Religion, Inc., A Reply to Bainbridge

Nationwide, legal battles rage over the ability of secular, for-profit corporations to raise religious freedom objections to government regulation.   At the center of the controversy lies the Affordable Care Act’s requirement that employer-based insurance cover contraception.  It might be tempting to see these cases as limited to contraception, or even religion. But the litigation has potentially widespread reach into doctrines of corporations, employee benefits, and antidiscrimination.

In my article, Contraception and the Birth of Corporate Conscience, I argue that courts increasingly rely on a new and dangerous doctrine of “corporate conscience” to excuse secular, profit-making businesses from compliance with law.  Many of these courts find that the corporation and its owners are coextensive (others conclude that corporations themselves exercise religion).  They then decide that requiring the corporation to cover contraception or face financial consequences constitutes a substantial burden on the religious freedom of the owners of the corporation.   I contend that these courts fundamentally misunderstand health benefits and social insurance, and disregard the purposes of incorporation.

Professor Stephen Bainbridge recently expressed skepticism that any doctrinal change is underway and took issue with my statement that the “corporation as shareholder alter ego” rationale deals a blow to the foundation of corporate law.  He claims endowing corporations with their shareholders’ religious beliefs is just another instance of the doctrine of reverse veil piercing.  He endorses the courts’ approach as veil piercing “to vindicate important rights.”

But veil piercing has been exceptional.  It has concerned assets, rather than private beliefs.   That challengers to the contraceptive mandate claim “important rights” cannot be determinative.  The owner of a small, closely held corporation cannot assert a Fifth Amendment claim against self-incrimination to refuse to produce documents in a criminal case against the corporation, notwithstanding the importance of the right.

Bainbridge himself has previously argued against the veil piercing doctrine.  He doesn’t explain why it should now become the rule in the contraceptive cases, permitting shareholders to regularly and successfully pierce the veil to advance their individual religious beliefs.  Indeed, in reading his article on the mandate, I was struck by the apparent rarity of courts’ reverse veil piercing to benefit the shareholder (the cases he cites involve the peculiar context of family farms and homestead rights).

The separateness of corporations matters in doctrine.  Hobby Lobby is Hobby Lobby, even when the Green family no longer owns it.  It is a separate legal entity with different rights and obligations.  The Greens ostensibly chose this business form for its many benefits, including limiting their own liability.

Courts in the contraceptive litigation join what were two or more separate legal entities into one, concluding that “the corporation should be deemed the alter ego of its owners for religious purposes.”  They treat liability for failure to comply with the ACA’s requirements, which belongs solely to the company, as a burden on its shareholders’ religious beliefs.   If these decisions do not undermine corporate doctrine altogether, they nonetheless deal a blow to the corporation itself.  Hobby Lobby no longer is a legal entity separate from its owners, nor is its owners’ liability limited.

Bainbridge says that courts should set aside concerns like mine to vindicate the free exercise rights of shareholders and exempt their for-profit corporations from the contraceptive mandate.  This result is unfounded in religious liberty doctrine.

Our legal system has had little tolerance for objections to social insurance regulation—especially when they come from business entities, incorporated or not.  Like employer-based insurance under the ACA, social security, unemployment insurance, and worker’s compensation all require employers to administer and pay premiums.  All, like most federal regulations, have significant exemptions (based on the size, sector, or religious nature of the employer, to name a few).   Yet, each and every one has withstood religious liberty challenges.

Faced with an Amish employer’s claim that administering and contributing to social security violated his religious freedom, the Supreme Court set out the general rule: when religious adherents choose to enter into commercial activity, they must abide by regulation and cannot superimpose their own values on the statutory scheme.  As the Sixth Circuit said in denying an exemption from worker’s compensation requirements “where [religious] beliefs clash with important state interests in the welfare of others, accommodation is not constitutionally mandated.”  The government’s compelling interests in comprehensive social insurance, public health, gender equality, and religious liberty for all individuals justify any burden that participation in insurance entails for employer religious exercise.

