The National Catholic Review
Religious freedom, Obamacare and the rights of American business

‘God created man” (Gn 1:27) and, according to the Declaration of Independence, endowed him with unalienable rights. But men and women created corporations and the laws that protect them. On March 25, 2014, the Supreme Court heard arguments about Hobby Lobby and Conestoga Wood, consolidated cases that arose out of challenges to Health and Human Services regulations issued to implement the Patient Protection and Affordable Care Act. (UPDATE: See my analysis of the oral arguments before the court below.) The lawsuits were brought by for-profit corporations and their pro-life owners, who object to the requirement that they provide their employees with insurance coverage for certain contraceptive methods. These cases are of great practical importance, but they will be decided upon legal abstractions concerning the relationship between a corporate person and its human owners and who, or what, is capable of exercising religion.

The Hobby Lobby case originated in Oklahoma and comes to the Supreme Court on appeal following a ruling from a U.S. Court of Appeals for the 10th Circuit that for-profit corporations are persons entitled to religious freedom rights. The Conestoga Wood case originated in Pennsylvania and is on appeal from a Third Circuit decision that came to the opposite conclusion: “for-profit, secular corporations cannot engage in religious exercise.” The U.S. Supreme Court, the final arbiter of the law, will decide which of these two courts is correct or if an alternative theory will prevail. The court may issue a monumental constitutional ruling, as it did in Citizens United, the 2010 case that granted extensive First Amendment protection to corporate political speech, or it may skirt the constitutional issue and base its decision on narrower statutory grounds. Similarly, the court may issue a decision applicable only to for-profit corporations or make a broader ruling that will affect religious organizations and nonprofit organizations as well.

Corporate Structure

The Hobby Lobby and Conestoga Wood corporations claim they have free exercise protection under both the First Amendment and the federal Religious Freedom Restoration Act of 1993. Alternatively, they assert the right to bring First Amendment and the R.F.R.A. free exercise claims on behalf of their human owners.

In the United States, organizations of various types, including churches, religious communities and nonprofit and for-profit corporations, are formed and recognized under state law. Recognition of these organizations as entities with existence separate from their members or owners facilitates business transactions. It would be extremely difficult, for example, for a worship community to operate unless it is considered a single entity empowered to buy and sell land, contract for services and purchase supplies. Most states provide for a range of organizational structures with varying degrees of separation between them and their individual owners. In all cases, however, individuals who form corporations consent to comply with additional government regulation, like shareholder meeting requirements, and forfeit some control over corporate assets in exchange for insulation from corporate liabilities. Corporate funds may not be used for the personal needs of shareholders, nor may shareholder assets be usurped to pay corporate expenses. Failure to maintain the distinction between a corporation and its owners may result in a “piercing of the corporate veil” and effective loss of corporate identity, which usually results in a finding of shareholder responsibility for the actions of the corporation. Hobby Lobby and Conestoga Wood are asking, in effect, for a reverse piercing of the corporate veil; a finding of corporate responsibility for the benefit of the individual owners.

Distinctions between nonprofit, for-profit and benefit corporations may be relevant to determine whether a reverse piercing of the corporate veil is appropriate. Nonprofit status is given to organizations that serve the social welfare and accept heightened government regulation of their finances. In return for their commitment to these limitations, nonprofits are given tax-exempt status and free-exercise rights commensurate with their stated social and religious purposes. For-profit corporations, on the other hand, may engage in philanthropic activities, but they have no government-imposed obligation to do so and may be sued by their shareholders if they overdo charitable donations or make decisions that substantially reduce profits. The argument against granting free exercise rights to for-profit corporations is that religiously motivated social policies do not foster the primary corporate purpose and therefore should not be recognized by the courts. Shareholders simply may not use for-profit corporations for their own purposes, whether financial or religious. On the other hand, Hobby Lobby and Conestoga Wood assert that the religiously oriented policies of their family-run businesses are integral to their existence. They allege, in essence, that their businesses are similar to benefit corporations or low-profit, limited liability companies, which are hybrid entities dedicated to both profit-making and specified social causes. These alternative corporate forms have been in existence for only a few years, so it cannot be determined how the Supreme Court will treat them. Nevertheless, the court may decide these cases based on the closely held, family-run nature of the businesses.

