While this summer saw a growing push for “marriage equality” and expanded protections for sexual identity, two other legal developments may have passed under the radar. The first concerns the Supreme Court affirming an employee and an applicant’s right to be free from discrimination because of religion. The second concerns the Department of Health and Human Services releasing its modified regulations related to the controversial “contraception mandate” under the Affordable Care Act after last year’s historic decision in Burwell v. Hobby Lobby Stores Inc., 134 S.Ct. 275 (2014), upholding a private business’ right to operate in accordance with its owner’s religious beliefs.
In June, the court was faced with this question: could a business deny employment to an applicant because it didn’t want to accommodate a religious practice it believed the applicant would require? In EEOC v. Abercrombie & Fitch Stores Inc., 2015 WL 2464053, the court affirmed “Title VII of the Civil Rights Act of 1964 prohibits a prospective employer from refusing to hire an applicant in order to avoid accommodating a religious practice that it could accommodate without undue hardship.” In this case, the applicant was a practicing Muslim who wore a headscarf for a religious reason when she was interviewed for a job. Her wearing of the headscarf was not discussed during the interview, and the applicant never made any mention of her religion or any inquiry about wearing a headscarf should she be hired. Although otherwise qualified for the job, she was rejected because her scarf violated the employer’s “look policy.”
The trial court granted summary judgment to the EEOC who brought suit on her behalf, but after a jury verdict awarded $20,000 in damages, the employer appealed. On appeal, the 10th Circuit Court of Appeals reversed and directed that summary judgment be entered in favor of the employer because the employer did not “know” that the applicant would require a religious accommodation because the issue had not been discussed. Yet, there was evidence that the hiring manager inquired about the headscarf and the application of the “look policy,” and that the hiring manager believed the wearing of the headscarf was for religious reasons. The hiring manager was told the headscarf would violate the prohibition on “caps” and to not hire the applicant. The Supreme Court reversed the Court of Appeals because “[a]n employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decision.” In short, the court found that a decision based on a form of “perceived need” for a religious accommodation was sufficient to establish religious discrimination.
The opinion does not fully answer the question of whether the motive requirement itself is met where there’s no evidence the employer at least suspects that the practicing question is a religious practice. In the facts of the Abercrombie & Fitch case, however, the employer knew or at least suspected the scarf was worn for religious reasons. The key factor for the majority of the court was the statute requires employers to provide a reasonable accommodation for religious practices, including the wearing of a headscarf, absent the accommodation causing an undue hardship to the business. Employers cannot simply avoid the reasonable accommodation requirement by failing to hire applicants the employer suspects might request a religious accommodation. This same rationale undoubtedly applies in cases under the ADA.
The second development for employers concerns not the religious observances of its employees, but the religious practices of the owners of a business. In Burwell v. Hobby Lobby Stores Inc., the Supreme Court upheld Hobby Lobby’s objection to providing certain forms of contraception and abortifacients as part of its company provided health care plan. In accordance with the federal Religious Freedom Restoration Act (“RFRA”), before infringing on a “person’s” religious free exercise, the government must establish that the law in question serves a “compelling governmental interest” and uses the “least restrictive means” available to achieve the government’s goal. The court found first that a person does not lose his or her religious liberty simply by going into business and a closely held corporation was entitled to religious free exercise protections just as its owners were. The court then found that forcing a closely held business to provide contraception and abortion inducing drugs contrary to their religious beliefs violated RFRA. In doing so, the majority noted that the regulations included an “accommodation” for religious employers whereby they can “opt out” of providing the offending drugs through a self-certification to the insurance carrier. The carrier would then be responsible for providing all FDA approve contraception methods at no cost to the employee.
In spite of significant and on-going litigation surrounding the alleged “accommodation,” and in light of the temporary injunction issued in the case of Wheaton College v. Burwell shortly after the Hobby Lobby decision (as it concerns the “accommodation” and religious employers) the Department of Health and Human Services has updated its rules regarding the “contraception mandate.” In the new regulations, closely held corporations who object on religious grounds to providing some or all of the mandated contraception drugs or devices may self-certify in one of two ways that they object to providing and paying for such coverage. As before, the onus will then fall to the insurance carrier to provide the contraception coverage to the employer’s employee, but at no cost to the employer or employees.
The new “accommodation” now applies to both religious nonprofit organizations, and to an “organization [that] is organized and operates as a closely held for-profit entity…and the organization’s highest governing body (such as its board of directors, board of trustees, or owners, if managed directly by its owners) has adopted a resolution or similar action, under the organization’s applicable rules of governance and consistent with state law, establishing that it objects to covering some or all of the contraceptive services on account of the owners’ sincerely held religious beliefs.” 45 C.F.R. § 147.131(b)(2)(ii).
A closely held corporation is limited to those organizations that are (1) for profit, (2) have “no publicly traded ownership interests,” and (3) have “more than 50 percent of the value of its ownership interest owned directly or indirectly by five or fewer individuals.” When determining the “directly or indirectly by five or fewer individuals” requirement, the regulations state that “an individual is considered to own the ownership interest owned, directly or indirectly, by or for his or her family. Family includes only brothers and sisters (including half-brothers and half-sisters), a spouse, ancestors and lineal descendants.” 45 C.F.R. § 147.131(b)(4). Accordingly, businesses where the majority is owned by a single family will qualify, but those businesses where more than five “individuals” own more than 50 percent of the business will not qualify.
The regulations state the ownership interests “owned by a corporation, partnership, estate, or trust are considered owned proportionately by such entity’s shareholders, partners, or beneficiaries,” so if a partnership made of us six unrelated individuals owns a majority of a business, that business will not qualify for the accommodation regardless of the shared religious convictions of the six owners.
For those for-profit businesses that qualify and now for all religious nonprofit organizations, there are two means for certifying a religious objection to the provision of some or all forms of contraception. The first is a certification (EBSA Form 700) provided to either the health insurance insurer (for insured health care plans) or to the third party administrator for self-insured plans. The alternative is to submit notice directly to the Secretary for Health and Human Services containing the scope of the religious objection (either all or a subset of the required contraception coverage), the name of the organization with contact information and whether the organization is a religious nonprofit or “other eligible organization,” and then the plan name, service provider with contact information, whether the plan is an insured plan or self-insured plan, and if applicable, a church plan or student plan. In either event, the insurer or third party administrator will then become responsible for providing or arranging for the required coverage directly to the objecting employer’s employees, but at no cost to the employer. Whether this accommodation satisfies the religious objections of qualified employers remains to be seen as this issue remains hotly contested by a number of religious employers, including the well-publicized case involving the Little Sisters of the Poor.
Religion and the workplace were once thought to be two separate things, but as these two recent developments show – and the news of the last 12 months as it relates to the scope of religious free exercise protected by the First Amendment continues to be debated in the context of ever changing social and cultural dynamics – the interplay will only become more pronounced over time. Employers need to be aware of their employees’ rights to not just maintain religious beliefs, but also their right to religious observance and practice. The same is true for employers in how they operate their business, but the line between protected and unprotected conduct for the employer is not so clearly defined. This development is only getting started in light of the Court’s Hobby Lobby decision and the courts will be forced to balance religious free exercise with a host of interests being asserted by across the political and cultural spectrum. It can certainly be said that we do indeed live in interesting times.