Appellate Ruling Sharpens Scrutiny of Unequal Benefits for Same-Sex Spouses

Surveys show unequal benefits for same-sex versus opposite-sex employee husbands and wives

By Stephen Miller, CEBS Apr 10, 2017
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Update: Texas Supreme Court Rules on Houston's Benefits

The Supreme Court of Texas's decision in Pidgeon v. Turner, handed down July 1, 2017, held open the possibility that Houston and other Texas cities may be barred under Texas law from granting spousal benefits to same-sex couples. See the SHRM Online article Texas Supreme Court Ruling Imperils Benefits for Same-Sex Couples.


A ruling by the U.S. 7th Circuit Court of Appeals in Chicago increases the risk for employers that don't offer lesbian, gay and bisexual (LGB) employees and their spouses or domestic partners benefits equal to those provided to non-LGB employees and to opposite-sex spouses and partners.

Earlier appellate rulings have extended protections to transgender employees.

But recent survey findings show some employers are not providing LGBT employees with equal workplace benefits.

In Hively v. Ivy Tech Community College, handed down on April 3, the 7th Circuit ruled 8-to-3 that workplace bias based on sexual orientation is unlawful under Title VII of the Civil Rights Act of 1964, which prohibits workplace discrimination based on sex. The ruling reversed an earlier decision from a three-judge panel on behalf of the circuit.

The full court found that sexual orientation discrimination was unlawfully based on an employer's perception of gender stereotypes, which the U.S. Supreme Court has determined in other contexts is unlawful under Title VII.

The Equal Employment Opportunity Commission (EEOC) also has taken the position that sexual orientation and gender-identity discrimination are types of sex discrimination prohibited by Title VII.

Impact on Employers

Following the Hively decision, "Employers located within the 7th Circuit—Wisconsin, Illinois and Indiana—that do not provide equal benefits to same-sex spouses are at risk of a Title VII discrimination lawsuit on the basis of sex discrimination," commented Todd A. Solomon, a partner with McDermott Will & Emery in Chicago. "These claims can be costly to defend."

"The decision by the 7th Circuit will have significant, if peripheral, impact on benefits," commented Tom Spiggle, principal at The Spiggle Law Firm in Washington, D.C., and a former federal prosecutor. Before the Hively ruling, "there was no clear line under federal civil rights law outlawing discrimination on the basis of sexual orientation. Now the line is clear; sexual orientation—at least in the 7th Circuit—is a 'protected category' under the Civil Rights Act. An employee cannot be subject to an 'adverse employment decision'—including the [unequal] provision of employee benefits—simply because of sexual orientation."

"For employers doing business in Wisconsin and Illinois, this ruling does not represent a great change; those states already have laws prohibiting discrimination based on sexual orientation," said JoLynn Markison, a partner in at law firm Dorsey & Whitney in Minneapolis. "Employers in Indiana, however, are not required by state law to treat LGBT employees equally—although some counties, cities and towns prohibit LGBT discrimination. Those employers should immediately update their policies and handbooks to explicitly prohibit discrimination based on sexual orientation," she said.

Some Benefits Remain Unequal

Most companies offer parity in workplace benefits for LGBT employees, Solomon said. "Now that same-sex marriage is legal in all 50 states, most companies do not differentiate between types of spouses," he told SHRM Online. Also, "There are no longer any barriers to offering benefits to same-sex spouses as there have been in the past," before the U.S. Supreme Court ruled in 2015 that same-sex marriages must be recognized nationwide.

But some unequal treatment with employee benefits remains. The Society for Human Resource Management's (SHRM's) 2016 Employee Benefits report, based on a survey of SHRM members conducted last year, found that 94 percent of respondents said that their organizations offered health care coverage to opposite-sex spouses, while 83 percent offered the same coverage to same-sex spouses.

Health Care Coverage Offered to Employees and Their Dependents

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Source: Society for Human Resource Management, 2016 Employee Benefits report (June 2016).


In other SHRM 2016 survey findings:

  • Slightly more (54 percent of) employers offered health coverage to same-sex domestic partners than did so for opposite-sex domestic partners (53 percent), probably a holdover from the time when many employers offered benefits to same-sex partners but not opposite-sex partners when same-sex couples could not marry.

  • 10 percent of employers imposed a surcharge on health coverage for same-sex domestic partners who had access to coverage from another employer or other entity, while 9 percent imposed a surcharge on opposite-sex domestic partners with access to coverage.

Update: SHRM's 2017 Employee Benefits survey report, drawn from a survey of SHRM members conducted in January and February 2017, shows little change in these disparities, although this year slightly more employers imposed surcharges or other cost-saving restrictions on health coverage for opposite-sex spouses and domestic partners than for same-sex spouses and partners.

Health Care Coverage and Restrictions

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Source: Society for Human Resource Management, 2017 Employee Benefits report (June 2017).


From 2014 to 2016, there was a large increase in coverage of both opposite- and same-sex spouses, the 2017 report reveals. A large increase was also seen for opposite- and same-sex domestic partner coverage during the same period, resulting in more than one-half of organizations offering health care coverage for domestic partners.

Although more organizations offer coverage for opposite-sex spouses than for same-sex spouses, this gap has narrowed since the legalization of same-sex marriage in 2015.

Overall, compared with 2016, health care benefits for employees' spouses and domestic partners seem to have leveled off.

Spousal and Domestic Partner Health Care Coverage Leveling Off

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Source: Society for Human Resource Management, 2017 Employee Benefits report (June 2017).


