Wisconsin said the work done by Catholic Charities and affiliate groups that help people with disabilities was primarily secular, though religiously motivated.
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WASHINGTON − As a religious organization, the Catholic diocese in northwest Wisconsin doesn’t have to pay unemployment taxes.
But when the diocese’s social ministry arm asked for the same exemption, it was denied.
Wisconsin said the work done by Catholic Charities and four nonprofit organizations it manages that help people with disabilities was primarily secular, even if the services were religiously motivated.
Catholic Charities will try to convince the Supreme Court on Monday that Wisconsin’s denial violates religious freedoms protected by the First Amendment.
According to Wisconsin, lawyers for the social ministry arm said in a filing, “the `Catholic’ in `Catholic Charities is entirely superfluous.”
Their appeal is one of three religious rights cases the Supreme Court is hearing in the next few weeks.
Another – which will determine whether Oklahoma can create the nation’s first religious charter school – is a potential blockbuster because it would allow government to establish and directly fund religious schools for the first time.
The third – a challenge from parents who want their elementary school children excused from class when books with LGBTQ+ characters are being used – could boost parents’ ability to demand curriculum opt-outs in public schools.
How broadly will the Supreme Court rule?
Some religious rights advocates may feel they have the wind at their backs following a number of recent rulings by the Supreme Court in their favor.
Luís Carlos Calderón Gómez, a tax law expert and Cardozo Law professor, expects that streak will continue and Catholic Charities will win. But how broadly they do so could have major implications for not only unemployment insurance programs, but also for other taxing provisions and additional laws that implicate religions freedoms.
On the other hand, he said, the court might narrowly rule if it concludes that Wisconsin’s exemption test is valid; it just wasn’t applied correctly to Catholic Charities and four of its affiliates.
“That would be a little bit of a nothing burger,” Gómez.
When are religious groups exempted from unemployment programs?
Wisconsin’s law, which is similar to most state’s and to the federal government’s, grants exemptions from its unemployment program for certain church-controlled organizations that are “operated primarily for religious purposes.”
The purpose of the exemption is to keep the government from violating the Frist Amendment by getting too involved in a church’s employment decisions. Because an employee is not eligible for unemployment benefits if he was fired for misconduct, a state doesn’t want to have to consult papal doctrine, for example, to determine if a priest was legitimately terminated.
Wisconsin points out that Catholic Charities has participated in the state’s unemployment system since 1971. Its initial registration reported described the nature of its operations as “charitable,” “educational,” and “rehabilitative,” not “religious,” according to filings. The four affiliates have also participated in the unemployment system for at least a decade.
But after another affiliate, which is not part of the challenge, received an exemption in 2015, Catholic Charities asked for one too.
Wisconsin courts didn’t agree on whether exemption applied
The multiple state entities that considered the request could not agree on whether it should get one.
The Department of Workforce Development denied an exemption, but an administrative law judge reversed that decision. Next up, the Labor & Industry Review Commission said the request should have been denied. A state court disagreed, and then an appeals court overturned that decision.
The final state ruling came from the Wisconsin Supreme Court, which said in a 4-3 decision that the services being provided wouldn’t look any different if they were driven by religious or secular concerns.
There’s no religious instruction with the job training, placement and coaching offered to disabled people. Employees don’t have to be Catholic. And much of the affiliates’ funding comes from state and local governments, as well as from Medicaid, the court noted.
“If we looked to the church’s purpose in operating the organization only, then any religiously affiliated organization would always be exempt,” Wisconsin Supreme Court Justice Ann Walsh Bradley wrote for the majority.
Catholic Charities says the denial was religious discrimination
Catholic Charities, which is represented by the Becket Fund for Religious Liberty, said it’s being discriminated against because – unlike other religious organizations – the charitable arm is incorporated separately from the diocese and because it broadly offers its services without proselytizing.
“This is therefore a simple case,” the organization’s lawyers told the Supreme Court. “Wisconsin has denied Catholic Charities a religious exemption that the state freely extends to other religious organizations based on the absurd view that Catholic Charities’ aid to the needy isn’t actually religious at all.”
Groups representing major religious dominations – including the United Methodist Church, the Church of Jesus Christ of Latter-day Saints and the Hindu American Foundation – filed briefs supporting Catholic Charities.
Lawyers for the state, however, argue Wisconsin properly focuses its exemption on organizations for which deciding employment questions would improperly involve the state in religious matters.
Religiously affiliated hospitals employ a lot of people
Wisconsin Attorney General Joshua L. Kaul asked the Supreme Court to consider what would happen if the state was required to exempt a religiously affiliated hospital that doesn’t base hiring decisions on its religion. Wisconsin might be accused of violating the First Amendment by treating that hospital more favorably than a comparable secular one, Kaul wrote in a filing.
And groups sympathetic to the state’s position point out that there are a lot of religiously affiliated hospitals.
Approximately 787,000 employees nationwide work for the six multi-billion-dollar Catholic-affiliated healthcare systems that are among the ten largest health systems in the United States, according to the Freedom From Religion Foundation.
In Wisconsin, more than 40% of hospital beds are at religiously affiliated, mostly Catholic-run hospitals, while nationally religiously affiliated hospitals account for about 20% of hospital beds, the secular advocacy group said.
The economic security of large swaths of workers could be put at risk under a broad religious exemption, labor unions told the court.
Catholic Charities prefers its own unemployment program
Catholic Charities, which does not operate a hospital, said it prefers to protect employees through the church’s unemployment program. The maximum weekly benefits are the same as the state’s program and can be more generous and received more quickly, according to the church.
Labor rights groups say the church’s unemployment program is not as good because it’s not backed up by the government if funds run out. And workers in a private system aren’t eligible for supplemental federal benefits such as those provided during the pandemic.
If exemption rules were broadened enough – including to cover businesses that aim to follow religious principles – state and local governments could face such a “snowballing loss of revenue” that they might choose to shut down all religious exemptions, according to an association of municipal attorneys.
A `hard case masquerading as an easy one’
Christopher Lund, who teachers at Wayne State University Law School where he specializes in religious liberty issues, said Catholic Charities’ exemption claim is “a hard case masquerading as an easy one.”
Unless the Supreme Court sets the boundaries on religious exemptions, he said, legislatures will draw lines that favor some practices and faiths above others.
But states also need flexibility, Lund wrote in a brief, including being able to give more protections to institutions with greater religious power and importance.
Gómez, the tax law expert at Cardozo Law, said Wisconsin probably made the right determination but the language the state supreme court used in applying its test “was not great.”
Their opinion looked “very much like they’re defining religion rather than just looking at, okay, are these activities secular or not?” Gómez said.
That led the Catholic Church to accuse Wisconsin of having a peculiar view of what constitutes “religious” behavior.
“Wisconsin’s crabbed understanding of religion,” the church’s lawyers told the court, “is as unwise as it is unnecessary.”