For-profit, secular corporations cannot argue that they are exercising religious beliefs to avoid the contraceptive coverage mandate under health care reform, the 3rd U.S. Circuit Court of Appeals ruled July 26. Such entities are “artificial beings” created to make money and cannot exercise religion,” which is an inherently “human” right,” the 3rd Circuit opined. Accordingly, the court affirmed a lower court’s denial of a preliminary injunction request from Mennonite owners of a Pennsylvania company. They objected to the mandate based on their church’s teachings. They are suing the U.S. Department of Health and Human Services, contending that complying with the mandate would violate their rights under the Religious Freedom Restoration Act and the Free Exercise Clause in the U.S. Constitution. The case is Conestoga Wood Specialties Corp. v. Secretary of U.S. Dept. of Health and Human Services, 2013 WL 3845365 (3rd Cir., July 26, 2013).
Background
The Patient Protection and Affordable Care Act requires non-exempt group health plans of employers with 50 or more employees to provide coverage without cost-sharing for preventive care and screening for women or face statutory penalties. Such coverage includes contraceptive services, which has proved controversial for employers with religious objections. Grandfathered plans are exempt from this requirement, as are “religious employers,” which are those deemed to be nonprofit organizations with religious objections.
Facts of the Case
Five members of the Hahn family own 100 percent of the for-profit Conestoga Wood Specialties Corp.. Conestoga became subject to the contraceptive coverage mandate as of Jan. 1, 2013. The Hahns are members of the Mennonite church, which teaches that terminating a fertilized embryo is evil and a sin.
The mandate includes two “emergency contraception” drugs that the Hahns contend conflict with the church’s teachings. The Hahns and Conestoga sued HHS, contending that forcing them to comply with the mandate violated the RFRA and several clauses in the U.S. Constitution, including the Free Exercise Clause. They sought a preliminary injunction, which requires a party to meet four factors, the first one being the likelihood of success on the merits. A federal district court found that they could not meet that first criterion and denied the injunction. The Hahns appealed.
The key issue in the case is whether in addition to individuals, Conestoga — as a for-profit, secular corporation — can exercise religion based on the Free Exercise Clause. The 3rd Circuit rejected the Hahns’ argument that it could based upon two principles:
- Directly, under a 2010 U.S. Supreme Court ruling upholding the principle that the Court has a long history of protecting corporations’ rights to free speech under the First Amendment. The 3rd Circuit noted that while an “extensive list” of Supreme Court cases addresses the free speech rights of corporations, there is none (other than those relating to the reform mandate) addressing free exercise protection to corporations. Furthermore, Supreme Court precedent and other case law have held that the purpose of the Free Exercise Clause “is to secure religious liberty in the individual” — not corporations, which the 3rd Circuit described as artificial beings” that cannot exercise religion,” which is an inherently “human” right.”
- Indirectly, under the 9th Circuit’s “passed through” theory, under which for-profit corporations can assert the free exercise claims of their owners. The 3rd Circuit rejected this theory, which it found based on “erroneous assumptions regarding the very nature of the corporate form” as a “distinct legal entity that has legally distinct rights and responsibilities from … the owners of the corporation.”
Next, the court quickly disposed of the RFRA claim based upon its analysis of the Free Exercise Clause, further noting that the RFRA only applies to a person’s exercise of religion.
In a footnote, the court acknowledged that the 10th Circuit in Hobby Lobby Stores, Inc. v. Sebelius, No. 12-6294 (10th Cir. June 27, 2013), recently held that for-profit, secular corporations can assert RFRA and free exercise claims in some circumstances. However, it “respectfully” disagreed with that analysis.
More details on this case can be found at http://hrcomplianceexpert.com.