In a historic decision on Friday, June 26, 2015, the United States Supreme Court recognized a fundamental right for same-sex couples to marry throughout the country. In a 5-4 opinion, authored by Justice Anthony Kennedy, the Court held that both the Due Process and Equal Protection Clauses of the Fourteenth Amendment require states to license a marriage between two people of the same sex.
The opinion (Obergefell et al. v. Hodges, No. 14-556) consolidated four federal court cases that presented two questions: first, does the Constitution require states to issue marriage licenses to same-sex couples; and second, are states required to recognize same-sex marriages performed elsewhere. The Court answered both questions in the affirmative.
On Due Process grounds, the Court stated that the Constitution guarantees same-sex couples the right to marry because: (1) “the right to personal choice regarding marriage is inherent in the concept of individual autonomy”; (2) the right to marry “supports a two-person union unlike any other in its importance to the committed individuals”; (3) the right to marry “safeguards children and families and thus draws meaning from related rights of childrearing, procreation, and education”; and (4) marriage is a “keystone of [the Nation’s] social order” for which there is no difference between same-sex and opposite-sex couples. Additionally, the Court also relied on the Equal Protection Clause to reach its decision, but with substantially less analysis.
Of note, the opinion expressly recognized the First Amendment rights of religious organizations and individuals to oppose same-sex marriage. Thus, there may be a latent conflict between the fundamental right to marry laid out in this opinion, and the expansive view of religious liberty laid out in opinions like Burwell v. Hobby Lobby Stores, Inc.
The Potential Impact
Although the tone of Friday’s decision was far-reaching, the full impact of the decision remains to be felt. For example, although it is clear that the states must recognize same-sex marriage, it is not clear that private employers are required to do so where such policies do not flow from federal or state law. (I.e., rights under employer-provided leave policies vs. FMLA leave rights). However, policies that treat opposite-sex spouses differently from same-sex spouses may become subject to legal challenge, as Friday’s decision will likely become a basis for litigation to further expand the reach of laws such as Title VII.
Of note, Friday’s ruling does not appear to impact other private employer discrimination claims. Specifically, in states that do not extend anti-discrimination protections to LGBT individuals in employment at the state level (such as Mississippi), while gay or lesbian individuals in these states are now able to lawfully wed, this ruling does not afford them employment anti-discrimination protections under Title VII. However, most legal experts expect additional litigation challenging adverse employment actions taken on the basis of sexual orientation—especially in light of the Court’s decision.
By highlighting the Court’s previous decision in Burwell v. Hobby Lobby Stores, Inc., the Court possibly foreshadowed a looming challenge between the federal government and private religious-based employers who feel recognizing same sex marriage (through the offering of employee benefits) violates their First Amendment religious protections. Can the employer opt to not provide the benefit to any “married” employee, regardless of sexual orientation? What about for mandatory federal benefits, such as the Family and Medical Leave Act? The Supreme Court’s decision in Obergefell did not resolve these questions.
The primary impact of this decision from the employer benefit plan perspective will be on health and welfare benefits.
Friday’s decision will impact some employers’ health and welfare benefits design and administration. After theUnited States v. Windsor decision in 2013 (which struck down part of the federal Defense of Marriage Act), employers who offered same-sex spouses health and welfare benefits were able to treat those benefits as non-taxable for federal tax purposes. In those states that did not previously recognize same-sex marriage, however, those benefits may have been subject to state taxes. This created a situation where some same-sex spousal welfare benefits were taxable for state tax purposes but not for federal tax purposes–resulting in the potential for participant confusion and administrative burden for the plan sponsor. After this ruling, those benefits should no longer be taxable for federal or state tax purposes which should ease administration for employers.
In addition, employers who had previously defined “spouse” for purposes of their welfare plans based on a state definition, should consider revisiting those definitions, to see if changes in administration are necessary. Employer welfare plans that continue to define “spouse” for purposes of welfare benefits to exclude same-sex marriages should expect an increased chance of potential legal challenges in light of the new ruling.
- Employers may need to make administrative changes to cover same-sex spouses in states where they were not previously covered.
- For example, employers will need to modify enrollment processes and create or modify consent and eligibility forms.
- The state income tax treatment of employer-provided benefits could change for individuals with same-sex spouses.
- With anticipated changes to the state income tax treatment, workers with same-sex spouses covered by employer plans will no longer need to pay imputed income on those benefits. Further, it will eventually be unnecessary for employers to continue to calculate imputed income.
- Eligibility rules for employer-provided benefits could change, which would open up eligibility to same-sex spouses in all states.
- In contrast, employers might discontinue same-sex domestic partner benefits, if all employees are able to marry in their state.
This ruling may impact the number of people who are considered spouses, but should not require a qualified retirement plan change. After the United States v. Windsordecision in 2013, the IRS issued guidance providing that for federal tax purposes the IRS applied a “state of celebration” rule. As a result, qualified retirement plans, which rely on the Internal Revenue Code definition of spouse, have already been considering same-sex spouses as “spouses” for purposes of those plans.
The Supreme Court’s decision on Friday was just the latest in a recent trend of legal and legislative changes that could alter the obligations employers face in offering benefits for their employees, and complying with regulations administering these obligations. We encourage you to have your legal professional review your current employment practices and policies to ensure up-to-date compliance with this ever-changing landscape.