The Supreme Court is set to hear arguments in a case that religious liberty advocates say could give the government a say in what is considered protected religious activity.

The nation’s highest court is scheduled to hear arguments in the case Catholic Charities Bureau. v. Wisconsin Labor & Industry Review Commission on March 31.

At the center of the case is whether Catholic Charities in Wisconsin has to pay into the state’s unemployment compensation system, instead of joining the Wisconsin Catholic Bishop’s system. Wisconsin law provides an exemption for certain nonprofit organizations, such as religious organizations, to avoid paying into the state system. 

The charity provides a variety of services such as in-home healthcare, housing for the elderly and disabled, and childcare services. The organization’s mission is to “carry on the redeeming work of our Lord by reflecting gospel values and the moral teaching of the church,” without regard to “race, sex, or religion.” It says its charity should be carried out “in an impartial manner towards members of other religions.”

When Catholic Charities, which is incorporated separately from the Diocese of Superior but controlled by the church, asked for an exemption from the state system to allow it to enroll in the Wisconsin Bishops’ Church Unemployment Program, it was denied as the state labor commission found its activities “are not religious, per se,” and it was not qualified for the exemption. 

In March 2024, the Wisconsin Supreme Court upheld the board’s determination on the grounds that the charity did not engage in what the state considered “typical” religious activities, such as holding worship services, nor does it “attempt to imbue program participants with the Catholic faith, nor supply any religious materials.”

Many states have exemptions for religious institutions to avoid paying into their unemployment tax system. Federal law also provides an exemption for religious schools. However, the Catholic Charities case would be the first time the Supreme Court weighed in on whether charitable organizations run by religious institutions have to pay into unemployment programs.

Critics of Catholic Charities argue that the Diocese was trying to have “civil society’s benefits and none of its costs.” A writer at the left-wing outlet Vox, Ian Milhiser, suggests that the church sought to incorporate its charitable organization separately to ensure that “lawsuit against Catholic Charities cannot touch the church’s broader assets.”

“Under Wisconsin law, however, the church’s decision to separately incorporate Catholic Charities also has a cost. Wisconsin exempts employers that engage in religious activity such as worship services from its unemployment regime, but it does not give this exemption to charitable corporations that only engage in secular activity,” Mr. Milhiser writes. “Because Catholic Charities is a separate legal entity from the church itself, and because it does not engage in any of the religious activity that would exempt it from paying unemployment taxes, it does not get an exemption.”

A senior counsel for the law firm representing Catholic Charities, Becket Law, Nick Reaves, tells the Sun this argument is “curious” and a misunderstanding of the Catholic principle of subsidiarity, which dictates that matters should be handled at the “most local level possible.” He noted the Diocese of Superior covers a large, sparsely populated swath of Wisconsin and said, “It doesn’t make sense to try to run the entire operation [for all of Northern Wisconsin] out of the headquarters in Superior.”

Mr. Milhiser also questioned why the matter is coming before the court now, when Catholic Charities has been paying into the state unemployment system since 1972. 

Mr. Reaves said that it was not until 1986 that the Catholic Church in Wisconsin established its own unemployment system. He noted that in 1999, Catholic Charities sought an exemption for one of its “sub-entities,” Challenge Center, and it was granted. However, when Catholic Charities sought to expand the exemption to its entire organization, it was rejected, which is what led to the current case pending before the Supreme Court. 

As for the issue of whether Catholic Charities engages in “typical” religious activities, Mr. Reaves said, “The government shouldn’t be in the business of second-guessing religious beliefs. There’s no dispute that Catholic Charities sincerely believes its mission is to be the hands and feet of Christ. It’s a religious mission, but, somehow Wisconsin still said, ‘We don’t think it’s religious enough.’”

Mr. Reaves said Wisconsin’s law by itself is “fine,” as he noted other states have similar statutes. However, he said, “They’ve put their own gloss on it in a way that violates the First Amendment in multiple ways.”

Catholic Charities appealed the Wisconsin Supreme Court’s decision to the federal Supreme Court in August, arguing that the state court’s decision violates their First Amendment right to the free exercise of religion. 

Mr. Reaves said that a ruling in Wisconsin’s favor could open the door for governments to “come in and say, ‘We are going to give exemptions to these types of religious beliefs we like, and what we think are typical or what we think are actually religious and not those other religious beliefs that we don’t like.’”

“I think that’s a dangerous place to be,” he said.

 The court is expected to release its decision in the case by late June.