Justice Samuel Alito Jr., United States Supreme Court
Justice Samuel Alito Jr., United States Supreme Court (Diego M. Radzinschi / National Law Journal)

WASHINGTON — In ruling Monday on corporations’ religious freedom and the Affordable Care Act’s contraceptive insurance requirement, a narrow U.S. Supreme Court majority insisted its decision was limited to closely held corporations.

But legal and employment experts warned that the court might have opened the door to new and broader challenges.

“The implications of this decision could be extremely broad,” said Steve Friedman, cochairman of Littler Mendelson’s employee-benefits practice group.

“This decision allows religious beliefs to dictate the extent to which closely held companies must comply with various provisions of the Affordable Care Act,” he said. “There are certainly other mandates in the ACA apart from those dealing with contraception that could be claimed to be objectionable by particular employers.”

And, he added, there is no reason to believe that the principles of the case would not extend to other areas of the employer-employee relationship.

“It is unclear whether employers could effectively object to providing coverage to same-sex couples where there is state-sanctioned, same-sex marriage and an employer covers spouses under a health care plan,” Friedman said. “Additionally, there are many other types of statutes that conceivably could be overturned to a limited extent on account of objections from religious business owners. These include child labor laws, the Family Medical Leave Act and other types of law.”

In Burrell v. Hobby Lobby, combined with Conestoga Wood Specialties v. Burrell, the 5-4 court, led by Justice Samuel Alito Jr., held that the contraceptive insurance requirement as applied to closely held corporations violated the Religious Freedom Restoration Act (RFRA).

The Internal Revenue Service defines a closely held corporation as one that has more than 50 percent of the value of its outstanding stock owned (directly or indirectly) by five or fewer individuals at any time during the last half of the tax year, excluding personal-service corporations.

The RFRA prohibits the government from imposing a substantial burden on a person’s exercise of religion unless the government proves it has a compelling interest and has chosen the least restrictive means of furthering that interest.

The owners of Hobby Lobby and Conestoga Wood objected to providing their employees with health insurance coverage for four of the 20 contraceptives included in the preventive health coverage for women under ACA regulations. They claimed that those contraceptives were abortifacients and that providing that coverage would violate their deeply held religious beliefs.

The U.S. Court of Appeals for the Tenth Circuit agreed with Hobby Lobby, but the Third Circuit ruled against Conestoga Wood.

Three Key Issues

In his majority opinion, Alito addressed three key issues.

First, he rejected the government’s argument that the RFRA did not cover for-profit corporations. Alito wrote that federal law includes corporations within the definition of “persons.” The government, he said, acknowledged that nonprofit corporations can bring suits under that law as “persons” and, he added, “no conceivable definition” of “person” would include natural persons and nonprofit corporations, but not for-profit corporations.

Second, in looking at whether the contraceptive requirement imposed a “substantial burden,” Alito said that Hobby Lobby and Conestoga Wood faced severe economic consequences unless they provided the insurance coverage: roughly $475 million annually for Hobby Lobby and $33 million annually for Conestoga Wood. If they eliminated their employee health insurance plans, they could face penalties of $26 million for Hobby Lobby and $1.8 million for Conestoga Wood.

Because the contraceptive requirement “forces them to pay an enormous sum of money if they insist on providing insurance coverage in accordance with their religious beliefs, the mandate clearly imposes a substantial burden on those beliefs,” Alito wrote.

The majority assumed that the government did have a compelling interest in providing cost-free access to the four challenged contraceptive methods. However, Alito said in analyzing the third principal issue, the government failed to show it was using the least restrictive means of achieving that objective.

“The most straightforward way of doing this would be for the government to assume the cost of providing the four contraceptives at issue to any women who are unable to obtain them under their health-insurance policies due to their employers’ religious objections,” he wrote.

And, he said, the government already has created an accommodation for nonprofit organizations that object to this type of coverage on religious grounds: They can self-certify that they object and their insurer or a third-party administrator must provide the coverage without any cost-sharing. That accommodation could be extended to closely held corporations objecting on religious grounds, he suggested.

“Our holding is very specific,” Alito insisted, applying only to closely held corporations and the contraceptive insurance requirement.

