Judge overturns Wal-Mart health care law

updated 2:50 p.m. ET July 19, 2006

BALTIMORE - A federal judge on Wednesday overturned a Maryland law that would have required Wal-Mart Stores Inc. to spend more on employee health care, arguing the retail giant “faces threatened injury” from the law’s spending requirement.

The state law would have required large employers to spend at least 8 percent of payroll on health care or pay the difference in taxes. Only Wal-Mart would have been affected by the law.

U.S. District Judge J. Frederick Motz concluded that the law would have hurt Wal-Mart by requiring it to track and allocate benefits for its Maryland employees in a different way from how it keeps track of employee benefits in other states. Motz wrote that the law “imposes legally cognizable injury upon Wal-Mart.”

The Retail Industry Leaders Association, of which Wal-Mart is a member, filed the lawsuit contesting the legislation. The group contended the law unfairly targeted the world’s largest retailer.

Without the court’s intervention, the law would have taken effect in January.

Lawyers for the state argued before Motz that the so-called Wal-Mart law wasn’t an illegal mandate. They said Wal-Mart was free to pay the penalty — estimated at $6 million a year — instead of providing better benefits. As another alternative, the retailer could also have set up health clinics for its employees.

Other states have considered bills similar to Maryland’s law, although no other state has adopted one.

In Maryland, where state budget writers were looking for ways to rein in a $4.6 billion annual Medicaid tab, the Wal-Mart law was seen as a way to encourage companies to keep employees off public rolls. It became law last winter when the Democratic legislature overrode a 2005 veto by Republican Gov. Robert Ehrlich.

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