EMPLOYEE BENEFITS

Nevada's new Domestic Partnership Act: how it affects your policies, procedures

Over the past decade, whether through court decisions or statutory changes, many states have gradually provided greater protections for domestic partners. As a sign of this growing national trend, the number of companies that offer benefits to domestic partners consistently increases each year.

Nevada has now joined a number of states that formally recognize domestic partnerships as a binding social contract between two persons and an alternative to marriage. But how does the newly enacted Nevada Domestic Partnership Act affect employers and employees? If you elect to provide benefits to your employees' domestic partners or already have been doing so for a number of years, now is a good time to review your handbooks and policies to ensure that your treatment of employees and their domestic partners complies with Nevada's new law.

Key provisions of the Act

At the end of its regular session this year, the Nevada Legislature enacted the Nevada Domestic Partnership Act. The new law, which passed despite a veto by Governor Jim Gibbons, will go into effect October 1, 2009. The law gives domestic partners, gay or straight, largely the same rights as those already available to married couples. Domestic partners who register their relationship with the secretary of state will be entitled to receive benefits such as hospital visitation, funeral planning, and community rights.

Despite the assumption many employers may have that they are now required to provide benefits to domestic partners, the new law may give you a choice. It states that the Act does "not require a public or private employer in this State to provide health care benefits to or for the domestic partner of an officer or employee." The Act goes on to state that it "does not prohibit any public or private employer from voluntarily providing health care benefits to or for the domestic partner of an officer or employee upon such terms and conditions as the affected parties may deem appropriate."

It appears the Act was drafted in that manner to emphasize that an employer is under no duty to provide benefits to employees or their dependents in the first place. However, it appears the overall intent of the Act is to afford domestic partners all of the same rights and protections as those afforded to married spouses and to eliminate, as much as possible, any discrimination or unequal treatment on that basis.

Accordingly, under the language of the Act, there is an argument to be made that if your company provides health benefits to your employees and their spouses, you are under the obligation to expand that coverage to include domestic partners as well. While that's a possible argument, courts usually interpret statutes according to their plain meaning and will give effect to the apparent intent of the law from the words used by the legislature. As a result, while there is some ambiguity in the language, it appears the Act doesn't require you to provide health coverage to domestic partners, even if you provide such coverage for employees' spouses.

Another question left open by the Act is whether domestic partners are considered the legal equivalent of a married spouse, a question that's important with respect to the application of many federal laws. On the one hand, the Act clarifies that a "domestic partnership is not a marriage" for purposes of the Nevada Constitution (an effort by the legislature to comply with a voters' referendum on the question from 2008), while simultaneously stating that "domestic partners have the same rights, protections and benefits . . . , whether derived from statutes, administrative regulations, court rules, government policies, common law or any other provisions or sources of law, as are granted to and imposed upon spouses."

The important determination of a domestic partner's status as a "spouse" under federal employment laws can be observed in, for example, the Family and Medical Leave Act (FMLA). The FMLA permits an employee to take leave to care for a "spouse" as that term is defined by state law for purposes of marriage. Again, it's unclear whether Nevada's Domestic Partnership Act intends to distinguish, in any substantive manner, a domestic partner from a married spouse. Until courts have an opportunity to interpret the application of these somewhat contradictory clauses, the safe approach would be to treat validly registered domestic partners of your employees as the legal equivalent of a spouse through marriage.

Whether to implement domestic partner benefits in your company

Roughly one-third of U.S. employers already offer domestic partner benefits to their employees, whether for opposite-sex partners, same-sex partners, or both. Many employers offer domestic partner benefits because they view them as necessary to remain competitive in recruiting and retaining valuable employees. However, offering domestic partner benefits may improve or harm public relations, depending on many factors, including an employer's industry and customer base.

With respect to costs associated with expanding benefits to include domestic partners, some studies found that offering same-sex domestic partner health benefits increased an employer's health plan costs by about .5 percent, largely because of low domestic partner enrollment. If you elect to change your company policies to voluntarily provide coverage to domestic partners under the Act, you should conduct a thorough review of (and make necessary changes to) your benefit plan documents.

Regardless of the ultimate decision your company makes with respect to coverage of domestic partners, you should bear in mind that under federal law, neither same- sex spouses nor domestic partners are generally recognized as spouses to whom favorable tax benefits apply. That would usually mean that certain tax-favored benefits (like pretax cafeteria plan or flexible spending account (FSA) benefits) can't be provided to employees who add domestic partners to group health plan coverage. Also, certain benefits for spouses mandated by federal law, such as COBRA continuation health coverage and FMLA leave, may not be available to domestic partners.

