• Kyle Dickson

U.S. Supreme Court Landmark Case: Burwell v. Hobby Lobby Stores, Inc.

UNITED STATES SUPREME COURT LANDMARK DECISION:

RELIGIOUS RIGHTS OF PRIVATE CLOSELY-HELD FAMILY BUSINESSES UPHELD


In one of the most hotly contested cases of the 2013-2014 term, the Supreme Court made a landmark ruling regarding a family’s religious rights in running their family-owned business on June 30, 2014. Burwell v. Hobby Lobby Stores, Inc. involved the objections of privately-owned businesses to the coverage of certain types of contraception under employer health care plans, as required by Department of Health and Human Services (HHS) regulation under the Affordable Care Act (ACA). In a decision that could have significant impact for other privately-held businesses, for-profit corporations, and their employees, the Supreme Court held that closely-held for-profit corporations are exempt from the HHS contraception regulation.


Hobby Lobby is an arts and crafts company founded by David Green and owned by the Green family with about 21,000 employees. The Green family are devout Christians. The Hobby Lobby case also involved Mardel Christian and Educational Supply, owned by Mart Green, one of David’s sons. Hobby Lobby’s case was consolidated with the case of Conestoga Wood Specialties, a small furniture company owned by the Hahns, a Mennonite family.


The decision was not founded on a private company’s right to raise religious First Amendment claims, but rather on an interpretation of the Religious Freedom Restoration Act of 1993 (RFRA). The companies relied on the RFRA’s mandate that the Government not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability, otherwise that person may be entitled to an exemption. The law presumes the exemption unless the Government can show that its action: (1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest. The employers objected to four types of contraception required to be covered by their health plans under the HHS regulations as a burden of their exercise of religion entitling them to an exemption under RFRA.


Under the ACA passed in 2010, the HHS is charged with determining what types of contraception should be covered by employer health plans. Certain entities were exempted from the outset by the HHS: churches and related entities, non-profits that object to contraception, employers with grandfathered plans (no changes prior to March 23, 2010), and employers with fewer than 50 employees. Companies in violation of the law are faced with the alternative of being fined $100 per person per day or payment of higher wages to employees and a scaled tax.


The Court noted that allowing RFRA and First Amendment religious claims by corporate entities is not novel. But extending those rulings to for-profit corporations is new, a direction the Court has been reluctant to take until now. The Court also noted that its ruling was narrow and only applied to closely-held companies.


Interpreting the RFRA as applied to the facts of these cases, the Court found that the HHS regulations create a substantial burden on the company owners’ religious rights. To the company owners the objectionable contraceptive methods were equivalent to abortion. Thus, they were faced with the choice of assisting carrying out health plans contrary to their religious beliefs or being subject to fines, which would have amounted to about $475 million a year for Hobby Lobby alone. While the Court determined that a compelling government interest existed, it found that other, less restrictive means to further that interest existed, such as plans that allow employees to make separate payments for such coverage.


The Court also noted that the simplest approach would be for the Government to assume such costs as the HHS had not demonstrated that such a plan was not a feasible alternative.

“Closely-held” corporations are defined by the Internal Revenue Service as those which a) have more than 50% of the value of their outstanding stock owned (directly or indirectly) by 5 or fewer individuals at any time during the last half of the tax year; and b) are not personal service corporations. By this definition, approximately 90% of U.S. corporations are “closely held”, and approximately 52% of the U.S. workforce is employed by “closely-held” corporations. (Blake, 2014).


Interestingly, the Court noted that determining issues regarding a publicly-traded corporation’s religious beliefs would be far more problematic than the closely-held corporations involved in Hobby Lobby. This case could have far reaching impact. It is yet to be seen what other religious exemptions will be claimed by other employers under the Hobby Lobby ruling. Stay tuned for further developments!

References

Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 22 (2014).

Affordable Care Act, 42 U.S.C. § 18001 et seq. (2010).

Religious Freedom Restoration Act, 42 U.S.C. §§ 2000bb - 2000bb-4 (1993).

Blake, A. (2014, June 30). A LOT of people could be affected by the Supreme Court’s birth control decision — theoretically. The Washington Post. Retrieved from http://www.washingtonpost.com/blogs/the-fix/wp/2014/06/30/a-lot-of-people-could-be-affected-by-the-supreme-courts-birth-control-decision/.

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