High Court Hears Challenge to WisconsinInterpretation of Religious Employer Exemption

The Supreme Court heard oral argument in case 24154, Catholic Charities Bureau v. Wisconsin Labor and Industry Review Commission, over whether Wisconsinlaw may exclude certain church-affiliated charities from a religious-employer exemption modeled on the Federal Unemployment Tax Act (FUTA).

At argument, counsel for Catholic Charities Bureau, Mister Rothbach, told the justices that the Wisconsin Supreme Court erred by reading the state exemption to exclude organizations that do not engage in "typical religious activity" such as public worship or proselytizing. "This case is not complicated," Rothbach said, arguing that "the constitution doesn't allow courts" to discriminate among religions by judging which religious activities count as "religious." He urged the Court to rule that once a statutory exemption exists, it must be applied evenhandedly and not along theological lines.

The stateand its advocate, Mister Gannon, defended Wisconsin's approach as a prophylactic, anti-entanglement rule aimed at avoiding state adjudication of disputes that would require courts or agencies to resolve religious doctrine. Gannon told the Court Wisconsin enacted an exemption targeted to employers most likely to force the state into doctrinal disputes: those whose employees "express and inculcate religious doctrine through worship, proselytization, and religious education." He said a motive-only test would "radically expand" exemptions and could leave large groups of employees (for example at religiously affiliated hospitals) without state unemployment coverage.

Why the question matters: the dispute implicates two separate lines of law the justices regularly weigh. One is statutory interpretation: whether Wisconsin correctly read a state exemption that mirrors FUTA and related federal provisions (the Internal Revenue Codeoperational tests used for 501(c)(3) determinations were discussed). The other is constitutional free-exercise doctrine: whether the state may apply an exemption in a way that treats religious organizations differently because of their practices or doctrinal content. Counsel and the justices repeatedly referenced precedents such as Larson, Church of Lukumi Babalu Aye, Amos, Cutter, Kedroff, and Hosanna-Tabor while debating whether the Wisconsin rule crosses a forbidden line of religious discrimination or instead avoids entanglement.

Justices pressed both sides on practical limits. Several asked whether the exemption must look to organizational structure (control/supervision by a church) or to what an organization actually does (the services it provides), and how courts should draw any line without deciding theology. Rothbach said limits can existfor example, requiring that an entity be controlled by a church and that religious claims be sincerebut that the state may not discriminate "along theological lines." Gannon responded that lines based on activities (worship, proselytizing, religious education) are administrable and shield the state from adjudicating doctrinal disputes that could arise in unemployment-benefit misconduct inquiries.

The argument probed hypotheticals the justices used to test each approach: a church-run vegan restaurant, an orphanage, and religiously affiliated hospitals were discussed repeatedly. Counsel for Catholic Charities argued that excluding ministries that serve the poor but do not proselytize would penalize essential religious charitable work; the state's counsel warned that treating motive alone as dispositive would sweep too broadly and exempt many secular-like operations simply because they are religiously motivated.

Multiple justices signaled interest in a narrow resolution. Some described the discrimination argumentthat Wisconsin's reading treats some faiths better than othersas a straightforward ground for reversal; others asked whether a church-autonomy or statutory-construction approach offered a cleaner path that would avoid broad constitutional pronouncements. The Solicitor General's office also urged the Court to adopt a saving construction for the federal statute rather than resolve the constitutional questions, arguing that a statutory reading could avoid constitutional difficulties.

No decision was made; the case was submitted after rebuttal. The Court's eventual ruling will determine whether the state may read its unemployment-exemption statute (modeled on FUTA) in a manner that focuses on the nature of activities performed by religious affiliates or whether it must apply an exemption based principally on religious purpose and motivation without discriminating among faiths.

For now, the arguments highlight two central tensions in religion clauses jurisprudence: how to prevent state entanglement in religious doctrine when adjudicating public-law claims, and how to ensure governments do not draw lines that impermissibly favor some religions over others.