Supreme Court Holds Employers Cannot Discriminate Against LGBTQ Employees: Are Your Employee Benefit Plans Up to Snuff?

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On June 15, 2020, the United States Supreme Court issued a landmark opinion in Bostock v. Clayton County Georgia. At issue in Bostock was whether an employer could fire an employee for being gay or transgender without violating Title VII of the Civil Rights Act of 1964 (“Title VII”). Title VII makes it unlawful “for an employer to fail or refuse to hire or discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.”

In a landmark 6-3 opinion, delivered by Justice Gorsuch, the Supreme Court held that “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”

Employee Benefit Plan Implications

Although Bostock specifically addresses the hiring and firing of LGBTQ employees, the holding also has wide-ranging employee benefit implications. Under Title VII, an employer cannot discriminate when providing “fringe benefits.” Applicable regulations define “fringe benefits” as including “medical, hospital, accident, life insurance and retirement plans; profit-sharing and bonus plans; leave; and other terms, conditions, and privileges of employment.”

Now that the Supreme Court has ruled that the term “sex” under Title VII includes sexual orientation and gender identity, employers should consider assessing whether their employee benefit plans discriminate against their LGBTQ employees. This could happen, for example, when a health or welfare plan:

  1. Provides coverage to opposite-sex spouses, but not same-sex spouses, or vice versa;
  2. Provides coverage to same-sex domestic partners, but not opposite-sex domestic partners, or vice versa;
  3. Denies coverage to transgender employees;
  4. Charges transgender employees a higher premium for coverage;
  5. Does not provide medically necessary mental health benefits, hormone therapy, and some level of gender-affirmation surgical benefits for transgender employees;
  6. Limits sex-specific care based on an individual’s sex assigned at birth, gender identity, or recorded gender (e.g., not covering a hysterectomy for a transgender man or a prostate exam for a transgender woman);
  7. Does not cover family planning benefits for LGBTQ employees if family planning benefits are covered for opposite-sex couples; and
  8. Does not provide disability benefits for short-term or long-term disability due to gender dysphoria or gender-affirmation surgeries.

The Bostock ruling takes effect immediately, so employers might need to move fast to implement appropriate changes to provide equal benefits.

Section 1557 Final Regulations

The United States Department of Health and Human Services (“HHS”) released final regulations under Section 1557 of the Affordable Care Act on June 12 (the “Final Regulations”), only three days before the Court’s ruling in Bostock. The Final Regulations, published in the Federal Register on June 19, 2020, can be found here and a Fact Sheet describing the rules can be found here.

As we previously reported, here, the Final Regulations roll back an Obama-era interpretation of the non-discrimination provisions of the Affordable Care Act. The Final Regulations repeal the rules under Section 1557 covering nondiscrimination based on sexual orientation and gender identity in health services. Effectively, the Final Regulations permit the categorical refusal of health coverage to transgender participants and the denial of treatment inconsistent with self-selected gender identity.

In revising its interpretation of Section 1557, HHS purports to rely on the “plain meaning” of “sex” to mean biological sex only, and not sexual orientation or gender identity. HHS asserts this interpretation is consistent with the interpretation of Title IX and other applicable federal statutes. Bostock makes clear that HHS’ interpretation in the Final Regulations is incorrect.

The Final Regulations are not directly impacted by the Court’s ruling in Bostock. Nevertheless, it is likely they will be challenged citing Bostock as evidence that HHS wrongly concluded that “sex” for purposes of Section 1557 does not include sexual orientation or gender identity. While it is unlikely that HHS will withdraw the Final Regulations, it will be interesting to see whether the Final Regulations are enjoined pending litigation. Absent an injunction or other revision, the Final Regulations are set to take effect 60 days after publication in the Federal Register.

Even though the Final Regulations roll back important protections for transgender employees, the Bostock decision to a significant degree negates the Trump Administration’s changes to Section 1557 because employees can now challenge transgender benefit exclusions under Title VII, making the protections previously provided under Section 1557 far less important. Accordingly, employers who amended their health plans to provide transgender benefits in compliance with Section 1557 will likely conclude after Bostock that Title VII requires a similar result, and subsequently not roll back benefits.

Other Employer Takeaways

Bostock will also have significant implications for employers that are subject to Title VII as noted in our Labor & Employment Group’s June 16 Legal Alert Supreme Court Confirms that LGBTQ Employees are Protected under Title VII.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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