Supreme Court hands win to Catholic Charities in case that could gut worker protections

The 9-0 ruling lets Catholic Charities avoid unemployment taxes despite offering no religious services. What happens when the definition of "religious" is this vague?

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The Supreme Court, in a unanimous decision yesterday, made it easier for groups that have very loose ties to religion to claim faith-based tax exemptions. They said that a Wisconsin group called Catholic Charities was eligible for the same tax breaks as the Catholic Church even though the work they did had virtually nothing to do with promoting religion.

The move reversed an earlier 4-3 ruling from the Wisconsin Supreme Court that infuriated Christian Nationalists who have come to rely on the courts to do their bidding.

The Supreme Court (via Adobe Spark)

The case involved the Wisconsin Unemployment Compensation Act. In short, all employers in the state are required to give money to the government to help pay eligible citizens temporary benefits when they’re out of work. But in 1972, religious non-profits were declared exempt from the law. Specifically, the law said that non-profits that are run by a church/ministry and that operate “primarily for religious purposes” do not have to pay into the system.

In 2023, an appellate court ruled that the Catholic Charities Bureau (along with four of its sub-entities) was not eligible for that exemption. While no one doubted they were run by the Catholic Diocese of Superior, there was disagreement over whether their work was religious in nature.

For example, the CCB-aligned groups assist with job placement, food services, and helping people with developmental disabilities. All of those are undoubtedly important, and the CCB says that the desire to help the “poor and disadvantaged” is an extension of their faith.

But helping the poor and disadvantaged is not inherently religious.

In fact, all those services they provide are secular in nature. Just because those groups happen to be overseen by the Catholic Church doesn’t mean they’re working to advance Catholicism. And if they’re not actively and directly promoting their faith, then why do they deserve a tax exemption meant to benefit religious organizations?

For decades, the CCB paid the unemployment taxes because they themselves said their work was “charitable,” “educational,” and “rehabilitative.” Not “religious.” Their employees and clients didn’t have to be Catholic, either.

But in 2015, they decided to apply for the religious exemption… and got rejected. Over the next several years, that decision was reversed, then reversed again. The same thing happened in the courts.

The court of appeals concluded that "for an employee's services to be exempt from unemployment tax the organization must not only have a religious motivation, but the services provided—its activities—must also be primarily religious in nature."

When the Wisconsin Supreme Court considered the case, they arrived at the same conclusion. They couldn’t just look at how the Catholic Church was at the top of the organizational pyramid, or else anything under them would have qualified as “religious” even when it clearly was not. Therefore, they had to look at the sub-groups themselves; they had to look at the “activities,” not the stated “motivations.”

To put that another way, it didn’t matter if a group claimed to be Catholic... because literally any organization could say they were religious in nature and get out of paying the tax. What mattered was what the organization did.

When the justices considered that, it was obvious that the tax exemptions were never intended for these particular groups.

The record demonstrates that CCB and the sub-entities, which are organized as separate corporations apart from the church itself, neither attempt to imbue program participants with the Catholic faith nor supply any religious materials to program participants or employees. Although not required, these would be strong indications that the activities are primarily religious in nature.

…

CCB's and the sub-entities' activities are primarily charitable and secular. The sub-entities provide services to individuals with developmental and mental health disabilities. These activities include job training, placement, and coaching, as well as services related to activities of daily living. CCB provides background support and management services for these activities—a wholly secular endeavor…

Such services can be provided by organizations of either religious or secular motivations, and the services provided would not differ in any sense…

…

Although CCB and the sub-entities assert a religious motivation behind their work, the statutory language indicates that this is not enough to receive the exemption. An objective examination of the actual activities of CCB and the sub-entities reveals that their activities are secular in nature. We therefore conclude that CCB and the sub-entities are not operated primarily for religious purposes…

There might have been a different outcome if the Catholic Church was literally running these organizations, but that wasn’t the case. The Church just oversaw these groups at arm’s length. From here on out, at least in Wisconsin, charities would have to do a lot more than point to a nearby cross to prove they deserved a faith-based exemption under the law.

It was an astonishing ruling in large part because it felt courageous for a powerful court to state the obvious. Just because an organization cited a religious link didn’t make it religious. (It was a far cry from the U.S. Supreme Court treating Hobby Lobby as a Christian company based on its owners whims.)

Just consider what could have happened if the decision went the other way:

If the charity groups had prevailed, the next step would be arguments to exempt religious hospitals and colleges, such as Marquette University, from paying the unemployment tax, [Patrick Elliott, an attorney for the Freedom From Religion Foundation,] said.

“It’s really a win for employees who work for religious organizations,” Elliott said. “They get coverage under the Wisconsin unemployment system.”

If you needed even more proof that the Wisconsin majority’s decision was correct, consider that the dissenting opinion began with a Bible verse… as if that mattered.

It was deeply ironic that, one paragraph after citing the Bible, Justice Rebecca Grassl Bradley went on to say that the liberal majority was “impermissibly entangling the government in church doctrine.”

The other side is wrongly merging church and state, said the justice citing a Bible verse in her legal opinion…

The religious groups defending CCB were predictably furious and vowed to take this up with their even more powerful allies:

“The Wisconsin Supreme Court got this case dead wrong,” said Eric Rassbach, vice president and senior counsel at the Becket Fund for Religious Liberty, a law firm that is representing Catholic Charities and its subentities. “CCB is religious, whether Wisconsin recognizes that fact or not.”

The firm will appeal to the U.S. Supreme Court, said Sarah Buckley, a Becket spokesperson.

It was telling that the response didn’t bother mentioning the facts of the case. CCB is religious in name, yes, but the work its sub-entities do is not, and that’s what this case was all about.

A ruling like this was long overdue.

