(Reuters) - A divided federal appeals court on Friday rejected a Pennsylvania cabinet maker's religion-based challenge to the 2010 healthcare law's requirement that larger companies provide workers with health insurance covering birth control.
The decision created a split among federal appeals courts, boosting the chance that the U.S. Supreme Court may step in to resolve the dispute over challenges to the provision in the Patient Protection and Affordable Care Act, known as Obamacare.
By a 2-1 vote, a panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia ruled against Conestoga Wood Specialties Corp, whose owners are Mennonite Christians, in finding that "for-profit, secular corporations cannot engage in religious exercise."
The decision departed from a June 27 ruling by the 10th Circuit Court of Appeals in Denver favoring the arts and crafts retailer Hobby Lobby Stores Inc, in which it said for-profit companies can sometimes assert religious rights.
Lawyers for Conestoga did not immediately respond to requests for comment.
The East Earl, Pennsylvania, company, which employs 950 people and is owned by the Hahn family, said the contraception mandate violated its rights under the Free Exercise Clause of the First Amendment, and the Religious Freedom Restoration Act (RFRA).
After a lower court refused to issue an injunction, Conestoga appealed, and its lawyer told the 3rd Circuit that the company was complying with the law during its appeal. Failure to comply subjects companies with 50 or more employees to daily fines that can grow quickly.
Like the 10th Circuit, the 3rd Circuit reviewed the Supreme Court's 2010 decision in Citizens United v. Federal Election Commission that gave companies a broad First Amendment right to engage in political spending through independent campaign groups.
But Circuit Judge Robert Cowen, writing for the 3rd Circuit majority, said that while there was "a long history of protecting corporations' rights to free speech," there was no similar history of protection for the free exercise of religion.
"We simply cannot understand how a for-profit, secular corporation - apart from its owners - can exercise religion," he wrote. "A holding to the contrary ... would eviscerate the fundamental principle that a corporation is a legally distinct entity from its owners."
Noting that the 10th Circuit said such corporations may raise some free exercise of religion and RFRA claims, Cowen said, "We respectfully disagree with that court's analysis."
Circuit Judge Kent Jordan dissented, saying the majority decision reflected a "cramped and confused understanding" of religious rights granted by Congress and the U.S. Constitution.
"Government should be enjoined from telling sincere believers in the sanctity of life to put their consciences aside and support other people's reproductive choices," he wrote.
The Supreme Court hears oral arguments in about 75 to 80 cases per year. Typically, more than half involve issues where lower courts are divided.
The Becket Fund for Religious Liberty, a nonprofit law firm that has argued against the contraception mandate, has said there are about 63 lawsuits nationwide challenging the mandate.
The case is Conestoga Wood Specialties Corp et al v. Secretary of the U.S. Department of Health and Human Services et al, 3rd U.S. Circuit Court of Appeals, No. 13-1144.
Editing by Philip Barbara