The First Amendment to the United States Constitution includes both an establishment clause and a free exercise clause.  Of these, the free exercise clause is often invoked in the employment context to challenge employer policies that, while facially neutral and generally applicable, incidentally burden religion.

In Employment Division, Department of Human Resources of Oregon v. Smith, decided in 1990, the State of Oregon denied unemployment benefits to individuals terminated from their jobs for ingestion of peyote for sacramental purposes at a ceremony for their Native American Church.  Peyote was classified as a Schedule I “controlled substance,” and Oregon state law prohibited possession of such substances unless prescribed by a medical practitioner.  The individuals challenged the denial of unemployment benefits and the law under the free exercise clause.  The United States Supreme Court found that the law was facially neutral and generally applicable and, as such, survived the individuals’ challenge because it was rationally related to a legitimate purpose (i.e., prevention of physical harm attendant to the use of Schedule I “controlled substances”).

For the past 31 years, the rational basis standard set forth in Smith has controlled the analytical framework applicable to a free exercise challenge of a law or policy that is facially neutral and generally applicable.  Of the three standards of review employed by the Supreme Court, rational basis – the standard applied by Smith — is the lowest level of scrutiny, and therefore the easiest to meet.  Intermediate and strict scrutiny become progressively more difficult to meet, with strict scrutiny being the highest level of review.

A prominent Supreme Court case decided several months ago in June 2021, however, Fulton v. City of Philadelphia, threatened to upend the decades-old precedent set forth in Smith.  Fulton considered whether a City’s Department of Human Services could stop referring foster children to a foster care agency, Catholic Social Services (“CSS”), because CSS refused to work with same-sex foster parents.  CSS argued that the Department’s decision violated CSS’s free exercise rights.

At oral argument on November 4, 2020, CSS urged the Supreme Court to overturn Smith.  CSS argued that the rational basis standard of review set forth in Smith should be replaced with strict scrutiny.  Had CSS prevailed in persuading the Court to overturn Smith and adopt a strict scrutiny standard of review, a facially neutral and generally applicable policy that incidentally burdened religion would not have survived a free exercise challenge unless it was narrowly-tailored to further a compelling governmental interest (a very high standard of review).

The Supreme Court ultimately declined CSS’s invitation to overturn Smith, holding on June 17, 2021 that the Fulton case’s underlying facts fell outside Smith’s scope.  The Court explained that Smith controls policies that are facially neutral and generally applicable, whereas the policies at issue in Fulton failed to meet either of these requirements.  In practical effect, the Court’s Fulton decision does not alter the existing free exercise analytical framework applicable to laws or policies that are both facially neutral and generally applicable.

Smith therefore survives for now.  But, for how long is an open question.

While joining the Court’s opinion, Justice Barrett penned a concurring opinion, noting: “I … see no reason to decide in this case whether Smith should be overruled, much less what should replace it.”  However, Justice Barrett added that in her view, “the textual and structural arguments against Smith are more compelling.”  Justice Kavanaugh joined in Justice Barrett’s concurring opinion.

Justice Alito also authored a lengthy concurring opinion, writing that Smith “committed a constitutional error,” and should be revisited shortly and overruled (and that the Court should have done this in Fulton).  Justices Thomas and Gorsuch joined in Justice Alito’s opinion.

While Smith remains good law at this time, three justices have openly called for it to be overruled, and two more have suggested that they find the arguments against it to be compelling.  Simply stated, it appears that a majority of five justices are ready and willing to revisit and overturn Smith if presented with a case permitting the Court to do so.  The only question is when that case will make its way to the Court.

Should the Supreme Court overturn Smith, employers could face many more constitutional challenges to policies that are facially neutral and generally applicable.  We will keep readers posted on developments.