By a 5-4 vote, the United States Supreme Court held in Burwell v. Hobby Lobby that for-profit, closely held corporations can hold religious beliefs and objections. Consequently, these companies could opt out of the contraceptive mandates that conflicted with the corporations’ religious stance.

Summary of the Decision

The Patient Protection and Affordable Care Act (ACA) requires employers with more than fifty employees to provide coverage for certain contraceptive methods and sterilization procedures. However, the government exempts certain non-profit “religious employers,” such as churches, from the contraceptive requirement. There is no explicit exemption for for-profit companies.

In response to the ACA’s contraceptive mandate, two companies – Hobby Lobby and Conestoga Wood Specialties – brought separate lawsuits claiming that the mandate violated their religious beliefs protected by the Religious Freedom Restoration Act (RFRA) and the First Amendment. Both companies are closely held by their respective family members and profess to operate their respective businesses in accordance with their religious beliefs. Both companies have argued that a core tenet of their respective religions is the belief that life begins at conception, making it a sin to provide access to post-conception contraceptives. As such, they specifically object to the four types of post-conception contraception required by the ACA mandate.

The issue before the Court was whether for-profit businesses are “persons” under the RFRA and entitled to the same religious freedom protections as individuals. The RFRA states “government shall not substantially burden a person’s exercise of religion.” If a law does substantially burden a person’s exercise of religion, the individual is entitled to an exemption unless the Government can show that 1) the law is in furtherance of a compelling governmental interest and 2) the rule is the least restrictive way of furthering that interest.

The Supreme Court concluded that the RFRA applies to closely held companies and provides those companies with religious freedom protections. Specifically, the Court found that for-profit, closely-held corporations are “persons” within the meaning of the RFRA and cannot be required to comply with the ACA contraceptive mandate. The Court agreed that protecting the free-exercise rights of a closely held company in turn “protects the religious liberty of the humans who own and control them.” While the Court reasoned that although free access to the four challenged contraceptives serves a compelling governmental interest, the government failed to show that this mandate is the least restrictive way of furthering that interest.

Employer Takeaways

By its own text, Hobby Lobby’s impact on the ACA and its implementation is limited.

• The Court’s decision is concerned solely with the contraceptive mandate. It does not give employers a pass to opt out of any other coverage mandates, such as immunizations or same-sex coverage that might conflict with the employer’s religious beliefs. These issues may be addressed in separate litigation.

• The Hobby Lobby decision does not affect most companies. The Court specifically limited its analysis to closely-held corporations (but did not define a closely-held corporation save for the description of the two challenging companies). The Court declined to address, and the decision should not be read, to foreclose privately held corporations with large shareholder bases or publicly held corporations from asserting similar challenges. Nevertheless, the Court opined that such challenges appear improbable because unrelated shareholders (including institutional investors with their own stakeholders) would likely not agree to run a corporation under the same religious beliefs.

• Closely-held corporations seeking to exclude contraceptive coverage in a similar manner will need to meet the same tenets of the RFRA, particularly showing the provision of a mandate stands in opposition to a sincerely held religious belief. Many employers do not espouse such beliefs in the governance of their organizations. This increases the difficulty of mimicking the examples set by Hobby Lobby and Conestoga Wood Specialties.

• The Court asserted that this ruling does not provide a “shield” for illegal practices such as discriminatory hiring that might be cloaked in religious reasons.