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3(c)

ClientAdvisory
July 2013

Supreme Court Decisions Change Legal Landscape for Employers
Changes to Employee Benefits after the DOMA Ruling On July 25, in United States v. Windsor, the United States Supreme Court declared unconstitutional a key provision of the federal Defense of Marriage Act (DOMA), paving the way for legally married gay and lesbian couples to take advantage of tax breaks, pension rights, and other federal benefits previously available only to married heterosexual couples. The DOMA provision that was struck down had previously mandated that federal statutes only acknowledge marriages between a man and a woman. While the Windsor decision does not establish a federal right of same sex couples to marry, it does compel the federal government to respect individual states’ own determinations regarding same-sex marriages. Consequently, the decision most immediately effects residents of jurisdictions1 that already recognize those marriages The benefits areas affected by Windsor include: open enrollment periods for health plans, continuation of benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA), eligibility for leave under the Family Medical Leave Act, taxation of spousal health benefits, eligibility for spousal
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retirement benefits, and surviving spousal social security benefits. For employers in states where samesex couples may legally marry (such as Massachusetts), the biggest impact of the decision may concern health insurance and similar benefits plans that are offered to the spouses of employees. These plans are generally governed by a federal law called ERISA, and DOMA gave employers the ability to exclude same-sex couples from coverage. In light of the Windsor decision, however, plans available to the spouses of beneficiaries should now cover all legal spouses, regardless of gender. A similar analysis applies regarding health insurance continuation benefits offered to employees and former employees under the federal COBRA law. Legal spouses of those individuals now have the same rights to continue their health insurance coverage regardless of gender. Under both ERISA and COBRA, the law did not compel employers to deny coverage to gay spouses. However, prior to Windsor, an employer in a state recognizing same sex marriage always had that option. That is no longer the case. From the employees’ perspective, these changes may also have tax ramifications – even if their employers elected not to distinguish between same-sex and different-sex couples. For example, prior to Windsor, the spouse of an employee in a different-sex marriage could be entitled to health benefits
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Thirteen states (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington), the District of Columbia and five Native American Tribes have legalized same sex marriage. The laws in Rhode Island and Minnesota go into effect on August 1, 2013.
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on a tax free basis, while the spouse of an employee in a same-sex marriage would have to pay federal income tax on those same benefits. That is no longer true, thereby reconciling the state and federal tax treatment of such benefits. Note that the lack of uniformity between states can give rise to complex “choice of law” issues that leave some questions yet unanswered. That will be particularly true for multi-state employers and for same-sex couples who change states of residence to where their marriage is not legally recognized. So while the Windsor decision does move toward greater consistency between state and federal law in most circumstances, some new questions will arise which only future litigation or legislative battles can resolve. *** Employee Discrimination Claims Will Be Easier to Defend Following the Nassar and Vance Decisions Two other decisions issued last week by the Supreme Court – Vance v. Ball State University and University of Texas Southwestern Medical Center v. Nassar – help clarify standards for employers facing discrimination and retaliation suits. As a general matter, the law imposes a more rigorous standard for plaintiffs trying to establish discrimination by a coworker than it does for discrimination by a supervisor. In Vance, the Court found that an employee is a “supervisor” only when the employer has empowered that worker “to take tangible employment actions against the victim,” including hiring, firing, failing to promote, reassignment, or some other action causing a significant change in employment status. If the individual who allegedly committed harassment is merely a coworker, the employer will be liable only if it was negligent in controlling
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the working conditions. An employer will still be exposed to liability if it knew or should have known about the harassment. In Nassar, the Court held that an employee/ plaintiff in a Title VII retaliation case must prove that employer retaliation was the determining factor, not merely a motivating factor, in its decision to take adverse action against the complaining employee. This means that an employee must establish that “but-for” his or her making the complaint, he or she would not have been terminated. Under the standard as defined in Nassar, if an employer can establish a record of poor performance regarding a complaining employee, this will go a long way to insulate the employer from liability for a retaliation claim. What these decisions do establish is that employers need to maintain and follow good workplace policies. Employers should have clear policies that prohibit employee harassment and discrimination and establishing (and following) internal complaint procedures. Employers should also have established codes of conduct and regular reporting and evaluating of employees. If you would like to further discuss the ramifications of these cases, or employment law issues generally, please contact Joe Laferrera at Joe.Laferrera@Gesmer.com or Nancy Cremins at Nancy.Cremins@Gesmer.com, or call them at (617) 350-6800.

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