On HHS vs Hobby Lobby

WEB-HHSAfter reading through the opinions from this recent (and controversial) Supreme Court decision, I want to write down some of my thoughts about the reasoning used to ultimately find for Hobby Lobby. From what I can tell, the decision hinges on just two crucial steps. First – are corporations persons such that they can have their free exercise of religion protected, and second – did the contraception mandate violate the corporation’s right to free exercise.

Read on for my analysis…

The first issue rests on what we mean by the word “person” – and this one is strange because in the eyes of the law, a corporation is a person. They are not “natural” persons like human beings, but they are considered persons nonetheless. One of the reasons for this, explained in the majority opinion, is that corporations are merely voluntary collections of people that have pooled their time and resources into some enterprise, and their individual rights get transferred into their association as collective rights. For example, if corporations do not have the right to be free from unreasonable search and seizure, the natural persons who have a stake in that corporation, whether they work there or are investors or managers, can have their joint property unreasonably searched and seized. The actions of a corporation are the actions of the people that make up that corporation. It is convenient, from a legal perspective, to consider the collective actions of the many people in a corporation (the stockholders, officers, employees, etc…) to be the actions of one, artificial person. Certain responsibilities and liabilities are then held collectively rather than individually, which is useful for everyone involved.

To be sure, corporations have some extra obligations and must follow extra rules that do not apply to natural persons, so the corporation = person idea is not absolute. But for the purposes of the law, corporations are people. Protections offered to people are automatically extended to corporations unless the laws explicitly restrict their scope to natural persons. Once it becomes clear that corporations are (artificial) persons, and persons, regardless of whether they are natural or artificial, have the right to religious liberty, then corporations have the right to religious liberty as well. Or so it would seem.

There was some debate over whether all corporations have the right to religious liberty, or only some, and if only some, what exactly might be the defining characteristic that would separate the two categories. One possible characteristic, which was rejected by seven of the judges, is whether the corporation is for-profit or nonprofit. In the months leading up to this decision, I have heard many pundits echo this distinction as a useful one for determining whether a corporation can have religious liberty. I myself find it somewhat less than helpful. I think there is some general confusion about the moral status of a nonprofit corporation. It seems that some people have understood nonprofit to mean “charitable” or “religious” or “meant for the greater good of humanity.” Of course, many nonprofit corporations are charitable, religious, and philanthropic. But that is not an essential characteristic. The distinction between for-profit and nonprofit is essentially this: what happens to the difference between the money coming in and the money going out? If the difference is repaid to investors, it is for-profit. If the difference remains within the corporation (either through salaries or capital projects) then it is nonprofit.

I imagine that this distinction is surprising to some people, who might associate nonprofit solely with humanitarian or religious organizations. But very large, very lucrative endeavors are nonprofit. The National Football League (NFL) is nonprofit, but they bring in $9 billion annually. Their commissioner has a $29 million salary. Many hospitals undertake enormous building projects and pay their CEOs over $1 million a year, yet they are also nonprofit. All the nonprofit status means is that the organization is not owned by shareholders and thus the organization has no investors. Can it make money? Of course – as long as the money is used to further the organization’s mission. Building buildings, paying big salaries – absolutely.

Why is it that nonprofit corporations may have religious convictions as artificial persons while for-profit corporations may not? One must assume that a for-profit corporation must have profit as its only goal, to which it must sacrifice all other goals. This is a controversial claim, to be sure. A shareholder might wish that a corporation have profit as its only goal, and many CEOs have a clear mandate to maximize shareholder value at all costs. But this is not the case for all and every corporation. The majority opinion lists several instances where a corporation may take on costly projects for the public good. Just this last month Starbucks announced that they were going to offer reimbursement for their employee’s college classes. Perhaps this will turn out to be profitable in the long run. Perhaps they will acquire more customers than before. Perhaps the customers will be happy to spend a few extra pennies on their coffee in order to subsidize their hardworking barrista. Perhaps, like the fictionalized Mr. Macy in Miracle on 34th Street, it is all done for greater profits in the future. Or perhaps, as their corporate officers say, it is simply the right thing to do. This is only one example. Many corporations routinely sacrifice maximum profit for “the right thing” and it is this very moral commitment that attracts investors.

