People, Planet, Profit ... Religion?

On November 26, 2013, the US Supreme Court agreed to hear two cases, Sebelius v. Hobby Lobby Stores, Inc. and Conestoga Wood Specialties, Corp. v. Sebelius, which challenge the Patient Protection and Affordable Care Act’s so-called “contraceptive mandate” requiring that employers offer all FDA-approved contraceptives in employee health care plans. These two cases have been consolidated, and the court will hear oral arguments on March 25, 2014.

Exemptions to the mandate already exist. Churches and other houses of worship are fully exempt from the mandate, and in 2012 the Obama Administration bowed to pressure and made accommodations available to religiously affiliated nonprofit organizations such as universities and hospitals, provided that they certify the mandate contravenes their religious beliefs. In this latest challenge to the mandate, the owners of for-profit corporations such as Hobby Lobby and Conestoga oppose the use of abortifacients (agents such as the “morning after pill” that induce abortion), and have sued on statutory and constitutional grounds seeking an exemption from the mandate as conflicting with the corporations’ religious convictions. As some commentators have observed, the result of the exemption sought by Hobby Lobby and Conestoga would force their employees to literally pay for the religious beliefs of their employers, regardless of whether the employees share the same beliefs.

To date, much of the mainstream and legal news coverage has focused on the Hobby Lobby case, and whether or not religious objectors can claim an exemption under the Religious Freedom Restoration Act (RFRA), a Clinton-era law granting religious objectors a broad exemption from generally applicable laws that conflict with their religious convictions. The Conestoga case, on the other hand, has garnered less attention, but buried deep within the lower court’s opinion lies the basis for a threat to the social enterprise movement.

Because the court consolidated the Conestoga and Hobby Lobby cases, it may consider an issue raised by the Conestoga case that goes unmentioned in the Hobby Lobby brief: the First Amendment. In 2010, the court issued its infamous ruling in Citizens United v. Federal Election Commission, which held that the First Amendment applies to corporations and generated the now-ubiquitous “corporations are people” apothegm. However, the facts of Citizens United related only to the Free Speech Clause of the First Amendment, leaving untouched the Free Exercise Clause, which provides individuals the right to the free exercise of religion. To date, it’s not clear whether the Citizens United decision applied the First Amendment in toto or resolved only the issue of corporate political expression, leaving open the question of corporate religious rights. Unsurprisingly, Conestoga maintains that Citizens United applies to the Free Speech Clause and the Free Exercise Clause, and that, as a corporation chartered by the Commonwealth of Pennsylvania, it possesses the same constitutional right to freely exercise religion as its individual employees. Judge Timothy Tymkovich, writing for the five-vote majority in the Tenth Circuit, agreed with this reasoning in the Hobby Lobby case, stating: “We see no reason the Supreme Court would recognize constitutional protection for a corporation’s political expression but not its religious expression.”

In the midst of this blockbuster Supreme Court case that some commentators believe will be the sequel to Citizens United, social enterprise enters the fray, making its debut appearance in a reported judicial decision in the United States, no less. Traditionally, courts have treated for-profit corporations and nonprofit corporations separately. However, the recent emergence of social enterprise forms such as benefit corporations has blurred the traditional line between for-profit and nonprofit entities by accommodating social and environmental missions in for-profit corporate forms. In his dissent in the Conestoga case, Third Circuit Judge Kent A. Jordan seized upon these corporate innovations in arguing that that Conestoga’s religious mission is analogous to the social and environmental missions of social enterprise. In Judge Jordan’s words:

It is commonplace for corporations to have mission statements and credos that go beyond profit maximization … [and] recent developments in corporate law regarding “Benefit” or “B” corporations significantly undermine the narrow view that all for-profit corporations are concerned with profit maximization alone … There is absolutely no evidence that Conestoga exists solely to make money. It is operated, rather, to accomplish the specific vision of its deeply religious owners. While making money is part of that vision, the government has effectively conceded that Conestoga has more than profit on its corporate agenda.

Conestoga carried this argument forward in its petition to the Supreme Court, asserting that corporations can exercise religion, and, in parlance familiar to social entrepreneurs, that “religion can be exercised while pursuing profit.”

The invocation of social enterprise on the behalf of Conestoga is misleading and dangerous. The analogy between Conestoga’s religious mission and social enterprise suffers from an overly broad interpretation of social enterprise as inclusive of any and all corporate purposes beyond shareholder wealth maximization. On the contrary, social enterprise is not an umbrella under which all alternative corporate purposes reside; rather, only those social and environmental purposes that produce, in the words of benefit corporation statutes, a “material positive impact on society and the environment, taken as a whole,” constitute a social enterprise. This is not to say that there is no overlap between religious purposes and social purposes (see infographic below). Indeed, the existence of religious organizations such as GreenFaith and others show that there is substantial space where religious and social entrepreneurial purposes intersect; however, this does not necessarily lead to the conclusion drawn by some commentators such as Prof. Steven J. Willis, who claims in a recent South Carolina Law Review article that “[t]he distinction between a ‘social entrepreneur’ and a ‘faith based company’...is, at best, thin.”

Convergence of Organizational Purposes. (Image by Robert T. Esposito & Shawn Pelsinger)

In fact, the goals of social enterprise and religion are not always coextensive. The Conestoga case is a textbook example of how the pursuit of a religious mission may be diametrically opposed to the social and environmental goals of what social entrepreneurs mean when they say “social enterprise.” In the health care context, social entrepreneurs produce “material positive impacts” by expanding access to health care to those who have little or none, and filling gaps in deficient health care systems, including the provision of contraceptives. Social entrepreneurs have already succeeded in this sector by providing and augmenting healthcare for the self-employed, the poor, and those in remote rural areas. Remarkably, companies like Conestoga that oppose contraception are employing the social enterprise analogy to achieve precisely the opposite goal—instead of expanding access to health care, they seek to exempt themselves from the mandate and deny their employees contraceptive health care coverage.

Furthermore, the analogy to social enterprise is dangerous because it further confuses, rather than helps clarify, the definitional uncertainty from which the social enterprise sector suffers. If the Supreme Court finds that corporations do, in fact, possess Free Exercise rights under the First Amendment, the social enterprise sector may soon find itself overwhelmed by a flood of organizations like Hobby Lobby, Conestoga, Chick-fil-A, and others pursuing religious missions that are anathema to the goals of secular social enterprises. Such a result would dilute the branding value of social enterprise at a time when social entrepreneurs, who rely on public recognition of their mission, depend on it most.

While these legal challenges to the contraceptive mandate do not at first glance appear to implicate social enterprise, they have the potential to create long-term consequences for its growth, and should serve as a wake-up call to social enterprise advocates and policymakers to continue efforts to address the boundaries of social enterprise and its intersection with religion. Whether the court decides the case on the RFRA issue or the First Amendment issue remains to be seen, but social entrepreneurs should be aware that the fate of contraceptive health care—and social enterprise—may hang in the balance.

Read more stories by Shawn Pelsinger & Robert T. Esposito.