Nowhere in American life are the ideological cleavages between the left and the right so apparent as in the looming dispute over the constitutionality and propriety of the Patient Protection and Affordable Care Act’s contraceptive mandate. The mandate requires business employers, both individual and corporate, to supply (at their own expense) their female employees with the full range of “preventive health services” on matters dealing with contraception, sterilization, and abortion.
This March, the Supreme Court will hear oral arguments in three cases concerning the mandate. In play are the religion clause of the First Amendment (“Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof”) and a key provision of the Religious Freedom Restoration Act of 1993 ("Government shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability," unless it chooses the least restrictive means to advance a compelling state interest).
The lower court decisions are hopelessly divided on how these two sources of law apply to the contraceptive mandate. The Tenth Circuit in Hobby Lobby Stores v. Sebelius sided with the challenge to the mandate on free exercise grounds, while the Third Circuit in Conestoga Wood Specialties Corp. v Sebeliusand the Sixth Circuit in Autocam Corp. v. Sebeliushave squarely rejected it. The legal situation has become even more knotty because of the well-publicized brief filed by Professor Marci Hamilton of the Cardozo Law School insisting that any exemption of religious organizations from the neutral requirements of the mandate should be struck down as an impermissible establishment of religion, and that the Religious Freedom Restoration Act itself is unconstitutional under Justice Scalia’s well-known decision in Employment Division v. Smith(1990), which upheld a neutral Oregon statute prohibiting the ingestion of Peyote by members of the Native American Church as part of their regular religious activities.
Current Law vs. First Principles
The acrimonious debate over the constitutionality of the contraceptive mandate takes place in the context of a legal framework announced by the late Justice William J. Brennan in the 1984 case of Roberts v. United States Jaycees. The overriding issue in this case was the extent to which the principle of freedom of association should yield to the social imperative of antidiscrimination enacted in the Minnesota Human Rights Act. The law prohibited discrimination on the grounds of sex in any place of public accommodation, which included the Jaycees (a community civic organization that refused to admit women as voting members).
Brennan’s influential decision divides the full range of associations into three classes. In the first are intimate ones, like marriage, where the principle of freedom of association overrides the antidiscrimination norm. At the opposite pole lie ordinary commercial institutions; they are subject to the various antidiscrimination laws, including Title II of the Civil Rights Act of 1964, which deals with public accommodations, and Title VII, which addresses employment discrimination. In the middle lie an uncertain group of expressive nonprofit organizations. Roberts held that the Jaycees, as a large impersonal organization, was properly subject to the public accommodations laws. Sixteen years later, in Boy Scouts of America v. Dale, a deeply divided Supreme Court refused to apply New Jersey’s antidiscrimination law to the Boy Scouts in light of its professed moral and religious views on homosexuality.
Unfortunately, this ad hoc approach to freedom of association blocks the rational development of constitutional doctrine. In line with the general classical liberal position, the only justification for the application of the nondiscrimination provision is that it serves as a counterweight to the exercise of monopoly power of the sort once exercised by common carriers. But since we’re dealing with employers, not common carriers, the classical liberal position converges with the libertarian view in denying the state any right to meddle in the internal affairs of a voluntary association.
Allowing freedom of association in competitive markets generates a succession of win/win exchanges for all parties. We know all too well that a diverse citizenry has no uniform preferences on key social issues, some of which are economic, but many of which are religious and moral. In these contested areas, everyone is free to try to persuade others of the errors of their deeply held convictions—but, in the end, people hold fundamentally different worldviews.
Holmes’s Lochner Mistake
In his famous 1905 dissent in Lochner v. New York, Justice Oliver Wendell Holmes stated correctly that a constitution “is made for people of fundamentally differing views,” from which he then drew the fundamentally wrong-headed conclusion that our Constitution “is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire,” which for these purposes is the functional equivalent of the classical liberal position. But that gets it backwards. It is precisely because preferences diverge that we need the laissez-faire; otherwise, legislatures will bow to the will of the majority to create uniform results. In Lochner, Holmes voted to uphold a 10-hours-a-day maximum hours law, which ultimately protected union workers from their nonunion rivals.
Yet the contraceptive mandate is, if anything, more intrusive when it forces all employers to bend to the will of the majority in areas of fundamental disagreement. The irreducible division of sentiment is the best reason to protect minority groups from legislative majorities. Outside the common carrier context, government coercion increases the likelihood that many private contracts will be win/lose affairs, which sets up conditions of partisan strife within firms.
Uniform Theory of Contract
In contrast, the classical liberal theory starts from the explicit proposition that the parties should decide the terms of their own contracts in light of their preferences. This approach leaves no place whatsoever for Justice Brennan’s tripartite classification in Roberts. None of these voluntary organizations have monopoly power, and all of them forge extended associations of members who come together on mutually acceptable terms. The correct role of the law is to reduce the transaction costs needed to form these agreements, not to instruct people on matters of race, sex, age, or anything else.
