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On June 5, the U.S. Supreme Court ruled unanimously that the state of Wisconsin cannot require a Catholic charity to pay unemployment taxes when other religious groups are exempt. The ruling overturned a 2024 Wisconsin Supreme Court decision that said the charity did not qualify for the exemption because its purpose was not explicitly religious.
The high court’s opinion in Catholic Charities Bureau v. Wisconsin Labor and Industry Review Commission was hailed as a victory for religious liberty against attempts by the government to define whether or not an organization’s motives are sufficiently rooted in faith. But its implications could be far-reaching, ending the ability of the government to treat religious groups the same as other employers, to the detriment of potentially millions of workers.
“This ruling is a dramatic expansion of religious exemptions that invites confusion, litigation, and further erosion of state/church separation,” said Patrick Elliott, legal director of the Wisconsin-based Freedom From Religion Foundation.
In an amicus brief filed with and apparently ignored by the U.S. Supreme Court, the Freedom From Religion Foundation warned that accepting the charity’s argument that the government has no right to differentiate between religiously affiliated groups based on how they operate would “strip away numerous regulatory protections from employees at countless other religiously affiliated nonprofit organizations.” These include regulations governing taxation, discrimination, and health care. Among those at risk, the brief said, are “the approximately 787,000 employees who work for the six multi-billion-dollar, Catholic-affiliated health care systems that are among the ten largest health systems in the United States.”
The Supreme Court’s ruling continues a trend that has been going on for years. As The New York Times wrote in March, “Since 2012, when the Court unanimously ruled that religious groups were often exempt from employment discrimination laws, the pro-religion side has won all but one of the sixteen signed decisions in argued cases that concerned the First Amendment’s prohibition of government establishment of religion and its protection of the free exercise of religion.”
The Wisconsin case, the paper noted, is one of three decided in the Court’s latest term that “test the limits of the Court’s assertive vision of religious liberty.” The Court deadlocked 4 to 4 in a case asking whether a Catholic charter school in Oklahoma could receive tax dollars after Justice Amy Coney Barrett recused herself. And in a Maryland case, the Court ruled 6 to 3 that parents with religious objections to a school’s curriculum may withdraw their children from class.
One question that arises from all three cases, perhaps especially the one from Wisconsin, is this: Can strict adherence to the First Amendment’s establishment clause be bad public policy?
In 1932, Wisconsin became the first state in the nation to create an unemployment insurance system, which requires employers to pay into a fund that provides payments for limited periods to workers who lose their jobs through no fault of their own. The law carved out an exemption for organizations “operated primarily for religious purposes.”
The Catholic Charities Bureau for the Diocese of Superior in northwestern Wisconsin, which offers a range of charitable services, paid the tax for more than fifty years. But in 2016, it sought an exemption on behalf of four of its subentities, beginning a series of alternating wins and losses culminating in a March 2024 Wisconsin Supreme Court ruling denying the exemption.
The 4-to-3 decision was written by Wisconsin Justice Ann Walsh Bradley, a devout Catholic, on behalf of the court’s liberal majority. It concluded that the activities of Catholic Charities and its subentities are “primarily charitable and secular” because they are open to people of all religions and do not involve any “attempt to imbue program participants with the Catholic faith.” The court’s three conservatives strongly dissented, chiding the majority for “proclaim[ing] itself the arbiter of what is and is not religious.”
The U.S. Supreme Court accepted the case for review. Oral arguments were heard in late March of this year, during which it became apparent which way the Court would rule.
“Isn’t it a fundamental premise of our First Amendment that the state shouldn’t be picking and choosing between religions?” asked conservative Justice Neil Gorsuch. “Doesn’t it entangle the state tremendously when it has to go into a soup kitchen, send an inspector in, to see how much prayer is going on?”
The high court’s unanimous decision, written by Justice Sonia Sotomayor, also focused on this concern. “A law that differentiates between religions along theological lines,” Sotomayor wrote, “is textbook denominational discrimination.” That makes it subject to strict scrutiny, the most stringent Constitutional test, meaning it must be both justified by a compelling government interest and narrowly tailored to serve that interest. The Wisconsin law, she wrote, only met the first test, serving “a compelling state interest in ensuring unemployment coverage for its citizens.” But the state “has failed to demonstrate that the theological lines drawn by the statute are narrowly tailored to advance that interest, particularly as applied to petitioners.”
Sotomayor wrote that it appeared as though Catholic Charities could have qualified for the exemption “if they engaged in proselytization or limited their services to fellow Catholics.” But this would run contrary to Catholic teaching, which she said forbids “misus[ing] works of charity for purposes of proselytism.” Thus denying the exemption “grants a denominational preference by explicitly differentiating between religions based on theological practices.”
Wisconsin, Sotomayor concluded, had failed to maintain neutrality among religions, as the First Amendment requires. “There may be hard calls to make in policing that rule, but this is not one.”
Alone among the Court’s members, Justice Ketanji Brown Jackson seemed mindful of the negative consequences that the Court’s ruling could have for workers at religiously affiliated organizations. She penned a concurring opinion suggesting a way to minimize the harm. She argued that states could enact unemployment insurance laws that pass Constitutional muster by applying a “function-based” test rather than a “motive-focused” one.
Wisconsin Justice Bradley, who in late July stepped down from the court after thirty years of service, told me in a recent interview that she disagrees with the U.S. Supreme Court’s ruling (“I feel very comfortable with the decision that I wrote”) and points to Jackson’s concurrence, which she says “touched upon the possibility of really being a dissent.” It is a way, Bradley says, to mitigate consequences that could be “horrendous.”
One consequence is that the decision puts workers for religiously affiliated organizations at risk of not receiving unemployment benefits. Some religious employers do run their own unemployment insurance systems, but there is no guarantee these will be available for newly exempt employers.
The deeper damage may come from the precedent this decision sets. It will limit the government’s ability to require religiously affiliated employers to follow the same rules as other employers. Some workers could lose access to coverage for abortion or contraception. Some may lose protections against workplace discrimination. And it may become harder to investigate religious employers for wrongdoing.
In fact, the repercussions of the Court’s ruling in the Wisconsin case are already being felt. On June 16, less than two weeks after this decision was rendered, the U.S. Supreme Court ordered a lower court in New York to revisit its earlier ruling limiting the scope of a religious exemption from a state regulation requiring health insurance plans to cover abortions. The high court said this was necessary “in light of” its ruling in the Wisconsin case.
On the same day, the Supreme Court accepted a case from New Jersey asking whether that state can enforce subpoenas seeking information on religiously affiliated pregnancy centers that try to discourage people from having abortions. The state says it is investigating First Choice Women’s Resource Centers Inc. for making false and misleading claims; the group that runs the centers calls this an infringement on its First Amendment rights.
This didn’t have to happen. The Freedom From Religion Foundation, in its brief, gave examples of other situations “where the government may permissibly inquire into a religious organization’s activities” in order to make a decision about it. Like when the IRS denied tax exempt status to the “Iowaska Church of Healing,” whose members share a sincerely held religious belief in the consumption of the hallucinogen ayahuasca.
Jackson’s concurrence does identify a way out by allowing states to assert their regulatory authority based on what organizations do and not why they do it. She also urged being mindful of legislative intent—which in this case was for the government “to extend to most nonprofit workers the stability that unemployment insurance offers.”
But there’s no reason to believe these alternatives will fall into place. The case of Catholic Charities Bureau v. Wisconsin Labor and Industry Review Commission will more likely lead to fewer protections for working people and more power for organized religion. Whether that’s what the Founders intended is debatable. Whether or not it’s a good idea is a separate question entirely.