Legalized bias: A great way to hinder growth

Since adopting a religious freedom law, Indiana Gov. Mike Pence, the people of the state and the nation at large have received a full-frontal look at the social and economic consequences of legalizing bigotry.

The list of businesses that have spoken out against the Indiana law, or taken direct action in response, grows every day. The chief executives of nine companies with a significant Indiana presence, including Indianapolis-headquartered Anthem and Eli Lilly & Co., wrote Pence and legislative leaders Monday, urging them to “take immediate action” to ensure that Indiana law can’t be used to discriminate “based upon sexual orientation or gender identity.”

Salesforce.com and Angie’s List have taken concrete steps to reduce their investments in the state, the governors of Connecticut and Washington and mayors of Seattle and San Francisco have barred official travel to Indiana, and at least two convention sponsors have said they’ll be taking their business elsewhere.

Beyond the immediate impact, there is evidence that discrimination harms economic growth more generally.

Economists from Stanford and the University of Chicago calculated in 2013 that the lowering of employment barriers against white women and black women and men accounted for as much as 20% of the productivity gains in the U.S. economy between 1960 and 2008. That immense effect underscores how deeply economic growth can be suppressed by

discrimination on the basis of sexual orientation.

What’s most interesting about the business community’s response — and we can add NASCAR and several Indiana universities to those expressing dismay — is what it says about the private sector’s willingness to speak out on an issue that used to be considered just cultural warfare — civil rights based on sexual and gender orientation. These companies can’t all be pigeonholed as touchy-feely Silicon Valley types — not when they include WalMart, Eli Lilly and Anthem.

Many have shown in their overall human resources policies that they understand that discrimination is bad business. It interferes with recruitment and can affect the appeal of company products and services to members of the public. America is gradually becoming a more inclusive society, as can be seen by the expansion of same-sex marriage.

It’s not unusual for Big Business to follow, rather than lead, such a trend, but the widespread condemnation of the Indiana law by business executives shows they understand the trend is real. Many of these CEOs aren’t being courageous, exactly, but they are being sensible.

Indiana’s law is different, and worse, from those of many other states and the federal government.

First, Indiana’s law applies to wholly private disputes in which the government is not a party. That places the burden of fighting discrimination on its victims. The result will be “private actors, such as employers, landlords, smallbusiness owners, or corporations, taking the law into their own hands” and using religious justification to violate other laws, a group of 30 law professors warned Indiana legislators. “Members of the public will then be asked to bear the cost of their employer’s, their landlord’s, their local shopkeeper’s, or a police officer’s private religious beliefs.”

Second, the law grants protection for the religious beliefs of partnerships, corporations, firms and a range of other organizations. That goes beyond state laws that limit their reach to individuals’ expressions of religion, and beyond the Supreme Court’s 2014 Hobby Lobby decision, which applied to privately held companies without dissenting shareholders — family businesses, in short.

“Nothing like this exists under federal law,” Jeffrey I. Pasek, an expert on the religious aspects of employment law, told Employment Law Daily. It’s a novel expansion for states too. Arizona’s 2012 religious freedom act, for instance, applies to “persons.” A legislative attempt last year to broaden it to partnerships, corporations and other organizations was vetoed by then-Gov. Jan Brewer. She listened to the sort of objections from businesses and residents that Pence ignored.

Put these two differences together, Pasek said, and those claiming religious grounds for discrimination “are much less likely to be challenged and much more likely to prevail.”

One other important point: Many other states with religious freedom laws have separate laws explicitly barring discrimination on the basis of sexual orientation. Some states also explicitly exclude sexual discrimination from religious-belief protection. Indiana has neither of these provisions.

In any event, the broad landscape of anti-discrimination law has changed. The federal Religious Freedom Restoration Act was enacted in 1993 to respond to a Supreme Court ruling that religious claims couldn’t trump a “generally applicable” federal law. (The case involved the use of peyote in a Native American rite.)

For years the federal law was judged to protect comparatively trivial religious expressions that could be accommodated without burdening anyone else — beards and turbans that violate secular dress codes, dietary restrictions, etc. But with the spread of gay and transgender rights, such laws were eyed as an instrument of pushback. (The New Mexico Supreme Court upheld the complaint of a same-sex couple who sued a New Mexico photography studio for refusing to shoot their wedding.)

Then came Hobby Lobby. In this 2014 decision, the Supreme Court vastly expanded the reach of the federal Religious Freedom Restoration Act to protect the religious convictions of businesses, as opposed to individuals, and to apply to non-trivial mandates — in this case, the Affordable Care Act’s mandate that employer-sponsored health plans cover contraceptives. Justice Ruth Bader Ginsburg warned in her blistering dissent that the court “has ventured into a minefield.”

Who could disagree today?

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