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Law's Backers Await Response From No. 1 Retailer

By John Wagner
Washington Post Staff Writer
Saturday, January 14, 2006

The symbolism was crystal clear: Unions and health care advocates had come together to force a notoriously stingy retailer to spend more on employee benefits.

The practical effect, for Wal-Mart and for Maryland, was far more murky the day after the General Assembly overrode Gov. Robert L. Ehrlich Jr.'s veto of a bill effectively requiring the retail chain to improve its benefits or pay into a state fund.

No one could say yesterday how much Wal-Mart would have to pay, whether the new law would pass legal muster or whether the company would move a planned distribution center to Delaware in retaliation.

Wal-Mart officials said company lawyers are exploring whether the Maryland law conflicts with federal statutes, and legislators said they fully expect the company to sue -- if only to stop 31 other states from moving forward with similar measures.

"Given where other states are in their interest in the Maryland legislation, Wal-Mart probably will challenge this," said Sen. Thomas M. Middleton (D-Charles), who shepherded the bill through his chamber. "I don't think it's the dollar amount they're fighting. I think they're fighting hard because of the precedent it may set."

Before Thursday's vote, business groups argued the bill violated the federal Employee Retirement Income Security Act , but the state attorney general's office dismissed that concern.

"Both the U.S. Chamber and the Maryland Chamber of Commerce have called into question the validity of the bill under ERISA," Wal-Mart spokesman Dan Fogleman said yesterday. "I'm sure that is something our attorneys are looking into as we decide our course of action."

Absent court intervention, the first requirement the bill places on Wal-Mart -- and any company with more than 10,000 employees in Maryland -- is a report due next January detailing employee health expenditures in 2005. Under the new law, any company whose spending fell short of 8 percent of its payroll will be required to pay the difference to the state's health program for the poor.

At least four companies of that size operate in Maryland, but Wal-Mart is the only one that has said it would not likely meet the target. The retailer has not made precise numbers public.

"We don't really know where they are," said Vincent DeMarco, president of the Maryland Citizens Health Initiative, a group that lobbied hard for the override of Ehrlich's veto. "We don't know their internal numbers."

DeMarco said the company testified in 2004 that its health care spending amounted to about 5 percent of payroll. Last year, he said, they told lawmakers that it had risen to more than 7 percent. Recently, Wal-Mart began offering a more affordable benefits plan, costing as little as $23 a month for a single worker in Maryland.

Based on figures supplied by legislative analysts during last year's debate, the legislation could cost Wal-Mart roughly $3 million for each percentage point it falls short of the 8 percent target.

Regulations required to implement the law still must be drafted, but an initial payment would be required sometime next year for any company not meeting the threshold, said James D. Fielder Jr., secretary of the Department of Labor, Licensing and Regulation.

Advocates of the legislation said it is their hope that Wal-Mart will continue improving their benefit plans and not be charged an assessment in future years.

"Our hope is they don't have to pay anything," DeMarco said.

With this week's votes, the fate of a planned regional distribution center in Somerset County, which would bring more than 800 jobs to one of the poorest counties in the state, hung in the balance. The company put plans for the center on hold last year after initial passage of the legislation that became known in Annapolis as "the Wal-Mart bill."

"We are pausing and evaluating the situation thoroughly at this point," Fogelman said yesterday.

Senate Minority Leader J. Lowell Stoltzfus (R-Somerset) said yesterday that he had not heard from the company but feared they may put the center elsewhere.

"It's huge," Stoltzfus said of the potential jobs impact.

Wal-Mart picked the site over rival locations, including Delaware.

In interviews yesterday, supporters argued that the new law is not aimed at a single company. Middleton said he feared that other companies would have cut their employee benefits to compete with Wal-Mart without some check on the company.

"I hope what this does is stop the bleeding," Middleton said.

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