A coalition of business groups have filed a lawsuit in federal court challenging New Jersey’s recently enacted law that imposes fees on employers with at least 50 workers who receive Medicaid health coverage.
The lawsuit, filed Thursday in the U.S. District Court in Trenton, seeks to block enforcement of the law on the grounds that the state statute is preempted by the federal Employee Retirement Income Security Act (ERISA) of 1974, which Congress enacted to encourage employers to provide health care coverage under a uniform national framework.
The plaintiffs are the National Retail Federation, the Restaurant Law Center, the International Franchise Association and the American Hotel and Lodging Association.
“This law amounts to a penalty on employers that create jobs, provide health care coverage and drive economic growth in New Jersey,” NRF Executive Vice President of Government Relations David French said in a statement.
“Rather than working with the businesses and organizations that employ millions of people and support communities across the state to find constructive ways to provide healthcare to New Jersey workers, lawmakers rushed forward with a mandate that ignores federal law, imposes new penalties on employers and makes New Jersey a more difficult place to do business.”
Under the law, fees range from $325 to $725 per beneficiary, depending on employer size. The Sherrill administration estimated the law would raise $145 million annually. NJBIA had opposed the new assessment on employers when it was before the Legislature.
"NJBIA appreciates these national business advocates challenging this illegal, anti-business and impossible to administer law, and we look forward to working with the Sherrill administration and Legislature to fix this law in the future," said NJBIA Chief Government Affairs Officer Christopher Emigholz on Friday.
Beyond imposing a costly new penalty on job creators, the law would force employers to redesign their health benefit plans to comply with state-imposed mandates. The plaintiffs argue the requirement directly conflicts with ERISA, which enables large employers to offer comprehensive, affordable coverage to employees across state lines without navigating a patchwork of conflicting state benefit mandates and reporting requirements.
Allowing New Jersey's law to stand would undermine the national framework protecting employee benefits that has been in place for more than 50 years, the plaintiffs argued.
New Jersey’s new employer penalty legislation was rushed through the Legislature in June without meaningful stakeholder engagement, the NRF said. The result is a law that is unlawful, wholly unworkable and administratively burdensome on New Jersey’s job creators.
The bill, A-5324, passed the Assembly by a 46-22 vote and the Senate by 22-15 vote on June 30, the last legislative voting session before lawmakers took their summer break. Gov. Mikie Sherrill signed the bill into law (P.L.2026, c.23 ) later that evening.
Go here to read the entire June 19 letter that NJBIA and other business groups sent to the Legislature that listed nine major flaws in the legislation.
