On July 11, 2013, the U.S. Court of Appeals for the Fourth Circuit, reconsidering a case in light of National Federal of Independent Business v. Sebelius, 132 S. Ct. 2566 (2012) (hereinafter NFIB), upheld the constitutionality of both the individual mandate and employer mandate of the Patient Protection and Affordable Care Act (ACA). In Liberty University v. Lew, the Court stated that the employer mandate was a valid exercise of Congress’s authority under the Commerce Clause and its taxing power. Liberty University v. Lew, No. 10-2347, 2013 WL 3470532, at *15 (4th Cir. July 11, 2013). The Court also rejected religion-based challenges to both the individual and employer mandates under the ACA. Id. at 16.

Liberty University, a large employer, filed suit against the Secretary of the United States Treasury, seeking a declaration that the individual and employer mandates are invalid. Specifically, Liberty University alleged that the mandates exceeded Congress’s Article I powers. The district court upheld the constitutionality of both mandates. On appeal, the Fourth Circuit held that the Anti-Injunction Act barred it from considering the claims and remanded the case back to the district court with instructions to dismiss for lack of jurisdiction. The Supreme Court granted the plaintiffs’ petition for certiorari, vacated the Fourth Circuit’s judgment, and remanded for further consideration in light of NFIB.

The Court first addressed two jurisdictional issues: (1) whether the Anti-Injunction Act (AIA) barred the plaintiff’s claim; and (2) whether Liberty University had standing. The Court rejected the federal government’s argument that Liberty’s University’s suit was barred by the AIA. In rejecting the federal government’s AIA arguments, the Fourth Circuit relied on the text of 26 U.S.C. § 4980H, which it determined gave no indication that Congress intended the AIA to apply. Id. at **5-6 (“Because Congress initially and primarily refers to the exaction as an “assessable payment” and not a “tax,” the statutory text suggests that Congress did not intend the exaction to be treated as a tax for purposes of the AIA.”).

The Fourth Circuit then discussed the federal government’s argument that Liberty University lacked standing to challenge the mandate because it was unlikely that the school would be penalized due to the fact that it already provides its employees with minimum essential coverage that may satisfy the employer mandate’s affordability criteria. Id. at 6. The Court dismissed this argument stating that Liberty “need not show that it will be subject to an assessable payment to establish standing if it otherwise alleges facts that establish standing.” Id. at 7. The Court went on to say that in this case, “Liberty alleges that the employer mandate and its ‘attendant burdensome regulations will . . . increase the cost of care’ and ‘directly and negatively affect [it] by increasing the cost of providing health insurance coverage.'” Id.

Liberty University argued that the employer mandate exceeds Congress’s commerce power because it compels employers to engage in particular conduct or purchase an unwanted product. The Court held that the employer mandate is a valid exercise of Congress’s authority under the Commerce Clause because the mandate regulates employee compensation, which is both a term of employment that substantially affects interstate commerce and an activity that substantially affects worker’s interstate mobility  Id. at 8-10. Lastly, the Court applied the Supreme Court’s “functional approach” in concluding that the employer mandate was also a valid exercise of Congress’s taxing power. Id. at 12-13.