Analyzing Obergefell v. Hodges - Implications for Employers
Labor & Employment @lert
Date: June 30, 2015
On June 26, the Supreme Court of the United States rendered its landmark decision determining that the U.S. Constitution requires states to license marriages between same-sex couples, sweeping away state laws defining marriage as a union solely between a man and a woman. Flowing from this recognition, the Court held that states must recognize same-sex marriages that were lawfully licensed and performed in other states. The Court held that the decision to marry is among the most intimate that an individual can make, and further, that the right to personal choice regarding marriage is inherent in the concept of individual liberties guaranteed under the Due Process and Equal Protection Clauses of the Fourteenth Amendment. Justice Kennedy wrote the 5-4 opinion; all four dissenting justices issued lengthy individual opinions based primarily on federalist and states’ rights principles, concluding that same-sex marriage is not a Constitutional issue and belongs to the legislative process.
Recognizing that this holding marked a radical departure from historic, and in many cases contemporary, beliefs about marriage, Kennedy recounted other significant changes in laws regarding marriage. He noted the decline of arranged marriages and the abandonment of the law of coverture, which provided that upon marriage a woman's legal rights and obligations were subsumed by those of her husband, while a single woman could hold property in her own name. Kennedy pronounced that radical as they were at the time, these changes have strengthened, not weakened, the institution.
While the decision was foreshadowed by the 2012 decision in United States v. Windsor, in which the Court struck down the federal Defense of Marriage Act defining marriage as a legal union only between one man and one woman as husband and wife for all federal purposes, Justice Kennedy found precedent in numerous previous cases. In the 1965 Griswold case, the Court established a “right to marital privacy,” striking down laws outlawing contraceptives. The Court also leaned heavily on the 1967 Loving case, which struck down laws prohibiting interracial marriage. As recent as the 2003 Lawrence case, the Court struck down a Georgia law making homosexual acts a crime because it demeaned the lives of homosexual persons.
The Court held that marriage is a keystone of the nation’s social order. Addressing the Respondents’ argument that allowing same-sex couples to wed will harm marriage as an institution, the Court called this position “counterintuitive” when viewed in light of the respect the Plaintiffs showed for the institution by so determinedly seeking its protections. The Court stated:
As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death. It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves. Their hope is not to be condemned to live in loneliness, excluded from one of civilization's oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right.
Further, the Court focused on the harm and humiliation the ban on same-sex marriage causes to children of same-sex couples, who suffer the significant material costs of being raised by unmarried parents and are therefore relegated to a more difficult and uncertain family life.
Earthshaking as the Obergefell decision is societally, the implications for private employer employment policies and benefit plans are modest in comparison. After the Windsor decision, the Department of Labor (DOL) issued guidance establishing that the definition of spouse under the Family and Medical Leave Act (FMLA) includes a same-sex partner from a marriage recognized in any state, even if the employer and employee reside in a state that did not at the time recognize same-sex marriage. If anything, removing the ban on same-sex marriages entirely may simplify FMLA administration. In any case, employers should review their employment practice to ensure that all married couples are treated equally.
Likewise from an employee benefits perspective, after Windsor, employers with pension and defined contribution plans like 401(k) plans were required to recognize same-sex spouses for purposes of administering retirement plan benefits (e.g., determining surviving spouse annuities or death benefits and obtaining spousal consent to change beneficiaries). Like the DOL’s interpretation for FMLA administration purposes, the Internal Revenue Service (IRS) also issued guidance following Windsor adopting a “state of celebration” rule recognizing marriages validly entered in a state whose laws authorized the marriage even if the married couple resided in a state that didn’t recognize same-sex marriage. Thus, the Obergefell decision does not generally further impact retirement plans other than to eliminate the need for plan sponsors to determine whether a same-sex marriage occurred in a state that authorized the marriage celebration.
Although the Windsor decision did not require private employers to provide health and welfare benefits to same-sex spouses, it did have an impact on the taxation of those benefits for employers who were already providing such benefits. Following Windsor and related IRS guidance, employers were no longer required to impute income to same-sex spouses (in contrast to providing tax-free benefits to opposite sex spouses) for federal income tax purposes. Also, following the Windsor decision, an employee with a same-sex spouse was able to contribute to health savings and flexible spending accounts at the same levels as an employee with an opposite-sex spouse, and COBRA continuation benefits also began to apply to same-sex spouses. Now, after the Obergefell decision, employers who provide health and welfare benefits to same-sex spouses will no longer have to impute income for state income tax purposes (note: it is unclear how quickly the state revenue/taxation departments will issue guidance to address this issue for 2015).
