Hobby Lobby Case Lets Closely Held Firms Avoid Religiously Objectionable ACA Mandate

78820071Today, the United States Supreme Court, by a 5-4 vote along strict conservative/liberal lines, confirmed that for-profit closely held corporations are protectable under the Religious Freedom Restoration Act of 1993 (RFRA), which reinforces the free exercise of religion clause of the First Amendment to the US Constitution.  The case arose from a Department of Health and Human Services regulation requiring health plans to cover four specific types of contraceptives in order to qualify as “minimum essential coverage” under the Affordable Care Act (ACA).

The Facts of the Case
The plaintiffs (collectively called Hobby Lobby) are two closely held Oklahoma corporations and their five related individual owners.  Hobby Lobby provides employees with comprehensive health insurance that includes several kinds of contraception, but its owners object to four other ACA-required kinds of contraception because they undo or divert conception rather than preventing it, which the owners find religiously objectionable as equivalent to abortion.  Without the required coverage for the controversial “abortifacients,” the Hobby Lobby health plan would be subjected to devastating multimillion dollar ACA penalties.

The government already exempts other types of organizations from the contraceptive coverage, including organizations that it considers more religious than Hobby Lobby.  Hobby Lobby is not in the religion “business,” as churches and religious orders are, but many of its policies and practices (like Sunday closing, Christian background music, and avoidance of alcohol-related merchandise and services) are inspired by its owners’ undisputedly sincere religious beliefs.  The government wanted to avoid further mandate exceptions that would erode the universal and compulsory nature of the ACA, so it fought for the right to deny an exception to Hobby Lobby.

The Holdings
The Supreme Court held that the Religious Freedom Restoration Act can apply to the sincere religious activities of closely-held, for-profit corporations and that HHS’s insistence that Hobby Lobby include the four contraceptive items violates that law.

Court’s Reasoning
RFRA requires that restrictions on religious exercise further a compelling government interest and that such restrictions employ the least restrictive means of furthering that compelling interest.  The Court assumed, without deciding, that making the four contraceptives available is a compelling government interest, but it held that the government failed to show that the ACA employer mandate, applied against people with sincere religious objections, is the least restrictive means of furthering that interest.  The Court suggested that, for example, the government itself could provide the contraceptives or that other ways of paying for the contraceptives might satisfy all parties.

PREMIUM CONTENT: Affordable Care Act – Summary of Final Regulations

Scope of Decision
The Court expressly cautioned that this decision applies only to the ACA contraceptive mandate and should not be understood to apply to all insurance mandates – like vaccinations and blood transfusions.  It also warned that the decision may not be used to protect illegal discrimination clothed as religious practices.  Approximately 90 other court cases on this issue are pending, and many will likely be resolved by this case.

Effects on Staffing Firms
This decision does not hold any special significance for staffing, but its focus on closely held firms potentially benefits thousands of staffing firms.  The four main elements that a firm must prove to benefit from this decision are:

  • that the firm is sufficiently closely held to fall under the scope of the decision;
  • that the legal requirement that the firm seeks to avoid conflicts with sincerely-held religious beliefs of the owners;
  • that the legal requirement that the firm seeks to avoid does not further a compelling interest of the government or is not the least restrictive way of furthering that compelling interest; and
  • that exempting the firm from the requirement would not impermissibly violate compelling government interests other than the one that the requirement furthers.

This opinion does not say what exactly will constitute “closely held” for the purpose of RFRA.  There are definitions of the term in other laws, but the opinion noted that the purpose of protecting corporations as persons is to protect the rights of people associated with the corporation (like shareholders, officers, and employees); so that may become the applicable overriding principle for RFRA.  The Court briefly discussed how religious disputes among owners could be resolved but deferred to state corporation law for those situations.

MORE: Who should pick up ACA’s tab?

George M. Reardon

George M. Reardon
George M. Reardon is an attorney whose practice is focused on the staffing industry. He can be reached at georgemreardon (at) aol (dot) com.

George M. Reardon

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