Sixth Circuit Court of Appeals Rejects Challenge to the Contraception Mandate Under the Affordable Care Act

Autocam is a group of for-profit corporations owned and controlled by members of the Kennedy family who are practicing Roman Catholics.  Autocam and the Kennedys brought suit against the government claiming that compliance with the contraception mandate under the Affordable Care Act violates the Religious Freedom Restoration Act (“RFRA”) because it forces them to violate the teachings of the church. See Autocam Corporation v. Sebelius Case No. 12-2673 (6th Cir. September 17, 2013). 

The Third and Tenth Circuits have already weighed in on the issue, and they are split. See Conestoga Wood Specialties Corp. v. Sec’y of U.S. Dep’t of Health & Human Servs., Case No. 13-1144 (3rd Cir. July 26, 2013) (affirming the district court’s judgment denying a preliminary injunction on both Free Exercise and RFRA grounds); Hobby Lobby Stores, Inc. v. Sebelius, Case No. 12-6294 (10th Cir. June 27, 2013) (en banc) (holding that plaintiffs have demonstrated a likelihood of success on the merits of their RFRA claims and remanding for consideration of the remaining preliminary injunction factors).

The Sixth Circuit, in a unanimous panel decision, held that the Kennedys lack standing as individuals to bring RFRA claims that arose from an obligation of their closely-held corporation.  The Sixth Circuit agreed with the government that the shareholder standing rule, under which shareholders of a corporation cannot bring claims intended to redress injuries to a corporation, barred the Kennedys from bringing a RFRA claim stemming from a legal obligation belonging to Autocam. The Sixth Circuit also held that the Kennedys could not bring a RFRA claim in their individual capacities. Once again relying on well-established principles of corporate separateness, the Sixth Circuit stated, “[t]he Kennedys’ actions with respect to Autocam are not actions taken in an individual capacity, but as officers and directors of the corporation.”

The Sixth Circuit then turned to Autocam’s claims. On appeal, the government argued that Autocam’s claims should be dismissed because the company is not a “person” capable of “religious exercise” under RFRA. The Sixth Circuit noted that “[t]his is a matter of first impression in our court and the subject of a recent split among our sister courts.” Compare Hobby Lobby (holding “as a matter of statutory interpretation ... Congress did not exclude for-profit corporations from RFRA’s protections”) with Conestoga (“Since [a for-profit, secular corporation] cannot exercise religion, it cannot assert a RFRA claim.”). The Sixth Circuit, disagreeing with the Tenth Circuit’s en banc decision in Hobby Lobby, sided with the Third Circuit in holding that Autocam was not a “person” capable of “religious exercise” under the RFRA. Accordingly, the panel affirmed the district court’s denial of Autocam’s motion for a preliminary injunction.

Given the existing split among the Circuit courts, it is becoming more and more likely that the Supreme Court will agree to review the constitutionality and enforceability of the contraception mandate.

Contact: Alex Kipp


Prime Tanning Bankruptcy: A Recent Threat to State Self-Insurance Law

Ohio and many other states require self-insuring employers to contribute to a guaranty fund regarding workers’ compensation. This fund guarantees that claim liabilities are satisfied if the self-insured employer is unable to pay them. This safeguard is not only in place for the protection of injured workers but for the integrity of a state’s workers’ compensation system.  However, with the bankruptcy filing of Prime Tanning Company in 2010, the preservation of this “safety net” was under attack.

As way of background, Prime Tanning was headquartered in Maine and operated its leather tanning business in Maine and Missouri. In 2010, the company declared bankruptcy under Chapter 11 of the Bankruptcy Code, and in 2011, a plan of reorganization was submitted that had sought to use the company’s self-insurance guaranty fund for use in the reorganization.  The bankruptcy court denied confirmation of the proposed plan, and the company appealed to the United States Bankruptcy Appellate Panel (“BAP”). In a decision dated August 15, 2013, the BAP held that the company’s workers’ compensation self-insurance guaranty funds were not part of the company’s estate. It ruled that the company’s bankruptcy plan should not be confirmed, as it would violate state self-insurance and property laws. On September 17, 2013, the BAP mandated its decision of August 15, 2013.

From a workers’ compensation perspective, Prime Tanning’s proposed bankruptcy plan had strong implications and posed a significant threat to self-insurance. Theoretically, if the plan was approved and the guaranty funds were utilized in the company’s ongoing operation (even those funds in excess of current workers’ compensation liabilities), it might have potentially caused a shortfall regarding Prime Tanning’s undetermined, future workers’ compensation claim liabilities in Maine and Missouri. On a national level, a dangerous precedent would have been set by putting all self-insurance guaranty funds at risk. Thankfully, reasonable minds prevailed.

Contact: Chris Debski


Department of Labor Revises Rules for Affirmative Action Plans of Federal Contractors

On August 27, 2013, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced new changes to the regulations implementing Section 503 of the Rehabilitation Act and the Vietnam Era Veterans’ Readjustment Assistance Act. These laws require federal contractors to have an affirmative action plan to employ veterans and individuals with disabilities. They also prohibit federal contractors from discriminating against these persons.

According to the OFCCP, the purpose of the new regulations is to improve job opportunities for veterans and disabled individuals by strengthening federal contractors’ affirmative action plans. To that end, the regulations require contractors to collect data regarding the number of veterans and disabled individuals that apply for and receive jobs. Contractors must also invite job applicants to “self-identify” as a veteran or disabled individual, using language provided by the OFCCP, both before and after the applicant receives a job offer. The rules also require that contractors use specific language in their subcontract if it incorporates an equal opportunity clause by reference. Further, contractors must provide the OFCCP with access to their records during a compliance review.

The regulations also establish new hiring benchmarks for veterans and disabled individuals. For veterans, contractors may establish a benchmark equal to the national percentage of veterans in the labor force, or they may establish their own benchmark based on their unique circumstances and industry data published by the OFCCP. For disabled individuals, the rules establish a flat 7% utilization goal. Contractors must conduct an annual assessment of any area in their workforce that has problems meeting this goal and develop a program to address the problems. Lastly, the rules revise Section 503 to bring it into conformity with the ADA Amendments Act of 2008.

The regulations will go into effect 180 days after they are published in the Federal Register, which is expected to occur in the next few weeks. The OFCCP has indicated that federal contractors with affirmative action plans already in place will have additional time to comply. Although the effective date appears far off, we recommend that employers immediately begin reviewing their affirmative action plans to make sure they comply with the new regulations.  

Contact: Nathan Pangrace