In my essay, Using Reverse Veil Piercing To Vindicate The Free Exercise Rights Of Incorporated Employers, 16 Green Bag 2d 235 (2013), I argue that:
Reverse veil piercing (RVP) is a corporate law doctrine pursuant to which a court disregards the corporation’s separate legal personality, allowing the shareholder to claim benefits otherwise available only to individuals. The thesis of this article is that RVP provides the correct analytical framework for vindicating certain constitutional rights.
Assume that sole proprietors with religious objections to abortion or contraception are protected by the free exercise clause of the First Amendment and the Religious Freedom Restoration Act (RFRA) from being obliged to comply with the government mandate that employers provide employees with health care plans that cover sterilizations, contraceptives and abortion-inducing drugs. Further assume that incorporated employers are not so protected. This article analyzes whether the shareholders of such employers can invoke RVP so as to vindicate their rights.
At least one court has recognized the potential for using RVP in the mandate cases, opining that these cases “pose difficult questions of first impression, including whether it is “possible to ‘pierce the veil’ and disregard the corporate form in this context.” The court further opined that that question, among others, merited “more deliberate investigation.” This article undertakes precisely that investigation.
Invoking RVP in the mandate cases would not be outcome determinative. Instead, it would simply provide a coherent doctrinal framework for determining whether the corporation is so intertwined with the religious beliefs of its shareholders that the corporation should be allowed standing to bring the case. Whatever demerits RVP may have, it provides a better solution than the courts’ current practice of deciding the issue by mere fiat.
In the course of the article, I propose "a three-pronged version of R VP that should be adopted in the mandate cases:"
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Is there such substantial identity of the shareholder(s)’s religious beliefs and the manner in which the corporation is operated and the purposes to which it is devoted that the corporation is effectively the shareholder’s alter ego?
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How strong is the government’s interest in ensuring that the corporation’s employees get the mandated insurance coverage?
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Would reverse piercing this corporation’s veil advance significant public policies?
With respect to the second prong, I argue that:
... the government contends it has an interest in ensuring that Americans have access to the health insurance coverage required by the mandate. Whether or not that interest rises to the level of a compelling one that would justify infringing on free exercise and RFRA rights remains to be deter- mined. In evaluating the government’s interest, however, courts should note that the government has already undermined the man- date by carving out exemptions for grandfathered plans, employers with fewer than 50 employees, “member[s] of a recognized religious sect or division thereof” who have religious objections to the con- cept of health insurance, or religious employers [as defined in the regulations].” As Judge Walton observed, a “law cannot be regarded as protecting an interest of the highest order . . . when it leaves appreciable damage to that supposedly vital interest unprohibited.”
All of which brings us to the announcement that President Obama has unilaterally exempted (purportedly temporarily) a whole new category of employers. The WSJ explains:
ObamaCare requires businesses with 50 or more workers to offer health insurance to their workers or pay a penalty, but last summer the Treasury offered a year-long delay until 2015 despite having no statutory authorization. ...
Under the new Treasury rule, firms with 50 to 99 full-time workers are free from the mandate until 2016. And firms with 100 or more workers now also only need cover 70% of full-time workers in 2015 and 95% in 2016 and after, not the 100% specified in the law.
The new rule also relaxes the mandate for certain occupations and industries that were at particular risk for disruption, like volunteer firefighters, teachers, adjunct faculty members and seasonal employees. Oh, and the Treasury also notes that, "As these limited transition rules take effect, we will consider whether it is necessary to further extend any of them beyond 2015." So the law may be suspended indefinitely if the White House feels like it.
I agree with the Journal that Obama's cavalier attitude towards the Constitutional separation of powers grows ever more troubling:
Changing an unambiguous statutory mandate requires the approval of Congress, but then this President has often decided the law is whatever he says it is. His Administration's cavalier notions about law enforcement are especially notable here for their bias for corporations over people. The White House has refused to suspend the individual insurance mandate, despite the harm caused to millions who are losing their previous coverage.
But I write today mainly to note that Obama's action further eviscerates the argument that the government has a compelling interest in preventing Hobby Lobby and its ilk from following the religious beliefs of their shareholders. To paraphrase Judge Walton, a law cannot be regarded as protecting an interest of the highest order when the President gets to eviscerate that supposedly vital interest anytime he feels like it.
