Marriage Equality and the FMLA

The Supreme Court’s 2013 ruling in United States v. Windsor created a lot of uncertainty in the area of federal employment benefits. Because the federal government’s definition of marriage as being between one man and one woman was held to be unconstitutional, the decision left open the question of when same-sex couples were eligible for spousal benefits in a variety of contexts. In a move that is sure to simplify issues for multi-state employers, the Department of Labor is taking steps to clarify that issue under the Family & Medical Leave Act (FMLA).

The FMLA

The FMLA is a federal law providing unpaid leave to employees who have worked for a company for at least twelve months, and who worked at least 1,250 hours in the calendar year preceding the request for leave. Leave may be taken for a variety of reasons, including to care for a spouse with a serious health condition. Thus, a key consideration in determining eligibility for FMLA leave is whether the person for whom you intend to care is a “spouse” under applicable law. The term “spouse” used to be defined by the Defense of Marriage Act (DOMA). However, DOMA’s definition of marriage was declared to be unconstitutional under the Windsor decision.

The Reaction to Windsor

In the wake of the Windsor decision, the federal government was forced to come up with a new approach to federal benefits impacting spouses. Different agencies adopted different approaches, and sometimes applied different standards to different laws administered by the same agency. With regard to the FMLA, the U.S. Department of Labor adopted a “state-of-residence” rule, meaning that if a same-sex couple’s marriage was not legal in the state where they lived, they were not entitled to spousal leave under the FMLA. So, for example, in 2003 a same-sex couple living in Pennsylvania, who are employed in Delaware and came to Delaware to get married, would not be entitled to spousal leave benefits under the FMLA because their marriage would not be recognized by the Commonwealth of Pennsylvania (a federal judge in Pennsylvania struck down the state’s ban on same-sex marriage in 2014).

This “state-of-residence” rule imposed a significant administrative burden on employers, who would have to research the legality of a couple’s marriage in their home state as part of the FMLA eligibility analysis. The problems are particularly taxing on the East Coast, where individuals frequently live and work in adjacent states. It also created a problem for businesses with a telecommuting workforce, where the HR professionals could have to familiarize themselves with the laws in all 50 states.

A New Approach

Recognizing the administrative burden imposed on employers, the Department of Labor had revised its approach to spousal benefits under the FMLA, adopting a “place-of-celebration” rule. Under the new rule, so long as the marriage is legal in the location in which it is celebrated, the couple will be considered spouses for purposes of being entitled to leave under the FMLA. This approach reduces the administrative burden on employers, who can now treat same-sex marriages the same way that they treat traditional marriages: by reviewing a copy of the marriage certificate of simply assuming that the marriage is valid.

The new rule is part of a formal rule-making process, and will be issued on February 25, 2015. It becomes effective March 27, 2015.

Bottom Line

The Department of Labor’s revised approach to spousal leave benefits is intended to give same-sex spouses the same access to FMLA leave as all other married partners. It has the added benefit of simplifying the administrative process for employers, which is already onerous under the FMLA. Employers who have already voluntarily extended FMLA leave to all same-sex spouses will not experience any change in the process, and can breathe an added sigh of relief!

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Delaware Mini-COBRA Law Grows

Editor’s Note:  This post was written by Timothy J. Snyder, Esq.  Tim is the Chair of Young Conaway’s Tax, Trusts and Estates, and Employee Benefits Sections. 

Delaware’s Mini-COBRA law, enacted in May 2012, allows qualified individuals who work for employers with fewer than 20 employees to continue their coverage at their own cost, for up to 9 months after termination of coverage.  When it was passed, the legislature provided that the provisions of the Mini-COBRA statute:

shall have no force or effect if the Health Care bill passed by Congress and signed by the President of the United States of America in 2010 is declared unconstitutional by the Supreme Court of the United States of America or the provisions addressed by this Act are preempted by federal law on January 1, 2014, whichever first occurs.<img style="border-bottom: 0px;border-left: 0px;margin: 10px;padding-left: 0px;padding-right: 0px;float: right;border-top: 0px;border-right: 0px;padding-top: 0px" title="health care" border="0" alt="health care" align="right" src="http://www.delaware

