The ‘Hobby Lobby’ Case: Religious Freedom, Corporations and Individual Rights

hobby-lobby

In this opinion piece, Wharton professor of legal studies and business ethics Eric W. Orts looks at the issues raised in the Sebelius v. Hobby Lobby Stores, Inc. case argued before the U.S. Supreme Court last Tuesday. Orts is the author of a recent book titled, Business Persons: A Legal Theory of the Firm. (Watch a video interview with Orts about his book here.)

The Hobby Lobby case that the U.S. Supreme Court has agreed to decide will be as important as Citizens United. It will significantly expand or constrain the influence that business corporations and those that own and control them have on American life. The Court heard oral arguments on Tuesday, March 25, and will issue its opinion this term.

In Citizens United v. Federal Election Commission, the Court held that business corporations were “persons” with constitutional rights of freedom of political speech. Business firms can now exert greater influence in political elections as a result. In Sebelius v. Hobby Lobby Stores, Inc., the Court will consider whether business corporations are correctly considered to be “persons” who have rights to the free exercise of religion. Because both “free speech” and “free exercise” are rights enumerated in the First Amendment, a strong argument in favor of recognizing corporate persons to have “freedom of religion” relies on the precedent of Citizens United.

This time around, it would be helpful for the Court and public discourse about the case to dig deeper into a discussion of the nature and purposes of business corporations (and other kinds of firms) than when Citizens United was decided.

It would be helpful for the Court and public discourse … to dig deeper into a discussion of the nature and purposes of business corporations (and other kinds of firms) than when Citizens United was decided.

The majority and minority opinions in Citizens United, as well as the public debate surrounding the case, adopted extreme characterizations. On one side, it was argued that corporations were “people, too” (to quote now almost forgotten presidential candidate Mitt Romney), and so political rights to free speech should extend to cover them. At least, corporations represented real people and therefore deserved a recognition of rights derivatively. On the other side, corporations were said to be merely artificial constructions allowed by government to exist, and they should therefore be regulated by government in the public interest without limits. However, as I have recently argued in my book, Business Persons: A Legal Theory of the Firm, the reality of business corporations and other organized “persons” in our modern world is much more complex than these simple characterizations.

Business firms are composed of both people and creations of government. This reality means that constitutional law applied to organizations should recognize this complexity and adopt a more nuanced approach than either saying, “corporations have rights” or “corporations don’t have rights.” Although this answer is satisfying to those who like black-and-white answers, the real world of organizations is inevitably gray.

In the past, Supreme Court opinions have recognized the need for differing approaches to the recognition (or not) of constitutional rights of business corporations in various settings. For example, the Court has decided that the constitutional protection against “double jeopardy” for an alleged crime covers organizational persons (such as a corporation), but the right protecting against forcible “self-incrimination” does not.

Similarly, the Court has recognized a right of political free speech for organizations in Citizens United, but not “rights to privacy” which have been reserved for individual human beings. In other words, the Court finds some constitutional rights make sense to extend to organizational persons, and it leaves others to cover only individual people.

Other relatively uncontroversial examples include the right of a business corporation to assert a constitutional claim to protect its property (such as from a government “taking”) and the fact that rights to vote in political elections belong only to citizens who are individual people.

Tough cases fall into a controversial intermediate zone, and the Hobby Lobby case is the most recent iteration of various legal problems that arise about how to protect rights in a world of organizations. Easier cases in the religious context involve protecting organizations that are specifically organized to advance religious objectives and, explicitly, are “not-for-profit.”

Hobby Lobby presents a harder case because the owners of this business corporation overtly and clearly express religious views with respect to moral principles which they believe they should follow when doing business. If they were acting alone – without other business participants – then their case may seem particularly strong.

The Hobby Lobby case is the most recent iteration of various legal problems that arise about how to protect rights in a world of organizations.

Even here, though, some jurisdictions have followed a rule that doing public business prevents one from asserting religious rights that may result in discrimination against the rights of others. Recently, for example, the highest court in the U.K. required bed-and-breakfast owners to treat gay couples the same as others, even in the face of the owners’ religious objections that this imposed an unreasonable constraint in the use of their own home.

On closer examination of the business firms involved in the Hobby Lobby case, this argument for an identification of rights-bearing individuals and business owners weakens. Hobby Lobby operates a chain of different stores and employs more than 15,000 people. (The other company in a companion case employs just under 1,000.) All of these employees do not share the same Christian beliefs as the corporation’s owners. For purposes of the “free exercise of religion,” these employees deserve to have their rights protected, too.

Arriving at this answer will require the Justices to consider in greater depth than they did in Citizens United the nature and structure of modern business corporations: what they are and what purposes they serve. It is insufficient to say that business corporations are amoral “money-making” machines and therefore can be regulated however a legislature may wish. It is also incorrect to equate a business corporation with its owners and extend to these entities rights as “persons” without further analysis of the complexity of relationships involved within modern business firms.

Opening up the black box of the business firm reveals intricate human relationships composed of legal contracts, property ownership and hierarchical authority – as well as expectations of everyday trust and mutual respect. Deciding how the foundational American principle of freedom of religion fits into the context of business firms requires an appreciation of these intricacies – and a respect for the rights of everyone who participates in firms as owners and employees (which means most of us). Let’s hope that the Court takes these complexities seriously in Hobby Lobby in a manner that protects the constitutional rights of all citizens.

Citing Knowledge@Wharton

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2 Comments So Far

Professor

Interesting article. The case is about the RFRA statute. There is nothing in the RFRA that excludes for-profit corporations and it does not exclude corporations (because churches can bring claims). Even S-G Verrilli conceded that there are no cases that say that a for­-profit enterprise cannot even make a religious freedom claim.

Moving on to what this means for the contraceptive requirement (which comes from HHS, not the ACA itself because the Democratic Congress that passed it did not want to touch this issue) – there is no exemption from the RFRA in the ACA, which suggests that there is no compelling government interest here. Even Justice Breyer notes that if there were a compelling goverment interest, then the government could just directly subsidize the purchases by individuals.

Citizens United (which, although you don’t refer to this, protected the First Amendment rights of unions and other players as well as corporations) gets a lot of media airplay but is tangential at best to the Hobby Lobby case. Hobby Lobby will generate plenty of media and commentary hysteria, but contrary to the K@W headline, it will not expand or contract the influence that corporations have on American life.

I would welcome your response to the issues I remark upon. Hobby Lobby is an important case. If your thesis is that the RFRA should exclude corporations, then this is an philosophical argument to be made to the community (and Congress) and could be an interesting article. However, if the intention is to inform the community about the Hobby Lobby company and case, and business more broadly, then the article as written muddies the waters in my view.

Respectfully,
Jon Adler

Thomas Dinsmore

Orts argues that, in Hobby Lobby, the case for extending religious rights to corporations is weakened because it may conflict with the religious rights of employees. That is an interesting argument that is entirely irrelevant to the Hobby Lobby case, since Hobby Lobby’s complaint is that the Obamacare contraception mandate violates the Religious Freedom and Restoration Act (RFRA), which places the burden of proof on the government to demonstrate a compelling state interest in restricting religious conduct. Since the Court unanimously upheld RFRA in 2006, the Court’s ruling will rest narrowly on (a) whether or not the RFRA applies in this case, and (b) whether or not HHS’ interpretation of PPACA represents a “compelling state interest”.