The dissenters, led by Justice Ruth Bader Ginsburg, were not convinced. “Although the court attempts to cabin its language to closely held corporations, its logic extends to corporations of any size, public or private,” Ginsburg wrote, joined by justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.

“Little doubt that RFRA claims will proliferate, for the court’s expansive notion of corporate personhood—combined with its other errors in construing RFRA—invites for-profit entities to seek religion-based exemptions from regulations they deem offensive to their faith,” she said.

The majority’s expansive reading of the RFRA, she said in a summary from the bench, “raises a host of ‘me, too’ questions.” Can a for-profit business owner, for example, opt out of coverage for blood transfusions, vaccinations, antidepressants or medications derived from pigs, based on religious beliefs? Or can they opt out of Title VII’s ban on sex discrimination in employment?

And, she said, Hobby Lobby’s counsel at oral arguments (Paul Clement of Bancroft) acknowledged that his argument would apply just as well if an employer’s religion ruled out every one of the 20 contraceptives approved by the U.S. Food and Drug Administration.

‘Tip of the Iceberg’

Religion scholar Ira Lupu of George Washington University Law School agreed with the majority that corporations are unlikely to attempt to opt out of coverage of medical procedures, such as vaccinations.

“We haven’t seen religious-objections lawsuits to covering blood transfusions and vaccinations. And the reason is that people who object to those things only object to them with respect to themselves and their families, but not for others. That’s what makes these cases distinctive,” he said.

Alito wrote that corporations seeking to engage in invidious racial discrimination would not be able to hide behind religious beliefs, Lupu said. But “he doesn’t say anything about gender discrimination or LGBT [lesbian, gay, bisexual and transgender] discrimination.”

The next run of cases coming as result of Hobby Lobby, he predicted, will be to President Obama’s executive order barring LGBT discrimination in federal contracts. “There are going to be religious objections to spousal benefits. That’s going to be wide open under Hobby Lobby.”

Agreeing with Lupu, Kara Loewentheil, director of the Public Rights/Private Conscience project at Yale Law School, called the decision “the tip of the iceberg.”

“The problem with these decisions is that they allow religious believers to create their own laws,” Loewentheil said. “We’re not talking about a house of worship—we’re talking about the public marketplace and public laws. And when religious belief controls decisions in those spaces, it’s no longer taking place in isolation. Now we are likely to see many more employers trying to impose their religious beliefs on their employees—whether they object to contraception, abortion, artificial reproductive technologies, marriage equality or transgender rights.”

Hobby Lobby’s lead counsel in the lower courts, Mark Rienzi of Catholic University of America Columbus School of Law, disagreed.

“The court was careful to make clear it was making a restrained decision,” he said. However, Rienzi argued, the contraceptive-mandate accommodation the government offers to religious nonprofit organizations likely would violate the RFRA.

Rienzi and the Becket Fund for Religious Liberty are involved in numerous challenges to that accommodation. Their nonprofit clients object to signing a form certifying that contraceptive coverage would violate their religious belief, arguing that their very signature would make them complicit in providing the coverage.

“The problem is, the government is trying to force those people to be a part of the process—sign the form or get crushed,” he said. “This [Hobby Lobby] opinion means that cannot happen. Although the court said it was not ruling on nonprofits, the rationale applies.”

Even some Hobby Lobby supporters viewed Monday’s decision as anything but “restrained.”

Curt Levey of the conservative Committee for Justice said the decision’s impact would be felt in the political and cultural arenas as well as in the legal world—”where religious liberty has come under increasing attack in the last few years when it stands in the way of progressive social causes, including same-sex marriage.”

He predicted the decision would slow that trend’s momentum.

“Consider a few high-profile examples ranging from the courtroom—legal losses by a photographer and bakers who declined work involving same-sex wedding ceremonies; to the political—a successful boycott threat against Arizona Gov. Jan Brewer on whose desk was a state bill providing some protection against discrimination lawsuits for those acting on sincere religious beliefs,” he said. The ruling, he said, was a “game-changing decision.”

Contact the reporter at mcoyle@alm.com.