January 20, 2006

Wal-Mart Nits

by PG

Linking last year's news rather than this year's override of Governor Ehrlich's veto*, Will Baude describes Maryland's controversial Fair Share Health Care Act as not requiring "Wal-Mart to pay its workers any more, it just requires it to pay its workers in a good rather than in flexible cash ... employee wages reduced 8% in exchange for some health-care in order to save money at the state treasury later."

He may be misreading the legislation. While opponents of the law may argue that Wal-Mart will now have to spend money on healthcare that it otherwise might have added to wages, I don't think that Maryland is telling Wal-Mart to reduce wages it's already paying in order to spend that money on healthcare. Rather, when the state says Wal-Mart must spend 8% of payroll on healthcare, that means that if payroll -- the amount given in wages -- is $100 million dollars, Wal-Mart must be spending $8 million additionally to fund employees' health care.

When I say "the amount given in wages," this may include deductions for the employees' own spending on healthcare. For example, let's pretend that when I worked, I got paid $1000 each paycheck. I didn't actually get $1000, of course; there were deductions for federal income tax, state income tax -- Virginia, incidentally, starts taxing at a lower income than D.C. does -- and health insurance**. So I contributed some of the money to fund my health plan, and my employer added some. Wal-Mart can honestly say that it offers health care benefits to the majority of its "associates," but its critics point out that the company doesn't pay in very much itself, instead requiring the associates to pay most of the deductible. Many of them can't really afford this on a Wal-Mart wage, and at that wage qualify for Medicaid and CHIP (for the more elderly greeters, like all people over 65, Medicare although the employer insurance is supposed to cover prescriptions and I will stop health care geeking now).

As for the constitutional questionability of the law, I don't think Wal-Mart could get an Equal Protection claim unless another for-profit company was moving toward the 10,000 employee mark, or one that would have 10,000 employees was considering moving to Maryland, and successfully lobbied to have the legislation changed such that it would apply only to companies with 15,000 employees, which still would capture Wal-Mart at its current employment level, but not affect this other company. That would look sketchy, which is the standard that I discern from Olech: imposing a different easement requirement on a single citizen, who just happens to have annoyed the city fathers previously, is Sketchy. The Maryland legislation is not a bill of attainder, because it's not imposing criminal penalties, merely a regulation, but I don't think it would qualify as a Regulatory Taking, either.

The McCulloch reference does tangentially relate to a more plausible, albeit less individual rights oriented, argument that Wal-Mart could make about the law, i.e. that it conflicts with federal legislation and therefore violates the Supremacy or Dormant Commerce Clause. Bow to ERISA, suckas.

* For those not conversant with current Maryland politics, the Democratic legislature does not often get along with the Republican governor; along the lines of the health care spending battle, on Tuesday the legislature voted to override Ehrlich's veto and raise the minimum wage by a dollar more than the federal floor. Ehrlich's been trying to get slot machines in Maryland ever since he was elected, and the measure has never managed to pass both houses despite his concerns about letting that gambling money leave the state. Fortunately, Maryland seems to be hanging on to the 'ho revenue pretty well.

** Actually I worked for an HMO (if you think Wal-Mart is evil, you should hear what my bioethics profs said when they heard about my post-graduation plans) and was on their cheapest program, so I only had to pay a co-pay when I actually went to the doctor and had no deduction from my paycheck.

January 20, 2006 06:21 PM | TrackBack
Comments

"I don't think Wal-Mart could get an Equal Protection claim"

Corporations have no Fourteenth Amendment rights, period. See, e.g., Orient Ins. Co. v. Daggs, 172 U.S. 557, 561 (1869).

Posted by: KipEsquire at January 20, 2006 08:47 PM

But see First National Bank of Boston v. Bellotti, 435 U.S. 765, 780 (1978) ("It has been settled for almost a century that corporations are persons within the meaning of the Fourteenth Amendment. Santa Clara County v. Southern Pacific R. Co., 118 U.S. 394 (1886); see Covington & Lexington Turnpike R. Co. v. Sandford, 164 U.S. 578 (1896).")

Posted by: Will Baude at January 21, 2006 10:54 PM

Probably the most relevant case actually is Liggett Co. v. Lee (1933). Florida passed a law imposing a particular tax on chain retail stores, and the defenders of that law argued that it was meant to apply "only to so-called giant corporations."
"Unequal treatment and arbitrary discrimination as between corporations and natural persons, or between different corporations, inconsistent with the declared object of the legislation, cannot be justified by the assumption, that a different classification for a wholly different purpose might be valid."

Posted by: PG at January 22, 2006 02:58 AM

There's a more recent case from 1957 about American Express whose name I forget, but it's no longer good law. Obviously Maryland's law will not be held unconstitutional in the final analysis in this Lochner-phobic day and age, so the only point of the above post is to point out that while corporations aren't citizens for purposes of amdt 14, they are at least sometimes "people".

Posted by: Will Baude at January 22, 2006 04:20 PM

How many people does Walmart employ in Md.?
How soon will 9,997 of them be working for a subsidiary that contracts for services with Walmart?
Walmart is bigger and faster and smarter than any legislature. They are used to adjusting business practices daily to deal with competition. And at no time do they ever just shrug and say, ok, we'll pay 8% more. They have a constant focus on cutting costs, to cut prices. That's why food is 10% cheaper in a town with a walmart supercenter. Which does more for the working poor than a $1 increase in the minimum wage.

Posted by: arbitrary aardvark at January 25, 2006 02:38 AM

Wal-Mart won't try to weasel out of the Maryland law. Right now, they're about 1/3 of 1% below the 8% threshold set by the legislature -- i.e., they currently spend about 7.6% of wages on employee health care. Given recent trends, they probably would have hit 8% within a year or two without any prodding. So it really wouldn't be worth the negative PR to attempt such a transparent dodge.

Which is not to suggest this isn't a profoundly stupid law. It should and will fall to ERISA, as will its clones in Colorado, West Virginia, etc.

Posted by: sonya at February 9, 2006 09:54 PM

Whether a court considers the law to conflict with ERISA may hinge partly on whether the federal government says that it does. After all, if the people running an incredibly complicated, confusing bureaucratic program say that it co-exists just fine with a state law, the presumption is against declaring pre-emption.

Posted by: PG at February 10, 2006 07:15 AM

I always thought the dormant commerce clause problem arose when the state discrimination was clearly focused on only out-of-state companies. In Maryland's case, their entire debate centered around finding an employee number cutoff that would guarantee no MD corporations got hit. They chose a standard that applied only to a single company that just happened to be out of state--Wal Mart.

Maybe I'm wrong, but that sure looks like discriminatory intent and a violation of the dormant commerce clause.

Posted by: Some Guy at February 15, 2006 03:20 PM

Some Guy,

Dormant commerce clause problems can arise for a variety of causes, not only for protectionism; a state statute that encroaches too far into federal territory would be such.

Wal-Mart is not the only large corporation to which the law applies, it's just the one that wasn't already at the percentage that the law mandates. The only Maryland company that might be considered a competitor of Wal-Mart and thus eligible for protectionism is Giant Foods, which already pays at the level the law requires. Moreover, the law applies to LA-based Northrop Grumman, another company that already met the standard.

It would be difficult to make a federal claim that the state cannot regulate companies based on their size, considering that the federal government mandates based on the size of a firm. (See COBRA, which only applies to health care-providing companies with more than 20 employees.)

Posted by: PG at February 15, 2006 05:57 PM
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