Last week, I posted a brief synopsis of the Supreme Court’s (SCOTUS) 5-4 decision in the Hobby Lobby case.  After reviewing the 89 pages of the majority and minority opinions, the question remains: What does the HL case really mean for Alabama employers?  The following is a more in-depth analysis of the decision and the impact it may have.

The majority opinion found that the Religious Freedom Restoration Act of 1993 (RFRA) did not prevent HL, a closely held, for profit corporation, from refusing to provide four types of contraception to its employees that would otherwise be required under the Affordable Care Act (ACA).  In reaching this conclusion, the majority looked at a number of definitions and facts, and why they are important in this case:

  1. Closely Held Corporation:  is a privately held corporation consisting of no more than five shareholders.
  2. Persons:  The Dictionary Act (definitions of words set forth in 1 U.S.C. Section 1) defines “persons” to include “corporations, companies, associations, firms, partnerships, societies, and joint stock companies as well as individuals.”  The Department of Human Services (HHS), in previous cases, conceded that a nonprofit corporation can be a “person” under FRFA, and that “no conceivable definition of ‘person’ includes natural person and non-profit corporation, but not for-profit corporations”.  HHS unsuccessfully argued that “the owners of the companies forfeited all RFRA protection when they decided to organize their businesses as for-profit corporations in the manner required by their religious beliefs.”  The majority found that “for-profit corporations, with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives.”
  3. RFRA, passed in 1993, almost unanimously by Congress and signed into law by President Clinton, prohibits the “Government [from] substantially burden[ing] a person’s exercise of religion even if the burden results from a rule of general applicability” unless the Government “demonstrates that application of the burden to the person-(1) is in the furtherance of a compelling governmental interest: and (2) is the least restrictive means of furthering that compelling governmental interest.”  RFRA was passed by Congress in response to two SCOTUS decisions:  the first concerned an Amish employee who was wrongfully denied unemployment benefits after being terminated for refusing to work on her Sabbath, and the second which found that two Native American Church members could be denied unemployment benefits after being terminated after ingesting peyote for sacramental purposes.   In 2000, Congress amended RFRA by passing the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), which amended the RFRA’s definition of the “exercise of religion”, by deleting any reference to the First Amendment and defined the “exercise of religion” to include “any exercise of religion, whether or not compelled by, or central to, a system of religious belief.”  Congress mandated that this concept “be construed in favor of a broad protection of religious exercise, to the maximum extent permitted by the terms of this chapter and the Constitution.”  In fact, the majority held that:  “By enacting RFRA, Congress went far beyond what this Court has held is constitutionally required.”  The majority in HL found that “there are other ways in which Congress or HHS could equally ensure that every woman has cost-free access to the particular contraceptives at issue here and, indeed, to all FDA-approved contraceptives…In fact, HHS has already devised and implemented a system that seeks to respect the religious liberty of religious nonprofit corporations while ensuring that the employees…have precisely the same access to all FDA –approved contraceptives as employees of companies whose owners have no religious objections to providing such coverage.”  HHS failed to provide a reason “why the same system cannot be made available when the owners of for-profit corporations have similar religious objections.” The majority was clear in stating that federal courts have no business addressing whether the religious belief asserted in a RFRA case is reasonable. Further, the majority found that the “least restrictive means standard is exceptionally demanding”, and that HHS has not met that standard, and failed to show that it “lacks other means of achieving its desired goal without imposing a substantial burden on the exercise of religion by the objecting parties in these cases.”  Although the Court suggests that the “government should provide the four contraceptives at issue to any women who are unable to obtain them under their health insurance policies due to their employers’ religious objections”, they did not rely on this option because HHS “has demonstrated that it has at its disposal an approach that is less restrictive than requiring employers to fund contraceptive methods that violate their religious beliefs…Under HHS’ s apparent belief that no insurance coverage mandate would violate the RFRA-no matter how significantly it impinges on the religious liberties of employers-that would lead to intolerable consequences.   Under HHS’s view, RFRA would permit the Government to require all employers to provide coverage for any medical procedure allowed by law in the jurisdiction in question-for instance, third-trimester abortions or assisted suicide.”  Notwithstanding this language, the majority limited its opinion to the contraceptive mandate alone.
  4. ACA:  The ACA and HHS regulations generally require employers with 50 or more full-time employees to offer “a group health plan or group health insurance coverage” that provides “minimum essential coverage”.  Unless an exception is applicable, the ACA “requires an employer’s group health plan or group health insurance coverage to furnish preventative care and screenings for women without any cost sharing requirements.”  Congress authorized the Health Resources and Services Administration (HRSA) to decide what types of preventative care must be covered, and in 2011, HRSA promulgated the Women’s Preventative Service Guidelines, which provided that employers are generally required to provide “coverage, without cost sharing” for “[a]ll Food and Drug Administration approved contraceptive methods, sterilization procedures and patient education and counseling.”  The HL decision found that “Although many of the required, FDA-approved methods of contraception work by preventing the fertilization of an egg, four of those methods…may have the effect of preventing an already fertilized egg from developing any further by inhibiting its attachment to the uterus.” HRSA also established exemptions from the contraceptive mandate for “religious employers” that encompassed “churches, their integrated auxiliaries, and conventions or associations of churches,” as well as “the exclusively religious activates of any religious order.”  HHS also exempted certain religious nonprofit organizations from the contraceptive mandate, defining “eligible organizations as a nonprofit organization that ‘holds itself out as a religious organization’” and “opposed providing coverage for some or all of any contraceptive services required to be covered…on account of religious objections.”  The ACA also exempts many employers from most of the coverage requirements, providing that a “grandfathered health plan” need not comply with many of the ACA’s requirements, including the contraceptive mandate.  The majority found that “over one-third of the 149 million nonelderly people in America with employer-sponsored health plans were enrolled in grandfathered plans in 2013.”  34 million employees are not covered because they work at companies that employ less than 50 people.
  5. EEOC.  Many commentators, and the dissenting minority on the SCOTUS expressed concerns that this opinion may lead to discrimination in the workplace, from hiring to termination. The majority stated that:  “Our decision today provides no such shield.  The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and the prohibitions on racial discrimination are precisely tailored to achieve that critical goal.”