COBRA. Currently, domestic partners and same-sex spouses aren't entitled to continuation coverage under COBRA. Only qualified beneficiaries are entitled to continuation coverage, and under federal law, a qualified beneficiary can only be either an opposite-sex spouse or a dependent child. COBRA's definition of "spouse" doesn't include domestic partners because through the federal Defense of Marriage Act, Congress has defined the term "marriage" to mean "only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife."

Therefore, if an employee's domestic partner loses coverage because of what would otherwise be a qualifying event, such as a termination of the domestic partnership as outlined by the Act, you don't have an obligation to offer COBRA coverage. Nevertheless, a private employer may still voluntarily offer the equivalent of COBRA coverage along with other domestic partnership benefits. However, you should carefully consider the pros and cons of providing "COBRA-equivalent" coverage.

FSAs. In most cases, an employee's FSA money may not be used to reimburse health care costs for a same-sex domestic partner, even if you do provide other domestic partner health benefits. That's because the IRS has ruled that employer-sponsored health benefits are exempt from taxable income only if domestic partners (same or opposite sex) are legally considered spouses or dependents under state law. As already discussed above, Nevada's Domestic Partnership Act has left some ambiguity regarding this issue by clearly distinguishing domestic partnerships from marriage yet affording all of the same rights and protections to domestic partners already applicable to spouses. However, it appears that the overall intention of the Act was to be overly inclusive and broad and that courts would interpret it to treat domestic partners as spouses under state law.

Health Insurance Portability and Accountability Act (HIPAA). HIPAA protects the portability of employee health coverage. But whether domestic partner benefits are portable if an employee changes jobs depends on state insurance laws and on whether the new employer offers such coverage. Nevertheless, because your company's health plan is likely covered under HIPAA, the Act's nondiscrimination rules apply to domestic partners to the same extent that they apply to a spouse or dependent covered under your plan.

FMLA. Under the FMLA, an employee may take family leave only to care for a spouse, child, or parent with a serious health condition. The regulations define spouse as "a husband or wife as defined or recognized under State law for purposes of marriage in the State where the employee resides, including common law marriage in States where it is recognized." In other words, an employee's right to take family leave for a domestic partner depends on whether the relationship is considered the legal equivalent of a marriage or common-law marriage. Because it appears that domestic partners will be treated as the legal equivalent of spouses under Nevada's new law, you should revisit your FMLA policy to ensure that employees would be permitted to take leave to care for a domestic partner.

Other policies may need updating

Many of your other policies may need updating. In general, wherever you reference an employee's spouse in your handbook or policies now should be revised to refer to "spouse and/or domestic partner." For example, if your company has a nepotism policy that sets forth expectations on hiring an employee's family members, the language should be expanded to include domestic partners. Other examples include domestic violence or workplace violence policies that reference family members or spouses. These policies should be revised to include domestic partners.

Another policy/practice that you should review concerns what evidence you require for employees to receive benefits that relate to their spouse. For example, if an employee needs to take time off under your sick/paid-time-off policy for a sick spouse, do you require certification of their marriage? Do you require certification for a similarly situated domestic partner? Since the FMLA adopts the state-law definition of a spouse, will you require an employee to show her secretary of state registration in order to use FMLA leave for her domestic partner's serious health condition? Do you require the equivalent certification for married employees? These practices should be evaluated and decisions made to ensure consistent treatment between traditional spouses and domestic partners.

Bottom line

Under Nevada's Domestic Partnership Act, employers that offer benefits to their employees and spouses will need to carefully evaluate each benefit and determine if it is required or if they will elect to include domestic partners. You also should update your handbooks and other company policies to reflect the additional category of domestic partner wherever a policy may affect an employee's spouse. Although domestic partnerships are distinct from marriage under the Nevada Constitution, domestic partners in most cases should be treated as the legal equivalent of spouses in any applicable situation.

Copyright 2009 M. Lee Smith Publishers LLC

The contents of NEVADA EMPLOYMENT LAW LETTER are intended for general information and should not be construed as legal advice or opinion. To request further information or to comment on an article, please contact Dora V. Lane at 775-327-3000 or Anthony L. Hall at 702-669-4600.