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In a move that will take effect just days before the end of the current administration’s term, the Department of Labor (DOL), Office of Federal Contract Compliance Programs (OFCCP), published a final rule expanding religious exemptions for federal contractors. The rule, which was announced on December 9, 2020 and takes effect on January 8, 2021, provides expanded protection to federal contractors who may otherwise be subject to discrimination liability for hiring, firing or making other employment decisions motivated by religious belief.    

Background of the Exemption and Recent Supreme Court Decisions

According to the OFCCP, the rule is meant to clarify the scope and application of the religious exemption contained in Executive Order 11246 by adding definitions of key terms and a rule of construction. EO 11246 requires federal contractors to include an equal opportunity clause in all covered contracts and subcontracts, but the order contains an exemption that applies to certain religious organizations “with respect to the employment of individuals of a particular religion to perform work connected with the carrying on” of those religious organizations’ activities.

The OFCCP generally interprets nondiscrimination provisions of EO 11246 consistent with the principles of Title VII of the Civil Rights Act of 1964. The OFCCP issued the final rule because “the scope and application of the Title VII religious exemption have not been given a uniform interpretation across the federal circuit courts, and many of the relevant Title VII decisions predate recent and relevant Supreme Court precedent, leading to a corresponding lack of clarity regarding the scope and application of the Executive Order 11246 religious exemption.” Thus, the rule “is intended to correct any misperception that religious organizations are disfavored in government contracting by setting forth appropriate protections for their autonomy to hire employees who will further their religious missions, thereby providing clarity that may expand the eligible pool of federal contractors and subcontractors.”

The rule’s executive summary specifically considers recent U.S. Supreme Court precedent on religious rights. These include:

  • Masterpiece Cakeshop, Ltd. v. Colo. Civil Rights Comm’n, 138 S. Ct. 1719 (2018)
    • Holding that the government violates the Free Exercise Clause of the First Amendment when its decisions are based on hostility to religion or a religious viewpoint.
  • Trinity Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012 (2017)
    • Holding that the government violates the Free Exercise Clause of the First Amendment when it decides to exclude an entity from a generally available public benefit because of its religious character, unless that decision withstands the strictest scrutiny.
  • Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682 (2014)  
    • Holding the Religious Freedom Restoration Act applies to federal regulation of the activities of for-profit closely held corporations.

The rule states that these recent Supreme Court decisions have “addressed the freedoms and antidiscrimination protections that must be afforded religion-exercising organizations and individuals under the U.S. Constitution and federal law.” The OFCCP explains that it “has chosen a path consistent with the Supreme Court’s religion and Title VII jurisprudence as well as what OFCCP views to be the more persuasive reasoning of the federal courts of appeals in these areas of the law.” 

Nonetheless, it remains to be seen whether applying the rule in practice will prove to be at odds with decisions directly addressing discrimination in the workplace, such as the Supreme Court’s June 2020 decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), which held that Title VII forbids workplace discrimination based on sexual orientation and transgender status.  

The New Rule and its Practical Impact

The rule applies to a “religious corporation, association, educational institution, or society” as well as “closely held” corporations that are owned and operated by a small number of people. In order to qualify, a federal contractor must certify its non-profit status or “strong evidence that it possesses a substantial religious purpose.” 

The rule’s extension to for-profit federal contractors who meet the “substantial religious purpose,” is determined by the entity’s “sincere understanding of its religious tenets.” The OFCCP will determine whether an organization meets this standard based upon the OFCCP’s interpretation of “sincere” religious belief; however, it is not clear how the OFCCP will determine whether an organization has such a “sincere” religious belief.       

The rule elicited over 109,000 comments during the public comment period—the most the agency has received for any proposed rule since it started accepting the online submission of public comments. Critics of the rule, including the American Civil Liberties Union and Lambda Legal, an LGBTQ+ advocacy organization, have expressed strong resistance to the rule, sounding the alarm for potential employment abuse in the context of government contracting.

In a press release issued December 7, 2020, Lambda Legal warns the rule could give carte blanche for religious organizations to discriminate while simultaneously accepting taxpayer funds. According to Lambda Legal, “[t]he [DOL] has crafted a grotesquely overbroad exemption that will be used by many federal contractors as a totally improper, catch-all defense to discrimination complaints. The rule allows contractors, including large for-profit companies, to use the special treatment designed for religious organizations if they merely ‘affirm [] a religious purpose in response to inquiries from a member of the public or a government entity.’”

On the other hand, the Family Research Council, a Christian public-policy organization and supporter of the rule, explains that the “protections laid out in the DOL’s proposed rule reaffirm the foundational principle that faith adherents must be afforded the same opportunities to participate in federal contracting as any other person.”

In sum, while the new rule expands the opportunity for certain government contractors to rely on the religious exemption, it remains to be seen whether the DOL, under the new Biden administration, will embrace the rule or take steps to narrow or even revoke the rule.