employers with 10,000 or more workers that sponsor health, retirement, and compensation benefit plans, says in the lawsuit that the the initiative’s health-care section is pre-empted by the Employee Retirement Income Security Act. The group is asking a court to bar the city from enforcing the section. The group said it will start negotiating a nonenforcement agreement with the city until a decision in the case is reached.

Last year, ERIC sued Oregon over its state-based retirement program, also known as OregonSaves. It argued that ERISA pre-empted the program regulations that required employers that sponsor ERISA-governed plans to report on certain plan activities. Earlier this year, Oregon agreed to ease OregonSave’s exemption process for those ERIC members that already offer retirement benefits to their workers.

Kilpatrick Townsend & Stockton LLP and Miller & Chevalier represent ERIC.

The case is The ERISA Indus. Comm. v. Seattle, W.D. Wash., No. 2:18-cv-01188, complaint filed 8/14/18.