Wall Street Journal - February 16, 2006
Retail Rumble
America's retailers announced last week that they aren't especially keen to follow the steel, airline and perhaps the auto industries into bankruptcy court. If Big Labor really wants a fight over mandated health insurance, it now has one.
The announcement came in the form of two federal lawsuits filed by the Retail Industry Leaders Association against the state of Maryland and Suffolk County, New York. At issue are the "Wal-Mart" laws that both jurisdictions recently passed, which would require a few large companies to pay more for their workers' health care. The lawsuits argue the statutes are "discriminatory," which may be the legal understatement of the year since both target only a few employers.
This is an unusual show of solidarity for the 400 or so member retail trade group, and it suggests more companies are figuring out that organized labor's campaign against Wal-Mart is merely a warm-up to a broader assault. Thanks to the exhortations of the AFL-CIO, some 30 states are now considering so-called "fair share" health-care laws that force companies to devote a certain percentage of their payroll to health care. The common denominator is that all of these laws largely single out non-union employers.
The union strategy is to force any competitive, non-unionized company to incur the same labor-induced costs as their own beleaguered employers. Unionized grocers such as Safeway, Albertson's and Kroger have been losing the fight against their lower-cost competitors, and shedding jobs in the process. In the past decade, more than two dozen supermarket operators have sought bankruptcy court protection or liquidated. The union goal is to stop this bleeding by dragging the Wal-Marts and Costcos to their cost level.
That agenda was clear in the Maryland and Suffolk County laws, which made no pretense of raising health-care benefits for all workers. Instead, the Maryland statute required employers with more than 10,000 employees to spend at least 8% of its payroll on health care. Only one company fit the bill: Wal-Mart. The Suffolk County law also only applies to large grocery stores, and it specifically exempts union employers.
The good news is that the judiciary isn't likely to let such legal gerrymandering stand. The trade group argues that both laws run afoul of the Employee Retirement Income Security Act of 1974, widely known as Erisa. One of Erisa's goals was to create a system in which nationwide employers could offer workers uniform benefits, free of conflicting state mandates. The courts have routinely struck down state laws that mandate particular benefits. In one well-known 1980 case, the Ninth Circuit Court of Appeals struck down a Hawaii law requiring employers to provide workers with comprehensive health care.
The retailers also have compelling discrimination claims. The Maryland Constitution, for instance, includes a prohibition against "special laws," which might include those that confer advantages on, or discriminate against, a particular individual or business. Meanwhile, Suffolk County's special exemptions for unionized grocers may violate a bevy of federal laws, including the National Labor Relations Act.
It's unfortunate that so many companies now feel compelled to go to court, although it's hard to see any alternative when politicians enact punitive laws designed expressly to make companies less profitable and competitive. The Suffolk County Legislature was warned in a public hearing that its mandate likely violated federal laws; it passed it anyway, 17-1. Maryland legislators appear to have written their law in a cagey attempt to evade Erisa rules. Supporters argue that since employers have a "choice" between providing the new benefits or paying the state a fine, the law is not really a health-care mandate. The courts may question how much of a "choice" that really is.
Ironically, the one company that may still be underestimating the union threat is . . . Wal-Mart itself. Even as the retail association (of which Wal-Mart is a member) was going to court, CEO Lee Scott was writing a Washington Post op-ed promising Marylanders that his company will remain in their state no matter how expensive it gets. If this is the kind of PR advice he's getting from Michael Deaver and the other outside image consultants he's retained, Mr. Scott is overpaying.
He might consider that his union opponents -- who threw $36,000 at Maryland legislators in the run-up to the Wal-Mart bill vote -- aren't likely to be moved by any Wal-Mart charm offensive. They do understand a good fight, however, and at least the lawsuits are honest about the stakes.