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HR and the Same-Sex Marriage Ruling

After last Friday's U.S. Supreme Court ruling that made marriage a fundamental right for same-sex couples, HR and employment-law experts weigh in about how HR may benefit from administrative improvements as well as face new challenges.

Tuesday, June 30, 2015
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In short, the news about the U.S. Supreme Court's 5-4 decision last week in Obergefell v. Hodges is generally good for employees and employers alike.

"The biggest thing we're seeing from the employer perspective is that this will be a very welcome administrative change," says Sandy Ageloff, Los Angeles-based senior consultant and West Division leader for Towers Watson's health and group benefits.

"This national ruling will really simplify the complexity that employers face today with the ever-changing map of state-by-state same-sex marriage laws," she says. "It will make the lives of those in the HR space a little bit easier."

Until now, larger companies with nationwide operations have had to accommodate a checkerboard of different states' marriage definitions for a few years now. Geographically centralized companies operating in states that haven't recognized same-sex marriage will be "starting from ground zero, in terms of making all the changes necessary" to accommodate the new marriage recognition, a process that she says may take some time to analyze and implement.

"Should they expand their coverage [to include gay and lesbian spouses]? This will be a big question that these employers will have to look at," says J.D. Piro, senior vice president and national practice leader in Aon Hewitt's health law group, based in Norwalk, Conn. The risks involved in not providing such benefits, he says, could include state-based discrimination lawsuits as well as the need to cover same-sex couples to comply with state and local contract requirements.

Another fly in the ointment may be that some employers that have recognized domestic partnerships may or may not change their benefits policies, now that both opposite-sex and same-sex couples can marry. Nearly 77 percent of employers offer domestic partners healthcare coverage, according to Aon, a practice that started in the 1990s to put same-sex couples on the same benefits footing as married opposite-sex couples.

Nonnie Shivers, an attorney and shareholder with the labor and employment law firm of Ogletree, Deakins, Nash, Smoak & Stewart, based in Phoenix, warns that eliminating domestic partnership coverage to further simplify benefits administration may not be in a company's best interest.

"Domestic partnership benefits are a recruitment and retention tool offered to gay employees because they didn't have the right to marry," says Shivers. "Not all gays and lesbians who have the right to do so will want to enter into the institution of marriage," she says, adding that some may not marry because of economic, social or even personal reasons.

"Every employer is going to evaluate their domestic-partner benefit under the context of this ruling and determine if it's needed based on the needs of their workforce," says Piro. "The question they'll be considering is whether it is a benefit that is valued by their employees. Some employers may decide to retain the benefit, while others do not."

The Supreme Court decision will extend into state laws that concern married couples, says Michael Droke, a Seattle-based attorney and partner at Dorsey and Whitney's labor and employment division.

"State-law rights that apply to married couples will now also apply to same-sex marriages, regardless of the laws in that particular state," he says. "These include those laws covering benefits, leaves of absence, property rights, informational rights, and the like."

He says the current ruling will also apply a new definition of "spouse" for state-based family leave programs. This brings the states in step with the inclusion of same-sex spouses under the federal Family and Medical Leave Act, the result of the 2013 United States v. Windsor Supreme Court decision that expanded the federal definition of spouse to include same-sex partners.

"The decision ends the discussion of whether same-sex marriage rights should apply in jurisdictions that had previously been [available] to them," Droke says. "Employers can have national policies on leaves of absence and similar issues without being required to justify the reasoning for these national policies with local management."

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There is one economic benefit to the ruling for employees and employers alike, says Piro. With legal recognition of marriage, the designation of "imputed income" will probably be discontinued. That means employees with partner benefits will no longer have the value of their benefits included as taxable income and employers will no longer have to pay additional payroll taxes such as Social Security and unemployment insurance tax on the domestic partner's benefits value.

For companies that haven't yet had to tackle the language change inherent in same-sex marriages, there will be a lot of editing and proofreading required while updating policy manuals, employee handbooks, beneficiary designation forms, healthcare open enrollment forms, summary plan descriptions and a host of other documents that list spouses as "husband and wife" or by gender. The change will also mean offering same-sex couples access to additional benefits such as tuition reimbursement and dependent care, among other things.

Finally, there will be some initial confusion and delays around the administrative focus as to what legal documentation the company will require "around the event of marriage," Ageloff says.

Resolution of this question will certainly depend on how fast marriage license offices in counties around the country update their own documentation, she says, and what companies choose to require as certification of a same-sex marriage.

How companies respond to this change goes beyond interpreting the new law of the land, says Shivers.

"The legality of it does not dictate everything," she says. "It gives you good guidance that we absolutely want to comply and be in a compliant culture.

"However," she says, "sometimes cultural beliefs and the culture of the company dictate not what we have to do, but what we want to do, after we comply with our minimal duties. It's always good to think globally about what the best decisions are in this respect."

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