I’m not sure what the Legislature meant when they provided that the Mini-COBRA statue would be preempted by federal law on January 1, 2014 but the intent was for the Mini-COBRA law to sunset on that date. However, in a little-publicized move in July of 2013, the legislature eliminated the January 1, 2014 sunset date for Mini-COBRA. They described their rationale for doing so as follows:

The Mini-COBRA Bill was originally passed as a short-term bill that was needed until the provisions of the Patient Protection and Affordable Care Act (“PPACA”) became applicable to states, which was to occur on January 1, 2014. However, because PPACA’s legislation relating to small employer group health policies now permits insurance companies to impose a ninety (90) day waiting period prior to the effective date of coverage, which was not anticipated when the Mini-COBRA Bill was passed, it is desirable to remove the sunset provision of the Mini-COBRA Bill so that the Mini-COBRA Bill remains in the Delaware Code, at least until a point in time when PPACA or other law may no longer permit an insurance company to impose waiting periods.

I initially thought that the Legislature provided for a January 1, 2014 sunset date because that is the date that coverage begins under the healthcare exchanges, which do not impose waiting periods in the typical COBRA scenario.  Thus, an individual terminated from a small employer could purchase his or her coverage for at least the 90-day waiting period from the exchange rather than requiring the former employer’s insurer to provide the mini-COBRA benefit.  In fact, the U.S. Department of Labor, which oversees regular COBRA benefit administration, has issued revised model COBRA Notices that inform the qualified beneficiaries that they can acquire COBRA coverage through their former employer or they can obtain new coverage from the healthcare exchange.

The Immediate Impact of the DOMA Ruling for Delaware Employers

Delaware began issuing marriage licenses to gay couples on July 1, 2013, less than a week after the U.S. Supreme Court’s decision striking down the Defense of Marriage Act (DOMA). Delaware will no longer perform civil unions pursuant to the Civil Union Equality Act, which was passed into law in 2010. Couples who entered into a civil union prior to July 1 may convert their civil union into a legally recognized marriage or wait until July 1, 2014, when all remaining civil unions will be automatically converted.

The Court’s DOMA ruling is expected to affect an estimated 1,138 federal benefits, rights, and privileges. For Delaware employers, the impact is potentially significant. Delaware employers must now extend all federal benefits to gay married couples that were previously made available to straight married couples. The impact also is immediate. Unlike with new legislation, there will be no delay between the Court’s ruling and an employer’s obligation to extend benefits.

Although the Supreme Court’s decision will impact who is eligible for benefits, the procedures remain unchanged. For example, the process for requesting and reviewing FMLA leave, COBRA coverage, and other federally mandated benefits of employment will not change.

One step employers should consider is possible adjustments to tax and health-insurance forms. Spouses that could not previously “claim” one another on federal tax forms may need to submit new IRS Form W-4s. In addition, if your company offers ERISA-covered health-insurance plans and did not previously extend benefits to gay couples, those plans will now be open to the enrollment of gay spouses. This means that, if your company offers health insurance coverage to the straight spouses of its employees, the same benefits must now be extended to gay spouses. In addition, gay spouses will now be the primary beneficiary on all 401(k) plans.

In the end, Delaware employers are likely in a better position to adapt to the Supreme Court’s decision, since benefits have been extended under State law since January 1, 2012. Employers should keep in mind that the same benefits must be extended and the same processes will still apply to same-sex married couples. In the event that you think it may be necessary to deviate from this rule of thumb for some unusual circumstances, consider consulting legal counsel before doing so.

In the U.S. Unlawfully But Eligible for Workers’ Comp?

Is an employee who is in the country illegally a covered “employee” under the Workers’ Compensation laws? That was the question of first impression presented to the Delaware Superior Court in Del. Valley Field Servs. v. Ramirez, (PDF) No. 12A-01-007-JOH (Sep. 13, 2012). The court concluded that the answer is “yes,” and ordered that the former employee, who has since been deported to Honduras, is eligible to receive benefits under Delaware’s workers-compensation statute.

