Supreme Court Preview: Analysis of Hobby Lobby v. Sebelius

Written by: Martin Sicilian, Pomona College ’17

On June 28, 2012, the Supreme Court upheld the individual mandate to purchase health insurance that is at the heart of the Affordable Care Act (ACA), which aims to provide every U.S. citizen with comprehensive healthcare. The part of this provision that requires large businesses to buy plans that offer all forms of contraception at no cost to the employee is called the contraceptive mandate. Among these contraceptives are four drugs that prevent a fertilized egg from implanting in the uterus, known as “abortifacient drugs.” Churches and some other non-profit religious corporations are exempt from the mandate on religious grounds. Small businesses are exempt from the mandate, which applies only to businesses with 50 or more employees.

In June 2014, the Supreme Court will decide the case Hobby Lobby v. Sebelius together with a companion case, Conestoga Wood Specialties Corp. v. Sebelius. For the first time, the Court will address the question of whether or not for-profit corporations have free exercise rights protected under the First Amendment. The Court’s decision will weigh religious liberty against women’s rights, public health, and equal access to comprehensive healthcare. This case presents a set of complex issues, and the lower courts are divided. Three federal circuit courts of appeal – the Seventh, Tenth, and D.C. Circuits – have ruled that for-profit private employers can claim religious exemptions from the mandate, and two – the Third and the Sixth- have rejected the religious liberty claims.[1]

Hobby Lobby, America’s 135th largest private company,[2] has refused to comply with the mandate and has sued for an exemption. While Hobby Lobby is not the only for-profit corporation to file such a lawsuit on grounds of religious freedom, it is the largest to do so.[3] Hobby Lobby is privately owned by the Green family, a family of Evangelical Christians. Hobby Lobby sued the government in September,[4] claiming that the mandate conflicts with the owners’ religious convictions. The Greens argue that four of the 20 methods of contraception that the mandate requires coverage for, such as the morning-after and week-after birth control pills, are equivalent to abortion because they can prevent a fertilized egg from implanting in a woman’s uterus. The Green family has stated that it has no moral objection to the other 16 contraceptives, and will continue covering them for its employees.[5]

The Supreme Court is expected to consider the relevant questions in the following order. First, the Court will decide if for-profit corporations have free exercise rights. If it finds that they do not, the Court will then have to decide if the owners of corporations have free exercise rights that pass through to the corporation. If either one or both of these are answered in the affirmative, the justices will then decide whether the mandate is neutral and generally applicable, as required by the Court’s decision in Employment Division v. Smith (1990). If the Court finds the mandate meets the neutrality and general applicability requirements of Smith, the Court will then consider whether Hobby Lobby might find protection in the more strict limitations on the federal government’s ability to burden religious exercise that are imposed by the Religious Freedom Restoration Act (RFRA) passed by Congress in 1993. This is contingent upon whether the Court decides Hobby Lobby is a person for the purposes of RFRA, and therefore protected by it. If so, the Court will deliberate on whether or not the contraception mandate is a substantial burden to Hobby Lobby’s supposed free exercise rights. If this is found to be true, the Court will then consider whether the contraception mandate serves a compelling government interest and if the mandate is the “least restrictive” means of serving that interest. If both of these two things are found true, then Hobby Lobby will not get an exemption even if everything else goes in their favor. However, if the Court finds that the government lacks a compelling interest or failed to employ the least restrictive means of achieving its interest, Hobby Lobby may be eligible for an exemption from the contraceptive mandate. Although Hobby Lobby could have also mounted an argument for an exemption based on the First Amendment stemming from the Court’s ruling in Citizens United v. FEC (2010), both Hobby Lobby and the government focused their arguments on the RFRA.[6]

