If you know the name of a case the Supreme Court will hear on March 31, Catholic Charities v. Wisconsin Labor & Industry Review Commission, you can probably guess who will prevail.
The Court’s Republican majority almost always rules in favor of Christian litigants who seek an exemption from a federal or state law, which is what Catholic Charities is looking for in this case. (Notably, the Court’s Republicans have not always shown the same sympathy for Muslims with religious liberty claims.)
But, while the outcome in Catholic Charities seems unlikely to be a surprise, the stakes in the case are still quite high. Catholic Charities seeks an exemption from Wisconsin’s law requiring nearly all employers to pay taxes that fund unemployment benefits. If the Court grants this exemption, the justices could give many employers a broad new power to evade laws governing the workplace.
Like every state, Wisconsin taxes employers to fund benefits for workers who lose their jobs. Like most states, Wisconsin’s unemployment benefits law also contains an exemption for church-run nonprofits that are “operated primarily for religious purposes.”
The state’s supreme court recently clarified that this exemption only applies to nonprofit employers that primarily engage in religious activities such as holding worship services or providing religious education. It does not apply to employers like Catholic Charities, which provide secular services like feeding the poor or helping disabled people find jobs — even if the employer is motivated by religious faith to provide these secular services.
Catholic Charities, however, claims that it has a First Amendment right to an exemption, arguing, among other things, that Wisconsin’s limited exemption for some religious nonprofits and not others discriminates against Catholics.
None of its arguments are persuasive, at least under the Supreme Court’s existing decisions. But precedent plays hardly any role in how this Court decides religion cases. The Republican justices routinely vote to overrule, or simply to ignore, religion cases that they disagree with. The Court’s very first major decision after Justice Amy Coney Barrett’s appointment gave Republicans a supermajority on the Court effectively overruled a decision governing worship services during the Covid-19 pandemic that was only a few months old.
Realistically, in other words, the Court will likely decide Catholic Charities based on the justices’ personal preferences, rather than by following the doctrine of stare decisis, which says that courts should typically follow their own precedents.
That said, it remains to be seen how far this Court might go in its ruling. It could choose to distinguish Catholic Charities — which is a legitimate charity that does genuinely admirable work — from employers who claim religious exemptions only to hurt their own employees. But if it chooses to be expansive, it could overrule a line of precedents that protect workers from exploitative employers who claim a religious justification for that exploitation.
“Religious liberty” doesn’t mean religious organizations get civil society’s benefits and none of its costs
In order to understand the Catholic Charities case, it’s helpful to first understand the legal concept of a “corporation.” Corporations are entities that are typically easy to form under any state’s law, and which are considered to be entirely separate from their owners or creators. Forming a corporation brings several benefits, but the most important is limited liability. If a corporation is sued, it can potentially be liable for all of its assets, but the owners or controllers of that corporation are not on the hook for anything else.
Corporations can also create their own corporations, thus protecting some of their assets from lawsuits.
Think of it this way: Imagine that José owns two businesses, one of which sells auto parts, and another that fixes cars. If these businesses are incorporated, that means that José’s personal assets (such as his house) are protected if one of his businesses are sued. Moreover, if both businesses are incorporated as two separate entities, a lawsuit against one business cannot touch the other one. So if, say, the auto parts company sells a defective part, that company could potentially be put out of business by a lawsuit. But the car repair company will remain untouched.
Catholic Charities is a corporation that is controlled by the Roman Catholic Church. According to its lawyers, the president of Catholic Charities in Superior, Wisconsin, is a Catholic bishop, who also appoints its board of directors. The Catholic Church gains significant benefits from this arrangement, because it means that a lawsuit against Catholic Charities cannot touch the church’s broader assets.
Under Wisconsin law, however, the church’s decision to separately incorporate Catholic Charities also has a cost. Wisconsin exempts employers that engage in religious activity such as worship services from its unemployment regime, but it does not give this exemption to charitable corporations that only engage in secular activity. Because Catholic Charities is a separate legal entity from the church itself, and because it does not engage in any of the religious activity that would exempt it from paying unemployment taxes, it does not get an exemption.
Presumably, the church was aware of all of these consequences when it chose to separately incorporate Catholic Charities. The Catholic Church has very good legal counsel, and its lawyers would have advised it of both the benefits of separate incorporation (limited liability) and the price of that benefit (no unemployment exemption). Notably, Catholic Charities has paid unemployment taxes since 1972.
