Religious Institutions Update: April 2013

by Holland & Knight LLP

Implementation of the Patient Protection and Affordable Care Act (PPACA) is in full swing. The law requires non-exempt religious organizations with fewer than 50 full-time employees to determine whether they are a large employer subject to its requirements if they also have part-time employees. The calculation requires at least four steps and should be reviewed with counsel. First, the organization must distinguish its employees who work an average of 30 hours per week or 130 hours per month or more from other employees. The institution may use a look-back period of not less than three months and not more than 12 months. For 2014, the institution can use any six-month consecutive period in 2013. Second, the organization must add up the total number of hours of service of its part-time employees (including seasonal workers) for the month (working fewer than 30 hours per week, but not more than 120 for any worker) and divide the total hours of service by 120. Third, add this number to the full-time employees to determine the number of full-time employees for the month for purposes of large employer status. Repeat this for each calendar month in the preceding calendar year and divide by 12 to determine the average number of full-time employees on business days during the preceding calendar year. Special rules apply if your organization is part of a controlled group (e.g., a parent-subsidiary relationship or brother-sister relationship with another organization), in which case these employees are counted as well. Organizations also should be careful about distinguishing employees from independent contractors. Under the PPACA, “employee” means a common law employee, which is frequently confused with an independent contractor. Seek professional assistance to confirm whether your organization qualifies as a large employer or may avoid qualifying as such.

Key Cases

Teachers State Free Exercise Challenge to Breach of Religious Observance Clause in Collective Bargaining Agreements

In Berkowitz v. E. Ramapo Cent. Sch. Dist., No. 11-cv-07002, 2013 WL 1155357 (S.D.N.Y. Mar. 21, 2013), the court denied the defendant's motion to dismiss the plaintiffs' section 1983 claims pursuant to the Free Exercise Clause and New York State Constitution, stemming from the defendant's refusal to abide by provisions in the teachers' and nurses' collective bargaining agreements with the district, entitling them as observant Jews to take paid days off from work for religious observance charged as sick leave. But the court granted the defendant's motion to dismiss with respect to the plaintiffs' section 1983 claims pursuant to the Establishment Clause and Equal Protection Clause. Reviewing Port Washington Union Free Sch. Dist. v. Port Washington Teachers Ass'n, the assistant superintendent asserted that it stood for the proposition that using personal or sick days for religious observance is a violation of the Establishment Clause. For their part, the plaintiffs argued that the defendant's enforcement of their collective bargaining agreements discriminates against them on the basis of religion, so that the plaintiffs' claims are not exclusively derivative of the contract.

The court agreed that the plaintiffs' section 1983 claims for constitutional violations, not just contractual violations, were well founded. Furthermore, the court determined that plaintiffs showed a substantial burden on their religious exercise because the defendant's policy had the effect of diminishing their future pension as a result of the district deducting salary for their religious observances. The court also ruled that the plaintiffs' letter to the district constituted substantial compliance with the notice of claim requirements for violations of article I, sections 3 and 11 of the New York State Constitution. Finally, the court distinguished Port Washington and concluded that the religious observance clauses in the collective bargaining contracts were reasonable accommodations of the employees' religious beliefs consistent with "benevolent neutrality," had no impermissible effect of advancing religion because they afforded no additional leave days or salary to the plaintiffs, and caused no excessive entanglement with religion.

But the court found that the school district did not violate the Establishment Clause when it breached the religious observance clause because its purpose was not to endorse or disapprove of religion, but to adhere to the Port Washington decision. The court added that the policy did not have the effect of communicating "disapproval of religion" and did not foster any interaction between church and state, much less excessive entanglement. In addition, the court denied the plaintiffs' Equal Protection Clause claim because they did not allege that the district's motivation was to discriminate against them on the basis of their religion.

Courts Uphold Legislative Invocations

In Atheists of Fla., Inc. v. City of Lakeland, No. 12-11613, 2013 WL 1197772 (11th Cir. Mar. 26, 2013), the court ruled that the defendants' amended practice of selecting invocation speakers to open city commission meetings did not violate the Establishment Clause, that their former practice of selecting invocation speakers was not subject to challenge as moot, and that their expenditures toward selecting invocation speakers did not violate article I, section 3 of the Florida Constitution. The city's amended practice provides, inter alia, that no person is required to participate in the invocation, the invocation is to be voluntarily delivered by an eligible member of the clergy, the secretary of the city commission must compile an all-inclusive database of the religious congregations and chaplains with a presence in the community and invite them to deliver the invocation, and the commission shall not engage in any prior review of invocation content.

