Alert / Employee Benefits
Supreme Court rules Title VII protects LGBTQ employees from workplace discrimination

June 16, 2020

Benefits implications remain a bit murky for now

The U.S. Supreme Court ruled this week that Title VII of the Civil Rights Act of 1964’s prohibition on workplace discrimination on the basis of sex protects gay, lesbian and transgender employees from discrimination on the basis of their sexual orientation or gender identity.

The opinion was written by Justice Neil Gorsuch and joined by Chief Justice John Roberts along with all the members of the court’s traditional four-justice progressive bloc, resulting in a 6-3 vote.

Much will be written by employment lawyers over the coming days about the implications and scope of the decision. The court’s opinion resolved three separate cases involving employees whose employment was terminated due to their sexual orientation or gender identity. However, we note as employee benefits lawyers, that the decision establishes a federal foundation for workplace-related discrimination claims on the basis of sexual orientation or sexual identity – a foundation that would certainly apply to discrimination arising under a fringe benefit program.

For example, it seems clear that an employee benefits plan sponsor violates Title VII when it provides coverage for opposite-sex, but not same-sex, domestic partners (and we think the opposite is also true). Offering coverage to an opposite-sex spouse, but not a same-sex spouse, is also a violation of Title VII.

Lockton comment: Of course, a plan sponsor is not required to offer coverage to spouses, or to domestic partners for that matter, but it is now abundantly clear that to limit such coverage to spouses or domestic partners of the opposite sex, or to only same-sex spouses or partners, creates a Title VII problem.

Beyond that things get a bit murky, particularly around the benefits plan implications related to gender identity. Does today’s decision require a group medical plan to cover gender confirmation surgery or gender dysphoria therapy? What other benefits-related implications might there be?

Historical context for sexual orientation and gender identity discrimination in employment and employee benefits law

Discrimination based on gender identity has been an employment law issue for years. In December 2014, President Barack Obama signed an executive order prohibiting federal contractors from discriminating on the basis of sexual orientation or gender identity. Shortly thereafter, the Equal Employment Opportunity Commission (EEOC) issued a “right to sue” letter for, and filed an amicus brief in support of, a transgender nurse who alleged his employer, a hospital system, discriminated against him by not providing for gender confirmation healthcare services under its health plan.

In 2016, the Obama administration finalized nondiscrimination rules under Section 1557 of the Affordable Care Act (ACA). Section 1557, by cross-references to other federal civil rights statutes, prohibits discrimination on the basis of race, color, national origin, sex, age or disability in certain types of health insurance and healthcare. Section 1557 applies to most insurance contracts, as well as to self-funded healthcare plans sponsored by healthcare providers that receive federal healthcare dollars, or where the self-funded plans are administered by a claims administrator (like an insurance company) that either receives federal healthcare dollars or participates in an ACA health insurance marketplace.

The Obama administration construed the reference to “sex” in federal nondiscrimination rules to include sexual orientation and sexual identity. As a result, the 2016 rules imposed several nondiscrimination requirements regarding medical treatment by healthcare providers, and medical plan coverage, related to gender identity. For example, health plans sponsored by entities covered by Section 1557 could not:

  • Include a categorical exclusion of health services related to gender confirmation.
  • Categorically exclude gender confirmation-related services as “experimental” or “cosmetic.”
  • Deny or limit benefits (or impose special cost-sharing requirements) for medically appropriate, gender-specific healthcare simply because the covered person identifies as a gender for whom the care would not normally be appropriate, or because of the gender under which the person is identified on the health plan’s rolls.

Lockton comment: Thus, the plan could not deny coverage for medically appropriate well-woman care simply because the health plan’s rolls identify the person as a man, but the individual is a transgender female.

Just last week the Trump administration rolled back those rules, concluding the rules’ prohibition on discrimination on the basis of sex did not prohibit discrimination on the basis of sexual identity. But this week’s Supreme Court decision makes clear that, in the context of the nation’s most significant federal civil rights law, “sex” includes sexual orientation and gender identity. It seems likely yesterday’s court decision will throw that rollback into reverse.

As the dust settles over the coming months on this week’s decision, the implications for employee benefits plans will become clearer. How this week’s ruling applies to fringe benefits plans will likely be fleshed out in future regulatory guidance and court decisions. Nevertheless, the prudent plan sponsor will steer clear of enforcing or writing into its healthcare plan categorical exclusions for healthcare related to gender confirmations or making other plan changes that might not be consistent with the ruling.

 

Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.

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