How the Supreme Court’s Hobby Lobby Decision Impacts Employers

Julie Stich, CEBSJuly 1, 2014January 17, 2015

By: Julie Stich

On Monday, June 30, Justice Samuel A. Alito Jr. announced the Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc.

What You Need to Know:

The Court ruled in favor of Hobby Lobby, finding that closely held for-profit corporations can claim religious exemption from providing contraceptives at no cost to their employees as mandated by the Affordable Care Act.
The ruling finds that corporations can fall within the Religious Freedom Restoration Act of 1993’s definition of persons and that closely held companies can claim religious exemptions.
The Court’s decision concerns only contraceptives and does not apply to other mandates that may conflict with an employer’s religious beliefs, such as coverage for immunizations or blood transfusions.

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Background:
The Affordable Care Act (ACA) mandates that companies provide contraceptive coverage at no extra cost to employees. Hobby Lobby Stores, Inc. and fellow plaintiff Conestoga Wood Specialties Corp. had sued, requesting on religious grounds an exemption from the mandate for certain types of contraceptives. The question was whether for-profit corporations could claim freedom of religious expression under the U.S. Constitution’s Free Exercise Clause and the Religious Freedom Restoration Act of 1993 (RFRA) to deny such coverage.

RFRA prohibits the government from imposing a substantial burden on a person’s exercise of religion unless the government proves that this burden furthers a compelling government interest. While language in RFRA applies to individuals (persons), courts and federal agencies, including the Department of Health and Human Services, have in the past entertained the idea that nonprofit corporations can be persons.

The companies argued that refusing to pay for contraceptive coverage would mean they would incur fines that would be a substantial burden. The government argued compelling interest in the mandate because it promotes public health and gender equality and ensures that all women have access to contraceptives without cost sharing.

The Tenth Circuit Court of Appeals had sided with Hobby Lobby, stating that for-profit corporations can be religious persons under RFRA and that the mandate substantially burdened their exercise of religion. On the other hand, the Third Circuit Court of Appeals ruled against Conestoga Wood Specialties, saying that a for-profit corporation can’t be a religious person and therefore can’t claim the right of religious freedom under RFRA or the Constitution.

Ruling:
In the 5-4 ruling, the Supreme Court affirmed the Hobby Lobby decision, and reversed the Conestoga Wood Specialties decision sending it back to the lower court to make its ruling consistent with the Supreme Court’s decision.

The ruling holds that the contraceptive mandate violates RFRA for closely held corporations, because corporations can fall within the law’s definition of persons. The opinion states that “protecting the free-exercise rights of closely held corporations thus protects the religious liberty of the humans who own and control them.” The court also finds that the fines for not providing coverage under the mandate or the penalties for dropping health care coverage altogether would cause a substantial economic burden for the companies.

While guaranteeing cost-free access to contraception may be a compelling governmental interest, the Court rules that the government did not show the mandate is the least restrictive means for furthering that interest. The Court suggests, for example, that the exemption allowed for nonprofit organizations with religious objections be extended to other organizations with religious objections. Another Court suggestion is that the government could pay for contraceptives if a woman’s employer objects to providing them based on religious beliefs.

The Court clarifies that the decision concerns only the contraceptive mandate; it does not apply to other insurance-coverage mandates that may conflict with an employer’s religious beliefs, such as coverage for immunizations or blood transfusions. It also does not “provide a shield for employers who may cloak illegal discrimination as a religious practice.”