DOMA's Immediate Impact on Benefits Offered by Employers
July 31, 2013
We expect to hear more about the effects of this decision from key federal agencies including the Internal Revenue Service, Department of Labor, and Securities and Exchange Commission, which heavily regulate employers. In the meantime, employers should begin planning for the inevitable changes that must take place, because the term "spouse" for many purposes now includes a same-sex spouse. This is particularly important for employers in Minnesota, whose employees residing here have, as of August 1, 2013, the legal right to marry a same-sex partner or have an out-of-state same-sex marriage recognized in Minnesota.
For your convenience, we've provided a Quick Reference Guide for spotting DOMA issues.
The Windsor Decision
In United States v. Windsor ("Windsor"), the Supreme Court held that the federal definition of "spouse" in DOMA, which the law limited to a person of the opposite sex, is unconstitutional. At least two immediate possible outcomes may arise from the invalidation of that federal definition of "spouse."
- Federal law may consider two persons to be spouses if their marriage is valid in the state where the marriage occurred (the "Celebrated Test").
- Federal law may consider them to be spouses if their marriage is valid in the state in which they live at the time (the "Residence Test").
Before Windsor, various federal laws used either the Celebrated Test or the Residence Test in different contexts.
Variations in State Same-Sex Marriage Recognition: What It Means for All Employers
On August 1, 2013, Minnesota will become the latest state to legalize same-sex marriage, joining 12 other states and the District of Columbia that allow same-sex marriages or recognize those that are lawful in other jurisdictions. In other states where the law does not permit or recognize same-sex marriage, Windsor will still impact employers in two ways:
- If the federal agencies decide to use the Celebrated Test, those employers are likely to be obligated to recognize same-sex marriages that are valid in other states for purposes of complying with federal laws, including employee benefits, federal tax laws, and leave policies.
- If the Residence Test applies in those states, employers may be subject to state laws that protect employees from discriminatory treatment on the basis of a number of factors, often including sexual orientation and marital status.
Employers may also choose to use a broader definition of spouse for employee relations reasons. Many employers already offer some benefits to same-sex couples that are more generous than those required by federal law. Considerations of employee morale and perception may cause employers to continue that practice, or offer more generous benefits voluntarily in order to attract and retain the best employees.
A similar rationale may apply for employers with operations both in states that recognize same-sex marriage and states that do not recognize same-sex marriage. Employers that do business and have employees in states with different laws affecting same-sex marriage must decide which employee marriages to recognize, and which benefits they will offer voluntarily or because of a state law mandate. Considerations of administrative efficiency and expense will be factors along with employee morale and perception factors.
For example, consider the Family and Medical Leave Act ("FMLA"). The FMLA regulations apply a version of the Residence Test. Prior to Windsor the DOMA definition applied to the FMLA. At this point, the United States Department of Labor has not issued any post-Windsor guidance. However, an employee living in a state that recognizes same-sex marriage may now be entitled to FMLA leave because a same-sex spouse has a serious health condition or is eligible for the military leave provisions of the FMLA. The FMLA will certainly cover an eligible employee with a same-sex spouse who both lives and works in such a state, like Minnesota.
However, Windsor leaves open some tough questions for employers. Here is our current advice on two potential issues.
- Is an employee with a same-sex spouse eligible for FMLA leave if he or she lives in a state that recognizes same-sex marriage but works in a state that does not recognize same-sex marriage? Because the FMLA regulations base the definition of a "spouse" on the Residence Test, we believe that the employer must grant FMLA leave to that employee.
- Is an employee eligible for FMLA leave if he or she has a same-sex spouse under the law of one state but lives in a state where same-sex marriage is not lawful? We believe the answer is technically no, although employers should certainly consider whether it is important for recruitment and employee relations strategies to voluntarily provide FMLA benefits to any eligible employee in a lawful same-sex marriage, even if the person lives where the law does not recognize same-sex marriage.
The Windsor decision makes it more important than ever for employers to be aware of the current state laws regarding marriage and ensure their policies and procedures are compliant. Until further guidance is available, we recommend that employers do the following:
- Review enrollment paperwork, plan documents, plan summaries and other written materials and communications with employees for the use of the term "spouse" and/or references to an employee's marital status. Flag those occurrences for further review when guidance is provided. Immediately eliminate any references to husbands and wives, so that these materials refer only to spouses without a gender identification. For your convenience, we have provided a Quick Reference Guide for spotting DOMA issues.
- Be prepared to promptly and effectively respond to requests from employees and plan participants who might be impacted by the change.
- Evaluate employee and plan participant requests with extra caution if the request might be implicated by the definition of "spouse" under a benefit plan or applicable law. The effect of Windsor is expected to be immediate, and may be retroactive, so decisions made now should attempt to comply as closely as possible with the principles of Windsor.
- Employers should provide training to managers and human resources professionals so they understand that eligibility and protections have been expanded for certain employees and the employee's same-sex spouse.
- Employers should provide anti-discrimination and anti-harassment training based on sexual orientation as well as marital status.
We can help
Please contact Maslon's Labor & Employment and Employee Benefits Teams if you have questions or would like more information about how DOMA may impact your company.