Implementing Legal Requirements Regarding the Equal Opportunity Clause's Religious Exemption, 79324-79372 [2020-26418]

Download as PDF 79324 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations DEPARTMENT OF LABOR Office of Federal Contract Compliance Programs 41 CFR Part 60–1 RIN 1250–AA09 Implementing Legal Requirements Regarding the Equal Opportunity Clause’s Religious Exemption Office of Federal Contract Compliance Programs, Labor. ACTION: Final rule. AGENCY: The U.S. Department of Labor’s (DOL’s) Office of Federal Contract Compliance Programs (OFCCP) publishes this final rule to clarify the scope and application of the religious exemption. These clarifications to the religious exemption will help organizations with federal government contracts and subcontracts and federally assisted construction contracts and subcontracts better understand their obligations. SUMMARY: Effective Date: These regulations are effective January 8, 2021. FOR FURTHER INFORMATION CONTACT: Tina Williams, Director, Division of Policy and Program Development, Office of Federal Contract Compliance Programs, 200 Constitution Avenue NW, Room C–3325, Washington, DC 20210. Telephone: (202) 693–0104 (voice) or (202) 693–1337 (TTY). SUPPLEMENTARY INFORMATION: DATES: jbell on DSKJLSW7X2PROD with RULES2 I. Executive Summary On August 15, 2019, OFCCP issued a notice of proposed rulemaking (NPRM) to clarify the scope and application of Executive Order 11246’s (E.O. 11246) religious exemption consistent with recent legal developments. 84 FR 41677. During the 30-day public comment period, OFCCP received 109,726 comments on the proposed rule.1 This total included over 90,000 comments generated by organized commentwriting efforts. Comments came from individuals and from a wide variety of organizations, including religious organizations, universities, civil rights and advocacy organizations, contractor associations, legal organizations, labor organizations, and members of Congress. Comments addressed all aspects of the NPRM. OFCCP appreciates the public’s robust 1 Of the 109,726 comments, 35 comments were inadvertently posted on Regulations.gov before redactions were made. The posted comments were withdrawn, redacted, and then reposted. When the comments were reposted, the number of comments on Regulations.gov increased to 109,761. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 participation in this rulemaking, and the agency has revised certain aspects of this regulation in response to commenters’ concerns. As stated in the NPRM, on July 2, 1964, President Lyndon B. Johnson signed the landmark Civil Rights Act of 1964. See Public Law 88–352, 78 Stat. 241. This legislation prohibited discrimination on various grounds in many of the most important aspects of civic life. Its Title VII extended these protections to employment opportunity, prohibiting discrimination on the basis of race, color, religion, sex, or national origin. In Title VII, Congress also provided a critical accommodation for religious employers. Congress permitted religious employers to take religion into account for employees performing religious activities: ‘‘This title shall not apply . . . to a religious corporation, association, or society with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, or society of its religious activities . . . .’’ Public Law 88–352, 702(a), 78 Stat. 241, 255 (codified as amended at 42 U.S.C. 2000e–1(a)). Congress provided a similar exemption for religious educational institutions. See id. § 703(e)(2), 78 Stat. at 256 (codified at 42 U.S.C. 2000e–2(e)(2)). Title VII’s protections for religious organizations were expanded by Congress in 1972 into their current form. Congress added a broad definition of ‘‘religion’’: ‘‘The term ‘religion’ includes all aspects of religious observance and practice, as well as belief, unless an employer demonstrates that he is unable to reasonably accommodate to an employee’s or prospective employee’s religious observance or practice without undue hardship on the conduct of the employer’s business.’’ Equal Employment Opportunity Act of 1972, Public Law 92–261, 2(7), 86 Stat. 103 (codified at 42 U.S.C. 2000e(j)). Congress also added educational institutions to the list of those eligible for section 702’s exemption. In addition, Congress broadened the scope of the section 702 exemption to cover not just religious activities, but all activities of a religious organization: ‘‘This title [VII] shall not apply . . . to a religious corporation, association, educational institution, or society 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.’’ Id. § 3, 86 Stat. at 104 (codified at 42 U.S.C. § 2000e–1(a)). The Supreme PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 Court unanimously upheld this expansion of the religious exemption to all activities of religious organizations against an Establishment Clause challenge. See Corp. of the Presiding Bishop of the Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327, 330 (1987).2 One year after President Johnson signed the Civil Rights Act, he signed E.O. 11246, requiring equal employment opportunity in federal government contracting. The order mandated that all government contracts include a provision stating that ‘‘[t]he contractor will not discriminate against any employee or applicant for employment because of race, creed, color, or national origin.’’ Exec. Order No. 11246, § 202, 30 FR 12319, 12320 (Sept. 28, 1965). Two years later, President Johnson expressly acknowledged Title VII of the Civil Rights Act when expanding E.O. 11246 to prohibit, as does Title VII, discrimination on the bases of sex and religion. See Exec. Order No. 11375, § 3, 32 FR 14303–04 (Oct. 17, 1967). In 1978, the responsibilities for enforcing E.O. 11246 were consolidated in DOL. See Exec. Order No. 12086, 43 FR 46501 (Oct. 5, 1978). In its implementing regulations, DOL imported Title VII’s exemption for religious educational institutions. See 43 FR 49240, 49243 (Oct. 20, 1978) (now codified at 41 CFR 60–1.5(a)(6)); cf. 42 U.S.C. 2000e– 2(e)(2). In 2002, President George W. Bush amended E.O. 11246 by expressly importing Title VII’s exemption for religious organizations, which likewise has since been implemented by DOL’s regulations. See Exec. Order No. 13279, § 4, 67 FR 77143 (Dec. 16, 2002) (adding E.O. 11246 § 202(c)); 68 FR 56392 (Sept. 30, 2003) (codified at 41 CFR 60– 1.5(a)(5)); cf. 42 U.S.C. 2000e–1(a). Because the exemption administered by OFCCP springs directly from the Title VII exemption, it should be given a parallel interpretation, consistent with the Supreme Court’s repeated counsel that the decision to borrow statutory text in a new statute is a ‘‘strong indication that the two statutes should be interpreted pari passu.’’ Northcross v. Bd. of Educ. of Memphis City Sch., 412 U.S. 427, 428 (1973) (per curiam). OFCCP thus generally interprets the nondiscrimination provisions of E.O. 11246 consistent with the principles of Title VII. Because OFCCP regulates federal contractors rather than private employers generally, OFCCP must apply Title VII principles in a manner that 2 Justice White wrote the majority opinion for five justices. Justices O’Connor, Blackmun, and Brennan (with Justice Marshall joining) wrote opinions concurring in the judgment. E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations best fit its unique field of regulation, including when applying the religious exemption. With that said, there has been some variation among federal courts of appeals in interpreting the scope and application of the Title VII religious exemption, and many of the relevant Title VII court opinions predate Supreme Court decisions and executive orders that shed light on the proper interpretation. The purpose of this final rule is to clarify the contours of the E.O. 11246 religious exemption and the related obligations of federal contractors and subcontractors to ensure that OFCCP respects religious employers’ free exercise rights, protects workers from prohibited discrimination, and defends the values of a pluralistic society. See, e.g., Bostock v. Clayton Cnty., 140 S. Ct. 1731, 1754 (2020) (‘‘[T]he promise of the free exercise of religion . . . lies at the heart of our pluralistic society.’’). This 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. 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. See, e.g., Masterpiece Cakeshop, Ltd. v. Colo. Civil Rights Comm’n, 138 S. Ct. 1719, 1731 (2018) (holding 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, 2022 (2017) (holding 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, 719 (2014) (holding the Religious Freedom Restoration Act applies to federal regulation of the activities of for-profit closely held corporations); HosannaTabor Evangelical Lutheran Church & Sch. v. EEOC, 565 U.S. 171, 196 (2012) (holding the ministerial exception, grounded in the Establishment and Free Exercise clauses of the First Amendment, bars an employmentdiscrimination suit brought on behalf of a minister against the religious school VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 for which she worked). Recent executive orders have done the same. See Exec. Order No. 13831, 83 FR 20 715 (May 8, 2018); Exec. Order No. 13798, 82 FR 21 675 (May 9, 2017). Additional decisions from the Supreme Court, issued after the NPRM, have likewise extended Title VII’s protections while affirming the importance of religious freedom. See Bostock, 140 S. Ct. at 1754 (holding Title VII’s prohibition on discrimination because of sex prohibits ‘‘fir[ing] an individual merely for being gay or transgender’’); Little Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania, 140 S. Ct. 2367, 2379–84 (2020) (holding the Departments of Labor, Health and Human Services, and the Treasury had authority to promulgate religious and conscience exemptions from the Affordable Care Act’s contraceptive mandate); Espinoza v. Mont. Dep’t of Revenue, 140 S. Ct. 2246 (2020) (a state ‘‘cannot disqualify some private schools [from a subsidy program] solely because they are religious’’ without violating the Free Exercise clause); and Our Lady of Guadalupe Sch. v. Morrissey-Berru, 140 S. Ct. 2049, 2069 (2020) (holding the ministerial exception applies ‘‘[w]hen a school with a religious mission entrusts a teacher with the responsibility of educating and forming students in the faith’’). These decisions are discussed in the final rule’s analysis as appropriate and applicable. In this final rule, OFCCP has sought to follow the principles articulated by these recent decisions and orders, and has interpreted older federal appellatelevel case law in light of them as applicable. OFCCP 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. A. Title VII and the EEOC Generally Some commenters on the NPRM agreed that OFCCP’s proposal was appropriately consistent with Title VII principles. For example, a faith-based advocacy organization commented that the religious employer exemption in federal contracting regulations is modeled on Title VII, and should therefore be understood ‘‘in the strong way’’ the Title VII exemptions have traditionally been understood. Other commenters asserted that OFCCP’s proposal was inconsistent with Title VII overall. Some of these commenters stated that the proposal’s interpretation of the exemption was contrary to congressional intent. For example, an affirmative action PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 79325 professionals association commented that Congress has repeatedly declined to extend the Title VII exemption to government-funded entities. A lesbian, gay, bisexual, and transgender (LGBT) rights advocacy organization commented that, at the time Title VII was enacted, Congress could not have envisioned that religious organizations that would qualify for the Title VII exemption would also seek to contract with the federal government, ‘‘let alone be given a broad right to discriminate based on religion while accepting federal funding.’’ In a related vein, OFCCP also received comments objecting generally to the provision of a religious exemption for federal contractors or specifically to OFCCP’s proposal. Most of these commenters characterized the religious exemption as taxpayer- or governmentfunded discrimination that was contrary to the purpose of E.O. 11246. For example, an affirmative action professionals association commented that ‘‘[t]he Federal Government should not be in the business of funding employment discrimination’’ and emphasized that religious organizations should not expect to maintain autonomy and independence from the government when they solicit and accept government contracts. An international labor organization submitted a similar comment, stating that organizations that choose to accept government funding through government contracts should not be allowed to conduct what it described as discrimination against qualified job applicants and employees. Relatedly, a public policy research and advocacy organization commented that no one should be disqualified from a taxpayer-funded job because they are the ‘‘wrong’’ religion or do not adhere to any religion. A technology company commented that the proposal conflicted with the spirit of nondiscrimination law. A group of U.S. Senators commented: ‘‘The government cannot use religious exemptions as a pretext to permit discrimination against or harm others.’’ Some religious organizations were among the commenters that opposed the provision of a religious exemption for federal contractors. One religious organization commented that, in line with its commitment to religious freedom, it opposed granting government contracts to organizations that, in its words, discriminate against qualified individuals based on their practices and beliefs. One religious organization commented that barring people from taxpayer-funded jobs based on their faith violates principles of equality and meritocracy. Another faith- E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79326 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations based organization cited First Amendment separation of church and state principles, and commented that, while some religious organizations hire staff based on religion, accommodations for religious hiring should not be applied broadly in the federal contracts context, as federal contracts are not provided to advance religious ends. Other commenters stated that the proposal’s expansion of the exemption was contrary to Title VII case law or principles. For example, an international labor organization commented that, in its view, the proposed rule mischaracterized federal case law in order to transform provisions designed to protect workers from religious discrimination into exemptions that would allow federally funded employers to discriminate against workers for religious reasons. Some commenters stated that the proposal was inconsistent with the interpretation of Title VII by the EEOC, the agency primarily responsible for enforcing Title VII. A group of state attorneys general commented that OFCCP should not undermine the EEOC’s efforts, ‘‘as would occur under the Proposed Rule, which takes positions contrary to the EEOC.’’ The state attorneys general asserted that the proposal would not increase clarity because it would create two separate legal standards for federal contractors and OFCCP staff—one under Title VII and one under E.O. 11246. A contractor association asserted that ‘‘federal contractors could face the Hobson’s choice of determining whether compliance with an OFCCP regulation will result in liability under Title VII.’’ Other commenters stated that the overall proposal departed from OFCCP’s prior interpretation, which they asserted had been consistent with the EEOC’s interpretation of Title VII prior to August 2018, when OFCCP issued Directive 2018–03, concerning the religious exemption in section 204(c) of E.O. 11246. For example, a public policy research and advocacy organization asserted that, until August 2018, the Department consistently interpreted the E.O. 11246 religious exemption narrowly to permit preferences for coreligionists by certain religious organizations, and applied the ‘‘motivating factor’’ test to evaluate claims of discrimination. OFCCP agrees with the comments stating that the rule will provide necessary clarity for contractors and potential contractors about the scope of the E.O. 11246 religious exemption. Regarding comments that a religious exemption protecting government contractors is contrary to congressional VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 intent or that such an exemption is misplaced in the government contracting context, that question is not at issue in this rulemaking. The religious exemption was added to E.O. 11246 almost twenty years ago, and OFCCP’s implementing regulations are nearly as old. The existence of the exemption itself is not at issue in this rulemaking. Regarding comments that the rule deviates from the EEOC’s interpretation of the Title VII religious exemption or creates two separate standards, OFCCP believes these concerns are unfounded. This rule is restricted to the application of the religious exemption. The vast majority of contractors and their employees, as well as OFCCP’s enforcement program, will be unaffected by this rule. As for the religious exemption specifically, OFCCP has followed the Title VII case law it finds most persuasive, especially in light of the principles of religious equality and autonomy reinforced by recent executive orders and Supreme Court decisions. OFCCP has also adapted Title VII principles to ensure a proper fit in the government contracting context. OFCCP’s specific choices in this regard and how they compare to the EEOC’s stated views are explained more fully in the section-by-section discussion and a section at the end of this preamble. OFCCP has also made some revisions to align this rule even more closely with Title VII. But even assuming any variation with the EEOC as to the exemption, this rule does not create a ‘‘Hobson’s choice’’ for government contractors. The exemption, to describe it most broadly, is an optional accommodation for religious organizations, not a requirement mandating compliance. In the rare, hypothetical instance where a contractor would be entitled to the E.O. 11246 exemption but not the Title VII exemption, the contractor would not face conflicting liability regardless of its choice: Rather, it would face potential liability under one enforcement scheme rather than two. OFCCP acknowledges that it is often helpful to regulated parties for regulators to try to harmonize their approaches when enforcing related legal requirements. OFCCP believes its approach here is consistent with Title VII and religious-accommodation principles, adapted appropriately to its own regulatory context and the government contracting community. OFCCP also is not concerned about this rule purportedly decreasing clarity by creating two standards for additional reasons. For one, it was not a concern primarily raised by commenters who may qualify for the E.O. 11246 religious PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 exemption. Those commenters—the ones who would actually need to negotiate the purportedly two different standards—were by and large supportive of the rule and did not raise this concern. For another, OFCCP believes that this rule, which incorporates many recent Supreme Court decisions and other case law and is in accord with recent Executive Orders and guidance from the Department of Justice, offers clarity as compared to less recent guidance from EEOC that does not incorporate these more recent developments. B. The Relevance of Recent Supreme Court Cases Commenters both supported and opposed OFCCP’s acknowledgement of recent Supreme Court cases granting antidiscrimination protections for persons bringing religious claims in a variety of contexts. These cases included Hobby Lobby, Trinity Lutheran, and Masterpiece Cakeshop. Supreme Court decisions in employment and religion cases issued after the proposed rule’s publication are addressed elsewhere in the preamble as appropriate. Some commenters expressed support for OFCCP’s interpretations of these Supreme Court cases and their application to the proposal in general. For example, a group of members of the U.S. House of Representatives noted approvingly that the proposed rule was consistent with these cases, each of which ‘‘came with the cost’’ of religious Americans shouldering the material, emotional, and spiritual burdens associated with litigating issues related to their faith. Discussing Masterpiece Cakeshop, a religious public policy women’s organization commented that the Supreme Court in that case acknowledged ‘‘the blatant, systematic government bias’’ against the owner of Masterpiece Cakeshop for refusing to participate in a same-sex wedding ceremony, noting that the owner continues to be harassed for his faith ‘‘to this day.’’ The commenter stated that this and other such cases prove that further clarification regarding existing First Amendment protections are necessary. Addressing Trinity Lutheran, a religious public policy advocacy organization asserted that the Supreme Court in that case made clear that Trinity Lutheran Church’s status as a church did not prevent it from participating on an equal playing field with secular organizations in seeking government grants. The commenter continued that OFCCP’s proposed rule simply reaffirmed a principle the E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations Supreme Court had held to be consistent with the First Amendment. Other commenters criticized OFCCP’s reliance on these Supreme Court cases. Many of these commenters stated that the cases were inapplicable because they did not involve federal contractors. For example, a secular humanist advocacy organization criticized the proposed rule for its reliance on case law unrelated to employment discrimination laws or the text of E.O. 11246. Many of the commenters stated that the cases cited, if interpreted properly, did not provide support for OFCCP’s proposal. For example, a labor union commented that the decisions cited did not authorize ‘‘the expansive view that the Proposed Rule seeks to support.’’ A group of U.S. Senators commented: ‘‘The Court has long held federally-funded employers cannot use religion to discriminate. Each of the cases cited in the proposed rule are consistent with that approach.’’ Many of the commenters who criticized OFCCP’s discussion of Masterpiece Cakeshop pointed to this sentence from the Court’s opinion: ‘‘While . . . religious and philosophical objections are protected, it is a general rule that such objections do not allow business owners and other actors in the economy and in society to deny protected persons equal access to goods and services under a neutral and generally applicable public accommodations law.’’ 138 S. Ct. at 1727. A labor union asserted that Masterpiece Cakeshop was irrelevant in the ‘‘entirely secular’’ context of federal contracting, and argued that the Establishment Clause dictates that federal contracting must be entirely secular. A transgender civil rights organization commented that, in the proposed rule, OFCCP did not suggest that its existing requirements or prior conduct reflect the sort of hostility to religious beliefs that the Court was concerned with in Masterpiece Cakeshop, and noted that, on the contrary, ‘‘EEO requirements for federal contractors fall squarely within the ‘general rule’ stated by the Court.’’ A group of state attorneys general commented that, if anything, Masterpiece Cakeshop stands for the proposition that overly broad religious objections to civil rights laws of general applicability are inappropriate. Commenters also criticized OFCCP’s discussion of Trinity Lutheran. Many of these commenters read the decision narrowly—as holding that ‘‘the state violated the First Amendment by denying a public benefit to an otherwise eligible recipient solely on account of its religious status,’’ as one contractor VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 association described it—and asserted that the decision was therefore inapplicable to OFCCP’s proposal. Some of these commenters pointed to a footnote in the Court’s opinion limiting it to ‘‘express discrimination based on religious identity with respect to playground resurfacing.’’ Trinity Lutheran, 137 S. Ct. at 2024 n.3. Many commenters stated that there are legally significant distinctions between government grant programs and government contracts. A labor union argued, regarding the Supreme Court’s decision, that it would have been perfectly lawful for the government to deny grants to religious applicants who restricted access to their playgrounds on the basis of sexual orientation, for example. The union also asserted that ‘‘Federal contracting is not a generally available public benefit, but a reticulated system for the funding and delivery of governmental functions and services by private parties.’’ A religious organization commented that Trinity Lutheran did not address whether a religious institution can discriminate with public funds, and stressed that the government’s interest in prohibiting discrimination in taxpayer-funded jobs is ‘‘of the highest order.’’ A group of state attorneys general commented that the Court’s decision drew a careful distinction between situations where a benefit is denied to an entity based solely that entity’s religious identity and situations involving neutral and generally applicable laws that restrict an entity’s actions. The group asserted that E.O. 11246’s anti-discrimination provisions are directed toward the latter. An LGBT rights advocacy organization commented that, because the decision involved a religious grant applicant that had agreed to abide by certain nondiscrimination provisions, its holding was inapplicable in the federal contracting context where funding is awarded on a competitive basis, as well as in situations where the contractor has no intention of complying with governing nondiscrimination rules. Some commenters similarly criticized OFCCP’s discussion of Hobby Lobby. Many of these commenters quoted or paraphrased the following paragraph from the Supreme Court’s decision: The principal dissent raises the possibility that discrimination in hiring, for example on the basis of race, might be cloaked as religious practice to escape legal sanction. . . . Our decision today provides no such shield. The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 79327 racial discrimination are precisely tailored to achieve that critical goal. Hobby Lobby, 573 U.S. at 733. For example, a city public advocate argued that the Hobby Lobby decision affirmed that securing equal access to workplace participation is a compelling interest. A civil liberties and human rights legal advocacy organization commented that the Court in Hobby Lobby expressly declined to promulgate a rule authorizing for-profit corporations that willingly enter into contracts with the federal government to discriminate against workers ‘‘because of who they are.’’ A contractor organization commented that it is ‘‘not at all clear’’ that Hobby Lobby supports the idea that religious rights override any other legal rights, given that the decision concerns only the availability of government programs. Finally, some commenters criticized OFCCP’s discussion of Hosanna-Tabor. Many of these commenters pointed out that this case applied the (constitutionally grounded) ministerial exception developed by courts and not the (statutory) Title VII religious exemption enacted by Congress. Some commenters expressed doubt that the ministerial exception was applicable to federal contractors. For example, a transgender legal professional organization commented that, though the ministerial exception bars ministers from pursuing employment discrimination cases, most federal contractors are unlikely to employ ministers or others who ‘‘preach or teach the faith.’’ Other commenters expressed concern that OFCCP intended to broaden the scope of the religious exemption to mimic the ministerial exception and asserted that HosannaTabor did not support such an expansion. For example, a labor union commented that the decision could not be read to extend the ministerial exception to lay people employed by religious institutions, or to private forprofit businesses whose owners may also hold religious beliefs. OFCCP believes the critical comments here are misplaced because OFCCP did not acknowledge these Supreme Court cases for the propositions that commenters said the agency did. OFCCP acknowledged in the NPRM that these Supreme Court cases did not specifically address government contracting. And indeed, with the exception of Hosanna-Tabor, they did not specifically address employment law, Title VII, or E.O. 11246. Rather, OFCCP noted the recent Supreme Court cases for the general and commonsense propositions that the government must E:\FR\FM\09DER2.SGM 09DER2 79328 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations be careful when its actions may infringe private persons’ religious beliefs and that it certainly cannot target religious persons for disfavor. These principles are not new, but these recent cases show that those principles remain vital. That is especially important when government at times has been callous in its treatment of religious persons.3 Those general themes of caution, permissible accommodation, and equality for religious persons have informed the policy approach in this rule. Where specific holdings or language in these Supreme Court decisions—and additional Supreme Court decisions issued since—suggest answers to specific aspects of this rule, they are noted in the section-by-section analysis. Comments on those more specific issues are addressed there as well. jbell on DSKJLSW7X2PROD with RULES2 C. Clarity and Need for the Rule The NPRM noted that prior to its publication, some religious organizations provided feedback to OFCCP that they were reluctant to participate as federal contractors because of uncertainty regarding the scope of the religious exemption contained in section 204(c) of E.O. 11246 and codified in OFCCP’s regulations. The NPRM also noted that while ‘‘only a subset of contractors and would-be contractors may wish to seek this exemption, the Supreme Court, Congress, and the President have each affirmed the importance of protecting religious liberty for those organizations who wish to exercise it.’’ 84 FR at 41679. The NPRM also noted throughout OFCCP’s desire to provide clarity in this area of regulation. OFCCP received numerous comments addressing the need for the proposed rule. Some commenters stated that the proposal was necessary to ensure that religious entities could contract with the federal government without compromising their religious identities or missions. Many of these commenters noted the important services provided by religious organizations. For example, a religious school association encouraged the federal government to protect religious staffing ‘‘in all forms of federal funding,’’ asserting that doing so would enable religious organizations to expand the critical services they provide. A religious liberties legal organization likewise commented that religious organizations are often uniquely equipped to respond to the 3 See, e.g., Nat’l Inst. of Family & Life Advocates v. Becerra, 138 S. Ct. 2361, 2368 (2018); Masterpiece Cakeshop, 138 S. Ct. at 1729–30; Holt v. Hobbs, 574 U.S. 352, 359 (2015). VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 needs of the communities they serve and predicted that the proposal would allow religious contractors to better ‘‘order[ ] their affairs.’’ A religious convention commission approved of the rule on the basis that the government should not be in the business of judging theology or privileging certain religious beliefs over others. A few commenters expressed support for the proposal specifically because they believed it would exempt religious organizations from the prohibitions on discrimination based on sexual orientation and gender identity that were added when E.O. 11246 was amended by Executive Order 13672 (E.O. 13672). 79 FR 42971 (July 23, 2014). For example, a faith-based advocacy organization praised OFCCP for ‘‘the important positive precedent that will be set by the proposed strong protection of the religious staffing freedom in the context of the requirement of no sexual-orientation or gender-identity employment discrimination in federal contracting.’’ An evangelical chaplains’ advocacy organization commented that ‘‘E.O. 13672 . . . prohibited military chaplains from selecting religious support contractors who did not affirm sexual orientation, same-sex marriage and gender identity’’ in violation of these chaplains’ free exercise rights. Some commenters agreed with OFCCP’s observation that religious organizations have been reluctant to provide the government with goods or services as federal contractors because of the lack of clarity or perceived narrowness of the E.O. 11246 religious exemption. One individual commenter who identified himself as a legal adviser to federal contractors noted that imposing ‘‘pass through’’ contracting obligations on subcontractors can be challenging, as religious subcontractors often fear that complying with federal anti-discrimination laws will require them to compromise their religious integrity. Two other commenters offered examples or evidence of religious organizations’ reluctance to participate in other contexts, such as federal grants. A religious medical organization cited a survey suggesting that many individuals working in faith-based organizations (FBOs) overseas feel that the government is not inclined to work with FBOs, and called for outreach programs to correct this perception. A religious legal organization referenced an audit of the Department of Justice’s Office of Justice Programs (OJP) which revealed that, though religious organizations were interested in participating in many programs, ‘‘the percentage of OJP funds distributed to PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 religious organizations to help the public through these programs was abysmally small—0.0025%.’’ The organization cited the concern of religious organizations that their right to hire members of their faith would be eroded as one of the reasons for this discrepancy. Many commenters expressed skepticism that religious organizations have been reluctant to participate as federal contractors because of the lack of clarity or perceived narrowness of the religious exemption. Most of these commenters stated that OFCCP had provided no evidence to support its claim. For example, a legal think tank commented that the proposal was ‘‘a regulation in search of a problem,’’ and criticized OFCCP for failing to provide data regarding the number of religious organizations reluctant to enter into federal contracts, the number of contractors that have invoked the Section 204(c) exemption in the past, and the number of contractors expected to avail themselves of the ‘‘expanded exemption’’ in the proposed rule. A labor union commented: ‘‘[T]here is no evidence that the current, settled interpretation of the E.O. 11246 religious exemption has deterred organizations from submitting competitive bids for federal contracts or prevented them from obtaining such contracts. At best, the Proposed Rule is an unjustified rulemaking solution in search of a problem.’’ A few commenters stated that the proposal was unnecessary given the applicability of Title VII case law. For example, a contractor association commented that the extent to which religious employers can condition employment on religion has been addressed by a long line of Title VII cases, rendering an executive rulemaking on this topic unnecessary. Some commenters cited evidence that federal contracts are being awarded to faith-based organizations. For example, a group of state attorneys general cited the 2016 congressional testimony of Oklahoma Representative Steve Russell, who explained that more than 2,000 federal government contracts were being awarded to religious organizations and contractors per year. As examples of faith-based organizations that were awarded contracts in the previous year, the state attorneys general listed the following: Army World Service Office ($27.5 million), Mercy Hospital Springfield ($14.4 million), Young Women’s Christian Association of Greater Los Angeles California ($10.2 million), City of Faith Prison Ministries ($5.2 million), Riverside Christian Ministries, Inc. ($2.7 million), Jewish Child and Family E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 Services ($2.1 million), Catholic Charities, various affiliates (over $1 million in sum total), to name a few.4 In addition, several commenters cited a report from a progressive policy institute noting that some religious organizations continue to be federal contractors despite their objections to a lack of an expanded religious exemption in E.O. 13672. Some commenters expressed skepticism that the proposal would encourage participation in federal contracting because, they asserted, the rule as proposed would increase rather than reduce confusion. For example, a contractor association commented that OFCCP’s proposal would create more confusion than clarity for federal contractors. An atheist civil liberties organization echoed this concern, commenting that the proposal would increase confusion because, in its view, the proposed rule deviated from decades of Title VII law. Other commenters stated that the proposal would have negative effects because of increased uncertainty about or expansion of the exemption. These commenters stated that the proposal would undercut other entities’ enforcement of nondiscrimination obligations, increase EEOC enforcement actions, increase contractors’ noncompliance, and strain OFCCP’s resources. For example, a group of state attorneys general commented that, given the prevalence of workplace discrimination, expanding E.O. 11246’s religious organization exemption to lessen OFCCP’s oversight could result in employers claiming the exemption in bad faith when faced with charges of discrimination. The state attorneys general commented that the proposed rule had the potential to strain OFCCP’s limited resources due to employers requesting determinations of whether they are exempt, and challenging the applicability of OFCCP enforcement actions already underway. OFCCP appreciates the comments supporting its view that clarity regarding the exemption would be useful, and notes their accounts of religious organizations that are hesitant to participate as government contractors, as well as their evidence of a perception among faith-based organizations that the federal government could do more to demonstrate that it will select the best organizations for its partners, whether faith-based or not. Given certain statements by these commenters regarding discrimination on the basis of 4 The commenter cited USASPENDING.GOV, https://www.usaspending.gov/#/recipient. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 sexual orientation or gender identity, OFCCP repeats here as it did many times in the NPRM that the religious exemption does not permit discrimination on the basis of other protected categories. The section-bysection analysis of Particular religion addresses the application of the religious exemption and other legal requirements to E.O. 11246’s other protections including those pertaining to sexual orientation and gender identity, and the application of the Religious Freedom Restoration Act (RFRA) in certain situations. Regarding comments that the rule is unnecessary because religious organizations are not presently deterred from contracting with the government, OFCCP believes that clarifying the law for current contractors is a valuable goal in itself, regardless of whether more religious organizations would participate as federal contractors or subcontractors. The disputes among commenters over the proper interpretation of the Title VII case law suggests as well that the guidance provided by this rule would be valuable to the contracting community. And in fact, as just noted, other commenters offered evidence that faith-based organizations have indeed been reluctant to contract with the federal government because of the lack of certainty about the religious exemption. The fact that some faith-based organizations have been willing to enter into federal contracts or subcontracts does not mean that other faith-based organizations have not been reluctant to do so. Admittedly, OFCCP cannot perfectly ascertain how many religious organizations are government contractors, or would like to become such, and how those numbers compare to the whole of the contracting pool. But neither does OFCCP find persuasive commenters’ assertions that faith-based organizations are already wellrepresented among government contractors, when those assertions are based on examples showing contracting awards to them totaling only tens of millions, when the federal government expended $926.5 billion on contractual services in fiscal year 2019 5 and, according to one estimate, faith-based organizations account for hundreds of billions of dollars of economic activity annually in the United States.6 OFCCP 5 See USA Spending, Spending Explorer (select Object Class, Fiscal Year 2019), https:// www.usaspending.gov/#/explorer/object_class. 6 See Brian J. Grim and Melissa E. Grim, ‘‘The Socio-economic Contribution of Religion to American Society: An Empirical Analysis,’’ Interdisciplinary Journal of Research on Religion, vol. 12 (2016), article 3, p. 10, 25, (describing PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 79329 disagrees that the rule will introduce confusion. OFCCP anticipates this rule will have no effect on the vast majority of contractors or the agency’s regulation of them, since they do not and would not claim the religious exemption. As commenters noted, religious organizations do not appear to be a large portion of federal contractors. While this rule may add clarity that encourages more religious organizations to seek to become federal contractors and subcontractors, OFCCP does not believe the increase will greatly influence the composition or behavior of the contractor pool that it regulates. The exemption is a helpful accommodation for this small minority of religious organizations that may seek its protection. For them specifically, the rule is intended to bring clarity. For instance, as explained below, this rule provides a clear three-part test for determining whether an entity can qualify for the exemption. Contrary to the assertions of some commenters, and as described more fully below, Title VII case law offers differing tests on a jurisdiction-by-jurisdiction basis, and some of those tests provide little guidance at all. As another example, this rule provides a clear approach to determining when a religious employer is appropriately taking action on the basis of an employee’s particular religion, another area where the case law is not uniform. OFCCP also disagrees that this rule will impede the agency’s enforcement efforts. OFCCP promulgates this rule from a position of familiarity with its own enforcement resources, priorities, and budget. For the reasons just stated above, OFCCP does not see this rule as significantly affecting the vast majority of its work. OFCCP also does not anticipate a flood of employers claiming the exemption in bad faith when faced with discrimination claims. That has not been the experience under the Title VII exemption thus far: The number of reported cases involving the exemption since 1964 are in the dozens, not the thousands. And in those cases, the employer may or may not have succeeded in claiming the exemption or defending against a discrimination claim, but in nearly all the employer did not appear to invoke the exemption nefariously, in bad faith. OFCCP is also optimistic given the federal government’s experience under the RFRA. This law provides generous accommodation for religious claims and revenues of faith-based charities, congregations, healthcare networks, educational institutions, and other organizations), www.religjournal.com/pdf/ ijrr12003.pdf. E:\FR\FM\09DER2.SGM 09DER2 79330 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations strict boundaries for the federal government, yet neither the courts nor OFCCP have been inundated with claims.7 OFCCP appreciates all comments received, and for the reasons stated believes that proceeding with a final rule clarifying the religious exemption is warranted. For the small minority of current and potential federal contractors and subcontractors interested in the exemption, this will help them understand its scope and requirements and may encourage a broader pool of organizations to compete for government contracts, which will inure to the government’s benefit. For the vast majority of contractors, OFCCP does not expect this rule to affect their operations or OFCCP’s monitoring and enforcement. This final rule is an Executive Order 13771 (E.O. 13771) deregulatory action because it is expected to reduce compliance costs and potentially the cost of litigation for regulated entities. Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), OIRA determined that this rule is not a ‘‘major rule,’’ as defined by 5 U.S.C. 804(2). Details on the estimated costs of this rule can be found in the economic analysis below. jbell on DSKJLSW7X2PROD with RULES2 II. Section-by-Section Analysis The NPRM proposed five new definitions to clarify key terms used in OFCCP’s religious exemption: Exercise of religion; Particular religion; Religion; Religious corporation, association, educational institution, or society; and Sincere. The regulatory codification of the underlying exemption itself—which is not at issue in this rulemaking—is found at 41 CFR 60–1.5(a)(5). The new definitions were proposed to be placed with the rest of the regulations’ generally applicable definitions at 41 CFR 60–1.3. The NPRM also proposed adding a rule of construction to § 60–1.5 to provide the maximum legally permissible protection of religious exercise. This final rule retains the same basic structure as the NPRM, with a few changes. First, there have been some modifications to some of the definitions, and one proposed definition, for Exercise of religion, is not included in 7 See 42 U.S.C. 2000bb(a)(5) (‘‘[T]he compelling interest test as set forth in prior Federal court rulings is a workable test for striking sensible balances between religious liberty and competing prior government interests.’’); Holt, 574 U.S. at 368 (rejecting the argument that the only workable rule is one of no exceptions); Gonzales v. O Centro Espı´rita Beneficente Unia˜o do Vegetal, 546 U.S. 418, 436 (2006) (rejecting ‘‘slippery-slope argument’’ that RFRA-mandated exceptions would become unworkable). VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 the final rule, as explained below. Second, this final rule adds several illustrative examples within the definition of Religious corporation, association, educational institution, or society to better illustrate which organizations qualify for the religious exemption. Third, this final rule adds a severability clause. A. Section 60–1.3 Definitions The definitions added to § 60–1.3 are interrelated, so they are discussed below in a particular order. This order is different from that presented in the NPRM. The change in order is not substantive. The change is intended only to make the rule as a whole easier to understand. 1. Definition of Religion OFCCP’s proposed definition of Religion provided that the term is not limited to religious belief but also includes all aspects of religious observance and practice. The proposed definition was identical to the first part of the definition of ‘‘religion’’ in Title VII: ‘‘The term ‘religion’ includes all aspects of religious observance and practice, as well as belief . . . .’’ 