On Sept. 18, three federal agencies — Health and Human Services, Labor and Treasury — petitioned the U.S. Supreme Court to overturn 10th Circuit’s decision in Hobby Lobby v. Sebelius, No. 12-6294 (10th Cir., June 27, 2013), after that court ruled in favor of the owner’s right to project his RFRA rights not to comply with the contraceptive care mandate through to his corporation. The government framed the following question to the High Court:
The question presented is whether the RFRA allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners.
The 10th Circuit had ruled that Hobby Lobby, a for-profit, $3 billion arts-and-crafts store chain with 514 stores in 41 states and 13,240 full-time employees, could refuse to provide coverage mandated by the health care reform law based on its owners’ religious objections. See here. The circuit said that the case brought by Hobby Lobby’s owners showed a likelihood of success, and that their rights under the RFRA were substantially burdened by the contraceptive mandate.
In its petition for a writ of certiorari, the government tells the High Court that the RFRA “does not allow a for-profit corporation to deny its employees the benefits to which they are otherwise entitled by federal law.”
Review by the High Court was due because the circuits are split on the question, the government said in its cert petition. The 10th Circuit’s position in Hobby Lobby was opposed to the decisions by the 3rd Circuit in Conestoga Wood v. Sebelius, 2013 WL 3845365 (3rd Cir., July 26, 2013), and by the 6th Circuit in Autocam v. Sebelius, No. 12-2673 (6th Cir., Sept. 17, 2013) (see below). Similar RFRA claims are pending in the 7th, 8th, 11th and D.C. Circuits, the government said.
6th Circuit Upholds Contraceptive Mandate
The owners of a Michigan company do not have legal standing to seek an exemption from health care reform’s requirement that all health plans provide forms of contraception and sterilization, a federal appeals court said in a Sept. 17 ruling.
The RFRA is designed to protect individual rights, the 6th Circuit reasoned, and the owner should not be allowed to assert his RFRA rights in an effort to avoid complying with a federal organization. In so doing, it unanimously upheld a decision from the U.S. District Court in Grand Rapids, Mich.
For-profits Cannot Be Protected with Mantle of RFRA Rights
The court also concluded that only a corporation has standing to challenge health care reform’s employer mandate, because only a corporation is subject to penalties under it.
Autocam Corp. is in the manufacturing business for the automotive and medical industries, and it self-insures its health plan. It employs 680 people in the United States and offers health insurance that includes no-cost preventative care.
The company owners, the Kennedys, opposed contraceptive coverage on religious grounds, and said the company’s direct purchase of contraception and sterilization services made them morally responsible for their use. They argued that dropping health coverage would injure it by violating their religious beliefs around caring for employees, but also because it would expose Autocam to pay-or-play penalties.
But the court said a for-profit corporation is not a person capable of exercising the right to free exercise of religion, and that to allow the Kennedys to sue under a personal statute for harm allegedly happening to Autocam would contradict one of the basic tenets of incorporation: shielding individuals by creating separate entities.
Incorporation’s basic purpose is to create a distinct legal entity, with legal rights, obligations, powers, and privileges different from those of the natural individuals who created it, who own it, or whom it employs, the court said. In return for the shield from liability, the shareholder has to give up some privileges, including that of direct legal action to redress an injury to him as primary stockholder in the business, the court said.