Labor and Employment Alert June 2009 Authors: Suzanne J. Thomas suzanne.thomas@klgates.com +1.206.370.6642 K&L Gates is a global law firm with lawyers in 33 offices located in North America, Europe, Asia and the Middle East, and represents numerous GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market participants and public sector entities. For more information, visit www.klgates.com. Washington s 2009 Registered Domestic Partnership Expansion Bill Understanding What it Means for Employers Washington State Governor Gregoire signed ESSSB 5688, the 2009 Registered Domestic Partnership Expansion Bill (dubbed the Everything But Marriage Act or 2009 Act ) on May 18, 2009, expanding the rights and responsibilities of state registered domestic partners. Most provisions of the 2009 Act are currently scheduled to become law at the end of July. However, enforcement of the 2009 Act may be delayed due to a referendum effort seeking to repeal the new legislation. Despite this uncertainty, employers and businesses should be aware of the many employment, benefits, and other issues that arise under the terms of the 2009 Act. This alert explores some of the employment and benefits impacts of the 2009 Act and identifies some interim steps employees may wish to take until and if the 2009 Act becomes effective. 2007 Recognition of Registered Domestic Partner Status and 2008 Expansion In 2007, the Washington State Legislature adopted new laws recognizing domestic partnerships in Washington. Under those laws,1 couples can register as domestic partners if they meet the following criteria: they are an opposite-sex couple and at least one of the partners is age 62 or older or they are a same-sex couple; both partners are at least 18 years of age; both partners share a common residence;2 neither partner is married or the state-registered domestic partner of another individual; both partners are legally capable of consenting to the domestic partnership; and the partners are not close blood relatives.3 Qualifying domestic partners who register with the state are provided with a certificate of state registered domestic partnership. Legal unions of same-sex partners in other jurisdictions are recognized as domestic partnerships in Washington if they are the substantial equivalent of a domestic partnership under Washington law.4 1 RCW 26.60.030. This term is defined in RCW 26.60.020 (3). 3 These terms are defined in RCW 26.60.030 (5). 4 RCW 26.60.090. 2 Labor and Employment Alert Some existing Washington statutes were amended in 2007 to recognize certain domestic partner rights and obligations, such as those associated with hospital visitation, health care decision-making, organ donation decisions, and other issues related to illness, incapacity, and death. Because of the volume of Washington laws that could be affected by domestic partnership recognition, not all of Washington s laws were amended in 2007 to recognize the rights and responsibilities of registered domestic partners. Additional domestic partner laws were adopted in 2008, such as community property rights, probate rights, and joint responsibility for debts. Again, not all Washington laws impacted by registered domestic partner status were amended. privilege, immunity, right, benefit, or responsibility granted or imposed by statute, administrative or court rule, policy, common law or any other law to an individual because the individual is or was a spouse, or because the individual is or was an in-law in a specified way to another individual, is granted on equivalent terms, substantive and procedural, to an individual because the individual is or was in a state registered domestic partnership or because the individual is or was, based on a state registered domestic partnership, related in a specified way to another individual. The provisions of this act shall be liberally construed to achieve equal treatment, to the extent not in conflict with federal law, of state registered domestic partners and married spouses. 2009 Expansion of Registered Domestic Partner Rights and Responsibilities Effectiveness and Effective Date of the 2009 Act The purpose of the 2009 Act is to give Washington State registered domestic partners all of the responsibilities and rights that married couples have in Washington, to the extent not in conflict with federal law. Federal and Washington State laws which prohibit same-sex marriage are not affected by the 2009 Act.5 As the Legislature explained in the 2009 Act: It is the intent of the legislature that for all purposes under state law, state registered domestic partners shall be treated the same as married spouses. Any 5 ESSSB 5688. Same-sex marriage is prohibited under federal law for all federal law purposes. The Federal Defense of Marriage Act defines the terms marriage and spouse as follows: the word marriage means 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. 