Applying a three-part test to the amended practice, the court found that: (1) the invocation speakers were primarily but not exclusively Christian, (2) the selection procedure was not motivated by an improper purpose, but was expansive and inclusive, and (3) the invocations were not exploited to advance or disparage a religion; therefore, the court could not scrutinize their content. As a result, the court of appeals affirmed the district court's determination that the prayer practice does not violate the Establishment Clause. But the court of appeals ruled that both it and the district court lacked jurisdiction to decide whether the city's prior invocation process was unconstitutional for lack of evidence that the city would reinstate that practice. The court of appeals was impressed that the city commission discontinued its prior speaker selection procedure a few days after it was requested to do so, and months prior to the filing of the lawsuit. Finally, the court of appeals ruled that the annual cost of $1,200 to $1,500 required to arrange for invocational speakers to attend meetings and solemnize the proceedings did not result in any pecuniary benefit upon any religious organization; therefore, the practice did not violate article I, section 3 of the Florida Constitution.

In Rubin v. City of Lancaster, No. 11-56318, 2013 WL 1198095 (9th Cir. Mar. 26, 2013), the court ruled that the city council's facially neutral two-step procedure of opening its meetings with privately-led prayers did not violate the Establishment Clause. The procedure requires: (1) the city clerk to compile and maintain an all-inclusive database of the religious congregations with an established presence in the community; and (2) to send an invitation to open a city council meeting with an invocation. The invitation provides that the invocation may not be used to convert others or to disparage any faith or belief. Voters approved the policy as a ballot measure. Finding the procedure constitutional, the court found that both sectarian and nonsectarian legislative prayer stand on equal footing as part of the fabric of American society, beginning with the first Continental Congress, and that "so long as legislative prayer — whether sectarian or not — does not proselytize, advance, or disparage one religion ... or affiliate government with a particular faith ... it withstands scrutiny." The court rejected the relevance of the reasonable observer test and Lemon test in favor of this historical test and an evaluation of the government's actions.

Specifically, the court concluded that the question is not whether, given the frequency of Christian invocations, the reasonable observer of Lancaster's city council meetings would infer favoritism toward Christianity, but whether the city itself has taken steps to affiliate itself with Christianity. The court ruled that the city had done the opposite of placing its seal of approval on Christianity by taking "every feasible precaution" to ensure the invocations were evenhanded, while avoiding the clerk engaging in any prior review of prayer content. Furthermore, the court was impressed by the extent of private choice and volunteerism inherent in the policy. The court rejected the plaintiffs' invitation to ban prayers in the name of Jesus Christ on the grounds that government may not establish a specific creed and may not decide what counts as a sectarian reference or embroil itself in religious controversies. "We 'can hardly imagine a subject less amenable to the competence of the federal judiciary, or more deliberately to be avoided where possible.'"

Contraceptive Coverage Mandate Imposes Substantial Burden on Religious Exercise of Individuals and Closely Held Corporations

In Geneva College v. Sebelius, No. 2:12-cv-00207, 2013 WL 838238 (W.D. Pa. Mar. 6, 2013), the court ruled that Geneva College had standing to challenge the contraceptive coverage mandate contained with the Patient Protection and Affordable Care Act (PPACA), but that its challenge was not ripe in light of various exemptions. The plaintiff, Geneva College, believes that the procurement, participation in, facilitation of, or payment for abortion including the use of what it alleges are abortion-causing drugs violates the commandment against murder. The plaintiffs, the Heplers, are practicing Catholics who run their closely held business, SHLC, as an extension of their faith opposed to abortifacients. The court declined to decide whether SHLC, as a for-profit corporation, may exercise First Amendment free exercise or Religious Freedom Restoration Act (RFRA) rights, because it ruled that SHLC may assert these claims on behalf of its owners.