The future of Hobby Lobby’s success as a business is dependent on the Supreme Court’s decision in this case. The first question the Court will have to address is a fundamental one: is a for-profit corporation, in legal terms, able to exercise religion? If not, are its owners able to exercise their religious preferences through the corporation?[7] Although it may seem intuitive that a for-profit corporation would not have free exercise rights, this is not necessarily the answer that precedent suggests. Supreme Court case Braunfield v. Brown (1961) established that individuals do not shed protections for religious views when engaging in trade.[8] This principle was reinforced in U.S, v. Lee (1982), Swaggart Ministries v. Board of Equalization (1990), and Hernandez v. Commissioner of Internal Revenue (1989). In these three cases, for-profit corporations were assumed to have the ability to exercise religion. Evan Bernick, a visiting legal fellow at the Edwin Meese III Center for Legal and Judicial Studies, asserts that “never in its jurisprudence on free exercise of religion has the Supreme Court treated organizational persons differently from individuals.”[9] In Hobby Lobby’s brief, it mentions that First Amendment religious protections apply to for-profit corporations. Hobby Lobby borrows from First National Bank of Boston v. Bellotti (1978) in saying that “the proper question … is not whether corporations ‘have’ First Amendment rights … Instead the question must be whether [the challenged law] abridges expression that the First Amendment was meant to protect.” In other words, the First Amendment protects an activity, even if the source of that activity is a corporation.[10]

However, this issue is far from settled. Judge Ilana Rovner, dissenting from the Seventh Circuit Court of Appeals decision, stated that religion is an “intensely personal experience.” Judge Rovner’s reasoning does not address the theory that an owner’s religious liberties can “pass through” to their corporation. Under such a “pass-through” theory, even if for-profit secular corporations cannot directly exercise religion, the owners’ religious preferences can be exercised by the corporation. The Tenth Circuit Court ruled that such a “pass-through” theory applies to Hobby Lobby. However, the Third Circuit Court, in its ruling on the very similar case of Conestoga Wood Specialties Corp. v. Sebelius, said that it was not persuaded that a company’s owners’ free exercise rights could pass through to the corporation. In Citizens United v. FEC (2010,) the Supreme Court allowed corporations to exercise free speech rights under the first amendment via the pass-through theory. Still, it has been argued in district courts that the logic in Citizens United does not necessarily apply to all first amendment rights just because it applies to certain ones. The Green family is publicly touting the “pass-through” theory by arguing on its website that it should be able to run its business in accordance with its evangelical views. The website says that “it is by God’s grace and provision that Hobby Lobby has endured,” and so it wants to honor God by “operating their company in a manner consistent with Biblical principles.” The Greens argue that every American, including business owners, should be free to live and do business according to their beliefs.[11] The Supreme Court has yet to rule on the issue.

If the Supreme Court finds that Hobby Lobby is able to exercise religion, either directly or under the ‘pass-through’ theory, then Hobby Lobby will clear the first hurdle. However, if the Supreme Court rules both that for-profit secular corporations have no religious autonomy of their own and that people cannot exercise their rights to freedom of religion when acting in their associated capacity as a corporation, Hobby Lobby will almost certainly have to abide by the mandate.

In Employment Division v. Smith (1990), the Supreme Court ruled that people must comply with “neutral, generally applicable regulatory law(s)” even if the law incidentally burdens their religion.[12] Therefore, under Smith, the standard for establishing whether a law is a free exercise violation is whether the law is neutral, generally applicable, and serving a legitimate state interest (as opposed to a “compelling” state interest). Smith was a drastic departure from prior jurisprudence. In response to the Smithdecision in 1990 and the fear it inspired among religious citizens, Congress passed the Religious Freedom Restoration Act in 1993 in order to impose more strict limitations on the ability of the government to burden free religious exercise. The RFRA states that the government “shall not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability,” except if it demonstrates that the burden “is in furtherance of a compelling government interest” and “is the least restrictive means of furthering” that interest.[13]

In light of the Court’s ruling in Smith, the Court must decide: Is the contraception mandate “generally applicable”? Hobby Lobby argues that this mandate is not generally applicable because of the numerous exemptions that the Obama administration has allowed. Last June, a federal judge in Tampa, Florida estimated that one third of employed Americans work for an employer that is not required to provide coverage for contraceptives.[14] The government argues that the mandate is generally applicable in that it applies to all for-profit businesses with more than 50 employees. The Supreme Court has not yet discussed whether or not the ACA (and the contraception mandate) is generally applicable in this sense. While we cannot be certain precisely what guidelines the Supreme Court will use to test whether or not this mandate is “generally applicable,” we can be certain that a law does not have to be universally applicable in order to be considered “generally applicable.” If the Court finds that the contraceptive mandate is not generally applicable, it will strike the mandate down. If instead the Court finds the mandate to be generally applicable, it will then consider the potential challenge to the mandate’s constitutionality posed by the Religious Freedom Restoration Act (RFRA).

