The Religious Exemption for Employers Who Are Federal Contractors and Subcontractors

The United States Department of Labor’s Office of Federal Contracts Compliance Programs (OFCCP), which regulates contracts between the federal government and federal contractors and subcontractors, recently rescinded a rule enacted during the final days of the Trump Administration. The rule in question — Implementing Legal Requirements Regarding Equal Opportunity Clause’s Religious Exemption — had expanded the scope of the religious exemption from the anti-employment discrimination principles ordinarily applicable to employers who contract with the federal government. The rule has been controversial since it was first announced in late December 2020.

Within days of taking effect in January 2021, several labor organizations — and a coalition of fifteen states, led by New York — challenged the rule in the U.S. District Court for the Southern District of New York. Supporters of the 2020 rule argued that employers have a First Amendment right to make employment decisions based on faith and that the expanded religious exemption rule should be upheld. Most of the lawsuits challenging the 2020 rule were stalled in November 2021, when the Department of Labor said it planned to rescind it.

As of March 31, 2023, that plan to rescind has been fulfilled.

What is the religious exemption?

President Lyndon Johnson’s historic Executive Order 11246, issued on September 24, 1965, prohibits federal contractors and subcontractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity, and national origin. President George W. Bush amended Executive Order 11246 to mirror an exemption for “religious organizations” included in Title VII of the Civil Rights Act of 1964, which allows churches, religious schools, and other non-secular employers to give hiring preference to “individuals of a particular religion.”

The Trump administration greatly expanded the reach of President Bush’s amendment to include employers that “… are organized for religious purpose, hold themselves out to the public as carrying out a religious purpose, and engage in activity consistent with and in furtherance of that religious purpose.” What made the 2020 rule so controversial was that it extended to federal contractors — and “closely held corporations” — the same exemption from discrimination liability as a church, temple, or mosque. Critics believed the 2020 rule could open the door to discrimination based on race, sex, and other protected characteristics.

What now?

It goes back to how it was before: The Executive Order 11246 religious exemption is preserved. According to the OFCCP, the rescission of the 2020 rule returns the DOL to its longstanding practice of “following the test from extensive Title VII case law” to determine what qualifies for the religious exemption. The rescission also reestablishes OFCCP’s long-established view that “the exemption does not permit a qualifying employer to discriminate on the basis of race, color, sex, sexual orientation, gender identity, or national origin — even if such discrimination is religiously motivated.”

Questions?

If you are a federal contractor or subcontractor, or if you have any questions about how the religious exemption is applied or any issue involving the constitutional rights of religious organizations and their employees, don’t hesitate to contact Orr & Reno for assistance.

About the Authors: Steven L. Winer and Elizabeth Vélez 

Print this entry