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Federal Court Rejects Discrimination Claim Against Catholic Hospital’s Refusal to Cover Same-Sex Spouse Under Employee Benefit Plan

Posted on: May 7th, 2014 by Art Leonard No Comments

Although both the federal government and the state of New York recognize same-sex marriages, and the state of New York prohibits discrimination against same-sex married couples, a federal judge in Manhattan ruled on May 1 that a woman whose Catholic hospital employer refused to enroll her wife in the employee health insurance plan could not sue under the federal employee benefits law. U.S. District Judge Nelson S. Roman granted a motion to dismiss by Empire Blue Cross Blue Shield and St. Joseph’s Medical Center.

The plaintiff is identified in court papers as “Jane Roe.” She has been employed at the St. Vincent’s (Westchester) division of St. Joseph’s Medical Center since September 2007. After New York enacted its Marriage Equality Act in 2011, she married her same-sex partner. At the next open enrollment period for her employer’s health insurance plan later that year, she submitted an unsuccessful application to enroll her wife as a dependent. St. Joseph’s Human Resources department told her that the plan did not cover “same-sex spouses.” She filed grievance letters with both St. Joseph’s and the insurer, Empire Blue Cross Blue Shield. Empire responded to her final round grievance letter, stating, “under [the Plan], same sex spouse and domestic partner is an EXCLUSION under the benefit.” Evidently Empire’s letter-writer needs a remedial English course.

“Roe” then filed suit in federal court, alleging violations of two provisions of the Employee Retirement Income Security Act (ERISA), a federal statute that regulates employee benefit plans of non-governmental employers. Her main argument was that because of the U.S. Supreme Court’s decision last June in U.S. v. Windsor, declaring section 3 of the Defense of Marriage Act unconstitutional, the federal government is now required to recognize same-sex marriages that are valid under state law, as her marriage is, and thus ERISA’s non-discrimination provision must mandate non-discriminatory coverage for same-sex couples in compliance with New York Law. The New York Marriage Equality Act says, “A marriage that is otherwise valid shall be valid regardless of whether the parties to the marriage are of the same or different sex.”

The defendants argued that the New York statute is preempted by ERISA, and thus is inapplicable in this case. ERISA has a broad preemption provision, which states that the federal law “shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.” Judge Roman rejected the idea that ERISA would preempt New York’s marriage law, but he deemed that issue to be “irrelevant.” “The question presented by Plaintiff’s Complaint is not whether ERISA or New York State law applies on the issue of marriage, but whether a private plan violates a provision of ERISA by excluding same sex couples from beneficiary status,” he wrote.

As to that, Judge Roman concluded that the exclusion of coverage for same-sex couples does not violate Section 510, the provision of ERISA that is usually called the non-discrimination provision. This provision, which is titled “Interference with protected rights,” says that it is unlawful to “discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.” The typical complaint to which this section applies is a situation where an employer discharges somebody in order to prevent them from qualifying for benefits. The 2nd Circuit Court of Appeals, which sets precedents for the federal courts in New York, has said that this section was “designed primarily to prevent ‘unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights.” As a result of this narrow interpretation, trial courts within the 2nd Circuit have given a narrow reading to this provision, holding, in one case, that in order to assert a claim under this section, “plaintiffs must allege that defendant took some type of adverse employment action to interfere with the attainment of their benefit rights under the plan.”

Although courts in some other parts of the country have taken a broader view of the non-discrimination provision, their rulings are not binding on a trial court in New York. Judge Roman noted that ERISA leaves employers “generally free” to “adopt, modify, or terminate welfare plans” such as health insurance plans, and does not regulate the “substantive content of welfare-benefit plans.” Consequently, unless another federal statute (which would not be preempted by ERISA) would ban such an exclusion as discriminatory, a federal court would not have jurisdiction over the discrimination claim. New York’s Human Rights Act, which forbids sexual orientation discrimination in employment, was interpreted by New York courts beginning in 2008 to require public employers in the state to allow legally-recognized same-sex spouses of their employees to participate in their insurance plans, but ERISA preemption prevents the application of New York’s Human Rights Act to a private (that is, non-governmental) employer’s plan, and St. Joseph’s, a Catholic hospital, is a private employer.

This gap in coverage against sexual orientation discrimination might be corrected if the version of the federal Employment Non-Discrimination Act (ENDA) approved by the Senate last year were to be enacted, since ERISA does not preempt other federal statutes. Although prior versions of ENDA specifically stated that it would not require employers to provide benefits to same-sex partners of employees, and it incorporated the Defense of Marriage Act by reference, that provision was dropped from ENDA after the Supreme Court declared Section 3 of DOMA unconstitutional last year. However, ENDA broadly exempts from coverage those corporations that are deemed to be “religious employers” under Title VII of the Civil Rights Act of 1964. If St. Joseph’s Catholic affiliation would result in it been considered a “religious employer,” it would not have to comply with the non-discrimination provisions of ENDA either. Gay rights advocates have criticized this religious employer exemption as being broader than would be required by the First Amendment, but sponsors of the bill deemed it necessary to win sufficient votes for passage.

Jane Roe also claimed that the defendants violated their fiduciary duties under Section 404 of ERISA, which requires that administrators of employee benefits plans carry out their duties in the best interest of the beneficiaries. Roe argued that it violates fiduciary duties to enforce a provision in an employee benefit plan that is unlawful. Judge Roman easily rejected this argument, as he found that the exclusion of coverage for same-sex spouses does not violate ERISA or any other federal law and so is not “unlawful.” Judge Roman pointed out that an ERISA fiduciary’s obligation is to “carry out his or her duties in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of ERISA,” so no breach of fiduciary duty could be found in this case.

Judge Roman noted that in a different context ERISA might require recognition of a same-sex marriage. A federal court in Philadelphia ruled last year that when an employee benefit plan uses the term “spouse” without a specific definition of that term, an ERISA requirement that pension plans make surviving spouses automatic beneficiaries would have to be interpreted as including legally married same-sex spouses, so long as they are living at the time of the employee’s death in a state that recognizes their marriage. However, there is no ERISA provision requiring employers to even have health insurance plans for their employees, much less plans that also cover spouses and other dependents, so that decision in the case of Cozen O’Connor P.C. v. Tobits does not apply to Jane Roe’s claim. The Cozen O’Connor decision was not appealed to the 3rd Circuit, so it has value only as a persuasive precedent at best.

Jane Roe is represented by Debra Sue Cohen, Jeffrey Michael Norton, and Randolph M. McLaughlin of the New York City law firm Newman Ferrara LLP.