The Perils of Hobby Lobby

The Perils of Hobby Lobby: The Cost of Corporate Religious Freedom

by Marvin L. Longabaugh

Suppose a robber walks into a convenience store, puts a gun to the head of one of the customers, and announces that he will shoot unless the cashier hands over all the money in the register. The cashier refuses. The robber shoots the customer, runs off, and is never seen again. The customer dies from his injuries, and his estate brings a lawsuit against the convenience store, complaining that the cashier should have surrendered the money — it was only about $50 — to the robber. What should the court do?

This is a dispute between the convenience store and the estate of one of its customers. They've come to court because they haven't been able to resolve their differences; the court serves as an adjuster of last resort, producing an answer the parties have to accept because it has the force of law. One of them will walk away a winner; the other will believe they have lost. While the court may fashion a remedy that both parties find lacking, it is highly unlikely that the court can fashion a remedy that makes both parties happy.

Does justice demand that the convenience store pay damages to the plaintiff? Did the convenience store do anything wrong? If the cashier’s refusal saved the company money, would it be fair for the convenience store to pay nothing to the party who was injured as a result (or, more precisely, to his estate)? Should the convenience store be required to pay some inordinately large sum that will presumably compensate for the value of the customer’s life, even though the value of a human life is incalculable? Can the convenience store bear the economic burden of the customer's death more easily than his kin? Our innate senses of fairness and morality suggest that the convenience store should be required to pay something to the estate.

On the other hand, what happened that day at the convenience store is sad but of secondary interest at this point; it's over, and nothing a court says can change what happened. What did the convenience store cashier do wrong, other than refuse to surrender to the demands of a criminal? Money can be transferred from one person to another, but that is just a rearrangement that will fall far short of compensating for the loss to the customer’s family. What's tragic about the day at the convenience store is the waste of it — the lost life. This is obvious to the family of the person who was killed. They are painfully aware that nothing the law says can bring him back. The point is that the law can’t fix bad things that have happened. All the law can do is redistribute the suffering. To be fair, assigning blame and making the right person pay for it might make the victim feel better, or make the rest of us feel better. But the law’s dream — anyone's dream — would be to turn the clock back and stop the bad thing from happening in the first place. That would be much better than quarreling afterwards about who should justly suffer for it. Unfortunately, that's impossible.

This is the sort of analysis courts employ when looking back at a devastating event. But courts don’t solely look backward in the pursuit of justice for the parties in the instant matter. Courts also look forward, hoping their rulings will, in some way, prevent such occurrences from happening again. In the case of the hypothetical convenience store robbery, the court will likely consider the future implications of its verdict. If it decides in favor of the plaintiff, merchants (not just the convenience store) will have an incentive to hand over the money to robbers when their customers are in danger (to avoid having to pay similarly large damage awards in the future). Of course, that would result in robbers having an incentive to threaten customers more often in order to secure a rapid surrender of the cash they seek.

Employing this forward view, the plaintiff HAS to lose (or collect only nominal damages) — otherwise, the decision simply encourages more of the behavior (armed robbery) that the court and society wants to discourage.

In this simple hypothetical, the court must balance fairness to the wronged plaintiff against the future consequences of its decision.

Which brings us to Burwell v. Hobby Lobby, 573 U.S. _____ (2014).

In Hobby Lobby, the United States Supreme Court held that closely held for-profit corporations that religiously object to a law are exempt from it if the government can assume the cost through the creation of an entirely new program, which would be the least restrictive means of furthering the law's interest.

The case was the first time that the court had recognized a for-profit corporation's claim of religious belief, but limited that recognition to closely held corporations under the Religious Freedom Restoration Act (RFRA). For such companies, the court directly struck down the contraceptive mandate, a regulation adopted by the U.S. Department of Health and Human Services (HHS) under the Affordable Care Act (ACA), requiring employers to cover certain contraceptives for their female employees. The court held that it was not the least restrictive way to ensure access to contraceptive care since, alternatively, the government could assume the cost of such care. However, the court observed that such a proposed alternative complied with the RFRA for the purpose of Hobby Lobby’s claim but not necessarily for all religious claims. The ruling could potentially have widespread future impact, permitting companies to claim a religious exemption from a number of federal laws.

Applying the concepts discussed in our convenience store hypothetical case, the Court found for the customer (here, Hobby Lobby) by protecting its rights to conduct its business in accordance with its religious beliefs, rather than shifting the balance in favor of society and the consequences of its decision.

It is easy to get sidetracked from this analogy by placing undue attention on the plight of Hobby Lobby’s employees. That argument rests primarily on the premise that an employee’s right to benefits (dictated by law) trumps a closely held company’s right to conduct its business in harmony with its religious beliefs. The Supreme Court, rightly or wrongly, appears by this decision to have sided with religious belief— presumably taking the position that the free market, through employee resignation and reduction in sales, will ultimately limit or curtail potential abuse of these expanded corporate rights.

But what other consequences might result from the Hobby Lobby decision?

One potential reaction to Hobby Lobby is an increase in the number of closely held companies, with its owners favoring such an organizational structure over the alternative of strict compliance with the ACA and its associated costs. Certainly, a company shopping for health insurance will find more attractive pricing if certain services (such as post-conception birth control) are not required to be included in a company’s health insurance plan. Of course, a potential downside to closely held forms of ownership becoming more popular is that it is typically more difficult for closely held companies to secure financing for expansion and growth. Any result that limits corporate growth and expansion would likely result in a reduction in the tax revenues and jobs that would have been generated by such growth.

Another potential consequence of Hobby Lobby is even higher costs of health care for all consumers. Making religiously controversial procedures such as blood transfusions, transplants, and stem cell treatment more difficult to obtain (due to lack of insurance coverage for employees of companies employing the Hobby Lobby exception) would likely cause the cost of such procedures to increase for everyone else. A natural consequence would be reduced medical research in these fields — lower company revenues provide fewer funds to finance such research.

To summarize, the Hobby Lobby decision can be characterized as a triumph for closely-held company’s religious beliefs as well as a clarification and expansion of the boundaries of corporate personhood. However, such a triumph may come at a high societal cost. Providing an incentive for companies to choose closely held forms of ownership that provide the opportunity for reduced healthcare costs (due to religiously protected exemption from certain coverage) could potentially hamper the growth and expansion of jobs and the economy. Fewer patients being able to afford religiously objectionable procedures will almost surely increase the cost of such procedures for everyone else and hamper future research in not only these areas of medicine, but other medical disciplines as well.

As in the convenience store hypothetical, our innate sense of fairness and morality suggests that Hobby Lobby’s religious views, like the rights of the customer’s estate, should be respected. It is equally important to acknowledge that such respect comes at a high cost to society as a whole.

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