Gay Marriage's Minefield for Businesses
By William C. Symonds
For millions of gay Americans, May 17 -- the day same-sex marriage becomes legal in Massachusetts -- will long be remembered as a milestone in their battle to achieve equality. "It will be transformative for the gay and lesbian community," predicts Josh Friedes, advocacy director for the Freedom to Marry Coalition of Massachusetts, "because marriage represents full equality." (For subscribers, see BW, 5/24/04, "Massachusetts' Gay Marriage Dividend.")
Symbolically, that may be so. But when it comes to health insurance, Social Security, and many other critical bread-and-butter benefits, newly married gay couples will be in a for a big shock: They won't be treated as well as their heterosexual counterparts.
In fact, while newly married gays will gain many important benefits, they'll "still be a long way from true equality," says Lee Badgett, research director of the Massachusetts-based Institute for Gay & Lesbian Strategic Studies. The key reason: Many of the most important spousal benefits -- including Social Security, tax benefits, and family-leave rights -- are governed by federal law, not state law, says Robert Webb, a partner at the Boston-based law firm, Nutter, McClennen & Fish.
The 1996 Defense of Marriage Act, signed by former President Bill Clinton, specifically defines a "spouse" for legal purposes as a person of the opposite sex, Webb notes. Moreover, while gay marriage may now be legal in the Bay State, it isn't permitted in any of the other 49 states -- most of which have passed their own defense-of-marriage laws, and so will likely refuse to recognize gay marriages performed in Massachusetts.
This murky legal situation is creating a minefield for local companies, as they scramble to adjust their benefit policies for newly married gay couples. "Many are surprised at how complicated same-sex marriage is, from a benefits perspective," says Andrew Sherman, senior vice-president of Segal Co., an international employee-benefits firm. Amid all the confusion, companies are adopting sharply different approaches to how they treat gay couples.
And they're discovering new headaches. Among them: Will gay couples married in Massachusetts now balk at transfers to other states? Some may just decide to tell their employers, "We can't leave Massachusetts, since if we do, the protection given our family will evaporate," warns Robert Witeck, CEO of gay-oriented Witeck-Combs Communications. Over time, that could create a "ghetto" of married gays that companies couldn't move, he predicts.
Or consider domestic-partner benefits, which until now have been regarded as the gold standard for companies wishing to give gay couples more equal treatment. Webb estimates that more than 5,000 companies -- including two-thirds of the nation's largest corporations -- now provide health-care insurance and other benefits to the partners of gay and lesbian employees in "committed" same-sex relationships. Because same-sex couples haven't been allowed to marry, domestic-partner benefits have been seen as the only way to extend a measure of equal treatment to the nation's estimated 600,000 same-sex households.
Boston-based Gillette (G ), for instance, "treats all qualifying domestic partners -- whether of the same or opposite sex -- as spousal equivalents," says a company spokesman. Even Massachusetts-based Raytheon (RTN ) -- one of the nation's largest defense contractors -- provides medical, dental, and life-insurance benefits to the same-sex partners of its 78,000 employees.
Now that gays have the right to marry in Massachusetts, however, some employers -- with the support of gay activists -- are getting rid of domestic-partner plans. Take Beth Israel Deaconess Medical Center, one of the renowned Harvard teaching hospitals, which provides such benefits to same-sex couples among its over-6,000 employees. Starting Jan. 1, 2005, it plans to begin treating gay couples just like heterosexual ones, which means gay couples living in Massachusetts must get married to qualify for benefits like health insurance. Living together in a "committed" relationship will no longer be good enough.
Staples (SPLS ), which has some 40,000 employees scattered across the U.S., is going even further. Starting July 1, its gay employees living in Massachusetts must get married to get health- and life-insurance benefits for their partners. Similarly, gay employees living in Vermont must enter into a civil union. But gay employees in the other 48 states will have to provide only a written statement stating they're in a committed relationship.
Scrapping or limiting domestic-partner benefits in an effort to encourage gay couples to marry might seem like an invitation to more controversy. But it may be the only legally defensible course for corporations. "In my opinion, as of May 17, it will be unlawful to limit partner benefits in Massachusetts to same-sex couples," argues Webb. His reasoning: Providing domestic-partner benefits only to gays might be construed as discrimination against heterosexual couples living together outside marriage.
Of course, companies could always extend partner benefits to committed heterosexual couples, as Gillette does now. But Webb warns that could be prohibitively expensive for many companies.
Benefits to married gays will also vary sharply, depending on where they work. Some companies will provide little more than health insurance. But state government workers -- the Commonwealth of Massachusetts is the state's largest employer -- will get far more. Its gay employees who marry will also be eligible for family or medical leave to care for their spouse, and they'll get free tuition for their spouse at any state or community college.
Regardless of where married gays work, they'll still face significant inequities, for example, in treatment of health insurance. Federal tax laws still requires companies to report the premiums they pay to insure the spouse of a gay employee as taxable income to the employee. With heterosexual couples, such premiums aren't considered taxable income. In effect, that means health insurance will be more expensive for gay couples. Nor will gay employees be able to use pretax dollars to pay for spousal health care via a flexible spending account.
Similarly, because the federal government still won't recognize gay marriage, gays won't get Social Security survivor benefits if their spouses die. Nor will they be eligible to take leave to care for their spouse under the federal family-leave law. And perhaps most important, they won't be able to file a joint federal income tax return, or take advantage of any of the other federal tax benefits given to married people -- including inheriting your spouse's estate tax-free at the time of death.
Another huge complication is that it may become far more difficult to transfer married gay employees, especially to states that refuse to recognize gay marriage. "Such employees would stand to lose hundreds of rights that go along with marriage, including the right to make medical decisions for their spouse, inheritance rights, and the protections given to spouses in divorce," says Sherman. In fact, once they leave Massachusetts, married gays might not even be allowed to divorce.
The upshot: Human-resource managers need to brace along with gays for what's likely to be a long, hard-fought legal battle for equality. In the months and years ahead, gays who are married in Massachusetts will file lawsuits to have their marriages recognized by other states as well as to overturn the federal Defense of Marriage Act. Meanwhile, the many opponents of same-sex marriage will be fighting to outlaw such unions in the Bay State -- where the legislature recently took the first step in approving a constitutional amendment to do just that.
Companies will be caught in the middle. Even if they want to treat married gay employees equally, they may find it impossible to do so because of federal and state laws. But a new shot heard 'round the world has just been fired in the land where the battles of Lexington and Concord are still remembered over 200 years later.
Symonds in BusinessWeek's Boston bureau chief
Edited by Douglas Harbrecht
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.