A number of recent legal changes will have a notable impact on employee benefits law both now and in the future.  Some of the most significant of those changes are the U.S. Supreme Court’s same-sex marriage decision in Obergefell v. Hodges, and the expansion of Title VII’s discrimination protections to lesbian, gay, bisexual, and transgender (“LGBT”) individuals by the Equal Employment Opportunity Commission (“EEOC”) and some federal courts.

Same-Sex Marriage:  Windsor and Obergefell v. Hodges

In the 2013 Windsor decision, the U.S. Supreme Court ruled that the federal government must recognize same-sex marriages for purposes of federal law.  After Windsor, the federal government issued guidance that it would look to the law of the state where the same-sex couple was married (state of celebration), rather than to the state law where the couple lived (state of residence), in most instances under federal law to determine if the same-sex couple was validly married.  On June 26, 2015, the U.S. Supreme Court held, in a 5-4 decision in Obergefell v. Hodges, that state laws banning same-sex marriage are unconstitutional, and mandated that states both permit same-sex couples to marry and recognize same-sex marriages lawfully performed in other states.  As a result of Obergefell, the “state of celebration” test for determining whether to recognize a same-sex couple’s marriage is no longer relevant under federal law.

No Changes to Domestic Partnership Law

It is important to note that the Obergefell decision did not change federal law with respect to domestic partnerships, and states are not required to recognize domestic partnerships from other states.  Accordingly, individual state law continues to apply with respect to benefits provided to domestic partners and the requirements for such benefits, and domestic partners are not considered to be “married” for any purpose under federal law.

Taxation of Employee Health Benefits and Obergefell’s Impact on Employer Health and Welfare Benefit Plans

Health benefits for same-sex spouses are now non-taxable for federal income tax purposes in all states.

However, a question left unanswered by Obergefell was whether employers are required to provide health and other welfare benefits to an employee’s same-sex spouse if the employer provided benefits to an employee’s opposite-sex spouse.  For governmental plans, Obergefell likely requires governmental employers to treat same-sex and opposite-sex spouses equally when offering spousal benefits under health and welfare benefit plans.  In contrast, the Obergefell decision did not have a direct impact on the health and welfare benefit plans of all private employers.  However, it is possible the Obergefell decision will have an indirect impact on such plans depending upon the following:

  1. The provisions of the private employer benefit plans;
  2. The insured or self-insured status of the private employer benefit plans;
  3. Whether the private employer benefit plans provide ERISA or non-ERISA benefits;
  4. A state’s non-discrimination laws; and
  5. The expansion of Title VII protections (discussed below).

Private employers sponsoring health and welfare benefit plans will want to coordinate with their legal counsel and third party plan administrators to ensure compliance with all applicable state and federal laws.  For example, Obergefell arguably does not require non-governmental employers to provide same-sex spouse benefits in self-funded health and welfare benefit plans, including health flexible savings accounts, even if benefits are provided to opposite-sex spouses.

Title VII Litigation Regarding Sexual Orientation

Even though Obergefell does not necessarily require employers to provide equal benefits to same-sex spouses, it is possible that Title VII does, at least according to recent guidance from the EEOC.  Title VII generally applies to employers with 15 or more employees, and prohibits discrimination on the basis of race, color, religion, sex, or national origin.  Title VII does not explicitly mention sexual orientation, and some courts have held that Title VII does not protect against discrimination in the workplace based on sexual orientation.  Nevertheless, some courts have recently begun to allow sexual orientation discrimination claims to proceed as sex or religious discrimination claims under Title VII.

For example, in Hall v. BNSF Railway Co., employees filed a Title VII claim due to the employer’s failure to cover same-sex spouses under its health plan.  The employer tried to have the case dismissed because Title VII does not provide protection from sexual orientation discrimination, but the court refused to dismiss the case and ruled that the claim could proceed as a sex discrimination claim.

In a more recent case, a Wal-Mart employee filed a class action complaint on behalf of current and former U.S. employees in legal same-sex marriages.  Wal-Mart began offering health benefits to same-sex spouses in January 2014, but prior to that had a national policy against providing such benefits.  Since 2008, the employee had repeatedly attempted to enroll her same-sex spouse in Wal-Mart’s health plan but was denied, and the employee’s same-sex spouse incurred large medical expenses for cancer treatments.  The lawsuit seeks backpay, out-of-pocket medical expenses, and consequential and punitive damages.

In Terveer v. Billington, a 2014 case, a gay employee alleged he was harassed by his supervisor about his appearance and mannerisms and repeatedly lectured about the sinfulness of homosexuality because the employee’s sexual orientation failed to conform to the employer’s religious beliefs and perception of acceptable gender roles.  The court allowed the Title VII claim to proceed based on allegations of religious discrimination and sex discrimination.

EEOC Position on Sex Discrimination Under Title VII and Related Litigation

The EEOC believes that Title VII’s broad prohibition of discrimination “on the basis of…sex” offers protections for LGBT individuals, and has issued a fact sheet for employers regarding litigation of Title VII and LGBT-related litigation, stating that LGBT workers may bring valid sex discrimination claims under Title VII.  The EEOC has instructed its field offices to process and investigate sexual orientation discrimination claims as sex discrimination claims, and the EEOC is actively filing lawsuits against employers on behalf of LGBT individuals who were discriminated against due to their sexual orientation.  Given this position, it is likely that the EEOC would consider an employer whose health plan only covered opposite-sex spouses to be discriminatory under Title VII.

For example, in EEOC v. Boh Bros. Constr. Co. LLC, a 2013 case, a supervisor harassed a construction worker because he was “not manly enough.”  The EEOC investigated and filed a lawsuit, and the jury issued a verdict in favor of the employee.  In a 2015 appeal to the EEOC in Complainant v. Foxx, an air traffic controller alleged that he was denied promotion and harassed because he was gay.  The Federal Aviation Administration (“FAA”) dismissed the employee’s complaint and advised the employee that he could not appeal to the EEOC because Title VII does not apply to claims of sexual orientation discrimination.  The EEOC ruled that sexual orientation discrimination is sex discrimination and sent the case back to the FAA.