Separately, a report released in March by HR consultancy Mercer titled 2017 LGBT Benefits Around the World, which includes country-specific findings, shows that in the United States:

  • 92 percent of companies said they provide benefits coverage at the same level to LGBT couples and their families as they do to opposite-sex couples.
  • 7 percent said they did not provide equal benefits coverage.
  • 1 percent didn't provide equal coverage but are planning to do so in the next 12 months.

The results are based on a survey conducted in November 2016, with responses from 256 U.S. companies.

In an effort to provide benefits coverage equally to all employees, organizations should "revisit the language of their health and wellness benefits programs to ensure that LGBT couples are eligible for the same company benefits as opposite-sex couples," said Ilya Bonic, president of Mercer's talent business practice.

[SHRM members-only toolkit: Introduction to the Human Resources Discipline of Employee Benefits]

Supreme Court Showdown?

In March, a three-judge panel of the 11th U.S. Circuit Court of Appeals in Atlanta ruled that Title VII of the Civil Rights Act does not protect against workplace discrimination based on sexual orientation. That same month, a 2nd Circuit three-judge panel in New York City delivered a mixed ruling, reviving an employee's claims under Title VII of sexual orientation discrimination based on sex stereotyping, but stopping short of reconsidering prior appellate rulings that Title VII does not expressly prohibit discrimination on the basis of sexual orientation.

The split between circuits likely means "we may see the Supreme Court taking up this issue in the near future," Markison said.

Are Unequal Benefits Legal?

After the U.S. Supreme Court's 2013 decision in U.S. vs. Windsor overturning the federal Defense of Marriage Act and 2014 guidance from the U.S. Department of Health and Human Services, same-sex spouses in fully insured plans were required to receive coverage equal to that of opposite-sex spouses, noted attorney Todd Solomon. But in self-insured, self-funded plans, same-sex spouses were not required to be extended spousal benefit coverage.

While the Supreme Court's 2015 ruling in Obergefell v. Hodges requiring nationwide recognition by the states of same-sex marriage did not technically change that situation, "self-insured employers that continue to provide coverage only to opposite-sex spouses face significant risk of legal challenges," Solomon cautioned. 

Lawsuits, he warned, could be brought by same-sex couples under applicable state anti-discrimination laws, and while there is no federal civil rights statute barring discrimination for LGBT individuals, the EEOC has taken the view that sexual-orientation discrimination is a form of sex discrimination and (as noted above) that view was embraced by the 7th Circuit in its Hively decision.

If courts continue to adopt this position, then nationwide "there will be significant risk for employers that treat same-sex spouses unequally," Solomon said.


Transgender Benefit Issues

The Hively ruling addressed sexual orientation discrimination. Separate appellate rulings have focused on whether transgender employees are protected by Title VII's prohibition against sex discrimination. Last year, the 4th Circuit declined to consider whether Title VII prohibits gender-identity discrimination, but the 11th Circuit in 2011 and the 6th Circuit in 2004 have extended protections to transgender employees.

"Gender identity discrimination, like sexual orientation discrimination, relates to one's sex," said Solomon. If other federal courts take the position that gender identity is not protected under Title VII then, like sexual orientation discrimination, gender identity issues "could be on a crash course to a circuit split that may need to be resolved by the U.S. Supreme Court."

"Much of the [7th Circuit] court’s reasoning that sexual orientation discrimination is indistinguishable from 'sex stereotyping' discrimination prohibited by Title VII under prior Supreme Court precedent would presumably apply to discrimination against employees based on transgender status," noted an analysis by Chicago-based law firm Franczek Radelet.

Regarding workplace benefits, SHRM's 2016 survey showed that only 6 percent of respondents provided health coverage for gender reassignment surgery. 

A 2016 survey by the nonprofit International Foundation of Employee Benefit Plans in Brookfield, Wis., found that 12 percent of U.S. organizations offer one or more transgender-inclusive health care benefit, based on a survey of 577 HR and benefits professionals at a range of U.S. organizations. The survey showed that among respondents:

  • 11 percent provide mental health counseling pre- and/or post-surgery for gender reassignment.
  • 9 percent cover prescription drug therapy (hormone replacement therapy, etc.).
  • 8 percent cover gender-reassignment/affirmation surgery.
  • 2 percent include cosmetic surgery (facial feminization, Adam's apple reduction, etc.).

"Employers continue to expand their employee benefit offerings to attract the best employees—including LGBT workers," said Julie Stich, CEBS, director of research at the organization. "Offering transgender-inclusive benefits is another step toward meeting the needs of a diverse workforce."

The Department of Health and Human Services in May 2016 issued a final rule to prohibit discrimination against individuals receiving health care under the Affordable Care Act, including discrimination based on gender identity and sex stereotyping. On the issue of whether health plans subject to the nondiscrimination rule must provide coverage for gender-realignment surgery and related services, including hormonal treatments and counseling, the rule affirmed that explicit categorical exclusions in coverage for health services related to gender transition were "facially discriminatory."

However, a federal judge in Texas issued a nationwide injunction on Dec. 31, 2016, that blocked the rule from taking effect on Jan. 1.

"Ultimately, what sex discrimination means will continue to be disputed until the Supreme Court of the United States weighs in," said Jaklyn Wrigley, an attorney with Fisher Phillips in Gulfport, Miss., commenting on the injunction.

[SHRM members-only toolkit: Managing Gender Transition in the Workforce]

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