Large For-Profit Corporations Do Not Exercise Religion

December 9, 2013
Guest Post
by Frederick Mark Gedicks, Guy Anderson Chair and Professor of Law, Brigham Young University
* This is the second in a series of posts on the two “contraception mandate” cases on which the Supreme Court recently granted certiorari review, Hobby Lobby Stores, Inc. v. Sebelius (10th Cir. June 27, 2013) and Conestoga Wood Specialties Corporation v. Sebelius (3rd Cir. July 26, 2013). Gedicks’ first post is available here.
Most discussions of whether Hobby Lobby and Conestoga Wood are protected by the Religious Freedom Restoration Act (RFRA) as corporations have focused on their for-profit character. This is something of a red herring; for-profit character matters, but not in the way most people think. As law professors Micah Schwartzman, Richard Schragger and Nelson Tebbe have pointed out (see here and here), what disqualifies a corporation from RFRA protection is as much its size as its for-profit character.
The corporate plaintiffs in Hobby Lobby, for example, insist that they “believe” and “practice” the religion of their owners because they are “family businesses” and “closely held” corporations that have very few shareholders. This self-description evokes the stereotypical image of the small-town “mom-and-pop” grocery store, staffed mostly by an extended family whose members greet everyone by name and whose customers, suppliers and other employees uniformly identify as the “real” owners irrespective of legal formalities.
Federal laws are frequently sensitive to the needs of such genuinely small businesses. For example, Title VII of the Civil Rights Act exempts businesses with fewer than 15 employees, and the Fair Housing Act similarly does not apply to small apartment complexes where the owner resides on the premises. The ACA itself exempts businesses with fewer than 50 employees from the employer mandate to provide employee healthcare insurance.
The corporations here are light years away from the “mom-and-pop” stereotype. Hobby Lobby and its affiliates employ 13,400 people in 600 locations scattered through 39 states (including a 3.4 million square foot headquarters complex). Forbes estimates its annual revenue at substantially more than $2 billion.
Conestoga Wood also leaves a large interstate footprint. It operates seven factories with 900 employees in five different states, with estimated annual revenues between $100 and $500 million. It is a “small” business only in comparison to the Hobby Lobby behemoth.
Why is the sheer size of these corporations so important? For one thing, the larger the corporation exempted by RFRA, the larger the external costs imposed on third parties who do not believe or participate in the exempted religious practice, as I discussed in my prior post. But more than that, when corporations are this large, with operations spread throughout the country and the economy, it is not reasonable to embody them with the personal attributes of their shareholders, even if the shareholders are few and closely related, and even if they themselves consider their commercial activity to constitute the practice of their faith.
There is a close analogy here in the Supreme Court’s freedom of speech cases. The Court has long held that actions may constitute protected speech, even if they are not accompanied by speaking, writing, or printing. The Court has made clear, for example, that anti-war protestors who burn an American flag are engaged in protected speech even if they never utter a word. But the proof of whether conduct is speech protected by the First Amendment does not rest solely with the intentions of the supposed actor/speaker, but also with the intended hearers: Even if the actor intends that her conduct be understood as speech, the conduct will not have First Amendment protections unless reasonable people would also understand it as speech. Were it not for this second, objective factor, a person could identify literally any act whatsoever as intended to send a message, and thus immunize herself from normal regulation or prosecution.
There is no reason to doubt that the shareholders of Hobby Lobby and Conestoga Wood sincerely believe that they are practicing their faith by operating their corporate businesses. But it is doubtful that most of Hobby Lobby’s hundreds of suppliers, thousands of employees, and millions of customers understand its craft-store business as the exercise of religion, or the corporate owner of that business as the legal personification of the shareholders’ religious consciences. As legal scholar James Nelson has demonstrated, large for-profit corporations simply do not generate the kinds of deep individual associations that inform personal conscientious belief.
But what about large religious nonprofit corporations like faith-based universities and hospitals? They can be as large as Conestoga Wood and even Hobby Lobby. This is where nonprofit status matters. So long as such operations are organized as charitable nonprofit entities, they are assuredly understood to be engaged in religious exercise, even corporate religious exercise – educating young people in a faithful environment, binding up the wounds of the suffering in need. Such activities have long been understood in the United States and elsewhere as “religious” when engaged in with a religious affiliation on a nonprofit basis, regardless of their corporate or other form of legal organization.
In reviewing Hobby Lobby and Conestoga Wood, the Supreme Court should make clear that large, for-profit corporations are not protected by RFRA, because such large entities are not and cannot reasonably be perceived as “exercising religion” when they operate unambiguously secular enterprises for commercial profit.