Supreme Court Issues Landmark Decisions on Same Sex Marriage and the Affordable Care Act
Same-Sex Marriage: In a 5-4 decision issued on June 26, 2015, the United States Supreme Court in Obergefell v. Hodges struck down all state bans on same-sex marriage, holding that same-sex couples have a constitutional right to marry. The Court’s decision also requires states to recognize marriages performed legally in another state or jurisdiction. Connecticut already authorizes same-sex marriages; however, multi-state employers will need to consider whether changes to benefit plans or policies are necessary to cover same-sex spouses in states that did not recognize same-sex marriages.
Affordable Care Act: In a 6-3 decision issued on June 25, 2015, the United States Supreme Court in King v. Burwell held that tax credits are available to individuals in states that use the federal Health Insurance Exchange. This allows the Affordable Care Act (the “Act”) to continue to operate as it has been with respect to premium tax-credit subsidies.
The issue before the Supreme Court arose from language in the Act that referred to tax credits as a form of subsidy for individuals who purchase coverage on a Health Insurance Exchange (“Exchange”) “established by the State.” At stake was the question of whether all Exchanges, either state or federal, could issue premium tax credits.
Currently, 34 states use the federal Exchange, and approximately 6.4 million individuals in those states receive a federal tax-credit subsidy. Therefore, a decision preventing the federal Exchange from issuing a premium tax-credit subsidy would likely have caused many individuals to drop coverage. Further, the employer mandate penalties are triggered only when an individual receives a premium tax credit. If individuals in federal Exchanges cannot receive a premium tax-credit, then there would have not been an employer mandate penalty in 34 states. This would have significantly impacted the viability of the Act.
In short, the Supreme Court reached its decision by reading the disputed language of the Act in context. In doing so, the Court noted that three provisions of the Act are closely intertwined: (1) guaranteed issue; (2) individual mandate to obtain insurance; and (3) premium assistance to make insurance more affordable. The Court found that the guaranteed issue requirement would not work without the coverage requirement, and the coverage requirement would not work without the tax credits.
The Court stated that, while the plain meaning of the phrase “an Exchange established by the State” suggests that the federal Exchange cannot issue premium tax credits, such a reading turns out to be “untenable in light of the statute as a whole.” The Court further stated: “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter.”
U.S. Department of Labor Proposes Rule Broadening Employee Eligibility for Overtime
The United States Department of Labor (DOL) unveiled proposed rules (they are not final) that would significantly expand the number of workers who are eligible for overtime. Under current federal regulations, an employee must be paid at least $455 ($475 under Connecticut law) per week—i.e., $23,660 annually—and meet job-duties-related tests to be considered exempt from receiving overtime pay under certain federal exemptions. The proposed rule raises the minimum salary level to the 40th percentile of weekly earnings for full-time salaried workers, which the DOL estimates will be $970 per week in 2016, or $50,440 annually.
The DOL is also proposing to increase the minimum annual salary level for the highly compensated employee exemption from $100,000 to $122,148, and to establish automatic updates to the minimum salary thresholds for exempt status. The DOL has not made any specific proposals to change the so-called “duties test” for determining whether salaried workers earning more than the threshold are exempt from overtime pay. However, the DOL will be soliciting comments on specific questions related to the duties test and may propose specific changes in the Final Rule.
Although the rules are not final, employers should carefully scrutinize the exempt status of employees who are paid a salary in the $50,000 range. We will continue to monitor the proposed rules and provide further guidance on developments.
Connecticut Paves Way for Paid Family and Medical Leave Program
On June 30, 2015, Governor Dannel P. Malloy signed the 686-page budget implementation bill. The bill includes a number of provisions that previously did not pass the House and Senate, including a plan to establish a paid family and medical leave program.
Specifically, the bill directs the Labor Commissioner, in consultation with the State Treasurer, State Comptroller, and Commissioner of Administrative Services, to establish the procedures necessary to implement a paid family and medical leave program.
The implementation plan will include, but is not limited to, the following items:
- A process to evaluate and establish mechanisms by which employees contribute a portion of their salary or wages to a paid family and medical leave program, including the possibility of utilizing existing technology and payroll deduction systems;
- Identifying and reporting on mechanisms for timely acceptance of claims; processing of claims; fraud prevention; and any staffing, infrastructure, and capital needs associated with administration of the program;
- Identifying and reporting on mechanisms for timely distribution of employee compensation and any associated staffing, infrastructure, and capital needs; and
- Identifying and reporting on funding opportunities to assist with start-up costs and administration of the program, including, but not limited to, the availability of federal funds.
By October 1, 2015, the Labor Commissioner must contract with a consultant to perform an actuarial analysis and report of the level of employee contributions necessary to ensure sustainable funding and administration of the program. By February 1, 2016, the Labor Commissioner must submit a report on the implementation plan and the actuarial analysis to the joint standing committees of the General Assembly that oversee appropriations and labor matters.
We will continue to monitor and report on developments concerning this program.
- Vincent Farisello
- Sarah S. Healey
- Howard K. Levine
- Giovanna Tiberii Weller
- Mark F. Williams
- Domenico Zaino