Analysis Law and Policy

Sixth Circuit Issues Strong Opinion Against For-Profit Religious Rights in Eden Foods Case

Jessica Mason Pieklo

The challenges to the contraception mandate have very little to do with religious beliefs, the court held, and everything to do with a lack of corporate accountability.

In the battle over the birth control benefit in the Affordable Care Act, the secular, for-profit corporations challenging the law’s contraception requirement have focused almost all of their arguments on the insidious overreach of the federal government into the personal religious practices of business owners. Of course, those craft chains, auto parts manufacturers, and processed foods businesses have done this on purpose. That’s because they’re engaged in a legal sleight-of-hand, a shell game in which one set of arguments serves as bait while another more pernicious argument advances. No matter what conservatives argue, the for-profit challenges to the birth control benefit are not about religious liberty, they are about a lack of corporate accountability.

On Thursday, the Sixth Circuit Court of Appeals made that clear in its opinion in Eden Foods v. Sebelius, when it held the individual plaintiffs lacked standing to challenge the mandate and that the for-profit, secular corporate plaintiff was not a “person” under the Religious Freedom Restoration Act. Following its earlier decision in Autocam, the court affirmed the denial of a preliminary injunction that would have blocked the Obama administration from enforcing the mandate against Eden Foods and sent the case back to the lower court to be dismissed for a lack of jurisdiction.

The opinion dismissing Eden Foods’ claims isn’t particularly long, but it makes clear the court is tiring of these challenges and sees them for what they really are: cloaked attempts to manipulate corporate law for individual gain. The plaintiff, Michael Potter—founder, chairperson, president, and shareholder of Eden Foods—is a Roman Catholic who challenged the mandate on the grounds it violates his “deeply held religious beliefs.” Citing an interview in Salon with Irin Carmon in footnote, the Sixth Circuit noted those beliefs were actually more of a “laissez-faire, anti-government screed” than a reflection of Roman Catholic ideology.

From there, the Sixth Circuit further uncloaked conservatives’ attempts to upend corporate law precedent under the guise of religious freedom. First, the court noted a panel of Sixth Circuit judges already came to the same conclusion earlier in the Autocam case, which meant absent intervention from the Supreme Court or an overruling of the Autocam decision by the entire Sixth Circuit it was bound to follow that decision here. But, the court noted, even if Autocam hadn’t been decided, the Supreme Court already set the law in 1982 in United States v. Lee, when it declined to grant a Social Security tax exemption under the Free Exercise Clause to Amish employers. The Supreme Court wrote:

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When followers of a particular sect enter into commercial activity as a matter of choice, the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on the statutory schemes which are binding on others in that activity. Granting an exemption from [statutory schemes] to an employer operates to impost the employer’s religious faith on the employees.

As to Eden Foods’ and Potter’s claims, the Sixth Circuit summed up the conservatives’ strategy and arguments like this:

By incorporating his business, Potter voluntarily forfeited his rights to bring individual actions for alleged corporate injuries in exchange for the liability and financial protections otherwise afforded him by utilization of the corporate form. Adoption of Potter’s argument that he should not be liable individually for corporate debts and wrongs, but still should be allowed to challenge, as an individual, duties and restrictions placed upon the corporation would undermine completely the principles upon which our nation’s corporate laws and structures are based. We are not inclined to so ignore law, precedent, and reason.

As Gretchen Borchelt, director of state reproductive health policy at the National Women’s Law Center, told Rewire in an email, “This unanimous decision by the Sixth Circuit in Eden Foods confirms once again that for-profit corporations and their owners cannot deny their employees health insurance coverage of birth control as guaranteed under the health care law. A boss’s religious belief should not trump women’s health and access to the health care they need.”

The Sixth Circuit’s decision doesn’t change the litigation landscape of the contraception benefit much for now. In addition to the Sixth Circuit, the Third Circuit Court of Appeals has also ruled against the challenges, while the Tenth Circuit Court of Appeals, in the Hobby Lobby case, ruled in favor of corporate for-profit religious rights. Both the Obama administration and Hobby Lobby have asked the Supreme Court to review that decision, and while the Roberts Court has not acted on that request yet, it’s a safe bet it will sometime this term. The question is, will the Court that upended years of precedents in the the Citizens United decision to create corporate, constitutional speech rights do the same for corporate religious exercise rights?

