Last Friday, the United States Supreme Court, in Obergefell v. Hodges, affirmed that the Fourteenth Amendment of the Constitution requires states to apply their marriage laws equally to all couples, regardless if they are opposite-sex or same-sex. Writing for the Majority, Justice Anthony Kennedy stated, “Under the Constitution, same-sex couples seek in marriage the same legal treatment as opposite-sex couples, and it would disparage their choices and diminish their personhood to deny them this right.” In deciding Obergefell, the Court, 5-4, resolved a consolidated challenge from the Court of Appeals for the Sixth Circuit, which had sustained several state statutes that excluded same-sex couples from marrying.
The Court’s decision follows its decision in United States v. Windsor, which came two years ago to the same day. In Windsor, the Court held that Section 3 of the Federal Defense of Marriage Act (“DOMA”) violated the Fifth Amendment of the Constitution, to the extent that the statute’s definition of “marriage” and “spouse” deprived same-sex couples of equal protection and due process, because it only recognized the marriages of opposite-sex couples.
The Court’s decision in Obergefell, at least with respect to Hawai’i employers, has fewer implications than it may have for employers elsewhere because: (1) In 2013, following the Court’s decision in Windsor, President Obama issued an Executive Order, and the Federal Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”) issued Final Rules, which expanded under federal statutes the definition of “marriage” and “spouse” to include same-sex marriages, if the state where the same-sex couple resided permitted them to marry, and then (2) In 2013, Hawai’i adopted the Hawai’i Marriage Equality Act, reforming our state’s statutes to permit same-sex couples to marry. So, since 2013, under both federal and state statutes, Hawai’i employers have been required to recognize employees’ same-sex marriages and their spouses, since they are now permitted in our state.
Nonetheless, given the Court’s recent decisions, along with subsequent developments under both federal and state statutes, it is a good time for Hawai’i employers to take stock of the flurry of changes that have occurred with respect to managing LGBT employees who have entered into same-sex marriages:
(1) Federal Contractors & Subcontractors Must Include an Equal Employment Clause in Their Contracts and Employment Policies Indicating They Do Not Discriminate on the Basis of Sexual Orientation or Gender Identity
On July 21, 2014, President Barack Obama signed Executive Order 13672, which, effective April 8, 2015, prohibits federal contractors and subcontractors from discriminating in all aspects of employment on the basis of sexual orientation or gender identity. Under the OFFCP’s Directive 2014-02, which implements President Obama’s Executive Order, federal contractors and subcontractors must take affirmative actions and revise their respective federal contracts and their employment policies to include an equal employment clause that makes clear they will not discriminate on these bases.
(2) Hawai’i Employers Must Not Discriminate Based on Sexual Orientation or Gender Identity
For Hawai’i federal contractors and subcontractors, these requirements may be less burdensome. The Hawai’i Employment Practices Act already prohibits our state’s employers from discriminating on these bases. All Hawai’i employers should ensure that their employment policies are up to date and make clear that they do not discriminate on the basis of sexual orientation or gender identity, and that their workplace posters are up to date, to reflect this requirement.
(3) For Federal/State Tax & ERISA Benefits, Employers Must Be Inclusive of Same-Sex Marriages
On August 29, 2013, the IRS issued Revenue Ruling 2013-17, adopting a broader interpretation of what constitutes “marriage.” As of September 16, 2013, the IRS Revenue Ruling says for federal tax purposes, including the Employee Retirement Income Security Act of 1974 (“ERISA”), recognition of a couple’s “marriage” will be consistent with what is permitted under the state’s laws where they wed; so for federal purposes, if the state’s law where the couple wed recognizes a same-sex marriage, for federal purposes the “marriage” will also be recognized. However, the IRS Ruling also clarified that for federal purposes, it would not recognize “civil unions,” regardless of whether an applicable state law permitted the sanctioning of the “civil union.”
Per the Court’s decision in Obergefell, though, employers should note and look for possible changes, because the IRS Revenue Ruling will likely be expanded to include all employees’ same-sex marriages, regardless of whether the state law where they wed recognizes such a marriage.
