Ideas from the Front
Same-Sex Benefit Bind
Federal Laws Can Complicate Corporate Efforts to Equalize Coverage
Posted Sep 29, 2005 2:15 AM CDT
By Martha Neil
When it comes to employment benefits, good intentions often aren’t enough.
The lack of a legal equivalent to marriage for gay and lesbian couples isn’t just a concern for the individuals involved, experts say. Employers who want to diversify their work forces and distinguish themselves from competitors by offering the same benefits to all employees are discovering it can be difficult, expensive and even impossible to equalize coverage under current legal standards.
Men and women who are married qualify for some 1,500 benefits in the workplace and elsewhere, of which 1,100 are conferred under federal laws such as those governing retirement plans, medical leave and Social Security, says Karen Doering, a lawyer with the National Center for Lesbian Rights in Tampa, Fla.
In contrast, same-sex couples do not qualify for any of the federally granted benefits, and they can receive only 400 or so benefits under the laws of the few states that currently recognize what she describes as “marriage light”—civil unions or domestic partnerships for gay and lesbian couples. That’s where many employers are stepping in—and discovering it’s not so easy.
Take medical insurance: When a company offers medical insurance to an employee, it’s common for that employee’s spouse to be covered under the policy, too. Even if a company offers that same opportunity to same-sex couples, there is one big difference: The domestic partner is required to pay taxes on his or her medical benefits, whereas a spouse is not, Doering says.
And when it comes to pension benefits, it’s all but impossible to achieve uniformity. “There are no protections for same-sex partners in pension plans,” says Howard Shapiro of New Orleans, immediate-past chair of the ABA Labor and Employment Section.
When an employee or former employee dies, his or her surviving spouse can generally count on receiving any benefit provided for under the pension plan, including both traditional pensions and retirement plans like 401(k)s and individual retirement accounts, he explains. If an employer wants to offer the same type of pension benefit to a same-sex couple, however, the 1996 Defense of Marriage Act stands in the way.
Because the DOMA says marriage must be between a man and a woman, “it would prohibit you—under federal law, which controls pension plans—from defining a spouse as somebody who is not of the opposite sex,” Shapiro says. “That’s why you can’t have a same-sex person inheriting as a spouse.”
If the employee is not married, it may be possible to name a same sex partner as an heir by filling out the proper forms, Shapiro says. But if the employee doesn’t act affirmatively to obtain pension benefits for his or her partner, the partner is out of luck.
Disadvantages for Employers
Employees are not the only ones who can be adversely affected. An employer that treats spouses and same-sex partners equally under the Family and Medical Leave Act, for example, can find itself at a disadvantage, explains Donna Hughes Latta, associate general counsel for Circuit City Stores Inc. in Richmond, Va. The FMLA says an employer must grant an employee up to 12 weeks of unpaid leave in a 12-month period to recuperate from illness or care for an ailing spouse (not a same-sex partner), child, parent, newborn or newly adopted child.
A company can voluntarily allow a worker to take up to 12 weeks to care for a seriously ill domestic partner, even though that is not required under the FMLA. But if that same employee then gets sick during the same 12 month period, it can put the employer in a bind because the employee is now entitled to up to an additional 12 weeks of unpaid leave.
Had a six-week leave been granted to care for a husband or wife, however, the employer would only have to grant another six weeks of unpaid leave for the employee’s own illness, since the earlier FMLA leave would be counted toward the 12-week total. There is no way an employer can protect itself against such “stacking” of voluntarily granted and FMLA leave by such an employee, Latta says.
While many employers might nonetheless decide to go ahead and offer voluntary leave to employees caring for a same-sex partner, Latta says, companies need to be aware of such potential pitfalls before offering benefits.
“You wouldn’t want to implement a policy like that without considering what this really means,” she says.
Companies looking to level the benefits playing field for heterosexual and same-sex couples also face “tons of tax consequences” when medical and retirement savings benefits are offered under plans that do not fall within the guidelines of the Employee Retirement Income Security Act of 1974, Doering says.
Federal law generally encourages employers to provide benefits to employees, their spouses and dependents by offering significant tax advantages for doing so, explains Shapiro.
But same-sex domestic partners often cannot qualify as spouses under federal tax law, he points out. So while many of the same benefits may still be offered by employers to married employees and same-sex partners, this means an employer won’t receive favorable tax treatment for offering these benefits for unmarried partners.
Despite these issues, surveys show many major corporations are still willing to go the extra mile. Latta cites a recent survey, for example, that found nearly half of Fortune 500 companies are offering health care benefits to employees’ domestic partners, meaning the question of equalizing benefits has turned from one of “whether” to one of “how.”
Precedents not In Place
Case law is still developing on how the federal defense of Marriage Act and so-called mini-DOMAs in some 40 states should be applied to benefits-related statutes. Tension exists between these statutes and laws in some states, counties and municipalities prohibiting discrimination on the basis of sexual orientation. That presents unique challenges, especially for multistate and multinational companies that want to adopt one uniform policy.
When contemplating amendments to benefits and policies, Latta advises employers to first identify their corporate philosophies and goals. “Put goals in place, and then domestic partnership benefits may be something that would help them further those goals, but they’ve got to identify those goals first,” she says. “Because, once you start providing those benefits, you don’t want to be in a situation where you have to roll anything back.”
Particularly for national and international employers, Latta says, “the issue is predicting how the law might evolve and coming up with something that you hopefully won’t have to change later.”
Free resources are available to companies interested in expanding their benefits programs. A Web site maintained by Human Rights Campaign, for instance, offers links to related laws, as well as a report, titled “State of the Workplace 2004,” that discusses what companies are doing to offer benefits to same sex couples, among other information.
The National Center for Lesbian Rights also offers free services to companies interested in expanding their benefits programs. Among the offerings are sample written policies and references to statistical and actuarial information that may be needed to implement new benefits programs.
“We’ll be happy to answer whatever questions they have, and provide them with whatever resources we can to help them offer the kind of policies they would like to offer,” Doering says. (The Web address for the organization is www.nclrights.org; it includes contact information for Doering.)
But it’s not all doom and gloom for companies wishing to offer consistent benefits, Latta says. Such policies improve employee morale and contribute to a company’s ability to stay competitive and attract talent. She also suggests that a resulting perception of fairness may be helpful when it comes to defending or even staving off employment actions.
While she says it is unlikely that an employee would win a discrimination suit brought because an employer does not provide comparable benefits to same-sex and married couples, benefit inequities could “invite claims that you would have to defend at the company’s expense.”
An even-steven benefits policy could also save a company time and trouble in the future. Although marriages and civil unions between same-sex partners are not legally recognized in most American states, they are gaining ground elsewhere. Canada, Great Britain and Spain, for instance, have all enacted nationwide legislation recognizing same-sex domestic partnerships.
It won’t be too long before the U.S. follows their lead, predicts Doering. “I think, a decade from now, workplaces will look very, very different than they do today. I think we’ll have domestic partnership of some sort, some sort of nonmarital relationship recognition.” And, by that time, she says, “I think companies that do not have these sorts of benefits policies will be the exception. Almost every company will have them.”