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October 11, 2013

A church plan exemption as part of a deal to end the government shutdown

NBC News reports that a "big development" in yesterday's Obama-House GOP meeting was that President Obama "opened the door to giving Republicans a concession to reopen the government--with the understanding that the concession would be something the GOP would have ALREADY GOTTEN during normal budget talks (maybe like repeal of the medical device tax)." (emphasis in original)

Another proposal for the negotiators to consider is giving a concession that accomplishes through legislation what would otherwise be accomplished through litigation.

The particular proposal I have in mind would be to expand the religious employer exemption from the contraceptives mandate to employers who participate in church plans. The legal rationales for such a proposal have already been laid out in comments filed by the Church Alliance this past April in response to the Notice of Proposed Rulemaking. To those comments, I would add the observation that the strength of the legal claims in Little Sisters of the Poor v. Sebelius provides another reason to consider such an exemption. If church plans and plan members are going to prevail anyway, but only after some (deserved) embarrassment to the Administration, it would be better to get something for it now instead.

A church plan exemption would not put an end to all of the litigation, by any means, and it is less (in my view) than RFRA already requires. But it would be a visible "get" for GOP negotiators and a costless "give" for the Administration (at least insofar as the interest groups who would be upset by the "give" recognize that the likelihood of the Administration actually prevailing in the Little Sisters case is rather low).

Posted by Kevin C. Walsh on October 11, 2013 at 03:01 PM in Walsh, Kevin | Permalink

Comments

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Hi Professor Walsh,

I've been sporadically commenting on this issue regarding the HHS mandate here on MOJ and I agree that the exemption should be extended to groups/non profits that are religiously affiliated with either an order or directly to the Church itself.

Where I've been disagreeing with many of the other posters here is when for profit companies are involved such as Hobby Lobby. I'd never heard of Hobby Lobby before this (I don't even think we have any stores here in Michigan) but I looked at its website and it says that it is a private corporation. Which, from my experience, means that there's a small number of directors who are limited in their liability to the profits/loss of the business.

It would seem to me that this is the flaw in the for profit argument concerning the HHS mandate. I don't doubt that Mr. Green is a good, sincere man. But it seems to me that if his business is going to take a corporate status for tax purposes, he can't then turn around and claim to be individually aggrieved by the mandate. It's either one or the other.

I guess I'd just like to hear more opinion this. I apologize if I'm moving away from the topic involving religious organizations but this seem as good a place to ask this question.

Thanks, Professor Walsh!

Posted by: Edward Dougherty | Oct 11, 2013 4:12:19 PM

Contraceptives are required to those not exempt pursuant to a study by an independent group that cited as I recall eight things that promote preventive health. Overall, businesses would be required to have health plans for their employees.

In any number of cases, some health benefit might violate the religious beliefs of some Hobby Lobby type owner. For instance, sterilization itself was flagged by someone on this very blog as potentially problematic given Catholic doctrine. While we talk about extending exemptions and so forth, it should be noted that "contraceptives" or "abortion" is not the only thing at stake here.

This might not be directly germane, but Mr. Dougherty's comment does bring to mind wider issues. The Little Sisters link, e.g., talks about the groups beliefs as to "life," but religious freedom is what seems to be the general argument being made here, not favoring one specific type of religious belief. So, when some janitor at a church run organization cannot pay for their daughter's therapy because it is too "pro-gay" or whatever, religious freedom might be deemed to be upheld too. However "embarrassing" that might be.

Posted by: Joe | Oct 11, 2013 6:16:51 PM

Regardless if one's company is for profit, or not for profit, one does not lose their inherent Right to Religious Liberty because they choose to run their company according to their Christian principles.

Posted by: Nancy | Oct 12, 2013 10:29:36 AM

Hi Nancy,

They might if they're using IRS rules (legally, yes, but still using them) to relieve their tax liabilities from business losses. You can't do that and still claim that you're being personally affected by things like the HHS mandate.

Posted by: Edward Dougherty | Oct 14, 2013 8:03:42 AM

The question is what "their inherent Right to Religious Liberty" demands. Also, positive law can violate natural law -- slavery would be a pretty good example for those who believe in natural law.

Posted by: Joe | Oct 14, 2013 11:09:09 AM

Hi Edward, I am wondering on what basis our Government can claim that the following does not apply: http://www.law.cornell.edu/constitution/first_amendment, when using IRS rules. I suppose this comment might appear snarky, but with all due respect to the IRS, using IRS rules to determine who qualifies for having their Religious Liberty secured and protected by our Constitution, seems like another "lemon" test to me.

Posted by: Nancy | Oct 14, 2013 11:43:04 AM

Looks like someone has misplaced The First Amendment to our Constitution. Hopefully, it will appear sometime soon: http://www.law.cornell.edu/constitution/first_amendment

Posted by: Nancy | Oct 14, 2013 11:45:01 AM

Joe, the question is, why is our Government using IRS rules to determine whose right to Religious Liberty they will secure and protect?

