DOL Rolls Back Expansion of Religious Freedom Exemption for Federal Contractors

The United States Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) recently rescinded a rule established during the Trump administration that eased anti-discrimination restrictions for federal contractors. The old rule specifically authorized federal contractors to make hiring and employment decisions based on an employee’s religious beliefs. According to the OFCCP, the DOL’s anti-discrimination watchdog for federal contractors and subcontractors, the previous rule conflicted with former President Lyndon B. Johnson’s landmark Executive Order 11246, which prohibits federal contractors from discriminating on the basis of race, color, national origin, gender, gender identity, sexual orientation or religion. 

In 2002, former 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 that allows churches, religious schools and other non-secular employers to give hiring preference to “individuals of a particular religion.” In 2020, the Trump administration broadly expanded this exemption 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.” 

The OFCCP published a proposal in November 2021 foreshadowing its intention to restore the 2002 amendment to Executive Order 11246. The U.S. Supreme Court’s marked shift toward expanding religious freedom protections for employers may have been a catalyst for the proposal. Proponents of the old rule argue that it clarified the scope of the religious exemption as set forth in Executive Order 11246. The DOL announced its rescission of the Trump-era rule amid a horde of official comments to the OFCCP’s proposal and a continuum of lawsuits challenging the old rule under Title VII. 

To qualify for the exemption under the new rule, an employer must satisfy the definition of a “religious corporation, association, educational institution, or society.” In the Title VII context, courts have interpreted those definitions by considering:

• • Whether the entity is for-profit
  • Whether the entity produces a secular product
  • Whether the entity’s incorporating documents state a religious purpose
  • Whether the entity is “owned, affiliated with or financially supported” by a church or synagogue
  • Whether a formal religious body participates in the management of the entity
  • Whether the entity holds itself out to the public as secular or non-secular
  • Whether prayer or religious worship is a regular part of the entity’s activities
  • For educational institutions, whether religious instruction is included in the institutions’ curriculum
  • Whether the entity is exclusively comprised of members of the same religion

The new rule was published in the Federal Register on March 1, 2023, and will take effect on March 31, 2023. In the meantime, employers who contract with the federal government should closely monitor the new rule to ensure full compliance with the OFCCP’s anti-discrimination and affirmative action regulations.

Please contact Marcellus Chamberlain or any member of the Phelps Labor and Employment team if you have questions or need advice or guidance.