The Supreme Court Rules in Favor of Corporations to Opt Out of Contraceptive Mandate in Burwell v. Hobby Lobby

by Cranfill Sumner & Hartzog LLP
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On June 30, 2014, in a decision on two cases involving application of a mandate of the controversial Affordable Care Act, the U.S. Supreme Court ruled that closely held corporations are not required to pay for employees’ contraceptives if the owners of the companies have religious objections. In Burwell et al. v. Hobby Lobby et al. (No. 13-354) (June 30, 2014), and in Conestoga Wood Specialties Corporation et al. v. Burwell et al. (No. 13-356) (June 30, 2014), the Supreme Court held 5-4 that the contraceptive mandate of the Affordable Care Act, requiring companies to provide cost-free contraceptives to employees, violated the Religious Freedom Restoration Act.

The Hobby Lobby Decision

Under the Religious Freedom Restoration Act of 1993, the Government may not take any action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest. The contraceptive mandate of the Patient Protection and Affordable Care Act of 2010 requires certain employers’ group health plans to furnish cost-free “preventive care and screenings” for women, including Food and Drug Administration approved contraceptive methods. At issue in Hobby Lobby and Conestoga are four contraceptive methods, which serve to inhibit further development of an already fertilized egg and operate as abortifacients.

The owners of three closely held corporations sued the Federal Government for violation of their religious beliefs under the Religious Freedom Restoration Act and the Free Exercise Clause of the First Amendment, citing their sincerely held beliefs that life begins at conception. The owners sought to enjoin application of the contraceptive mandate insofar as it requires them to provide health care coverage for these contraceptives. In No. 13-356, the Third Circuit denied the injunction, holding that a for-profit corporation such as Pennsylvania-based Conestoga Wood Specialties could not “engage in religious exercise” under the Religious Freedom Restoration Act or the First Amendment. In No. 13-354, the Tenth Circuit similarly denied an injunction, but held that businesses such as Oklahoma-based Hobby Lobby, Inc. and Mardel are “persons as contemplated by the definition in the Religious Freedom Restoration Act and that the corporations were substantially burdened in their exercise of religion by the mandate.

On Monday, in a majority opinion authored by Justice Alito, the Supreme Court reversed the Third Circuit’s ruling and affirmed the Tenth Circuit’s ruling, rejecting the Government’s arguments. Turning first to the Government’s contention that the Religious Freedom Restoration Act did not apply to corporations, the Supreme Court held that the Religious Freedom Restoration Act applied to govern the activities of the three closely held corporations and that the definition of “persons” in the Religious Restoration Freedom Act included corporations. The Government also failed to persuade the Court that the owners’ religious beliefs were too attenuated with an employee’s own choice of contraception to be substantially burdened by application of the contraceptive mandate. The Court noted that by requiring the owners to comply with the contraceptive mandate, the owners were forced to compromise their religious beliefs or face steep fines under the Affordable Care Act for refusing to provide the mandated health-care coverage. Finally, in assuming that the interest of guaranteeing cost-free access to the four challenged contraceptive methods is a compelling government interest, the Court likewise rejected the Government’s argument that the Affordable Care Act implements the least restrictive means of furthering that interest. In support of other least restrictive means of furthering that assumed interest, the Court referred to other provisions in the Affordable Care Act that applied to religious nonprofit organizations, exempting these organizations from the requirement to provide contraceptive coverage.

Justice Kennedy filed a concurring opinion, asserting that the majority did not properly resolve whether the Government should create additional programs to pay for the contraceptive methods that the corporate owners found objectionable. Justice Ginsberg authored a dissent in which Justice Sotomayor joined and Justices Breyer and Kagan joined as to all but one part. In her dissent, Justice Ginsberg noted that the Religious Freedom Restoration Act was misread by the majority and that the majority decision will open the door to a host of other implications. Justices Breyer and Kagan also filed a dissenting opinion, noting that a decision on the merits did not require a determination as to whether the Religious Freedom Restoration Act applied to for-profit corporations.

The Effect of Hobby Lobby

The high profile Hobby Lobby case has been closely monitored by advocates of corporate rights, religious rights, and women’s rights. The decision involves two aspects that appear to hold big implications in those contexts. First, the Supreme Court has held for the first time that a for-profit corporation can hold and exercise religious beliefs. Second, while the decision has received criticism by some women’s groups, the ruling also served to recognize a woman’s right to contraception as a compelling government interest, which has not been recognized before.

Nevertheless, as noted by Justice Alito, the holding is limited to the narrow set of circumstances involving closely held corporations and the contraceptive mandate. Although the decision turned on application of one, single requirement of the politically volatile Affordable Care Act, the Hobby Lobby ruling will likely have far more impact on religious liberty, employment, and corporation law.

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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