Well over a year since the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) published its proposed rule updating regulations implementing the religious exemptions from certain nondiscrimination prohibitions under Executive Order (E.O.) 11246, the agency is finally publishing the final rule in the waning days of the Trump administration.

The OFCCP indicates that the agency received almost 110,000 comments on the proposed rule. Further noting that over 90,000 of those were “generated by organized comment-writing efforts,” implying that most comments did not raise significantly different substantive issues, that still left the agency with around 20,000 comments to parse and consider before formulating the final rule. And those comments had some effect.

In many instances the OFCCP stuck to its guns, but in many others the agency made modifications to the proposed rule in direct response to public comment. This is a very good thing, by the way, and indicates that whatever politics of the day that might have inspired the rulemaking are not necessarily dominating the process.

The rule itself is fairly straightforward, but the notice of the rule contains a wealth of detail akin to legislative history often cited when interpreting statutes. This information can be extremely valuable for interpreting the final rule and anticipating how the OFCCP will (and won’t) enforce it.

While we highly recommend reading the full notice, below we will highlight some of the key revisions to the final rule.

Definitions

The proposed rule would add regulatory definitions for the terms, “religion,” “particular religion,” “sincere,” and “religious corporation, association, educational institution, or society.” In response to public comment the agency made some modifications to some of the proposed definitions, dropped the proposed addition of the term “exercise of religion” entirely, and provided more examples for the definition of “religious corporation, association,” etc.

The definition of “religion” does not change from the original proposal. The agency notes commenters’ concerns that the definition does not address the employer’s duty to provide religious accommodation, noting that accommodations are already addressed in a separate section of existing regulations and that accommodation requirements are not being revised.

Threshold Test

Perhaps the largest revision to the proposed rule involves the definition of “religious corporation, association, educational institution, or society” (hereinafter referred to simply as “religious organizations”). The final rule provides a four-prong test to determine whether or not an organization is a religious one for these purposes.

To claim a religious exemption, the organization must show that it:

1. Was 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. Either:
   • Operates on a not-for-profit basis; or
   • Presents other strong evidence that its purpose is substantially religious.

With regard to the fourth prong, many commenters feared that the agency was broadening the definition of a religious organization too much by allowing for-profit organizations to potentially benefit from the exemption. The final rule notes, however, that while the fourth prong does allow for this in certain circumstances, the agency does not anticipate that many for-profit organizations will claim the exemption in the first place and that most will find it difficult to do so successfully. Whether or not that provides assurance to commenters with expansionist concerns remains to be seen.

The final rule now addresses particular evidence required to establish each prong, as well as more examples with accompanying explanation. For instance, with regard to the first prong, the final rule clarifies that document evidence in the form of either corporate formation documents (such as articles of incorporation) or “documents that are central to the organization’s identity and purpose” in the case of corporate forms that do not require formation documents such as unincorporated proprietorships or partnerships.

Scope

The final rule directly addresses concerns about the potential scope of religious exemptions and reiterates that the exemptions are limited to discrimination on the basis of religion alone. In other words, claiming a religious exemption is not an excuse to discriminate against applicants or employees on the basis of other protected characteristics like race/ethnicity or sex.

Note here that, unlike Title VII of the Civil Rights Act, the OFCCP’s regulations explicitly list sexual orientation and gender identity as protected characteristics. The recent Supreme Court decision in Bostock affirmed that Title VII also protects against LGBTQ+ discrimination, just not directly. Rather, the Court concluded that LGBTQ+ discrimination (impliedly legal) is not possible without engaging in prohibited sex discrimination. Regardless of the legal gymnastics there, Title VII and E.O. 11246 are effectively aligned on the matter and when/if a religious organization discriminates against an applicant or employee based on their LGBTQ+ status, the exemption does not necessarily provide the employer safe harbor.

The Supreme Court’s reasoning in Bostock may also play a role in evaluating the extent to which things like refusing to cover reproductive services in company health plans would be allowed under a religious exemption. It is difficult to imagine, under a Bostock framework, how that sort of policy could be enacted without running afoul of prohibited sex discrimination, even if reproductive issues are “central” to a particular religion espoused by the employer.

The “Devil” in the Details

Overall, the OFCCP’s final rule could be characterized as a “win” or a “loss” across the political spectrum, depending on interpretation and actual enforcement practices and circumstances. Undoubtedly there will be instances when religious rights organizations are disappointed in its application and times when civil rights advocates will be equally disappointed.

This may actually be the mark of good policy-making, though. At the end of the day, the OFCCP and courts must weigh competing interests and try to strike a reasonable balance. In any such exercise both opposing parties should, ideally, be partially vindicated and required to partially compromise.

The final rule does not necessarily put a “thumb on the scale” for one group or another. Rather, it appears to be a sincere effort to provide the regulator and the contractor community with clearer rules and guidelines for more consistent enforcement. That is a strong foundation for future inquiries into whether and to what extent those rules and guidelines are the right ones, or if further tinkering is required.

The fact remains, though, that claims of religious exemption have historically been and, according to the OFCCP, still are exceedingly rare. While reporting bias may give the impression that religious exemption claims are rampant, that simply does not match up with reality.

But if your organization is interested in a potential religious exemption claim, be sure to read through the OFCCP’s final rule in detail and share with your legal team. Because as with so many things, “the devil is in the details.” Please forgive the pun.

As always, if you have questions, feel free to contact us at bcgi@biddle.com.