Posted by: Nancy | Oct 14, 2013 1:09:30 PM

Sorry to have taken so long to respond to the earlier query about the idea that one cannot "take a corporate status for tax purposes" and "and then turn around and claim to be individually aggrieved by the mandate." I have an excuse that should be good enough for a Catholic legal theory blog--attendance at an out-of-town baptism for my nephew.

It is important to separate out two strands of objections to companies like Hobby Lobby claiming the protection of RFRA and the Free Exercise Clause.

One strand has to do with corporate status. But corporate status alone does not render one unable to assert a RFRA or Free Exercise claim, as we know from all the cases involving religious corporations.

Another strand stems from the profit-seeking nature of certain corporations' conduct. But it is hard to see how a distinction between profit-seeking and non-profit-seeking corporations marks a sensible division between protected and unprotected religious exercise. Take a religious publisher, for example. Why should it matter whether it sells bibles for a profit or gives them away for free?

Two pieces that go into the analysis in some level of detail are Mark Rienzi, God and the Profits, at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2229632, and Ronald Colombo, The Naked Private Square, at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2173801. Also, back in February, I wrote a blog post addressing some of these issues, at http://walshslaw.wordpress.com/2013/02/09/the-third-circuit-is-wrong-rfra-protects-corporations-without-any-carve-out-of-for-profit-corporations-from-its-protections/.

Posted by: Kevin C. Walsh | Oct 14, 2013 2:52:11 PM

In response to Nancy's question for Joe, it may be worth clarifying that I would find it preferable for the Administration to use the "IRS rules" identifying church plans as the basis for an exemption from the mandate than for the Administration to have crafted the strange system that it has.

Posted by: Kevin C. Walsh | Oct 14, 2013 3:08:18 PM

Professor Walsh, I suppose the IRS rules would be preferable to the strange system that has been crafted by the Obama Administration, but the fact is, both the IRS rules and the strange system are a violation of The First Amendment:
http://www.law.cornell.edu/constitution/first_amendment

Posted by: Nancy | Oct 14, 2013 4:26:01 PM

Hi Professor Walsh,

Thank you for the links to the articles and I think a family baptism in the Big Easy is a great excuse!

I had trouble downloading the SSRN papers so I was only able to read yours. Again, I am not a lawyer but rather someone who's works in private industry for close to 20 years. I understand your emphasis on the allowance of corporations to participate in religious activity through RFRA and how these corporations are made up of persons who can act on their belief through the corporation. However, my reference to the IRS rules for corporations is about how those same individuals can take advantage of tax rules when it comes to business losses. The individual's liability is lessened because they can refer those losses to the corporation. Similarly, the HHS mandate for corporations (be they PC, LLCs, incorporations, etc.) are not mandates on the individuals but rather on the corporation. It is the corporation that is paying for the insurance, not the individuals involved in the corporate governance. Using RFRA to object to the mandate is allowing these individuals to use the corporate status when it is convenient for them. First they're a corporation, next they're not.

I understand that RFRA was an answer to the Employment Division vs. Smith case but I think it's a badly written law despite what may be in the text. We had some discussion of Smith back when the Hosanna Tabor decision came and I remember that it was said (hope I can remember correctly) that Smith covered religious practices while Hosanna Tabor covered religious administration. Similarly, I think that the mandate affects a religious practice and the ACA is a generally applicable law (I know of no religious exceptions in it but if there are, please correct me) so the Hobby Lobbys and Autocam don't have a leg to stand on and, as I understand it, Smith is still precedent despite the RFRA.

I also think that it depends upon how you look at employer provided health insurance. Some on the blog seem to think that it is something provided by the employer as a "benefit" while I (and my educated guess-and it's only a guess) is that the majority of working Americans would see it as compensation for services rendered. If these challenges succeed, then what's to stop Hobby Lobby from firing employees who used their pay to engage in off work activities they would find objectionable? I'm not normally one to go on slippery slope arguments but I fail to see how they could not be used if this works.

I'll stop here but I'll just sum up by saying that corporations can't take advantage of that status without accepting the pitfalls. And one of them should be compliance with generally applicable law with which the individuals do not agree. Happens all the time in the business world.

Thanks, Professor Walsh!

Posted by: Edward Dougherty | Oct 16, 2013 4:04:44 PM

Edward,

I know I'm late here, but your posts slightly puzzled me in a couple of ways.

1. You say "If these challenges succeed, then what's to stop Hobby Lobby from firing employees who used their pay to engage in off work activities they would find objectionable?"

