The Third Circuit Is Wrong Again: “For-Profit, Secular Corporations” Can Engage in the “Exercise of Religion”

I suspect that the government lawyers who successfully defended the HHS contraceptives mandate against RFRA and Free Exercise claims in Conestoga Wood Specialties Corp. v. HHS really would have preferred to win on different grounds. That is because the basis for the Third Circuit’s decision is legally insubstantial. On an issue that will be decided by the Supreme Court, it would be better for the government to have won on a more defensible basis than the conclusion that a “for-profit, secular corporation” cannot “exercise religion.”

The dissenting opinion by Judge Jordan convincingly demonstrates that the majority’s ultimate conclusion is wrong and that its supporting reasoning is defective. Will Baude at Volokh Conspiracy and Marc DeGirolami at Mirror of Justice have also raised questions about the panel majority’s analysis. Over the next couple of weeks, I aim to provide additional critical commentary that elaborates on criticisms previously raised and offers new angles of analysis and criticism. While some of these criticisms will be based on arguments advanced in the amicus brief that I co-authored in Conestoga, I aim to expand beyond the targeted set of arguments advanced there.

For now, I will begin with Marc DeGirolami’s argument about the short shrift given RFRA in the panel majority’s analysis. The majority opinion states: “Our conclusion that a for-profit, secular corporation cannot assert a claim under the Free Exercise Clause necessitates the conclusion that a for-profit, secular corporation cannot engage in the exercise of religion. Since Conestoga cannot exercise religion, it cannot assert a RFRA claim.” DeGirolami argues that the court should not have simply assumed “that a term as used in the Constitution must mean exactly the same thing as a term used in a statute.”

DeGirolami is right that there cannot be a one-to-one relationship between RFRA and the Free Exercise Clause as interpreted by the Supreme Court. The purpose of RFRA was to replace the legal standard for evaluating Free Exercise claims adopted in Employment Division v. Smith, 494 U.S. 872 (1990). But given the stated intention of RFRA, there should be a close correspondence between the pre-Smith reach of the Free Exercise Clause and the reach of RFRA. One of the purposes declared in the legislation is “to restore the compelling interest test as set forth in Sherbert v. Verner, 374 U.S. 398 (1963) and Wisconsin v. Yoder, 406 U.S. 205 (1972) and to guarantee its application in all cases where free exercise of religion is substantially burdened.” 42 U.S.C. § 2000bb(b)(1).

If the panel majority’s analysis had started with RFRA instead of the Free Exercise Clause, it is less likely that its analysis would have led to the wrong conclusion. To begin with, there is more textual guidance in the U.S. Code. As DeGirolami points out, Congress has declared that the protected “exercise of religion” “includes any exercise of religion, whether or not compelled by, or central to, a system of religious belief.” That language suggests an expansive understanding of “exercise of religion,” and it invites further inquiry into how “exercise of religion” should be understood.

As I have previously argued in connection with the Third Circuit’s earlier mistaken decision on the contraceptives mandate, “a religiously based refusal to do something otherwise required by law is an ‘exercise of religion.'” Consider the facts of Sherbert v. Verner, 374 U.S. 398 (1963), one of the two cases singled out in RFRA. The exercise of religion in that case was Adele Sherbert’s religion-based refusal to work on Saturday. See id. at 403 (describing the relevant conduct as “appellant’s conscientious objection to Saturday work”).

A corporation can engage in this kind of “exercise of religion” if a corporation can refuse, for religious reasons, to do something otherwise required by law. And it plainly can. Suppose a federal law requiring fast-food restaurants located near interstate highways to be open seven days a week. Chick-fil-A’s religion-based refusal to operate on Sundays in violation of this law would surely be an “exercise of religion” akin to Ms. Sherbert’s refusal to work on Saturdays.

The profit-making character of the corporation does not change the analysis of whether the corporation can make a religion-based decision. Chick-fil-A is a profit-making business. Yet it foregoes the profits it would otherwise make through Sunday operation because its religion-based corporate policy controls the manner in which it seeks to make a profit. Similarly, Ms. Sherbert was working for money (and later seeking unemployment benefits). Yet her religious obligation not to work on Saturday conditioned the manner in which she could go about earning money.

