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How Will Hobby Lobby Decision Impact New Jersey Businesses?


July 16, 2014
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In Burwell v. Hobby Lobby, the U.S. Supreme Court struck down the Affordable Care Act’s (ACA) “contraception mandate,” as this applies to “closely held” corporations. Now that the Court has issued its much-anticipated, controversial decision, the debate now rages over how widely it will impact corporate employers. The Contraception Mandate  The ACA requires employers with more than 50 employees to provide health insurance coverage for the 20 contraceptive methods approved by the Food and Drug Administration, which include four that prevent an already fertilized egg from developing further by inhibiting attachment to the uterus. Religious employers, such as churches, are exempt from this contraceptive mandate. In addition, the Department of Health and Human Services created an additional exemption for religious nonprofit organizations that object to providing coverage for contraceptive services. The Supreme Court’s Decision Hobby Lobby is a leading non-public company in the arts and crafts industry that claims to “operate the company in a manner consistent with biblical principles.” It, together with other “closely held corporations,” alleged that the ACA’s contraceptive mandate violated the Religious Freedom Restoration Act of 1993 (RFRA), which prohibits the federal government from taking any action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest. The plaintiffs alleged that facilitating access to certain contraceptive drugs or devices violated their sincerely held religious belief that life begins at conception. The thin majority of the Supreme Court agreed, holding that corporations were “persons” under the RFRA that are capable of exercising religion. As explained by Justice Samuel Alito, it was Congress’ intent to provide very broad religious liberty protection and that merchants should not be forced to “choose between giving up the right to seek judicial protection of their religious liberty or forgoing the benefits of operating as corporations.” The majority further held that the contraception mandate placed a substantial burden on closely held corporations, noting that the provision “forces them to pay an enormous sum of money [in the way of excise taxes] if they insist on providing insurance coverage in accordance with their religious beliefs.” While the majority acknowledged that there is compelling governmental interest in providing women with cost-free access to contraception, it concluded that the mandate failed to satisfy least-restrictive-means standard of the RFRA. The Court’s majority found that the federal government failed to show why it could not assume the cost of such methods or why the accommodation afforded to nonprofit organizations with religious objections would fail to effectively protect the asserted needs of women. The Potential Implications The Supreme Court’s decision is limited to the ACA’s effect on closely held corporations, which are defined by the IRS regulations as having more than 50 percent of the value of their outstanding stock owned (directly or indirectly) by five or fewer individuals at any time during the last half of the tax year, excluding “personal-service” corporations such as professional practices. Many legal scholars fear that the Supreme Court’s reasoning could be expanded to substantiate objections to many other federal laws. This concern was expressed in a strong dissent by Justice Ruth Bader Ginsburg, who argued that the majority’s overly broad opinion could allow businesses “to opt out of any law . . . they judge incompatible with their sincerely held religious beliefs.” She added, “Although the court attempts to cabin its language to closely held corporations, its logic [inevitably] extends to corporations of any size, public or private.” Many legal experts agree that the majority decision will likely spur future challenges under the RFRA as well as other federal laws. For example, corporations may seek to rely on the Hobby Lobby decision to avoid providing insurance coverage for artificial reproductive technologies or to provide benefits to same-sex couples based on their religious objections. Ultimately, the success of such suits will be determined by how broadly the courts apply the Supreme Court’s decision. For a more in-depth discussion of the Hobby Lobby case, please visit the Scarinci Hollenbeck Constitutional Law Reporter. See also,  Ginsberg Dissent on Obamacare Contraception Choice on politickernj.com for more information on this recent U.S. Supreme Court decision. If you have any questions about the Court’s decision or would like to the issues involved, please contact me, Gary Young, or the Scarinci Hollenbeck attorney with whom you work.