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Employers with California Operations Should Heed Impact of Same-Sex Marriage Decision

    Client Alerts
  • June 06, 2008

In a widely publicized decision in May, the California Supreme Court became the second U.S. state after Massachusetts to bestow full marriage rights on same-sex couples. While organizations opposed to this concept will attempt to reverse the decision through ballot initiative, employers with California operations cannot ignore the impact of this decision on their benefits plans.

Whether same-sex spouses of benefit plan participants must be included as beneficiaries under such plans will depend on whether the plans are governed under federal or state law. The federal Defense of Marriage Act (DOMA) preempts state laws that could be interpreted to extend spousal rights under federal laws to same-sex couples. For example, ERISA-covered welfare benefit plans could not be required to count a same-sex spouse as a “spouse” for plan purposes, certain tax benefits from group medical plans could not be extended to same-sex spouses (unless they otherwise meet the definition of a dependent under the tax rules), and certain rights granted to spouses under retirement plans would not be extended to same-sex spouses. Similarly, COBRA benefits need not be offered to same-sex spouses.

Non-ERISA benefits arising under California law, including those granted through employer policy will need to take same-sex spouses into effect. For example, under California’s family leave law, the illness of a same-sex spouse would be an eligible ground for leave (the law already provides such leave rights for registered domestic partners). Failure to allow an employee to bring a same-sex spouse to a business function involving other spouses could give rise to a sexual orientation discrimination claim.

What happens if an employee who is not a California resident obtains a same-sex marriage in that state (or in Massachusetts), and requests that the employer in a different state recognize it? Outside of New York (whose governor announced that such marriages will be recognized by state agencies), DOMA would not require the employer in a different state to recognize the marriage.

Many employers outside of these two states offer some benefits to domestic partners. With the exception of tax and other benefits restricted to traditional spouses under DOMA, employers could voluntarily expand spousal benefits to same-sex spouses. Others may decide to treat such spouses under their existing domestic partner policies. Employers inside and outside California should revisit their policies, handbooks, plan descriptions, and other benefits documents to make certain that the definition of spouse meets applicable law and their own expectations.