Analysis Law and Policy

Federal Court Says Trans Worker Can Be Fired Based on Owner’s Religious Beliefs

Jessica Mason Pieklo

“Plain and simple, this is just discrimination against a person because of who she is,” said John Knight, the director of the LGBT and HIV Project of the American Civil Liberties Union of Illinois, in an interview with Rewire.

When the U.S. Supreme Court ruled in 2014 in Burwell v. Hobby Lobby that the owners of secular for-profit businesses could challenge laws they believed infringed on their religious liberties, civil rights advocates warned that the decision was just the start of a new wave of litigation. On Thursday, those predictions came true: A federal district judge in Michigan ruled that a funeral home owner could fire a transgender worker simply for being transgender.

The language of the opinion is sweeping, even if the immediate effect of the decision is limited to the worker, Aimee Stephens, and her boss. And that has some court-watchers concerned.

“Plain and simple, this is just discrimination against a person because of who she is,” said John Knight, the director of the LGBT and HIV Project of the American Civil Liberties Union of Illinois, in an interview with Rewire.

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According to court documents, Stephens, an employee at Detroit’s R.G. & G.R. Funeral Homes, gave her boss—the business’ owner—a letter in 2013 explaining she was undergoing a gender transition. As part of her transition, she told her employer that she would soon start to present as a woman, including dressing in appropriate business attire at work that was consistent both with her identity and the company’s sex-segregated dress code policy.

Two weeks later, Stephens was fired after being told by her boss that what she was “proposing to do” was unacceptable and offensive to his religious beliefs.

In September 2014, the Equal Employment Opportunity Commission (EEOC) filed a lawsuit on behalf of Stephens, arguing the funeral home had violated Title VII of the federal Civil Rights Act, which prohibits employment discrimination. According to the EEOC, Stephens was unlawfully fired in violation of Title VII “because she is transgender, because she was transitioning from male to female, and/or because she did not conform to the employer’s gender-based expectations, preferences, or stereotypes.”

Title VII of the Civil Rights Act allows those employees who have been discriminated against in the workplace to collect money, known as civil damages. Those damages usually come in the form of lost wages, back pay, and funds to make up for—to some degree—the abuse the employee faced on the job. They are also designed to make employers more vigilant about their workplace culture. Losing an employment discrimination case for an employer can be expensive.

But attorneys representing Stephens’ employer argued that the Religious Freedom Restoration Act (RFRA) protected their client from legal liability for firing Stephens. On Thursday, a federal court agreed. It said that paying such damages for unlawfully discriminating against an employee could amount to a substantial burden on an employer’s religious beliefs. 

According to the court, despite the fact that Stephens’ boss admitted he fired her for transitioning, and despite the fact that the court found this admission to be direct evidence of employment discrimination, RFRA can be a defense against that direct discrimination. To use that defense, the court concluded, all the funeral home owner had to do was assert that his religious beliefs embraced LGBTQ discrimination. The funeral home had “met its initial burden of showing that enforcement of Title VII, and the body of sex-stereotyping case law that has developed under it, would impose a substantial burden on its ability to conduct business in accordance with its sincerely-held religious beliefs,” the court wrote.

In other words, Hobby Lobby provides employers a defense to discriminating against LGBTQ people on the basis of religious beliefs.

“The RFRA analysis is extremely troubling, and the implications of it [are] as well,” said Knight. “I believe this is the first case applying RFRA to a Title VII claim with respect to nonministerial employees.”

If the scope of the opinion were broader, Knight continued, “this would allow [employers in general] to evade and refuse to comply with uniform nondiscrimination law because of their religious views.”

This, Knight said, is what advocates were afraid of in the wake of Hobby Lobby: “It is the concern raised by all of the liberal justices in the dissent in Hobby Lobby, and it is what the majority in Hobby Lobby said the decision did not mean. [That majority] said it did not mean the end of enforcement of nondiscrimination laws.”

And yet that is exactly what we are seeing in this decision, Knight said.

According to court documents, Stephens’ boss has been a Christian for more than 65 years and testified that he believes “the Bible teaches that God creates people male or female,” that “the Bible teaches that a person’s sex is an immutable God-given gift, and that people should not deny or attempt to change their sex.” For Stephens’ former boss, Stephens’ transition to a woman was “denying” her sex. Stephens had to be fired, her boss testified, so that he would not be directly complicit in supporting the idea that “sex is a changeable social construct rather than an immutable God-given gift.”

