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Big Sky Colony, Inc., and Daniel E. Wipf v. Montana Department of Labor and Industry

December 31, 2012

BIG SKY COLONY, INC., AND DANIEL E. WIPF, PETITIONERS AND APPELLEES,
v.
MONTANA DEPARTMENT OF LABOR AND INDUSTRY, RESPONDENT AND APPELLANT.



APPEAL FROM: District Court of the Ninth Judicial District, In and For the County of Glacier, Cause No. DV 10-4 Honorable Laurie McKinnon, Presiding Judge

The opinion of the court was delivered by: Jim Rice

December 31 2012

Argued: April 25, 2012

Submitted: November 28, 2012

Filed: Clerk

Justice Brian Morris delivered the Opinion of the Court.

¶1 Appellant Montana Department of Labor and Industry (the Department) appeals from the order of the Ninth Judicial District Court, Glacier County, that granted summary judgment to Appellees Big Sky Colony, Inc., and Daniel E. Wipf (collectively Colony). The District Court determined that the requirement to provide workers' compensation coverage for the Colony's members engaged in certain commercial activities contained in House Bill 119 (2009 Mont. Laws, ch. 112 § 30) (HB 119) violated the Colony's rights under the Free Exercise Clause and the Establishment Clause of the First Amendment to the U.S Constitution, and also violated the Colony's right to equal protection of the laws under the U.S. Constitution and the Montana Constitution. We reverse.

¶2 We address the following issues on appeal:

¶3 1. Whether the provisions in HB 119 that incorporate the Colony into the definition of "employer" and the Colony's members into the definition of "employee" under the Workers' Compensation Act violate the Free Exercise Clause.

¶4 2. Whether the provisions in HB 119 that incorporate the Colony into the definition of "employer" and the Colony's members into the definition of "employee" under the Workers' Compensation Act violate the Establishment Clause.

¶5 3. Whether the provisions in HB 119 that incorporate the Colony into the definition of "employer" and the Colony's members into the definition of "employee" under the Workers' Compensation Act violate the Colony's right to equal protection of the laws.

FACTUAL AND PROCEDURAL BACKGROUND

¶6 The Hutterite Brethren Church originally formed in the 16th century as part of the Anabaptist movement during the Protestant Reformation in Europe. Anabaptists rejected infant baptism as "unbiblical" and instead renewed the practice of adult baptism. Anabaptists live a life of pacifism. Jacob Hutter and his followers eventually broke away from other Anabaptists over a dispute regarding communal living.

¶7 Jacob Hutter suffered a violent end as he was burned at the stake in a public square in Innsbruck, Austria, in 1536. Austro-Hungarian authorities held Hutter in freezing water and then placed him in a hot room. Authorities further tortured Hutter by pouring brandy on his wounds before burning him to death.

¶8 Hutterite believers moved across Europe for the next several centuries in search of a safe place in which to practice their faith and live their communal life. This wandering eventually brought the Hutterites to North America in the 19th century in search of religious freedom. Hutterites continue to practice their faith and live a communal lifestyle in colonies in Minnesota, North Dakota, South Dakota, Montana, Washington, and parts of Canada.

¶9 The Colony, a signatory to the Hutterian Brethren Church Constitution, organizes itself as a religious corporation under Montana law. The Colony's Articles of Incorporation provide that it was formed for the purpose of operating "a Hutterische Church Brotherhood Community." All members of the Colony must belong to the Hutterische Church Society and all members agree to "live a communal life and follow the teaching and tenets of the Hutterische Church Society." Daniel Wipf serves as the Colony's first minister and corporate president.

¶10 The Department initially determined that the Workers' Compensation Act did not apply to the Colony or its members due to the fact that the Colony did not pay "wages" to its members. The Department based this determination on the fact that the Colony did not fall within the definition of "employer" set forth at § 39-71-117, MCA, and that the Colony's members did not fall within the definition of "employee" set forth at § 39-71-118, MCA. The 2009 Montana legislature enacted HB 119.

¶11 HB 119 worked a laundry list of changes to the Workers' Compensation Act, including revised claims handling practices (§ 39-71-107, MCA), and revised accident reporting requirements for employers (§ 39-71-307, MCA). Pertinent to our analysis, Section 6 amended the definition of "employer" to include: a religious corporation, religious organization, or religious trust receiving remuneration from nonmembers for agricultural production, manufacturing, or a construction project conducted by its members on or off the property of the religious corporation, religious organization, or religious trust.

Section 39-71-117(1)(d), MCA. Section 7 of HB 119 amended the definition of "employee" to include: a member of a religious corporation, religious organization, or religious trust while performing services for the religious corporation, religious organization, or religious trust, as described in 39-71-117(1)(d).

