Employers must adapt to Obergefell v. Hodges. Prior to the Supreme Court’s June 26, 2015 decision, many states did not require employers to recognize and provide benefits for married same-sex couples. Only 36 states and Washington D.C. legalized same-sex marriage. Now, the Supreme Court determined that the 14th Amendment requires states to license same-sex marriages and to recognize lawfully licensed same-sex marriages performed out-of-state. In light of this holding, employers must ensure that their policies, procedures and the benefits comport with federal law.
Employers and benefit providers are now operating in an evolving legal landscape. Those that fail to comply risk a discrimination lawsuit. Prior to Obergefell, employers in states where same-sex marriage was legal began the process of re-writing policies to comport with state law. However, many states still refused to legalize same-sex marriage based upon the Defense of Marriage Act (DOMA). As a result, many employers denied same-sex couples the rights set forth in federal statutes, such as ERISA, COBRA, HIPAA, FMLA and the Internal Revenue Code.
Granted, the 2014 decision in States v. Windsor declared that the definition of marriage under DOMA (one man and one woman) to be unconstitutional. But, the court did not address Section 2 of DOMA, which allowed states the option of not recognizing marriages performed in other jurisdictions. Thus, employers needed to look to state law to determine an employee’s status and rights. This created a problem for employers due to a lack of guidance as to which state’s law controlled.
If an employee worked in a state where same-sex marriage was legal, then that question was easily answered. But there was no clarity for employers if an employee was married in a state that recognized same-sex marriages yet worked in a state where same-sex marriage was not. 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.
The Supreme Court’s decision in Obergefell 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.
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 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 benefiting 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.
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.