Federal Judge Upholds Law Requiring SFO Employers To Provide No-cost Health Care to Employees

Apr. 7—Rejecting airline industry arguments, a federal judge has upheld a San Francisco law requiring employers at San Francisco International Airport to provide no-cost health care benefits to many of their employees.

The ordinance, which took effect in March 2021, applied to airline employees and other workers at the airport who dealt with passengers, baggage and safety and security services — 35% to 40% of the private employees at SFO, according to the court ruling. Their employers must provide and finance health insurance for the employees, their spouses and dependents, or pay into a city fund that provides equal coverage.

The industry group Airlines for America said the ordinance would force airlines to raise prices and cut services and staff to pay their added expenses. In its lawsuit, the group said San Francisco was trying to regulate air travel that is governed by federal agencies and market forces, under federal law, and was interfering with exclusive federal regulation of airline operations and labor relations.

But U.S. District Judge Edward Chen said Tuesday that San Francisco, as manager of the airport, was acting as a "market participant," not a regulator, and was entitled to determine health benefits for private employees.

City supervisors were seeking to "reduce employee turnover and restore public confidence in the safety of air travel," which they considered necessary "for city administration of a self-sustaining commercial enterprise," Chen said.

"In order to have a secure, well-functioning airport, we have to make sure our workers are healthy," City Attorney David Chiu, whose office defended the ordinance, said in a statement.

A lawyer for Airlines for America could not be reached for comment. The organization could appeal the ruling.

San Francisco imposed some insurance mandates for airport employees in 2009 and expanded them in the 2021 ordinance to cover more workers, including previously exempt unionized workers, at the height of the coronavirus pandemic. Chen noted that the airlines had signed leases with SFO, currently running through 2023, that agreed to follow the airport's rules, including those for health care.

Airlines for America argued that the city was threatening airlines with criminal penalties for non-compliance, since under California law, any violation of a local ordinance can potentially be prosecuted as a misdemeanor or an infraction. In other words, the airline group said, San Francisco was acting as a regulator, in conflict with exclusive federal regulation of airlines.

Chen disagreed, saying that under the airline group's interpretation, "every municipal ordinance would be criminalized." He cited a 1977 opinion by California's then Republican attorney general, Evelle Younger, that said a violation of a local ordinance becomes a crime only when the city or county declares it to be one.

Airlines that fail to provide insurance coverage must pay penalties to the city of $100 per week for each uninsured employee and can lose their airport contracts. But Chen said the airlines agreed to those conditions in the leases they signed over a decade ago.

"The airlines have the choice to do business elsewhere," the judge wrote. Mandating minimum health benefits for employees, he added, "is a requirement that a private airport operator could impose on its business partners through a contract term," and does not amount to a government regulation.

Bob Egelko is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @BobEgelko

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