Late last week, the 7th Circuit Court of Appeals became the latest Federal Court to issue a ruling on the issue of whether the Affordable Care Act’s requirement that employer-provided health insurance include coverage for birth control violates the First Amendment rights of employers who claim that providing such coverage would violate their religious beliefs. As I’ve noted before, this is an issue that has been making its way through the Federal Courts for the better part of two years now and we’ve seen judges come down on both sides of the issue. Just last week, for example, the Court of Appeals for the District of Columbia struck down the mandate. The Seventh Circuit’s opinion reaches the same conclusion, by the same 2-1 margin in a three judge panel, but its ruling is potentially far wider reaching, especially it ends up being the basis for a Supreme Court opinion:
A federal appeals court on Friday blocked a provision of the Obama administration’s health-care law requiring employers to provide birth-control coverage in employee insurance, ruling that it imposed a “substantial burden” on religious rights of two Midwestern companies.
The move by the Seventh U.S. Circuit Court of Appeals in Chicago marked the first time a federal appeals court has issued a ruling preventing the federal government from enforcing the provision. Federal appeals courts in Washington, D.C., and Denver have sided with plaintiffs challenging the provision on religious grounds but stopped short of issuing injunctions. Federal appeals courts in Philadelphia and Cincinnati, meanwhile, have sided with the Obama administration.
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The plaintiffs sued the federal government over the so-called contraceptive mandate in 2012, arguing that it placed a burden on their practice of religion in violation of the federal Religious Freedom Restoration Act and the free-exercise and free-speech clauses of the First Amendment. The Justice Department, which is charged with defending the mandate in court, has argued that for-profit companies have no religious rights.
“The government draws the line at religiously affiliated nonprofit corporations. That line is nowhere to be found in the text of RFRA or any related act of Congress,” wrote Judge Diane S. Sykes for a 2-1 majority.
She gave the example of a Jewish deli, in support of the notion that for-profit companies also enjoy religious rights. If the restaurant had no religious rights, it could be denied the ability to observe Kosher dietary restrictions, wrote Judge Sykes, who was appointed by President George W. Bush.
The Seventh Circuit’s ruling contrasts with the decision last week by the U.S. Court of Appeals for the D.C. Circuit, which held there was “no basis for concluding a secular organization can exercise religion.” Still, the D.C. court said the owners of produce-distribution companies in Ohio could challenge the mandate as a burden on their own beliefs.
As usual, we turn to Lyle Denniston for his insights into the ruling:
The Seventh Circuit decision involved challenges by a construction company in Highland, Illinois, Korte & Luitjohan Contractors Inc., and its two owners, who together hold eighty-seven percent of the stock, and a Madison, Illinois, company that makes vehicle safety systems, Grote Industries, Inc., and the six Grote family members who together own the company and its parent corporation. Their challenges, which lost in preliminary rounds in federal district courts, have been pursued on behalf both of the business firms in their own right and the owners as individuals — all relying upon religious beliefs against the contraceptive mandate and some related reproductive health services under the Affordable Care Act.
The mandate applies to companies that provide their employees with health insurance under group plans. While the law and government regulations provide some exemptions from the mandate for churches and other strictly religious entities, there are no exemptions for profit-making businesses.
Circuit Judge Diane S. Sykes wrote the majority ruling finding protection for the religious preferences of corporations and their individual owners, when the companies are closely held. That opinion was joined by Circuit Joel M. Flaum. Circuit Judge Ilana Diamond Rovner dissented.
Five federal circuit courts have now issued rulings on the constitutional challenges, at least in preliminary decisions on the enforcement issue: the Third, Sixth, Seventh, Tenth, and D.C. Circuits. The Third and Sixth rejected the challenges. The split among these courts practically assures that the Supreme Court will agree to take on the issue, both as to corporations and to their owners.