But Catholic Charities now claims that this decades-old arrangement is unfair and unconstitutional. According to its brief, “the Diocese of Superior operates Petitioners as separately incorporated ministries that carry out Christ’s command to help the needy,” but “if Catholic Charities were not separately incorporated, it would be exempt.” That very well may be true, but if Catholic Charities were not separately incorporated, it also would not benefit from limited liability.
That brief alleges three separate constitutional violations — it claims that Wisconsin discriminates “against religious groups with more complex polities” (that is, with more complex corporate structures), and it also raises two claims that both boil down to an allegation that Wisconsin is too involved with the church’s internal affairs because its law treats Catholic Charities differently if that entity were not separately incorporated.
The discrimination claim is weak, because the Constitution does not prohibit discrimination against entities with complex corporate structures, it prohibits discrimination on the basis of religion. Wisconsin law treats Catholics no differently than anyone else. If a Muslim, Hindu, Protestant, Jewish, or nonreligious charity also provides exclusively secular services, it also does not receive an exemption from the state’s unemployment law.
Similarly, Wisconsin law does not entangle the state in the church’s internal affairs, or otherwise dictate how the church must structure itself and its subordinate entities. It merely offers the church a bargain that it is free to turn down — the church may have limited liability, but only if it accepts the consequences of separate incorporation.
A decision for Catholic Charities could have disastrous consequences for workers
Realistically, the immediate consequences of a decision for Catholic Charities would be virtually nonexistent. The church maintains its own internal program that pays unemployment benefits to laid off workers, and it claims that this benefit program “provides the same maximum weekly benefit rate as the State’s system.” So it appears that, no matter who prevails before the Supreme Court, unemployed former employees of Catholic Charities will still receive similar benefits.
But other religious employers may not offer benefits to their unemployed workers. If Catholic Charities prevail in this case, that victory would likely extend to all organizations which, like Catholic Charities, engage in secular charitable work motivated by religious belief. So workers in other organizations could be left with nothing.
Historically, the Supreme Court was reluctant to allow religious employers to seek exemptions from laws that protect their workers, and for a very good reason — abandoning this reluctance risks creating the situation the Court tried to ward off in Tony and Susan Alamo Foundation v. Secretary of Labor (1985).
Tony Alamo was often described in news reports as a cult leader. He was convicted of sexual abuse against girls he considered to be his wives. One of his victims may have been as young as nine. Witnesses at his trial, according to the New York Times, testified that “Alamo had made all decisions for his followers: who got married; what children were taught in school; who got clothes; and who was allowed to eat.”
The Alamo Foundation case involved an organization which was nominally a religious nonprofit. But, as the Supreme Court explained, it operated “a number of commercial businesses, which include 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.” Tony was the president of this foundation, and its workers received no cash salaries or wages — although they were given food, clothing, and shelter.
The federal government sued the foundation, alleging violations of federal minimum wage, overtime, and record keeping laws. And the Supreme Court rejected the foundation’s claim that it was entitled to a religious exemption from these laws. Had the Court ruled otherwise, it could have allowed people like Tony Alamo to exploit their workers with little recourse to federal or state law.
The Alamo Foundation opinion warned, moreover, that permitting the foundation to pay “substandard wages would undoubtedly give [it] and similar organizations an advantage over their competitors.” Cult leaders with vulnerable followers would potentially push responsible employers out of the market, because employers who remained bound by law would no longer be able to compete.
Indeed, the Supreme Court used to be so concerned about religious companies gaining an unfair competitive advantage that, in United States v. Lee (1982), it announced a blanket rule 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.” Religious entities were sometimes entitled to legal exemptions under Lee, but they had to follow the same workplace and business regulations as anyone else.
It’s important to be clear that the Catholic Church bears little resemblance to the Alamo cult, and Catholic Charities certainly does not exploit its workers in the same way that the Tony and Susan Alamo Foundation was accused of doing.
But the Court paints with a broad brush when it hands down constitutional decisions, and the Constitution does not permit discrimination among religious faiths. So, if the Catholic Church is allowed to exempt itself from workplace regulations, the same rule will also extend to other religious employers who may be far more exploitative. Should Catholic Charities prevail, religious workers can only pray that the Court writes a cautious opinion that doesn’t abandon the concerns which drove its decision in Alamo Foundation.