1 U.S.C. § 7. Washington law defines marriage as a civil contract between a male and a female who have each attained the age of eighteen years, and who are otherwise capable. RCW 26.04.010 (1). Washington s version of the Defense of Marriage Act, which prohibits same-sex marriage in Washington, remains in place. RCW 26.04.020 (c). Washington will not recognize a same-sex marriage even if it is valid in another jurisdiction. RCW 26.04.020 (3). Most provisions of the 2009 Act are scheduled to go into effect on July 26, 2009.6 However, a Referendum to the People seeking to repeal the 2009 Act has been filed with the Secretary of State, which may impact the effectiveness as well as the effective date of the 2009 Act. The proponents of this Referendum have until July 25, 2009 to submit over 120,500 valid signatures to the Secretary of State in order to place the repeal Referendum on the November general election ballot. If the proponents do not declare to have turned in sufficient signatures by July 25, 2009, the 2009 Act will become law on July 26, 2009. However, if the Referendum s proponents turn in what they argue to be sufficient signatures, the effective date of the 2009 Act will be placed on hold until the signatures are counted. If the count demonstrates that there are insufficient signatures to place the Referendum on the November ballot, the 2009 Act will become law right away. If the count confirms that sufficient signatures were turned in to place the repeal Referendum on the November ballot, enactment of the 2009 Act will be placed on hold pending the outcome of the election. If the repeal is not 6 A few provisions relating to corrections institutions would not go into effect until August 1, 2009. Other provisions, such as those relating to certain state pensions, would not go into effect until January 1, 2014. June 2009 2 Labor and Employment Alert successful, the 2009 Act would go into effect upon certification of the election. What kinds of laws are affected if the 2009 Act becomes law ? A myriad of employment-related laws will be affected if the 2009 Act becomes law. Much of the 2009 Act s implementation would be clear-cut. In general, registered domestic partners would be treated the same as married spouses for almost every purpose, unless federal law requires otherwise. For example, the Washington Family Leave Act ( WFLA ) requires an employer to allow an employee to take leave to care for his or her spouse with a serious health condition. This WFLA leave runs concurrently with any leave the employee is entitled to under the federal Family and Medical Leave Act ( FMLA ). If the 2009 Act goes into effect, an employee who is eligible for rights under WFLA would be entitled to leave to care for that employee s registered domestic partner with a serious health condition, just like an eligible married employee could take such leave to care for a spouse. But WFLA and FMLA are not equivalent in all respects. By definition, FMLA does not provide coverage for domestic partner care leave, and it prohibits designation of non-FMLA qualifying leave as FMLA leave. Thus, WFLA leave to care for the serious health care condition of a domestic partner would be in addition to, not concurrent with, any leave the employee would be entitled to under FMLA.7 employers may choose to extend COBRAequivalent rights to domestic partners. Disparities in treatment of spouses versus domestic partners also exist under Flexible Spending Account plans. For example, medical expenses of a non-dependent domestic partner are not eligible for tax-free reimbursement from an FSA, even if the employer offers partner health insurance benefits. Other technical traps for the unwary exist in implementation of the 2009 Act. Using another FMLA example, if an exempt employee takes intermittent leave under the FMLA, the employer can commensurately reduce pay without jeopardizing the employee s exempt status under the Fair Labor Standards Act.8 However, under the federal regulations governing the FMLA, even if a state requires leave that is similar to, but broader than, FMLA, the employer cannot dock the employee s pay for intermittent leave without jeopardizing the employee s exempt status.9 A significant provision of the 2009 Act is its requirement that insurance contracts issued in Washington offer benefits to registered domestic partners, although employers would not be required to pay the premiums for such benefits.10 Many group health plans that are not subject to state law primarily self-insured plans - would not be impacted in the same way due to ERISA s exemption of many such plans from state laws.11 8 29 CFR §825.206 (a). 29 CFR §825.206(c). An alternative is to convert the employee to non-exempt status for the period of such leave. Id. 9 Other federal laws also result in certain disparities in treatment of domestic partners. For example, although employer-provided health coverage for different-sex spouses is excluded from an employee s gross income, the fair market value of domestic partner benefits is taxable income to the employee (with some exceptions relating to dependent status under IRS regulations). As a result, an employee who elects domestic partner coverage pays more income and payroll tax than a similarly-situated married employee. Federal COBRA rights are also available for spouses, but not for domestic partners - even when the employersponsored plan covered such partners. However, 7 29 CFR §825.701 (3). 