In this week’s Hobby Lobby case (Burwell v. Hobby Lobby) the Supreme Court held that closely held corporations have religious freedoms under the First Amendment. This comes a few years after the Citizens United case (Citizens United v. FEC) in which the Supreme Court said that corporations have a First Amendment right to participate in the political process by contributing to candidates.
Most of the public discussion of the case focuses on the fact that these cases give corporations rights that are similar to an individual. But these rulings also create a danger for corporations.
A corporation is a legal entity distinct from its owners. The corporate form of business ownership has two major benefits: an unlimited duration, and the “corporate veil” which shields owners from liability for corporate action. Corporations have superhuman power. They live forever, and they have a magic shield to protect their owners.
While corporations are superhuman they still must comply with certain rules. One major rule is that the owners must keep their personal affairs separate and distinct from the operation of the corporation. If the owner and the corporate entity are too intertwined, the corporation is deemed the alter ego of the owner. If the corporation is merely the alter ego of the owner then the owner cannot hide their behavior behind the corporate veil. If the individual’s behavior and beliefs are so intertwined with the corporation that the corporation is merely an extension of the individual and not a separate entity, the corporate veil can be pierced and the individual owners can be held liable for the actions of the corporation.
In Citizens United the Supreme Court said that corporations can have political views, and in Hobby Lobby the Supreme Court said that corporations can have religious views. Of course corporations don’t have political or religious beliefs. Corporations are nothing more than legal entities that own property and transact business. It is the owners of the corporation that have the political and religious beliefs.
The Hobby Lobby case is a good example of this. Hobby Lobby is a closely held corporation that is entirely owned by the company’s founder and his family. The corporation’s religious beliefs are the family’s religious beliefs. But if the corporate entity is so intertwined with its owners that its religious views are co-equal with the owner’s religious views, has it become the alter ego of the owners? If the owners of Hobby Lobby claim, on one hand, that the corporation’s religious beliefs are so intertwined with its owners that is shares their religious views for the purpose of the First Amendment, how can the owners then claim that the two are separate entities for the purposes of liability? I’m not sure that they can.
So the Hobby Lobby decision seems to create a chink in the corporate veil. Corporations may be able to exercise “their” religious beliefs, but they may be doing so at the risk of loosing their shield from liability.