Exempting employers from the contraception mandate (or other social insurance) would instead permit corporate owners to interfere with their many employees’ religious beliefs.  Bainbridge dismisses this concern:  “On every issue of moral concern, the shareholders’ collective will is determinative …. When have employees ever had a voice in any issue of corporate social responsibility? After all, he who pays the piper, calls the tune. So Sepper’s argument … has no traction. None.”

We can agree that owners make business decisions—within regulatory limits.  But preventive healthcare coverage is not employer largesse.  It’s employee protection.  And concern for employee beliefs has had traction in free exercise doctrine.  As the Supreme Court said in rejecting a religious liberty challenge to social insurance, giving an employer an exemption “operates to impose the employer’s religious faith on the employees.”   For the same reason, state courts have required even religious corporations to comply with state contraceptive mandates.

If we were to accept the determinacy of “shareholders’ collective will” in opposition to government regulation, closely held corporations could set wages below the minimum, withhold social security payments, and refuse worker’s compensation plans.  After all, as Bainbridge says, the employees could always exit.  These are precisely the arguments that the courts consistently rejected in litigation against social insurance.  They should continue to reject them here.


  1. CLS '07

    Not being familiar (beyond this article) with the legal precedents in this area of law, I’m ill equipped to raise a legal defense based on current law and instead point out a serious philosophical oversight in the author’s reasoning: a system that precludes religious people from operating businesses while still adhering to the core moral beliefs of their religion (“when religious adherents choose to enter into commercial activity, they must abide by regulation and cannot superimpose their own values on the statutory scheme”) effectively relegates them to a separate class of serfdom. In the state always trumps religion model, people who believe in nothing or tolerance or whatever religion is en vogue are able to usurp the economic and liberty rights of people who are in the minority. For instance, what if we had the political will to require all companies to procure liquor for their company kitchens? You could argue it’s for the benefit of the employee, but it would still bar plenty of religious minorities from owning their own business. While it is certainly possible to argue (as the author has implied but not defended) that business ownership, economic prosperity and self-determination are not expressly protected by the Constitution– it is hard to argue they are less protected than concepts like “privacy” and subsidized birth control.

  2. Elizabeth Sepper

    Thanks for your comment. You raise a number of issues, of which I’ll answer a few. Religious people helm many (and some of the most powerful) businesses in America, but they are not entitled to act free of legislative restraint. A key consideration in enacting legislation and providing exemptions has been the threat of harm to others. The regulatory state regularly precludes operation of businesses in a way that harms employees or broader societal interests, despite the fact that such operation may advance the religious beliefs of a particular employer (or sect). Thus, courts have routinely rejected claims (which, by the way, until now have almost exclusively come from religious organizations, not for-profit secular businesses) from employers who sincerely objected as a matter of “core moral beliefs” to paying minimum wage, ensuring against on-the-job injuries, and providing health insurance to married women who their religious sect does not believe can be heads of household and thus should receive any insurance through their husbands. Antidiscrimination law is a key area where businesses–with exceptions for distinctly religious employers and occasionally small businesses because of the intimacy and perhaps family relation of employees–must comply with generally applicable law despite religious objections. This is so even though religious adherents resisted antidiscrimination laws from their origin (see William Eskridge, Noah’s Curse, for more on this). Harm comes into this analysis as well and actually safeguards the ability of religious people to enter the workplace. Laws prohibiting discrimination based on religion do impose burdens on employers, perhaps in particular on employers who seek to run for-profit businesses in accordance with religious principles. But antidiscrimination laws don’t recognize exemptions for them and instead protect adherents of a variety of religions – this is minority-status protective. (Your hypothetical doesn’t seem to reach this same level, as it’s difficult to imagine the government interest, let alone a compelling one, in liquor in each company kitchen; a state could, however, mandate fire extinguishers in each kitchen even if some religious adherents might object).

  3. Pingback: Contraception Mandate Debate Leads to Worrisome 'Corporate Conscience' Concept | South Carolina Special Needs

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