The panel majority opinion simply does not address this line of argument. One way in which its failure to address RFRA independently may have contributed to this failure to analyze what counts as a protected “exercise of religion” emerges from a word search for that phrase. It does not appear until page 28, after the majority has already concluded its Free Exercise analysis. In the course of its Free Exercise analysis, the Third Circuit panel majority does not ask whether a corporation can engage in the “exercise of religion” (RFRA’s words), but rather whether corporations can “engage in religious exercise” [11] or whether corporations can “exercise religion” [15]. The wording shift is subtle and almost certainly unintentional, but it nevertheless tends to lead analysis in the wrong direction. For the panel majority’s rephrasing suggests asking whether a corporation can engage in religious exercises like prayer, worship, participation in sacraments, and so on. But that is not what the governing law requires.

One might try to distinguish the exercise of religion in Sherbert on the ground that the underlying basis of the refusal to work on Saturday was so that Ms. Sherbert could engage in the religious exercise of attending worship services. The problem with this distinction is that it is sufficient for the religion-based refusal to be sincere and religion-based. It does not need to be tied to some other “religious exercise.” Consider Thomas v. Review Board, 450 U.S. 707 (1981). The exercise of religion in that case was Mr. Thomas’s refusal to participate in the production of turrets for military tanks. This refusal was based on Mr. Thomas’s beliefs as a Jehovah’s Witness. It did not matter that this religion-based refusal conditioned Mr. Thomas’s pursuit of money. The Supreme Court found it sufficient that “Thomas terminated his employment for religious reasons.” Similarly, the Third Circuit should have found it sufficient that Conestoga objects to compliance with the mandate for religious reasons. That religion-based objection is an “exercise of religion” within the compass of both RFRA and the Free Exercise Clause.

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If RFRA protects for-profit corporations, what’s to stop Jehovah’s Witnesses’ companies from refusing coverage for blood transfusions?

An argument against recognizing RFRA coverage of for-profit corporations that seems to be popping up with some regularity goes like this: Once courts recognize the right of evangelical employers to buy insurance coverage that excludes abortion-causing drugs and devices, or the right of Catholic employers to buy insurance coverage that excludes contraceptives, there is nothing to stop Jehovah’s Witness employers from buying insurance coverage that excludes coverage for blood transfusions. See, e.g., Matthew Boudway at dotCommonweal (“Should an overzealous Jehovah’s Witness be able to get a group plan that excludes coverage for emergency blood transfusions, even if none of his employees are coreligionists?”); Americans United for Separation of Church and State (“The logic of Plaintiffs’ argument would transcend the provision of coverage for contraception. A Jehovah’s Witness could choose to exclude blood transfusions from his company’s health-insurance coverage.”).

This argument obviously appeals to some, or they would not bother making it. But there are several reasons that the argument is weak. And the fact that some advance this argument seriously in reasoned public debate may work against improving mutual understanding of religious liberty. Consider:

(1) Has any Jehovah’s Witness employer ever made such a claim? I’m not aware of any. Yet all of the legal tools available to make such a claim have been available for years. It is hard to see how the roll down the slippery slope to this location would get started by rulings about the contraceptives mandate if it has not yet started in some other way.

(2) RFRA prohibits the government from substantially burdening the exercise of religion. The religiously objecting employer under RFRA seeks protection from a government mandate. I’m not aware of any blood transfusion coverage mandate by the government–probably because there is no problem out there of employers limiting coverage in this particular way. If Jehovah’s Witness employers have not sought to limit coverage even when there is no mandate preventing them from doing so, figuring out the scope of their religious freedom in this regard seems like an idle exercise.