Facts
The employee, Saul Melgar Ramirez, was hired in April 2010 as an “independent contractor'”–which the term the court uses to say that Ramirez was paid in cash. In January 2011, he was converted to a regular employee and added to the payroll. When told by his boss that he would need a Social Security number for his I-9 documentation, Ramirez bought a fake SSN card for $180. In February, the payroll service informed the employer that the number was false. Ramirez was deported in March.

In late January, shortly after he was converted to employee status, Ramirez fell down six steps and landed on his back. The company’s president, who witnessed the fall, reported the accident to the company’s workers’ compensation carrier and made arrangements for Ramirez to get medical treatment. The treating physician determined that Ramirez was totally disabled.

Issues
The Industrial Board awarded benefits to Ramirez. (See Cassandra Robert’s cleverly named post about the Board’s decision, The Dearly Deported–Illegal Alien Status Does Not Work a Forfeiture in Delaware). The employer appealed to the Delaware Superior Court, where it made several arguments, including:

  • the employee’s “fraudulent inducement” in obtaining the job disqualified him from receiving benefits;
  • because, pursuant to the federal immigration laws, Ramirez could not be lawfully hired, those laws preempted the State’s workers’ compensation laws; and
  • the employee’s exclusion from the U.S. was the equivalent of being incarcerated, which would result in the suspension of benefits.

Judge Herlihy rejected each of the three arguments in turn and concluded that, despite his status as an illegal alien at the time of his employment, Ramirez was not disqualified from receiving workers’ compensation benefits.

Nuts and Bolts
Regular readers may be mildly surprised to read that I actually side with the employee in this case. Not so much because of complicated legal reasons but more because of the basic facts. The employer hired Ramirez. The basic employment relationship involves the performance of services by the employee and the provision of certain compensation and benefits by the employer in return. One of those benefits is workers’ compensation insurance.

Here, there is no dispute that Ramirez performed the services for which he was hired. Thus, the employer received the bargained-for benefit of the employment relationship. Ramirez, in return, was entitled to receive, in exchange, the benefits for which he had bargained, including wages for work performed and workers’ compensation insurance.

There is no dispute that Ramirez was injured during the course and scope of his employment and there appears to be no dispute as to the extent of his injuries. Thus, it seems fair to me that he receive the benefits of the employment relationship, just as his employer did.

Feel free to disagree with me–I’m open to different opinions. Sean O’Sullivan reported the case in an excellent article in the News Journal today and notes that the case has been appealed to the Delaware Supreme Court. So we’ll keep you posted.

EEOC Wins Summary Judgment in Balt. Co. Pension Case

EEOC was awarded summary judgment by a federal court in Maryland last week. The court found that Baltimore County’s pension plan violates the ADEA in EEOC v. Baltimore County, Civil No. L-07-2500-BEL (D. Md. Oct. 17, 2012).

The Plan
All full-time employees under age 59 were required to participate in the Plan. Employees were required to contribute to the Plan at different rates based on the age at which they joined, so that the contribution would be sufficient to fund approximately one-half of his or her final retirement benefit, with the other half to be funded by the County. Older workers were required to contribute a higher percentage of their salary than younger workers because their contributions would have less time before retirement to accrue earnings. For example, a laborer who became a member of the Plan at age 25 was required to contribute 2.75%, whereas a laborer who joined at age 45 was required to contribute 4%. The Plan was changed in 2007 so that new employees were required to contribute at a flat rate, regardless of their age at the time they were hired.

The Litigation
In 2007, the EEOC filed suit on behalf of older County employees who had been hired under the original terms of the Plan. The District Court granted summary judgment to the County in 2008, finding that the Plan did not violate the ADEA because the disparate contribution rates were justified by a permissible financial consideration–the time value of money. The Court reasoned that the system was not based on age but on the number of years an employee had until reaching retirement age. The EEOC appealed and the Fourth Circuit vacated the judgment and remanded the case.