Section 39-71-118(1)(i), MCA.

¶12 The Colony brought an action against the Department in 2010. The Colony alleged that Sections 6 and 7 of HB 119 impermissibly swept the Colony and its members within the definition of "employer" and "employee" in the Workers' Compensation Act. The Colony and the Department agreed that the inclusion of the Colony within the definition of "employer" and the Colony's members within the definition of "employee" would require the Colony to provide workers' compensation coverage for its members engaged in commercial activities. The Colony alleged that this requirement to provide workers' compensation coverage violated the Free Exercise Clause, the Establishment Clause, and the Colony's right to equal protection of the law.

¶13 The parties filed cross-motions for summary judgment. The District Court first addressed the Colony's Free Exercise claim. The court determined that Sections 6 and 7 were not neutral as the burdens posed "fall only on the Hutterite religion." The court further determined that Sections 6 and 7 were not generally applicable as the bill "unquestionably targets only the Hutterite religious practice of communal living." The two determinations prompted the court to apply strict scrutiny. The court's strict scrutiny analysis led it to reject the Department's claim of any compelling state interest being served by Sections 6 and 7.

¶14 With respect to the Colony's Establishment Clause claim, the court purported to apply the test from Lemon v. Kurtzman, 403 U.S. 602, 91 S. Ct. 2105 (1971). Sections 6 and 7 foundered on every factor of the Lemon Test. The court concluded that Sections 6 and 7 impermissibly "targeted a group defined by their religion." The primary effect of this impermissible targeting, in turn, "would be to inhibit the Colony in the practice of their religion." Finally, the court concluded that excessive entanglement with the State would ensue as it "appears evident that a comprehensive, discriminating, and continuing state surveillance will inevitably be required to ensure that only particular areas of Hutterite activities are scrutinized."

¶15 The court also determined that Sections 6 and 7 violated the Colony's right to equal protection of the laws. These provisions, according to the court, specifically identify "religious organizations" and target a particular religious organization. The separate classification created by Sections 6 and 7 "treats Hutterites differently from other religious organizations and further targets religious organizations generally." This classification, according to the District Court, failed to satisfy even the rational basis standard that applies to constitutional challenges to workers' compensation laws. The Department appeals.

STANDARD OF REVIEW

¶16 This Court exercises plenary review of constitutional issues. DeVoe v. City of Missoula, 2012 MT 72, ¶ 12, 364 Mont. 375, 274 P.2d 752. We review for correctness a district court's decisions on constitutional issues. DeVoe, ¶ 12. Statutes enjoy a presumption of constitutionality. The party challenging the constitutionality of a statute bears the burden of proof. DeVoe, ¶ 12.

DISCUSSION

¶17 Issue 1. Whether the provisions in HB 119 that incorporate the Colony into the definition of "employer" and the Colony's members into the definition of "employee" under the Workers' Compensation Act violate the Free Exercise Clause.

¶18 The District Court determined that the practice of the Hutterite faith demands that its members engage in commercial activities with nonmembers for remuneration. This determination prompted the District Court to analyze the statute based on the strict scrutiny standard applied in the U.S. Supreme Court's decision in Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 113 S. Ct. 2217 (1993). The Court in Lukumi Babalu struck down a group of municipal ordinances that banned animal sacrifice.

¶19 The Santeria church intended to construct a church in the City of Hialeah. Animal sacrifice represents one of the principal forms of devotion of the Santeria church. Church members perform animal sacrifices "at birth, marriage, and death rites, for the cure of the sick, for the initiation of new members and priests, and during annual celebrations." Lukumi Babalu, 508 U.S. at 524, 113 S. Ct. at 2222. The City of Hialeah enacted four ordinances immediately after the Santeria church announced its plans to construct a church there.

¶20 The Court recognized that the ordinances, though seemingly neutral on their faces, effectively served to ban animal sacrifices undertaken for religious reasons. The Court likened the religious discrimination effect of the ordinances to an impermissible state law that disqualified members of the clergy from holding certain public offices in McDaniel v. Paty, 435 U.S. 618, 98 S. Ct. 1322 (1978). Lukumi Babalu, 508 U.S. at 532, 113 S. Ct. at 2226. The Court similarly considered the effect of the ordinances in light of the unconstitutional application of a municipal ordinance in Fowler v. Rhode Island, 345 U.S. 67, 73 S. Ct. 526 (1953). Lukumi Babalu, 508 U.S. at 532, 113 S. Ct. at 2226. There the city had interpreted a municipal ordinance to prohibit preaching in a public park by a Jehovah's Witness, but to allow preaching during the course of a Catholic Mass or a Protestant church service. Lukumi Babalu, 508 U.S. at 532, 113 S. Ct. at 2226, citing Fowler, 345 U.S. at 69-70, 73 S. Ct. at 527. The Court in Lukumi Babalu concluded that the religious exercise of the Santeria church represented "the only conduct" subject to the prohibition on animal sacrifice. Lukumi Babalu, 508 U.S. at 535, 113 S. Ct. at 2228.

