In a narrow decision that could alter workplace dynamics for years to come, the Supreme Court sides with Hobby Lobby.

By Jeremy Quittner

Score one for America’s religious business owners.

Hobby Lobby, the closely held crafts store owned by evangelical Christians, won a narrow victory in its Supreme Court case against the federal government on Monday–putting to rest years of bickering over whether company-sponsored health plans are legally required to provide employees contraceptives.

At issue are the rights of companies to exempt themselves from provisions of the Affordable Care Act on religious grounds. Yet Hobby Lobby’s victory has implications that will extend far beyond the ACA and it is likely to reshape workplace rights for years to come.

In a 5 to 4 ruling, which factored out along ideological lines, Justice Samuel Alito writing the majority opinion, said private companies have a right to special religious exceptions when it comes to the benefits they’re required to offer their employees under the Affordable Care Act. The decision also questions the protections employees have against workplace discrimination, and could open the door to a flood of new employment discrimination litigation.

“This is a blockbuster ruling,” says Daniel O. Conkle, an expert on constitutional law, the First Amendment, and religion at Indiana University. “The Supreme Court for the first time extends religious liberty rights to profit-making corporations, and it makes it clear that such rights cannot easily be overcome.

The ruling applies only to small, closely held companies where individuals or families own 50 percent or more of outstanding stock, and leaves open to question what will happen with large, publically traded companies. While closely held companies may now exclude contraception and other fertility treatments from their coverage, the federal government has the right to intercede–setting up a process whereby coverage could be obtained at an additional cost to individuals or the government.

Some Background

Hobby Lobby, and co-plaintiff Conestoga Wood Specialties, have been at the center of one of the most controversial Supreme Court cases this year. The case intersects with the First Amendment right that protects the free exercise of religion, as well as the idea of a company’s “personhood.”

Hobby Lobby is owned and operated by David Green, who ranks on Forbes’ list of wealthiest people in the world, with a net worth of $5 billion. The craft store chain employs 23,000 people in nearly 600 stores throughout the U.S.

The cases, known as Burwell v. Hobby Lobby Stores, Inc. and Conestoga Wood Specialties Corp. v. Burwell, grew out of sections of the Affordable Care Act, which require new health plans to pay for contraception and fertility treatments.

The ruling brings clarity to what had been a murky area for religious organizations, such as non-profits run by the Catholic Church. Yet it also thrusts smaller businesses and their workers into a similarly opaque territory–instigating questions regarding what’s permissible in the workplace. By their very nature, companies bring together many different kinds of people in groups that often hold very different beliefs.

‘A Dangerous Precedent’

Key to the ruling was the degree to which the Religious Freedom Restoration Act (RFRA) of 1993 applies to for-profit corporations. The act allows for individual exemptions from federal laws based on religion where the government is unable to prove a compelling interest, or where laws impose a substantial burden on an individual. The law, signed with overwhelming majorities by both the House and Senate, has been the subject of legal debate ever since.

Monday’s ruling represents a significant expansion of RFRA, legal experts say. And some constitutional law experts, such as Kevin Martin, a partner at Goodwin Procter in Boston, and a former clerk for Justice Antonin Scalia, see potential problems for LGBT people.

“Same-sex marriage is an issue where you could see laws passed that would trigger litigation,” Martin says.

Companies may now claim religious exemption from future federal laws, such as the Employee Non-discrimination Act (ENDA), currently before Congress, which would add LGBT people to the roster of people who would be protected by federal non-discrimination laws.

“The ruling for Hobby Lobby sets a dangerous precedent for future laws, such as the Employment Non-Discrimination Act, because it could give legal argument to for-profit companies to claim religious exemption on non-discrimination policies,” Justin Nelson, co-founder and president of the National Gay & Lesbian Chamber of Commerce, said in a statement.

In the decision today, Justice Alito seemed aware of that possibility when, referring to racial discrimination only, he wrote:

The principal dissent raises the possibility that discrimination in hiring, for example on the basis of race, might be cloaked in religious practice to escape legal sanction. Our decision today provides no such shield. The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal.

Added Reverberations

The cases cut even deeper, as they ultimately involve a corporation’s ability to interfere with the First Amendment guarantee of a separation between church and state in public life. Both Hobby Lobby and Conestoga essentially argue that their companies are the equivalent of people, relieving them of some federal obligations as organizations, where many different kinds of people work together.

“As Justice Ruth Bader Ginsburg explained in a powerful dissent, the Court puts claims of corporations over those of its employees and allows a corporation’s owners to override the federal rights of its employees, many of whom have a different set of religious beliefs,” David Gans, civil rights director of the Constitutional Accountability Center, a left-leaning think tank, said in a statement.

Echoing the federal matter, a number of states this year have tried to pass laws that would grant businesses religious exemptions over whom they hire and the customers they serve. Such laws provoked firestorm in Arizona, where an angered business community rallied to overturn legislation pushed through by conservative legislators. By contrast, the Mississippi Religious Freedom Restoration Act , a state version of RFRA, sailed through its local statehouse and was signed by the governor in April. It is expected to go into effect in July.

Legal experts say the Hobby Lobby ruling will strengthen such state laws. And going forward, some experts fear today’s victory will lead to a flood of new challenges, such as to the Family Medical Leave Act and child labor laws.

“It will be interesting to see if this victory by a religious business owner opens the floodgates to further types of exceptions in other areas of law,” Steve Friedman, a healthcare and employee benefits attorney at employment law firm Littler, based in San Francisco, says.