In the landmark 2015 case Obergefell v. Hodges, the Supreme Court of the United States ruled that same-sex couples have a constitutional right to marry, federally granting same-sex spouses access to the same type of legal rights and benefits that opposite-sex spouses have (e.g., tax relief, spousal benefits, domestic relations laws, inheritance rights). Naturally, this ruling was considered an overall “win” for same-sex marriage advocates. However, it also altered the legal landscape for some domestic partner benefits, especially since legalizing same-sex marriage doesn’t eliminate the need for domestic partner benefits.
Consider this scenario: What if couples in long-term domestic relationships choose not to marry, for whatever reason? Are companies legally required to offer employee benefits to those in common-law living arrangements, same-sex or not? We’re breaking down everything to know about granting domestic partner benefits to employees.
A domestic partnership is a type of relationship that grants a couple that lives together but wishes to remain unmarried access to similar legal rights that they would otherwise obtain by entering a marriage. Same-sex and opposite-sex couples can enter domestic partnerships, and these individuals often live together, raise children and split their finances the same way a married couple would.
There are no federal guidelines governing domestic partnerships; it’s left to the states to define any regulations. As a result, the recognition of domestic partnerships, what exactly constitutes one, and what companies are legally obligated to cover in terms of benefits vary by city and state.
The notion of domestic partnership stems from the gay rights movement in the 1980s. Vermont was the first state to extend domestic partner benefits. Today, states that offer domestic partner benefits include Connecticut, Nevada, New Jersey, Oregon, Vermont and Washington. Many cities nationwide extend benefits on the local level as well – such as Los Angeles and New York City.
Although domestic partner benefits can differ by location, these are some common coverages an employer may offer an employee and their domestic partner:
You’ll notice that these are the same benefits typically granted to spouses, and that’s the idea – giving domestic partners the same coverages as legally married couples. However, one thing to note is that federal income tax laws don’t apply to domestic partners the same way they do to married couples. For instance, if an employee’s spouse receives domestic partner benefits, they will need to count the cost of those benefits as taxable income. Select tax exceptions may be made under certain circumstances. See these tax-saving tips, and visit the IRS website for more information on domestic partnership taxes.
Some employers don’t offer health insurance to domestic partners (unless legally required) because they believe it will be too costly. However, domestic partner plans typically see lower participation, and the employees who do sign up tend to be younger, healthier, and less likely to need support for pregnancy and childbirth, keeping plan costs relatively low.
Although the legalization of same-sex marriage benefited many, it had unintentional consequences for some employees in terms of the domestic partner benefits their employers continued to offer. With no federal law governing domestic partnerships, many businesses chose to do away with providing domestic partnership benefits altogether.
Previously, many employers extended domestic benefits coverage to same-sex couples only because they were legally prohibited from marrying. After that change, some of those business owners reverted to providing spousal benefits only. The argument is that the legalization of same-sex marriage now entitles everyone to the legal status of a spouse. Because it is no longer discriminatory, employers can elect to offer spousal benefits only and drop domestic partner benefits. In this view, the fact that some couples choose not to marry puts the legal burden not on employers but on the employees.
A Kaiser Family Foundation survey found that the number of companies offering domestic partner health benefits has been gradually decreasing since 2014. For example, 42% of large firms offered coverage to same-sex domestic partners in 2019, compared with 47% the year before.
LGBTQ organization Human Rights Campaign advocates for the retention of domestic partnership benefits “as a sign of sustained commitment to family diversity, inclusion and protection of LGBT employees whose rights outside the workplace are not guaranteed under law in some states.”
Offering domestic partner benefits is not only beneficial to the affected employees and their partners, but it can also be advantageous for employers. Recent workplace trends show that employees place a high priority on employee benefits when choosing which organization to work for. Domestic partner benefits can help you create a well-rounded and inclusive benefits package that attracts workers. It can also encourage employee loyalty, enhance your company’s image as socially progressive and reflect the owner’s ethical values.
Moreover, one trend among millennials, a key labor demographic, is cohabitation outside of marriage. A company that offers domestic partnership benefits might have a competitive recruiting edge over those that do not. This could also be an advantage for managing Generation Z in the workplace too.
Another thing to note is that if an employee isn’t “out” at work, requiring them to get married just to receive spousal benefits may, in effect, “out” them, causing them potential distress or unease. Employers should aim to create a diverse and inclusive workplace and have fair policies that protect all LGBTQ employees. After all, business owners should be supporting employees’ mental health, not harming it.
Why would a business not continue to extend domestic partner benefits to employees? Well, now that all people have equal access to marriage, companies stand to save a substantial amount of money and time by streamlining their benefit plans.
Determining domestic partner status can also be an administrative headache. The Mayo Clinic, for example, has 73,000 employees working in all 50 states – states with varying regulations on domestic partnership. According to the Star Tribune, the organization started phasing out same-sex domestic partnership benefits in those states where marriage was legalized before the Supreme Court ruling. Then, with federal recognition, the director of the health system noted, “This makes it much easier for us. Now we’re applying the same rules across the organization.” The nonprofit gave employees a one-year grace period to get married to maintain their partner benefits.
In cases where companies offered domestic partner benefits to same-sex couples only, a potential legal consequence now seems moot, as they can no longer be accused of discrimination based on sexual orientation where such laws are in effect. Now, ironically, if a company continues to offer domestic benefits to unmarried same-sex couples but not unmarried opposite-sex couples, it could be vulnerable to discrimination suits.
Whether businesses choose to defend themselves in court or extend the definition of domestic partnerships to include opposite-sex couples, this is an added complication and cost. Some owners may see more value in dropping domestic partnership benefits to make some of the possible downsides go away.
So, what should your business do? Whether to offer domestic partner benefits depends on how many states you operate in, the costs of your benefits, your particular social values, and, to be realistic, what your accountant and lawyer are telling you. Perhaps the best advice to small businesses is to take a wait-and-see approach if you aren’t entirely sure. You might also want to initiate a discussion with your employees to see how they feel.
For small companies, your decision either way may not be much of an issue. But if it is, you’ll want to be aware of that and address the situation in a way that is fair both to you as a business owner and to the interests of your employees.
Chad Brooks contributed to the writing and reporting in this article.