2020 Brings Expansions of Religious Beliefs and Moral Convictions Exemptions Available to Employers

The Supreme Court’s recent Little Sisters opinion upheld employers’ rights to decline to provide contraceptive coverage due to a sincerely held religious belief or moral conviction. In light of the Supreme Court’s recent expansion of Title VII protections to include sexual orientation and gender identity, the courts might recognize the same reasoning in the context of these types of discrimination claims. The following will consider the impact and potential protections for employers asserting religious and moral objections in the wake of these developments.

Earlier this month in Little Sisters of the Poor v. Pennsylvania, the United States Supreme Court upheld final regulations from the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (Departments) that expanded the employer exemptions from the Affordable Care Act’s (ACA’s) contraceptives mandate. Little Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania, No. 19-431, 2020 WL 3808424, at *14 (U.S. July 8, 2020). The Departments issued the final regulations in November 2018. The Supreme Court’s ruling reverses a Third Circuit decision from July 2019 that affirmed a nationwide injunction blocking execution of the Departments’ final regulations. The final regulations include exemptions from the ACA’s contraceptives rules for entities and individuals with objections based on sincerely held religious beliefs or moral convictions.

Overview of Religious Beliefs and Moral Convictions Exemptions

Religious Beliefs

Under the final regulations, the Departments’ religious beliefs exemption is available to:

1) Nongovernmental employers and certain non-employer entities that sponsor health plans, such as association health plans (AHPs), unions, and sponsors of multiemployer plans;
2) Plans sponsored by nonprofit and for-profit organizations (including both privately held and publicly traded entities); and,
3) Higher education institutions organizing student health plans.
Generally, the religious beliefs exemption applies to an objecting employer’s group health plans and insurers that provide coverage under those plans (irrespective of whether the insurer has its own religious objections). 45 C.F.R. § 147.132. As a result, an employer (or organization), insurer, and plan covered by the expanded exemption is not subject to penalties for omitting contraceptives coverage from relevant benefit plans nor required to comply with a self-certification process.

Moral Convictions

The moral convictions exemption is available to nongovernmental employers that sponsor group health plans and object to contraceptive or sterilization coverage, as well as related patient education and counseling, based on sincerely held moral convictions. 45 C.F.R. § 147.133. This exemption includes group health plan and related health insurance coverage for plan sponsors that are either:

1) Nonprofit organizations; or
2) For-profit entities that have no publicly traded ownership interests.

May Employers Invoke Religious Exemptions Outside of Contraceptive Coverage?

Probably. The Supreme Court’s decision in Bostock v. Clayton County, Georgia—issued less than three weeks prior—expanded Title VII’s anti-discrimination protections to sexual orientation and gender identity. These two opinions would appear, at first glance, to present a conflict where Bostock expanded employee protections yet Little Sisters narrowed protections. However, Bostock seems to have foreshadowed the Little Sisters decision.

In Bostock, the Court addressed the “fear that complying with Title VII’s requirement [against sexual orientation and gender identity discrimination] in cases like ours may require some employers to violate their religious convictions.” Bostock v. Clayton Cty., Georgia, 140 S. Ct. 1731, 1753 (2020). It continued that “[w]e are also deeply concerned with preserving the promise of the free exercise of religion enshrined in our Constitution; that guarantee lies at the heart of our pluralistic society.” The Court noted that “in appropriate cases” Title VII’s requirement might be displaced by overriding religious interests, indicating that employers may attempt to use religious liberty arguments in defense of allegations of unlawful sexual orientation or gender identity discrimination. Further, in addition to the First Amendment, the Court noted the protections provided by the Religious Freedom Restoration Act of 1993 (“RFRA”), which was another statute under which the Court analyzed Little Sisters. The result is that employers may be able to analogize both the Bostock dicta reserving religious interests and the Little Sisters protection of religious interests to further an argument that current policy prioritizes, if not favors, the protection of an employer’s religious interests. As applied to Title VII, for example, this argument would rely on the RFRA.

The Bottom Line

The Little Sisters opinion has expanded employers’ rights to claim religious and moral exemptions particularly with respect to contraceptive coverage, and these rights may prove to expand to discrimination and retaliation claims under Title VII’s expanded protections of sexual orientation and gender identity.  Employers should keep tabs on this developing area of the law.