In this circumstance, the Court would have to decide: are for-profit corporations protected under RFRA? Under RFRA, it is unclear whether there exist relevant legal differences between a religious corporation like a church and a for-profit secular corporation with religious owners. It comes down to whether or not for-profit corporations are considered “persons.” As there is no definition of “person” in RFRA itself, the question reverts to the Dictionary Act, which defines a “person” to include “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.”[15] While the Dictionary Act does yield to context, Judge Sykes of the Seventh Circuit Court observes that “there is no statutory basis for defining the term to include only those corporations that are religiously affiliated nonprofit corporations”, as the government argues.[16]

Should the Supreme Court find that RFRA applies to Hobby Lobby, the following question would be: is the contraception mandate a “substantial burden” on Hobby Lobby’s exercise of religion? To answer this we must consider Hobby Lobby’s options if it is not found to be exempt from the mandate. Hobby Lobby has four options: 1) comply with the mandate, 2) pay a $1.3 million per day fine ($100 per day for each of its 13,000 employees), 3) drop its health care plan entirely and pay a $26 million per day fine (destroying their business entirely,)[17] or 4) shut down or sell its business. While options three and four are obviously burdensome, Hobby Lobby has to show that the first two options are “substantial burdens” as well. In Braunfield, it was established that making a set of religious beliefs more expensive is not the same as making the beliefs illegal, but when the financial burden is large enough, a set of beliefs can become practically impossible to follow. A $1.3 million per day fine would amount to a glaring 14.3% of Hobby Lobby’s yearly revenue, and the Supreme Court will have to decide whether this would amount to a “substantial burden”.

There is a good chance that the last three options would be found to be substantial burdens. However, Hobby Lobby has to show that all of its options, and not just some or most of them, would result in a substantial burden. The compliance option is where Hobby Lobby’s case finds itself upon shakiest ground. The government argues that that just because Hobby Lobby would be providing the contraception coverage does not mean that would be making the decision for those contraceptives to be used. Instead, employees make that decision, and Hobby Lobby’s legal obligation is just to provide a choice to use contraception. Giving employees a choice, the argument goes, cannot burden the beliefs of the employer when the choice is out of the employer’s hands. In the words of D.C. Circuit Judge Edwards, the mandate would not “encourage employees to use contraceptives any more directly than the government does by authorizing the corporations to pay wages.”[18] In its brief, Hobby Lobby argues that the government must recognize that the mandate would make the Greens “complicit” in abortions because the government has provided an exemption to churches. Hobby Lobby asks why an exemption would be allowed to churches if the government did not agree that the mandate makes corporations “complicit” in destroying an embryo.[19]

Under RFRA, even if the mandate is found to be a substantial burden, that burden is legally justified if it furthers a compelling government interest and employs the least restrictive means of doing so.[20] The government asserts three primary compelling interests.[21] First, it claims that the availability of contraception is important to public health. Second, it claims that all citizens, including women, should have equal access to health-care services. Third, it claims that everybody should have access to a comprehensive healthcare system. While these interests seem to intersect to some degree, they can essentially be boiled down to public health, gender equality and comprehensive healthcare for citizens. Hobby Lobby argues that these must not be compelling interests because the government has allowed religious non-profit corporations and small employers to be exempt from the mandate. What makes this a thorny issue is that government interests can be “compelling” enough to manifest themselves in some cases but not in others. There are many possible scenarios in which an interest could be compelling enough to justify general applicability but not complete applicability. Consider child labor laws: they apply to most businesses, but exceptions exist when reasonable. For example, children are allowed to work for their parents’ business.

The Supreme Court will likely weigh the burden to Hobby Lobby’s religious freedom against the public’s interest in the mandate’s fulfillment. As religious freedom is being weighed against not only gender equality but also the practical benefits of public health improvements achieved through comprehensive coverage, it is certainly possible that the Supreme Court will agree that the government does have a (sufficiently) compelling interest. Even if the justices are not convinced that there is a compelling interest, it should be noted that the Court usually defers to the government when it says it has a compelling interest. Not all of the information that is available to Congress and the President is available to the courts, and, more importantly, it is not considered the role of the judiciary to assess the practical merits of legislation.

