Can the Supreme Court duck the central issue in the Hobby Lobby case?

By Phil Lawler ( bio - articles - email ) | Mar 28, 2014

In the the Hobby Lobby case, a key question facing the Supreme Court is whether a corporate enterprise qualifies for the same religious-freedom protections as an individual. At first glance that seems a very simple question. It is a long-established principle of Anglo-American law, set forth clearly in Blackstone’s Commentaries even before the American Revolution, that for legal purposes, a corporation is a person.

For purposes of affirmative-action programs, the US government recognizes certain corporations as “minority” contractors, because the companies are controlled by members of racial minority groups. It doesn’t matter that some employees may be WASP males; the corporation, as a legal person, qualifies for the minority preference. So it’s difficult to see why others corporations—in this case, Hobby Lobby and Conestoga—should not be recognized as Christian “persons,” qualifying for protection.

During the Supreme Court hearing on the Hobby Lobby case, an alert Wall Street Journal reporter noticed that Chief Justice John Roberts spied one way in which the Court might resolve the Hobby Lobby case without entirely gutting the contraceptive mandate in the Obamacare program. The Court could rule that “S corporations”—generally small corporations, which pass their taxable income directly along to shareholders, rather than paying corporate income taxes—qualified for religious-freedom protection, while larger corporations do not. But such a ruling would be a step away from the general principle that every corporation is a legal person. By taking that step, and setting a new precedent, I suspect that the Court would be creating havoc in other fields of corporate law.

In another revealing exchange during the oral arguments, Justice Elena Kagan tried out the argument that Hobby Lobby was not unduly burdened by the contraceptive mandate, because the company could simply stop providing any health-care insurance for employees, and pay the $2,000-per-worker penalty for failure to comply with the Obamacare rule.

That’s an interesting argument. Justice Kagan thereby suggests that the best way to justify the Obamacare law might be to frustrate its purpose; the law is set up to ensure that all workers have health insurance, and yet she proposes that the company could stop providing health insurance. Aside from its byzantine complexity, there are two problems with that logic.

First, the $2,000-per-employee penalty is most assuredly burdensome. For Hobby Lobby, that penalty would amount to $26 million. Kagan suggests that the company could simply pony up that money and move on, saving all the money that it might have spent on employees’ health insurance. It doesn’t work that way. Employees of Hobby Lobby, suddenly deprived of an important job benefit, would certainly demand much higher wages. To satisfy them—just to avoid slashing their real income—the corporation would be obliged to raise their wages by an amount equivalent to the cost of the health-care policies they would buy. So the real burden for the company would be, roughly speaking, the current cost of health-care insurance plus $26 million. By any reasonable standard, that’s a substantial burden.

Yet even that’s not the whole story. As Francis Beckwith points out in a perceptive commentary, the corporate executives of Hobby Lobby see it as a moral obligation to provide their employees with decent health-care coverage. So by suggesting that they should drop the coverage and pay the penalty, Justice Kagan is saying that they should avoid one moral wrong by committing another. As Beckwith states the dilemma:

Either they must acquiesce to the HHS mandate and materially cooperate with the termination of nascent human life, and thus violate their conscience and what they believe is a clear command of God (Psalm 127:3), or they must cease offering health benefits to their employees, and thus violate their conscience and what they believe is a clear command of God.

As things stand, the Hobby Lobby executives cannot escape the moral dilemma without some help from the Supreme Court. A ruling that ducks the central issue will leave the legitimate complaints of Christian employers unresolved.