For employers, the Hobby Lobby decision of the U.S. Supreme Court makes no attempt to define the scope and meaning of the term “closely held” corporation. The majority opinion stated that “the cases before us are closely held corporations, owned and controlled by members of a single family”.
- Is this ruling supposed to be limited to family run businesses?
- What is a “family” in this context? Does it include members outside of lineal ascendants and descendants? What about spouses? What about in-laws?
- What happens if the “family” owns a controlling interest, but not the entire company?
The ruling only applies if the corporation holds a “sincere religious belief”.
- What type of corporate action will be required to prove that the corporate entity holds a sincere religious belief?
- Can an officer of the company certify to that fact?
- Will a board resolution be needed? What if the Board members who approve the resolution do not comprise all or most of the owners of the business? What if the board vote is not unanimous?
- Will a shareholder vote be needed? Would it need to be unanimous? What if the vote is 51% to 49%?
The Court’s holding can be extended to any other type of legal entity, such as a partnership or LLC. That might make some of the foregoing questions more difficult to answer. For example, imagine the difficulty of the analysis if the business entity is an LLC with complex “unit” ownership classes, and a complex operating agreement.
If a business goes to an insurer and asks the insurer to exclude contraceptive care on the basis of this case, I imagine the insurer will only agree to do so if the business agrees to indemnify the insurer for litigation claims and expenses. In some cases, that might dissuade smaller employers from trying to exclude the contraceptive care. In other cases, the insurers might even refuse to agree to exclude the contraceptive care, if the insurer thinks the business does not have the wherewithal to make good on an indemnity claim.