Breaking News! U.S. Supreme Court Issues Landmark Decisions in Hobby Lobby and Union Cases

supreme courtBY:  TIMOTHY C. HAUGHEE

JUNE 30, 2014

In two landmark cases today, the U.S. Supreme Court ruled that (i) owners of closely held corporations cannot be required to provide contraception coverage under the Affordable Care Act and (ii) non-union members who are not “full-fledged public employees” cannot be required to pay union fees.

The Hobby Lobby Case

In the first case, Burwell v. Hobby Lobby Stores, Inc., the owners of three (3) closely held for-profit corporations challenged a regulation promulgated under the Patient Protection and Affordable Care Act of 2010 (ACA) that requires non-exempt employers to offer health insurance coverage to their employees that includes several types of FDA-approved contraceptive methods. Religious employers, such as churches, and religious non-profit organizations are already exempt from that requirement. The corporate owners in Hobby Lobby claimed that the requirement that they offer health insurance with contraception coverage clashed with their sincere Christian beliefs that life begins at conception and argued that the contraceptive methods that they were required to provide through federally-mandated insurance violated their religious freedom.

The Supreme Court agreed with the corporate owners. In its opinion, the Supreme Court agreed that the Government had demonstrated a “compelling government interest” in guaranteeing cost-free access to the contraceptive methods in question. However, the Supreme Court disagreed that the contraceptive mandate was the “least restrictive means of furthering that interest,” such that the mandate violated the corporate owners’ exercise of religion under the First Amendment. On this point, the Supreme Court noted that the Government had other means of achieving its goal without substantially burdening the corporate owners’ free exercise of their religion, such as (i) paying for the contraceptives for all women who are unable to obtain them from their employer-provided health insurance due to their employers’ religious objections or (ii) exempting from the mandate for-profit employers with religious objections.

The Supreme Court noted that its opinion is limited to the contraceptive mandate only and “should not be understood to hold that an insurance-coverage mandate must necessarily fall if it conflicts with an employer’s religious beliefs.” The Supreme Court further emphasized that its decision does not provide a shield for employers who might cloak illegal discrimination as a religious practice. Finally, the Supreme Court’s opinion only applies to closely held corporations and not to other types of entities, such as larger, publicly-traded corporations.

The Union Case

In the second case, Harris v. Quinn, the Supreme Court held that the First Amendment does not permit a State to compel certain quasi-State employees to pay fees to a union that the employees do not wish to join. In Harris, the plaintiffs/employees served as “personal assistants” to provide home-care services to Medicaid recipients (referred to as “customers”) under a program operated by the State of Illinois. Under the program, both the customer and the State were “joint employers” of the personal assistant, although their respective roles as employers were significantly different. The customer controlled nearly all aspects of the employment relationship and, in that capacity, was responsible for hiring, firing, training, supervising, and disciplining the personal assistant. Conversely, the State had a particularly minimal role in the employment relationship and only obtained the status of “employer” by virtue of a state law that also permitted the personal assistants to join a labor union and engage in collective bargaining under Illinois law.

Pursuant to that Illinois law, the union that represented the personal assistants entered into a collective bargaining agreement with the State that contained, among other things, a provision requiring all non-union members to pay the union a fee for the costs associated with certain activities, including those tied to collective bargaining. In response, the Harris plaintiffs filed a class action lawsuit in federal court, arguing that the Illinois law in question violated their First Amendment rights because it forced them to subsidize the union’s speech (i.e., the union’s collective bargaining activities).

On appeal, the Supreme Court agreed with the Harris plaintiffs. In its opinion, the Supreme Court acknowledged its prior opinion in Abood v. Detroit Board of Education, which held that unions may collect fees from non-members in order to prevent those non-members from free-riding on the union’s efforts by receiving the benefits of those efforts without sharing the costs. In Harris, however, the Supreme Court differentiated between the non-union members in Abood (who were “full-fledged public employees”) and the non-union member plaintiffs in Harris, who are “different” from full-fledged public employees because the State had such a minimum amount of supervision and control over their employment.

In light of that difference, the Supreme Court declined to extend the holding of Abood to the Harris case. In addition, the Supreme Court held that none of the rationales offered by the State of Illinois in allowing for the imposition of the fee serves a “compelling state interest” that cannot be achieved through means “significantly less restrictive of associational freedoms,” which is the standard required in First Amendment cases. As a result, the Supreme Court held that the Harris plaintiffs’ First Amendment rights were violated by the State of Illinois when they were required to pay a fee to the union even though they were not members.

It is important to note that the Supreme Court’s ruling is limited to those public employees who are not “full-fledged public employees.” Further, the Supreme Court declined to overrule its prior decision in Abood, although it certainly called that decision into question. Accordingly, public employers who have established quasi-employment relationships in the same vein as those described in Harris should ensure that their state labor laws and practices do not controvert the Supreme Court’s decision in Harris.

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