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Today, the Supreme Court unanimously held that the City of Philadelphia’s refusal to contract with a Catholic foster care agency that refused to place children with same-sex couples violated the agency’s rights under the First Amendment’s Free Exercise Clause. In so ruling, the Court declined the agency’s request to overturn the Court’s seminal 1990 First Amendment decision, Employment Division v. Smith, which held that litigants cannot challenge “neutral” and “generally applicable” laws under the Free Exercise Clause.

The case, Fulton v. City of Philadelphia, is a narrow ruling and essentially reflects a détente in the debate between balancing protecting religious freedoms and protecting individuals from discrimination. Nevertheless, Fulton portends an ideological clash over Smith and presents various immediate implications for governments and religious contractors.

The Free Exercise Clause and Smith

The Free Exercise Clause of the First Amendment, applicable to the states under the Fourteenth Amendment, states: “Congress shall make no law…prohibiting the free exercise of religion.” The Free Exercise Clause’s protections, however, are not absolute. In an opinion authored by the late Justice Antonin Scalia, Smith held that a “neutral” and “generally applicable” law incidentally burdening religion typically does not violate the Free Exercise Clause—no matter how severely that law burdens religious freedom.

Fulton v. City of Philadelphia

A. Factual Background.

The facts of Fulton are straightforward. Catholic Social Services (“CSS”) is a tax-payer funded foster care agency in Philadelphia (“City”). The City, which enters into contracts annually with licensed foster care agencies, had worked with CSS to place children in foster homes for over 50 years. The religious views of CSS inform its work in the foster care system. CSS believes that “marriage is a sacred bond between a man and a woman.” Under Pennsylvania law, state-licensed foster care agencies like CSS must first certify foster families before the state, via a referral to a licensed agency, seeks to place a child with a foster family. Because CSS understands the certification of prospective foster families to be an endorsement of their relationship, it will not certify same-sex couples. (Notably, though not relevant to Fulton, CSS does not object to certifying gay or lesbian individuals as single foster parents or to placing gay and lesbian children).

This long relationship changed in 2018 when CSS’s position on certifying same-sex couples came to the attention of the City Council. Ultimately, the City informed CSS that it would no longer refer children to it, citing the CSS’s refusal to certify same-sex couples as violative of a non-discrimination provision in its annual contract as well as the non-discrimination requirements in the City’s Fair Practices Ordinance. The City stated it would resume referrals to CSS if the organization started certifying same-sex couples.

B. CSS Sues the City under the First Amendment’s Free Exercise Clause.

Alleging the freeze violated its Free Exercise rights, CSS sought a temporary restraining order and preliminary injunction against the City in federal district court directing the City to refer children to CSS without requiring the agency to certify same-sex couples. The district court denied preliminary relief, concluding that CSS’s suit was unlikely to succeed because the contractual non-discrimination requirements and the Fair Practices Ordinance were “neutral” and “generally applicable” under Smith.

The Third Circuit affirmed. Relevant to the Supreme Court’s decision, however, is how the annual contract between the City and CSS had expired. Thus, the Third Circuit focused on whether the City could insist on including new language as a condition of renewal forbidding discrimination on the basis of sexual orientation, unless the City grants a discretionary exemption. The Third Circuit held that the new language, and the anti-discrimination provision under the Fair Practices Ordinance, fell under Smith.

Notably, CSS presented Free Speech arguments before the district court and the Third Circuit, which were rejected in each case. The Supreme Court did not reach the Free Speech question because it resolved the case based on the Free Exercise Clause.

C. The Supreme Court Reverses the Third Circuit and Preserves Smith.

The Supreme Court reversed the Third Circuit in CSS’s favor. Finding the City’s policies clearly burdened CSS’s religious rights, the Court looked to Smith. Contrary to the lower courts, however, the Court ruled that Smith did not apply because the City’s policies did not meet the requirement of being both neutral and generally applicable.

The Court explained that a law is not “generally applicable” if it invites the government to consider the particular reasons for a person’s conduct by creating a mechanism for individualized exemptions. Largely focusing on the City’s new anti-discrimination provision, which permitted discretionary exemptions, the Court decided the City’s policy was not generally applicable because the provision created “a formal mechanism for granting exceptions [that] renders a policy not generally applicable.” The Court also rejected the City’s arguments under its Fair Practices Ordinance because, interestingly, the Court ruled that foster care agencies are not places of public accommodation. Therefore, Smith did not apply.

Because Smith did not apply, the Court subjected the City’s policies to the onerous strict scrutiny standard. A government policy can survive strict scrutiny only if it advances “interests of the highest order” and is narrowly tailored to achieve those interests, i.e., so long as the government can achieve its interests in a manner that does not burden religion, it must do so. To survive the strict scrutiny standard, the City must provide a compelling interest for its anti-discrimination policies. The City presented three generalized anti-discrimination “compelling interests.” The Court rejected all three proposed interests as being too imprecise to answer the material question of why the City has a compelling interest in enforcing its non-discrimination policies in denying an exception for contract renewal to CSS while permitting discretionary exemptions to other agencies. Accordingly, the Court reversed in favor of CSS.

CSS advocated for the Court to overturn Smith and impose a categorical strict scrutiny standard in its place. Yet, the Court announced it had no occasion to reconsider Smith because, ironically, CSS convinced the Court that the City’s policies were subject to strict scrutiny.

Takeaways from Fulton

Although Fulton represents a notable victory for a religious organization, perhaps the much bigger headline from the Court’s decision is how it treated, or did not treat, Smith. On one hand, the Court confirmed that a government entity violates a religious organization’s Free Exercise rights if, absent a compelling interest, that entity imposes policies upon the organization from which the government entity may exempt other organizations. The Court based its holding, however, on narrow, fact-specific grounds without creating any new sweeping religious exemptions. In other words, the Court applied existing law.

On the other hand, the unanimity of today’s decision masks a larger ideological divide. All but three Justices agreed to side-step Smith—at least for now—effectively maintaining a categorial exemption for governments to pass “neutral” and “generally applicable” laws without running afoul of the Free Exercise Clause. In separate concurrences, joined by Justice Thomas, Justices Alito and Gorsuch wrote that the Court inappropriately sidestepped the Smith question, and they would overturn Smith. In another concurrence, Justice Barrett, joined by Justice Kavanaugh, opined how she finds Smith less than ideal precedent, but she struggled with how to replace Smith because she similarly disfavored a categorical strict scrutiny standard. Ultimately, Justices Barrett and Kavanaugh did not see a reason to resolve the Smith question based on the facts, and in part because there is no clear replacement for Smith. Thus, at present, five Justices seem prepared to consider, or outright overturn, Smith, but whether that happens anytime soon is far from certain.

While the Court may address Smith another day, Fulton also presents more immediate implications for government bodies and contractors. Fulton says nothing about government bodies that outright forbid sexual orientation discrimination in contracts, laws or ordinances without exceptions. At present, it seems a litigant challenging laws or ordinances without exceptions would be required to do so under the more lenient Smith standard, making it much easier for governments to prevail. Fulton indeed suggests that tax-payer funded religious organizations, like CSS, may be subject to government anti-discrimination provisions under Smith. Further, religious organizations can likely expect to see government entities model anti-discrimination provisions in light of Fulton, i.e., policies without exceptions. What Fulton makes clear, at least for now, is that the question of whether the application of government policies to religious contractors survives constitutional scrutiny remains highly fact-specific.