After all, we know there are megachurch pastors who don’t pay taxes on their mansions because they can claim those homes are owned by their ministries. Should religious ministries be allowed to claim property tax exemptions on everything they own, even when that land isn’t being used for religious reasons? Of course not—and that’s usually how courts have seen it, too.

Serving the poor and helping the needy aren’t inherently religious just because some people want to pretend they are.

At the end of the day, none of this prevented the Catholic Church from doing a damn thing. They could still help people if they believe their faith calls for it. No one was stopping them. If anything, by paying into the system, they would actually be doing even more good by helping people dealing with unemployment. It was a win-win!

By appealing this decision to the U.S. Supreme Court, the Catholic Church and the Becket Fund folks were basically saying that screwing over the unemployed is also a part of their faith, negating whatever goodwill they may have preserved by focusing on helping the less fortunate.

Unfortunately, late last year, the Supreme Court rewarded their whining and agreed to hear the case.

The fear was that if the Court’s conservatives overturned the ruling—and why would they take up this case if that wasn’t their intention?—faith-based colleges and hospitals across the country could receive a financial windfall because they would no longer have to pay unemployment taxes, at least in the states where they’re not already exempt. It wasn’t clear what the Court would do. Would they issue a narrow ruling applying only to the Wisconsin entity or use this case as a vehicle to go bigger?

“That said, the fact that the court is agreeing to hear this case at all is perhaps a sign that the court wants to weigh in more generally on the scope of such state-law exemptions — and how they’re applied across the country,” [Steve Vladeck, CNN Supreme Court analyst and professor at Georgetown University Law Center] added. “Either way, this quickly becomes the most significant religious liberty case to receive full review from the court in the last two years.”

You can just imagine how many charities would race to align with a religious group, regardless of what they actually do, for no reason than to avoid paying certain taxes if the Supreme Court gave them the green light.

Yesterday, the Supreme Court finally weighed in… and said in a 9-0 ruling written by Justice Sonia Sotomayor that Wisconsin went too far in denying the tax exemption to the Catholic group. By basically punishing Catholic Charities for not proselytizing during their work, she wrote, they were privileging certain religious groups over others.

Wisconsin’s exemption, as interpreted by its Supreme Court, thus grants a denominational preference by explicitly differentiating between religions based on theological practices. Indeed, petitioners’ eligibility for the exemption ultimately turns on inherently religious choices (namely, whether to proselytize or serve only co-religionists), not “‘secular criteria’” that “happen to have a ‘disparate impact’ upon different religious organizations”…

Much like a law exempting only those religious organizations that perform baptisms or worship on Sundays, an exemption that requires proselytization or exclusive service of co-religionists establishes a preference for certain religions based on the commands of their religious doctrine.

…

It is fundamental to our constitutional order that the government maintain “neutrality between religion and religion”… There may be hard calls to make in policing that rule, but this is not one. When the government distinguishes among religions based on theological differences in their provision of services, it imposes a denominational preference that must satisfy the highest level of judicial scrutiny. Because Wisconsin has transgressed that principle without the tailoring necessary to survive such scrutiny, the judgment of the Wisconsin Supreme Court is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.

In some ways, the fact that Sotomayor authored the opinion and crafted a very narrow victory for Catholic Charities is a win for all of us… in the sense that things could be much worse. Remember that the dissenters on the Wisconsin Supreme Court would have blown this issue so out of proportion that groups merely saying they have religious motivation could get out of paying these taxes. Sotomayor’s ruling at least requires the exempted groups to have that formal religious connection even if the work they’re doing isn’t explicitly religious.

That said, while it’s great news for Catholic Charities, it’s disturbing news for everyone else because it could—key word “could”—open the door for other groups with loose religious ties to avoid paying into the unemployment system.

The question now will be whether those groups, both in and out of Wisconsin, will attempt to use this decision to get out of paying the taxes they owe. After all, what’s stopping hospitals and schools with religious identities from prioritizing their pocketbooks over people?

Conservatives are celebrating this as a victory for religious freedom, but what they’re not saying out loud is that this means it’ll be harder for the state to help the most vulnerable people when they’re out of work.

The Freedom From Religion Foundation is worried about precisely that slippery slope. They said in a press release that “Hundreds of thousands of employees, including those at Catholic-affiliated hospitals, could potentially lose the benefit of unemployment insurance.”

The Wisconsin Supreme Court’s opinion had maintained neutrality by taking a common sense approach to deciding whether a religiously affiliated nonprofit’s activities are religious or secular. Today, the U.S. Supreme Court’s opinion signals that it has accepted a religious organization’s claims about its work no matter what, even if that work is clearly nonreligious.

As FFRF stressed in its amicus brief, the court’s decision could allow religiously affiliated organizations, including over half of the 10 largest Catholic health systems in the United States, to potentially claim exemptions from unemployment insurance and countless other government regulations.

“This ruling is a dramatic expansion of religious exemptions that invites confusion, litigation and further erosion of state/church separation,” says FFRF Legal Director Patrick Elliott.

Americans United for Separation of Church and State said that the ruling “favored the purported religion of companies and organizations over protections for individual workers.”

… companies and organizations can simply claim a religious motive in order to sidestep worker protections. If these religious extremists succeed, the mere invocation of religious beliefs will erase important social safety nets and civil rights protections for workers.

The American Humanist Association also worries that the ruling “broadens the realm of what conduct is considered religious practice and invites allegations of discrimination into any effort to regulate religiously-adjacent conduct.”

What no one seems to be saying is what the implications will be because, frankly, no one really knows how this decision will be used to further destroy the social safety net. But given the sort of people celebrating the decision, that destruction is all but guaranteed. The exact method remains up in the air.

(Portions of this article were published earlier)

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