42 U.S.C. 2000e(j). The proposed definition omitted the second portion of the Title VII definition, which refers to an employer’s accommodation of an employee’s religious observance or practice, because that would have been redundant with OFCCP’s existing regulations. OFCCP’s regulations at 41 CFR part 60–50, Guidelines on Discrimination Because of Religion or National Origin, contain robust religious protections for employees, including accommodation language substantially the same as that in the portion of the Title VII definition omitted here. Compare 42 U.S.C. 2000e(j), with 41 CFR 60–50.3. Those provisions continue to govern contractors’ obligations to accommodate employees’ and potential employees’ religious observance and practice. The proposed definition of Religion is used by other agencies. It is identical to the definition used by the Department of Justice in grant regulations implementing section 815(c) of the Justice System Improvement Act of 1979. See 28 CFR 42.202(m). The Small Business Administration has used the same definition as well in its grant regulations. See 13 CFR 113.2(c). Some commenters generally supported the proposed definition, noting that it is legally sound, as it tracks the Title VII definition and provides broad protection for religious entities. Commenters also noted that the definition is sensible and will aid PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 contractors in understanding the exemption. Other commenters argued that importing the definition from Title VII is inappropriate because the context of Title VII is protection of an employee’s individual religious beliefs in the workplace, not those of the employer. A legal professional organization raised the concern that this definition is overbroad as applied to the employer, particularly where it could allow a government-funded employer to make faith-based employment decisions beyond those currently allowed under Title VII and E.O. 11246. Commenters also objected to the omission of the second part of the Title VII definition, arguing that the weighing of the burden that an employee’s request for religious accommodations places on an employer is an important limitation on Congress’s intent to accommodate religion in the workplace. Commenters stated that, in their view, an employee’s requested accommodations may impose no more than a de minimis burden on the employer. Commenters argued that OFCCP’s proposed definition is broader than Congress intended in that it does not consider the burden the employer’s assertion of the religious exemption would impose on employees, thus allowing religious employers to take adverse actions against employees based on religious belief no matter the hardship it causes them. Some commenters argued that partially importing the Title VII definition would ‘‘muddy the waters’’ rather than provide clarity. Other commenters requested clarification on the proposed definition of Religion. Specifically, some commenters proposed that the final rule clarify that ‘‘observance and practice’’ includes refraining from certain activities. Another commenter noted that the proposed rule did not explain the extent to which it might displace employees’ right to reasonable accommodation of their religious beliefs and practices if such accommodation conflicts with the contractor’s religion. For the reasons described above and in the NPRM, and considering the comments received, OFCCP is finalizing the proposed definition of Religion without modification. No change is needed to make clear that inaction or omission can be a form of ‘‘observance and practice.’’ See, e.g., Emp’t Div., Dep’t of Human Res. of Or. v. Smith, 494 U.S. 872, 877 (1990) (holding the ‘‘exercise’’ of religion protected by the First Amendment ‘‘involves not only belief and profession but the performance of (or abstention from) physical acts’’); see also Espinoza, 140 E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 S. Ct. at 2277 (Gorsuch, J., concurring) (‘‘The right to be religious without the right to do religious things would hardly amount to a right at all.’’). OFCCP disagrees with commenters who argued that the definition of Religion is overbroad and would permit contractors to make faith-based employment decisions beyond those permitted by law. The definition is the same as that used in other federal regulations and the same as that used in Title VII when read in conjunction with the rest of OFCCP’s regulations. The definition must also be construed in harmony with those regulations, the requirements of which remain in force just as strongly as before this regulation’s promulgation. OFCCP also disagrees that it should import the second half of Title VII’s definition of religion into its general list of definitions in § 60–1.3. OFCCP’s regulations in part 60–50 governing protection of employees’ religion and national origin already contain this language and remain in force, and employers must continue to comply with them. The definition of Religion added to § 60–1.3 is intended to apply generally, to both employers and employees. Regarding comments about burden on employees’ exercise of religion, OFCCP looks to the functioning of the religious exemption. E.O. 11246, like Title VII, requires employers to accommodate employees’ religious practices to a prescribed extent. But the religious exemption is precisely that: An exemption that relieves ‘‘religious organizations from Title VII’s [or E.O. 11246’s] prohibition against discrimination in employment on the basis of religion.’’ Amos, 483 U.S. at 329. That logically includes a lesser exemption from the duty to accommodate religious practice. While religious organizations can accommodate employees’ religious practices, and in many instances may find that desirable, under the exemption, they are not required to do so. See Kennedy v. St. Joseph’s Ministries, Inc., 657 F.3d 189, 194 (4th Cir. 2011). 2. Definition of Religious Corporation, Association, Educational Institution, or Society One of the primary objectives of this rulemaking is to clarify the conditions of eligibility for the religious exemption. Thus the NRPM proposed a definition of Religious corporation, association, educational institution, or society. This term is used in E.O. 11246 section 204(c) and 41 CFR 60–1.5(a)(5), and it is the same term used in the Title VII VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 religious exemption at 42 U.S.C. 2000e– 1(a). The definition as proposed would apply to a corporation, association, educational institution, society, school, college, university, or institution of learning.8 As explained in the NPRM, clarity on this topic is essential because federal courts of appeals have used a confusing variety of tests, and the tests themselves often involve unclear or constitutionally suspect criteria. The NPRM favored, with some modifications, the test used by the U.S. Court of Appeals for the Ninth Circuit in Spencer v. World Vision, Inc., 633 F.3d 723 (9th Cir. 2011) (per curiam). This was for several reasons, including because the World Vision test generally prevents invasive inquiries into matters of faith, the uncertainty and subjectivity of a multifactor balancing test, and the inherently difficult and constitutionally suspect exercise of measuring the quantum of an organization’s religiosity. See 84 FR 41681–84. The controlling per curiam opinion in World Vision offered a four-pronged test for determining an entity’s qualification for the religious exemption: an entity is eligible for the . . . exemption, at least, if it is [1] organized for a religious purpose, [2] is engaged primarily in carrying out that religious purpose, [3] holds itself out to the public as an entity for carrying out that religious purpose, and [4] does not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts. World Vision, 633 F.3d at 724 (per curiam). This four-pronged test reflects the overlap of agreement between the two judges in the majority, Judges O’Scannlain and Kleinfeld, who also each wrote separate concurrences that laid out their own preferred tests. Both judges agreed on the first two prongs, that the entity be organized for a religious purpose9 and hold itself out to 8 The words ‘‘school, college, university, or institution of learning’’ also appear in 41 CFR 60– 1.5(a)(6), the exemption for religious educational organizations. They were included in the definition to make clear that the definition’s listing of ‘‘educational institution’’ includes schools, colleges, universities, and institutions of learning. Depending on the facts, an educational organization may qualify under the § 60–1.5(a)(5) exemption, the § 60–1.5(a)(6) exemption, both, or neither. The inclusion of educational organizations is maintained in the final rule. 9 To be precise, Judge O’Scannlain’s formulation was that the entity be ‘‘organized for a selfidentified religious purpose (as evidenced by Articles of Incorporation or similar foundational documents).’’ World Vision, 633 F.3d at 734 (O’Scannlain, J., concurring). Judge Kleinfeld noted that some people organize in religious bodies ‘‘with no corporate apparatus’’ and expressed concerns about the exemption being defeated by an ‘‘[a]bsence of corporate papers.’’ Id. at 745 PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 79331 the public as carrying out that religious purpose. The third and fourth prongs reflect Judge Kleinfeld’s view. See id. at 748 (Kleinfeld, J., concurring). Regarding the third prong, Judge O’Scannlain would have employed a broader formulation, requiring that the employer engage ‘‘in activity consistent with, and in furtherance of, those [founding] religious purposes.’’ Id. at 734 (O’Scannlain, J., concurring). As to the fourth prong, Judge Kleinfeld restricted the exemption to organizations that charge little or nothing for their goods or services, regardless of their formal incorporation as a nonprofit organization. See id. at 745–47 (Kleinfeld, J., concurring). Judge O’Scannlain would have broadened the fourth prong (in most instances) by requiring nonprofit status, including nonprofit organizations that charge market rates for their goods or services. See id. at 734 (O’Scannlain, J., concurring). The NPRM proposed to follow a modified World Vision test. The NPRM proposed adopting the first two prongs of the per curiam opinion. The NPRM favored Judge O’Scannlain’s formulation of the second prong given the significant constitutional difficulties that accompany determining whether an organization is ‘‘primarily’’ religious. The NPRM also proposed to revise Judge O’Scannlain’s phraseology, that the entity be engaged ‘‘in activity’’ consistent with those religious purposes, with the requirement that the entity be engaged ‘‘in exercise of religion’’ consistent with a religious purpose. No material change was intended by this adjustment; it was meant to capture in succinct regulatory text Judge O’Scannlain’s lengthy discussion that the kind of activity contemplated under this prong is religious exercise. See 84 FR at 41683; see also World Vision, 633 F.3d at 737– 38 (O’Scannlain, J., concurring). Finally, the NPRM proposed not to adopt the fourth prong of the test, on grounds that a no-charging rule would exclude many bona fide religious organizations, especially in the government contracting context, and that an absolute bar on for-profit organizations was tenuous given other court decisions and the Supreme Court’s more recent decision in Hobby Lobby. See 84 FR at (Kleinfeld, J., concurring). Judge Kleinfeld wrote that this ‘‘narrowness problem may be repairable by a tweak in the test,’’ id., which may be why the per curiam opinion does not include Judge O’Scannlain’s parenthetical referring to Articles of Incorporation. The difference is slight—a ‘‘tweak.’’ OFCCP’s approach to this first factor, including the necessary evidence to satisfy it, is discussed below in this preamble. E:\FR\FM\09DER2.SGM 09DER2 79332 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 41684. The proposed rule could also be viewed as essentially following Judge O’Scannlain’s concurrence save for his requirement that the entity be nonprofit to qualify for the exemption. In response to comments and a subsequent reevaluation of World Vision and other case law, OFCCP is revising the proposed regulatory text in this final rule. The final rule’s test can be viewed as generally adopting Judge O’Scannlain’s concurrence in World Vision, including by adopting a fourth prong. Satisfaction of this test will be sufficient to qualify for the exemption, and OFCCP believes that this is the means by which most organizations interested in the exemption will qualify. However, OFCCP acknowledges that in certain rare circumstances, an organization might not satisfy the nonprofit prong of the World Vision test yet still present strong evidence that it possesses a substantial religious purpose. Thus the regulatory text includes an alternative means of satisfying the fourth prong: When an organization does not operate on a notfor-profit basis, it must present ‘‘other strong evidence that it possesses a substantial religious purpose.’’ The final rule also adds several examples to illustrate how the test will be applied. The final rule also adds a clarifying provision regarding the meaning of ‘‘consistent with and in furtherance of’’ a religious purpose, a phrase used in one of the test’s prongs. The Department does not anticipate many for-profit organizations claiming the exemption, and as explained through the examples and their accompanying discussion, it may be quite difficult for such organizations to do so. This section of the preamble addresses this topic as well as other comments regarding OFCCP’s proposed definition of Religious corporation, association, educational institution, or society. OFCCP believes its definition is reasonable in light of Title VII and Supreme Court case law and that it will contribute to one of OFCCP’s primary goals in this rulemaking, which is to increase economy and efficiency in government contracting by providing for a broader pool of government contractors and subcontractors. Issues specific to the EEOC’s view on this matter are also discussed below and later in a separate part of this preamble. a. The Selection of World Vision as the Basis for the Religious Organization Test OFCCP received numerous public comments on its proposed definition, including comments on OFCCP’s discussion of the shortcomings in some Title VII case law. Some commenters VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 agreed that OFCCP should reject nonWorld Vision tests based on these shortcomings. For example, a religious legal organization commented that the proposed test ‘‘eliminates the subjectivity inherent in the LeBoon tests. It further eliminates the Establishment Clause violation present when a court determines whether an organization is ‘religious enough,’ and it also prevents inter-religion discrimination.’’ Some commenters who supported OFCCP’s proposed definition commented that it provided important clarification that would be helpful to religious organizations in meeting their missions. For example, a religious school association commented that the proposal is especially important considering that local control and leadership are central to many of its participating schools’ beliefs. A religious charities organization commented that the proposed definition would help it advance its mission of providing essential services to people in need—a mission rooted in its religious convictions. Other commenters disagreed with OFCCP’s characterization of the existing religious employer tests in Title VII case law. For example, a legal professional organization noted that courts have generally agreed that the following factors are relevant in deciding whether an organization qualifies for the religious exemption: (1) The purpose or mission of the organization; (2) the ownership, affiliation, or source of financial support of the organization; (3) requirements placed upon staff and members of the organization; and (4) the extent of religious practices in or the religious nature of products and services offered by the organization. Other commenters opposed the proposed definition because they viewed it as too broad and unsupported by Title VII case law. For example, an organization that advocates separation of church and state asserted that the definition in the proposed rule has not been proposed or used by any federal court and represents an attempt by OFCCP to vastly expand the scope of the existing narrow exemption. A labor organization likewise commented that, in its view, the definition in the proposed rule is contrary to law and does not reflect the Title VII definition. Some commenters objected generally to OFCCP’s selection or modification of the World Vision test. For example, one contractor association commented that the proposed rule removes critical limits on the standard set forth by Judge O’Scannlain. Another contractor association emphasized that World PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 Vision involved the removal of two employees by a religious organization based on the employees’ failure to adhere to the organization’s religious views. Therefore, according to the association, the World Vision test should not apply to for-profit organizations holding themselves out as religiously motivated. A group of U.S. Senators criticized the proposal not only for adopting the test set forth in the concurrence, but also for modifying part of that test. A legal think tank asserted that OFCCP appeared to have created its own test, designed to qualify more types of contractors for the exemption. This commenter went on to say that the ‘‘exceedingly more expansive criteria’’ proposed by OFCCP are untethered to Title VII case law and not in line with the ‘‘measured’’ exemption required by the Establishment Clause, quoting Cutter v. Wilkinson, 544 U.S. 709, 722 (2005) (‘‘Our decisions