This morning, the Supreme Court of the United States issued its highly anticipated decision in United States v. Windsor, ruling that the Defense of Marriage Act (DOMA) is unconstitutional on equal protection grounds. With Justice Kennedy writing for the majority in a 5-to-4 decision, the Court ruled that DOMA, which excludes a same-sex partner from the definition of “spouse” as that term is used in federal statutes, is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment of the U.S. Constitution. The case is significant for employers because of its far-reaching impact on their benefits plans and how they are administered. It is also significant for employers based on the expected ripple effect on state, federal, and local law. This morning, the Court also issued its decision in Hollingsworth v. Perry, a case on California’s Proposition 8, which defined marriage to exclude same-sex couples. United States v. Windsor, No. 12-307, Supreme Court of the United States (June 26, 2013).
The DOMA Case
DOMA, which Congress enacted in 1996, defines marriage under federal law as a legal union between one man and one woman as husband and wife. In addition, DOMA clarifies that a “spouse” is a person of the opposite sex who is a husband or a wife. As such, under DOMA, federal law does not recognize same-sex spouses, even if they are recognized under state law. Furthermore, DOMA provides that states are not required to recognize a same-sex marriage that occurs and is legally recognized in another state.
Justice Kennedy found that “[t]he avowed purpose and practical effect” of DOMA “are to impose a disadvantage, a separate status, and so a stigma upon all who enter into same-sex marriages made lawful by the unquestioned authority of the States.” This purpose, the Court ruled, raised “a most serious question under the Constitution’s Fifth Amendment.” Concluding that DOMA’s principal effect is to identify a subset of state-sanctioned marriages and make them unequal, the Court held that DOMA is unconstitutional as a deprivation of the liberty of those individuals protected by the Fifth Amendment. In arriving at this conclusion, the Court considered the additional cost and burden that same-sex couples and their children must bear in obtaining government health care benefits and acquiring health care benefits for their families.
According to a shareholder in the Atlanta office of Ogletree Deakins, “The Windsor decision results in the federal government getting out of the marriage business and leaving the definition of marriage to the states. From the perspective of a benefits attorney, this decision will have many implications on employee benefits plans. For example, it will no longer be the case that tax-preferred benefits can only be provided to an opposite-sex spouse; rather, the applicable state law will govern who is considered a spouse and may therefore include same-sex spouses depending on the state at issue. Employers will need to closely review their plans’ rules relating to spousal benefits in light of Windsor.” For more on the effects of DOMA on employee benefits, see “The Defense of Marriage Act and Employee Benefits—Is the Tide Turning?“
According to a shareholder in the Cleveland office of Ogletree Deakins, “The Windsor decision significantly impacts the benefits and the associated tax rules related to same-sex spouse coverage under employee benefits plans. Employers that sponsor employee benefits plans must now review how spousal benefits are provided under the terms of their plans as well as address the tax issues associated with such benefits in light of the decision. Of key importance is revisiting a plan’s definition of ‘spouse.’ In addition, plan sponsors will now have to consider state laws with respect to marriages and may have administrative challenges in plan operation depending on how broad or narrow they decide to define ‘spouse’ post-decision.” For additional considerations on this decision’s effects on employee benefits plans, see “U.S. Supreme Court Hears DOMA Case—Now What?“
According to Vicki M. Nielsen, of counsel in the Washington, D.C. office of Ogletree Deakins, “The Windsor decision also impacts the determination of whether certain benefit payments, such as employer-paid health care coverage, group-term life insurance premiums, and other fringe benefits, are taxable wages. Under DOMA, benefits that could be provided on a tax-free basis to opposite-sex married couples could not have been provided on a tax-free basis to same-sex married couples unless the same-sex spouse was a tax dependent, as defined for federal income tax purposes—a test that is often not met. These benefits generally constituted taxable wages subject to federal income and employment taxes (commonly referred to as the Federal Insurance Contributions Act (FICA) taxes), as well as state income taxes in a majority of states, when received for the benefit of an employee’s non-dependent same-sex spouse.”
“As a result of the Supreme Court’s ruling,” Nielsen continued, “same-sex spouses should be eligible for benefits that have been provided on a tax-free basis to opposite-sex married couples. Furthermore, employers should no longer be required to impute income on the value of such benefit coverage for employees’ non-dependent same-sex spouses or continue to withhold and pay FICA taxes on the imputed amount. In addition, the value of spousal health and other fringe benefits that were included in wages because of DOMA represents a wage overstatement, presumably entitling employers and employees to FICA tax refunds and entitling employees to income tax refunds.”
The Supreme Court’s decision will likely impact employers in other ways as well. According to Nonnie L. Shivers, a shareholder in the Phoenix office of Ogletree Deakins, “A seismic shift in the cultural and legal landscape of lesbian, gay, bisexual, and transgender (LGBT) rights and protections began well before the Proposition 8 and DOMA challenges arrived at the Supreme Court. Today’s significant and broad ruling striking down DOMA on equal protection grounds will likely spur further expansion of federal, state, and local protections for LGBT individuals, including employees. Employers must keep abreast of these rapidly expanding and changing protections under federal, state, and local laws for not only LGBT individuals, but also protections covering gender identity and gender expression. Employers should expect changes to federal laws impacting the workplace based on today’s rulings, in particular the inclusion of same-sex partners in leave considerations under the Family and Medical Leave Act and potentially sponsorship of same-sex partners for immigration purposes, as well as expanded state and local protections similar to Puerto Rico’s prohibition on employment discrimination based on sexual orientation enacted just weeks ago.”
The Proposition 8 Case
In addition to the Windsor case, this morning the Supreme Court also decided Hollingsworth v. Perry, No. 12-144 on the issue of California’s ballot initiative, Proposition 8, which amended the state constitution to define marriage as a union between a man and a woman. In that case, the Court ruled that the official proponents of the initiative did not have standing to appeal the lower court’s order. Thus the Court vacated the judgment of the Ninth Circuit Court of Appeals and remanded the case with instructions to dismiss the appeal for lack of jurisdiction. Same-sex marriages are anticipated to resume in California in short order.
In reaction to this ruling, Governor Jerry Brown’s administration has notified county officials that the Hollingsworth v. Perry ruling applies statewide—with all 58 counties in California required to issue marriage licenses to same-sex couples once a stay is lifted by the Ninth Circuit. In a statement on the Hollingsworth decision, Governor Brown stated, “After years of struggle, the U.S. Supreme Court today has made same-sex marriage a reality in California. In light of the decision, I have directed the California Department of Public Health to advise the state’s counties that they must begin issuing marriage licenses to same-sex couples in California as soon as the Ninth Circuit confirms the stay is lifted.” As a result, the state Department of Public Health, which oversees marriage licenses, birth certificates, and other such documents, issued a letter to county clerks stating that “same-sex couples will once again be allowed to marry in California” but cautioning clerks not to issue marriage licenses to same-sex couples until the stay is lifted.