(3) The people putting this argument forward may not even understand what Jehovah’s Witnesses actually believe. While the religion teaches its adherents to avoid blood transfusions, it is not at all clear (at least to me, anyway) that the religion teaches this as a matter of the moral law binding on all, rather than a form of divine positive law that is not binding on those outside the community of religious adherents. (For an articulation of this distinction, see this discussion by Mark Shea.)

(4) RFRA is not a free pass for a religious exemption, but its application does trigger the requirement for the government to satisfy strict scrutiny, and the government can sometimes satisfy that test. The application of strict scrutiny should stop the roll down the slippery slope from reaching the point where the government cannot use certain regulatory tools to achieve a compelling government interest. Even assuming that a substantial burden analysis comes out the same, the compelling interest is easier to identify in with respect to emergency blood transfusions. The need for an emergency blood transfusion is unpredictable. And in comparison with emergency contraception, which is available over the counter at most pharmacies (for around $40 for a generic or $50 for a brand name), emergency blood transfusions are much more expensive.

(5) The casual deployment of this Jehovah’s Witness example is sometimes coupled with related arguments that reveal a misunderstanding of the religious beliefs of other groups. For example, the same amicus curiae brief in which Americans United for Separation of Church and State advanced the Jehovah’s Witness argument also argued that “Catholic owners could deprive their companies’ employees of coverage for end-of-life hospice care and for medically necessary hysterectomies.” With statements like this, it is difficult to believe that this brief was reviewed before filing by someone familiar with Catholic moral teaching. Catholics object neither to end-of-life hospice care nor to medically necessary hysterectomies.

(6) A casual approach to religiously based moral beliefs that differ in some ways from majority-held moral beliefs can easily lead to harm through a failure to appreciate and offer reasonable accommodations. While my research into this issue did not uncover an example of a Jehovah’s Witness employer denying insurance coverage for a blood transfusion, it did reveal a case in which a state denied to a Jehovah’s Witness on public aid coverage for a bloodless liver transplant that was available out-of-state at lower cost than an in-state transplant requiring a transfusion. Mary Stinemetz eventually prevailed on her Free Exercise challenge to this denial, but by the time the case was over, her condition had apparently deteriorated too far for her to any longer be eligible for a transplant.

(7) Most of the people who are advancing this particular slippery-slope argument probably have no idea of the contributions that Jehovah’s Witnesses have made to the law of religious liberty in the United States. See, e.g.,Thomas v. Review Bd.; West Virginia Bd. of Educ. v. Barnette.

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The Third Circuit is wrong: RFRA protects corporations, without any carve-out of for-profit corporations from its protections

A split panel of the Third Circuit recently joined the minority of federal courts that have denied preliminary injunctive relief to for-profit corporations and their owners in RFRA and Free Exercise challenges to the HHS Mandate. Both judges in the majority (Judge Rendell and Judge Garth) endorse the district court’s conclusions that “a secular, for-profit corporation . . . has no free exercise rights under the First Amendment, and is not a “person” under RFRA.” Writing in dissent, Judge Jordan contends (powerfully) that these conclusions rest on erroneous premises and merit further consideration by the court. If anything, Judge Jordan’s dissent understates the problems with the majority’s adoption of these conclusions because the standard of review did not require him to reach definitive conclusions. There is no legal basis for a judicial carve-out of “secular, for profit corporations” from RFRA’s protections.

RFRA provides that “[g]overnment shall not substantially burden a person’s exercise of religion” unless the government satisfies strict scrutiny. 42 U.S.C. § 2000bb-1(a) (emphasis added). In the U.S. Code, “person” ordinarily encompasses “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” 1 U.S.C. § 1. Nothing in RFRA excludes corporations generally. To the contrary, it is plain that corporations can assert claims under RFRA. The only Supreme Court case applying RFRA against the federal government involved a claim asserted by a corporation, O Centro Espírita Beneficente União do Vegetal.

Rather than adopt the obviously incorrect interpretation of “person” to exclude corporations, courts have carved up the category of corporations into “religious corporations” and “secular, for-profit corporations.” But there is no textual basis for this distinction in the statutory term “person.”

