Two Significant Decisions Affecting Employers Issued the Final Day of the U.S. Supreme Court Session

by Miller & Martin PLLC

On the last day of its 2013-2014 session, the U.S. Supreme Court held  that (1) for-profit companies are protected as "persons" under the federal Religious Freedom Restoration Act of 1993 (RFRA) and (2) that the government cannot compel individuals who are not "fully-fledged government employees" to pay agency representation fees to a union.

Burwell v. Hobby Lobby

The key question in the Hobby Lobby case was whether for-profit companies have standing (or are able legally) to assert the protections of the federal Religious Freedom Restoration Act of 1993 (RFRA). RFRA prohibits the federal Government from substantially burdening a person's free exercise of religion, even if the burden results from a law or other rule which has general application (i.e., it is not specifically designed or targeted to affect religious freedom), unless the Government can show the application of the burden (1) is in furtherance of a compelling government interest and (2) is the least restrictive means of furthering that compelling interest.

The vehicle for this RFRA question was the Patient Protection and Affordable Care Act of 2010 (ACA) and specifically the requirement that employers with more than 50 employees must provide coverage for 20 contraceptive methods which have been approved by the Department of Health and Human Services. Four of these methods were opposed by Hobby Lobby and Conestoga Wood Specialties because they may have the effect of preventing an already fertilized egg from developing any further by inhibiting its attachment to the uterus. Because the owners of Hobby Lobby and Conestoga Wood Specialties believe that life begins at conception, asking them to pay for contraceptive methods for their employees which using this definition would end a life was a violation of their Christian beliefs, and, they argued, thereby a violation of RFRA.

Financially, Hobby Lobby was looking at a $475 million a year cost and Conestoga Wood Specialties $33 million if they refused to cover such contraceptive methods as part of their employee health insurance plans under the penalty section of the ACA.

What the Court Said – In what most all Court observers anticipated would be a close 5-4 decision (written by Justice Alito), the Court held that for-profit companies do have standing to assert RFRA protections.

The majority stated that "to do otherwise would leave merchants with a difficult choice: give up the right to seek judicial protection of their religious liberty or forgo the benefits of operating as a corporation. RFRA's text shows that Congress designed the statute to provide very broad protection for religious liberty and did not intend to put merchants to such a choice." "The Dictionary Act defines 'person' as including corporations. The Government has already conceded as much by exempting non-profit corporations from the ACA contraceptive mandate which is at issue in this case; no conceivable definition of 'person' can include natural persons and non-profit corporations but not for-profit corporations." "Any suggestion that for-profit corporations are incapable of exercising religion because their purpose is to make money flies in the face of modern corporate law. . .as corporations are authorized by the states in which they are incorporated to pursue any lawful purpose or business, including those which are in conformity with their owners' religious principles."

Perhaps the most compelling argument put forth by the Government through the Department of Health and Human Services and argued by the U.S. Solicitor General as to why corporations should not be allowed to assert religious beliefs was the difficulty of ascertaining "the beliefs of a corporation." The majority of the Court was not moved by this argument, however, saying they were not aware of any large, publicly traded corporations which were asserting RFRA rights. The Court also found again here a contradiction to this argument based on the Government's exception to the ACA contraception requirements for non-profit corporations. "What reason is there to think that Congress believed that spotting insincere claims would be tougher in cases involving for-profits?" "Corporate laws provide that corporations must define who their decision makers will be. To the extent there arise disputes among the owners of a corporation regarding religious beliefs, these can be resolved the same as any other dispute."

"The Court assumes that the interest in guaranteeing cost-free access to the four challenged contraceptive methods is a compelling interest within the meaning of RFRA. The Government has failed to satisfy the second 'least restrictive means' standard, however." "The Government could assume the costs of these four contraceptive methods to women who are unable to obtain coverage based on their employers' religious objections to them." "Or the Government could extend the exemption it has already established for non-profit religious organizations to for-profit employers with religious objections to the contraceptive mandate."

What the Court Did NOT Say – The Court did not say that this decision should be read to hold that all insurance coverage mandates (for services like vaccinations or blood transfusions) will necessarily fail if they conflict with an employer's religious beliefs. It also did not say RFRA can now be used as a basis for employers to avoid compliance with antidiscrimination laws.

"Here, there is a less restrictive alternative to fulfill the Government's compelling interest of providing contraceptive services, such that this particular ACA mandate does violate RFRA regarding those for-profit corporations who have an objection to it based on their religious beliefs, and that is all we are addressing in this opinion today."

Harris v. Quinn

The key question in the Quinn case was whether non-union home-health care workers could be compelled by state law to pay union agency representation fees.

What the Court Said – In another 5-4 decision, also written by Justice Alito, the Court held that such requirements are not legal regarding non-union members.

The fees at issue were required by the State of Illinois. All home-health care providers who received Medicaid payments had to pay these fees in order to be represented by a union in State agency proceedings. A group of public-sector unions in Illinois accordingly was seeking to collect these fees from a group of home-health care workers who were paid with Medicaid funds. The home-health care workers challenged the legality of the fees saying they violated their First Amendment rights of free speech and association by making them fund a union they were not a member of.

A 1977 Supreme Court opinion, Abood v. Detroit Bd. of Educ., provided that public employers such as the State of Illinois can require all employees (whether members of the public employer's union or not) to pay certain types of union fees, as long as such fees were not used to support ideological activities. Home-health care workers paid by Medicaid had been deemed to be "state employees" for collective bargaining purposes only by the Illinois Public Labor Relations Act (PLRA). So this designation was the basis for the public-sector unions seeking the agency representation fees from the home-health care workers.

This portion of the PLRA was struck by the Court, however, on the basis that merely calling such workers "state employees" for union organization purposes but not including them in most state employee benefits was an invalid basis for compelling them to pay the union agency representation fees, such that the Abood decision should not be extended to these workers.

Specifically, the Court held that the collection of a union agency representation fee from the home-health care workers is prohibited by the First Amendment, because the agency representation fee provision contained in the PLRA did not serve "a compelling state interest that cannot be achieved through means significantly less restrictive of associational freedoms." As a result, the First Amendment protection of freedom of speech and association was upheld, and the collection of an agency representation fee from home-health care workers who were not really "full-fledged state employees" and did not want to join or support a union is prohibited.



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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