Because of these types of examples, I cannot accept the thesis that a for-profit corporation must always and in all instances seek profit above all else. On this, seven of the nine justices agree. Seeking profit does not preclude other aims and goals, and those might include religious aims and goals. Thus, since corporations are persons, and for-profit corporations may have religious aims and goals, and persons have religious freedom, then for-profit corporations have religious freedom.

Since the first issue is settled, let us turn to the second issue, whether the contraception mandate violated the corporation’s free exercise.

For this issue, the Religious Freedom Restoration Act (RFRA) provides a set of conditions whereby the government can restrict a person’s free exercise of religion. The RFRA requires the government to have a compelling interest, and it must enact the least restrictive means to further that interest. In other words, the government cannot restrict a person’s free exercise of religion for something of minor importance, and if the matter is important enough that free exercise must be restricted, the government must use the least restrictive method. Let’s look at each condition in turn:

Is the issue of compelling interest to the government? The majority opinion stipulates that it is, though there is some reservation in the wording. Obviously, having the most healthcare options for the most people is a worthy goal. Since contraception is a healthcare option, the conclusion is clear. But is it a compelling interest to the government? The majority opinion complains about overly general justifications like “public health” and “gender equality.” Almost anything could be justified with those two. Daily quota of coffee? Public health. Special scholarships for men training for early childhood education? Gender equality. But exactly how much public health and gender equality is promoted by the four forms of contraception discussed – that seems like a can of worms that the majority do not want to open.

I myself am somewhat skeptical of this issue, since elsewhere the HHS directs the insurers to cover the cost for these four contraception methods. Their justification is that coverage has a net-zero cost. That is, every dollar spent on these four forms of contraception is recovered by other procedures that do not have to be performed, but presumably would have had to be performed otherwise. They are, in other words, break-even benefits from the standpoint of the insurers. But since the insurers are the ones covering the monetary cost of these methods and procedures, it is unclear to me how else their benefit should be evaluated. Perhaps there is some great societal benefit that cannot be measured by medical procedures and methods, and this benefit requires the no-patient-cost availability of these four contraceptive methods instead of the other forms of contraception that are not at issue. Perhaps.

Leaving that issue aside, since the majority stipulated the government’s interest, is there a less-restrictive method that the government can use? And the answer to this is most assuredly, yes. Here is where the HHS shot itself in the foot. Certain non-profits are already exempt from offering contraception. The insurers are already picking up the bill for those organizations since HHS assures them that it costs them nothing when taking into account savings on future medical needs. Apparently the insurers either believe the HHS or consider the difference too small to be worth fighting it out in court. Does the government really need to fine Hobby Lobby nearly half a billion dollars a year in order to achieve its compelling interest? According to the HHS, the insurers can do it for free. FREE! Clearly the least restrictive method is the FREE method that is already in place. The fines so exceed the value of the medical care involved (the actual costs of the contraceptives) that they look more like punitive measures rather than the legally mandated “least restrictive” method.

Let’s review: corporations are artificial persons and thus have religious liberty. Since for-profit corporations can have goals and aims other than profit, they are not excluded from having religious liberty. The contraceptive mandate violates their religious liberty, but the government can still enforce the mandate if they have a compelling reason for doing so and it is the least restrictive method for achieving their compelling reason. The compelling reasons look dubious to me, but the court stipulated them, so that’s fine. However, since the government already has less restrictive methods in place for other corporations, the large fines cannot be the least restrictive method, so the contraceptive mandate is struck down.

Given the language of the RFRA and the status of corporations as persons, this is a very reasonable result.

One last point, for those still reading – there has been some worry, both on the internet and in the dissenting opinion, that this will allow any corporation to ignore laws it dislikes by claiming religious expression. There are two reasons to think not. First, the corporation has to have some religious identity. The organizations in question had their Christian identity baked into their mission statements and bylaws. A company like Apple could not, out of the blue, insist that they are Hindu in order to avoid paying taxes since those taxes are used to wage war. Second, the “least restrictive” requirement prevents religious objections to things like paying taxes, since there is no less-restrictive method of financing for the government. A line-item objection to the federal budget would be a real nightmare. Similarly, Ford could not claim to have religious objections to worker safety, since there are no less-restrictive ways to ensure worker safety (which is a compelling government interest) other than having rules for worker safety that all corporations must follow. In the case of contraception availability, not only do alternatives exist, but according to the HHS they are zero-cost and already implemented.

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