The Supreme Court will hear arguments today in Catholic Charities Bureau, Inc. v. Wisconsin Labor & Industry Review Commission, a case testing whether the First Amendment's Religion Clauses prevent a state from denying an exemption from the state's unemployment compensation program to a religious organization when that organization provides secular services. My preview, from the ABA Preview of United States Supreme Court Cases, with permission, is here:
ISSUE
Did Wisconsin violate the Religion Clauses when it denied an exemption from the state’s unemployment compensation program to Catholic Charities and four sub-entities because they were not “operated primarily for religious purposes” under Wisconsin law?
FACTS
Catholic Charities Bureau (CCB) is a not-for-profit corporation in Wisconsin that operates as the social ministry arm of the Diocese of the Superior, a diocese of the Roman Catholic Church. CCB’s mission is “[t]o carry on the redeeming work of our Lord by reflecting gospel values and the moral teaching of the church.” Since 1917, CCB has fulfilled its mission by “providing services to the poor and disadvantaged as an expression of the social ministry of the Catholic Church.” CCB’s “purpose” “is to be an effective sign of the charity of Christ” by providing services without discriminating by “race, sex, or religion.” CCB pledges that it “will in its activities and actions reflect gospel values and will be consistent with its mission and the mission of the Diocese of Superior.”
CCB oversees several separately incorporated sub-entities that provide direct services to the community. CCB provides management services for its sub-entities; it establishes and coordinates their missions; and it approves all capital expenditures and investments of the sub-entities. CCB’s executive director supervises the sub-entities’ operations.
At the same time, however, CCB does not require its employees or employees of its sub-entities to be of any particular religious faith. CCB similarly does not require those who receive services from sub-entities to be of any particular religious faith. Program participants do not receive any religious instruction, and CCB and its sub-entities do not attempt to “inculcate the Catholic faith with program participants.”
Four of CCB’s sub-entities are involved in this case. First, Barron County Developmental Services contracts with the Department of Vocational Rehabilitation to provide job-related services for individuals with disabilities. Next, Black River Industries, Inc., provides services to individuals with developmental or mental health disabilities and individuals with limited incomes. Third, Diversified Services, Inc., provides work opportunities for individuals with developmental disabilities. Finally, Headwaters, Inc., provides support and training services related to daily living for individuals with disabilities.
In 1972, the Wisconsin Department of Industry, Labor and Human Relations determined that CCB was subject to the state’s unemployment compensation program and therefore required to make contributions to the program. The Department made this determination after CCB self-reported that its operations were “charitable,” “educational,” and “rehabilitative,” and not “religious.” CCB has made unemployment contributions ever since.
In 2015, the Douglas County Circuit Court determined that a sub-entity of CCB was exempt from the unemployment compensation program on the ground that it was “operated primarily for religious purposes.”
The next year, CCB and the sub-entities in this case asked the Department of Workforce Development (DWD) for a similar determination. In support of their request, they cited the state unemployment-compensation law, which exempts those “[i]n the employ of an organization operated primarily for religious purposes . . . .” Wis. Stat. § 108.02(15)(h)(2). DWD denied the request, stating that “these organizations are supervised and controlled by the Roman Catholic Church, but it has not been established that they are operated primarily for religious purposes.” After some back-and-forth rulings at the administrative level, the state Labor and Industry Review Commission (LIRC) concluded that CCB and the four sub-entities were not “operated primarily for religious purposes” under Wisconsin law and therefore not exempt from making payments to the state unemployment insurance program.
The circuit court reversed, and the appellate court reversed again (restoring LIRC’s conclusion). The Wisconsin Supreme Court affirmed, and CCB and its sub-entities brought this appeal.
CASE ANALYSIS
The First Amendment contains two religion clauses: the Establishment Clause, which prohibits the government from “establishing” religion; and the Free Exercise Clause, which prohibits the government from restricting or interfering with the free exercise of religion. Rather than focusing on the clauses individually, the parties frame their arguments around principles that emerge from the Religion Clauses as read together.
CCB and its sub-entities (together, CCB) argue that the state’s denial of an exemption violates the Religion Clauses in three ways. First, CCB asserts that the denial “violates the principle of church autonomy by penalizing Catholic Charities because of its structure, including the fact that it is separately incorporated from the Diocese of Superior.” CCB says that “[i]t would violate Catholic social teaching to force Catholic Charities to be ‘absorbed and substituted’ by ‘social entities of a higher level,” and therefore the state’s decision to deny an exemption “unless [CCB] merges with the Diocese thus penalizes it for following specific Catholic teachings about church governance.” CCB contends that the Religion Clauses prohibit such state meddling in a church’s decisions on church governance.
CCB argues next that Wisconsin’s denial of an exemption impermissibly entangles the state in religion by second-guessing CCB’s religious commands and beliefs. It says that “Wisconsin has taken it upon itself to override the Catholic Church’s beliefs about whether (for example) helping those with developmental disabilities is a religious act, and to force Catholic Charities to participate in the State’s unemployment compensation system on that basis.” CCB contends that the Religion Clauses prohibit this kind of co-opting of its religious beliefs.
