The U. S. Supreme Court has declared unconstitutional a portion of the Defense of Marriage Act (DOMA), which had established a federal definition of marriage as a legal union only between one man and one woman. The Court’s 5-4 vote in U.S. v. Windsor will reach well beyond the case of Edith Windsor, a New York widow, who was sent a $363,000 estate tax bill by the Internal Revenue Service after her wife died in 2009. The Windsor decision means that same-sex couples who are legally married now must be treated the same under federal law as married opposite-sex couples.
How will this decision impact employers? Here’s our initial take:
Most notably, the Windsor decision will impact employers in the application of the Family and Medical Leave Act (FMLA). In striking down a significant part of DOMA, the Supreme Court cleared the way for each state to decide its own definition of “spouse.” This, in turn, will impact employee rights under federal law.
For states that recognize same-sex marriage: If an employee is married to a same-sex partner and also lives in a state that recognizes same-sex marriage, the employee will be entitled to take FMLA leave to care for his/her spouse who is suffering from a serious health condition, for military caregiver leave, or to take leave for a qualifying exigency when a same-sex spouse called to active duty in a foreign country in the military.
For states that do not recognize same-sex marriage: For employees who live in a state that does not recognize same-sex marriages some questions remain unanswered. As an initial matter, the FMLA regulations look to the employee’s “place of domicile” (state of primary residence) to determine whether a person is a spouse for purposes of FMLA. Therefore, even if the employee formerly lived or was married in a state that recognized the same-sex marriage, he/she is unlikely to be considered a spouse in the “new” state for purposes of FMLA if the state does not recognize the marriage. This is no small issue, since 30+ states currently do not recognize same-sex marriage and some don’t go all the way (e.g., Illinois, which recognizes same-sex unions, not marriages). Surely, some might argue that the United States Constitution requires other states to recognize the marriage; however, this issue is far from settled.
On this issue, employers clearly need some help from the Department of Labor. Might the DOL draft regulations on how employers administer the FMLA in situations where the employee’s spouse is not recognized under state law? If so, we could see the DOL give life to concepts such as a “State of Celebration” rule, in which a spousal status is determined based on the law of the State where the employee got married. Without more guidance, however, it still is too early to tell where this question is heading.
The Windsor decision also will affect employers in the application of other federal laws (e.g., employee benefits, taxes, social security, citizenship, etc.).
Employee benefits: Same-sex spouses are likely to be treated equally when it comes to employee benefits, including retirement benefits from 401(k) plans and pension plans. The repercussions of the Windsor decision may have a far and wide reach in the employee benefits arena impacting entitlement to death benefits, consent rules regarding designation of beneficiaries, entitlement to surviving spouse annuities, etc.
Affordable Care Act and COBRA: The Court’s decision will impact how the Affordable Care Act is carried out, though many details remain unclear. For example, the impact could reach children of a same-sex spouse who could now fall within the definition of dependent of a covered employee, becoming entitled to coverage until age 26. Moreover, same-sex spouses may be eligible for continuation of health insurance benefits (COBRA) even though the spouse may lose his/her job.
Taxes: Same-sex spouses likely will share many federal benefits and may be able to manage tax liability in a way that opposite sex spouses typically do. For instance, an inheritance, which was taxed under DOMA, will no longer be taxed for a same sex spouse (this was the factual scenario at issue in the decision). Income taxes, payroll taxes, health insurance benefits, and tax reporting may also be impacted going forward. At this time it is not possible to determine the extent to which DOMA will impact taxation for same-sex spouses. Also, whether the impact will be retroactive is yet to be determined. As mentioned, the IRS is expected to issue guidance clarifying the impact of DOMA on taxation. It is possible that employers may be able to seek FICA tax refunds (for the employer portion of FICA) on previously imputed income on account of same-sex partner health benefits.
Social security benefits: The Court’s decision also paves the way for social security survivor benefits to continue onto a legally married same-sex partner.
: According to NBC News, some 28,000 same-sex spouses
who are American citizens will now be able to sponsor their non-citizen spouses for U.S. visas and can qualify for immigration measures toward citizenship.
Shortly after the Windsor decision was handed down, President Obama directed his administration to review relevant federal statutes to determine the need for additional guidance on statutes impacted by the Court’s decision, and the IRS stated that it plans to provide revised guidance in the near future.