Same-Sex Marriage: A Practical Guide for Employers

Now that the U.S. Supreme Court has issued its highly anticipated ruling that states must legally recognize same-sex marriages, what specific impacts will it have on the employment relationship and employee benefits?

In its June 26 decision in Obergefell v. Hodges, the Supreme Court held that the Fourteenth Amendment requires states to license marriages between two people of the same sex and to recognize marriages between two people of the same sex when their marriage was lawfully licensed and performed out-of-state.

For employers and benefit providers, that means operating in a new and evolving legal landscape — in which work may need to be done in order to become fully compliant and to minimize the risk of a discrimination lawsuit.

Our team has prepared the following guide to the decision’s broad employment implications, both immediate and long-term, and the questions that still linger.

The Changing Legal Landscape

As states legalized same-sex marriage, employers in those states began the process of re-writing their policies and procedures to comport with state law. However, because the Defense of Marriage Act (DOMA) defined marriage as the “legal union of one man and one woman,” only people of the opposite sex could be married for purposes of federal law. Thus, same-sex couples were not entitled to the rights and responsibilities set forth in federal statutes, such as the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code, the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and the Family and Medical Leave Act (FMLA).

On June 26, 2013, the Supreme Court issued its decision in United States v. Windsor, 133 S. Ct. 2675 (2013), wherein it declared that definition of marriage under DOMA to be unconstitutional. However, the court did not address the constitutionality of Section 2 of DOMA, which allowed states to not recognize marriages performed in other jurisdictions. Thus, employers needed to look to state law to determine an employee’s status and rights. However, there was very little guidance as to which state’s law controlled the determination. If an employee worked in a state where same-sex marriage was legal, then that question was easily answered. But if an employee worked in a state where same-sex marriage was not recognized but were married in a state where it was legal — there was no clarity for employers. Similarly, if an employee was married while it was legal in their state, but the law since changed, employers were left guessing as to how to proceed. This state of uncertainty has persisted for the past two years.

During that time, various federal agencies began issuing guidance using a “state of celebration” rule whereby the federal government would recognize same-sex marriages if it was legal in the state the couple was married, even if it was not legal in their state of residence. Most recently, in March 2015, the Department of Labor adopted a new rule that the FMLA would cover a same-sex spouse if the marriage was entered into in a state that recognizes same-sex marriages. Texas, Arkansas, Louisiana, and Nebraska filed suit seeking an injunction and, on March 26, the United States District Court for the Northern District of Texas issued a preliminary injunction halting application of the new rule.

The Supreme Court’s decision in Obergefell has removed much of the uncertainty facing same-sex couples. Now, states can neither ban licensing same-sex marriages nor refuse to recognize same-sex marriages legally performed in a different state. Thus, same-sex couples are now entitled to all of the benefits and protections state and federal law extends to married couples — including many in the employment arena.

Employer Compliance

In the 36 states and Washington D.C. where same-sex marriage was already legal, this decision will have little to no effect. However, employers in all 50 states should take the time to ensure that they are in full compliance. While issues will continue to arise, here are a number of things all employers should consider:

• Employee handbooks: Employers should review and update all employee handbooks, policies, and procedures to extend to same-sex spouses the rights given to opposite-sex spouses.
• Taxes: As same-sex couples can now file their state and federal taxes jointly, employees may need to update their W-4 forms to account for their change in status.
• Health insurance: Companies that offer health benefits to employee’s spouses will now be required to cover both gay and straight spouses (it is currently unclear whether this requirement also pertains to self-insured companies). Employers will likely need to modify things such as enrollment processes and eligibility forms.
• Other benefits: Discretionary benefits extended by employers, such as bereavement leave, housing benefits, relocation benefits, tuition reimbursement, and employee discount plans must be must be the same for all legally married couples.
• COBRA: Same-sex spouses are now covered by COBRA.
• FMLA: Employees must be permitted to take medical leave to care for same-sex spouses.
• Pensions, qualified retirement accounts, and IRAs: Employees may need to change their beneficiary designations.
• Domestic partnership benefits: Employers who voluntarily offered domestic partnership benefits will need to decide whether to continue these plans and, if not, how to phase them out. However, as it will likely take time for some local governments to begin issuing same-sex marriage licenses, employers should not rush to eliminate these benefits.
• Social Security benefits: Prior to the Windsor decision, a surviving spouse in a same-sex marriage wasn’t eligible to receive Social Security retirement benefits based on a deceased spouse’s earnings record. Now such a claim may be filed with the Social Security administration (SSA) if a couple was married in a state permitting same-sex marriages and the survivor resides in a state recognizing same-sex marriage. However, for the time being, the SSA says it will continue to follow state law on other claims.
• Qualified retirement accounts and IRAs: The rights and benefits for same-sex married couples now mirror those for traditional married couples if one spouse participates in a qualified retirement plan like a 401(k) plan — regardless or whether the employer is based in a state recognizing same-sex marriages. Thus, a surviving spouse in a same-sex marriage may benefit from favorable distribution rules under the law. Similarly, rules benefitting a surviving spouse of an IRA holder are extended to a surviving spouse in a same-sex marriage.
• Employee benefits: Employees may be eligible for employer-provided fringe benefits like health insurance. Previously, if a health insurance plan covered a same-sex spouse of an employee, the employee spouse was taxed on the value of the coverage. Now the coverage is tax-free — just like it is for spouses of traditional marriages. Other rules involving fringe benefits involving employees in same-sex marriages are still evolving.

Possible Future Impact

While the decision will have immediate effects, it has the potential to influence other issues and also leaves unanswered questions.

• Statutory protections: Currently, 22 states prohibit employment discrimination on the basis of sexual orientation in the public and private sector; an additional 10 states have similar prohibitions that only apply to public-sector jobs. However, there is currently no federal statute that explicitly prohibits discrimination on the basis of sexual orientation in private-sector employment. The Employment Non-Discrimination Act (ENDA), a bill that has been pending in Congress for many years, would prohibit discrimination on the basis of sexual orientation. It is possible that the momentum from the Obergefell decision may cause Congress, as well as various states, to reconsider and pass this type of legislation.
• Constitutional protections: For public-sector employers, many expected the Obergefell decision would provide clarity as to what level of scrutiny to apply to constitutional claims of sexual orientation discrimination. However, in his majority opinion, Justice Kennedy again failed to state whether these claims should be subject to some form of heightened scrutiny. Accordingly, that will be a question for another day.
• Religious liberty: Over the past year, there has been much debate about the interplay between gay rights and religious liberty. Chief Justice Roberts, in his dissent, acknowledged some of the potential conflicts between this decision and the exercise of religion. In particular he questioned what would happen when “a religious college provides married student housing only to opposite-sex married couples, or a religious adoption agency declines to place children with same-sex married couples.” There will no doubt be similar issues that will arise in the employment context.

This watershed decision will undoubtedly prove challenging for employers that operate in states that did not recognize same sex marriage. However, the federal recognition of all marital unions will streamline employer policies and employee benefits such that large employers will be able to enact consistent policies, offerings, and processes across national operations. The decision will undoubtedly lead to broader agency enforcement and likely imminent federal statutory protections for LGBT employees nationwide.

For more information on the impact of this decision, or for assistance updating employment policies and procedures, please contact:

• Caroline J. Berdzik (609.986.1314; cberdzik@goldbergsegalla.com)
• Or another member of the Goldberg Segalla Employment and Labor Practice Group.