If the “complicit in denying God’s will” sounds familiar, it should. It has been the exact argument used by businesses challenging the birth control benefit of the Affordable Care Act. Those business owners believe contraception is contrary to God’s will and that complying with federal law, which says birth control should be treated in insurance policies as any other preventive service, makes them complicit in sin. Thursday’s decision cites Hobby Lobby directly to support the court’s conclusion that complying with federal nondiscrimination law can be avoided by asserting a religious objection.

Think of the implications, should other courts follow this lead. Conservatives have, in the past, launched religious objections to child labor laws, the minimum wage, interracial marriage, and renting housing to single parents—to name a few. Those early legal challenges were unsuccessful, in part because they were based on constitutional claims. Hobby Lobby changed all that, opening the door for religious conservatives to launch all kinds of protests against laws they disagree with.

And though the complaint may be framed as religious objections to birth control, to LGBTQ people generally, and whatever other social issue that rankles conservatives, these cases are so much more than that. They are about corporate interests trying to evade regulations that both advance social equity and punish financially those businesses that refuse to follow the law. Thursday’s opinion represents the next, troubling evolution of that litigation.

CORRECTION: This article has been updated to clarify John Knight’s position with the American Civil Liberties Union of Illinois.

Analysis Law and Policy

The Supreme Court Could Give Religiously Affiliated Employers Even More Room to Discriminate

Jessica Mason Pieklo

A series of cases working their way through the courts could expand which businesses get a pass for offering employees discriminatory health and retirement benefits.

You may remember the Little Sisters of the Poor—that group of earnest nuns who challenged the process for accommodating religious objections to the birth control benefit in the Affordable Care Act. The Little Sisters, along with dozens of other religiously affiliated nonprofits, have continuously argued that the act of completing a form to be legally excused from complying with the law substantially burdens their religious rights.

Well, the Little Sisters remain tied up in litigation with the Obama administration over birth control, nondiscriminatory insurance coverage, and their religious objections to providing for both. But there’s more at stake here. To be clear, the Sisters are intent on doing everything they can to block comprehensive insurance coverage for their employees, and block third parties from providing it to them as well. But buried in litigation footnotes is a provision of employee benefits law that, if the Sisters and other religiously affiliated organizations get their way, will solidify another pass for discriminatory corporate practices beyond contraception coverage alone.

The Employee Retirement Income Security Act, or ERISA, is the federal law governing employee benefit plans, including retirement accounts and health insurance. Both the Department of Labor (DOL) and the Internal Revenue Service (IRS) are charged with ensuring ERISA compliance, which, as you can imagine, makes ERISA a prime target for conservatives who already hate “big government.”

Employer plans governed by ERISA have a few requirements that particularly draw conservative ire. One mandates that employer-sponsored retirement plans meet certain minimum funding levels by the employer. This is to help those plans be meaningful ways for employees to save for retirement, without putting the entire burden on those workers. Another provision forbids those plans from discriminating in benefits, such as matching a higher percentage of a male employee’s retirement contributions than a female one’s, or providing comprehensive health insurance coverage for men but not women. The ACA’s birth control benefit draws upon this theory.

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However, not all employers are required to follow ERISA. In particular, the statute exempts “church plans” from its requirements. ERISA defines church plans as those “established and maintained … for its employees … by a church or by a convention or association of churches which is exempt from tax under section 501 of the Internal Revenue Code.” Church plans also include those plans maintained by an organization “controlled by or associated with a church or by a convention or association of churches.” The rationale behind the church plan exemption is similar to the rationale behind most religious or ministerial exemptions to other nondiscrimination laws: Religious orders and institutions like churches and synagogues will generally employ people who follow the same religious tenets as they do because those organizations are engaged in spiritual outreach as part of their “business.”

That prohibition on ERISA governing “church plans” is also incorporated into the ACA.

Historically, organizations like the Little Sisters have had a regulatory pass when it came to maintaining retirement plans and insurance coverage that are either underfunded, discriminatory, or both. That’s because both the DOL and the IRS have been generous in their determination of how they interpret “controlled by or associated with a church or by a convention or association of churches.” And if those agencies determine that an organization has a “church plan,” that, in turn, means it won’t be subjected to a tax penalty for not complying with the ACA’s birth control benefit.