If the mandate places a “substantial burden” on Hobby Lobby’s religious exercise, it must also employ the “least restrictive means” of serving the government’s compelling interests. This question is far from straightforward. The Supreme Court will have to consider what other means of achieving these interests could be, and how restrictive those means are. It is also unclear how the Court will go about determining what exactly constitutes the “least restrictive” means.

The public health benefits of contraceptives are well-documented,[22] but the Court may also take into account that the administration considers the mandate to be a very economically efficient way of fulfilling its objectives, since contraception prevents greater medical costs later on. Of course, the absolute “least restrictive” means to achieving the government’s interests would be to provide all of the contraceptives itself, but that would likely involve a divisive political battle over whether this is an appropriate use of taxpayer funds. Notably however, the government has not asserted as one of its compelling interests the reduced costs of implementing an insurance mandate as compared to delivering the contraceptives more directly. This may be because saving money is an interest the government can achieve in a number of ways that are far less burdensome on religious freedom.

Given the number of complex and interrelated issues involved in this case and the fact that the Supreme Court’s usual ideological lines often break down on First Amendment cases, the Court’s decision with respect to Hobby Lobby v. Sebelius is impossible to predict with any reasonable degree of certainty. However, given its potentially large ramifications, corporations, academics and legal professionals alike will be waiting eagerly on the result, which is expected to be announced this June.

 

[1] Dorothy J. Samuels, “Trouble for the Contraception Mandate,” New York Times, 11/12/13.

[2] “Hobby Lobby Stores,” Forbes, 12/15/13.

[3] Tim Talley, “Hobby Lobby Obamacare Lawsuit: Judge Rules Store Must Cover Morning After Pill,” Huffington Post, 11/19/12.

[4] Talley,” Hobby Lobby Obamacare Lawsuit.”

[5] Talley, “Hobby Lobby Obamacare Lawsuit.”

[6] Paul D. Clement, Michael McGinley, et. al, “Brief For Respondents on Hobby Lobby v. Sebelius,” Scotusblog, 10/2/14, AND Donald B. Verrill, Jr., “Reply Brief For the Petitioners,” Scotusblog, March 2014

[7] This is called the “pass through” theory because the preferences of the corporation’s owners are “passing through” to the corporation.

[8] Feisal G. Mohamed, professor, University of Illinois, “Does Hobby Lobby Have a First Amendment Case? Yes and No,” Huffington Post, 12/02/13.

[9] Evan Bernick, “Why All Americans Should Support Hobby Lobby’s Case Against Obamacare,” The Foundry, 12/23/13.

[10] Paul D. Clement, Michael McGinley, et. al, “Brief For respondents on Hobby Lobby v. Sebelius,” Scotusblog, 10/2/14.

[11] The Becket Fund for Religious Liberty Case Summary, http://www.becketfund.org/hobbylobby/

[12] Evan Bernick, “Why All Americans Should Support Hobby Lobby’s Case Against Obamacare,” The Foundry, 12/23/13.

[13] Religious Freedom Restoration Act of 1993, Pub L. No. 2000bb.(1993)

[14] This is largely due to the fact that small businesses are not required to provide this coverage.

Adam Liptak, “Court Confronts Religious Rights of Corporations,” New York Times, 11/24/13.

[15] Dictionary Act of 1947, Pub. L. No. 388, 61 Sat. 633 (1947).

[16] Judge Sykes, “Judge Sykes Versus Judge Robner on the HHS Mandate,” National Review, 13/11/13

[17] Hobby Lobby makes $3.3 billion in revenue yearly. A $26 million per day fine would be 287% of their yearly revenue. No matter how much they save on the plan they will be significantly in debt. Information as of December 2013, from Forbes: http://www.forbes.com/companies/hobby-lobby-stores/

[18] Fox News – Politics. Published 11/2/13. http://www.foxnews.com/politics/2013/11/02/appeals-court-deals-blow-to-obamacare-contraceptive-mandate/

[19] Paul D. Clement, Michael McGinley, et. al, “Brief For respondents on Hobby Lobby v. Sebelius,” Scotusblog, 10/2/14.

[20] Religious Freedom Restoration Act of 1993, Pub L. No. 2000bb.(1993)

[21] Andrew Evans, “The Hobby Lobby Case Explained,” Free Beacon, 12/9/13.

[22] Rebecca Wind,” Services Provided at Family Planning Centers Yield Myriad Public Health Benefits,” Guttmacher Institute, 8/7/13.

 

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