Corporate Personhood

Corporations have been considered persons under the law since 1886, but their personhood is not identical to that of human persons. Each time a corporation alleges a constitutional right, the Supreme Court must analyze whether the corporation is entitled to that protection. Hobby Lobby and Conestoga Wood rely on Citizens United, which refused to limit the free speech rights of for-profit corporations, to argue that they, like religious organizations and nonprofit corporations, have free exercise rights. The 10th Circuit, in the Hobby Lobby case, accepted this argument and held that the R.F.R.A., a federal statute that protects “a person’s exercise of religion,” prevents the government from enforcing regulations the corporation deems offensive to its religious values. The court applied the ordinary legal meaning of the word “person,” which includes corporations, “unless the context indicates otherwise.”

The Third Circuit rejected this argument when it ruled against Conestoga Wood; it held the word “person,” when used in the context of religious exercise, refers to human persons or nonprofit organizations formed for the purpose of fostering religious beliefs and principles. The Third Circuit distinguished the corporate need for free speech from the free exercise of religion. Corporations cannot function without speech (in the form of promotional materials, for example), and the Supreme Court has therefore always protected corporate speech. Corporations have no objectively recognizable need for religion, however, and the Supreme Court has never recognized corporate free exercise rights. The First Amendment guarantees religious freedom to individual believers and the faith-based associations those individuals form, but the Third Circuit found nothing in Supreme Court jurisprudence to support the free exercise claims of for-profit, secularly purposed corporations.

The Conestoga Wood decision also rejected an alternative theory that free exercise rights could “pass through” from individuals to the corporations they own; that corporations could, in effect, sue to defend the religious liberties of their owners. This theory was first adopted by the Ninth Circuit, but it was rejected by the Third Circuit because it contradicts the normal rule that the corporate veil is pierced and corporations lose their separate identity whenever they serve as the alter egos of their owners. In another case challenging the mandate, the D.C. Circuit used a slightly different rationale and held that the free exercise rights of individual owners of family run or closely held corporations extend to and, thus, are burdened by offensive laws imposed on their corporations. This is a creative theory, but it may run counter to the traditional “shareholder standing” rule, which provides that shareholders are not separately harmed by injury to their corporations.

The Sixth Circuit rejected the personal burden and pass-through theories when it refused to hear the free exercise claims of another for-profit, family-run corporation that challenged the mandate, but the Seventh Circuit held that both corporations and their owners may challenge the mandate. This disagreement among the circuit courts calls out for a unifying Supreme Court decision. If the Supreme Court determines either that for-profit corporations have free exercise rights, or that individual shareholders are burdened by the mandate, then it must determine whether the mandate violates those rights.

Free Exercise Rights Tests

The First Amendment states, “Congress shall make no law...prohibiting the free exercise [of religion],” but, despite the plain meaning of the words, this prohibition is not absolute. Beginning in 1879, when the Supreme Court upheld an anti-polygamy law (Reynolds v. United States), some restrictions on the free exercise of religion have been permitted. The standard for determining the permissibility of these restrictions, however, has been controversial. In Sherbert v. Verner (1963), the Supreme Court reviewed the denial of unemployment benefits to a worker who refused job opportunities that would require her to work on the Sabbath. The denial was declared unconstitutional because it infringed on a substantial right and was not narrowly tailored to achieve a compelling state interest. The Supreme Court used this same “strict scrutiny” balancing test in Wisconsin v. Yoder (1972), when it determined Amish parents could not be required to send their children to high school.

In Employment Division v. Smith (1990), however, the court specifically rejected the standard of review articulated in Sherbert v. Verner and used instead a test that requires a “valid,” rather than “compelling,” government interest and “neutral,” rather than “narrowly tailored” application. Applying this test, the court upheld a state law that denied unemployment insurance benefits to members of the Native American Church who had been dismissed from their jobs at a drug rehabilitation center for smoking peyote, a controlled substance. Writing for the majority, Justice Antonin Scalia stated, “Subsequent decisions have consistently held that the right of free exercise does not relieve an individual of the obligation to comply with a ‘valid and neutral law of general applicability on the ground that the law proscribes (or prescribes) conduct that his religion prescribes (or proscribes).’”

