How Hobby Lobby and Harris Will Impact the Nonprofit World

Hobby Lobby

Monday was a tough day at the Supreme Court. Two SCOTUS decisions were announced that could have the effect of changing the landscape of infrastructure of social policy.

The issue isn’t whether the Hobby Lobby case undermines part of the Affordable Care Act. Immediately after the SCOTUS announcement, Congressional Democrats launched an effort to enact a fix for contraceptive coverage for people who work for private corporations run by owners with a restrictive religious bent. The issue underlying Harris v. Quinn could be written off as limited to the circumstance of independent contractors, as home health care workers in Illinois were, being converted to government employees due to state legislation.

Both decisions are much more fundamental in terms of modifying the structure of significant and influential institutions on the American political scene—with implications for nonprofits.

Hobby Lobby

The 5-4 ruling in favor of Hobby Lobby, the privately owned arts and crafts store corporation whose evangelical Christian owners wanted an exemption from the ACA’s requirement of coverage for certain kinds of contraceptives, has been subject to much discussion about the health and women’s rights impacts of the decision. Commentators have extrapolated from the Hobby Lobby rationale to imagine other kinds of “religious” beliefs that might be suggested as potential ACA exemptions. For example, even Hillary Clinton weighed in to aver that some people, based on their religious beliefs, don’t believe in blood transfusions. If they were in the “closely held” position of the Green family that owns Hobby Lobby, they could argue against ACA coverage of blood transfusions for their employees. Other owners might oppose for religious reasons vaccinations or even healthcare treatment in general. Employers comparable to Hobby Lobby could use a religious veto on the healthcare coverage of their employees.

It doesn’t matter that there is credible science that the contraceptives that Hobby Lobby opposes (the “morning after” pill, the “week after” pill, and two forms of IUD) are not instruments of abortion. The Court has basically ruled that the owners of for-profit corporations can impose their religious beliefs on their employees who may not share those beliefs.

The import of the decision, however, isn’t simply that the court narrowed the coverage of the Affordable Care Act based on religious beliefs. It is in the concept of corporations having person-like beliefs.

The court ruled that a “closely held” corporation can have deep religious beliefs that trump the beliefs and rights of corporate employees who are simply working for a living without any aspect of religion entering the picture. Filling out a job application for Hobby Lobby is for most people far different than applying for a job in a Catholic or evangelical religious entity. The court has ruled that the owners of closely held corporations get the same sort of protection as an explicitly religious nonprofit—in this case, religious beliefs attributed to a secular structure, a business corporation.

What is a closely held corporation? Commentators may have missed that this isn’t simply a question of an individual or family owning a small business so that the owner and the business are virtually interchangeable. A closely held corporation has a limited number of shareholders, generally five or fewer individuals owning half or more of the firm’s stock. Mediaite identifies other closely held corporations that could be next in line to follow Hobby Lobby given the known religious beliefs of their owners: Atlas Machine and Supply in Louisville, owned by an evangelical Christian, known for his position against certain kinds of contraceptives; the Hastings Automotive and Hastings Chrysler automotive dealerships in Minnesota, whose owner is said to be “eager” to halt insurance coverage of certain contraceptives; O’Brien Industrial Holdings LLC in St. Louis; and Weingartz Inc. in Michigan.

But such privately held corporations aren’t just small, unknown companies. A Forbes listing of such corporations included many well-known entities:

RANK

COMPANY

STATE

INDUSTRY

REVENUE ($BIL)

EMPLOYEES

1

Cargill

MN

Farm Products

110.63e

152,600

2

Koch Industries

KS

Chemicals – Major Diversified

98.00e

80,000

3

Chrysler

MI

Auto Manufacturers – Major

59.70e

66,409

4

GMAC Financial Services

MI

Financial Services

31.49 

26,700

5

PricewaterhouseCoopers

NY

Business Services

28.19 

154,000

6

Mars

VA

Confectioners

27.401

64,400

7

Bechtel

CA

Heavy Construction

27.00 

42,500

8

HCA

TN

Hospitals

26.86 

180,000

9

Ernst & Young

NY

Business Services

24.52 

135,730

10

Publix Super Markets

FL

Grocery Stores

23.19 

145,000

11

US Foodservice

IL

Food – Major Diversified

20.16 

27,091

12

C&S Wholesale Grocers

NH

Food Wholesale

19.45 

17,100

13

HE Butt Grocery

TX

Grocery Stores

15.502

70,000

14

Fidelity Investments

MA

Asset Management

14.90 

44,000

15

Cox Enterprises

GA

Entertainment – Diversified

14.59 

79,660

16

Flying J

UT

Oil & Gas Refining & Marketing

14.32 

15,900

17

Toys “R” Us

NJ

Toy & Hobby Stores

13.79 

70,000

18

Meijer

MI

Grocery Stores

13.65e

68,800

19

Platinum Equity

CA

Conglomerates

13.502

50,000

20

Aramark

PA

Business Services

13.20e

250,000

21

Enterprise Rent-A-Car

MO

Rental & Leasing Services

13.102

78,000

22

TransMontaigne

CO

Oil & Gas Pipelines

12.25e

730

23

JM Family Enterprises

FL

Auto Manufacturers – Major

12.20 

4,700

24

Tenaska Energy

NE

Diversified Utilities

11.60 

624

25

Love’s Travel Stops

OK

Lodging

11.46 

5,900

Out of 441 such companies, Hobby Lobby was far from the largest, ranking 276th in revenues. Forbes said that these 441 companies employed 6.2 million people and accounted for $1.8 trillion in revenues.