¶21 The requirement that a religious corporation provide workers' compensation coverage for its members differs markedly from the outright ban of an activity central to the Santeria faith. Unlike the prohibitions in Lukumi Babalu and McDaniel, the workers' compensation requirement does not prohibit the Colony members from engaging in the commercial activity. HB 119 regulates the Colony's engagement in commercial activities in the same manner that the workers' compensation system regulates the commercial activities of other employers in Montana. The Colony, like all other employers in Montana, simply will make less money on these commercial endeavors once it pays the workers' compensation premiums. And unlike the ordinance in Fowler, the workers' compensation requirement does not place the Colony members in a discriminatory position compared to other religious groups who might choose to engage in similar activity. These distinctions lead us to reject the strict scrutiny analysis from Lukumi Babalu as the appropriate lens through which to analyze the Colony's claim.

¶22 We instead apply the standard used by the Court in Dept. of Human Resources of Oregon v. Smith, 494 U.S. 872, 878, 110 S. Ct. 1595, 1599 (1990). The workers' compensation requirement must be facially neutral and serve a secular purpose in order to survive a Free Exercise challenge. Smith, 494 U.S. at 878, 110 S. Ct. at 1599. The requirement also must impose only an incidental burden on religious conduct as opposed to a prohibition on religious conduct. Smith, 494 U.S. at 878, 110 S. Ct. at 1599.

Facially Neutral and Secular Purpose.

¶23 The District Court concluded that HB 119 "unquestionably targets only the Hutterite religious practice of communal living." This conclusion ignores the fact that the workers' compensation requirement in Montana applies generally to multiple types of entities. See § 39-71-117, MCA. The legislature did not conceive of the workers' compensation system as a means to shackle the religious practices of Colony members. HB 119 simply adds to the scope of the workers' compensation system religious corporations that engage in commercial activities with nonmembers for remuneration through its expansion of the definition of "employer" contained in § 39-71-117, MCA.

¶24 No doubt exists that the workers' compensation requirement would apply if the Colony employed its members to work for wages on these commercial activities. Indeed, in St. John's Lutheran Church v. State Comp. Ins. Fund, 252 Mont. 516, 524, 830 P.2d 1271, 1277 (1992), this Court rejected a Free Exercise challenge to the requirement that the church provide workers' compensation coverage to its pastor on the basis that the provision of workers' compensation represents "an overriding governmental interest." No doubt exists that the workers' compensation requirement would apply if the Colony opted to establish separate commercial entities to perform the type of work at issue here. See Ridley Park Methodist Church v. Zoning Hearing Board, 920 A.2d 953, 960 (Pa. 2007) (denying zoning variance to operate a daycare on church site did not impinge on religious activities of church as operation of the daycare "is not a fundamental religious activity of a church").

¶25 The Dissent suggests that HB 119 would not capture the activities of the other religious employers, in part, because they do not engage in the types of economic activities enumerated by HB 119. Dissent, ¶ 88. HB 119 did not need to capture these other religious employers, however, to incorporate them into the workers' compensation system. Section 39-71-117(1)(a), MCA, already captures other religious employers who engage in commercial activities. Subsection (a) includes within the definition of "employer" "all public corporations and quasi-public corporations," religious or otherwise. Subsection (a) further includes within the definition of "employer" "each firm, voluntary association, limited liability company, limited liability partnership, and private corporation," religious or otherwise. Finally, subsection (c) defines employer to include "any non-profit association, limited liability company, limited liability partnership, or corporation or other entity," religious or otherwise, that receives federal, state, or local government funds to be used for community service programs.

ΒΆ26 The Department of Labor and Industry previously did not consider the Colony subject to the workers' compensation system due to the fact that the Colony did not pay "wages" to its members as part of its communal living system. The Colony nevertheless engaged in commercial activities. The Colony instead provides food, shelter, clothing, and medical care to its members who engage in these commercial activities. See Stahl v. United States, 626 F.3d 520, 521 (9th Cir. 2010). HB 119 clarified that religious corporations, organizations, or trusts that engage in specified commercial activities, who do not pay "wages" to their members for labor on these commercial activities, but who receive remuneration from nonmembers, qualify as "employers" for purposes of the workers' compensation system. Section 39-71-117(1)(d), MCA. HB 119 does not lose its ...


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