Given the explosion of religiously affiliated employers like hospitals and nursing homes, however, the scope of what does and does not qualify as a church plan has become an increasingly important issue. As religiously affiliated employers began to grow well beyond employing people of similar tenets, away from their ministerial core and into marketplace competition with secular, for-profit businesses, it has made less and less sense to allow those employers a pass to discriminate under ERISA.

At least that’s the argument advanced in a flurry of lawsuits challenging the scope of the church plan exemption under ERISA. Those lawsuits include one against Dignity Health Care, the Catholic-affiliated hospital system facing separate lawsuits related to failing to offer comprehensive reproductive health care at its hospitals. According to the allegations in the complaint, Dignity repeatedly underfunded its retirement plan in violation of ERISA. Dignity responded by arguing its plans were church plans and not subject to ERISA oversight.

Neither the district court nor the Ninth Circuit Court of Appeals bought Dignity’s argument, holding there was no way that when Congress created the church plan exception, it intended the exemption to stretch as far as to shield the country’s fifth-largest health-care employer from regulatory oversight.

That question presented in the Dignity case—of just how broadly that exemption extends—could end up before the U.S. Supreme Court next term. The Roberts Court is considering a pair of cases with this exact issue at their center. Both involve religiously affiliated hospitals, and both have appellate court decisions ruling that organizations like Dignity, which are not actually churches nor actually maintained by religious orders, may not qualify for the church plan exemption.

Which brings us back to the Little Sisters, on whose cases these organizations will undoubtedly base some of their own arguments. The Little Sisters do have a church plan. And it should mean that they will never have to comply with the birth control benefit anyway—which would give them no standing to challenge the ACA’s accommodation. But this is not the argument the Little Sisters and their attorneys want the courts or the public to hear. Instead, the litigation has focused on whether or not completing the form for the birth control accommodation would be a substantial burden for the nuns, despite the fact that at this point under ERISA, there is no question that the federal government could penalize the Little Sisters for refusing to comply with the contraception benefit.

However, the Little Sisters are more than just a group of nuns. They own and operate facilities that employ and serve others. The DOL and IRS have, to date, agreed that the Little Sisters benefits plan is in fact a church plan. But that is in part because without switching plan administrators, the question of whether or not their employee benefits package still qualifies for the exemption has not arisen again. If and when the Little Sisters do switch plans or administrators, the status of their benefits exemption will come up.

At some point during oral arguments in March in Zubik v. Burwell, the conglomerate of cases challenging the accommodation process to the birth control benefit, the fact that the Little Sisters had a church plan and would never be subject to having to comply with the benefit did come up. Paul Clement, who represented the nuns, skillfully dodged the question of whether there was a church plan issue for the Little Sisters. Instead of acknowledging that fact—one even established in the record as an assumption the Tenth Circuit Court of Appeals was making earlier in the litigation to move the case along—Clement assured the justices the church plan wasn’t really something the Court needed to concern itself with at the moment.

Maybe that’s because Clement and the nuns were hoping that if nobody noticed the pass given Little Sisters in their challenge to the birth control benefit, nobody would notice when hospitals and nursing homes also argue for the right to provide discriminatory retirement benefits and cite Zubik for their authority to do so. Maybe they didn’t know about the fight brewing in the appellate courts over which enormous corporate entities are shielded from regulatory nondiscrimination laws like provisions in ERISA and the ACA.

That seems unlikely, though, doesn’t it?

While it may be dry as toast, the church plan exemption under ERISA is critically important. As we’ve seen throughout the nonprofit challenges to the birth control benefit, when employers are allowed to opt out, the effect disproportionately falls on poor women and women of color. And the wages offered to hospital and nursing home workers? They hardly are the kind to lift a person up to more stable financial footing. Which is all another way to say that conservatives’ assertions that institutions like Dignity Health fulfill some spiritual mission and should therefore be treated like a church are all smoke and bluster. Instead, these institutions want cover for ongoing attempts to nickel-and-dime their own workers and to discriminate, based on religious beliefs, when it comes to how and whom these institutions serve. And they’re hoping the Roberts Court will give it to them this next term.

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