It is likely that you are familiar with the widely publicized Hobby Lobby case that was decided this summer. What may not be as familiar are the implications for employers following the U.S. Supreme Court’s decision.

The ruling gave closely-held corporations like Hobby Lobby the green light to opt-out of providing comprehensive contraceptive coverage for its employees and families. Nonprofits, such as churches and religious hospitals, have always had an exemption from the new health care law, but Hobby Lobby turned the nation's attention to for-profit organizations.

Introduction to the Hobby Lobby decision

On June 30, 2014, in the case of Burwell v. Hobby Lobby, Inc., the U.S. Supreme Court ruled in a 5-4 decision that owners of closely held, for-profit corporations cannot be forced under the Affordable Care Act (the “ACA”) to provide their employees with certain kinds of contraceptives that offend their religious beliefs. With respect to these companies, the Court struck down the contraceptive mandate adopted by the U.S. Department of Health and Human Services (“HHS”). The Court’s decision was based on the protections offered under the federal Religious Freedom Restoration Act (“RFRA”), which prohibits the government from imposing a substantial burden on a person’s religious exercise unless it can show a compelling interest achieved by the least restrictive means.

Notably, the Hobby Lobby decision marks the first time that the Court recognized a for-profit corporation’s claim for protection of religious belief. To raise a claim under RFRA, “a person’s exercise of religion” must be affected. See 42 U.S.C. § 2000bb-1 (emphasis added). In reaching its decision, the Court interpreted the term person to include closely held corporations.

After determining that RFRA protection would apply to closely held corporations like Hobby Lobby, the Court proceeded to consider whether the HHS contraceptive mandate imposed a substantial burden on the company’s religious exercise, ultimately finding that it did because of the stiff penalties associated with non-compliance. The Court then concluded that, while the federal government had a compelling interest in requiring contraceptive coverage, the HHS contraceptive mandate was not the least restrictive means of achieving that interest, as evidenced by the existing accommodation for nonprofit employers with religious objections, which the Court highlighted as a less restrictive alternative. Under that alternative, the HHS funds the supply of contraceptives for employees of nonprofit organizations objecting to the HHS contraceptive mandate on religious grounds. The Court reasoned that the HHS could do likewise for for-profit employers with similar objections.

By not being the least restrictive means for achieving the government’s compelling interest, the HHS contraceptive mandate failed under the strict scrutiny test required by RFRA. Accordingly, the Court’s decision in Hobby Lobby struck down the HHS contraceptive mandate as applied to closely held corporations with sincerely held religious objections to compliance.

Limitations of the Decision and Future Implications for Employers

Since its issuance, the Hobby Lobby decision has been erroneously characterized by some as a victory for religious freedom under the First Amendment. It is important to note that the First Amendment’s guarantee of free exercise of religion was not at issue in Hobby Lobby. Employers should understand that the Hobby Lobby decision in no way expands employers’ rights under the Free Exercise Clause, nor does it allow employers to advance their religious views in the workplace or impose their religious beliefs on their employees.

It is also important to note that the Court explicitly limits its holding to closely held corporations. Additionally, the Court warned employers that its decision was limited to the HHS contraceptive mandate and explained that it should not be understood to hold that an insurance-coverage mandate must necessarily fail if it conflicts with an employer’s religious beliefs, citing immunizations as an example.

Employers should understand that the decision does nothing to alter their obligations under Title VII to protect their employees from discrimination on all federally protected statuses, including religious identification. Furthermore, employers should understand that they may not assert religious identity or beliefs as a defense for violating other neutral, generally applicable statutes, as the Court in Hobby Lobby explicitly rejected that notion and emphasized that their decision provides no such shield. As before, employers should continue to exercise care in all hiring, firing, and other employment actions to avoid the appearance that their employment decisions are made on the prohibited status of religious identity, lest they find themselves sued for religious discrimination in violation of Title VII.