Is Your Business Ready for Obamacare? No? Don’t Worry, Neither is the Government

This meme has been going around Facebook, credited to Quickmeme.com. Papa John's pizza famously cut its workforce's hours to part time to avoid the employer mandate of the Affordable Healthcare Act (Obamacare).On Tuesday, the U.S. Treasury Department announced that it was delaying the insurance mandate on employers by one year. (In case you did not know this, the IRS is in charge of enforcement of the Affordable Care Act requiring that we all buy or provide health insurance.)

What does this mean? Essentially, businesses were asking the Assistant Secretary for Tax Policy to explain what they are supposed to do (i.e. how to report compliance or pay fines). No one really knew and the government could not provide a good answer. Lots of businesses complained. So President Obama and the IRS gave themselves an extra year to figure it out. They marketed it as “listening” to the feedback of American businesses. (I wish President Obama would have listened before passing this unworkable monstrosity, but I digress.)

But let’s get down to brass tacks. How does this affect you and your business?

  • If your business has more than 50 employees, it means you get another year of not knowing what to do, but at least you do not have to do anything right now.  The compliance reporting and/or $2000 fine for each uninsured employee has been abated until July 1, 2014.
  • Businesses hovering around 50 employees are likely to continue to job freeze and allow for natural attrition rates to keep them below 50, or to hire only part time employees.
  • Businesses with less than 50 employees (the vast majority of businesses in America) will still have to face the uncertainty in the health insurance marketplace, which has generally resulted in higher premiums for employers of all sizes.  Expect premiums to go up again in 2014.
  • Businesses with less than 50 employees will still face additional burdens from the Affordable Care Act, which begin on January 1, 2014.  (Stay tuned to this blog — we will be providing more information and compliance training soon.)
  • Payroll taxes (including Medicare) have already increased and the state-run insurance exchanges for individuals buying their own insurance begin on January 1, 2014, which will (of course) need to be funded.
  • The exchanges have already resulted in (predictably) higher premiums for individuals, so the job market should see some pressure by consultants and employees negotiating for permanent, full-time positions with insurance because their expenses have just gone up.

Obamacare continues to be a nightmare of economic uncertainty for business owners, employers and taxpayers.  Keep that in mind, next time you vote.

How the Supreme Court’s DOMA ruling will affect employers.

DOMA is dead. Well, mostly dead.

DOMA is dead. Well, mostly dead.

Almost exactly two years ago, I wrote a post on how “grossing up” on taxes for benefits given to gay civil union employees could trigger discriminatory pay liability. In that post, I highlighted how Google is providing extra compensation to gay employees in civil unions to make up for the fact that they receive less tax breaks than married heterosexual couples with respect to health insurance benefits. My concern was that making any pay dependent on one’s sexual orientation is a per se violation of the anti-discrimination laws, even if the intent is to ultimately treat homosexual couples equally with heterosexual couples. This was because of the Defense of Marriage Act.

From an employment law standpoint, DOMA is frustrating. On the one hand, it creates a legal class of benefits only allowable for heterosexual couples (specifically, with respect to IRS regulations). On the other hand, and in seeming contradiction, sexual orientation is a protected class and employers can be held liable for discriminating on wages and benefits. (Not surprisingly, everything boils down to the IRS and who gets what as tax breaks. Every time a new law gets passed that affects tax categories, there are sweeping unintended consequences that make it difficult for the average business owner to comply with every duty foisted upon him.)

DOMA really has two parts. 1. Every state is not required to accept the gay marriages of another state, but is free to define marriage how it sees fit. 2. Federal laws and regulations defined marriage as between one man and one woman.

What the Supreme Court did today was strike out that second part. Marriage is now defined individually by each state. And each state does not have to honor the other state with respect to gay marriage (yet… this will certainly beg a “full faith and credit clause” challenge).

So basically, if you are gay and married in a gay marriage state, such as California, you are married for purposes of California law (i.e. adoption, inheritance, property rights) and for purposes of federal law (i.e. federal income taxes). But you are not married for purposes of Missouri law because Missouri has a state constitutional amendment defining marriage as heterosexual marriage only. So a gay couple should not expect to move to Missouri and claim the same rights as a heterosexual couple after being married in California.

This seems complicated. But actually, in my humble opinion, today’s opinion makes things easier for most employers. Why? Well because you no longer have to decide who is married and who is not for purposes of particular state and Federal laws. If somebody is married, then you can now apply all those employment laws in the same way regardless of their sexual orientation. “Married” will mean the same thing under both state and federal law for all your employees. In your role as an employer, you no longer have to ask, and you no longer have to care, about the sexual activities of your employees. I say “hooray!” It’s one less administrative burden.

