Does “Hobby Lobby” Apply to My Family Business?


On Monday, June 30, 2014, the United States Supreme Court ruled that “closely-held” for-profit companies could be exempt from the Affordable Care Act (“ACA”) requirement to offer birth control coverage to their employees. As with many controversial Supreme Court decisions, Hobby Lobby is getting more attention for the precedent it may have set for the future, rather than for the decision itself. But without discussing what the opinion really grants to Hobby Lobby and what the full impact is, the threshold question for every family business ought to be: Does this case even apply to me and my company?

The Court indicated the exemption only properly applies to closely-held, for-profit corporations run on religious principles for which the requirement of the ACA imposed a substantial burden on their religious liberty. According to the Court, the concept of being “closely-held” speaks only to the number of equity owners, not the size of the business. Hobby Lobby, itself, is reported to have 500 stores and employ more than 13,000 workers. In identifying Hobby Lobby as “closely held”, the Court relied heavily on the fact that, despite its growth, the company was still exclusively owned by the Green family – just the parents and direct children. On multiple occasions in the opinion, the author, Justice Samuel Alito, clarified that the ruling did not apply to large, publicly-traded corporations.

The Court was not as abundantly clear on how the ruling applied to all the businesses in between these two extremes. The Court did not expressly say one way or another whether the exemption from the ACA applied to the middle ground – those privately held corporations that may happen to have larger shareholder bases. Similarly, the Court did not say if it was possible that ownership in a family owned business could be sufficiently diffused throughout the family that the corporation would no longer be deemed “closely-held”.

So, for now, it seems we can proceed on the basis that family-owned businesses held only by a handful of true family members, regardless of revenues or employees, are the kinds of companies the Supreme Court is identifying as potentially being eligible for the exemption from the ACA discussed in the opinion.

(More to come on what the Hobby Lobby opinion does to validate the distinction and special role of closely held family businesses in our society and economy!)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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