High Court Says For-Profit Corporations Can Claim Religious Exemptions
BY ARTHUR S. LEONARD | In a decision with the potential to open up wide gaps in nondiscrimination protections for sexual minorities, the Supreme Court has ruled that a family-owned corporation could claim an exemption from complying with the Affordable Care Act (ACA) because of the owners’ religious objections to funding certain forms of contraception.
The court’s 5-4 decision on June 30 drew an impassioned dissent from Justice Ruth Bader Ginsburg, who specifically noted two gay-related decisions by state courts that could be endangered.
The court’s opinion by Justice Samuel Alito, however, disputed that the ruling would have the broad effects Ginsburg identified.
Ruling in Affordable Care Act case could weaken LGBT nondiscrimination protections, giving businesses an out
According to Alito, the ruling was a narrow one, addressing only the specific facts of the case, which was brought by two “closely-held” corporations, Conestoga Wood Specialties and Hobby Lobby Stores. These businesses began as small family enterprises –– Conestoga is a woodworking business begun by a Mennonite man in his garage that now employs 950 people, and Hobby Lobby is a small arts-and-crafts business started by a Catholic family that is now a national chain with more than 13,000 employees. As the businesses grew, the owners formed corporations, but did not sell stock publicly, each retaining ownership and control in their family circle.
The owners of Conestoga and Hobby Lobby have religious objections to four of the contraceptives included in the ACA’s minimum coverage requirements for employers’ healthcare plans. Failure to meet the ACA requirements can result in substantial fines, and the two companies argued that forcing them to pay for such coverage places a substantial burden on their free exercise of religion, a right protected by the federal Religious Freedom Restoration Act.
RFRA was enacted in 1993 by overwhelming majorities in both houses of Congress and promptly signed by President Bill Clinton. That law reflected an outcry that erupted after the Supreme Court, in 1990, ruled that individuals cannot claim a religion exemption from laws that apply generally if those laws were not intended to burden religious freedom. The case that gave rise to the ruling involved a Native American who lost his job after ingesting peyote as part of a religious ceremony, was denied unemployment benefits, and sued under the First Amendment’s Free Exercise of Religion Clause. The high court found he could not claim a religious exemption from a state law that generally barred the use of peyote and so was properly denied unemployment benefits.
With RFRA, Congress aimed to reinstate prior Supreme Court precedents that allowed individuals to claim exemption from laws that burdened their religious practice if those laws were not necessary to achieve a compelling governmental interest.
The big point of contention in the Conestoga and Hobby Lobby cases was whether a family-owned business corporation could seek the protections that RFRA’s authors were widely thought to have intended only for individuals. In the 1993 law, Congress spoke of “persons,” but Alito found that the term “person” when used in a federal statute includes corporations and other business entities, unless that law specifically says otherwise.
Lower courts have split over this issue, some arguing it is impossible for a corporation, as opposed to an individual, to have and practice religious beliefs. Countering this argument, Alito pointed out that states authorize the formation of religious corporations whose purpose is to advance religious beliefs and that Congress had recognized the existence of such entities by allowing them exemptions under the ACA. In fact, he noted, the Obama administration’s regulations under the ACA extended the coverage exemption to non-profit corporations that were not religious corporations, such as church-affiliated hospitals and universities, providing them with a “work-around” under which they would not directly fund the contraceptives. Alito treated these examples as the government’s concession that corporations can and do practice religion.
Alito conceded the government could have a compelling interest in seeing that women have access to contraception, but found it failed to create a mandate that was “the least restrictive means of serving that interest.” Instead, the contraceptive mandate “plainly fails that test,” because Congress could have made such coverage available at public expense or have extended to companies like Conestoga and Hobby Lobby the work-around already provided to religiously affiliated non-profit corporations.
Alito emphasized that the ruling is tailored to the specific circumstances raised by the plaintiff companies and expressed no opinion about whether it might apply to publicly-traded companies or to situations other than the contraception issue. He did, however, note that there are no reports of publicly traded corporations seeking religious exemptions from laws of general application and suggested it was unlikely they would do so.
Ginsburg, by contrast, sounded the alarm that the court was ripping a hole in federal –– and potentially state –– laws on a wide range of issues, including employment and public accommodations nondiscrimination protections.
“Until this litigation,” she wrote, “no decision of this Court recognized a for-profit corporation’s qualification for a religion exemption from a generally applicable law, whether under the Free Exercise Clause or RFRA. The absence of such precedent is just what one would expect, for the exercise of religion is characteristic of natural persons, not artificial legal entities” such as corporations.
