Corporations and Religious Freedom

By David Skeel

The Supreme Court takes on faith-based objections to ObamaCare’s contraception coverage mandate. 

Stephen Colbert recently treated his viewers to a funny spoof of the claim that for-profit corporations may have religious-freedom rights. Corporations “follow the one true profit,” his joke went. Mr. Colbert was responding to a federal appellate court ruling that the contraception-coverage mandate in the Affordable Care Act violated the religious freedom rights of Hobby Lobby, a crafts store that objected to covering contraceptives that would prevent the implantation of a fertilized egg.

The appellate courts are deeply divided on corporate religious freedom. The Supreme Court has now agreed to review two cases—Hobby Lobby Stores, Inc. v. Sebelius and Conestoga Wood Specialties Corp. v. Sebelius, which reached the opposite conclusion—to resolve the latest health-care imbroglio. The idea that for-profit corporations have religions-freedom rights is less silly than it may sound, but it also is not likely to start an avalanche of exemptions.

The corporations in these cases both sued under the Religious Freedom Restoration Act, which Congress enacted in order to expand religious freedom rights after the Supreme Court had restricted them in a 1990 case, and under the First Amendment’s Free Exercise Clause. The central question is whether a corporation can be a “person” for the purposes of the Religious Freedom Restoration Act, and whether the Free Exercise Clause applies to for-profit corporations.

Although the Supreme Court has never directly confronted the question of whether ordinary corporations can have religious-freedom rights, it is quite likely to conclude they can. Corporations often are treated as “persons” for legal purposes; indeed, many laws explicitly define “person” to include corporations as well as individuals. This doesn’t mean corporations are persons for all purposes, as a California driver found out last year when he tried to get out of a ticket for driving in a high-occupancy-vehicle lane by pointing to the corporation documents in the passenger seat. But for some purposes they are.

The courts that have rejected corporate religious freedom point out that corporations like Hobby Lobby or Conestoga “do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors,” as the trial court in the Hobby Lobby case had put it. But one can say the same thing about churches and other religious organizations, which are usually organized as corporations.

Bypassing the corporate freedom issue, some argue that any religious freedom rights simply “pass through” the corporation to the shareholders. After all, with both Hobby Lobby and Conestoga, the corporation’s stock is held by a single family of devout Christians. But the corporation is the one that is required to satisfy the mandate that its health-care plan cover the objectionable contraceptives or that it pay a very stiff fine ($1.3 million per day for Hobby Lobby).

The federal appellate court in Washington, D.C., recently tried another tack, holding that corporations lack religious freedom rights, but that the health-care law’s mandate infringed the shareholders’ rights in that case. But this conclusion was backward. The real harm was to the corporation; any harm to the shareholders was indirect.

Although some might worry that a massive wave of corporate religious freedom claims would follow a Supreme Court ruling, this is unlikely. Hobby Lobby would probably qualify, since its statement of purpose affirms the Green family’s commitment to “honoring the Lord in all we do by operating the company in a manner consistent with Biblical principles.” But a corporation whose managers happen to be religious, but which lacks a similarly clear policy, would not.

As cases arise in the future, courts would need to determine whether the corporation does in fact operate on religious principles. But the same question arises when an individual asserts religious-freedom rights, and sincerity is much easier to determine with a corporation than with an individual, since there is no need to look inside the heart of a corporation. If a corporation’s certificate of incorporation requires that it be operated in accordance with religious principles, or if its board of directors has established a clear and explicit practice of pursuing religious objectives, it would qualify. Otherwise it would not. Among large corporations, perhaps Chick-fil-A would satisfy such a test, but very few others would.

Religious freedom rights also would not protect a corporation from every law that offends the corporation’s principles. The Supreme Court held in 1982 that an Amish business could not forgo making Social Security contributions, despite the owner’s sincerely held religious objections, because an exemption would undermine the overall system. The government would still be free to make this kind of argument in defense of subjecting religious for-profit corporations to the health-care act’s contraception mandate.

Corporations are not like other people. They are persons for the purposes of some rights but not others. In the coming months, there is a very good chance the Supreme Court will conclude that one of the rights that some for-profit corporations do enjoy is a right to religious freedom.

Mr. Skeel, a visiting professor at New York University School of Law, is the author of “The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences” (Wiley, 2011).

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