So what employment laws and policies are affected by married status? Here is a non-exhaustive list:

  • Healthcare and insurance benefit offerings to spouses and families, particularly pre-tax
  • Family medical leaves
  • Bereavement
  • Maternal and paternal leaves
  • Equal pay practices
  • Childcare benefits
  • Hiring practices (this was unchanged by DOMA)

Here’s the upshot: If you’re in a state where gay marriage is legal (like California), then offer the same benefits to all married couples (gay or straight). If you’re in a state where gay marriage is not legal (like Missouri), then offer the same benefits to all married couples (who would, by operation of state law, all be straight). If you’re in a state like Missouri, and you want to offer additional benefits to gay couples, be very careful and talk to your lawyer. As I noted two years ago, making any employment law or pay determinations based solely on sexual orientation, no matter your intentions, is problematic.

Now whether you agree or disagree with your particular state’s gay marriage recognition laws is altogether another question. It certainly should not be a debate for the workplace as an employer. And it certainly will not be uniform across the United States for some time to come (if ever). SCOTUS kicked that can down the road with today’s California Prop 8 ruling. Currently, it is a matter of each state’s preference.

UPDATE: In November 2014, a Missouri state judge ruled that the Missouri ban on gay marriage was unconstitutional. Since this conflicts directly with the state constitution, the law is now unsettled in this state.

Google Invites a Lawsuit to Make a Statement in Favor of Gay Marriage

Gay Marriage

Google Invites Lawsuit to Make a Statement in Favor of Gay Marriage

Google will begin reimbursing its employees in civil domestic partnerships for taxes they pay on health insurance benefits for their domestic partners.  The problematic part: they will only be reimbursing the taxes paid by same-sex domestic partners (and not opposite-sex domestic partners, though that is a legal status in California) because they say opposite-sex domestic partners could get married instead.

Under Federal law, employees do not have to pay tax on health benefits for their spouse or children. For domestic partners, however, health benefits are added to wages and become taxable. Some states also tax benefits, but California does not tax domestic partner benefits if the union is registered with the secretary of state.

It’s possible that Google’s decision to only reimburse the taxes paid on benefits for same-sex domestic partners (and not opposite-sex domestic partners) could lead to a discrimination lawsuit on the basis of sexual orientation.  I wonder whether this curious decision to discriminate on the type of domestic partnership has to do with Google not wanting to pay more in benefits than is necessary while still appearing to be a supporter of gay rights.  Or, it could just be a brazen political statement in favor of gay marriage!  I suspect the latter.

Google is one of only a few employers that pays the employment taxes on benefits offered to same-sex domestic partners. The Bill and Melinda Gates Foundation has been reimbursing domestic partners (regardless of sexual orientation) for several years. For the last three years, Klimpton Hotels and Restaurants of San Francisco has also been reimbursing taxes for same- and opposite-sex domestic partners.

The main distinction between Google and other employers is that Google is the only one who purposefully states that sexual orientation is a specific criteria for this increase in pay.  It may be that the tax code discriminates against domestic partners over spouses — resulting in a de facto sexual orientation discrimination — but one discrimination does not make another discrimination lawful.

My personal feeling is that Google should be allowed to pay more or less wages in any way that it wants.  If they are discriminatory in their pay practices, they’ll lose their best opposite-sex domestic partner employees to competitors (we may have high unemployment, but we still seriously lack quality engineers in America).  In other words, the market should dictate and Google should be free to act in accordance with market pressures or its own ethos.  Unfortunately, that is not the law and to set a pay criteria based specifically on sexual orientation straight-up invites a lawsuit.  (There has to be a brave opposite-sex domestic partner couple that steps forward first, but someone will do it eventually.)

If I were Google’s lawyer (call me), I probably would have advised them to just extend it to all domestic partners.  That would accomplish the goal of making the work place favorable to gay employees without increasing the cost that much.  (While I don’t have hard numbers, it seems likely that there really aren’t that many opposite sex domestic partners in comparison.)  Such a policy is also based on legal status (not protected by discrimination laws) and not on sexual orientation (protected by discrimination laws).  Since all adults, regardless of their sexual status, are free to join civil unions, the policy would not be discriminatory on its face.  As it currently stands, it is.

In addition, my hypothetical policy, to the extent that it is based on political motives, is also philosophically consistent: the argument in favor of gay marriage is that it is a private affair between two people, that the government should get out of it and allow consenting adults the same rights and privileges regardless of their sexual orientation, and that marriage is essentially a religious concept, whereas a civil union is an economic contract.  Those arguments ask the government — and Google — to be genuinely blind to sexual orientation altogether.  Isn’t that really what they are aiming for?

In any event, despite Google’s good intentions, it is not a legal defense to an illegal policy that they are “righting a wrong” imposed by the law or society against gay marriage.  The discrimination laws apply to them on an equal basis as to other businesses who discriminate in pay based on race, gender, color or creed — or sexual orientation, whether straight, gay, bisexual or transgender.