Ginsburg quoted from an 1819 opinion by Chief Justice John Marshall observing that a corporation is “an artificial being, invisible, intangible, and existing only in contemplation of law,” and a 2010 statement by retired Justice John Paul Stevens, in his last great dissenting opinion, in Citizens United, pointing out that corporations “have no consciences, no beliefs, no feelings, no thoughts, no desires.”
Alito argued that an individual or family should not have to sacrifice their right to free exercise of religion just because they incorporate their small business to gain the advantages of doing so. Ginsburg countered that employers seeking the benefits of doing business as corporations should also have to assume the responsibilities of complying with generally applicable laws.
The court’s failure to state explicitly that RFRA would not provide religious exemptions for publicly traded corporations alarmed Ginsburg.
“The Court’s determination that RFRA extends to for-profit corporations is bound to have untoward effects,” she wrote. “Although the Court attempts to cabin its language to closely-held corporations, its logic extends to corporations of any size, public or private. Little doubt that RFRA claims will proliferate, for the Court’s expansive notion of corporate personhood –– combined with its other errors in construing RFRA –– invites for-profit entities to seek religion-based exemptions from regulations they deem offensive to their faith.”
Ginsburg cited two examples of particular concern to the LGBT community –– a 1985 case from Minnesota and a New Mexico case from last year, both involving family-owned businesses asserting claims of religious exemption from gay rights laws.
The Minnesota case involved a health club owned by born-again Christians that denied membership to anyone they deemed “antagonistic to the Bible,” including “fornicators and homosexuals” as well as unmarried heterosexuals cohabiting and married women working without their husband’s consent. The Minnesota courts held that this policy violated the state’s ban on public accommodation discrimination, and specifically the ban on sexual orientation discrimination.
The New Mexico case involved Elane Photography, which refused to provide photographic services for a lesbian commitment ceremony. Elane claimed a First Amendment right to withhold its services as well as an exemption under the state’s version of the RFRA, but the New Mexico Supreme Court rejected both claims, finding the company’s refusal to provide services a violation of the state’s gay rights law.
“Would RFRA require exemptions in cases of this ilk?,” Ginsburg asked. “And if not, how does the Court divine which religious beliefs are worthy of accommodation, and which are not? Isn’t the Court disarmed from making such a judgment given its recognition that ‘courts must not presume to determine the plausibility of a religious claim’?”
Alito had commented that religious objections to employing people because of their race would not be allowed pursuant to the Civil Rights Act of 1964, but he failed to address Ginsburg’s more general objection.
“There is an overriding interest, I believe, in keeping the courts ‘out of the business of evaluating the relative merits of differing religious claims,’” she wrote, quoting from an opinion by Justice Stevens, “or the sincerity with which an asserted religious belief is held.”
She expressed concern that approving some religious claims and not others could lead to a perception that the court was favoring one religion over another, and suggested that with the new ruling the court “has ventured into a minefield by its immoderate reading of RFRA.”
According to Ginsburg, only organizations formed “for a religious purpose, engaged primarily in carrying out that religious purpose, and not engaged substantially in the exchange of goods or services for money beyond nominal amounts” should be entitled to religious exemptions from complying with general laws.
Alito’s opinion was joined by Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy, and Clarence Thomas.
Ginsburg’s dissent was joined by Justice Sonia Sotomayor. Justices Stephen Breyer and Elena Kagan joined Ginsburg’s dissent in part, but said it was not necessary to decide –– as Ginsburg’s dissent did –– whether “for-profit corporations or their owners may bring claims” under RFRA, since they agreed with Ginsburg that Conestoga and Hobby Lobby’s exemption claim would fail even if RFRA applied.
Since court ruling was based on RFRA rather than a First Amendment finding, it could be overruled if Congress were to amend the 1993 law to create, for example, a distinction between non-profit and for-profit corporations or to eliminate exemptions for all but religious corporations.
The decision is yet another in a growing body of Supreme Court rulings expanding the rights and immunities of corporations by treating them as “persons.”
And it signals the importance of making sure that proposed laws to ban sexual orientation and gender identity discrimination, such as the Employment Non-Discrimination Act, address the issue of religious exemptions carefully to avoid the problems Ginsburg highlighted in her dissent. Indeed, the ruling may require LGBT advocates to examine existing state and local laws to determine whether amendments are necessary to close any loopholes, since there are thousands of privately-held corporations and other small businesses that might be able to claim exemptions under this decision, especially since many states adopted their own versions of RFRA in the years after 1993.