Since last October, legal experts and business leaders have been watching and waiting for the U.S. Supreme Court to hand down their decision one of the most high-profile business law cases in recent years.
Late in June, on the very last day of the current term. the high court published its its ruling in Burwell v. Hobby Lobby. The issue: whether a closely-held, for-profit corporation could refuse based on the private owners’ personal religious convictions against birth control, to provide contraception coverage to its employees as mandated by the federal regulations if the 2010 Affordable Care Act. By a razor-thin, 5-4, majority vote, the Supreme Court answered that it could.
The four dissenting justices disagreed, strenuously, on both the result and the rationale. However, the public and media attention that has been given to this significant Supreme Court opinion has almost overshadowed the reality that — for most small and mid-sized businesses — it will have no impact at all.
The Decision in a Nutshell
Two families, the Hahns and the Greens, own a total of three companies. The Hahns and their children own and control Conestoga Wood Specialties (kitchen cabinets), while the Greens and their children own and control all of the Hobby Lobby craft stores. One of the Greens’ sons also owns an affiliated Christian bookstore chain.
Though these for-profit businesses meet the definition of “closely held” corporations that is, (five or fewer shareholders) they are hardly what most people would consider to be small businesses. The Hobby Lobby chain operates some 500 locations nationwide with almost 13,000 employees. The bookstore firm, Mardel, has about 35 stores and some 400 employees. Conestoga has about 950 employees.
The families argued that the Health & Human Services Department regulations mandating birth control coverage violated their rights under the federal Religious Freedom Restoration Act and the First Amendment. Among the many, complex issues decided was whether a for-profit company could “engage in religious exercise.”
Five of the justices (Kennedy, Roberts, Scalia, Thomas, and Alito) ruled that these families’ rights are violated by the contraception mandate, that it “substantially burdened their exercise of religion,” and that HHS “had not demonstrated a compelling interest in enforcing the mandate against them,” or proved that the mandate was the “least restrictive means” of furthering a compelling governmental interest.
Justice Samuel Alito, writing for the majority, indicated that this ruling “…applied to closely held corporations” and, in a concurring opinion, Justice Anthony Kennedy noted that it is intended to be a narrow in scope.
Why Many Businesses Will Be Unaffected By This Ruling
Legally, this decision does not apply to the majority of American businesses and, particularly, on family-owned firms.
First, there is no “employer mandate” at all under the Affordable Care Act for any business with fewer than 50 employees. These firms are already exempt and have no requirement to provide workers with any health insurance coverage at all. Furthermore, while the great majority of small businesses in the United States (about 78%) are family owned, only about 2 percent of small businesses have 50 or more employees.
So, for most closely held corporations, this Supreme Court case, however newsworthy, is not relevant.
Second, even before the passage and implementation of the Affordable Care Act, the majority of businesses , including small and midsized firms, already offered the mandated contraceptive coverage. Over 70% of all U.S. employers not affiliated with religious institutions included birth control in their company health plans. Even for businesses with fewer than 200 employees, that figure was over 60%.
Third, the Affordable Care Act already exempts religious for-profit corporations as well as nonprofit corporations from this coverage mandate.
For Affected Companies, There are Broad Implications
This ruling will affect a relatively small number of closely held corporations whose private owners choose to assert that they hold “sincerely held religious beliefs” against contraception. However, the Court’s majority opinion is not exactly clear how these religious convictions are to be measured or proved.
In her blistering dissent, Justice Ruth Bader Ginsburg predicted that this opinion could eventually allow “businesses to opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.”
Other critics, including many legal experts, are concerned about its broader implications, and what they describe as a “slippery slope” of possible religious challenges to a wide array of government regulations.