The Decision
On remand, the District Court determined that there are no non-age-related financial considerations that justify the disparity in contribution rates. In other words, the Court concluded that the County charged different contribution rates to different employees based on age and, therefore, age is the “but-for” cause of the disparate treatment in violation of the ADEA.

See also, EEOC press release.

Same-Sex Civil Unions Recognized in Delaware

The Delaware House of Representatives voted yesterday in favor of Senate Bill 30, a bill that would create same-sex civil unions in Delaware, and recognize civil unions performed in other states. The bill also changes all sections of the Delaware Code where marriage is mentioned, by requiring that the word “marriage” be read to mean “marriage or civil union.”  Delaware Capitol Hill color

Senate Bill 30 was approved by the Delaware Senate on April 7, and Governor Markell has already declared that he will sign the bill into law “as soon as a suitable time and place are arranged.” The law will take effect on January 1, 2012.

The new law raises several questions for employers.  For example, the law cannot, and does not, alter federal non-recognition of civil unions. So how will the new law impact employers?

Right to Employment Benefits

As we have previously indicated, the most significant impact of Senate Bill 30 is likely to be on employment benefits. When the law takes effect, employers will be required to provide partners in a civil union with the same benefits that they provide to partners in a marriage. The Act would not cover those currently not protected by the Delaware Discrimination in Employment Act (DDEA): (a) employers with less than 4 employees; or (b) religious corporations with respect to discrimination based on sexual orientation

Equality of Benefits

Employers should also be aware that equality of benefits is a two-way street. Many employers previously offered employment benefits to unmarried same-sex partners, but not to unmarried heterosexual partners. Now that same-sex couples have access to civil unions that are substantively identical to marriage, employers may be open to claims of reverse discrimination if they continue to offer benefits to same-sex partners who have not entered into a civil union, but do not offer the same benefits to unmarried heterosexual partners.

Employers should also be careful to impose the same requirements for receipt of benefits upon same sex civil union partners as they do upon married partners. While it is perfectly acceptable to ask an employee to verify his or her marital status before extending benefits, the same requests should be made of both same-sex and heterosexual partners. If you do not require a copy of a marriage certificate to establish benefits, you should not require a copy of a civil union certificate.

Discrimination Protection

As we have previously reported, the DDEA already protects Delaware employees from discrimination on the basis of sexual orientation. Keep in mind that homosexual individuals who may not have previously chosen to disclose that fact may, as a result of the new law, disclose that information so that their partner may enjoy benefits. Therefore, employers may possibly have knowledge of an employee’s protected class they might not otherwise have had – and should proceed cautiously with any adverse employment actions, particularly ones that may follow closely on the heels of such disclosure.

This post was authored by Adria B. Martinelli and Lauren Moak.  Adria will be speaking about the implications of Delaware’s Civil Union and Equality Act of 2011 at our upcoming Annual Employment Law Seminar on May 11, 2011. 

Benefit Limitations Remain Unchanged from 2009 to 2011

If you were hoping to be able to sock away more money into your 401(K) Plan in 2011 than you did in 2011, fuggedaboutit! The maximum elective deferrals for 2011 remains the same as it was for 2009 and 2010 — $16,500. The catch-up contribution limitation for those who are at least age 50 during 2011 is also unchanged at $5,500. The annual limit on compensation remains at $245,000, the defined contribution limit on contributions remains at $49,000 and the maximum benefit payable from a defined benefit remains at the lesser of 100% of compensation or $195,000.

Congress established the method by which the IRS determines the inflation adjusted annual benefit plan limitations. However, it seems like bad public policy to limit amounts that will be payable to employees upon retirement by the current cost of living increases, especially when the stock market is performing sluggishly.

Look for the complete listing of the adjustments to the benefit limitations when we publish our 2011 Benefits Update Card, a link to which will be posted on this blog.

*This post was written by Timothy J. Snyder, Esq.  Tim is the Chair of Young Conaway’s Tax, Trusts and Estates, and Employee Benefits Sections.