When one analyzes the claim, it turns out that the argument is not really about the meaning of the word “person” (even though the conclusion of the argument purports to be a claim about the meaning of this word). Rather, the argument pivots on “exercise of religion.” In the words of the district court opinion adopted by the Third Circuit, “a for-profit, secular corporation cannot exercise religion.”

Again, the claim is not that corporations cannot engage in exercise of religion. After all, corporations can, and do, exercise religion. Consider, for example, Church of Lukumi Babalu Aye, Inc. or Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter-Day Saints. The claim, rather, is limited to “secular, for-profit corporations.” But the claim rests on a mistake about “exercise of religion” under federal law and a mistake about corporate action.

As to “exercise of religion,” it is plain that a religiously based refusal to do something otherwise required by law is an “exercise of religion.” Indeed, two of the leading cases on the meaning of the Free Exercise Clause involved individuals who refused, in the course of their employment (profit-seeking employment!) to do something. Because of their religious beliefs, Eddie Thomas refused to fabricate tank turrets and Adele Sherbert refused to work on Saturdays. These religion-based refusals were their protected exercises of religion.

A corporation’s religion-based refusal to engage in a particular action is also an “exercise of religion.” A corporation’s religion-based refusal to open its stores on Sundays, for example, is as much an exercise of religion as an individual’s refusal to  work on Saturdays. The involvement of a profit motive makes no difference. People work for money, and some choose not to work on certain days for religious reasons. Similarly, for-profit corporations operate for money, and some choose not to operate on certain days for religious reasons.

Some judges seem to think that a for-profit corporation can do nothing but seek profits. In the Third Circuit decision mentioned above, for example, Judge Garth insists that “the purpose–and only purpose–of the plaintiff Conestoga is to make money!” There is no reason to characterize corporate purpose so narrowly, and certainly no basis in corporate law to do so. Even a publicly traded corporation with an obligation to act in the best interests of shareholders can be “socially responsible” and incur various costs in pursuit of long-term value and goodwill.

Unfortunately, the misunderstandings involved run even deeper. Judge Garth approvingly adopts Judge Heaton’s reasoning in the Hobby Lobby case that “[g]eneral business corporations . . . do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors.” But this reasoning applies as well, of course, to religious corporations. All corporations act through “the intention and direction of their individual actors.” When performed under certain circumstances, however, the actions of individuals count as the action of the corporation. We have no problem understanding this concept in the context of discrimination. If a for-profit corporation were to announce a policy to refuse to hire Muslims, or adherents of some other religion, there would be no difficulty in attributing that religion-based discrimination to the corporation. The law recognizes corporate intention and corporate motivation all over the place. If a for-profit corporation can discriminate on the basis of religion, why can’t a for-profit corporation perform some other act on the basis of religion? When Hobby Lobby Stores, Inc., for example, decides to honor the Sabbath by staying closed on Sundays (and thereby forgoing profits the corporation would otherwise earn), that is a corporate act on the basis of religion–a corporate “exercise of religion.” And just as a corporate refusal, for religious reasons, to operate on a particular day is a corporate “exercise of religion” under federal law, so too is a corporate refusal, for religious reasons, to include particular drugs and devices in the group health plan offered by the corporation to its employees.

Statutory law does sometimes distinguish between for-profit and not-for-profit corporations. Under Title VII, for example, for-profit corporations may not limit hiring to co-religionists, while some not-for-profit corporations can. But this only shows that Congress knows how to make that distinction when it wishes to do so. Congress made no such distinction in RFRA.

If people think that, as a matter of good public policy, there should be such a difference, then Congress can amend RFRA. Or Congress can amend the PPACA to explicitly exclude the application of RFRA’s protections from the statutory scheme. These exclusions might raise some constitutional questions, but we are not even close to that right now. Instead, some courts are incorrectly carving out certain corporations from RFRA’s blanket coverage. These judicial carve-outs are based on mistaken statutory interpretation, a mistaken understanding of the meaning of “exercise of religion,” and a mistaken understanding of corporate action.

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