Please join McDermott Will & Emery partner, Todd Solomon, at a Worldwide Employee Benefits (WEB) Network Chicago Chapter event that will cover recent developments in same-sex partner benefits.

A much-anticipated Supreme Court ruling overturned a key part of the federal Defense of Marriage Act, or DOMA. That much is clear. What is less clear is what long-term impact this will have on employer-sponsored retirement and health benefit plans.  How do the federal tax laws apply to health benefits provided for same-sex spouses? How should retirement plans treat same-sex spouses who did not receive a qualified joint and survivor annuity as a default form of benefit? Following this ruling, should plan sponsors consider adopting a definition of spouse based on state law?

If you are confronting these and or other practical questions, you will not want to miss our session focusing on the most recent developments in same-sex partner benefits.

Wednesday, August 28, 2013
11:30 am – 12:00 pm CDT – Lunch
12:00 pm – 1:00 pm CDT – Program

McDermott Will & Emery
227 W. Monroe Street
Chicago, IL 60606-5096

To register and learn more, please click here.

by Joseph Adams, Todd Solomon and Brian Tiemann

Earlier this morning, in the case of U.S. v. Windsor, the Supreme Court of the United States found Section 3 of the Defense of Marriage Act (DOMA) to be unconstitutional. In a 5-4 decision authored by Justice Kennedy, the Court ruled that Section 3 of DOMA deprived same-sex couples of the equal protection guarantee of the Fifth Amendment of the U.S. Constitution.  Note that the Windsor decision only applies to Section 3 of DOMA (which previously prohibited same-sex couples from enjoying any benefit under federal law).  The decision does not apply to another key provision of DOMA that allows one state to refuse to recognize same-sex marriages performed in another state. 

In the separate Hollingsworth v. Perry case challenging California’s Proposition 8 (which prohibited same-sex marriages), the Court ruled that it lacked jurisdiction to rule on the constitutionality of Proposition 8.   This ruling has the effect of reinstating the original opinion of the United States District Court for the Northern District of California which found Proposition 8 unconstitutional under California law and prohibited the enforcement of Proposition 8 statewide.  As a result, same-sex marriages will resume in California relatively shortly (perhaps in as soon as a month).  As widely expected, the Court did not declare a constitutional right to marry in all states.

For more information on these cases and the immediate impact on employee benefit programs, register for our webinar (see link in Featured Post above) or visit “DOMA and Proposition 8: Immediate implications for employee benefit plan sponsors” scheduled for July 2, 2013.

by Amy M. Gordon, Jacob Mattinson and Susan M. Nash

As part of the Patient Protection and Affordable Care Act (ACA), the U.S. Department of Health and Human Services (HHS) recently released proposed regulations regarding the estimated amount of annual contributions that are required to be paid to HHS from employer-sponsored group health plans to finance state transitional reinsurance programs.  The reinsurance programs are intended to help stabilize premiums for coverage in the individual market during the first three years the state health insurance exchanges are operational (2014 through 2016).  HHS is estimating the annual contribution rate for 2014 will be $63 per covered life (employees and their dependents).  This will undoubtedly impact the overall cost of providing coverage under an employer-sponsored group health plan and should be taken into account by employers for purposes of estimating cost trends.

Read the full article here.

by Amy Gordon, Susan Nash, Maureen O’Brien

Recent guidance issued by the Departments of Health and Human Services and Labor and the Internal Revenue Service clarifies health care reform rules regarding waiting periods and the definition of full-time employee for purposes of the employer requirement to provide health care coverage beginning in 2014.   The Internal Revenue Service has also issued guidance relating to the determination of wages for purposes of determining affordability of health care coverage under the Affordable Care Act.

Click here to see IRS Notice 2012-58 and here for Technical Release 2012-02.  McDermott will be releasing a detailed analysis of the new guidance soon.

by Joe Adams, Brett Johnson, Todd Solomon and Brian Tiemann

Developments in state same-sex marriage laws have added complexity to the options and obligations of employers providing benefits for employees’ same-sex spouses and partners.  These conflicting developments—some legalizing same-sex marriage and others restricting marriage to an opposite-sex union—are occurring at an increasingly rapid pace.  Further complicating the issue is that changes are occurring by judicial action, legislative action and voter referendums.

Judicial Actions
The U.S. Court of Appeals for the Ninth Circuit ruled in February 2012 that California’s state constitutional ban on same-sex marriage violates the Equal Protection Clause of the U.S. Constitution.  Same-sex marriage was legalized in California in 2008, but was banned a few months later after state voters approved Proposition 8, an amendment to the state constitution that defines marriage as a union between a man and a woman.  Despite the court ruling, same-sex marriage remains on hold in California pending the expected appeal of the decision.

