Effectively legalizing gay marriage throughout the United States, a divided U.S. Supreme Court has ruled that states must issue a license for a marriage between two people of the same-sex and that state prohibitions against same-sex marriages violate the Fourteenth Amendment rights of same-sex couples. Obergefell v. Hodges, No. 14-556 (June 26, 2015). The Supreme Court, 5-4, found that statewide prohibitions on same-sex marriage violate the Equal Protection and Due Process clauses of the U.S. Constitution’s Fourteenth Amendment. This decision has wide-ranging implications for employers.

Background

Several groups of same-sex couples sued their respective state agencies and state actors in Ohio, Michigan, Kentucky, and Tennessee to challenge the constitutionality of those states’ ban on same-sex marriage or refusal to recognize legal same-sex marriages that occurred in jurisdictions that provided for such marriages. The plaintiffs in each case argued that the states’ statutes violated the Equal Protection and Due Process clauses of the Fourteenth Amendment, and one group of plaintiffs also brought claims under the Civil Rights Act. In all cases, the trial courts found in favor of the plaintiffs. The U.S. Court of Appeals for the Sixth Circuit, which has jurisdiction over Kentucky, Michigan, Ohio, and Tennessee, reversed the trial court decisions and held that the states’ bans on same-sex marriage and refusal to recognize marriages performed in other states did not violate the couples’ Fourteenth Amendment rights to equal protection and due process.

14th Amendment Protection

The Supreme Court disagreed with the Sixth Circuit, finding that the Fourteenth Amendment, under both the Due Process Clause and Equal Protection Clause, requires states to recognize same-sex marriages that were validly performed. 

Under the Due Process Clause, the Court found four principles and traditions demonstrating that marriage is fundamental under the Constitution, which applies “with equal force to same-sex couples.” These are: 

1. the right to personal choice regarding marriage is inherent in individual autonomy; 
2. the right to marry is fundamental because it “supports a two-person union unlike any other in its importance to the committed individuals”; 
3. marriage “safeguards children and families”; and
4. marriage is the “keystone to social order.” 

Under the Equal Protection Clause, supported by Loving v. Virginia, 388 U.S. 1 (1967), and Lawrence v. Texas, 539 U.S. 558 (2003), the Court found that marriage prohibitions enforced by the states are unequal — “same-sex couples are denied all the benefits afforded to opposite-sex couples and are barred from exercising a fundamental right.” The Court found that same-sex couples “ask for equal dignity in the eyes of the law [and] [t]he Constitution grants them that right.” 

Implications for Employers

Obergefell will affect application of certain employment-related laws. 

The Family and Medical Leave Act of 1993 (“FMLA”) requires private employers who have employed at least 50 employees on each working day during at least 20 calendar weeks in the current or preceding calendar year to grant qualifying employees time off to care for their sick spouses. Obergefell will provide clarity and consistency to FMLA administration. Earlier this year, the Department of Labor issued a Final Rule revising the regulatory definition of spouse under the FMLA. (For details, see our article, New FMLA Regulations Expand Definition of Spouse and Include Same-Sex Spouses.) It established that a spousal relationship for purposes of FMLA is based on the law of the place in which the marriage was entered into (“place of celebration”), as opposed to the old FMLA regulations basing the spousal relationship on the law of the state in which the employee resides. As a result of the Supreme Court’s decision, it appears any questions regarding the DOL’s Final Rule have been all but eliminated. Employers should review and make changes to policies and practices to ensure FMLA is applied consistently with the DOL’s Final Rule.

In addition, in 2013, the Internal Revenue Service and DOL issued guidance providing that same-sex spouse marriages would be recognized for purposes of the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) if they were legally recognized in the state where the marriage was celebrated. Thus, the federal law protections of the IRC and ERISA were extended to same-sex spouses even if the couples lived in a state that did not recognize or even banned same-sex marriage. These new protections included same-sex spouse entitlement to joint and survivor annuities and qualified preretirement survivor annuities under defined benefit plans and certain defined contribution plans, status as a default beneficiary under 401(k) plans, and the ability to roll over a survivor benefit to another employer’s eligible retirement plan. The new protections also included same-sex spousal entitlement to cafeteria plan participation, COBRA continuation elections, and flexible spending account participation. 

One of the main protections extended by the 2013 guidance was the ability of employees to purchase same-sex health plan coverage for their spouses on a pre-tax basis and to exclude the cost of the coverage from gross income for federal income tax purposes — which is the same treatment afforded to opposite-sex spouse health coverage. Prior to the 2013 guidance, same-sex health plan coverage was paid for by the employee on an after-tax basis and the value of the coverage was included as imputed income to the employee for federal income tax purposes. State income tax laws, however, were not affected by the 2013 guidance. Following Obergefell, states must recognize same-sex marriages that were legally recognized in the state where the marriage was celebrated — which will include same-sex marriages celebrated in all 50 states — for purposes of state income tax laws. Accordingly, employees will no longer be required to recognize imputed income on the value of same-sex health coverage for state income tax purposes.

Furthermore, there is no mandated level of health plan coverage under federal law (specifically, under ERISA) and Obergefell does not create any such requirement — health plan coverage remains a benefit that employers may provide, or not, in their sole discretion. Accordingly, private employers who offer self-insured health coverage are not required by Obergefell to offer same-sex spouse health coverage or, indeed, any coverage at all. The definition of “spouse” used in the plan document will continue to determine eligibility for coverage under self-insured plans. Employers with self-insured plans who offer only opposite-sex spousal coverage, however, certainly will risk sex discrimination claims under Title VII, which is not preempted by ERISA. In contrast, employers who offer insured coverage that includes any spousal coverage will have to offer same-sex spousal coverage as well. 

Why the difference between self-insured and insured coverage? 

Unlike self-insured plans, insured coverage must comply with state insurance codes and, post-Obergefell, state laws cannot treat same-sex spouses differently than opposite-sex spouses. Given the benefit changes associated with Obergefell, now is the time to consult appropriate counsel to ensure benefit plans are designed in a manner consistent with your company’s goals, as well as applicable laws.