The concern, however, is beyond the distinction between private, closely held corporations and publicly traded corporations. The Hobby Lobby decision is yet another Supreme Court decision attributing qualities of “personhood” upon corporate entities. In Citizens United, the Court already gave corporations the ability to exercise their political beliefs through expenditures through PACs and 501(c)(4) entities in political campaigns. Now, not only are closely held corporations assumed to be able to have person-like beliefs and values, but what would stop the Court from moving to the next stage of this line of thinking? Why wouldn’t corporations with more than five shareholders be allowed to have the person-like beliefs that are now attributed to closely held entities with five or less shareholders?

This is a big step forward for corporate power. The Hobby Lobby decision’s impact on the Affordable Care Act can and well might be rectified by legislation, especially in an election year, as women—like the three women on the Supreme Court, who all dissented—will see themselves treated unfairly and stuck with their employers’ intervention in their health. The bigger implications are in terms of the power of corporations to be treated like they are persons. Imagine if larger, publicly traded corporations raised such concerns going forward. When and where will the advance of corporate power under the cloak of corporate personhood end? Which will be the corporation with more than five shareholders to invoke the Religious Freedom Restoration Act, the basis for Justice Samuel Alito’s majority opinion, to ask for an exemption from the Affordable Care Act or some other provision of federal law?

And what will nonprofits and foundations do about the march of corporate power—if they do anything at all?

Harris v. Quinn

Earlier this week, we wrote about and largely predicted the decision of the Supreme Court regarding union dues payments for state-employed but non-union home health care workers in Illinois. Some observers are suggesting that this ruling, feared as a sharp limitation on public sector unions, isn’t as bad as it seems. Rather than overturning state laws that require non-union members to pay union dues—“agency fees”—because of the unions’ work in negotiating contracts and representing employees in grievances, the court narrowed the application of this decision to employees who are not “full-fledged public employees.”

In Harris, the case addressed the situation of home health care workers who were originally private contractors but, due to state law, were reclassified as public workers. The court decided that despite the state law, these home health care workers, although paid by the state through Medicaid, aren’t like other state workers because they can be hired and fired by individual patients and work in their patients’ homes. As such, despite the Illinois state law, they aren’t like other state workers and cannot be compelled to pay union dues to the SEIU or other unions that might represent them.

There are several important issues here beyond the specifics of the Illinois case. First is the issue of home health care workers themselves. Home health care workers are a fast-growing part of the employment picture in this country. The Bureau of Labor Statistics said that there were 875,100 “home health aides” in the U.S. in 2012. The outlook for home health jobs is a 48 percent increase between 2012 and 2022, a much faster than average increase in job growth—compare to predicted job growth of 29 percent in the healthcare and social assistance industry and 11 percent job growth for all industries.

However, these home health care positions are very low-paid jobs, with median pay of $10.01 per hour or $20,820 a year. Persons of color occupy many of these home health care jobs and therefore have a stake in their relationships with the unions like the SEIU that aim to protect the working conditions and to boost the wages of these employees. The SEIU claims to represent some 400,000 home health workers nationwide. The Harris ruling could give many home health aides the opportunity to opt out of mandatory “agency fees” while allowing them as “free riders” to benefit from union collective bargaining achievements.

The second issue is about public unions themselves. As we noted earlier this week, private sector union membership has been declining over the years, but public sector union membership has been increasing. Although the ruling in Harris was limited to home health care workers, Justice Alito’s opinion issued an invitation for a broader challenge to state laws that require non-union members of any sort to pay union dues that cover the unions’ contract negotiating services to member and non-members alike (Note that non-union members do not have to pay for the political advocacy activities of unions). Might the court take the next step, beyond Harris, to free all non-union members from paying union dues as mandated by state laws? Might the automatic deduction of public employees’ union dues from their paychecks be next on the SCOTUS agenda?

For the blacks, public sector employment, abetted by public sector unions and labor contracts, has boosted entry into the middle class. Some 35.5 percent of public sector workers are union members compared to only 6.7 percent of private sector employees. Public sector union membership is seen by some as organized labor’s “last major bulwark against oblivion.” Could public sector union membership continue its recent rates of expansion if employees could opt out and become free riders, benefitting from contract negotiations and grievance representation despite not having contributed to the unions’ operations?

Public sector unions have been hit hard in the polls and in politics, notably the successful efforts of Wisconsin governor Scott Walker to limit public sector collective bargaining and the recent overturning of state teacher protection laws in California. Yet there are many studies that show that employees represented by public sector unions (and private sector unions as well) earn substantially more than non-union members, especially blacks and women. There is a legitimate argument, given the low unionization rate for private sector jobs, that an important mechanism for boosting incomes and reducing gender-based wage discrepancies is more likely to be protected and expanded through public sector employment with its high union rates than through private sector job creation.

However, nonprofits and foundations—other than conservative foundations—rarely address public sector unionization. Are nonprofit sector antipathies toward public sector unions—think about some nonprofits as mechanisms for the privatization of state government jobs—likely to lead nonprofits away from grappling with this issue, pro or con? Are nonprofits aware that until regulatory changes announced by the Obama administration just this year, many federally paid (through Medicaid) home health care aides were not even guaranteed the federal minimum wage and were not entitled to overtime pay? If public sector unions in the health care industry are weakened by the Harris or subsequent court decisions against mandatory union dues, will the people getting new jobs as low-paid home health aides find themselves getting less collective bargaining protection than they might need and deserve?

In the Hobby Lobby case, nonprofits have to think through how they feel and what they are willing to do regarding the increasing powers of corporations in America. In the Harris case, nonprofits have to consider where they stand on public sector employment as a means of advancement into the middle class for potentially hundreds of thousands of employees with limited job skills and education, especially as job growth occurs in the health care industry. Empowering corporations and weakening public sector unions are changes in the landscape of institutional prerogatives in this nation, with major implications for nonprofits that relate to both.