The US Supreme Court granted the petition for review in Catholic Charities, and oral argument is scheduled for March 31st at 10am eastern time. You can listen to the oral argument at this link.

The issue being addressed by the justices in this case is:

Does a state violate the First Amendment’s Religion Clauses by denying a religious organization an otherwise-available tax exemption because the organization does not meet the state’s criteria for religious behavior?

Framed in this manner, the petitioning Becket Fund for Religious Liberty cannot lose.

What is being ignored in this “issue” are two facets of this case that indicate the “issue” is more about privileging those claiming religion than in preventing any kind of alleged religious discrimination.

First, there are no religious monies at issue in this case. The Northwestern Wisconsin entities at issue in this case receive no funding from the Catholic Church but are actually funded almost entirely by the state of Wisconsin and other governmental bodies (there is one entity that also receives some private foundation monies). As explained in Wisconsin’s brief in this case:

Federal, state, and local government funding supports much of Petitioners’ operations. J.A.186, 203, 209, 221-22; R.100:99-100, 271-72. That federal funding may not be spent on “explicitly religious activities,” and federally funded operations must be “neutral in their treatment of religion.” J.A.197-98. None of the affiliated organizations receives funding from the Diocese of Superior. J.A.222, 241, 244, 248.

Responsive brief at 26-7. The only religious connection these entities have to the Catholic Church is the church serving as an administrative agent for managing the funds these entities receive from governmental bodies and private foundations.

Second, unemployment benefits themselves have had no impact on these entities. As non-profits, these entities have the option to be reimbursable employers under unemployment law.

Note: Typically, most employers pay an insurance premium for the unemployment benefits paid to their employees. These employers are called contributory. The unemployment insurance premium they pay is higher for the employers that have high levels of unemployment among their employees and is lower for the employers that lave lower levels of unemployment among their employees. In 2019, the unemployment taxes paid per employee in 2019 on average was $185.78, and many of Wisconsin’s contributory employers paid $0 or close to $0 then because of the declining amount of unemployment benefits being paid out in the state.

But, non-profit and governmental employers have the option of being reimbursable. Under that option, these employers do not pay any unemployment insurance premiums. Instead, they pay dollar-for-dollar for any unemployment benefits actually paid out to their former employees. Because the maximum amount of unemployment benefits in Wisconsin is $370 per week ($9620 in toto in a benefit year), reimbursable employers must pay the state unemployment agency these benefit amounts when paid out to their former employees.

All of the entities at issue in this case are reimbursable employers. And, it appears that none of their employees over the last few decades have ever received unemployment benefits. During the two days of hearing in this case before an administrative law judge, only one entity had discharged an employee, and that was for mistreatment of clientele (which very likely would have qualified as misconduct and so been disqualifying for receiving for unemployment benefits–if the former employee had even applied for unemployment benefits).

So, if none of their employees have ever received unemployment benefits, then these entities have NOT had to reimburse the state unemployment agency for any unemployment benefits. Accordingly, there has not been any financial burden created by unemployment benefits for these entities. Unemployment has essentially been $0 for these entities.

Together, these two pieces of information indicate that unemployment benefits have not had any actual financial impact on Catholic Charities itself. No church dollars are being expended, and unemployment benefits themselves have had no effect on the entities being funded with governmental dollars.

Yet, the argument being presented in this case would allow ANY entity connected to any religious body to claim an exemption from unemployment benefits being available to their employees for no actual reason other than that there is a faith-based rationale at issue. To learn more about this argument, see my previous posts about the Wisconsin Supreme Court decision and the petition for review.

Such a broad-based claim essentially exempts almost all workers connected to any religious organization from being eligible for unemployment benefits. And, there is no stopping point with this claim to just non-profit employers. Contributory, for-profit employers could also begin claiming this exemption. The only way to limit this rule would be for state agencies to begin to examine the actual motives of those claiming faith-based initiatives to determine how “authentic” those faith-based motivations are.

Note: the history of why courts have usually not allowed claims of religious faith to be the sole factor in determining whether generally commercial or public activities should be exempt from most legal requirements is examined in Ian Millhiser, The Supreme Court’s new religion case could devastate American workers (24 March 2025).

Having government workers, attorneys, and administrative law judges making inquiries into what is truly faith-based or not is probably the last thing anyone wants. But, such an inquiry may be the only way to prevent the kinds of abuses of workplace law that the broad exemption being proposed by petitioners would certainly lead to.

Finally, while the issue is being framed as a question for employers — their liability for unemployment benefits — the flip side of the benefits being available to their employees is being ignored. An amicus brief in which I played a small part demonstrates why unemployment benefits matter a great deal.

The argument here essentially carves out all workers at any religious-connected employer like Marquette University, SSM hospitals, or even Goodwill used-clothing stores from ever being eligible for unemployment benefits when laid off from their jobs. The impact of such a broad exemption would be far-reaching and unknown.

Note: The amicus brief from the Freedom from Religion Foundation does a good job of indicating how this proposed exemption could easily be expanded to other areas of law with many unforeseen and ill-understood effects.