This June the Supreme Court will decide whether a corporation can claim an exemption from a federal law on religious grounds. The media has mischaracterized the case, Sebelius v. Hobby Lobby, either as an attack on the Affordable Care Act or as a threat to women's access to contraceptives. The media misses the real point. Regardless of how the Court decides, women will still have access to contraception, and Obamacare will survive. But a decision in favor of Hobby Lobby would undermine both corporate law and the separation of church and state.
Hobby Lobby is a chain of more than five-hundred arts-and-crafts stores with more than ten-thousand employees. The company's stock is owned by members of the Green family, who profess to run their business empire according to Christian precepts. The Greens don't object to providing employee health insurance. However, they do object to a regulation issued under Obamacare that requires coverage for certain forms of contraception such as the "morning after pill." The Green family claims that covering this kind of contraceptive violates Christian beliefs.
Hobby Lobby bases its argument on another federal statute, the Restoration of Religious Freedom Act (RFRA). RFRA provides that the federal government can't impose a law of general application on a "person" if it would substantially burden their free exercise of religion, unless there is no less burdensome way to accomplish a compelling governmental objective. Hobby Lobby argues that the government has no compelling purpose for forcing them to provide such insurance to their employees. The case turns on whether a profit-making corporation is a "person," for purposes of RFRA and can therefore claim an exemption based on the religion of its shareholders.
Should corporations enjoy the same constitutional rights that natural persons have? In Citizens United the Supreme Court held that corporations have a First Amendment right to participate in elections by making unlimited campaign contributions. One could reasonably defend the Citizens United decision by arguing that the Court was defending the public's right to hear what corporations have to say. But Hobby Lobby goes much farther towards claiming that a corporation really is the same as a natural person.
Anthropomorphosizing corporations would be a bizarre and dangerous shift in our legal system. Our law has always distinguished profit-making corporations from natural persons. The separation of the corporation's legal identity from its shareholders gives investors the confidence to invest and grow our economy.
A decision in favor of Hobby Lobby would call into question this separation between a corporation and its shareholders. If we can attribute shareholders' religious beliefs to their corporation, then why not attribute a company's liabilities to its shareholders?
Hobby Lobby's argument would open the door to endless litigation: If one shareholder's religious beliefs differs from another's, or if management's religious beliefs differ from shareholders, whose religious convictions are attributable to the company? Can a profit-making company held by a shareholder who believe in Christian Science refuse to provide health insurance to its employees on the grounds that it offends its religious convictions? Can religious opposition to women or hiring people of other faiths, races, or ethnicities allow a corporation to claim an exemption from the civil rights laws? And how could federal courts judge the authenticity of a corporation's religious convictions?
One might ask whether it's fair to compel a corporation to pay insurance premiums for its employees if it offends the religious views of its shareholders. The Greens cannot reasonably control how an employee spends her compensation. Insurance benefits, like wages, are a form of employee compensation. Whether an employee pays for contraceptives from her wages or from her insurance benefits, hardly burdens the religious practices of the corporation's shareholders, even if it may offend their beliefs.
Let's face it, the Greens have benefited in myriad ways from the separation of their corporation from its shareholders. The Greens don't pay taxes on the income of Hobby Lobby. They can't be sued for Hobby Lobby's liabilities. The separation of the corporate entity has enabled the Greens to amass a vast business enterprise. They have enjoyed the benefits of this separation, so why should they now complain that they are inseparable?
Some conservatives have tried to frame Obamacare as threatening the First Amendment right to worship. But that argument is foreclosed by the Supreme Court's decision in a case known as Smith. In 1990 Justice Scalia held that a tribal member of the Native American Church who used peyote, a controlled substance, as part of the traditional religious worship service, could be criminally prosecuted. Scalia wrote that the First Amendment only required the government to have some reasonable basis for imposing the law, even if it prohibited someone from exercising his religious practice. Scalia admitted that upholding a law of general application against an individual's claim of religious freedom "will place at a relative disadvantage those religious practices that are not widely engaged in; but that unavoidable consequence of democratic government must be preferred to a system in which each conscience is a law unto itself."
Surely, the Court cannot now decide that the First Amendment affords greater protection to the Christian beliefs of a corporation than it provides to the Native American Church.
The separation of corporations from their shareholders preserves our economic vitality just as the separation of church and state protects our freedom to worship. Both legal principles would be ill served by a judgment in favor of Hobby Lobby.
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