Gay marriage ruling leaves U.S. firms unclear on spousal benefits

Reuters News
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Posted: Jul 16, 2015 7:05 AM

By Kylie Gumpert

NEW YORK (Reuters) - The Supreme Court was definitive in its decision to legalize gay marriage nationwide, but what is far from clear is whether U.S. companies must offer corporate benefits to same-sex spouses.

Many large and mid-sized employers are self-insured, which means their benefits are governed by a 1974 act that has no language on preventing discrimination based on sexual orientation.

The Employee Retirement Income Security Act allows companies to bypass differing state laws that complicate healthcare options for employees spread out across the country.

    In a Reuters survey of 60 large U.S. employers, nearly half said they were already providing benefits to same-sex spouses before the Supreme Court ruling last month, including 13 that are based in states where gay marriage was illegal.

While benefits experts see many more companies moving in that direction, the lack of legal clarity could lead to some notable holdouts that will test the spirit of the gay marriage ruling.

    “This is a great decision by the Supreme Court, but people are wrong in thinking that the struggle is over and that nothing is left in the ability to discriminate, because it’s still there,” said Robert Louis, a senior partner who represents plaintiffs at Saul Ewing LLP in Philadelphia on employee benefits issues.

While ERISA requires companies to comply with federal law that protects employees against discrimination based on race, gender or religion, there is no language preventing discrimination based on sexual orientation. The act itself does not specifically address same-sex marriage.

“ERISA was enacted in the 1970s, and I don’t think it contemplated anything of that nature,” said Annette Guarisco Fildes, chief executive of the ERISA Industry Committee, which represents self-insured employers. She expects many self-insured employers will ultimately provide the same benefits to same-sex spouses as they do for heterosexual couples.

The U.S. Equal Employment Opportunity Commission has taken on cases involving discrimination against gay or transgender employees, but legal advocates say it needs to update anti-discrimination rules to include sexual orientation. The agency would not comment on its future plans.

“We clearly need a federal law that will protect sexual orientation claims so that the federal courts won’t have to jump through hoops to do that,” said Randolph McLaughlin, an attorney at Newman Ferrera LLP. Last year, he represented plaintiffs in a case they ultimately lost, after a judge ruled that ERISA does not prohibit self-insured employers from excluding same-sex spouses in their benefit policies.

Some plaintiffs are trying to win by suing employers for violating existing laws against gender discrimination. One such case was filed on Tuesday against Wal-Mart Stores Inc <WMT.N> for its previous policy excluding same-sex spouses from health coverage. Wal-Mart, the largest private U.S. employer, began offering health insurance to same-sex spouses last year. [ID: nL2N0ZU0ZJ]

  

STAYING COMPETITIVE

Executives from companies that provide benefits to gay spouses say their policy is an important recruiting tool, and also not that expensive.

“We want to make sure that we’re providing access to as many individuals and their families as possible,” said Brian Nick, director of national media relations at Walmart, referring to the company’s decision to make the benefits available to same-sex spouses.

    “If we want to attract talent pools, we need to remain open and inclusive,” said Jamal Kheiry, communications manager for Marathon Petroleum Corp <MPC.N> headquartered in Ohio, where gay marriage was illegal until the Supreme Court ruling. The company began offering same-sex spousal benefits after it first became legal for couples to wed in individual U.S. states.

Some employment experts expect a significant increase in the number of self-insured employers that decide to offer same-sex spousal benefits rather than risk being sued.

    “The administrative nightmare to applying this exception would be worse than granting,” said Julius Turman, a partner at San Francisco law firm Reed Smith LLP who represents employers in discrimination claims and other matters.

Others say the future of company policy is less clear-cut.

Jonathan Scruggs, a lawyer with Alliance Defending Freedom, a conservative Christian nonprofit group, sees ERISA allowing companies with conservative views on marriage to continue excluding same-sex couples from their benefits plans. That would change if ERISA and other federal law is amended to include specific protection for sexual orientation.

    “We have heard initial reservations and disagreement, but have yet to see definitive action from employers on how to ... avoid or minimize the impact of the Supreme Court ruling on their benefits and corporate philosophy,” said Sandy Ageloff, U.S. West division leader at Towers Watson in Los Angeles, in an email.

    Companies that do not want to offer benefits to same-sex couples could reduce or eliminate benefits for all employee spouses, add a surcharge for spouses that could receive benefits from their own employer, or object on religious grounds.

In a highly contentious case that sparked demonstrations on both sides, privately held craft-store chain Hobby Lobby successfully argued before the Supreme Court in 2014 that the Religious Freedom Restoration Act exempted it from covering certain contraceptives for employees under President Barack Obama’s healthcare law.

    Hobby Lobby said in a statement that it is evaluating the gay marriage ruling and what it means for the company.

(Editing by Michele Gershberg and Matthew Lewis)