For advocates of religious freedom, Employment Division v. Smith showed the correctness of the adage of Oliver Wendell Holmes Jr., “Great cases, like hard cases, make bad law.” The intrinsic logic of the facts, that drug rehabilitation centers should have the ability to dismiss employees who themselves use drugs, may have compelled the Supreme Court to make bad law. Religious freedom proponents were so distressed by the diminution of religious liberty protections enunciated in Employment Division v. Smith that they lobbied Congress to pass the Religious Freedom Restoration Act to reinstate the compelling interest test. The act states: “Government may substantially burden a person’s exercise of religion only if it demonstrates that application of the burden to the person 1) is in furtherance of a compelling governmental interest; and 2) is the least restrictive means of furthering that compelling governmental interest.” Congress does not have the power to force the Supreme Court to use this standard when analyzing First Amendment claims, but the R.F.R.A. does provide additional protection for litigants, like those in Hobby Lobby and Conestoga Wood, who challenge federal laws that impinge on the exercise of religion.

The 10th Circuit based its decision in Hobby Lobby on the R.F.R.A. and found the mandate did not meet the required strict scrutiny (compelling interest, narrowly tailored) standard. The federal government’s interest in promoting public health and gender equality were determined to be less than compelling as promoted by the mandate because of the many permitted exceptions, including those for religious employers, which dilute the mandate’s efficacy. According to the court, if the government’s interest in requiring employers to provide this coverage is so essential to the public good, it would have demanded near universal compliance.

The Third Circuit in Conestoga Wood never reached the substantive merits of the free exercise claims and so applied neither the strict scrutiny test of the R.F.R.A. nor the much less restrictive “valid and neutral” First Amendment test of Employment Division v. Smith. The Supreme Court, however, has been presented with both the R.F.R.A. and First Amendment free exercise claims and will have the opportunity to re-examine the appropriate standard of review. Of the nine justices who decided Employment Division v. Smith, only Justice Scalia, who wrote the opinion, and Justice Anthony M. Kennedy, who joined him, remain on the court. It is difficult to predict how the seven new justices will rule, but it is quite possible they will render a decision that will have a deep and lasting impact on the role of religion in secular society.

Update, March 27

It is always difficult to tell from questions asked at oral argument how the court will decide, but the tenor of the questioning indicates the court might issue a narrow ruling based on RFRA rather than the First Amendment that is limited to closely-held, family-run businesses. The first question asked by Justice Kennedy, who often is the swing vote in 5-4 decisions, was whether the case could be decided without reaching the constitutional questions. Later in the questioning, Chief Justice Roberts indicated they could “await another case” to decide whether “large publicly-traded corporations” may assert religious rights. It also is possible the court will avoid the free exercise issue altogether and vacate the HHS regulations because they exceed the authority granted by Congress.  As Justice Kennedy stated when questioning the government’s attorney, “what kind of constitutional structure do we have if the Congress can give an agency the power to grant or not grant a religious exemption based on what the agency determined? [W]hen we have a First Amendment issue of this consequence shouldn’t we indicate that it's for the Congress, not the agency to determine?”

Ellen K. Boegel, an associate professor of legal studies at St. John’s University in New York, clerked for the United States Court of Appeals for the Second Circuit.


Charles Erlinger | 3/27/2014 - 9:50am

Prof. Boegel, this is the best short summary of the issue that I have read, and I thank you for it. I hope that it is possible for you or some other authority on this subject to go a little deeper into the philosophical implications of the artifact of corporate personhood. There should be some other way to designate the attributes of a legal and accounting artifact besides one that invariably implies that some characteristics of humanity belong to this conceptual construct. The current way of legally thinking about it seems deeply irrational.

Ellen Boegel | 3/30/2014 - 10:02am

Thank you. I agree that our country would be better served if we stopped treating corporations as persons, but I do not think there is the political or judicial will to make such a change. My read of the oral argument on this case, however, is that the justices will not recognize corporate religious exercise rights if they can find some other way to protect the interests of the human persons who own those corporations.

Louis Candell | 3/25/2014 - 6:38pm

Although I believe staunchly in the concept of a free exercise of religion, I do not believe that a secular government should base its laws on religious tenets. Of course, sometimes secular laws and religious beliefs coincide. For example, religious principles forbid murder, theft and perury and so do secular laws but secular laws forbidding these acts are not based on a religious principle. They are based on the principles of the establishment and maintenance of the generaL welfare and security of the populace which are necessary for orderly government as opposed to anarchy. Those opposing contraception should remain free to refrain from utilizing contraception drugs and devices but they should not be permitted to force other individuals to abide by their beliefs. Using the religious beliefs of some persons as a basis for the formulation of secular law is tantamount to the establishment of an American version of the Taliban and is contrary to our Constitution.

