Supreme Court Rules In Favor Of Hobby Lobby, Opens Door To Religious Objections To Statutes Covering Employers

On June 30, 2014, the U.S. Supreme Court ruled that closely held, for-profit entities with religious objections to certain aspects of the birth control mandate imposed by the Patient Protection and Affordable Care Act ("the ACA") could avoid the mandate by invoking the Religious Freedom Restoration Act (RFRA).1 While the majority expressed intent to limit its holding to the facts of the cases before it, the decision's language may open the door for a variety of religious objections to generally applicable federal laws. Whether employers should actually raise those objections is discussed later in this article.

Summary of Supreme Court's Conclusion

Seeking exemption from the birth control mandate were three closely held entities: Hobby Lobby Stores, Inc., Mardel, Inc., and Conestoga Wood Specialties Corporation. Last year, the U.S. Court of Appeals for the Tenth Circuit ruled in favor of Hobby Lobby and Mardel, while the Third Circuit held that Conestoga did not have standing to challenge the birth control mandate.2

The Supreme Court's majority opinion closely tracks the Tenth Circuit's logic in the Hobby Lobby case,3 holding that (1) for-profit, closely held corporate entities are "persons" entitled to bring claims under RFRA; (2) the ACA's coverage mandate with respect to four forms of birth control placed a substantial burden on the religious beliefs of the entities seeking the exemption; and (3) while giving corporate employees free access to these four forms of birth control was a matter of compelling interest to the federal government, the ACA's coverage mandate was not the least restrictive means of achieving that goal.

In a strongly worded dissent, Justice Ginsburg disagreed with all three of these holdings. Justice Sotomayor joined Justice Ginsburg's dissent in full. Justices Breyer and Kagan dissented from the majority decision, refused to express an opinion on whether for-profit corporate entities could bring claims under RFRA, and joined in the remainder of Justice Ginsburg's dissent.

Birth Control Mandates Under the Affordable Care Act

The ACA mandates that employment-based group health plans covered by the Employee Retirement Income Security Act (ERISA) provide certain types of preventive health services at no cost to the participant. One provision requires these plans to include all preventive care and screenings recommended for women, as promulgated by the Health Resources and Services Administration (HRSA).4 Therefore, these health care plans must offer all FDA-approved contraceptive methods as preventive care.5

The ACA contains a number of exemptions to this requirement. Health plans that are "grandfathered" under the ACA are exempt from the preventive services requirements, but this exception applies only if the group health plans have not been significantly modified since March 23, 2010. Another exemption covers plans sponsored by churches, and a third covers plans sponsored by non-profit, religious-affiliated institutions. If such institutions certify they have faith-based objections to providing the contraceptive coverage, either the private insurers that provide the institutions' health insurance will provide the contraceptive coverage directly to the employees, thereby bypassing the employers, or the federal government will provide the coverage through the third-party administrators of self-funded plans.6

The penalties to employers for offering non-compliant plans are steep: $100 per day for each individual employee not covered. If an employer drops health care coverage altogether, the penalty is $2,000 per year per affected employee. For Hobby Lobby alone, that would mean $473 million annually for failing to provide the four methods of contraception it finds objectionable, or $26 million to drop coverage entirely.7

Factual and Procedural Background

Hobby Lobby Stores, a craft store chain, and Mardel, a Christian bookstore chain, are for-profit, closely held family businesses that "operat[e] ... in a manner consistent with Biblical principles."8 The Green family owns both entities and manages both through a trust of which each Green family member is a trustee. Each member of the Green family has pledged, in writing, to "run the businesses in accord with the family's religious beliefs and use the family assets to support Christian ministries."9 The stores are not open on Sundays. Hobby Lobby does not engage in activities that promote alcohol use, contributes financially to Christian missionary activities, and regularly buys newspaper ads promoting evangelical Christian beliefs.

The Hahn family, who are Mennonites, are the only owners of Conestoga, a closely held, for-profit corporation. The company's mission includes the goal of operating the business consistent with Christian principles. Its "Vision and Values" statement provides the company strives to earn a "reasonable profit" while acting consistent with the family's Christian heritage. Its Board of Directors has adopted documents stating "human life begins at conception."10

Both the...