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Corporation May Not Assert Free-Exercise Rights in Contraceptive Mandate Challenge

By Christina Broxterman and Laura Summers  9/3/2013
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A for-profit corporation was not entitled to a preliminary injunction enjoining the enforcement of the contraceptive mandate under the Patient Protection and Affordable Care Act (ACA), the 3rd U.S. Circuit Court of Appeals ruled.

Under the regulations provided by the ACA, most group health plans must cover approved contraceptive methods and sterilization procedures for women with reproductive ability. Group health plans must meet these requirements unless the employer or plan is exempt. The exemptions apply to grandfathered plans and religious employers.

Conestoga Wood Specialties Corp. is a for-profit Pennsylvania corporation that is 100 percent owned by the Hahn family, who are Mennonites. Neither Conestoga nor the group health plan that it offers to its employees meets either of the exemptions from the contraceptive mandate. Because the Hahns’ religious beliefs conflicted with the contraceptive mandate, Conestoga requested preliminary injunctive relief from the U.S. District Court for the Eastern District of Pennsylvania, on the grounds that the mandate violated the Free Exercise Clause of the First Amendment of the U.S. Constitution and the Religious Freedom Restoration Act (RFRA) as applied to Conestoga. The district court denied the preliminary injunction, and Conestoga appealed to the 3rd Circuit. The threshold question for the appellate court was whether a for-profit, secular corporation is capable of engaging in religious exercise to assert a claim under the Free Exercise Clause or the RFRA.

Under the Free Exercise Clause, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” Conestoga offered two theories to support the argument that a for-profit, secular corporation could exercise religion and thus assert a claim under this clause. First, it cited two cases in which the First Amendment had been applied to corporations; however, the 3rd Circuit found these cases unhelpful because they did not address whether the Free Exercise Clause applied to corporations. Consequently, the 3rd Circuit conducted an independent determination of whether the “nature, history and purpose” of the clause support the conclusion that a for-profit, secular corporation is protected under its terms; it found no basis for a for-profit, secular corporation’s exercise of religion. The court explained that while free-exercise rights might exist for churches, these institutions are distinguishable from a for-profit, secular corporation in that they are a “means by which individuals practice religion” and have long enjoyed the protections of the Free Exercise Clause.

Conestoga also argued for a “pass through” theory of protection whereby the Hahns’ individual Free Exercise Clause rights should be passed through to the corporation. The court rejected this theory because it required the court to ignore the corporate form and the fundamental principle that “incorporation’s basic purpose is to create a distinct legal entity.” The court noted that even though Conestoga was a closely held, family-owned company, it was Conestoga, not the Hahns, that was subject to the contraceptive mandate, and Conestoga did not have an independent right to protection under the Free Exercise Clause.

For the same reasons that the corporation did not have a right to protection under this clause, the court held that it did not have a right to protection under the RFRA, which prohibits the government from substantially burdening “a person’s exercise of religion.”

Conestoga Wood Specialties Corp. v. HHS, 3rd Cir., No. 13-1144 (July 26, 2013).

Professional Pointer: This decision conflicts with other circuit courts that have addressed the issue of whether for-profit, secular corporations can assert protection under the Free Exercise Clause or the RFRA with respect to the contraceptive mandate. It is likely that the Supreme Court will be asked to resolve this issue.

Christina Broxterman is a shareholder, and Laura Summers is an associate, in the Atlanta office of Ogletree Deakins, an international labor and employment law firm representing management.

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