Kristen Hoffmaster | 6/4/2014 - 12:50pm

This was a very interesting and informative article. I tend to share the concern expressed by Ginsberg, Kagan, etc (and here by Candell) that free exercise of religion for for-profit, secular corporations could lead to the major shareholders of corporations exerting undue influence over the majority members or consumers of the corporation who do not share the same religious concerns or who hold valid objections (or have valid dispensations) to the shareholders religious claims.

For example, refusal to comply with contraceptive coverage mandates for employees based upon claims to religious freedom could lead to employees being denied access to contraceptive measures that are not used for contraception but as medicine to cure disease.

Would refusal to provide coverage lead to an individual with HIV being prevented access to measures that would prevent transmission of the disease to his wife? Would an individual with endometriosis or ovarian cysts be prevented from gaining access to hormonal medicine (usually in the form of a contraceptive oral or topical dose) for the purpose of clearing the cysts or mitigating painful menstrual cycles or bleeding concerns?

The moral question for Catholic discernment might then become: Where do we delineate between necessary medical contraceptive usage for healing/curing disease and perhaps unnecessary contraceptive usage for avoiding pregnancy?

In the case of non-abortive or non-hormonal contraceptives for avoiding pregnancy, are there allowances where it would be reasonably and morally acceptable to use these measures?

For example, would a woman living in a refugee camp (or any inadequate housing division) or without access to educational support for sympto-thermal family planning (and with irregular cycles) have an unreasonably more difficult time avoiding pregnancy for health or dire financial reasons than would a woman living in a safe environment with medical care, communal support, and educational resources supporting nfp? How about a woman whose husband is not on board with nfp, or who cannot or does not want to give it the attention it deserves for appropriate practice?

Do we currently have moral statutes that are more accessible to certain segments of the population as opposed to others, and if so, how can we address this concern to meet the moral and personal health needs of those with seemingly less access to education/finance?

Should we also consider individuals living with health conditions that make natural family planning much more difficult and perhaps unreasonable (ptsd, lack of knowledge of family planning, high-risk pregnancy category, cancer, etc). We all know that it is possible to natural family plan in these circumstances but the question is, are we placing an unreasonable burden upon certain individuals or populations of individuals that we would not expect from ourselves if we were in those circumstances?

Are we extending mercy (or dispensation in the model of “wheat-picking on the Sabbath”) where it is needed and helping individuals to become knowlegable of the fact that mercy is available so as not to place undue health or psychological burden on them?

For more difficult moral dilemmas (like ectopic pregnancy or other life threatening pregnancy complications), we all know that Catholic moral teaching does not allow for abortion.

How do we differentiate, then, between medical procedures that attempt to save a mother’s life but do not directly end the life of the child, and medical procedures that seek first to abort (even when the goal is placing the mother’s life ahead of the child’s life in order to save the mother).

I imagine that, given the choice, most mothers would place their child first, however, are there legal punishments that are reasonable in the case where a mother places her own life first? Or a husband or a doctor places the mother’s life first?

How can we even regulate this? Should we regulate this; or should these items be considered on a case by case basis with overwhelming mercy for all parties involved?

Perhaps mothers recovering from traumatic pregnancies can be granted the freedom to discern whether or not future pregnancies that have been deemed medically unadvisable can be reasonably avoided with additional non-abortive contraceptive measures (like condoms).

Perhaps we can treat the brain (and associated trauma) as an organ of the body that needs medical care and attention like any other organ of the body. Perhaps we can consider that the brain may need more time to heal than the reproductive system? Perhaps there can be mercy or dispensation (for additional non hormonal contraception) extended to a woman in light of her overall personhood and not just her ability to maintain an effective reproductive system?

Perhaps a woman experiencing a traumatic pregnancy has developed a fear of intimacy with her husband and a non-hormonal contraceptive measure might help her to overcome this fear by reducing anxiety?

Should we consider women as total persons with balanced needs (who, given the various factors taken into medical discernment, might actually be the best people to make these decisions) or should women be reduced to their reproductive functioning alone?

Perhaps, in the case of pastors counseling women recovering from traumatic pregnancies, rather than accusing a frightened woman of succumbing to fear and choosing to use non-hormonal contraceptives, we might consider her past experience, and her continued bravery (as we would a soldier or other individual who has been traumatized) and grant her the opportunity not to feel obligated to re-enter a highly dangerous (or even seemingly dangerous) situation, especially under emotional duress.

John Loeffler | 5/19/2014 - 11:21am

Then you believe in something the can never be. Laws in democratic societies involve concepts of right and wrong. Those concepts are based on the religious/worldview positions of the lawmakers and the public. If religion does not form the basis for the law-making, which it did in the US for 200 years, then another worldview will be substituted, and there will be invariably be serious conflicts.