The court determined that the mandatory insurance coverage imposed a substantial burden on the Heplers in violation of RFRA and the Free Exercise Clause by pressuring them to modify their behavior and to violate their beliefs by either giving up their health insurance generally or providing the objectionable coverage. The court rejected the government's argument that it had a compelling interest in requiring SHLC to be subject to the mandate in light of the myriad exemptions to the mandate's requirements already granted to over 190 million individuals. For the same reason, the court rejected the government's argument that the mandate was neutral and generally applicable and, thus, was not subject to the compelling interest test. But the court disagreed with the plaintiffs that the religious employer exemption violated the Establishment Clause by excluding the defendants; violated the Free Speech Clause inasmuch as the plaintiffs remain free to express their views about the objected to services; violated the Due Process Clause as too vague and ambiguous; was contrary to the PPACA's ban on providing abortion services inasmuch as the plaintiffs were not health insurance issuers with standing to enforce it; or was contrary to the Weldon Amendment to the Consolidated Appropriations Act of 2012, because they could not point to a definition of abortion that would be applicable to the statute. The court found that the plaintiffs stated a claim that the notice and comment requirements of the Administrative Procedure Act were violated.

In Monaghan v. Sebelius, No. 12-15488, 2013 WL 1014026 (E.D. Mich. Mar. 14, 2013), the court granted the plaintiff, Domino's Farms Corp, a secular, closely held, for-profit property management company (DF), an injunction under the Religious Freedom Restoration Act (RFRA) against enforcement of the contraceptive coverage mandate contained within PPACA. The court declined to decide whether DF has an independent right to exercise religion, but ruled that it may assert its single owner and director Thomas Monaghan's free exercise rights. The court ruled that merely requiring DF to provide coverage for contraceptive services or pay substantial fines constitutes a substantial burden on Monaghan's religious exercise. The substantial burden on Monaghan's free exercise "inheres in the coerced coverage ... not — or perhaps more precisely, not only — in the later purchase or use of contraception or related services." In addition, the court called into question the government's compelling interest in promoting public health and increasing access to and utilization of contraceptive services in light of the number of exemptions already in existence. Furthermore, the court agreed with the plaintiffs that the court could have provided the contraceptive services directly, or perhaps offer incentives to employers who provide for such services as a less restrictive way of serving the same compelling interests. Therefore, the court found that plaintiffs established a likelihood of succeeding on the merits. The court also found that the loss of First Amendment freedoms constitutes irreparable injury and balanced the harms to the plaintiffs if the injunction is denied with the harm to the government of granting it in favor of the defendants.

Court Denies Company's Request for Temporary Restraining Order

In Eden Foods, Inc. v. Sebelius, No. 13-11229, 2013 WL 1190001 (E.D. Mich. Mar. 22, 2013), the court denied a secular for-profit natural foods company's motion for a temporary restraining order against the PPACA contraceptive coverage mandate on the grounds that the company has no right to proceed on its own under the Free Exercise Clause and is not the alter ego of its owners. The court also denied the same request of its sole shareholder on the grounds that the Women's Preventive Healthcare Regulations are neutral, generally applicable rules not specifically targeted at conduct motivated by religious belief.

In Gilardi v. Sebelius, No. 13-104(EGS), 2013 WL 781150 (D.D.C. Mar. 3, 2013), the court denied the motion for preliminary injunction against the PPACA contraceptive coverage mandate of Freshway Foods, a closely held, secular for-profit company, owned in equal parts by plaintiffs Francis and Philip Gilardi. The court declined "to disregard the corporate form by imputing the religious beliefs of the Gilardis to the corporations they own." Without deciding that no secular, for-profit corporation can exercise religion, the court ruled that under the facts of this case, the corporation does not exercise religion and, therefore, cannot succeed on the merits of a claim that the regulations substantially burden its exercise of religion. The court found that Freshway Foods is engaged "in purely commercial conduct and do[es] not exercise religion under the RFRA." Furthermore, the court ruled that the regulations do not impose any burden on the Gilardis' exercise of religion because they are imposed instead on Freshway Foods. The regulations do not require the Gilardis, as distinct from their corporation, to "arrange for, pay for, provide or facilitate" health coverage.

Religious Institutions in the News

Russell Moore will lead the Southern Baptists' policy office.;

Melissa Rogers will lead the White House Office of Faith-based and Neighborhood Partnerships.;;

Episcopal bishops agreed not to help breakaway congregations.

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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