Obamacare ruling means corporations can practice religion and deny contraception coverage

The 7th Circuit Court of Appeals recently granted an injunction against the Affordable Care Act’s mandate that employers must provide contraception care coverage to employees. In its remarkably expansive ruling, the court said business owners and their companies are persons entitled to religious freedom. Further, the court concluded the Affordable Care Act substantially burdened the owners and their companies’ religious freedom and granted a preliminary injunction barring the contraception mandate from taking effect while the case is litigated in the trial court.

Business owners raised religious objections

The Affordable Care Act (aka Obamacare) mandates that employee health care plans provide coverage for contraception and sterilization procedures. Two companies, run by Catholic families, objected to the mandate and claimed it interfered with their religious beliefs. The owners sued for relief under the Religious Freedom Restoration Act of 1993 (RFRA).

RFRA prohibits the federal government from placing substantial burdens on a person’s exercise of religion, unless the government can demonstrate there is a compelling interest and that it has chosen the least restrictive means for furthering that compelling interest.

The companies argued that the mandate substantially burdened their ability to operate within Catholic guidelines and that they faced the choice of either violating their faith or being penalized for violating the mandate. If the companies did not comply with the mandate, they faced financial penalties of $100 per day per employee, totaling $36,500 per year per employee. For one of the companies, those penalties could have been as high as $17 million.

Can a private business exercise religion?

The major problem for the companies was that RFRA only covers “persons,” and there was no precedent that a for-profit company, not organized for a specific religious purpose, could claim RFRA protection as a person. The owners claimed the companies deserved coverage because they were operated in line with Catholic principles.

The 7th Circuit agreed and ruled that individuals and corporations are persons under RFRA and can exercise religious beliefs. In making its ruling, the court gave some startling insights about RFRA’s reach. First, RFRA is a sweeping super-statute that cuts across all other federal laws, regulations, and policies. Unless a future federal law exempts itself from RFRA, the law must bend and accommodate religious objections when there is a substantial burden not justified by a narrowly tailored compelling interest. Second, it does not matter if the religious objector is interpreting the religious tenets correctly. All that is required is a sincerely held belief that a law demands something in violation of the person’s religion.

The Supreme Court will likely have to settle the debate

The 7th Circuit is the third court of appeals to uphold a challenge to the contraception mandate. Two other courts of appeals have rejected the challenge. Due to this split between the federal appellate courts, the Supreme Court will likely have to decide whether the mandate is valid and whether religiously operated corporations should be able to claim RFRA rights.

According to the SCOTUSblog, the Supreme Court will evaluate the existing cases on Nov. 26, and it may review the issue during the current term.

Implications for the workplace

Until the Supreme Court issues a decision, the 7th Circuit’s ruling is binding precedent for Wisconsin, Illinois, and Indiana. That means employers in those states can potentially raise RFRA-based religious objections to federal laws, regulations, and policies. While the current case dealt with two Catholic-based corporations, the ruling provides rights to corporations operated under any religion.

Going forward, this case raises some challenging questions. If employers can object to forced benefits that might violate their religious beliefs, what other federal employment laws must give way? In addition, how are federal employment laws supposed to function when an objector from any religion can claim an RFRA violation?



Congress drafted RFRA so that every federal law, past and future, is subject to its requirements. Therefore, it is up to Congress to modify any previous law or draft future laws in a way that they are exempt from RFRA. Congress’ attention to this detail is no longer theoretical given that the Employment Non-Discrimination Act (ENDA) is currently being considered. ENDA would prohibit employment discrimination against individuals who are, or are perceived to be, gay, lesbian, bisexual, or transgender.

If Congress does not exempt ENDA from RFRA, religious corporations may be able to raise the same religious objections to ENDA as they did to the contraception mandate. In essence, this could mean that discrimination based on sexual orientation or transgender status may not receive federal protection and individuals in those groups would have to rely on state or local law for protection. In Wisconsin, this would mean that individuals who are gay, lesbian, or bisexual would continue to be protected by the Wisconsin Fair Employment Act while neither state nor federal law would protect transgendered individuals.

The Family Medical Leave Act (FMLA) is another area where religious corporations could raise an RFRA objection. Could an employer deny FMLA leave for an abortion? In fact, could a religious employer terminate employment altogether after learning about the employee’s plans? Could the same employer deny federal FMLA or terminate an employee who is in a same-sex relationship and requests time off for an adoption?

Unless the Supreme Court reverses religious corporations’ rights under RFRA or Congress exempts those laws from RFRA, more litigation may occur to clarify whether such employees’ FMLA rights substantially, and impermissibly, burden the employer’s religion. 

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