Kansas Employment Law Blog Photo
 
Considering the Scope and Impact of the Supreme Court's Hobby Lobby Decision
07/10/2014
The Supreme Court's Hobby Lobby decision answered the question whether certain for-profit employers may, on religious grounds, avoid complying with the ACA's contraception mandate. But in doing so, it raised a number of other questions regarding the scope and impact of its decision.
 
Background. The Hobby Lobby case involved three for-profit corporations (Hobby Lobby, Mardel, and Conestoga Wood Specialties) whose owners objected, on religious grounds, to fully complying with the portion of the ACA's preventive-care mandate that requires most health plans to provide coverage (without cost-sharing) for all FDA-approved contraceptive methods for women. Specifically, these owners objected to a subset of contraceptive methods that they believed to be abortive - drugs such as "Plan B" and devices such as IUDs.
 
Ruling in favor of these employers, the court held that a separate federal statute, the Religious Freedom Restoration Act (RFRA), prevented enforcement of the contraception mandate against these employers because doing so would violate a sincerely held religious belief of the employers and because the mandate to provide coverage was not the "least restrictive means" of implementing the government's interest in ensuring access to these contraceptive methods.
 
Which Employers? One question that remains after the court's decision is which employers might be able to obtain a similar reprieve from compliance with the mandate. On its face, the decision applies to closely held for-profit corporations whose owners have sincerely held religious beliefs that are shared by the corporation. But many definitional issues remain.
 
Closely Held. What does it mean for an organization to be closely held? The court's opinion does not provide a definition. We know from the facts of the case that organizations with no more than five owners likely qualify. That was basically the ownership structure of Hobby Lobby, Mardel, and Conestoga Wood Specialties. At the other end of the spectrum, the decision suggests (but doesn't quite say) that publicly traded corporations don't qualify. But where the line is between the two isn't clear. Is it 10 owners? 100? Do they all have to be related to each other? (All the owners of Hobby Lobby, Mardel, and Conestoga are.) Do they all have to be actively involved in the business?
 
Perhaps this will be a question with a mostly practical answer. If an organization has few enough owners that they can agree on a particular set of religious principles by which the business will be operated, the business likely will be closely held.
 
The court's opinion suggests, for example, that it would be unlikely for a corporation with widely held stock ownership to be operated in a manner that prioritizes religious principle over profit-making. And that is probably true in most cases. But even corporate law and practice has evolved over time to recognize and accommodate concepts such as social responsibility and public benefit as legitimate corporate objectives. How those approaches might overlap with the principles at issue in the Hobby Lobby case remains to be seen.
 
Corporations. The employers at issue in the case were organized as corporations, so the court's opinion refers to corporations. Would the same result apply to a similarly situated employer organized as a partnership or limited-liability company? The rationale of the decision would seem to apply regardless of the form of the organization. But it's not totally clear.
 
For-Profit. The opinion is clearly limited to for-profit employers, but some non-profit organizations have similar sincerely (and strongly) held religious beliefs. Will the court's rationale eventually be extended to them as well? It may not take long to find out, as several non-profit organizations are actively challenging the application of the mandate.
 
Sincerely Held Religious Beliefs. The court's opinion doesn't provide a roadmap for what standard is applied to determine whether a business owner's religious beliefs are sincerely held or, if so, how those beliefs must be projected onto the entity that sponsors the health plan. It appeared to be undisputed that the business owners in question had sincerely held beliefs. And they had taken significant steps to incorporate those beliefs in their business practices, such as by adopting an express statement of faith and placing their stock in a trust that established faith-based management standards.
 
But it's not clear where the line is on that either. Is it necessary to formally incorporate faith-based standards in the company's organizational and ownership documents? Or is it enough to show that the business is operated in accordance with a faith-based standard? The court does say in a footnote that a "pretextual assertion of a religious belief" would not be enough to claim protection under RFRA, so there must be more required than a mere un-corroborated statement of religious belief.
 
Which mandates? The Hobby Lobby case only involved a few of the contraceptive methods that are currently required to be covered as part of the mandate. Does this mean the ruling is limited to those methods, or does it apply to all contraceptive methods under the mandate? Might it even apply to mandates other than contraceptive methods?
 
The court indicates it's decision will apply to more than just the contraceptive methods at issue in the case. The same analysis will apparently apply to the entire contraceptive mandate. But the case purports to be limited to the contraceptive mandate and may not extend to other mandates, including other preventive-care benefits, such as immunizations.
 
Impact. Looking at the bigger picture, a key question is how broad an impact the court's decision will have going forward. It is not likely to have a significant impact on the ACA as a whole, since it's limited to the contraceptive mandate and, within that, only to those employers that meet all the various standards described above.And it may not even have a significant impact on the contraceptive mandate, except in the limited number of cases where employers seek to avail themselves of the relief Hobby Lobby obtained.
 
Bottom Line. Although the case is significant for the legal proposition it establishes, a number of questions remain about how and when an employer might actually claim the relief provided. And on the whole, although significant for those it affects, the case will likely have a limited impact on the continued implementation of the ACA and the contraception mandate.
 
A copy of the court's opinion is here.
 


Editors
Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers Image
Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
Additional Sources
Subscribe to Kansas Employment Law Letter Image
Subscribe to Kansas Legislative Insights Image