Corporate Accountability

These Two Cases Could Be Corporate America’s Biggest Gift Since Citizens United

By Jeffrey Rosen


The Supreme Court today agreed to hear two cases involving the most hotly contested and far reaching question from the latest round of constitutional challenges to the Affordable Care Act: Do corporations have the same religious liberty rights as individuals? The cases arose out of the Obama administration’s decision, under threat of litigation, from religious liberty groups like the Beckett Fund, to exempt churches, organized as non-profit corporations, from the ACA’s requirement that all businesses provide their employees with health insurance coverage related to contraception. Now the Beckett Fund and other scholars are arguing that the ACA’s exemption for religious non-profits is too narrow and that all corporations, profit and non-profit alike, should be able to claim an exemption from the contraception mandate because, according to the Citizens United case, corporations have the same First Amendment rights as individuals.


The case has huge significance because, if the broad version of the constitutional challenge is accepted, any for-profit corporations whose owners claim that they are organizing their businesses to further religious principles could claim exemption from a host of federal regulations. As Judge Illana Rovner pointed out in her dissent from the Seventh Circuit case granting a religious exemption to the health care mandate to for-profit corporations, a ruling along these lines “has the potential to reach far beyond contraception and to invite employers to seek exemptions from any number of federally-mandated employee benefits to which an employer might object on religious grounds.” For example, Judge Rovner noted, an employer who is a Methodist and objects to stem cell research might refuse to cover an employee’s participation in a clinical trial of stem cell research for Lou Gehrig’s disease; an employer who is a Christian scientist might insist that the ACA’s mandate of coverage for traditional medical care is a violation of his religious beliefs; and an employer who is a Southern Baptist and objects to gay marriage and surrogacy might refuse family leave to gay employees that would otherwise be required under federal law.


The question of whether corporations have the same religious liberty rights as individuals is both hugely significant and open-ended: As the Obama administration and the Third Circuit Court of Appeals have noted, before this litigation began, no court had found that “a for-profit, secular corporation” had the same First Amendment rights as individuals to the free exercise of religion.  


Five federal circuit courts have now issued rulings on the constitutional challenges. The Seventh, Tenth, and D.C. Circuits have accepted the challenges, for different reason, and the Third and Sixth circuits have rejected the challenges. Several of the judges who have found that for-profit corporations profit have the same religious freedom rights as individuals have cited the court’s Citizens United holding that corporations and individuals have the same First Amendment rights of free expression for the purposes of campaign finance law. For example, the majority in the Hobby Lobby case wrote that: “Because Hobby Lobby and Mardel express themselves for religious purposes, the First Amendment logic of Citizens United, where the Supreme Court has recognized a First Amendment right of for-profit corporations to express themselves for political purposes, applies as well.” Similarly, Judge Kent Jordan’s dissent in the Third Circuit cited Citizens United and dismissed the fact that there is no historical precedent for treating for profit corporations like individuals when it comes to the free exercise of religion. “While authority is admittedly scanty, that is in all probability because there has never before been a government policy that could be perceived as intruding on religious liberty as aggressively as the Mandate, so there has been little reason to address the issue,” he wrote.  


“By contrast, those judges who have rejected the constitutional claim argue that “Citizens United represents the culmination of decades of Supreme Court jurisprudence recognizing that all corporations speak,” as the libertarian conservative Judge Janice Rogers Brown wrote for the U.S. Court of Appeals for the D.C. Circuit. “When it comes to the free exercise of religion, however, the Court has only indicated that people and churches worship. As for secular corporations, the Court has been all but silent.”


In a recent podcast debate hosted by the National Constitution Center, Michael McConnell of Stanford Law School and David Gans of the Constitutional Accountability Center drew opposite conclusions from constitutional history about whether corporations have the same religious liberty rights as individuals. Citing McConnell’s historical scholarship, Gans argued in the podcast and his brief to the Supreme Court that “the Founding generation well understood that the First Amendment’s guarantee of free exercise was an inalienable individual right, inextricably linked to the human capacity to express devotion to a god and act on the basis of reason and conscience.” He also emphasized that English common law during the Founding generation sharply distinguished between religious and other private corporations. In his response, McConnell emphasized that the modern business corporation didn’t exist at the time of the Founding, that it wasn’t until the 1840s that ordinary people were able to organize their businesses in corporate form, and no one thought the precise corporate organization of an entity—for profit or non-profit, corporation or sole proprietorship—deprived its owner of constitutional rights. McConnell’s arguments are amplified in this comprehensive scholarly argument by Mark Rienzi of the Beckett Fund that denying religious liberty rights to for profit corporations would single them out for discriminatory treatment in ways that the First Amendment forbids.


There are good arguments on both sides of this case, as there are on any important Supreme Court case of first impression. But it’s clear that the Obama administration has history, Supreme Court precedent, and judicial restraint on its side, while those who are demanding a broad exemption from the contraceptive mandate for all religiously motivated employers are offering a novel argument, not previously raised before this litigation began, that could indeed lead religiously motivated employers to demand exemptions from a broad range of anti-discriminatory, health, and safety laws. “By casting the mandatory provision of benefits to an employee as a substantial burden on the free exercise rights of a closely-held corporation and its owners, without considering whether compliance with the mandate directly interferes with the free exercise of religion or is at most a modest burden on a plaintiff’s free exercise rights, the court’s rationale subjects a potentially wide range of statutory protections to strict scrutiny, one of the most demanding standards known in our legal system,” Judge Rovner wrote in her Seventh Circuit dissent. “In some ways, this is reminiscent of the Lochner era, when an employer could claim that the extension of statutory protections to its workers constituted an undue infringement on the freedom of contract and the right to operate a private, lawful business as the owner wished.”


If the Supreme Court wants to avoid the most explosive implications of a holding that corporations have the same religious liberty rights as individuals, it might instead take the narrower approach of the U.S. Court of Appeals for the D.C. Circuit, which held that individual businesses owners who are religiously motivated can challenge the contraceptive mandate but a corporate as a whole cannot. That would still leave open the central question of whether or not an obligation to provide contraceptive coverage does, in fact, burden the religious liberty rights of the individual business owners. And on that score, Judge Harry Edward on the D.C. Circuit had the most convincing take. While acknowledging that individual business owners, Frances and Phil Gilardi, owners of the Freshway corporation, could challenge the health care mandate, he noted three reasons why the mandate doesn’t substantially burden the business owner’s religious liberty: “First, the Mandate does not require the Gilardis to use or purchase contraception themselves. Second, the Mandate does not require the Gilardis to encourage Freshway’s employees to use contraceptives any more directly than they do by authorizing Freshway to pay wages. Finally, the Gilardis remain free to express publicly their disapproval of contraceptive products.” Because the business owners weren’t forced by the government personally to engage in conduct that their religious beliefs prohibit, Edwards concluded, “this case differs from every case in which the Court has found a substantial burden on religious exercise.”


And that’s the nub of the issue. The question of whether or not corporations have the same constitutional rights of religious liberty as individuals is legally significant, politically explosive, and has huge consequences for the future of the regulatory state. But even if the Court holds that corporations can’t challenge the mandate in their collective capacity but individual business owners can, the underlying question is whether the religious liberty of for-profit business owners is actually burdened by a federal requirement that they give their employees access to federal benefits on the same terms available to employees of any other business. If the Court says yes, and allows religiously motivated corporations to claim exemptions from otherwise neutral federal regulations, it could not only drive a stake into the heart of the regulatory state; it could also balkanize Americans based on their place of employment in ways that are hard to reconcile with the Founders’ vision that all employees and all citizens are equal in the eyes of the law.

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