Yesterday, the U.S. Supreme Court unanimously ruled that a federal law exempting the employee retirement plans of religious groups from government oversight applies broadly to hospitals set up by religious organizations.
Congress passed the Employee Retirement Income Security Act (ERISA) in 1974 to regulate pension plans run by private businesses. Because religious groups had for centuries set up retirement plans for their employees, Congress exempted religious groups from ERISA’s requirements under a provision called the “church plan” exemption. Congress clarified the church plan exemption with legislation in 1980, after the Internal Revenue Service (IRS) ruled that a hospital started by an order of Catholic nuns did not qualify for the church plan exemption because an order of nuns is not technically a church, but merely a religious group. The IRS then reversed its ruling, and for decades has routinely exempted religious-based hospitals under ERISA’s church plan provision.
But several groups of employees for religious hospitals filed lawsuits challenging whether their hospitals qualified for the church plan exemption. And until now, the hospital employees had won: Three federal appeals courts ruled the hospital systems did not qualify for the church plan exemption, so they must pay millions of dollars in added charges to their employees, penalties, etc.
The Supreme Court took up three cases, and reversed those decisions yesterday. Here are the three takeaways from Justice Elena Kagan’s unanimous opinion in favor of the hospitals:
The decision protects the autonomy of religious groups.
Although the decision did not discuss the Constitution, clearly the justices had in mind the First Amendment doctrine that protects religious groups from government interference or punishment on how they set up their internal rules and governance.
Justice Kagan stated for all of the other justices that if they ruled against the hospitals, that decision would put the government in the position of “deciding just what a church is and is not.” Reading the ERISA statute that way would make it unconstitutional because it would exempt a hospital set up and run by a church, but not a hospital set up by an order of nuns, or set up by an independent Baptist agency because neither are a “church.” That is why Congress clarified the ERISA law in 1980, to protect hospitals that are clearly religious, although not set up by a church. The Supreme Court’s decision recognizes that the Constitution carves out space protecting the decisions of churches and other religious groups setting up their internal church governance and operation.
Policy questions are different than legal questions.
Justice Sonia Sotomayor wrote a concurring opinion highlighting the important difference between the public policy and legal dimensions of an issue. In this case, the legal question is whether the ERISA law exempts hospitals operated by religious groups. The public policy aspect of this case is whether that exemption is a good idea, and how broad it should be. Congress and the President decide this issue.
In that light, Justice Sotomayor joined the majority opinion “because I am persuaded that it correctly interprets the relevant statutory text.” She later questioned whether Congress would have written the church plan exemption as broad as it did if it foresaw that it would cover large hospital systems that “operate for-profit subsidiaries … employ thousands of employees … earn billions of dollars in revenue … and compete in the secular market with companies that must bear the cost of complying with ERISA.”
It is a fair question whether Justice Sotomayor needed to mention any of this at all, but she understands that, as a judge, she only decides the legal question (that is, what does this statute permit?), and leaves Congress to decide whether to amend the statute in light of new facts she mentioned. That is why Justice Sotomayor wrote, ‘[i]n the end, I agree with the majority that the statutory text compels today’s result.”
So, the big positive here is that Justice Sotomayor and the other justices showed commendable judicial restraint in leaving this public policy issue to Congress to address and limiting themselves to ruling only on the legal issues in the case.
Justice Kagan is an excellent writer.
Justice Kagan is emerging as the most insightful and colorful writer on the Supreme Court, filling the shoes that Justice Antonin Scalia occupied for many years. Justice Samuel Alito is in hot pursuit of this title, too, but the ERISA opinion puts the spotlight on Justice Kagan. Her opinion simultaneously shows her intelligent, systematic analysis written in a clear, readable, and delightful style.
For example, after quoting the ERISA statute, she made the comment, “That is a mouthful, for lawyers and non-lawyers alike.” When responding to an argument the hospital employees made on how to interpret the statute, she wrote, “[i]n essence, the employees ask us to treat those words as stray marks on a page – notations that Congress regrettably made but did not really intend.”
You gotta love that kind of writing.
And Justice Kagan may want to watch her rearview mirror for Justice Neil Gorsuch. From many of his lower court opinions, he also shows the chops to write well, adding another talented writer to the mix.
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