Legislative Actions
Washington and Maryland are the most recent states to legalize same-sex marriage under laws enacted by their respective state legislatures earlier this year (although voters in these states may ultimately decide whether the new laws will take effect, if opponents of the laws are able to collect enough signatures to support a voter referendum in each state).  The Illinois legislature is also currently considering a bill to legalize same-sex marriage.  Meanwhile, a bill to repeal New Hampshire’s 2009 same-sex marriage law has been introduced in the state’s legislature.  If passed, New Hampshire would be the first state in which the legislature has reversed itself on the issue of same-sex marriage.

Voter Referendums
This year voters in Maine will consider whether to legalize same-sex marriage.  Same-sex marriage was legalized by the Maine legislature in 2009, but was repealed by a previous voter referendum before the law took effect.  Meanwhile, voters in Minnesota and North Carolina will consider whether to amend their respective state constitutions to define marriage as an opposite-sex union (both states already have laws banning same-sex marriage).  Twenty-nine states have amended their constitutions to limit marriage to opposite-sex couples; an additional 12 states have enacted state laws banning same-sex marriage.

Next Steps for Employers
The rapid developments in state laws regarding marriage and other forms of same-sex unions makes providing benefits to employees’ same-sex spouses and partners an evolving challenge.  Employers should consider whether their benefit plans and procedures need to be updated to address varying state law approaches to the recognition of marriages and/or other forms of same-sex unions.  In addition, employers need to ensure their payroll systems are structured to reflect the differing federal and state tax treatment of benefits provided to employee’s same-sex spouses and partners.

by Heather Egan Sussman, Linda Doyle and Sabrina Dunlap

On Wednesday, January 25, 2012, National Labor Relations Board (NLRB) acting General Counsel Lafe Solomon released a second report describing social media cases reviewed by his office. The report (Operations Management Memo) addresses 14 cases related to social media and employer social media policies. 

Many of the cases reviewed involved employees who had been discharged after they posted comments on Facebook. The general counsel found that a number of the terminations were improper because employees had engaged in protected activity and their terminations arose from unlawful employer policies. However, the general counsel upheld several terminations – despite overly broad employer policies – where the employees involved were not engaged in protected activity and had merely posted general complaints or individual gripes unrelated to working conditions or wages.

The report emphasizes two key points made in an earlier report in August 2011: 1) Employer policies should not be so broad that they prohibit activity protected by federal labor law, such as the discussion of wages or working conditions; and 2) an employee’s comments on social media sites will generally not be protected if they are simply complaints unrelated to working conditions or wages that impact a group of employees.

There are three cases involving social media questions currently pending before the NLRB and those decisions will likely give further guidance on acceptable employer social media policies. 

In addition, McDermott partner Heather Egan Sussman will be speaking with Lafe Solomon, and Edward Loughlin (EEOC) on this topic at the International Association of Privacy Professionals (IAPP) Global Privacy Summit, Wednesday, March 7, 2012.

by Andrew Liazos

Proxy season is now upon us, and a key task is to evaluate whether shareholder approval is needed for any executive compensation plan. One of the typical reasons to seek shareholder approval is to qualify for tax-deduction relief under Section 162(m) of the Internal Revenue Code. By and large, seeking shareholder approval for that purpose has been viewed as a relatively routine task. However, recent shareholder derivative lawsuits suggest that public companies should take a careful look at disclosures that solicit Section 162(m) shareholder approval. 

Read the full article on CFO.com.

by Andrew Liazos, Heather Egan Sussman and Sabrina Dunlap

Massachusetts Wage Act May Extend to Employees Living and Working Elsewhere — Out-of-State Employees May Sue Officers Personally for Mandatory Triple Damages, Attorneys Fees and Costs

A Massachusetts Superior Court judge recently extended the reach of the Massachusetts Wage Act – including its provisions for officer liability, mandatory triple damages, attorneys fees and costs – to an employee who lives and works in Florida. The judge found that the employee had “sufficient contacts” with Massachusetts during his employment, and was thus entitled to protection of its Wage Act. 

In Dow v. Casale, a former sales employee of a small, failed Massachusetts company sued three former executives personally in Massachusetts, alleging they owed him more than $100,000 in commissions he earned prior to the company’s failure. The executives argued that Massachusetts law did not apply because the employee lived and worked in Florida. The court disagreed and held that the Wage Act “was designed to regulate the actions of Massachusetts employers, regardless of where their employees work.” 

The judge found the following activities established “more than sufficient contacts” with the Commonwealth to afford the employee the protection of the its Wage Act:

  • The salesman conducted his business largely via the internet, which was paid for by the Massachusetts employer
  • His business cards listed the company’s Massachusetts address, phone number and fax number
  • He had customers in Massachusetts and visited them about 20 times over two years
  • He was in daily contact with his supervisor in Massachusetts
  • All sales paperwork was generated in Massachusetts
  • All customer purchase orders were sent to Massachusetts, invoices were then sent to customers from Massachusetts and customers sent their payments to Massachusetts 

In light of this decision, out of state employers may want to consider taking steps to avoid the type of “sufficient contacts” with Massachusetts that might expose them and their officers to unfavorable liabilities and penalties under the Massachusetts Wage Act.

by Jilali Maazouz and Sébastien Le Coeur

As of 26 January 2011, the French Supreme Court ruled that the change of control clauses in French executive-level employment contracts are valid, a consideration which international companies contemplating the acquisition of a company in the country need to consider.  The control clause is also valid for both public and private companies.

In July 2005, further to the termination of several of Havas’s officers, one of the top managers decided to leave the company by claiming constructive dismissal under her change of control clause.  A McDermott employment lawyer in Paris advised on the drafting of this landmark control clause upheld by the French Supreme Court.

This change of control clause within the Havas executive’s contract was as follows:

  • The identities of the top managers were key reasons as to why the employee entered into her/his employment contract.
  • Should one or several of these top managers be terminated by the company, the employee would be entitled to claim constructive dismissal, within a certain period of time.
  • The claim for constructive dismissal would trigger the payment of a golden parachute.
  • The French Supreme Court upheld the clause and justified this decision by the seniority of the employee’s position.

As a result of this landmark Supreme Court decision, companies in France can now apply the change of control clause as a deterrent to hostile takeovers through the entrenchment of its top management executives.

by Jilali Maazouz and Sébastien Le Coeur

Under French law, an employee can only be dismissed on economic grounds when all efforts have been well documented to redeploy him or her in an alternative position within a company.

On 7 April 2004, the French Supreme Court concluded that an employee facing economic dismissal has priority over an external candidate to fill a position available in the company. 

On 23 March 2011, the French Supreme Court went even further and ruled that an internal vacancy within a company in France should be offered as a priority to the in-house employee who is at risk of redundancy.

This recent Supreme Court ruling extends the obligations of French entities or international entities operating in France contemplating redundancies.  As a result, should an employer decide to offer a position to an employee who is not at risk of redundancy, he or she will be liable to pay damages to the employees who are eventually made redundant.

In the internal recruitment/redeployment process, the employee within the company facing economic dismissal has priority over an employee within the company whose economic dismissal is not contemplated and over an outside candidate.  If priority is not given to him/her, the company’s redeployment obligation is not fulfilled and the dismissal is held unfair.  That is why we recommend not having external or internal recruitment ads of the shortlisted positions.

Clients contemplating employees redundancies in France should consider the following steps to fulfil its redeployment obligation:

  1. Collect information on the employees whose dismissals are contemplated (current and past positions, skills, current compensation, languages spoken, CV’s, recent training, annual reviews, etc).
  2. List all the positions available in the company worldwide during the period of when the redundancies in France are planned (e.g. 3 to 6 months).
  3. Shortlist all the available positions that match the employee’s current professional qualifications or are compatible with the employee’s skills. Even positions which require employees to have a short period of training or roles viewed as less of a position than the employee’s current status need to be listed.  Avoid shortlisting employees for roles that: a) require knowledge of a foreign language not mastered or b) require relocation in countries where immigration laws would prevent the employee from working. Also be sure not to externally or internally advertise the shortlisted positions.
  4. If one or several available shortlisted positions are located outside of France, the French entity must ask the employee in writing whether or not he/she would accept a position abroad.  The letter must make a list of all the company’s geographic locations and require the employee to indicate any restrictions regarding redeployment, particularly in relation to the offices proposed and compensation given.  Within six days of receiving this letter, the employee must provide a response. If the employee fails to reply within the allocated time than the employer can justify termination on the grounds of refusal to be redeployed abroad. The available positions shortlisted can then be reviewed and the freeze on external or internal recruitment may be totally or partially lifted.
  5. Send the employee a letter explaining the redeployment process.  The letter must be as precise as possible, with all the necessary details regarding: the position; the location; the compensation; the start date; the recruitment process; the deadline to accept an offer; the relocation package, which might involve a visit to the site before the employee accepts his/her new position.  Although the employee has not yet accepted the new position, the letter must be as precise as a job offer in order to comply with French law.
  6. If the internal recruitment/redeployment process leads to the employee accepting one of the available positions, his/her employment contract with the French entity is terminated by mutual agreement and a new contract is established with the other group company.  If the employee does not accept one of the available positions, he/she is dismissed on economic grounds. Clients can then start advertising again either externally or internally for the recruitment of the shortlisted positions.