For Hawai’i employers, the IRS Revenue Ruling has important implications with respect to managing employees’ taxable benefits-employers must recognize employees’ same-sex marriages, and their respective spouses, for such purposes. For example, an employer should not consider benefits provided to an employee’s same-sex spouse as taxable income to the employee, and employees should be permitted to pay for their same-sex spouse’s benefits on a pre-tax basis, if applicable.
Similarly, for Hawai’i tax law purposes, employers should also recognize an employee’s same-sex spouse, for any such purposes.
(4) Employers Must Revise Employee Benefits Plans to Be Inclusive of Same-Sex Marriages
Per federal and state law, employers should closely review other employee benefit plans to determine whether they are inclusive of the new definition of “marriage” and “spouse.” This definition impacts nearly every facet of an employers’ employee benefit plan administration, including:
- Qualified Retirement Plans – For purposes of a Qualified Retirement Plan, under qualified plan distribution options and any required spousal consent rules there under, an employee’s “spouse” now includes a same-sex spouse.
- COBRA – Under COBRA, after a loss of coverage due to a qualifying event, an employee’s same-sex spouse must be given the opportunity to elect to continue their group health plan coverage. Additionally, under COBRA, an employee’s same-sex spouse can be considered a “qualified beneficiary,” which means that he/she must be provided formal COBRA notices and the opportunity to continue health coverage after a COBRA “qualifying event.”
- HIPAA – The special enrollment rules for newly acquired employees’ spouses now extend to new same-sex spouses. It remains unclear whether the Supreme Court’s decisions (or Revenue Ruling 2013-17) should be considered a special enrollment event.
- Flexible Spending Accounts (“FSA’s) – Both employee health FSA’s and dependent care FSA’s will use the new definition of an employee “spouse” to determine whether expenses are reimbursable from an employee’s account.
- Health Savings Accounts (“HAS’s”) – Under a Health Savings Account, the annual contribution limits for married couples now apply to same-sex couples.
(5) Under FMLA and HFLA, Employers Should Grant Employees Leave to Tend to Same-Sex Spouses
The Federal DOL issued a Final Rule on February 25, 2015 revising the regulatory definition of “spouse” under the Family and Medical Leave Act of 1993 (“FMLA”). FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons.
Effective March 27, 2015, the Final Rule amends the regulatory definition of “spouse” under the FMLA so that eligible employees in same-sex marriages will be able to take FMLA leave to care for their spouse, regardless of where they live. Essentially, under the FMLA regulations, the DOL moved from a “state of residence” rule to a “place of celebration” rule for the definition of “spouse.” That is, the Final Rule looks to the law of the place in which the employee’s marriage was entered into, as opposed to the law of the state in which the employee resides.
However, as with the IRS Revenue Ruling, employers should monitor the DOL’s Final Rule here, because it will likely be expanded to include all employees’ same-sex spouses, regardless of the applicable state law where the celebrated their marriage.
Under the Hawai’i Family and Medical Leave, the regulatory definition for “spouse” also now includes an employee’s same-sex spouse.
(6) Employers Should Not Segregate Facilities for LGBT Employees &, If Facilities Permit, Employers Should Consider Gender-Neutral Restrooms
Finally, although not related to the Court’s decisions on marriage equality and subsequent developments under federal and state law, the federal government has also provided employers some guidance on managing LGBT employees with respect to facilities. President’s Obama’s Executive Order 13672 and the subsequent OFFCP Directive directed employers to refrain from segregating work facilities, based on employees’ sexual orientation or gender identity. And, on June 8, 2015, the Federal DOL issued guidance for employers on what are best practices for accommodating employees who are transgender with respect to providing access to restrooms. Where an employer’s facilities permit, employers are not required to but should consider providing employees either (1) use of multiple-occupant, gender-neutral restrooms with lockable single occupant stalls, or (2) single-occupancy gender-neutral facilities.