The dissenting opinion written by Justice Ginsburg, begins as follows:  “In a decision of startling breadth, the Court holds that commercial enterprises, including corporations, along with partnerships and sole proprietorships, can opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.”

  1. ACA.  The dissent relies on a 1992 case that held, in part, “The ability of women to participate equally in the economic and social life of the Nation has been facilitated by their ability to control their reproductive lives [citation omitted].  Congress acted on that understanding when, as part of a nationwide insurance program intended to be comprehensive, it called for coverage of preventative care responsive to women’s needs…HHS, in consultation with public health experts, promulgated regulations requiring group health plans to cover all forms of contraception approved by the Food and Drug Administration (FDA).”
  2. RFRA.  The dissent stated that “Any First Amendment Free Exercise Clause [HL] might assert is foreclosed by the [Smith decision]” (the Native American Church case referenced above) where the Court found unemployment compensation was not available to two individual Church members who smoked peyote and were terminated. “Accommodations to religious beliefs or observances, the Court has clarified, must not significantly impinge on the interests of third parties.”  The dissent traces the history of RFRA in arguing that it is not applicable to the HL case, and chastises the majority in finding that “[d]espite these authoritative indications, the Court sees RFRA as a bold initiative departing from, rather than restoring, pre-Smith jurisprudence”, and finds that “[t]he Court’s reading is not plausible.”  The four questions addressed by the dissent regarding RFRA are:  1. “Do for-profit corporations rank among ‘person[s]’ who exercise…religion”?  2. “Assuming that they do, does the contraceptive coverage requirement ‘substantially burden’ their religious exercise”? 3. “If so, is the requirement ‘in furtherance of a compelling government interest’?”  4. “And last, does the requirement represent the least restrictive means for furthering that interest?” “Misguided by its errant premise that RFRA moved beyond the pre-Smith case law, the Court falters at each step of its analysis.”

The dissent believes that RFRA claims will proliferate as a result of the majority opinion in HL.

What does the HL decision mean for Alabama employers?  Time will tell, but I predict the following:

  1. More closely held for profit corporations, sole proprietorships and other associations may bring suits to opt out of the contraceptive coverage mandated by the ACA.
  2. The same type of entities may bring suits to opt out of other provisions of the ACA that relate to non-contraceptive coverage.
  3. At some point, a large, for-profit corporation (more than 50 employees) may decide to challenge various provisions of the ACA.  This is more likely as more regulations are imposed, grandfathered plans are phased out, and premiums continue to rise.
  4. Since religious discrimination is already happening in Alabama and around the country, I expect that some of the discriminatory practices may be defended on the basis of “freedom of religion”.  However, I don’t believe that this defense will be very effective.

There are more ACA cases that are winding their way through the court system.  Various Courts of Appeals, as well as SCOTUS are expected to be hearing cases and releasing opinions in the coming days and months that will further define the ACA and how employers and employees will be affected by this law.