Recent developments and their impact on the workplace

By G. Phillip Shuler

Louisiana voters will soon vote on a Constitutional Amendment that would ban same-gender marriage. What are the implications of this change in the social and legal fabric of our society to your workplaces?

First, in the area of employee benefits law, federal law (ERISA) preempts all state laws regulating or relating to an ERISA established employee benefit plan. Federal law does not recognize same gender marriage; hence, a state ruling on same gender marriage defining "spouse" to include a person of the same gender cannot mandate how an ERISA plan determines eligibility or benefits.

Specifically, the federal Defense of Marriage Act (DOMA) provides that when the term "marriage" is used in federal law it means only an opposite gender marriage and "spouse" means only an opposite gender husband or wife. Therefore, under federal law, a right or obligation for married couples does not create a right or obligation for same gender couples, even if validly married under some state law.

For example, under an ERISA established retirement plan, a spouse must consent to a named beneficiary for the designation to be effective but a same gender spouse's consent would not be required since DOMA does not include same gender spouses within the definition of spouse in any federal law.

The same result obtains with regard to health insurance. Employees electing dependent coverage may enroll their spouse in an employer provided health care plan without adverse tax consequences because, under Sections 105 and 106 of the Internal Revenue Code (IRC), employees, their spouses, their children and other dependents are not taxed on the value of employer provided coverage in a group health plan.

However, if the spouse is of the same gender the spouse could be taxed on the value of the benefits because DOMA, hence the federal tax laws, does not define him (her) as a spouse. The same would be true of rights given to spouses by COBRA since COBRA is a federal law and would not include same gender spouses within its coverage, even where the employer provides domestic partners benefits to employees with a same gender domestic partner; i.e., COBRA would not create an entitlement to benefits for a same gender spouse.

However, an employer could choose to extend the same right to same gender spouses in its plan. The same analysis would be true of Family Medical Leave Act (FMLA) leave to care for a spouse. Furthermore, for a non-ERISA benefit (e.g., a bereavement policy) or state insurance mandates not preempted by ERISA, state law would govern whether a same gender spouse is entitled to a right or benefit.

Finally, under Code Section 125, employees may make pre-tax contributions under a cafeteria plan for group health plan coverage for themselves, their spouses, their children and other tax code dependents.

The general tax rules described above (no tax on the value of coverage, no tax on the amount of reimbursements, employee pre-tax contributions under a cafeteria plan) apply only to the extent that an employer provided group health plan extends coverage to employees, spouses, children and other tax code dependents. When coverage is provided for same-gender spouses and civil union partners, the general tax rules may not apply.

Based on DOMA, same-gender spouses and civil union partners cannot qualify as "spouses" under federal law. Therefore, if health coverage is provided to an employee's same-gender spouse or civil union partner, favorable federal tax treatment will only be available if the same-gender spouse or civil union partner qualifies as a tax code dependent under the rule in Code Section 152. Under that rule, a same-gender spouse or civil union partner may qualify as an employee's dependent if the following requirements are met:

• the same-gender spouse or civil union partner receives more than 50 percent of his or her financial support in a calendar year from the employer;
  
  
• the same-gender spouse or civil union partner has the employee's home as his or her principal place of residence and is a member of the employee's household; and
  
  
• the relationship between the employee and the same-gender spouse or civil union partner does not violate local law.
  

Based on these three requirements, in particular the 50-percent support test, many same-gender spouses and civil union partners do not qualify as tax code dependents.

As a result, the fair market value of the health plan coverage provided to an employee's non-dependent same-gender spouse or civil union partner frequently must be treated as income to the employee, subject to applicable federal income and employment taxes. In addition, an employee cannot make pre-tax contributions under a cafeteria plan for coverage of a non-dependent same-gender spouse or civil union partner; such contributions must be made on an after-tax basis.

The development of state laws sanctioning same gender marriage also exaggerates the possibility of sexual and religious harassment claims against employers. In Bodett v. Ex Com Inc., 366 F.3d 736 (9th Cir. 2004), a company supervisor criticized a subordinate's homosexuality, asked her to attend church, prayed with her and bought her a ticket to attend a religious conference.

The employee did not sue for religious or sexual harassment but the employer, relying upon its anti-harassment policy, fired the supervisor who did sue claiming, "sometimes there is a higher calling than company policy."

In Peterson v. Hewlett Packard Co., 358 F.3d 1761 (9th Cir. 2004), an employee posted anti-gay posters in response to the company's poster explaining its diversity program. The employee stated he would remove his posters if the company removed its posters. The Company fired the employee who sued claiming religious discrimination and failure to accommodate his religious belief maintaining that his religion compelled him to speak out and expose evil when confronted with sin.

In Wilson v. U.S. West Communications, 58 F.3d 341 (8th Cir. 1985), a catholic employee had made a religious vow to wear an anti-abortion button depicting a fetus and in Chalmers v. Tucon Co. of Richmond, 101 F.2d 1012 (4th Cir. 1996), an employee sent letters to co-workers accusing them of immorality. These examples of litigation risks are apt to multiply when same gender married couples enter the workplace.

Social change, whether legally driven or not, inevitably presents private, and even more so, public employers with legal issues. Same gender marriage will be no different, especially for Louisiana employers if the voters approve the Constitutional Amendment defining marriage as only between a man and a woman.

Questions abound. What will be the status of domestic partners benefits granted by some Louisiana employers, including the City of New Orleans? What will be the status of same gender marriages lawfully performed elsewhere? What will be the liability of an employer who believes, based upon privately held beliefs, that same gender couples in Louisiana are violating state law by living in a "common law" marriage?

These questions have yet to be answered.

Editor's Note: G. Phillip Shuler is a partner in the New Orleans office of Chaffe, McCall, Phillips, Toler & Sarpy.