Critics of this view often claim that free association allows men to exclude women, whites to exclude blacks, and straight people to exclude gay people. That characterization is only half correct, because it ignores the flip side whereby blacks can exclude whites, women exclude men, and gays exclude straights. It also ignores the way in which voluntary associations can advance their own affirmative action programs without fearing blowback from the state. The members of all affinity groups express support for their mission. Elsewhere, they eagerly join many organizations with broader membership bases. Classical liberalism just lets them decide which groups to join and why.
It is sometimes said, however, that this approach necessarily ignores the costs borne by those excluded from these associations. Again, the point is only half true. No transactional obstacles block expanding the membership of any organization. Therefore, if the gains to outsiders were greater than the losses to insiders, all subjectively measured, a win/win exchange could be arranged that benefits all parties. The refusal to extend these offers to outsiders is potent evidence that the losses to insiders from forced association outstrip the gains to outsiders.
Nor does the result change once we take into account preferences of nonmembers. We would never make individuals abandon their religious beliefs because of the disapproval of others, even as we subject them to the normal rules against aggression toward third parties or the abuse and neglect of children. Why then should that disapproval disrupt their voluntary organizations? Majority indignation offers the greatest threat to civil peace if it leads to laws that squash vulnerable organizations that don’t have the clout to survive the political storm.
Revisiting the Contraceptive Mandate
One depressing feature of the misguided constitutional debate over Obamacare was that it started from the common assumption that any general “freedom of contract” objection to the statute was dead-on-arrival. This dubious premise warps the entire constitutional discourse. A robust interpretation of freedom of association blocks the contraceptive mandate, not just for religious organizations, however defined, but for every group, regardless of its purposes or members. Any group that wants to supply contraceptive services is, of course, free to do so. But any group that opposes the mandate is free to go its separate way. Civil peace is preserved because no one faction or interest group can out-muscle any other.
Without the general baseline of freedom of association, opponents of the mandate now only have their narrower free exercise claim. That raises a new set of irrelevant disputes. Can Hobby Lobby, Conestoga Wood, and Autocam assert their free exercise rights as corporations? Has the Obama Administration offered a sound definition of a “religious employer” not subject to the act? Does the strength of an organization’s religious convictions influence its right to a statutory exemption?
First, corporate status does not matter one way or the other. Corporate shareholders should not be forced to surrender their religious and associational liberties on receipt of a state charter, even if they can be rightly asked to take out corporate liability insurance to protect outsiders injured by corporate activities. The incredible array of private businesses defeats any regulatory definition of a religious employer. Nor should federal judges be asked to evaluate the bona fides or intensity of any firm’s private religious beliefs.
The broad account of freedom of association also undercuts the dubious charge that opposition to the contraceptive mandate wages a war on women, not all of whom, we must remember, support the contraceptive mandate. Freedom of association ends wars; it does not start them. The correct baseline does not guarantee any package of healthcare benefits to any person, but leaves that topic to negotiation between parties. In a competitive world, firms can compete by offering or denying particular benefits, without the state having to second-guess its choices. Offering contraceptive services to women goes beyond the valuable insurance function of risk pooling, for providing any service free of charge only introduces dangerous cross-subsidies into the system. The higher cost of healthcare for women of childbearing age does not warrant this cross-subsidy any more than age differentials justify the all-too-destructive system of community rating.
This correct view of freedom of association also lays bare the dangerous argument made by Marci Hamilton on behalf of the ill-named “Freedom From Religion Foundation” that the exemption of religious organizations from generally applicable commands of law is itself an unconstitutional establishment of religion. No one wants to prohibit her organization from supplying contraceptive services to its employees. But classical liberals do want stop the government from forcing people who believe in religious freedom to sacrifice their own beliefs.
Hamilton’s extravagant claim is only plausible in a world in which the state is free to force ordinary businesses to knuckle under. But once all individuals have equal rights of association across the entire range of human endeavors, the establishment issue disappears. It should be flatly unconstitutional for the state to force these mandates on any private organization period. If so, then there is no illicit preference for religious groups when they receive the same protection for their organizations that are given to other groups. But there is a manifest intrusion into ordinary religious liberties by forcing them to bear these costs.
The moral of the story should be clear. It is not possible to deviate in part from the classical liberal principles of freedom of association and hope that the resulting confusion will be ironed out down the road. The key defect in the central premise leads to indefensible distinctions and to second-best solutions, all of which should be rejected out of hand. In this context, religious liberty is lost by the imposition of an employer mandate. The entire mandate should be struck down root and branch.
Richard A. Epstein, Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, Laurence A. Tisch Professor of Law at New York University, and senior lecturer at the University of Chicago, researches and writes on a broad range of constitutional, economic, historical, and philosophical subjects. He has taught administrative law, antitrust law, communications law, constitutional law, corporate law, criminal law, employment discrimination law, environmental law, food and drug law, health law, labor law, Roman law, real estate development and finance, and individual and corporate taxation. His publications cover an equally broad range of topics. His most recent book, published in 2013, is The Classical Liberal Constitution: The Uncertain Quest for Limited Government (2013). He is a past editor of the Journal of Legal Studies (1981–91) and the Journal of Law and Economics (1991–2001).