As the tide begins to rise with state same-sex marriage laws, employers must continue to monitor the potential impact on their personnel policies; more specifically, employee benefits and leave policies. In the last half of 2013, there was also a surge of activity affecting same-sex couples and their employers in the federal courts and administrative agencies that will likely continue into 2014. This article summarizes that law and the effect that an increasing crop of state laws allowing for same-sex marriage may have on employers' benefits policies.

On June 26, 2013, the U.S. Supreme Court decided that limiting the terms "marriage" and "spouse" to heterosexual couples is unconstitutional in U.S. v. Windsor. Thus, it struck down the section of the Defense of Marriage Act (DOMA) that limited marriage to unions between a man and a woman under federal law. The Court, however, did not go so far as to require states in which same-sex marriage is banned to recognize same-sex marriages that occurred outside of their states.

As a result of the decision, federal agencies began to issue guidance on the subject. Different federal agencies decided to employ different standards to the question of whether same-sex couples should be recognized for purposes of federal law.

The IRS issued guidance that same-sex couples would be treated as “married” for federal tax purposes if they were legally married in the place that the marriage was celebrated—otherwise known as the “place of celebration” standard. The U.S. Department of Labor, on the other hand, used a "place of residence" standard for Family Medical Leave Act purposes. That is, the law of the state in which the employee resides dictates whether he/she is eligible for FMLA benefits for a same-sex spouse. If the state in which an employee resides does not recognize same-sex marriage, then even if the couple was legally married in another state, they would not be eligible for FMLA leave in order to care for their same-sex partner.

And, to further complicate the issue, many employers have their own domestic partner benefit policies. The intersection of the Windsor case, the federal agency guidance that followed, state same-sex marriage laws and employer-established domestic partner policies has the potential to cause major headaches for employers and employees alike when it comes to certain employee benefits.

One key issue is that many domestic partner policies were drafted with the idea that same-sex couples were not allowed to be married. Because of this, the policies specified that only same-sex couples were eligible (because opposite-sex couples were allowed to get married). Now, as states are beginning to legalize and recognize same-sex marriages, unmarried heterosexual couples may have claims of unlawful discrimination on the basis of sexual orientation. The rationale is that in order to receive the benefits, heterosexual couples would have to get married, whereas same-sex couples would not. Now that same-sex couples may get married in some states, and potentially have federal benefits recognized in many additional states, is there a need for domestic partner benefit policies still? Domestic partner policies that were aimed at leveling the playing field five years ago may come back to haunt employers today.

In order to avoid potential litigation, employers have a few options. First, they could simply offer the domestic partner benefits to all employees, regardless of the sex of their significant other. This is the option that many large employers have taken, but could come with greater administrative costs such as creating rules and verifying which relationships qualify and which do not. A second option is to remove the policies completely and allow only married employees to have these benefits. The downside to this option, however, is that domestic partner benefits have become a popular recruiting tool, particularly with younger employees.

In any event, employers should pay close attention as the IRS and DOL continue to issue guidance that might affect benefits and leave policies. Additionally, it is important to know where state laws stand on allowing same-sex marriage. This evolving issue directly affects the employer's need to have domestic partner benefits policies, and, perhaps more importantly, whether continuing to employ these policies may result in litigation.