Hospitals Aren’t Churches: Why The Supreme Court Should Conclude As Much And Protect Hundreds Of Thousands of Pensions

UPDATE: On Thursday, February 23, 2017, Americans United filed a friend-of-the-court brief in this case arguing that a hospital should not be able to take away employee pensions just because it's religiously affiliated. You can read the brief here. This post originally appeared on December 5.

From our Wall of Separation blog:

On Friday, the Supreme Court agreed to hear three cases that could affect hundreds of thousands of employees nationwide. The cases— Dignity Health v. Rollins (Ninth Circuit), St. Peter’s Healthcare System v. Kaplan (Third Circuit), and Advocate Healthcare Network v. Stapleton (Seventh Circuit)— deal with the federal Employee Retirement Income Security Act, better known as ERISA. Many people’s eyes gloss over at the mere mention of ERISA, but here’s why we have been working on these cases, and why you should pay attention.

ERISA protects the retirement savings, and hence the financial security, of tens of millions of employees nationwide. The law requires that if an employer offers a pension plan, it must meet certain basic standards. These include, among others, (1) adequately funding the pension plan (to ensure that there is money available to pay the benefits promised to employees when those employees actually retire), (2) informing employees of key information about the plan (so that the employees will know whether the plan is adequately funded and precisely what it covers), and (3) insuring the plan (again, to ensure that the money is there when the employees need it). ERISA assures that the employer’s promises of guaranteed pension benefits will be met, allowing people to reliably plan for their retirement. And because of those guarantees, employees who receive pension plans treat those plans as a form of compensation: The benefits inform employees’ choices about where to work and how to negotiate their wages.

As important as ERISA is, however, Congress exempted houses of worship from its requirements. ERISA involves governmental regulation of employers’ finances and business organization, and applying it to houses of worship would raise some difficult legal questions because, as a matter of religious freedom and respect for church autonomy, the government generally does not intrude into the financial administration and management of houses of worship.

But here’s the problem: It’s not just houses of worship that have claimed the church exemption. Religiously affiliated hospitals across the country have decided that they should be entitled to be treated as churches under ERISA— and therefore have not been following ERISA’s requirements.

The upshot is that hundreds of thousands of employees of religiously affiliated hospitals—from janitors to doctors—who aren’t required to be of any particular faith and who perform overwhelmingly if not completely secular duties, aren’t getting ERISA’s protections. The hospitals promise their employees retirement benefits, which the employees depend on in planning for their futures, but then the hospitals don’t adequately fund the pension plans (meaning that there won’t be enough money to pay the employees what is due to them), and the hospitals don’t comply with legal requirements to give employees information about the plan (meaning that the employees have no notice that anything fishy is going on). Thus, it has turned out that hundreds of thousands of hard-working people across the country have traded higher wages for what they thought were better benefits. They have gone about their daily lives believing that they had ample savings for their retirement, only to find when the time comes that their employers won’t have lived up to their end of the bargain. The result: The employees have no nest egg for their retirement.

To make matters worse, religiously affiliated hospital groups are purchasing non-religiously affiliated hospitals at an incredible clip and then invoking ERISA’s church-plan exemption to defund existing employee pension plans at those hospitals, so that the employees who had, and relied on, a fully funded pension suddenly are left with nothing— and may not even be told that that’s happening.

Employees of the hospitals have been going to court to protect their legal rights to their hard-earned pensions. And in each case, Americans United has filed a friend-of-the-court brief in the federal court of appeals to explain that ERISA’s drafters intended for the church exemption to protect religious liberty by preserving church autonomy and the Constitution forbids stretching the exemption to cover religiously affiliated hospitals. As we regularly explain to the courts, claims of religious liberty cannot be used to harm innocent third parties. And that’s precisely what is happening here.

Hundreds of thousands of employees nationwide are at risk of losing hundreds of millions, if not billions, of dollars in retirement funds. And they aren’t even being told that their money is being taken away from them. That’s just wrong. When these cases are heard in the Supreme Court, we will continue working to ensure that ERISA’s narrow exemption intended to avoid having the government muck around in church finances isn’t used to strip the financial security of hospital workers across the country.

We hope that you will join us in this fight. 

Follow Bradley Girard online at @BradleySGirard