Finally, CCB argues that the state’s denial amounts to impermissible state discrimination among religions. According to CCB, “[u]nder the Wisconsin Supreme Court’s test, religious groups that serve only those of their own faith or that proselytize can obtain the tax exemption, as can religious groups with a simpler internal structure.” But CCB contends that Wisconsin law treats CCB differently “because it follows particular Catholic beliefs and has a particular Catholic polity.” CCB says that the Religion Clauses prevent this kind of discrimination, too.
The government weighs in as amicus to support CCB. The government argues that the Wisconsin Supreme Court misconstrued the federal analogue to Wisconsin’s law, the Federal Unemployment Tax Act (FUTA). According to the government, contrary to the Wisconsin Supreme Court’s reading, “[t]he statutory text makes clear that the relevant inquiry is whether the organization actually operates primarily for religious reasons, not whether another organization could undertake the same activities for nonreligious reasons.” Because the Wisconsin Supreme Court based its interpretation of Wisconsin law on its misinterpretation of FUTA, the government argues that the Court should reverse.
Wisconsin counters that the exemption is specifically designed not to entangle the state in religion. The state says that in applying the exemption it “searches for distinctively religious activities like worship, ritual, teaching the faith, or spreading a religious message—all of which can pose entangling unemployment questions when discharging an employee who engages in them.” Wisconsin claims that this approach is analogous to the approach to the “ministerial exemption,” the Religion Clauses doctrine that allows religious organizations to make employment decisions without state interference about their employees who fill religious roles.
Wisconsin argues next that it did not impermissibly discriminate against CCB in denying the exemption. On the one hand, the state says that “[t]he Establishment Clause allows [it] to tailor this accommodation to the religious organizations—unlike [CCB]—whose employment decisions might well present entangling religious questions.” On the other, it claims that tailoring the exemption to religious organizations does not violate CCB’s free-exercise rights. According to the state, that’s because CCB has “no religious objection to participating in the unemployment system; they do not show that Wisconsin targeted their faith; and they cannot claim that the exemption favors secular organizations over religious ones.” In any event, Wisconsin asserts that the exemption is “properly tailored to accommodate only those organizations that present entangling unemployment questions,” that is, religious organizations unlike CCB, when the state might violate the Establishment Clause.
Wisconsin argues that denying CCB an exemption does not violate principles of church autonomy. The state says that denying the exemption only affects “minor and incidental economic incentives on their corporate affiliation choices,” and not the “matters of faith and mission” that are at the core of church autonomy.
Finally, Wisconsin argues that the Wisconsin Supreme Court’s interpretation of the exemption is not at issue. But even if it is, the state says that the state Supreme Court’s interpretation was “consistent with the statute’s plain language, context, and purpose,” and legislative history and judicial precedent.
SIGNIFICANCE
Every state and the federal government exempt religious organizations from their unemployment compensation programs if they “operate primarily for religious purposes.” As a result, this case could affect how every state and the federal government apply their exemptions. Moreover, given the size and reach of Catholic Charities and other similar organizations, this case could affect a wide swath of community services and community-service providers.
This case is one in a string from recent years that tests whether and how government must accommodate religion under the First Amendment’s Religion Clauses. The Court in these cases has moved to expand religious liberties, to provide greater space for religion in public life, and to compel states to treat religion on par with how they treat similarly situated secular entities.
Here are just three examples. The Court ruled that a school district’s efforts to avoid an Establishment Clause violation by forbidding a football coach from praying with students on the field after games violated the coach’s free-exercise rights. Kennedy v. Bremerton School District, 597 U.S. 507 (2022). The Court held that a state law that prohibited students from using a generally-available student-aid program to attend private religious schools violated the Free Exercise Clause. Carson v. Makin, 596 U.S. 767 (2022). And the Court ruled that a state program that provided grants for schools to purchase rubber playground surfaces, but that excluded religiously-affiliated schools, violated the Free Exercise Clause. Trinity Lutheran Church of Columbia, Inc. v. Comer, 582 U.S. 449 (2017).
At the same time, the Court has clamped down on government discrimination against religion when government enforces generally-applicable laws. For example, the Court ruled that a state civil-rights commission violated the free-exercise rights of a cakeshop owner when the commission expressed animus against the owner in enforcing state anti-discrimination law. Masterpiece Cakeshop v. Colorado Civil Rights Commission, 584 U.S. 617 (2018). Similarly, the Court ruled that Philadelphia violated the free-exercise rights of Catholic Social Services when the city’s contract for foster-care services allowed for discretionary exceptions to its general non-discrimination provision. Fulton v. City of Philadelphia, Pennsylvania, 593 U.S. 522 (2021).
If this trend holds, look for the Court to favor CCB’s position.
One more point. This isn’t the only case dealing with the Religion Clauses this Term; there are two other significant cases coming in April. In Mahmoud v. Taylor, No. 24-297, the Court will determine whether public schools violate parents’ religious exercise when they compel elementary school children to participate in instruction on gender and sexuality against the parents’ religious convictions. In Oklahoma Statewide Charter School Board v. Drummond, No. 24-394, the Court will assess whether a state violates the Free Exercise Clause by excluding private religious schools from the state’s charter-school program solely because the schools are religious.