I don't think I'm following you, because if I understand you correctly, you might be surprised to know that that's the way most employment already works: for most employment situations, most employees are "at will" and can be fired for any reason or no reason at all, including if they do something objectionable during their off-work time. (It's for only a small, limited number of reasons as set out in law, like race, for which you can't be fired.) And this arrangement of an employer having the ability to fire employees for any or no reason at all (as long as it's not illegal) is generally regarded as a positive one that protects an employer's freedom.

2. Your posts all seem to have this basic principle: if a business is going to take a corporate status for tax purposes, then the business owner can't then turn around and claim to be individually aggrieved by the mandate (or any other rule). In other words: if you want to run a business with the rights and privileges given to the business from the government, you have to follow the government's rules, and (I suppose) if you don't like the rules, then you can always choose to not have a business. Am I correct in thinking that's your basic principle? If so, I suggest that your principle is wrong. We can think up plenty of potential government rules for running a business that are obviously unjust against an employer. Consider a rule requiring all employers to renounce Christianity in order to obtain a business license, or a rule requiring all employers to employ only white people. Telling the employer in those instances that they can simply choose to shut down doesn't mitigate the injustice of the government rules.

Posted by: Thales | Oct 17, 2013 10:53:45 PM

Hi Thales,

I am very familiar with at will employment but I also know that any employer who terminates an employee for actions that occur outside of their employment (and if that employee has a solid work record and no other issues there) is probably going to face a legal challenge that they may or may not win.


Well, yes, that's my basic principle but I don't think that automatically means it has to shut down. A corporate status isn't taken by a business in order to confer it with dignity (to use a Catholic term) or to allow it to exercise rights against a generally applicable law. It is a status used to claim profits and losses against one's personal income. I have no real issue with such statuses and I agree that the individuals involved have their own personal rights to religion freedom but they aren't being affected here-it is the corporation (which doesn't have any religious freedom rights granted through its corporate status) that is being mandated.

It's like when companies had to let employees who were service members fight in Iraq despite the fact their personal member may have had religious objections to the invasion (as I did). I realized that there wasn't a leg to stand on in that case so we just had to grit out teeth and deal with it. And I would say that such companies were far more burdened than Hobby Lobby is in this case.

As for the rule to renounce Christianity, that would never happen. And the rule to hire only white people was taken care of by the 1964 Civil Rights Act.

Posted by: Edward Dougherty | Oct 18, 2013 8:25:25 AM

Edward,

1. You say, "I am very familiar with at will employment but I also know that any employer who terminates an employee for actions that occur outside of their employment (and if that employee has a solid work record and no other issues there) is probably going to face a legal challenge that they may or may not win."

[shrug] I suppose... but in our litigious society, you can always face a legal challenge for anything or nothing. In the case we're talking about, the person bringing the lawsuit has no leg to stand on and his case should be thrown out of court. What's more, the ability to terminate someone's at-will employment for something they do outside of their employment is not necessarily a bad thing: consider the situation of an employee who commits public scandal outside his employment. Sure, the ability to terminate someone because you don't like them for some non-work-related reason can be abused... but the freedom to associate with who you want to and to hire who you want to hire (with the corresponding possibility that one person might be mean to another person) is generally regarded as much more desirable than not having the freedom of association and not having the freedom to hire who you want to hire as your employee.

2. You're not understanding my point. Initially, you seemed to be saying that "any mandate on a corporation is fine -- if you don't like the mandate, don't run the corporation. Your personal rights as an individual are not being violated." I'm saying that's a deeply flawed argument, and I gave the examples of a mandates on a corporation that I think we would both agree are unjust, like regulations requiring a renouncing of Christianity or racism in hiring. (The fact that a law would never happen is (1) irrelevant to my point, and (2) perhaps optimistic on your part. The Civil Rights Act illustrates that such a law *could* happen, as it did. And religious laws as I describe currently exist in the world today, and used to exist in Western countries within the last hundred years.)

The argument that you should be making is that the HHS mandate is a regulation on corporations that is not unreasonable because the regulation is not overly burdensome to comply with, or because the regulation does not gravely violate the freedom of the individual setting up the corporation, or because the societal interest behind the regulation is important enough to justify the burden, etc. That's a valid argument to make (though I disagree with it), and a fundamentally different argument from the one that I describe above and that I think is deeply flawed (namely, the argument that any government regulation on a corporation is okay, because if you don't like the regulation, you can just close your corporation.) Do you see the distinction? Your Iraq example illustrates the distinction: If I were to argue in favor of the Iraq regulation that you didn't like, I would argue by saying that despite the employer's religious objection to the war and his desire to not cooperate with it in any way, the burden on the employer is relatively small, that the cooperation with the war is relatively remote, that the burden is justified by society's interest in fighting in Iraq and the employees' interest in joining the fight if he so desired, etc. I wouldn't argue that the employer's objection is completely baseless because there is no violation of freedom in the first place, and that the employer can simply decide to shut down if he doesn't like the regulation.

Posted by: Thales | Oct 19, 2013 11:48:40 AM

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