Kennedy addressed benefits bestowed on married persons in his opinion, but mentioned health insurance benefits just once when the Court stated:
Indeed, while the States are in general free to vary the benefits they confer on all married couples, they have throughout our history made marriage the basis for an expanding list of governmental rights, benefits, and responsibilities. These aspects of marital status include taxation; inheritance and property rights; rules of intestate succession; spousal privilege in the law of evidence; hospital access; medical decision making authority; adoption rights; the rights and benefits of survivors; birth and death certificates; professional ethics rules; campaign finance restrictions; workers’ compensation benefits; health insurance; and child custody, support, and visitation rules.
Kennedy further stated that “by virtue of their exclusion from that institution, same-sex couples are denied the constellation of benefits that the States have linked to marriage.” Interestingly, in his dissenting opinion, Chief Justice Roberts noted that the equal protection analysis might be different, in his view, if the Court was “confronted with a more focused challenge to the denial of certain tangible benefits” that are associated with marriage but that “those more selective claims will not arise now that the Court has taken the drastic step of requiring every State to license and recognize marriages between same-sex couples.”
Based on the opinion, it would seem that state and local government employers who provide health and welfare benefits to spouses must now also extend benefits to same-sex spouses who have a valid marriage license. However, under federal preemption principles, private employers who have self-insured health and welfare plans governed solely by the Employee Retirement Income Security Act of 1974, as amended (ERISA), are not required by the Obergefell decision to offer benefits to same-sex spouses (but see the paragraph below regarding Title VII issues). But, if a state law requires an insurance carrier to recognize same-sex spouses before an insurance policy may be issued in a state (which is now likely to be the case), then a private employer whose benefit plans are fully insured may not be able to avoid providing benefits to same-sex spouses.
The Obergefell decision requires a state to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state. The Obergefell decision does not address the handful of states that still recognize common law marriage either by state statute or state common law (and which generally refer to husband and wife or opposite sex individuals as part of the criteria for establishing a common law marriage). Although the Court holds “same-sex couples may exercise the fundamental right to marry in all States,” it is unclear whether Obergefell requires these states to recognize same-sex couples who otherwise meet the state’s criteria for common law marriage, especially if such couples do not seek a marriage license. Employers who offer benefits to common law spouses generally require employees to complete an affidavit certifying that they meet the common law marriage criteria in the state in which they reside. Employers will need to consider whether such affidavits require modification after Obergefell. Also, ironically, some employers, who previously had allowed benefits coverage for non-married same-sex domestic partners in fairness to same-sex couples who could not legally marry, may consider eliminating coverage for domestic partners, limiting coverage only to same-sex couples with a marriage license. If an employer desires to discontinue same-sex domestic partner benefits, the employer should consider whether it will provide a period of time for the previously covered domestic partners to marry before they lose coverage.
Looking to the future, the Obergefell decision may substantially contribute to the development of Title VII jurisprudence, as it outlaws discrimination based on sex. The current state of the law provides no direct protection to employees based on their sexual orientation. In recent years, this exclusion has been eroded by cases finding a Title VII violation when employers discriminate based on an employee’s failure to conform to certain gender stereotypes. The Obergefell Court held that the fundamental liberties protected by the Fourteenth Amendment extend to certain personal choices central to individual dignity and autonomy, including intimate choices defining personal identity. In the opening words of the decision, Justice Kennedy states that “The Constitution promises liberty to all within its reach, a liberty that includes certain specific rights that allow persons, within a lawful realm, to define and express their identity.” This language could form the basis for the extension of Title VII protections to gay and lesbian employees and, to an even greater extent, to transgender employees. If this should occur, it could also impact whether a private employer may exclude same-sex spouses from its self-insured health and welfare benefit plans.
FOR MORE INFORMATION
If you would like further information on this topic, or need assurances that your current employment policies and benefit plans conform to the Obergefell decision or other aspects of gay and lesbian rights, please contact any member of our Labor & Employment or Employee Benefits & Executive Compensation practice groups.
This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgement of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.
This document may be considered attorney advertising in some jurisdictions.
© 2015 THOMPSON HINE LLP. ALL RIGHTS RESERVED.