10 Note, though, if the employer pays for spousal benefits, under the Washington Law Against Discrimination (RCW 49.60 et seq.), an employer may face disparate treatment or even disparate impact discrimination claims if the premiums are not likewise paid for registered domestic partners. 11 If the employer pays for married spouses under a self-insured plan, but does not pay such premiums for registered domestic partners, the employer may face a discrimination claim. Such claims may be subject to an ERISA preemption argument, although the law in this area is an ever-changing landscape. June 2009 3 Labor and Employment Alert Because Washington is a marital community state, employment and business issues regarding marital communities will also arise if the 2009 Act goes into effect. For example, in Washington, an employee s spouse needs to consent in order for the employee to assign his or her wages.12 Consent of an employee s spouse is necessary in certain other contexts as well, such as for certain loan guarantees. If the 2009 Act goes into effect, any time a spousal consent is required, an equivalent domestic partnership consent will be required. These are only a handful of the many ways in which the 2009 Act relates to employment and business in general. Many other specific employment issues regarding benefits, pensions and tax issues will need to be carefully analyzed if the 2009 Act becomes law. For businesses and employers who wish to prepare for possible implementation of the 2009 Act, we suggest the following initial steps: the 2009 Act, employers could be prepared to post or distribute a simple notice on the effective date of the 2009 Act while policy revisions are under consideration. The notice to employees could state: Recently, changes were made to Washington law regarding the rights and responsibilities of registered domestic partners. We will comply with all such laws and are working on revisions to our policies and handbooks to reflect these changes. Please feel free to direct any questions about domestic partnership employment issues to ________ as we work to update our policies. As noted above, the impacts of the 2009 Act for businesses and employers may be wide-ranging. K&L Gates will continue to monitor the 2009 Act and related developments. This alert is not comprehensive and does not constitute legal advice. All specific situations should be reviewed on a caseby-case basis. Talk to your insurance broker. Employers who offer state-regulated insurance coverage to employees should check with their insurance broker or carrier to determine what specific impact the 2009 Act will have on their policies, enrollment and related issues, and to be ready to roll out coverage to registered domestic partners if the 2009 Act becomes law. Review handbooks and other policies. Periodic review of handbooks or other policies is always a good idea, particularly given this year s amendments to the Americans with Disabilities Act and the FMLA. Employers also need to ensure that their anti-discrimination policies are up to date. Review of such policies should be a good tool to begin identifying areas where updates would be necessary upon enactment of the 2009 Act. Draft a simple notice to distribute to employees if the 2009 Act becomes law. Instead of revising policies in advance of the enactment of 12 RCW 49.48.100. June 2009 4 Labor and Employment Alert Anchorage Austin Beijing Berlin Boston Charlotte Chicago Dallas Dubai Fort Worth Frankfurt Harrisburg Hong Kong London Los Angeles Miami Newark New York Orange County Palo Alto Paris Pittsburgh Portland Raleigh Research Triangle Park San Diego San Francisco Seattle Shanghai Singapore Spokane/Coeur d Alene Taipei Washington, D.C. K&L Gates is a global law firm with lawyers in 33 offices located in North America, Europe, Asia and the Middle East, and represents numerous GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market participants and public sector entities. For more information, visit www.klgates.com. K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and maintaining offices throughout the U.S., in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), in Dubai, U.A.E., in Shanghai (K&L Gates LLP Shanghai Representative Office), and in Singapore (K&L Gates LLP Singapore Representative Office); a limited liability partnership (also named K&L Gates LLP) incorporated in England and maintaining offices in London and Paris; a Taiwan general partnership (K&L Gates) maintaining an office in Taipei; and a Hong Kong general partnership (K&L Gates, Solicitors) maintaining an office in Hong Kong. K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners in each entity is available for inspection at any K&L Gates office. This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. ©2009 K&L Gates LLP. All Rights Reserved. June 2009 5