John Schuh | 3/26/2014 - 12:27am

Our government is “secular” only in the negative sense that the United States is not a confessional state. If we look at the constitution, we observe that sets up a government that is not the antithesis of the Government of the United Kingdom, but is modeled on it. It is a republic, not a monarchy. An extended republic, not a consolidiated state. It has a head of state who is elected, not a member of a royal family. It has a “upper house” which represents members of a federal union, which are the equivalent of a nobility. It has no Established Church; there is no religious test for office. Only in this way is it definitely a “secular state.” Without saying so, it accepts both the form and content of the English Common law, which are deeply religious, and based on a thousand years or more of precedent based on a Christian morality, as well as the folkways of germanic and celtics peoples who have been Christian for a good fifteen hundred years. Only by accident and no by design, as in the case of French law dating to the Revolution, does it represent a break from the Christian past, nor a culturally radical one from the British past. In spirit, it is a government serving a nonconforming Protestant society, so clearly that Tocqueville spelled its out for us in his famous “Democracy”, and the Catholic historian Christopher Dawson, calls John Wesley, a political Tory, one of the founding fathers of the American Republic.

THOMAS FARRELLY | 3/25/2014 - 4:44pm

Let's face it. The Supreme Court judges will first decide what outcome they prefer and then find reasons for voting that way. Think of Roberts' ingenious discovery that ACA premiums are really a tax. Or practically anything that Brennan decided.

Marie Rehbein | 3/19/2014 - 12:36pm

Since the science regarding the medications and products covered by the ACA contradicts the supposedly religious belief that these items cause abortions, this is actually a test of whether one can claim a right to believe anything one wants and call it a religious belief. There is no long-standing tradition or cultural standard among Baptists (which is David Green's church affiliation) that prohibits the spacing of children or the prevention of conception when there are compelling personal reasons. Like other Protestant religions, the use of contraception is permitted so long as the marriage is open to welcoming children. This would allow for a scenario where a couple chooses not to conceive their own children, but to adopt.

John Schuh | 3/26/2014 - 12:48am

The “science” does not such thing. Rather some scientists, with who the Secretary agrees , contend that certain drugs are not abortifacient. What is wrong with the law is that it empowers the secretary to decide which is medically desirable and to beg the moral questions about the origins of human life, and to impose her views on the subjects of the law, which is to say, the parties who must obey her decision. There is nothing in the law that limits the right of the secretary to decide in favor of those who assert that even generally accepted abortiacients are “good medicine, nor for that matter, is surgical abortion ruled out as a medical treatment, which must be iincluded in a medical insurance policy.

Marie Rehbein | 3/27/2014 - 9:07am

Many herbs that people grow in their own yards and use for seasoning and teas can be abortifacient in medicinal (tea strength) as opposed to culinary amounts. What do you think should be done about the possibility that a Hobby Lobby employee might grow some of these in their yards, having bought the seeds with the money, as opposed the insurance, they earned from working at Hobby Lobby?

ed gleason | 3/21/2014 - 1:12pm

The idea that corporations [people????] are like baptized persons is heretical and should be treated as such.

Marie Rehbein | 3/21/2014 - 3:18pm

That is probably another point. Is a family owned corporation any different from a stockholder owner corporation -- does a family business get to impose the homogenous religious views of its owners onto its employees while a corporation owned by many people with diverse religious beliefs does not because it cannot logically do so? I cannot see the Supreme Court accepting this, but then the Supreme Court is what came to conclusion that corporations are covered by the First Amendment as if they were individuals and that donating money is a form of speech.

John Schuh | 3/26/2014 - 1:00am

The family business is not imposing its views but is being imposed upon by the law whose administrators wants to disregard moral objections to a medical treatment, or rather wants to set aside any moral objections based on religious doctrine as spurious, if the party affected is not a church. Now in our society, a church is a voluntary association that falls under the laws of incorporation. But in our culture, as not so much in Europe, a church is first of all a voluntary association. A family owned business which places as much stress on religious piety as Hobby Lobby does and which tries to treat its employees as members of an extended family, or as an old-fashioned “economy” is not in reality all that different from your local megachurch.

Marie Rehbein | 3/26/2014 - 8:50am

Whatever the Hobby Lobby tries to be to its employees, there are rules it has to follow that apply to all corporations. Companies are not kingdoms.

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