July 2013

By: James B. Sherman, Esq.

On June 26, 2013, the United States Supreme Court in United States v. Windsor struck down part of the Defense of Marriage Act (DOMA), making legally married same-sex couples eligible for federal benefits. Essentially, the Supreme Court ruled that federal law must recognize same-sex marriages by states that have legalized them and extend the same federal benefits to an employee’s same-sex spouse as it would to an employee’s opposite-sex spouse.

However, the Court’s ruling raises more questions than answers for employers looking to find consistency in implementing, among other things, benefit and leave policies. Simply put, the current state of affairs means that each individual state may decide for itself how to define the term “marriage.” Currently, thirteen states and the District of Columbia have laws that allow same-sex marriage, eight others accommodate some variation of a civil union for same-sex couples, and several other states – either by state law or through a constitutional amendment – ban same-sex marriage. Even more confusing is the fact that the Supreme Court did not address whether a same-sex couple legally married in one state must be recognized as legally married in all states. Therefore, employers with employees in different states will inevitably face concerns as to which law applies and how best to revise the policies affected. Although there are a multitude of affected benefits and practices, employers are likely to focus their immediate attention on family medical leave, health insurance benefits and taxes. Each of these areas will be touched on briefly below.

Are same-sex spouses entitled to FMLA? Under the FMLA, the term “spouse” is defined as a husband or wife recognized under state law for the purposes of marriage in the state where the employee resides. Again, because each state gets to define marriage and it remains unclear whether all states must recognize legally married same-sex couples, FMLA entitlements for same-sex spouses remain on unstable ground. What can be said for certain is that FMLA leave is available to an employee to care for a same-sex spouse’s serious health condition if the employee resides in a state that recognizes same-sex marriage. This is true even if that same employee works in a state that does not recognize same-sex marriage. (e.g. resides in Minnesota but is employed in North Dakota). However, employees that were married in a state that allows same-sex marriage but choose to reside in one that does not may not be entitled to FMLA leave (e.g. married in Minnesota but reside and work in North Dakota).

The challenge, therefore, is that an employer may find itself in a position where it is required to provide FMLA leave for the care of a same-sex spouse to some employees, but not others. Accordingly, employers may simply decide to allow FMLA leave for same-sex spouses who reside in states where same-sex marriage is not recognized. While this may be a good avenue to consider, be advised that it is not completely risk free. Employees residing in states that do not recognize same-sex marriage may argue that leave to care for a same-sex spouse should not count against the 12-week FMLA entitlement if, for example, the employee needs additional leave for a different FMLA qualifying event, such as to care for his or her own serious health condition.

What about health benefit plans and COBRA? Many private employers are unsure of whether to provide insurance benefits to the same-sex partners of their employees. While a number of employers already voluntarily provide these benefits to same-sex or other non-legally recognized partners, in states where same-sex marriages carry legal status, such spouses will likely be covered automatically under the language of most fringe benefit plans, which would necessarily include federal COBRA eligibility. Although prior to the Court’s ruling there was nothing preventing group health plans from providing same-sex spouses with COBRA type benefits, legally married same-sex spouses are now eligible for federal COBRA benefits under proper qualifying events.

What about certain tax and retirement issues? Previously, employers who offered same-sex couples health insurance benefits were required to treat those benefits as income to the employee because technically the employee was giving something of value to someone who was not a relative. From this point forward, however, those benefits will be treated the same as an employee’s own health insurance, making them free from federal taxes. As a result, employers no longer have to pay federal payroll taxes on those benefits. Moreover, employers and employees need to review retirement plans to ensure the Court’s decision does not inadvertently change plan beneficiaries. Generally, legal spouses are considered default beneficiaries and a legally recognized same-sex spouse may or may not be the current plan beneficiary.

There are many other implications to the Court’s ruling in the areas of leave and benefit policies that warrant a further in-depth discussion and as always it is important to obtain an understanding of these issues by consulting with experienced legal counsel who are well versed in employment law and the issues surrounding same-sex marriage. For help with reviewing existing policies and benefit terms for compliance with the new law, contact attorneys James Sherman at (952) 746-1700.