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Last week, in a unanimous opinion written by Justice Sotomayor, the Supreme Court decided Catholic Charities Bureau v. Wisconsin Labor & Industry Review Commission. The Court held that requiring Catholic Charities to only serve Catholics or to proselytize any non-Catholics it serves (conduct the Catholic faith prohibits) to qualify as engaging in religious activity for a religious organization exemption to the state unemployment compensation statute violates the First Amendment. That’s because the Wisconsin Supreme Court’s interpretation of its state law “impose[d] a denominational preference by differentiating between religions based on theological choices.” This denominational discrimination triggers strict scrutiny, and the Court found that Wisconsin failed both the compelling interest and narrow tailoring prongs of the strict scrutiny test.

First, Wisconsin’s alleged compelling interest in “ensuring unemployment coverage for its citizens” as applied to Catholic Charities was not persuasive because Catholic Charities privately provides equivalent benefits to its employees. And the exemption regime was underinclusive as to that purported interest because (1) over forty forms of employment are exempted from the unemployment compensation program, and (2) religious entities that provide similar services in a similar manner to Catholic Charities are exempted because the work is done directly by the church or its ministers.

Second, the Court found that Wisconsin had not narrowly tailored the exemption to fulfill an interest in avoiding state entanglement with religion. Wisconsin said it was concerned that in determining whether a fired employee should get unemployment compensation, disputes between a religious employer and a fired employee about whether the employee had engaged in misconduct “could often force the state to decide whether employees complied with religious doctrine.” But, the Court noted, “the exemption here functions at an organizational level, covering both the janitor and the priest in equal measure,” instead of just applying to employees “tasked with inculcating religious doctrine.” This over-inclusiveness meant the exemption was not “closely fitted to further” the alleged interest and thus failed the second prong of strict scrutiny.

It’s not clear that this case breaks any new doctrinal ground, though it could be read to tweak the strict scrutiny test in the denominational discrimination context. Normally, the second prong of the test asks whether the challenged law or action is the least restrictive means or is narrowly tailored to advance the compelling government interest. But the Court here used language from the 1982 case Larson v. Valente for the strict scrutiny test, asking whether the relevant law or action was “closely fitted to further a compelling governmental interest.” Is “closely fitted” the same standard as “narrowly tailored” or “least restrictive means”? The Court probably didn’t think it was creating a new test for a subset of religious liberty cases, but it’s possible some lower courts will read the case that way. And if they do, “closely fitted” seems easier for the government to satisfy than “least restrictive means.” Perhaps there is no daylight between “narrowly tailored” and “closely fitted,” and courts have not seemed to indicate there’s a difference between “narrowly tailored” and “least restrictive means.” So maybe the “closely fitted” language will not change anything.

Justice Thomas joined the majority in full and wrote a concurrence arguing that the Wisconsin Supreme Court also violated the principle of church autonomy because it viewed Catholic Charities as the entity in question rather than the local archdiocese which controls Catholic Charities, because Catholic Charities was separately incorporated. But, Thomas said, religious organizations are free to organize themselves as they want, and governments must defer to religious organizations’ views of their own organizational structures lest governments infringe on the right of “religious institutions to define their internal structure for themselves.” Justice Jackson also joined the majority’s opinion in full and wrote a concurrence arguing that the federal law that the Wisconsin law is based on (the Federal Unemployment Tax Act) does not have the same constitutional problems as the Wisconsin law (as interpreted by the Wisconsin Supreme Court) does.