Seattle Hotel Worker Insurance Mandate Upheld in Ninth Circuit

A Seattle law requiring large hotels and related businesses to provide workers with either health insurance coverage or enhanced compensation doesn’t interfere with the federal Employee Retirement Income Security Act, the U.S. Court of Appeals for the Ninth Circuit ruled Wednesday.

The Seattle law doesn’t involve a “fundamental area of ERISA regulation” like reporting and disclosure of health claims and payments, the court said in an unpublished opinion. The law is also similar to the San Francisco ordinance the court upheld in 2008’s Golden Gate Rest. Ass’n v. San Francisco, which controls the outcome of this case, the Ninth Circuit said.

The Seattle law was challenged by the ERISA Industry Committee (ERIC), a trade group representing large employers with ERISA-governed benefit plans. ERIC claims the law’s direct payment option—which mandates cash payment to workers who don’t receive specified health coverage—creates an ERISA-governed health plan and therefore interferes with the federal statute.

A Washington federal judge sided with the city last year. On appeal, Seattle received support from a collection of cities and counties—including San Francisco, Chicago, and Austin, Texas—and a group of law professors, which argued that the law could exist alongside ERISA. Trade groups in the hospitality and employee benefits industries supported ERIC.

Senior Judges A. Wallace Tashima and Jay S. Bybee and Judge Johnnie B. Rawlinson joined the decision.

Keller Rohrback LLP and the Seattle City Attorney’s office represent the city. Kilpatrick Townsend & Stockton LLP and Miller & Chevalier Chtd. represent ERIC.

The case is ERISA Indus. Comm. v. Seattle, 9th Cir., No. 20-35472, unpublished 3/17/21.