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Employment Practices Liability: How Will the DOMA Decision Affect Employment Law, Benefits?

Employment Practices Liability: How Will the DOMA Decision Affect Employment Law, Benefits?Employment Practices Liability: After Supreme Court Ruling, Employers Look for Guidance

The Supreme Court in a 5-4 landmark decision in late June struck down DOMA, the Defense of Marriage Act, as unconstitutional and in violation of the Fifth Amendment. DOMA, signed by former President Bill Clinton in 1996, barred the federal government from recognizing same-sex marriages legalized by the states, and prevented these couples from receiving hundreds of benefits available to other married spouses under federal law. But with the Court’s recent ruling come many unanswered questions regarding when same-sex marriages will be considered valid for purposes of employee benefit plans and federal legislation, such as the Family and Medical Leave Act (FMLA).  These issues can have an impact on employers, who must now navigate through a field of potential landmines.

For example, the FMLA allows eligible employees to take leave to care for a family member with a serious health condition. A “family member” includes the employee’s spouse, which, by definition under FMLA regulations, is: “a husband or wife as defined or recognized under State law for purposes of marriage in the state where the employee resides, including common law marriage in states where it is recognized.” Before DOMA was struck down, the FMLA was bound by DOMA’s definition that a “spouse” could only be a person of the opposite sex who is a husband or wife, which meant the leave was not available to same-sex spouses. Now, the Supreme Court has cleared the way for each state to decide its own definition of “spouse”. So, if an employee is married to a same-sex partner and also lives in a state that recognizes same-sex marriage, the employee will be entitled to take FMLA leave.

But what happens for those employees who live in a state in which same-sex marriage is not recognized? Will they be entitled to FMLA leave to care for their spouse?  This is not clear, according to legal experts. Initially, the regulations look to the employee’s state of primary residence to determine whether a person is a spouse for purposes of FMLA. Therefore, even if the employee formerly lived or was married in a state that recognized the same-sex marriage, he/she is unlikely to be considered a spouse in the “new” state for purposes of FMLA if the state does not recognize the marriage. This can get complicated, as about 30 states currently do not recognize same-sex marriage while others don’t fully recognize it (for example, Illinois may recognize same-sex unions, not marriages). It’s clear that employers will need guidance from the Department of Labor regarding this issue.

Other federal employment laws also need to be examined in light of DOMA. According to law firm Reed Smith, which addressed some of the outstanding issues in an article last month, employers will need to take action today to begin treating same-sex spouses from states that permit or recognize same-sex marriages as lawful spouses. This includes the following:

  • For tax-qualified retirement plans, these same-sex spouses must be treated as lawful spouses for purposes of maximum benefit limitations, spousal consent rules, rollovers, death benefits, minimum required distributions, availability of in-service hardship withdrawals, and assignment of benefits under qualified domestic relations orders.
  • Allow employees the ability to modify elections under group health plans due to a Code Section 125 change in status or HIPAA special enrollment event that is associated with a same-sex spouse who is entitled to enroll in the plan.
  • If coverage is provided to a same-sex spouse under the eligibility rules of a group health plan, provide for the availability of continuing health benefits under COBRA.
  • Update beneficiary designations to reflect the existence of a legal spouse, where necessary

Employers should also review their benefit plans and identify which provisions are affected and need to be updated. Summary plan descriptions and election forms also should be amended, and plan administration will have to be revised accordingly. Additional communications may need to be sent to employees and former employees (and, depending on guidance on retroactivity, to their same-sex surviving spouses) informing them of the changes to their benefit rights.

The Supreme Court decision has made employment law more complex and less clear for the time being. How the DOMA ruling will affect employers down the road in states where same-sex marriage is not recognized remains to be seen. At Axis Insurance Services, LLC, we’ll keep you updated on this and other topics that affect your business and employment practices.

Axis Insurance Services is a leading professional and management liability insurance specialist, and offers employers Employment Practices Liability Insurance (EPLI) coverage, including to large corporations and small businesses. Give us a call at (877) 787-5258 to discuss our insurance programs.

Sources: Reed Smith, MONDAQ, Advisen

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Blogged on: August 6, 2013 by Mike Smith
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