Summer 2014 SCOTUS Roundup: Burwell v. Hobby Lobby

by LeClairRyan

HobbyLobbyTo close out our review of the Supreme Court’s summer decisions impacting labor and employment issues, we’ll examine the ramifications of the much-publicized and hotly discussed Burwell v. Hobby Lobby.

Circuit Split Leads To Supreme Court Review
On June 30, 2014, the Supreme Court concluded that the federal government, through Health and Human Services (“HHS”), could not require faith-based private, for-profit employers to pay for certain forms of birth control for their employees that violated those employers’ “sincerely held” religious beliefs.

The regulations at issue – enacted by HHS to implement the Affordable Care Act (“ACA”) – required non-grandfathered health insurance plans to cover “preventive services” at no cost to participants. A number of companies challenged the requirement, including several closely-held for-profit corporations. In Conestoga Wood Specialties Corp. v. HHS, the Third Circuit held that a for-profit corporation could not challenge the requirement under the Religious Freedom Restoration Act of 1993 (“RFRA”). In contrast, in Hobby Lobby Stores, Inc. v. Sebelius, the Tenth Circuit concluded that the RFRA protected a for-profit employer. This split in the circuits led to review by the Supreme Court.

In its review, the Supreme Court held that corporations with sincerely held religious beliefs did not need to satisfy the contraceptive coverage requirement because the requirement was not being imposed using the least restrictive means possible under the RFRA.

Decision Leads to Controversy
The Supreme Court characterized its decision as narrow, noting that the religious freedom exemption would not likely extend to publicly traded corporations. The dissent, on the other hand, raised concerns, including whether corporations owned by individuals objecting to vaccinations and blood transfusions based on their religious beliefs may challenge a requirement that a health plan provide these benefits to employees.

Looking Forward – Potential Implications for Closely-Held, Faith-Based Employers
Immediately, the ruling will directly impact only closely-held, faith-based employers. While it is doubtful many employers will actually decide to invoke the religious exemption for contraceptive coverage, those employers seeking to do so should bear several things in mind.

First, the decision does not extend beyond closely-held corporations, and, in order to qualify for the exemption, the corporation must demonstrate that its owners hold “sincere religious beliefs.”

Furthermore, nearly 20 years ago, the Supreme Court ruled that the RFRA does not apply to states. As a result, the Hobby Lobby decision would have no impact on a state law mandating an employer’s insured health plan to provide contraceptive coverage.

In addition, at the federal level, the Hobby Lobby decision implicates a 2000 decision by the U.S. Equal Employment Opportunity Commission (“EEOC”), which requires employers to “cover the expenses of prescription contraceptives to the same extent, and on the same terms, that they cover” other drugs and preventive care, and “offer the same coverage for contraception-related outpatient services as are offered for other outpatient services.” If burdened in obtaining contraceptive coverage from her employer, an employee could sue based on the EEOC ruling.

Looking Forward – Broad Potential Implications
More broadly, the decision underscores the complications involved with employer-based health care. The ruling significantly signals an unwillingness of the Court to provide the federal government much leeway in its implementation of the ACA, when such implementation impacts and is limited by other federal rights. This may influence the ACA’s various other new mandates for employers to provide affordable health care. Beginning next year, companies with 100 or more full-time workers will have to comply with these mandates or pay a penalty. Those employing between 50 and 100 full-time workers have until 2016 to do so.

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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