The Supreme Court seems poised to give religious employers a big win

There wasn’t a lot of suspense going into Monday’s Supreme Court argument in Catholic Charities v. Wisconsin Labor & Industry Review Commission. This Court is typically very sympathetic to Christian organizations that seek religious exemptions from the law, even as it shows less sympathy for other religious groups such as Muslims.

As the name of the Catholic Charities case suggests, this case involves a Catholic organization that seeks a religious exemption from a state law — in this case, Wisconsin’s law requiring most employers to pay taxes that fund unemployment benefits for their workers. After Monday’s argument, it appears that a lopsided majority of the Court will vote to give Catholic Charities that exemption.

All six of the Court’s Republicans, plus Democratic Justice Elena Kagan, seemed to favor that outcome, and the Court’s decision could potentially be unanimous.

That said, several of the justices, including Republicans Chief Justice John Roberts and Justice Amy Coney Barrett, did express concerns that there must be some limit on a business’s ability to exempt itself from the law if it claims that its operations are motivated by religion. Roberts, for example, asked whether a group of people who think it is a sin to eat meat could exempt themselves from taxes if they opened a vegetarian restaurant.

Similarly, Barrett noted at one point that there is a difference between a nonprofit charity and a for-profit business, suggesting that she may limit the scope of some religious exemptions to nonprofits.

The question of whether this Court will set some limit on when religiously motivated organizations can claim an exemption from the law is probably more important than the specific dispute before the justices in Catholic Charities. The Catholic Church claims that it maintains its own internal unemployment benefits system that “provides the same maximum weekly benefit rate as the State’s system.” So it appears that, regardless of who prevails before the Supreme Court, Catholic Charities’ workers will still receive similar benefits.

But the Court’s decision is unlikely to be limited to the Catholic Church, meaning that workers at religious organizations that do not offer unemployment insurance could lose that benefit altogether. And, if the Court’s decision is too broad, it could potentially allow for-profit businesses to thumb their nose at workplace regulations of all kinds, simply by claiming that they object to those regulations on religious grounds.

It remains to be seen whether Roberts, Barrett, or some other justice will slip language into the Court’s decision that will prevent for-profit companies from dodging unemployment laws, minimum wage laws, workplace safety laws, and similar regulations. If they do not, the Court’s decision in Catholic Charities could have dire consequences for many American workers.

Wisconsin, like every other state, taxes employers to fund benefits for workers who lose their jobs. Like most states, Wisconsin’s law includes an exemption for church-run nonprofits that are “operated primarily for religious purposes.” According to the state’s highest court, this exemption only applies to nonprofits that primarily engage in religious activities such as holding worship services, and not to charities that provide secular services like feeding poor people or caring for people with disabilities — even if these secular services are motivated by the charity’s faith.

Catholic Charities, meanwhile, provides these kinds of secular services and does not proselytize its faith to the people it serves. Significantly, the Catholic Church chooses to operate Catholic Charities as a separate corporation that is distinct from the greater church itself, even though the charitable arm is controlled by church officials.

This decision to separately incorporate Catholic Charities provides considerable benefits to the greater church. Most notably, it means that, if Catholic Charities is successfully sued, that lawsuit cannot touch the broader church’s assets. But the church’s decision to make Catholic Charities a separate corporate entity means that this entity is not exempt from the state’s unemployment law — because Catholic Charities itself only provides secular services.

Catholic Charities claims that this arrangement is unconstitutional, and that it should be allowed to benefit both from separate incorporation and from the state’s exemption for organizations “operated primarily for religious purposes.”

Though its lawyers offered three different reasons to rule in their favor, several of the justices suggested that the simplest and most straightforward way to rule in the church’s favor would be to conclude that Wisconsin unconstitutionally discriminates against religious sects that engage in charitable work without proselytizing or otherwise engaging in the kind of religious activity that triggers Wisconsin’s exemption.

Indeed, many of the justices pounced on a disastrous concession by Colin Roth, the lawyer defending Wisconsin’s regime before the Court. Justice Samuel Alito asked Roth what is the bare minimum Catholic Charities would need to do in order to secure an exemption, and Roth said that a charity which runs a soup kitchen would be exempt if it requires hungry people to say the Lord’s Prayer before they receive soup, but not if it runs an identical soup kitchen without this requirement.

But such a distinction, Kagan warned, discriminates against the Catholic Church specifically because its religious beliefs require it to do charitable works without demanding that the beneficiaries of those works participate in Catholicism. “I thought it was pretty fundamental that we don’t treat some religions better than other religions,” Kagan said.

Without the Obama-appointed Kagan’s vote, it’s hard to imagine how Wisconsin can win this case. And all six of the Court’s Republicans appeared to share Kagan’s concern.

The Court’s 40-year-old decision in Tony and Susan Alamo Foundation v. Secretary of Labor (1985) looms large over Catholic Charities. In that case, a religious organization that was widely described as a cult owned numerous for-profit businesses, including “service stations, retail clothing and grocery outlets, hog farms, roofing and electrical construction companies, a recordkeeping company, a motel, and companies engaged in the production and distribution of candy.” Workers in these businesses were given no wages or cash salaries, only food, clothing, and shelter.

After the federal government sued, claiming violations of minimum wage and overtime laws, the Court rejected the organization’s request for a religious exemption from these laws. Among other things, the Court warned that if a religious cult is allowed to pay substandard (or nonexistent) wages, that “would undoubtedly give [it] and similar organizations an advantage over their competitors” — and push employers who must comply with federal law out of the market.

Again, the immediate consequences of a decision ruling in favor of Catholic Charities is likely to be minimal, because the Catholic Church has its own unemployment benefits program. But if Catholic Charities is entitled to a religious exemption for the reason offered by Kagan, then it is unclear why some other religious organizations cannot claim an exemption even if it does not provide unemployment benefits.

Similarly, if it is unconstitutional for a state to treat religions that do not proselytize differently than religions that do, why can the state discriminate against religions that operate for-profit businesses? As Justice Barrett noted at one point, a church may very well believe that raising money to fund its operations is as essential to its religious mission as the Catholic Church believes that charitable work is to its mission.

One possibility is that the Court could create a carve-out specifically for for-profit entities — ruling that they cannot seek religious exemptions from the law. This is the rule the Court laid out in United States v. Lee (1982), which held that “when followers of a particular sect enter into commercial activity as a matter of choice, the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on the statutory schemes which are binding on others in that activity.”

But the Court also seemed to walk away from Lee in Burwell v. Hobby Lobby (2014), which held that for-profit corporations may seek religious exemptions from federal (although not necessarily state) law.

After Monday’s oral argument, it seems inevitable that the Court will rule that the Catholic Church can enjoy all the benefits of separately incorporating Catholic Charities, without the costs that normally come along with that decision. If that’s all the Court rules, then it is hardly the end of the world for American workers.

But it will be very difficult for the Court to write a decision in favor of Catholic Charities that does not open the door to much more exploitative employers receiving exemptions from very basic laws intended to protect workers.