Indiana's anti-LGBT law is even worse than it seems

By Michael HiltzikBusiness Columnist

March 31, 2015 9:02 AM PT

The study of the jurisprudence of legalized bigotry took a big step forward last week. The trigger was Indiana’s Republican Gov. Mike Pence signing a law purportedly aimed at expanding protections for business owners’ religious beliefs and practices.

The effect of the law, as an army of critics has pointed out, is to provide religious cover for discrimination against customers and employees. As we reported last week, the political context of the law’s passage and signing makes it clear that a prime goal of its promoters--perhaps the prime goal--is to allow discrimination based on sexual orientation.

Here’s how Advance America, an organization that helped lead the campaign for SB 101, the Religious Freedom Restoration Act, described its rationale: “Christian businesses and individuals deserve protection from those who support homosexual marriages and those who support government recognition and approval of gender identity (men who dress as women). SB 101 will help provide the protection!”

Since the signing, Gov. Pence, the people of Indiana, and the nation at large have received a full-frontal look at the social and economic consequences of legalizing bigotry. Staggering under an onslaught of criticism from citizens and businesses in Indiana and elsewhere, Pence has tried to defend the law as roughly identical to “religious freedom” measures on the federal books and those of 19 other states--first in a bumbling, burbling appearance on ABC’s “This Week” program Sunday, and then in a Wall Street Journal op-ed Monday. He’s dead wrong.

Let’s take an updated look at the issues raised by SB 101.

1. Indiana’s law is different, and worse, than those of many other states and the federal government. SB 101 is broader than the federal law and differs from the other state laws in significant ways.

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, small-business owners, or corporations, taking the law into their own hands and acting in ways that violate generally applicable laws on the grounds that they have a religious justification for doing so,” a group of 30 law professors from across the country warned Indiana legislators while SB 101 was being debated. “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 not just of individuals, but partnerships, corporations, firms, and a range of other organizations. That goes beyond not only state laws that limit their reach to individuals’ expressions of religion, but 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 RFRA, 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, who 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 RFRAs also have laws explicitly barring discrimination on the basis of sexual preference. Some RFRAs also explicitly exclude sexual discrimination from religious-belief protection. Indiana has neither of these provisions. Some localities, including Indianapolis, have their own anti-discrimination laws, but whether they’re trumped by SB 101 is an open question.

2. The anti-discrimination landscape has changed. The federal Religious Freedom Restoration Act, supposedly the model for the state laws, was enacted in 1993 to respond to the Supreme Court’s 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 RFRA 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, including same-sex marriage, such laws began to be eyed as an instrument of pushback. Among the key cases was one in which a same-sex couple sued a New Mexico photography studio for refusing to shoot their wedding. Their complaint was upheld by the New Mexico Supreme Court.

Then came Hobby Lobby. In this 2014 decision, the Supreme Court vastly expanded the reach of the federal RFRA 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, asserting in her blistering dissent that the law had been designed “to serve a far less radical purpose,” warned that the court “has ventured into a minefield.”

Who could disagree today?

3. Discrimination is economically costly. Gov. Pence and the Indiana Legislature followed the court into no-man’s-land, and they’ve been blown up. Pence’s defense that 19 other states already have RFRAs implies that Indiana has been attacked for being in the wrong place at the wrong time, but timing is everything, and laws like SB 101 deserve, and are receiving, greater scrutiny. Tough luck.

The list of businesses that have spoken out against the Indiana law, or taken direct action in response, has been growing every day. The CEOs of nine companies with a significant Indiana presence, including Indianapolis-headquartered Anthem and Eli Lilly & Co., wrote Pence and legislative leaders on 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 mayor of San Francisco have barred official travel to Indiana, and at least two convention sponsors have indicated 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’s an immense effect to stem from a single factor. It underscores how deeply economic growth can be suppressed by discrimination on the basis of sexual orientation. But that’s a modern outlook, and Indiana’s willingness to overlook it merely to carry the flag for extreme religious conservatives shows how far behind the curve its political leaders have fallen.

What’s most interesting about the business community’s response—and we can add NASCAR and several Indiana universities to those expressing dismay with SB 101—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. The companies that have spoken out can’t all be pigeonholed as touchy-feely Silicon Valley types—not when they include Wal-Mart, Eli Lilly, and Anthem.

Many of these companies have shown in their human resources policies that they understand that discrimination is bad business. Among other drawbacks, it interferes with recruitment of the best personnel and reduces their appeal to customers. 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 such a trend, rather than lead it, but the widespread condemnation of SB 101 by business executives (it’s hard to name a single one who supports the law) indicates that they understand the trend is for real, and resisting it is a policy that belongs firmly on the cost side of the ledger. Many of these CEOs aren’t being courageous, exactly, but they are being sensible.

A reeling Pence said Tuesday that he would call for a “fix” from the Legislature this week, but also said he would “stand by this law.” Time, and the facts, are against him.

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