December 17, 2020Client Alert

DOL Strengthens Religious Exemption for Federal Contractors

On December 7, 2020, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued a final rule (Rule) clarifying its existing religious exemption for federal government contractors from the anti-discrimination provisions of Executive Order 11246 (Order). The Rule adds new, expansive definitions to the religious exemption to ease anti-discrimination restrictions on religious organizations that contract with the federal government. The Rule’s stated goal is to encourage more religious organizations to participate in federal contracts by outlining “appropriate protections for their autonomy to hire employees who will further their religious missions.” The Rule is scheduled to become effective on January 8, 2021.

Executive Order 11246 and the Religious Exemption

The OFCCP enforces the anti-discrimination protections in Executive Order 11246 and its religious exemption. The Order prohibits federal contractors and subcontractors from discriminating in employment decisions on the basis of race, color, religion, sexual orientation, gender identity, or national origin. The Order also requires federal contractors to take affirmative action to ensure that they provide equal opportunity to employees in all aspects of their employment.

Not all federal contractors must comply with all aspects of the Order’s anti-discrimination protections. The OFCCP’s regulations exempt any federal contractor that is a “religious corporation, association, educational institution, or society” from complying with the Order “with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities.” Under the religious exemption, religious organizations may assert a religious defense to employment discrimination claims based on religion, but it does not permit discrimination on the basis of other protected categories.

The original religious exemption does not define many of these terms. As a result, according to the OFCCP, religious organizations have been deterred from joining federal contracting program because of uncertainty as to how this religious exemption applies in practice. The OFCCP contends that by adding definitions, the new Rule clarifies the scope of the exemption to “correct any misperception that religious organizations are disfavored in government contracting” and provide “clarity that may expand the eligible pool of federal contractors and subcontractors.”

The New Final Rule Enhances the Religious Exemption

The Rule defines the following key terms in the religious exemption: “religion”; “particular religion”; “religious corporation, association, educational institution”; and “sincere”.

Religion” means religious beliefs and “all aspects of religious observance and practice.”

Particular religion” means “the religion of a particular individual, corporation, association, educational institution, society, school, college, university, or institution of learning, including acceptance of or adherence to sincere religious tenants as understood by the employer as a condition of employment, whether or not the particular religion of an individual employee or applicant is the same as the particular religion of his or her employer or prospective employer.”

Religious corporation, association, educational institution, or society” means “a corporation, association, educational institution, society, school, college, university, or institution of learning” that means the following four criteria:

  1. Is organized for a religious purpose;
  2. Holds itself out to the public as carrying out a religious purpose;
  3. Engages in activity consistent with, and in furtherance of, that religious purpose; and
  4. (A) Operates on a not-for-profit basis; or (B) Presents other strong evidence that its purpose is substantially religious.

Sincere” means “sincere under the law applied by the courts of the United States when ascertaining the sincerity of a party’s religious exercise or belief.”

The Rule is intended to be “construed in favor of a broad protection of religious exercise, to the maximum extent permitted by the U.S. Constitution and law, including the Religious Freedom Restoration Act of 1993.”

Key Takeaways for Religious Employers

The Rule’s practical effect is that the OFCCP will not seek enforcement actions against religious employers qualifying for the religious exemption and make employment decisions based on the organization’s sincerely-held religious beliefs, observances, or practices. Likewise, qualifying religious employers may assert a religious defense to employment discrimination claims based on religion. Although the religious exemption has always provided these protections, the Rule clarifies the religious exemption’s expansive scope and shows the OFCCP’s renewed commitment to encouraging religious organizations to contract with the federal government.

It is critical for religious employers to remain mindful of what the religious exemption to the Order does not permit. The OFCCP is clear that race discrimination is always prohibited unlawful conduct notwithstanding a religious organization’s beliefs. Further, the Rule states the OFCCP “remains fully committed to enforcing all [applicable] nondiscrimination requirements, including those protecting employees from discrimination on the bases of sexual orientation and gender identity.” In other words, to benefit from the exemption, a religious employer must prove it made a particular employment decision based on sincerely-held religious beliefs. If a religious employer cannot make that showing, then it may face liability under anti-discrimination laws. Thus, religious employers must still exercise caution in making employment decisions.

It bears further mentioning the OFCCP’s issuance of the Rule followed contentious debate and strong opposition. The new administration under President-elect Joe Biden may consider amending or rescinding the Rule. The Rule may also engender significant litigation. Michael Best will track all developments.

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