Since the question of whether corporations have enforceable rights under the Free Exercise Clause, and under the Religious Freedom Restoration Act, is at the center of this particular case, it’s helpful to see how the Court actually reached its conclusion. In this section of the opinion, that the Supreme Court has, in the past, recognized the Free Exercise rights of incorporated religious entities, a fact which in and of itself would seem to severely weaken the argument that merely being an incorporated entity is sufficient in and of itself to defeat a claim under the First Amendment or the RFRA. Additionally, the Court goes through a trio of cases that show how the Supreme Court has in the past recognized the Free Exercise rights of for-profit corporations. Nonetheless, the Federal Government had made one more argument, which the Court felt necessary to address:
The government relies on a concluding statement in Lee as support for its position that profit-making is incompatible with free-exercise rights:
Congress and the courts have been sensitive to the needs flowing from the Free Exercise Clause, but every person cannot be shielded from all the burdens incident to exercising every aspect of the right to practice religious beliefs. When followers of a particular sect enter into commercial activity as a matter of choice, the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on the statutory schemes which are binding on others in that activity.
Id. at 261 (emphasis added).
The government apparently reads this passage as foreclosing all religious-exercise claims arising in the course of commercial activity merely because the context is commercial. That reading is both unsound and extraordinary. Unsound because it would nullify the rest of the Court’s opinion, which considered the Amish farmer’s claim on the merits even though his activities were for profit; the commercial context did not defeat the claim. And extraordinary because it would leave religious exercise wholly unprotected in the commercial sphere. At bottom, the government’s argument is premised on a far-too-narrow view of religious freedom: Religious exercise is protected in the home and the house of worship but not beyond. Religious people do not practice their faith in that compartmentalized way; free-exercise rights are not so circumscribed.
If the government’s view is correct, commonplace religious practices normally thought protected would fall outside the scope of the free-exercise right. The Jewish deli is the usual example. On the government’s understanding of religious liberty, a Jewish restaurant operating for profit could be denied the right to observe Kosher dietary restrictions. That cannot be right. There is nothing inherently incompatible between religious exercise and profit-seeking. The better reading of the concluding dictum in Lee is that it foreshadowed the coming holding in Smith eight years later. The references to “incidental burdens” and “statutory schemes binding on others” suggest as much.
In short, nothing in the Supreme Court’s free-exercise jurisprudence prior to Smith categorically forecloses RFRA claims by profit-seeking entities.
The Court seems to me to have gotten it correctly here. While I was skeptical of the argument when it was first raised when the mandate first became public, it’s become rather apparent as the issue has made its way through the Federal Courts that the religiously motivated employers have a fairly strong Free Exercise claim here, especially when viewed in light of both past Supreme Court precedent and what would seem to be the exceedingly clear language of the RFRA. Just as the publishers of The New York Times don’t lose their First Amendment rights because the Times is incorporated, the owners of these businesses should not lose their Free Exercise and RFRA rights merely because they chose to organize as a corporate entity, most likely for tax and asset protection purposes. As with the Plaintiffs in the case handed down by the D.C. Circuit a week earlier, the business owners here would have obviously been able to exercise their Free Exercise rights had the remained a sole proprietorship or a partnership, so there is no logical reason why they should not be able to do so merely because they have incorporated.
Obviously, this issue becomes more complicated if you move beyond the closely-held, mostly family owned, corporations that have been at issue in the cases making their way through the Federal Courts. For one thing, it would be much harder for the Court to identify a particularized religious belief that the large scale corporation could be said to be exercising. However, that issue hasn’t been before any Court to date, and it wasn’t at issue in this case. The sole issue was the question of whether or not individuals retain their rights even when acting via a corporation. It seems clear to me that they answer is that they do.
The Supreme Court is likely to weigh in on this issue very soon. Indeed, several of these cases are now at the stage where they would be available for SCOTUS review before the end of this term. At that point, we’ll get a final ruling on this question. Until then we’re sure to see more Federal Courts weighing in. It will be interesting to see which one the Supreme Court finds most persuasive.
Here’s the Court’s opinion:
