Indiana Governor Signs Religious Freedom Law, Sparking Debates That Echo the Hobby Lobby Dispute

While supporters say the law protects small business owners' religious freedom, critics say it will allow for discrimination against gay customers and drive business out of the state.

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By Kate Taylor

Opinions expressed by Entrepreneur contributors are their own.

An Indiana law has sparked another round of debate on what constitutes business owners' religious freedoms and what is simply discrimination.

On Thursday, Indiana Governor Mike Pence signed SB-101, a law intended to protect religious freedom that declared the government may not "substantially burden" citizens' religious practices. In other words, the government cannot interfere with business practices rooted in owners' religious beliefs, including company policies and what customers are served.

"Last year the Supreme Court of the United States upheld religious liberty in the Hobby Lobby case based on the federal Religious Freedom Restoration Act, but that act does not apply to individual states or local government action," Indiana Governor Mike Pence said in a statement. "At present, 19 states—including our neighbors in Illinois and Kentucky—have adopted Religious Freedom Restoration statutes."

While supporters point to these Religious Freedom Restoration laws as necessary protections for religious business owners, critics have claimed the laws will allow businesses to discriminate against customers, especially gay and lesbian residents. In one commonly used example, if a bakery refuses to bake a wedding cake for a gay couple due to the owner's religious beliefs, this law could ensure that she will not face legal repercussions.

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Supporters say running a business according to one's beliefs, including excluding certain customers, is a business owner's right. Even if they themselves would not exclude potential customers, supporters argue that other business owners' right to do so is a necessary American freedom – even if they personally believe to do so is ethically and economically wrong.

Meanwhile, critics say that Religious Freedom Restoration statutes allow businesses to opt out of laws that are crucial to protecting the rights of historically-discriminated-against groups, such as gay, lesbian, bisexual and transgender individuals. For example, a landlord might refuse to rent apartments to same-sex couples, making it more difficult for them to find housing. Under SB-101, to do so may be considered his right, especially as Indiana does not have laws in place that prohibit housing discrimination based on sexual orientation or gender identity. In fact, Indiana does not currently have any laws addressing hate or bias crimes against gay or transgender citizens.

Pence said in a statement that the bill is "not about discrimination." There is not a single mention of sexual orientation in the bill. At this point, the concern that SB-101 will be used to condone discrimination is still an untested fear.

However, its passage has already made certain organizations wary of doing business in Indiana. Organizers of GenCon, a massive yearly video game convention held in Indianapolis, are threatening to relocate in the future. The NCAA, which is hosting the Final Four for men's basketball next week in Indianapolis, said that it planned to "closely examine the implications of this bill and how it might affect future events as well as our workforce."

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Some Indiana business owners have also spoken out against the bill. The CEOs of seven Indiana-based technology companies sent an open letter to the governor asking that the bill not be passed, as it would adversely impact their ability to recruit and retain talent in the tech sector. A number of business owners have started posting "Open For Service" stickers on windows and doors to indicate that they oppose business that discriminate against potential customers.

While the two sides don't agree on much, both point to Hobby Lobby as a major influence in the creation of SB-101. Supporters argue that Hobby Lobby's need to take their case to the Supreme Court represents an ongoing attack on business owners' religious beliefs. While the Supreme Court decided that for-profit companies can't be required violate owners' religious objections, Indiana and other states passing Religious Freedom Restoration Acts hope to reinforce this decision more broadly and on a state level.

Meanwhile, opponents of the bill argue that Hobby Lobby paved the way for businesses to opt out of any law that they judge incompatible with their religious beliefs, including anti-discrimination legislature. Opponents believe that this could have disastrous effects in the enforcement of laws intended to assist in everything from providing healthcare under the Affordable Care Act (as in the Hobby Lobby case) to same-sex marriage (as in SB-101).

How will this actually affect businesses? Only time will tell. The bill is short and vague on how it could be executed. Since Indiana doesn't have local state laws dealing with LGBTQ discrimination, it is possible that SB-101 will only serve as an empty threat or promise for business owners and customers. In any case, driving potential business out of the state isn't a promising start for a law intended to support local businesses.

Related: Supreme Court: Hobby Lobby Can't Be Forced to Buy Contraceptive Coverage

Kate Taylor


Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor. 

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