An attorney for the state of Maryland urged a federal appeals panel yesterday to uphold a law requiring Wal-Mart-type employers to provide healthcare to workers.

Assistant Maryland Attorney General Steven Sullivan told a three judge panel of the 4th U.S. Circuit Court of Appeals in Richmond, Va., that the state law conforms to a federal statute mandating equal treatment for all employers.

The appeals court reserved decision.

Mr. Sullivan argued the law gave an operation such as Wal-Mart the option to pay a tax to the state, estimated at $6 million a year, in lieu of additional health care payments for employees.

But a retail trade group, which won a lower court ruling overturning the law before it became effective, countered that the choice was a false one, contending that no employer would ever pay the state a tax rather than spend more on health care for its own employees.

William J. Kilberg, a lawyer for the Retail Industry Leaders Association, argued that the judicial panel must uphold a June 23 decision by U.S. District Court Judge Frederick Motz in Baltimore that struck down the Maryland law.

Judge Motz found the Maryland statute was preempted by the federal Employee Retirement Income Security Act, mandating uniform treatment of employees' health and welfare.

In a written decision released in July, Judge Motz said his ruling adhered to “long established Supreme Court law that state laws that impose employee health or welfare mandates on employers are invalid” under ERISA.

The decision also said that the law harmed Wal-Mart by requiring the company to make reports to the state about its payroll and health care contributions, a requirement that was not imposed on other employers in the state.

The Maryland law was passed last January over the veto of Gov. Robert Ehrlich in the first test of a nationwide initiative to require large companies such as Wal-Mart to pay a larger share of their employees' healthcare. The Maryland law is known as the Maryland Fair Share Health Care Fund Act.

It requires companies with more than 10,000 workers to spend at least 8 percent of their payroll on employee health care or make up the difference in an equivalent payment to the state. It is due to take effect Jan. 1, 2007.

Of the four companies that size operating in the state, only Wal-Mart matched the criteria set out in the law, leading the company to charge that it had been singled out.

After the arguments, officials of the retail association said the lower court ruling was appropriate. “RILA believes that the district court reached the right decision in this matter,” said Sandy Kennedy, RILA president.

“Today, we respectfully urge the appeals court to uphold the district court's decision,” he said.

“Congress enacted ERISA, in part, to create uniformity in national health benefit plans,” said Stephen Cannon, outside general counsel to RILA. “A patchwork of state and local health benefit mandates would only serve as a strong disincentive for employers to offer health coverage.”

A staff official for the Maryland Attorney General's office, which handled the appeal for the state, said it would have no comment on the RILA statement.

The Maryland State Attorney General's office argues that the law is a legitimate effort by the state to combat spiraling health care costs created by the uninsured.

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Appeals Court Mulls Wal-Mart Health Care Mandate

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