Domestic Partner Benefits in the Era of Marriage Equality

What is a domestic partnership?

A domestic partnership is a type of relationship that grants a couple that lives together but wishes to remain unmarried access to similar legal rights that they would otherwise obtain by entering a marriage. Same-sex and opposite-sex couples can enter domestic partnerships, and these individuals often live together, raise children and split their finances the same way a married couple would.

There are no federal guidelines governing domestic partnerships; it’s left to the states to define any regulations. As a result, the recognition of domestic partnerships, what exactly constitutes one and what companies are legally obligated to cover in terms of benefits vary by city and state.

What are domestic partner benefits?

The notion of domestic partnership stems from the gay rights movement in the 1980s. Vermont was the first state to extend domestic partner benefits. Today, other states offering domestic partner benefits include California, Connecticut, Hawaii, Maine, Nevada, New Jersey, Oregon, Washington and Wisconsin. Many cities and jurisdictions nationwide extend benefits on the local level as well — such as Washington, D.C., and New York City.

Although domestic partner benefits can differ by location, these are some common coverages an employer may offer an employee and their domestic partner:

• Accident and life insurance
• Bereavement leave
• Dental insurance
• Health insurance
• Relocation expenses
• Sick leave
• Vision insurance

You’ll notice that these are the same benefits typically granted to spouses, and that’s the idea — giving domestic partners the same coverage as legally married couples. However, one thing to note is that federal income tax laws don’t apply to domestic partners the same way they do to married couples. For instance, if an employee’s spouse receives domestic partner benefits, they will need to count the cost of those benefits as taxable income. Select tax exceptions, though, remain possible under certain circumstances.

How did the legalization of same-sex marriage affect domestic partner benefits?

Although the legalization of same-sex marriage benefited many, it had unintentional consequences for some employees in terms of the domestic partner benefits their employers continued to offer. With no federal law governing domestic partnerships, many businesses chose to do away with providing domestic partnership benefits altogether.

Previously, many employers extended domestic benefits coverage to same-sex couples only because these couples remained legally prohibited from marrying. After that changed, some of those business owners reverted to providing spousal benefits only. The argument is that the legalization of same-sex marriage now entitles everyone to the legal status of a spouse. Because it is no longer discriminatory, employers can elect to offer spousal benefits only and drop domestic partner benefits. In this view, the fact that some couples choose not to marry puts the legal burden not on employers but on the employees.

What are the advantages of offering domestic partner benefits?

LGBTQ organization Human Rights Campaign advocates for the retention of domestic partnership benefits “as a sign of sustained commitment to family diversity, inclusion and protection of LGBT employees whose rights outside the workplace are not guaranteed under law in some states.”

Offering domestic partner benefits is not only beneficial to the affected employees and their partners, it can also be advantageous for employers. Here are some of the potential advantages of offering domestic partner benefits.

Employee recruitment

Recent workplace trends show that employees place a high priority on employee benefits when choosing which organization to work for. Domestic partner benefits can help create a well-rounded and inclusive benefits package that attracts workers. 

Moreover, one trend among millennials, a key labor demographic, is cohabitation outside of marriage. A company that offers domestic partnership benefits might have a competitive recruiting edge over those that do not. This could also be an advantage for managing Generation Z in the workplace.

Employee retention

Similar to employee recruitment, offering domestic partner benefits can aid employee retention. By offering domestic partner benefits, your affected employees and their partners can receive benefits similar to their married colleagues. This level of support can encourage employee loyalty and appreciation.

Company culture

Offering domestic partner benefits can boost efforts to promote an inclusive and equitable company culture. For example, if an employee isn’t “out” at work, requiring them to get married just to receive spousal benefits may, in effect, “out” them, causing them potential distress or unease. 

Employers should aim to create a diverse and inclusive workplace and have fair policies that protect all LGBTQ employees. After all, business owners should be supporting employees’ mental health, not harming it.

Company reputation

Another advantage of offering these benefits is optics. It can reflect the owner’s ethical values and enhance your company’s image as a socially progressive organization. This is a great way to build a reputation as a company that truly cares about its employees, which can be appealing to clients, customers and potential employees.

Why are some businesses dropping domestic partner benefits?

Why would a business not continue to extend domestic partner benefits to employees? Well, now that all people have equal access to marriage, companies stand to save a substantial amount of money and time by streamlining their benefits plans.

Determining domestic partner status can also be an administrative headache. The Mayo Clinic, for example, has 76,000 employees working in all 50 states — states with varying regulations on domestic partnership. According to the Star Tribune, the organization started phasing out same-sex domestic partnership benefits in those states where marriage had been legalized prior to the Supreme Court ruling. Then, with federal recognition, the director of the health system noted, “This makes it much easier for us. Now we’re applying the same rules across the organization.” The nonprofit gave employees a one-year grace period to get married to maintain their partner benefits.

In cases where companies offered domestic partner benefits to same-sex couples only, a potential legal consequence now seems moot, as accusations of discrimination based on sexual orientation can no longer take place where such laws are in effect. Now, ironically, if a company continues to offer domestic benefits to unmarried same-sex couples but not unmarried opposite-sex couples, it could be vulnerable to discrimination suits.

Whether businesses choose to defend themselves in court or extend the definition of domestic partnerships to include opposite-sex couples, this is an added complication and cost. Some owners may see more value in dropping domestic partnership benefits to make some of the possible downsides go away.

Should your business offer domestic partner benefits?

So, what should your business do? Whether to offer domestic partner benefits depends on how many states you operate in, the costs of your benefits, your particular social values, and, to be realistic, what your accountant and lawyer are telling you. Perhaps the best advice to small businesses is to take a wait-and-see approach if you aren’t entirely sure. You might also want to initiate a discussion with your employees to see how they feel. 

For small companies, your decision either way may not be much of an issue. But if it is, you’ll want to be aware of that and address the situation in a way that is fair both to you as a business owner and to the interests of your employees.