June 30, 2014

Supreme Court Decides Burwell v. Hobby Lobby Stores, Inc.

On June 30, 2014, the U.S. Supreme Court decided Burwell v. Hobby Lobby Stores, Inc., No. 13-354, holding that, under the Religious Freedom Restoration Act (RFRA), closely-held for-profit corporations cannot be required by the Affordable Care Act to provide group health plan coverage of certain kinds of contraceptives that the corporations' owners find religiously objectionable.

The federal Affordable Care Act and its implementing regulations require "non-grandfathered" group health plans to cover certain "preventive care" services and screenings for women without any "cost-sharing requirements" (such as deductibles and co-payments), including coverage for "all Food and Drug Administration approved contraceptive methods." Four of the 20 approved contraceptive methods may prevent the development of an already fertilized egg. Hobby Lobby Stores, Conestoga Wood Specialties, and Mardel—family-owned corporations operated in accordance with their owners' religious principles—sued to enjoin application of the contraceptive mandate to them, asserting religious objections to providing these types of contraceptives. They relied on RFRA, which provides that "Government shall not substantially burden a person's exercise of religion" unless the government "demonstrates that application of the burden to the person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest."

The lower courts came to conflicting results, with the Third Circuit upholding the contraceptive-coverage requirement as to Conestoga, and the Tenth Circuit holding that it could not apply to Hobby Lobby and Mardel.

The Supreme Court reversed the Third Circuit and affirmed the Tenth Circuit, holding that the regulations imposing the contraceptive mandate violate RFRA. The Court first concluded that for-profit corporations are eligible for RFRA protection. It held that Congress "included corporations within RFRA's definition of 'persons,'" that "[b]usiness practices that are compelled or limited by the tenets of a religious doctrine fall comfortably within" the exercise of religion, and that the laws of every state permit for-profit corporations to also pursue charitable or religious purposes. The Court limited its holding to "closely held corporations, each owned and controlled by members of a single family," and stated that similar claims by "publicly traded corporations" seemed "unlikely."

The Court then held that the contraceptive mandate substantially burdens the exercise of the companies' religion. The Court observed that noncompliance with the contraceptive-coverage mandate would expose the companies to millions of dollars in fines and penalties. The Court rejected the argument that the companies would face much lower penalties if they simply dropped insurance coverage altogether, stating that the companies had religious reasons for providing health-insurance coverage for their employees, and it was not clear that the companies would be better off dropping the coverage and paying the penalty than providing the coverage. The Court also rejected the argument that there was no burden on the companies' religious beliefs because the employee, and not the company, would be choosing the coverage and contraceptive method to be used, so "providing the coverage would not itself result in the destruction of an embryo." The Court held that discerning "the circumstances under which it is wrong for a person to perform an act that is innocent in itself but that has the effect of enabling or facilitating the commission of an immoral act by another" is itself a "religious and philosophical question" protected by RFRA.

Moving to the compelling-governmental-interest and least-restrictive-means tests, the Court assumed that the coverage requirement furthered a compelling governmental interest, but held that the government "has not shown that it lacks other means of achieving its desired goal," because the government "has already established an accommodation for nonprofit organizations with religious objections" that allows such a nonprofit to "self-certify that it opposes providing coverage for particular contraceptive services," after which its insurance issuer or third-party administrator, and not the nonprofit, must itself pay for the coverage. The Court noted that other plaintiffs have challenged that accommodation under RFRA, and the Court made clear that "[w]e do not decide today" whether such an arrangement is valid in those cases, but that "[a]t a minimum…it does not impinge on the plaintiffs' religious belief that providing insurance coverage for the contraceptives at issue here violates their religion."

The Court cautioned that it did not address "[o]ther coverage requirements, such as immunizations." The Court also cautioned that its decision does not provide a "shield" for employers to engage in discrimination in hiring (for example, on the basis of race) "cloaked as religious practice." The court held that the government has a compelling interest in providing equal opportunity in the workforce without regard to race, and that its prohibitions on racial discrimination are precisely tailored to achieve that goal. The Court also noted that "[r]ecognizing a religious accommodation under RFRA for particular coverage requirements…does not threaten the viability of ACA's comprehensive scheme in the way that recognizing religious objections to particular expenditures from general tax revenues would."

Justice Alito wrote the majority opinion, in which Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas joined. Justice Kennedy filed a concurring opinion. Justice Ginsburg filed a dissenting opinion, which was joined by Justice Sotomayor and in part by Justices Breyer and Kagan. Justices Breyer and Kagan also filed a separate dissent.

Download Opinion of the Court

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