Constitution Daily

Smart conversation from the National Constitution Center

Why corporate free exercise needs to be revisited

January 24, 2014 by Scott W. Gaylord


The constitutional rights of corporations are in the spotlight once again.  The Supreme Court has agreed to hear two cases, Hobby Lobby and Conestoga Wood Specialties, challenging the portions of the Affordable Care Act that require most employers to provide insurance coverage for contraception and certain drugs that some people believe act as abortifacients.

healthcaregovA threshold question in each case is whether a closely held corporation can exercise religion for purposes of the Free Exercise Clause and the Religious Freedom Restoration Act (RFRA).  To date, the federal courts have split on this question, with the Third, Sixth, Seventh, Tenth, and D.C. Circuits reaching conflicting results.  Confronted with this tension, the Supreme Court should permit closely held corporations to raise free exercise claims for at least three reasons.

First, the Court has not limited the Free Exercise Clause to individual worship in one’s home or place of worship.  The First Amendment protects the exercise of religion, allowing individuals and groups to act publicly on their religious beliefs.  Under the Court’s prior decisions, workers can bring a free exercise challenge when denied unemployment benefits for refusing to work on their Sabbath (Sherbert), churches and religious schools can raise a free exercise defense to claims of religious discrimination in hiring (Hosanna-Tabor), and sole proprietors can contest on free exercise grounds government regulations affecting their for-profit businesses (Lee and Braunfeld).

Building on the Court’s broad interpretation of the Free Exercise Clause, a nearly unanimous Congress enacted RFRA in 1993 to provide heightened protection for religious free exercise claims.  Under RFRA, the definition of “person” includes “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.”  Thus, the idea that for-profit entities might exercise religion is not new to the Court and is expressly provided for in RFRA.

Second, those denying that closely-held corporations can exercise religion frequently contend that free exercise is a “purely personal” right, one that accrues only to individuals.  On this view (which the Third Circuit adopted in Conestoga), for-profit corporations cannot exercise religion because they are artificial “persons” (created under state law) that do not pray, worship, or observe sacraments separate from the individuals acting on their behalf.

According to the Court, a purely personal right is one that “cannot be utilized by or on behalf of any organization.”  Neither non-profit nor for-profit corporations can invoke such purely personal rights such as the right against self-incrimination and the right to privacy.

As all federal courts have acknowledged, however, certain non-profit corporations—churches and religious schools—can and do exercise religion.  Yet these religious non-profits, like their for-profit counterparts, “do not pray, worship, observe sacraments or take other religiously-motivated actions” independently of the individuals who comprise the organizations.  All such activities are conducted by and through the priests, ministers, religious, and lay members of the non-profit organizations.  Thus, the free exercise of religion cannot be a purely personal right.

The upshot of all of this is that the non-profit or for-profit status of a corporation, which is a product of our tax code, is a lousy way to determine which entities have free exercise rights.  To see why, consider two organizations—both corporations—that are comprised of members of the same faith who object to the HHS mandate for exactly the same reasons.  One is a non-profit, while the other is a closely-held corporation.  Under Conestoga, only the religious non-profit corporation may claim the protection of the free exercise clause.

But why should individuals in a closely-held corporation lose their First Amendment rights when incorporating?  After all, not all religiously motivated people are called to be priests, ministers, religious, or lay persons who work for a religious non-profit.  Some individuals, such as the Greens (Hobby Lobby) and Hahns (Conestoga), sincerely believe that they are called to live their faith through their closely-held companies.

This should not be surprising.  As the Court noted in Roberts v. United States Jaycees, individuals frequently come together to form expressive associations “for the purpose of engaging in those activities protected by the First Amendment—speech, assembly, petition for the redress of grievances, and the exercise of religion.”

And, as Citizens United confirms, these First Amendment freedoms are not limited to natural persons or non-profits: “The Court has thus rejected the argument that political speech of corporations or other associations should be treated differently under the First Amendment simply because such associations are not ‘natural persons.’”

Finally, allowing the government to limit the free exercise rights of for-profit corporations threatens other important societal interests.  If the government can require closely-held corporations to avoid religion and to “stick to business” (making money), then it also may limit civic-minded or environmentally aware corporations to stick to that same business (profit maximization), precluding businesses such as Ben & Jerry’s and Microsoft from using the corporate form to advance ethical, environmental, or other social values.  In an age of growing concern over corporate responsibility, the Court is unlikely to permit such restrictions.

To recognize that Hobby Lobby and Conestoga may raise free exercise claims does not mean that every for-profit corporation will do so.  Many corporations—perhaps most—will not engage in religious activities or attempt to implement the religious views of their owners.  As evidenced by Hobby Lobby’s closing on Sundays, there are costs associated with a corporation’s exercising religion.  But there also are important benefits to the individuals who feel called to live their faith in all they do.  And the right to freely exercise religion protects the decision by the individuals and their closely-held corporations to do just that.


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