Oral Argument Held in Cases Testing Rights Of Corporations to Avoid Paying for Coverage

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By Mary Anne Pazanowski

March 25 — The U.S. Supreme Court took up an issue March 25 that has divided the lower federal courts—whether secular, for-profit corporations may avoid, on religious grounds, compliance with federal regulations requiring them to provide health insurance that covers contraceptive drugs and devices at no cost to their employees.

The challengers, Hobby Lobby Stores Inc., Conestoga Wood Specialties Corp. and their respective owners, argued that the so-called contraceptive mandate places a substantial burden on their right to religious exercise in violation of the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb. The contraceptive mandate is the regulation interpreting the Affordable Care Act's preventive services mandate for women.

The RFRA states that, even through a neutral law of general applicability, the federal government may not place a substantial burden on religious exercise unless the regulation serves a compelling government interest and is the least restrictive means of serving that interest.

The corporations argued that their religious beliefs, or at least those of their owners, hold that some forms of birth control are sinful and that, by enabling others to access contraceptive care, they are themselves engaging in sin. The contraceptive mandate forces them to either violate their beliefs by providing the required coverage, or pay a substantial fine to the federal government for noncompliance.

Paul D. Clement of Bancroft LLC in Washington told the court that once the government “compelled employers to provide something as religiously sensitive as contraception, it knew that” RFRA claims were sure to follow. The issue of contraception is “so religiously sensitive, so fraught with religious controversy” that the government itself provided a number of exemptions and accommodations, thereby raising the question of just how compelling the government's interest is in providing birth control coverage.

Solicitor General Donald B. Verrilli, defending the regulation, questioned the corporations' assertion that they have any right to exercise religion. He said the Supreme Court, in its 200-plus-year history, has never said secular, for-profit corporations have a right to exercise religion. Justice Antonin Scalia, however, pointed out that the court also has never held that corporations don't have such rights.

Slippery Slope, RFRA Scope

Justice Sonia M. Sotomayor, joined by Justice Elena Kagan, questioned Clement on what would happen if the court sided with the challengers. Would it mean corporations could avoid, on religious grounds, providing insurance coverage for blood transfusions or vaccines?

Clement said the first question in such a case would be whether the regulation substantially burdened the corporation's religious exercise, although he suggested that contraception is different, because of its religious sensitivity.

Clement also said each case must be analyzed on its own. A regulation requiring companies to pay for vaccines might be justified by a compelling interest and may prove to be the least restrictive means of furthering that interest, he said. The government's compelling interest in requiring vaccinations may be “stronger” than its interest in compelling coverage of birth control.

Kagan also brought up the scope of the RFRA, saying that it was a “special statute” passed in response to the court's holding in Employment Div. v. Smith, 494 U.S. 872, 52 FEP Cases 855 (1990). The law sought to re-energize a specific body of case law that suggests religious accommodations should sometimes, but rarely, be made, Kagan said. The pre-Smith case law uses a balancing test, not a compelling interest standard, she said.

Later in the argument, Kagan said Clement's understanding of the RFRA “would essentially subject the entire U.S. Code to the highest test in constitutional law, to a compelling interest standard.”

Clement replied, “I don't say that. I think Congress said that.”

Effect on Third Parties

Kagan went on to say that in pre-Smith cases, the court engaged in balancing, looking at both the government's and the individual's interest, as well as whether there was any harm to third parties. Verrilli took up this theme in his argument defending the government's regulation. In any RFRA case, Verrilli told the court, one has to consider the impact of the holding “on third parties, otherwise you will be skating on thin constitutional ice.”

Scalia challenged that statement, asking where in the RFRA it says the court has to weigh the effect of an accommodation on third parties. Verrilli said it informs “every operative provision” of the statute. But Congress made no reference to a balancing in the law, Scalia said.

The compelling interest test “certainly” requires consideration of third parties' interests, Verrilli said.

Justice Samuel A. Alito then turned the argument to why the government objected to a for-profit corporation bringing religious claims. Is there something about the corporate form, he asked. Verrilli said “no.”

Is it the for-profit activity, Alito asked. Verrilli answered “no,” but said the relevant question is, what did Congress think it was doing in enacting the RFRA? The operative language is a “person's exercise of religion,” he said.

Although the Dictionary Act defines a corporation as a person, Congress didn't say, look at the Dictionary Act, it said look at pre-Smith case law—and nowhere in that case law was a for-profit corporation allowed an exemption to federal law based on religious exercise, Verrilli said.

Scalia fired back: “There is not a single case which says that a for-profit enterprise cannot make a freedom of religion claim, is there?”

Verrilli agreed but went on to say that recognizing an exemption from the contraceptive mandate in this case would “impose a burden on third parties or extinguish rights of third parties, employees or others, and that really can't be what Congress was thinking about.”

To contact the reporter on this story: Mary Anne Pazanowski at mpazanowski@bna.com

To contact the editor responsible for this story: Fabia Mahoney at fmahoney@bna.com

Text of the transcript of the oral argument is available at http://www.supremecourt.gov/oral_arguments/argument_transcripts.aspx.

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