On May 11, 2017, the United States Court of Appeals for the Ninth Circuit reversed a district court ruling, and upheld a California law that invalidates a plan provision that assigns the final determination on benefit payout determinations to an insurer. How will this impact the future of discretionary clauses in California life and disability insurance agreements?
On February 7, 2012, the U.S. Court of Appeals for the Ninth Circuit found California’s Proposition 8, which amended the California Constitution to ban same-sex marriage, to be unconstitutional because it violated the Equal Protection Clause of the U.S. Constitution. Supporters of Proposition 8 have vowed to appeal the ruling to the Supreme Court of the United States, and it is unclear whether the entire Ninth Circuit might agree to hear the case en banc.
The lower court had previously held Proposition 8 unconstitutional for two separate reasons: (1) it impermissibly deprived same-sex couples of the fundamental right to marry guaranteed by the Due Process Clause of the U.S. Constitution, and (2) it violated the Equal Protection Clause of the U.S. Constitution because it excluded same-sex couples from state-sponsored marriage while allowing opposite-sex couples to marry. The Ninth Circuit affirmed the lower court, but narrowly tailored its decision to facts specific to California. Because same-sex couples had previously been granted the right to marry and Proposition 8 eliminated that right, the Ninth Circuit limited the question before it to whether California had a legitimate reason to take away same-sex couples’ right to the official status of “marriage,” rather than the substitute label of “domestic partnership.” The Ninth Circuit found no such legitimate reason, stating “Proposition 8 serves no purpose, and has no effect, other than to lessen the status and human dignity of gays and lesbians in California, and to officially reclassify their relationships and families as inferior to those of opposite-sex couples.”
Because the Ninth Circuit’s decision was focused on facts specific to California, the ultimate legal effect of the ruling is likely to be limited to California.
For now, same-sex marriage in California continues to be on hold because the Ninth Circuit affirmed the lower court’s stay pending further appeal. By keeping the stay in place, same-sex marriages will not resume in California until the appeal process runs its course (or until a court lifts the stay). As a result, the immediate effect of the decision on employee benefits is to maintain the status quo. While additional same-sex marriages cannot yet take place, California does recognize the approximately 18,000 same-sex marriages performed in 2008 before Proposition 8 was passed. Further, couples in California can still enter into spousal-equivalent domestic partnerships, meaning employers may have several different types of same-sex relationships to address in their employee benefit arrangements. Employers should keep an eye on further developments in California as litigation surrounding Proposition 8 winds its way through the appeal process. If and when same-sex marriages resume in California, employers will need to carefully review their employee benefit plans and programs to determine what changes are necessary or desirable.