Assessing the Full Impact of the Supreme Court's Hobby Lobby Decision

Volume 13, Issue 12
July 2, 2014

Assessing the Full Impact of the Supreme Courts Hobby Lobby DecisionThe embattled Obama Administration was handed another legal defeat on Monday when the United States Supreme Court ruled in Burwell v. Hobby Lobby Stores, Inc. that closely-held businesses owners cannot be forced to provide health insurance coverage for certain types of contraceptives required under the Patient Protection and Affordable Care Act of 2010 (ACA) if doing so conflicts with their religious beliefs protected by the Religious Freedom Restoration Act of 1993 (RFRA).42 U.S.C. § 2000bb et seq.

In implementing ACA, the U.S. Department of Health and Human Services (HHS) issued regulations requiring employers to include contraceptive coverage as part of health insurance plans offered to employees, which were challenged by Hobby Lobby Stores, Inc. and several other family-owned businesses. The Court rejected the Obama Administration's argument that the owners of such businesses forfeited any protections under the RFRA when they decided to structure their companies as for-profit corporations instead of sole proprietorships or general partnerships. Rather, the Court observed that modern corporate law, as currently established by the states, does not require for-profit corporations to pursue profit at the expense of all other concerns. It found the ACA contraceptive mandate to constitute a substantial burden on the exercise of religion, particularly given the tax assessments associated with noncompliance under ACA's "pay or pay" rules. Finding the RFRA "was enacted to provide very broad protection for religious liberty," the Court concluded corporations are a subset of the "persons" whose exercise of religion the RFRA is designed to safeguard. Of note, the Court found publicly-held companies are unlikely to frequently assert RFRA claims as they will have a difficult time demonstrating their religious objections to such a mandate.

The Justices disagree as to whether or not the Court's ruling is limited in scope. Indeed, the dissenting Justices maintain that the Court's ruling is of "startling breadth" and "will lead to a flood of religious objections regarding a wide variety of medical procedures and drugs" with Justice Ginsburg envisioning the courts having to address situations where employers assert "religiously grounded objections to blood transfusions (Jehovah's witnesses); antidepressants (Scientologists); medications derived from pigs, including anesthesia, intravenous fluids and pills coated with gelatin (certain Muslims, Jews and Hindus); and vaccinations (Christian Scientists)." However, Justice Alito stressed the contrary, stating that the case is concerned solely with the contraceptive mandate and should not be understood to hold that an insurance-coverage mandate must necessarily fall if it conflicts with an employer's religious beliefs.

So far, a number of legal commentators agree with Justice Ginsburg and predict the Hobby Lobby decision will have long-lasting effects, which could include challenges to other types of government mandates such as certain state laws requiring employers to provide benefits to same sex spouses.

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.