indicate that an accommodation [of religious observances] must be measured so that it does not override other significant interests.’’). As explained in the NPRM, OFCCP believes that a LeBoon-type test invites subjectivity and uncertainty. See LeBoon v. Lancaster Jewish Cmty. Ctr. Ass’n, 503 F.3d 217 (3d Cir. 2007). That is problematic in any circumstance, but especially so in the context of government contracting, where parties’ obligations should be as clear as possible. OFCCP also declines to attempt to write a definition that purports to synthesize all the Title VII case law on this subject. OFCCP is doubtful that such a task could be done, especially given Judge O’Scannlain’s observation (with which Judge Kleinfeld agreed) that several factors used by other courts are constitutionally suspect, including, contrary to the commenter’s suggestion above, an assessment of the religious nature of an organization’s products and services. See World Vision, 633 F.3d at 730–32 (O’Scannlain, J., concurring); id. at 741 (Kleinfeld, J., concurring). OFCCP’s approach in the final rule, like World Vision, instead requires consideration of a discrete set of factors that can be reliably ascertained in each case. OFCCP acknowledges that the definition it is promulgating here modifies the World Vision test in some respects, or alternatively can be viewed as following Judge O’Scannlain’s concurrence with one addition. OFCCP describes those modifications in more detail below along with its reasons for making them, including the need to provide clarity to contractors and enforcement staff. OFCCP disputes the E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 relevance of commenters’ assertions that these modifications are being made for the purpose of qualifying more organizations for the exemption. OFCCP acknowledges that the modifications may allow marginally more organizations to qualify for the exemption and that the final rule is intended to increase the pool of federal contractors. But, as described herein, OFCCP believes the test adopted by this final rule is appropriately measured and serves the purpose of qualifying only genuinely religious organizations for the exemption. b. OFCCP’s Application of the Definition Generally The NPRM proposed how OFCCP would apply the factors in its proposed test for religious organizations. The NPRM stated ‘‘that it would be inappropriate and constitutionally suspect for OFCCP to contradict a claim, found to be sincere, that a particular activity or purpose has religious meaning’’; that ‘‘all the factors . . . are determined with reference to the contractor’s own sincerely held view of its religious purposes and the religious meaning (or not) of its practices’’; and that the proposed three-factor test would be exclusive ‘‘stand-alone components and not factors guiding an ultimate inquiry into whether an organizations is ‘primarily religious’ or secular as a whole.’’ 84 FR at 41682–83. The NPRM proposed this approach for several reasons. The NPRM relied on World Vision’s concerns about courts’ substituting their own judgment for what has religious meaning when the question is disputed: ‘‘The very act of making that determination . . . runs counter to the ‘core of the constitutional guarantee against religious establishment.’ ’’ World Vision, 633 F.3d at 731 (O’Scannlain, J., concurring) (quoting New York v. Cathedral Acad., 434 U.S. 125, 133 (1977)). ‘‘[I]nquiry into . . . religious views . . . is not only unnecessary but also offensive. It is well established . . . that courts should refrain from trolling through a person’s or institution’s religious beliefs.’’ Id. (alterations in original) (quoting Mitchell v. Helms, 530 U.S. 793, 828 (2000) (plurality opinion) (internal quotation marks omitted)). Further, such inquiries could lead to discrimination among religions. See id. at 732 & n.8. The NPRM also drew on Supreme Court and Title VII case law showing the constitutional and practical difficulties of determining whether a particular religious belief is ‘‘central’’ to one’s faith or whether an organization is ‘‘primarily’’ religious. See 84 FR at 41682–83. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 Commenters expressed a variety of views on the NPRM’s proposed approach. Some were supportive. For instance, a religious legal organization commented that Judge O’Scannlain’s test requires little judicial ‘‘‘trolling’ through’’ an organization’s religious beliefs, because it is based exclusively on information the organization makes public. Relatedly, the same commenter observed that OFCCP staff can easily and consistently apply the test, with positive implications for the rule of law. Other commenters objected generally to OFCCP’s description of how it would determine whether a contractor had met the test. For example, a civil liberties organization expressed concern that OFCCP would not enforce baseline evidentiary standards in determining whether an entity meets the test’s factors. A contractor association commented that the modified World Vision test ‘‘is unclear on its face and problematic in application.’’ A transgender civil rights organization commented that the test relies on illdefined criteria that must be measured from the perspective of the employer. Many of the commenters who opposed the proposed definition expressed concern that it would have negative consequences. For example, a legal professional association asserted that the proposal would allow even nominally religious entities to discriminate on the basis of religion in hiring, potentially exposing them to legal liability under federal and state law despite their ability to retain their status as federal contractors. A group of state attorneys general stated that OFCCP’s proposed test represents a sharp departure from precedent and thus would be difficult for OFCCP staff and adjudicators to apply. The attorneys general also commented that the test would likely cause non-compliance by increasing legal uncertainty about which organizations qualify. Other commenters requested clarity. Regarding the NPRM’s statement that the three factors would be standalone provisions rather than factors guiding an ultimate ‘‘primarily religious’’ inquiry, a contractor association commented that, in its view, the statement was unclear and did not lend credence to OFCCP’s assertion that the test would be easy to apply or likely to be consistent in application. The commenter asked for clarification as to how OFCCP would apply the factors of the test as standalone factors, rather than as factors leading to the ultimate determination whether the contractor is primarily religious or secular. The commenter sought explanation from OFCCP as to how it could easily conduct the required PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 79333 analysis when even the courts struggle to do so. The commenter requested more specific examples of how the proposed test will apply and asked that the contractor community be consulted before a test is adopted. OFCCP appreciates these comments and has re-reviewed World Vision and other relevant case law in light of them. World Vision and its antecedent cases in the Ninth Circuit, as well as LeBoon in the Third Circuit, begin from the premise that the religious exemption should cover only organizations that are, in fact, primarily religious. But courts have labored over how to operationalize that requirement into a set of factors that can be applied neutrally, objectively, and with minimal constitutional entanglement. See World Vision, 633 F.3d at 729 (O’Scannlain, J., concurring) (‘‘Though our precedent provides us with the fundamental question—whether the general picture of World Vision is primarily religious— we must assess the manner in which we are to answer that question in the case at hand.’’); LeBoon, 503 F.3d at 226. That does not mean that courts have dispensed with an organization’s need to present evidence in order to claim the exemption. Rather, it means that the evidence required must be of a kind that courts are competent to evaluate and that avoids entanglement. See World Vision, 633 F.3d at 730–33 (O’Scannlain, J., concurring); cf. NLRB v. Catholic Bishop of Chi., 440 U.S. 490, 502 & n.10 (1979); id. at 507–08 (appendix). Indeed, one of the purposes of Congress’s expansion of the Title VII religious exemption to cover all of an employer’s activities, rather than simply its religious activities, was to avoid difficult line-drawing between religious and secular activities and the interference with religious organizations that could result. See Amos, 483 U.S. at 336. In OFCCP’s view, World Vision generally, and Judge O’Scannlain’s concurrence in particular, has done the best job of formulating a test that meets the competing and delicately balanced goals of giving the exemption only its proper reach while employing useable and constitutionally proper inquiries. With that in mind, OFCCP clarifies here its general approach to applying the exemption, addresses the particular evidence needed for each factor, and adds to the regulatory text examples with accompanying explanation to further illustrate its approach. First, OFCCP acknowledges the need to clarify and revise its statement that the factors are ‘‘stand-alone components and not factors guiding an ultimate inquiry’’ in order to make clear the agency’s intent. 84 FR at 41683. OFCCP agrees with E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79334 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations commenters that the aim of any test in this context is to determine whether the organization qualifies as a religious organization, and that any components are intended to guide or define that ultimate inquiry. The NPRM’s statement was intended to mean that OFCCP would apply the proposed three factors as the exclusive elements for ascertaining whether an organization qualifies for the religious exemption, rather than as mere considerations to be weighed along with other facts and circumstances. OFCCP affirms that approach here as the predominant path by which organizations are anticipated to qualify for the exemption. This approach is consistent with World Vision. The per curiam opinion and both concurrences provided slightly different factors, but in each instance the factors were presented as sufficient to determine an organization’s entitlement to the exemption. See World Vision, 633 F.3d at 724 (per curiam) (holding ‘‘an entity is eligible for the . . . exemption, at least, if it’’ meets four factors (emphasis added)); id. at 734 (O’Scannlain, J., concurring) (holding ‘‘a nonprofit entity qualifies for the . . . exemption if it establishes that it’’ satisfies three factors (footnote omitted)); id. at 748 (Kleinfeld, J., concurring) (‘‘To determine whether an entity is a ‘religious corporation, association, or society,’ determine whether it [satisfies the four factors].’’). Second, the World Vision-derived test promulgated here is not a subjective one. OFCCP shares commenters’ concern about contractors attempting to claim the exemption with little evidence other than their own testimony that theirs is a religious organization. (Though OFCCP is also skeptical that many contractors would attempt to do so. As noted above, bad-faith claims to the Title VII exemption have been rare.) The World Vision factors have been selected because they provide objective criteria for determining an organization’s religious status without the need for intrusive religious inquiries. See id. at 733 (O’Scannlain, J., concurring) (holding where religious activities or purposes are ‘‘hotly contested, . . . we should stay our hand and rely on considerations that do not require us to engage in constitutionally precarious inquiries’’). The World Vision factors are similar to a test used in the National Labor Relations Act context, which similarly ‘‘avoids . . . constitutional infirmities’’ while providing ‘‘some assurance that the institutions availing themselves of the Catholic Bishop exemption are bona fide religious institutions.’’ Univ. of Great Falls v. NLRB, 278 F.3d 1335, VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 1344 (D.C. Cir. 2002); see also Duquesne Univ. of the Holy Spirit v. NLRB, 947 F.3d 824, 831 (D.C. Cir. 2020). It is true that in applying the World Vision factors, OFCCP will not substitute its own judgment for a contractor’s view—found to be sincere— that a particular activity, purpose, or belief has religious meaning. For instance, OFCCP would not contradict a drug-rehabilitation center’s view, found to be sincere, that its work is a religious healing ministry by stating that its work is merely secular healthcare delivery. See Amos, 483 U.S. at 344 (Brennan, J., concurring) (finding religious organizations ‘‘often regard the provision of [community] services as a means of fulfilling religious duty’’); cf. World Vision, 633 F.3d at 745 (Kleinfeld, J., concurring) (‘‘Religious missionaries and Peace Corps volunteers both perform humanitarian work, but only the latter is secular.’’). Any other course would risk severe constitutional difficulties. ‘‘The prospect of church and state litigating in court about what does or does not have religious meaning touches the very core of the constitutional guarantee against religious establishment . . . .’’ New York v. Cathedral Acad., 434 U.S. 125, 133 (1977). But a contractor must prove its sincerity, which is a question of fact to be proved or disproved in the same manner as any other question of fact. And questions about religious characterization apply to only some aspects of the test. For instance, whether an organization operates on a nonprofit basis is a factual determination to which religious characterizations have little if any relevance. Similarly, as clarified in this final rule, an organization’s holding itself out as religious requires an objective evidentiary showing. Finally, OFCCP does not defer to any contractor’s assessment that it is entitled to the exemption itself. Whether an organization is a religious corporation, association, educational institution, or society under E.O. 11246 is a legal determination based on whether the organization satisfies the relevant factors. OFCCP next addresses specific issues related to each factor, including the evidence necessary to satisfy each factor. c. The First Factor: The Organization’s Religious Purpose As stated in the NPRM, to qualify for the religious exemption, a contractor must be organized for a religious purpose, meaning that it was conceived with a self-identified religious purpose. This need not be the contractor’s only purpose. Cf. Universidad Cent. de PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 Bayamon v. NLRB, 793 F.2d 383, 401 (1st Cir. 1985) (finding no NLRB jurisdiction when, among other things, an educational institution’s mission had ‘‘admittedly religious functions but whose predominant higher education mission is to provide . . . students with a secular education’’). A religious purpose can be shown by articles of incorporation or other founding documents, but that is not the only type of evidence that can be used. See World Vision, 633 F.3d at 736 (O’Scannlain, J., concurring); id. at 745 (Kleinfeld, J., concurring) (noting that some religious entities have ‘‘no corporate apparatus’’). And finally, ‘‘the decision whether an organization is ‘religious’ for purposes of the exemption cannot be based on its conformity to some preconceived notion of what a religious organization should do, but must be measured with reference to the particular religion identified by the organization.’’ Id. at 735–36 (O’Scannlain, J., concurring) (quoting LeBoon, 503 F.3d at 226–27). Some commenters objected that this factor, as described in the NPRM and summarized above, was too relaxed or that OFCCP was proposing to accept insufficient evidence. Many of these commenters stated that the proposal was inconsistent with Judge O’Scannlain’s requirement of demonstrating religious purpose through ‘‘Articles of Incorporation or similar foundational documents.’’ Id. at 734. For example, a labor union asserted that OFCCP’s implementation of this factor would be ‘‘more lax than Judge O’Scannlain’s concurrence.’’ A contractor association stated that the test was vague and overly simple. An individual commenter requested more guidance as to what types of evidence OFCCP would accept to prove a contractor’s organization for a religious purpose. An organization that advocates separation of church and state commented that an organization that fails to document a religious purpose in any of its foundational documents was likely not organized for a religious purpose. OFCCP appreciates these comments and is revising its approach in response. OFCCP agrees that additional clarity is needed here and that this factor should require documentary evidence of an organization’s religious purpose in its foundational documents. Judge O’Scannlain’s concurrence examined World Vision’s Articles of Incorporation, bylaws, core values, and mission statement. See id. at 736. An organization may have other foundational documents, such as a statement of faith, company code of conduct, business policies, or other E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations governance documents demonstrating a religious purpose. No one particular document is necessary. For instance, some federal contractors may be unincorporated proprietorships or partnerships and thus not have formal corporate-formation documents. But the organization must be able to show a religious purpose in documents that are central to the organization’s identity and purpose. OFCCP believes this requirement for documentary evidence will reduce uncertainty, provide objective means for the agency to confirm an organization’s satisfaction of this factor of the test, and help contractors better understand the kind of showing they will need to make to satisfy this factor. OFCCP emphasizes that it will not challenge a sincere claim characterizing a document’s statements as religious in the contractor’s view. See id. at 735–36. But OFCCP will rarely be able to find a claim of religious purpose to be sincere where the documents themselves are no different from standard corporate documents or where an organization adds a religious purpose to its documents after it becomes aware of potential discrimination liability or government scrutiny, including through an OFCCP compliance review. Sincerity is a factual determination, so each case where sincerity is at issue will turn on its own particular circumstances.10 jbell on DSKJLSW7X2PROD with RULES2 d. The Second Factor: Engages in Activity Consistent With, and in Furtherance of, Its Religious Purpose Second, the contractor must engage in activity consistent with, and in furtherance of, its religious purpose. Here too, ‘‘religious purpose’’ means religious as ‘‘measured with reference to the particular religion identified by the contractor.’’ Id. This factor is adopted from Judge O’Scannlain’s World Vision concurrence rather than the per curiam opinion. Cf. id. at 734. The regulatory text of the final rule has been slightly revised from the proposed language to more closely reflect Judge O’Scannlain’s formulation. This factor is now the second factor in the test rather than the third. No material change is intended. This factor also now states that the organization must exercise religion consistent with, and in furtherance of, ‘‘its’’ religious purpose, rather than ‘‘a’’ religious purpose. OFCCP does not view this change as significant, since a religious organization is quite unlikely to further a religious purpose other than its own. 10 As noted in the proposed rule, see 84 FR at 41685, sincerity is often not at issue. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 As explained in the NPRM, OFCCP proposed not to follow the World Vision per curiam opinion’s formulation of this factor for both practical and legal reasons. The per curiam opinion would require a contractor to be ‘‘engaged primarily in carrying out [its] religious purpose.’’ Id. at 724 (per curiam) (emphasis added). But such a formulation would invite OFCCP to balance things that cannot be balanced consistently and leave contractors without the kind of clarity that ought to prevail in contractual relations. Further, the Supreme Court and lower courts have cautioned against drawing lines between religious activity or belief that is ‘‘central’’ or ‘‘primary’’ and religious activity or belief that is not. See 84 FR at 41682, 41683. Also as explained in the NPRM, OFCCP proposed to use the phrase ‘‘engages in exercise of religion’’ rather than Judge O’Scannlain’s phrase, ‘‘engages in activity.’’ See World Vision, 633 F.3d at 734 (O’Scannlain, J., concurring) (‘‘engaged in activity consistent with, and in furtherance of, those religious purposes’’). No material change was intended by this adjustment; it was meant to capture in succinct regulatory text Judge O’Scannlain’s lengthy discussion that the kind of activity contemplated under this prong is religious exercise. See 84 FR at 41683; see also World Vision, 633 F.3d at 737–38. OFCCP received many comments on this aspect of the NPRM. A religious organization asked OFCCP to clarify that ‘‘consistent’’ as used in the third factor does not mean that OFCCP will be assessing ‘‘the coherence or consistency of the contractor’s religious beliefs, see Thomas v. Review Bd., 450 U.S. 707 (1981) (forbidding such an inquiry), but only [making] a determination that the contractor is engaged in activity reflecting a religious, as opposed to a secular, purpose.’’ OFCCP confirms that its intent in including this element is to determine whether the contractor’s exercise of religion is consistent with its religious purpose, not to test the internal consistency of a contractor’s religious beliefs. To make this point as clear as possible, OFCCP has added regulatory text explaining that ‘‘[w]hether an organization’s engagement in activity is consistent with, and in furtherance of, its religious purpose is determined by reference to the organization’s own sincere understanding of its religious tenets.’’ As with other factors, some commenters asserted that this factor, as described in the NPRM and summarized above, was too relaxed or that OFCCP was proposing to accept insufficient PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 79335 evidence. Many of these commenters stated that the incorporation of ‘‘exercise of religion’’ as defined in RFRA into this factor further loosened the standard. For example, a group of state attorneys general asserted that incorporation of the RFRA standard revealed confusion on the part of OFCCP as to the fundamental difference between the religious organization exemption and RFRA. The state attorneys general stated that the religious organization exemption is triggered only when an organization’s exercise of religion is so significant that the organization’s overall identity becomes religious and criticized the proposed rule for focusing instead on whether an organization engages in exercises of religion generally. A civil liberties organization characterized the preamble as mistakenly stating that inquiry into the religious nature of entities’ actions is impermissible. A labor union commented that this aspect of OFCCP’s proposal could lead businesses to feign religiosity solely for the purpose of cloaking discriminatory activity. Some commenters also criticized the exclusion from OFCCP’s proposed test of the requirement that a contractor be ‘‘primarily religious,’’ or ‘‘engaged primarily in carrying out that religious purpose.’’ Some of these comments stated that OFCCP did not persuasively explain why it was excluding this element from the definition. A contractor association commented that Title VII’s religious organization exception has traditionally been limited to institutions whose ‘‘purpose and character are primarily religious,’’ and that OFCCP has no basis to depart from this principle. An anti-bigotry religious organization commented that OFCCP should consider all relevant circumstances in determining whether a contractor is indeed religious, as OFCCP proposed to do for Sincere (that is, taking into account all relevant facts). The organization commented that the Supreme Court in Hosanna-Tabor reviewed the employee’s religious and secular functions, undermining OFCCP’s claim that it cannot engage in a similar type of balancing. OFCCP disagrees with the idea that this factor, either as proposed or as adopted in the final rule, confuses the religious exemption with RFRA. An organization that exercises religion under RFRA may not satisfy this factor of the test, yet even if it did, that alone would not satisfy the other factors of the test necessary to claim the E.O. 11246 religious exemption. Further, as will be discussed shortly, OFCCP has revised this prong to adhere to Judge E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79336 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations O’Scannlain’s formulation, which should alleviate any confusion regarding RFRA.11 OFCCP agrees with commenters that activity consistent with the contractor’s religious purpose must be a substantial aspect of the contractor’s operations. Insofar as the NPRM could be read to suggest that a one-time or de minimis amount of religious activity would be sufficient, OFCCP clarifies that understanding here. The need for a material amount of religious activity flows from the text used in the regulation, that the entity ‘‘engage in religious activity.’’ To engage is ‘‘[t]o employ or involve oneself; to take part in; to embark on,’’ Black’s Law Dictionary (11th ed. 2019), or to ‘‘involve oneself or become occupied; participate,’’ American Heritage Dictionary (5th ed. 2020). It suggests more than occasional or half-hearted efforts. The case law further illustrates that there must be a significant level of religious activity. For instance, World Vision easily satisfied that requirement since activity consistent with its religious purpose was ‘‘essentially all World Vision appears to do.’’ World Vision, 633 F.3d at 737–38 (O’Scannlain, J., concurring). The examples added to the final regulatory text also help illustrate the religious activity needed to qualify for the exemption. OFCCP disagrees with commenters to the extent they argue that an organization must engage solely in religious activity (and explains below that such an inquiry would be difficult and constitutionally imprudent). When an organization engages in other, secular, activities, that alone does not diminish its ability to satisfy this factor of the test. See LeBoon, 503 F.3d at 229; cf. Univ. of Great Falls, 278 F.3d at 1342. This is made clear by the text of the religious exemption. The Title VII exemption was expanded in 1972 (and that expanded language is used in E.O. 11246) to cover religious organizations’ employees engaged in any of the organization’s activities, rather than only employees engaged in the organization’s religious activities. Thus the exemption contemplates that religious organizations will engage in activities that are not religious, and it makes clear that religious organizations do not forfeit the exemption simply because they do. OFCCP also disagrees with commenters who argued that the 11 Because of this change, the phrase ‘‘exercises religion’’ no longer appears in this prong. Thus, as explained later in this preamble, the definition for Exercise of religion is no longer needed and has been removed from the final rule. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 organization’s religious activity under this factor must be shown to ‘‘constitute a comprehensive religious identity.’’ That is simply a rephrasing of the ultimate inquiry underlying the World Vision test. This factor has a crucial role to play in that inquiry, but it should not be mistaken for the whole of it. One of the most useful aspects of the World Vision test is that it provides a step-bystep framework for assessing an organization’s religious nature, including this factor, rather than leaving the inquiry an open-ended assessment in which a religious organization is simply known when it is seen. Cf. Jacobellis v. State of Ohio, 378 U.S. 184, 197 (1964) (Stewart, J., concurring). Regarding comments that applying Judge O’Scannlain’s concurrence rather than a ‘‘primarily engaged’’ factor is an unjustified departure from Title VII jurisprudence or reflects an overly prophylactic view of religious inquiry, OFCCP respectfully disagrees. OFCCP’s position requires being mindful of the distinction between the test’s underlying inquiry and the factors used to ascertain the answer to that inquiry. The test’s underlying inquiry is whether an organization’s ‘‘purpose and character are primarily religious.’’ See, e.g., World Vision, 633 F.3d at 726 (O’Scannlain, J., concurring). But World Vision operationalized that inquiry into four factors. Thus any constitutional or practical problems regarding the inquiry’s ‘‘primarily religious’’ formulation are academic because OFCCP will be answering the inquiry by means of applying the factors. That is one of the reasons why OFCCP prefers the World Vision test to other formulations. When it comes to those four factors, however, the World Vision per curiam opinion carried forward a ‘‘primarily’’ inquiry in two of the factors: The organization must be ‘‘engaged primarily in carrying out [its] religious purpose’’ and must ‘‘not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts.’’ Id. at 724 (per curiam). Judge O’Scannlain’s wellreasoned concurrence used an alternative formulation that avoids the ‘‘primarily’’ questions. OFCCP believes the better choice is to adopt the concurrence. The main problem with determining whether an organization is ‘‘primarily’’ engaged in its religious purpose—as opposed to substantially or materially or genuinely engaged in its religious purpose—is not that it requires a determination that the organization is engaged in significant religious activity, something that can be ascertained easily enough, but rather that it requires PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 comparison between the amount of religious and secular activity at an organization. In essence, the organization must engage in a greater quantum of religious activity than secular activity, though without specifying whether the ratio must be 51:49, 70:30, or 99:1. However, any attempt to so compare religious and secular activity leads to additional problems: Some activities do not clearly fall on one side of the line or the other, and a court’s or an agency’s attempts to determine on which side of the line those activities fall can lead to constitutionally intrusive inquiries. See, e.g., Cathedral Acad., 434 U.S. at 133 (observing the ‘‘excessive state involvement in religious affairs’’ that may result from litigation over ‘‘what does or does not have religious meaning’’). Moreover, even when all activities are properly categorized, it is unclear what weight each should have. See, e.g., Univ. of Great Falls, 278 F.3d at 1343 (observing that a test that requires ascertaining an entity’s ‘‘substantial religious character’’ or lack thereof ‘‘boils down to ‘is it sufficiently religious?’’’). OFCCP avoids these problems by adopting Judge O’Scannlain’s formulation of this prong. OFCCP agrees with commenters that some courts have nonetheless undertaken the task of comparing secular and religious activity when examining the religious exemption. See LeBoon, 503 F.3d 217; Kamehameha Sch., 990 F.2d 458; Boydston v. Mercy Hosp. Ardmore, Inc., No. CIV–18–444– G, 2020 WL 1448112 (W.D. Okla. Mar. 25, 2020). OFCCP disagrees that it also must do so when Judge O’Scannlain’s concurrence provides a viable alternative. That alternative is especially attractive to OFCCP as an enforcement agency and as a regulator of government contractors. In both instances a factor that offers more clarity than another gives better notice to contractors, better guidance to field staff, and crisper lines to the bargain between the two parties. e. The Third Factor: Holding Itself Out as Religious Third, the contractor must hold itself out to the public as carrying out a religious purpose. Again here, and as explained in the NPRM, ‘‘religious purpose’’ ‘‘must be measured with reference to the particular religion identified by the contractor.’’ World Vision, 633 F.3d at 736 (O’Scannlain, J., concurring). The NPRM proposed that a contractor could satisfy this requirement in a variety of ways, including by evidence of a religious purpose on its website, publications, advertisements, letterhead, or other public-facing E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations materials, or by affirming a religious purpose in response to inquiries from a member of the public or a government entity. See 84 FR at 41683. Again, some commenters stated that this factor, as described in the NRPM and summarized above, was too relaxed or that OFCCP was proposing to accept insufficient evidence. Many of these commenters criticized OFCCP’s proposal for allowing a contractor to meet this requirement by declaring its religious purpose in response to an inquiry from a government entity such as OFCCP itself. Commenters asserted that, as a result, almost any employer could designate itself a religious organization. Commenters also stated that taxpayers, employees, and applicants therefore would not necessarily have notice that the religious exemption could be applied. Commenters stated that this factor would thus not serve as the ‘‘market check’’ that Judge O’Scannlain envisioned. World Vision, 633 F.3d at 735 (O’Scannlain, J., concurring) (quoting Univ. of Great Falls, 278 F.3d at 1344). A group of state attorneys general, for example, criticized OFCCP’s proposal for purportedly relaxing Judge O’Scannlain’s ‘‘ ‘market check’ that would come from requiring an organization to hold itself out to the public as religious,’’ which ‘‘could come at a cost in terms of broader public support.’’ One contractor association remarked that, under the proposed rule, a federal contractor could satisfy this factor simply by responding to an OFCCP inquiry, whereas World Vision had always identified itself as a Christian organization, requiring its descriptor statement on all its communications. Another contractor association commented: ‘‘Making such a showing [for example, in response to an inquiry] is very easy and may or may not actually align with actual corporate purpose.’’ OFCCP appreciates these comments and, here too, is clarifying its approach in response. OFCCP agrees that a contractor could not satisfy this factor simply by affirming a religious purpose in response to one public or government inquiry, if that was all the contractor could put forward as evidence. More would be needed to show that the public was on notice of the organization’s religious nature. How much more is a factual question that cannot be defined with complete specificity, but the case law provides some guideposts. World Vision easily satisfied this requirement: Its logo was a stylized cross; religious artwork and texts were displayed throughout its campus; its communications guidelines VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 required references to its Christian identity in all external communications; and its employment guidelines expressly required subscription to particular Christian beliefs. See id. at 738–40. Very recently, a district court held that a Catholic hospital and its affiliates satisfied the requirement when they held ‘‘themselves out to the public as sectarian through their display of religious symbols in their facilities and through their sectarian mission statement and values statements displayed on [their] public website.’’ Boydston, 2020 WL 1448112, at *5. In the analogous NLRA context, a university satisfied the test when, ‘‘in its course catalogue, mission statement, student bulletin, and other public documents, it unquestionably holds itself out to students, faculty, and the broader community as providing an education that, although primarily secular, is presented in an overtly religious, Catholic environment.’’ Univ. of Great Falls, 278 F.3d at 1345. The university also filled its campus, classrooms, and offices ‘‘with Catholic icons, not merely as art, but it claims as an expression of faith.’’ Id. In short, a contractor satisfies this requirement when the contractor makes it reasonably clear to the public that it has a religious purpose. As noted in the NPRM, evidence of a religious purpose can come from the contractor’s website, publications, advertisements, letterhead, or other public-facing materials, and in statements to members of the public. Evidence can also include religiously inspired logos, mottos, or the like; and religious art, texts, music, or other displays of religion in the workplace. Statements to the government in the ordinary course of business, such as corporate documents or tax filings, can also be probative. Such statements should be distinguished from statements to the government made in the course of an investigation or litigation in which the contractor’s religious purpose is at issue. No one piece of evidence is required or, most likely, sufficient. But together the evidence must show that the contractor is presenting itself to the outside world as religious. f. The Fourth Factor: Operating on a Not-for-Profit Basis OFCCP proposed not to adopt the fourth factor set out in World Vision: That the entity seeking exemption ‘‘not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts.’’ 633 F.3d at 724 (per curiam). The NPRM proposed this course for several reasons: Many religious entities may operate discount retail stores or otherwise engage in the PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 79337 marketplace; 12 religiously oriented hospitals, senior-living facilities, and hospices may engage in substantial and frequent financial exchanges; 13 the religious exemption in E.O. 11246 pertains to government contracting, an economic activity in which most participants are for-profit entities; 14 other courts have not considered dispositive an organization’s for-profit or nonprofit status, or the volume or amount of its financial transactions; Amos left open the question of whether for-profit organizations could qualify for the exemption; and the Supreme Court’s more recent decision in Hobby Lobby, which held that for-profit organizations can exercise religion, counseled against an absolute prohibition on allowing forprofit organizations to qualify for the exemption. OFCCP received a wide variety of comments on this aspect of the NPRM. Some commenters agreed with OFCCP’s reasons for declining to require that a contractor ‘‘not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts.’’ For example, a religious liberties organization commented that federal contractors typically engage in substantial exchanges of goods and services, and therefore religious organizations would be categorically denied the section 204(c) exemption if they became federal contractors. Other commenters opposed the exclusion of the requirement that a contractor ‘‘not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts.’’ A group of U.S. Senators commented that the existence of a financial motive constitutes strong evidence that the exercise of religion is not the objective of the entity. Some of these commenters stated that OFCCP did not persuasively explain why it was excluding this element from the definition. OFCCP declines to restrict the exemption to those religious entities that charge little or nothing for their services. Contra World Vision, 633 F.3d at 724 (per curiam); id. at 747 (Kleinfeld, J., concurring). First, E.O. 11246 governs federal contractors, not grantees. Contractors by definition charge for 12 See Brian J. Grim and Melissa E. Grim, ‘‘The Socio-economic Contribution of Religion to American Society: An Empirical Analysis,’’ Interdisciplinary Journal of Research on Religion, vol. 12 (2016), article 3, pp. 10, 24, https:// www.religjournal.com/pdf/ijrr12003.pdf. 13 See id. at 7. 14 See General Service Administration, System for Award Management, Advanced Search—Entity (listing 410,021 active for-profit entities and 99,781 nonprofit and/or other-not-for-profit entities), sam.gov/SAM/pages/public/searchRecords/ advancedEMRSearch.jsf (last accessed Oct. 2, 2020). E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79338 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations their goods and services, even if they are nonprofits. E.O. 11246’s religious exemption would be a virtual nullity were it restricted to contractors that do not charge. Second, OFCCP agrees with Judge O’Scannlain that nonprofit status is a sufficiently reliable proxy for religious identity,15 without the need to restrict this factor further to only those organizations that do not charge. Judge O’Scannlain explained that nonprofit status, and its restrictions on monetary gain, is reliable evidence that the organization has religious aims rather than purely pecuniary ones, see id. at 734–35 (O’Scannlain, J., concurring), and OFCCP agrees. Plus, the narrower formulation would exclude many bona fide religious organizations, like certain hospitals and care facilities, that engage in substantial and frequent market transactions, including by charging sums to beneficiaries of their goods and services. And while religious educational institutions have their own particular exemption, it would seem odd to think that their charging for books, tuitions, and dormitories would call into question their religious status. Third, one of the reasons OFCCP is promulgating this rule is to encourage broader participation in government contracting and subcontracting. Restrictions that would unduly restrict the exemption’s availability could affect the size of the pool, to the detriment of the government’s interests in a competitive and diverse field of potential contractors. OFCCP also received many comments on its proposal to remove the requirement that organizations be nonprofit to qualify for the exemption. As mentioned above, OFCCP has substantially revised this aspect of the rule in response to commenters’ concerns. Some commenters agreed with the proposal that it was not necessary for a contractor to ‘‘be nonprofit.’’ For example, a religious civil rights organization commended the proposal for affirming that the owners of for-profit entities do not have to forfeit their religious convictions. Those commenters agreed with OFCCP’s explanation that Hobby Lobby counsels against a stark distinction between nonprofit and for-profit corporations. For example, a religious legal organization commented: ‘‘[A]s the Supreme Court noted in Hobby Lobby, a for-profit corporation substantially engaged in an exchange of goods and services can exercise religion.’’ 15 In the next few paragraphs, this preamble explains further why and how OFCCP is limiting the exemption to nonprofit organizations in most circumstances. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 Other commenters opposed the proposal not to make nonprofit status a determinative factor. For example, an anti-bigotry religious organization emphasized that Judge O’Scannlain’s concurrence in World Vision focused on whether the employer’s purpose is nonpecuniary, while Judge Kleinfeld’s analysis focused on whether the employer provided services at no cost or for a nominal fee. The organization criticized the proposed rule for rejecting both factors. Commenters asserted that OFCCP’s proposal not to make nonprofit status a determinative factor would unacceptably broaden the exemption. A religious organization asserted that the proposed rule would allow for-profit corporations to exploit faith in order to justify discrimination, and that the spirit of religious institutions would be diminished if houses of worship were placed in the same category as for-profit institutions. Some commenters stated that the proposal would allow discrimination by contractors that should not be entitled to the religious exemption. A labor organization commented that even forprofit companies, whose primary purpose is, by definition, to make a profit, could protect themselves from discrimination claims by claiming to have a religious purpose. Some commenters stated that the proposed removal of the nonprofit requirement was inconsistent with Title VII case law interpreting the same term, including Judge O’Scannlain’s own test. Many of these commenters stated that OFCCP had not cited any Title VII cases in which a court had found a for-profit entity to qualify for the religious exemption. For example, a contractor association commented that Judge O’Scannlain considered non-profit status to be an ‘‘especially significant’’ consideration, which was consistent with the reasoning in numerous Title VII cases. Some commenters stated that the proposed removal of the nonprofit requirement was inconsistent with guidance from the EEOC or was a reversal of OFCCP’s previous position. Many of these commenters stated that OFCCP gave inadequate reasons for the deviation. For example, a group of state attorneys general commented that the proposed reversal was not justified by the executive branch’s contracting authority, which ‘‘must be exercised within the boundaries of Title VII’s prohibitions.’’ A contractor association commented that omitting a legal requirement because it could be difficult to apply does not align with OFCCP’s stated commitment to follow the rule of law and to apply Title VII principles. PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 Some commenters specifically objected to OFCCP’s reliance on Hobby Lobby as justifying or requiring the proposed removal of the nonprofit status factor. Most of these commenters stated that Hobby Lobby was inapplicable because it centered not on the Title VII religious exemption but on RFRA, specifically on that statute’s definition of ‘‘person.’’ For example, a civil liberties organization commented that the Supreme Court in Hobby Lobby focused its analysis on the definition of the word ‘‘person’’ in RFRA and offered no insight into the definition or scope of the phrase ‘‘religious corporation’’ in the religious exemption context. A gender equality advocacy organization commented that RFRA goes far beyond what is constitutionally required by subjecting any laws burdening religious exercise to strict scrutiny and, thus, the question of RFRA’s application should not dictate a company’s eligibility for a Title VII religious exemption. Some commenters also stated that Hobby Lobby has not been applied in subsequent Title VII religious exemption cases. These commenters typically cited Garcia v. Salvation Army, 918 F.3d 997 (9th Cir. 2019). In that case, the Ninth Circuit found that the Salvation Army satisfied the requirement that it ‘‘not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts’’ both because it is a nonprofit (Judge O’Scannlain’s approach) and because it gives away or charges only nominal fees for its services (Judge Kleinfeld’s approach). Id. at 1004. In addition to distinguishing Hobby Lobby on the ground that it addressed RFRA and not the Title VII religious exemption, commenters also stated that key limitations present in Hobby Lobby were not reflected in OFCCP’s proposal. In particular, they stated, Hobby Lobby held that only closely held for-profit corporations could invoke RFRA, but OFCCP’s proposal included no such limitation, and the Court in Hobby Lobby considered harms an exemption would impose on third parties, but OFCCP did not consider third-party harms the commenters believed the proposal would cause. Commenters also stated that Hobby Lobby did not address government contractors. For example, a women’s rights advocacy organization commented that, while Hobby Lobby dealt with a general requirement on all non-grandfathered insurance plans, the proposed rule deals with businesses that willingly enter contracts with the federal government. According to the organization, ‘‘[a]n entity does not have E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations a right to a contract that it is unwilling to perform.’’ In consideration of these comments, OFCCP is revising the definition of Religious corporation, association, educational institution, or society in the final rule. OFCCP recognizes that, as Judge O’Scannlain observed, nonprofit status is ‘‘strong evidence’’ that an organization has a nonpecuniary purpose. World Vision, 633 F.3d at 734– 35 (O’Scannlain, J., concurring); see also Amos, 483 U.S. at 344 (1987) (Brennan, J., concurring). Nonprofit status also allows a determination of religious purpose to be made objectively and without engaging in a more searching inquiry. With that said, OFCCP recognizes that, in certain rare circumstances, an organization might be for-profit yet still be fairly considered a religious rather than secular organization. Thus the final rule adds a fourth requirement: That the contractor either ‘‘(A) operates on a not-for-profit basis; or (B) presents other strong evidence that it possesses a substantial religious purpose.’’ Paragraph (A) has been written in a manner that covers federal contractors that do not have formal taxexempt status under 26 U.S.C. 501(c)(3) but operate in substantial compliance with 501(c)(3)’s requirements. See World Vision, 633 F.3d at 745 (Kleinfeld, J., concurring) (noting the need for a small adjustment to the test to cover small groups that do not formally incorporate). Paragraph (A) meets the goals of certainty and clarity in contracting for what OFCCP believes will be the vast majority of contractors interested in the exemption. Paragraph (B) is a helpful contingency for situations where a contractor may not satisfy this prong of the test but in all fairness should be considered a qualifying religious organization. This alternative test is consistent with World Vision and the more recent Ninth Circuit case highlighted by commenters, Salvation Army, 918 F.3d 997. World Vision’s brief per curiam opinion stated that an organization is eligible for the exemption ‘‘at least’’ when it meets the four factors. 633 F.3d at 724 (per curiam) (emphasis added). Judge O’Scannlain’s opinion stated that other factors may be relevant in other cases. See id. at 729–30 (O’Scannlain, J., concurring). In Salvation Army, the court applied an ‘‘all significant religious and secular characteristics’’ standard as well as noted that the Salvation Army satisfied the World Vision test. See Salvation Army, 918 F.3d at 1003–04. In his World Vision concurrence, Judge O’Scannlain described nonprofit VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 status as ‘‘especially significant’’ because of its evidentiary value. He wrote that nonprofit status ‘‘bolsters a claim that [an organization’s] purpose is nonpecuniary,’’ ‘‘provides strong evidence that its purpose is purely nonpecuniary,’’ ‘‘makes colorable a claim that it is not purely secular in orientation,’’ and ‘‘bolster[s] a ‘contention that an entity is not operated simply in order to generate revenues . . . , but that the activities themselves are infused with a religious purpose.’ ’’ World Vision, 633 F.3d at 734–35 (O’Scannlain, J., concurring) (quoting Amos, 483 U.S. at 344 (Brennan, J., concurring)).16 OFCCP agrees with these observations, which is why it has adopted nonprofit status as a sufficient means for satisfying this factor of the test. There may be rare situations, however, where an organization is legally constituted as a for-profit enterprise yet infused with religious purpose. In those situations, the organization would need to come forward with strong evidence that its goals are religious rather than pecuniary—evidence comparable in probative weight to nonprofit status. OFCCP has added examples within the regulatory definition of Religious corporation, association, educational institution, or society to illustrate some of these rare instances, including a contractor that provides chaplaincy services to the military and a kosher caterer that supplies meals for federal events. OFCCP doubts that an entity that is not closely held could ever satisfy this requirement, especially since such an entity would have multiple and disparate shareholders. See Hobby Lobby, 573 U.S. at 717 (‘‘[T]he idea that unrelated shareholders—including institutional investors with their own set of stakeholders—would agree to run a corporation under the same religious beliefs seems improbable.’’). OFCCP likewise doubts that an entity could qualify if it predominantly provides undifferentiated marketplace goods or services that are not associated with an expressly religious purpose or a charitable, educational, humanitarian, or other eleemosynary purpose. OFCCP has also modified the NPRM’s definition of Religious corporation, association, educational institution, or society to reflect these considerations. Unlike the proposed rule, which stated only that a religious organization need not be nonprofit, the final rule now 16 These varying statements span the range from ‘‘not purely secular’’ to ‘‘purely nonpecuniary.’’ OFCCP’s regulatory text attempts to strike a balance down the middle, using the phrase ‘‘possesses a substantial religious purpose.’’ PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 79339 requires that the organization, if forprofit, present ‘‘other strong evidence that it possesses a substantial religious purpose.’’ This formulation attempts to synthesize the various statements in World Vision and Amos as to the quantum of religious purpose an organization must have, and recognizes their reasoning that nonprofit status serves as a valuable evidentiary proxy for religious purpose. Thus the final rule requires a for-profit organization to put forward strong evidence to demonstrate that it does indeed have a substantial religious commitment rather than serve solely as a vehicle to facilitate profitmaking or other secular ends. This formulation recognizes that an organization may have more than one purpose, but its religious one must be substantial. It would not be enough, for instance, that an organization feature a scriptural quote in marketing materials or make a brief reference to religious values on its ‘‘About Us’’ web page. The examples in the regulatory text may be instructive to readers on this point. This new regulatory text is also consistent with Hobby Lobby’s observation that a corporation need not choose absolutely between financial objectives and other objectives: While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. . . . If for-profit corporations may pursue such worthy objectives [as supporting charitable causes, environmental measures, or working conditions beyond those required by law], there is no apparent reason why they may not further religious objectives as well. Hobby Lobby Stores, 573 U.S. at 711. OFCCP believes that the approach promulgated here, which has been modified from that in the NPRM, is consistent with Title VII case law. Again, World Vision set out a four-factor test that, if satisfied, is sufficient for organizations to qualify for the exemption. But as Salvation Army and other cases show, there are other ways to qualify for the exemption. See Salvation Army, 918 F.3d 997; EEOC v. Townley Eng’g & Mfg. Co., 859 F.2d 610 (9th Cir. 1988). In these other cases, nonprofit or for-profit status has been treated as an important factor, but not as dispositive. That is similar to this final rule’s approach. For the same reason, OFCCP disagrees that its approach is an unjustified change in agency position. Until this rulemaking, OFCCP had not set forth the specific factors it would use to decide which organizations qualify for E.O. 11246’s religious exemption; rather, in E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79340 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations withdrawn subregulatory guidance OFCCP stated that it would follow EEOC and court interpretations of Title VII and apply an all-facts-andcircumstances test. To the extent that withdrawn statement could be considered the position of the agency, for the reasons stated in this preamble, OFCCP now believes such a test is too indeterminate and involves potential legal infirmities, and that a moredefined test will give better clarity to contractors and foster a broader pool of potential contractors and subcontractors. It is certainly true, as commenters asserted, that OFCCP’s general position is to follow Title VII principles when interpreting E.O. 11246. For the reasons stated in this preamble OFCCP believes its approach is consistent with Title VII principles and Supreme Court case law, and better furthers the goals of this rulemaking. The minor differences between the EEOC’s approach to determining which organizations can claim the exemption and OFCCP’s definition of Religious corporation, association, educational institution, or society are addressed later in this preamble. OFCCP also disagrees with commenters who argued that Hobby Lobby is irrelevant to this issue. Certainly Hobby Lobby was not a Title VII case. But Hobby Lobby’s holding that for-profit corporations qualify as ‘‘persons’’ who can exercise religion under RFRA is hard to square with a rule that a for-profit entity can never be a religious organization eligible for E.O. 11246’s religious exemption. And much of its reasoning has broader implications. The Supreme Court observed that furthering the religious freedom of corporations, whether forprofit or nonprofit, furthers individual religious freedom. See Hobby Lobby, 573 U.S. at 707. The Supreme Court found no reason to distinguish between for-profit sole proprietorships—which had brought Free Exercise claims before the Supreme Court in earlier cases—and for-profit closely held corporations. See id. at 709–10. And as just stated, the Supreme Court noted that every U.S. jurisdiction permits corporations to be formed ‘‘for any lawful purpose or business,’’ id. at 711 (internal quotation marks omitted), including a religious one, see id. at 710–11. OFCCP is required to give some consideration to that language in formulating its own test here. If forprofit corporations can exercise religion and further religious objectives as well as pecuniary ones, then OFCCP should consider carefully whether they should be categorically excluded from qualification as religious organizations VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 under the religious exemption. Hobby Lobby does not demand a result one way or the other on that issue, but OFCCP has found the case to be an important data point in support of its approach here. Regarding commenters’ concerns that a removal of the nonprofit requirement would unacceptably broaden the exemption, OFCCP has revised the regulatory text as described above. OFCCP does not anticipate many forprofit organizations seeking to qualify for the exemption, and those that do will need to satisfy the other three prongs—which themselves contain significant evidentiary requirements— plus provide strong evidence of their religious nature. OFCCP believes this test will ensure that only bona fide religious organizations will qualify. Finally, regarding comments about socalled third-party harms, OFCCP recognizes that Cutter v. Wilkinson stated that government must adequately account for accommodations’ burdens on others. 544 U.S. 709, 720 (2005). OFCCP believes it has adequately accounted for any burdens on others that this rule may cause, and on balance believes that the vindication of the law’s religious protections, the need for clarity in this area of contracting, and the potential expansion of the government’s contracting pool justify any burdens on third parties. See infra section III.B.5. Further, under controlling Supreme Court precedent, the Establishment Clause allows accommodations that remove a burden of government rules from religious organizations, reduce the chilling on religious conduct, or reduce government entanglement. See Amos, 483 U.S. at 334–39. Any third party burdens that might result from such accommodations are attributable to the organization that benefits from the accommodation, not to the government, and, as a result, do not violate the Establishment Clause. Id. at 337 n.15. In the Sherbert line of Free Exercise Clause cases that later became the basis of RFRA, dissents and concurrences routinely pointed to such burdens on third parties but did not persuade the majorities of any Establishment Clause violation.17 17 See, e.g., Thomas, 450 U.S. at 723 n.1 (Rehnquist, J., dissenting) (citing several burdens on the system and other beneficiaries, including that ‘‘[w]e could surely expect the State’s limited funds allotted for unemployment insurance to be quickly depleted’’); Wisconsin v. Yoder, 406 U.S. 205, 240 (1972 (White, J., concurring) (outlining the state’s legitimate interest in educating Amish children, especially ones that leave their community but finding the evidence of harm insufficient); Yoder, 406 U.S. at 245 (Douglas, J., dissenting) (arguing PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 The Supreme Court has applied this principle to allow accommodations that litigants claimed caused significant third-party harms. For example, the Supreme Court upheld the Title VII exemption for religious employers— discussed in Section 8—despite the alleged significant harms of expressly permitting discrimination against employees on the basis of religion. See Tex. Monthly, 489 U.S. 1, 18 n.8 (1989) (citing Amos). This is consistent with Hobby Lobby, which expressly held that a burden lawfully may be removed from a religious organization even if it allows such a religious objector to withhold a benefit from third parties. Hobby Lobby, 573 U.S. at 729 n.37 (‘‘Nothing in the text of RFRA or its basic purposes supports giving the Government an entirely free hand to impose burdens on religious exercise so long as those burdens confer a benefit on other individuals.’’). Ultimately, government action that removes such a benefit merely leaves the third party in the same position in which it would have been had government not regulated the religious objector in the first place. Otherwise, any accommodation could be framed as burdening a third party. That would ‘‘render[ ] RFRA meaningless.’’ Hobby Lobby, 573 U.S. at 729 n.37. ‘‘[F]or example, the Government could decide that all supermarkets must sell alcohol for the convenience of customers (and thereby exclude Muslims with religious objections from owning supermarkets), or it could decide that all restaurants must remain open on Saturdays to give employees an opportunity to earn tips (and thereby exclude Jews with religious objections from owning restaurants).’’ Id.; see also Attorney General’s Memorandum, Principle 15, 82 FR at 49670. Finally, OFCCP views these comments as addressed more to the religious exemption itself, which is not at issue here, than to this rule. Congress decided in enacting Title VII, and the President decided in amending E.O. 11246, that preserving the integrity of religious organizations merited an exemption from the religious-neutrality requirements that would otherwise apply to their employees. OFCCP does not and could not question those judgments. Further, insofar as commenters argued that the test expands the number of contractors that might qualify for the exemption, that fact alone does not show any third-party harm. Indeed, among the rule’s intended purposes is expanding the pool of that the decision ‘‘imperiled’’ the ‘‘future’’ of the Amish children, not their parents). E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations contractors while avoiding religious entanglement. No contractor is compelled to seek the exemption, and no contractor so exempted is compelled by receipt of the exemption to take any particular employment action. See Amos, 337 n.15. To the contrary, the Title VII case law confirms that religious employers have flexibility to accommodate employees’ religious preferences if they so choose. See Kennedy, 657 F.3d at 194. Additionally, OFCCP discusses below, regarding the scope of the exemption, how this rule interacts with other protected classes and the proper balance between employers’ and employees’ freedoms and rights. OFCCP believes it has provided an accommodation that reasonably addresses these interests. jbell on DSKJLSW7X2PROD with RULES2 g. Other Features The final rule retains two proposed non-determinative features in the definition of Religious corporation, association, educational institution, or society. Those are the statements that the organization ‘‘may or may not’’ ‘‘have a mosque, church, synagogue, temple, or other house of worship’’ or ‘‘be supported by, be affiliated with, identify with, or be composed of individuals sharing, any single religion, sect, denomination, or other religious tradition.’’ With regard to these features, some commenters expressed support, and other commenters expressed opposition. For example, one religious education association commented, in support of the absence of a requirement that the contractor ‘‘[h]ave a mosque, church, synagogue, temple, or other house of worship’’ that religious schools that are controlled by a body of religious leaders directly connected to the school are no less ‘‘controlled by a religious organization’’ than are schools controlled by hierarchical religious denominations. OFCCP continues to believe that requiring these features could lead the agency to discriminate among religions, which could violate the First Amendment’s Establishment Clause. See World Vision, 633 F.3d at 732 & n.9 (O’Scannlain, J., concurring). For these reasons and the reasons described in the preamble to the proposed rule, see 84 FR at 41684, OFCCP agrees with the commenters who stated that it is appropriate not to require that contractors have these features to be deemed religious. 3. Definition of Exercise of Religion OFCCP proposed to define Exercise of religion as the term is defined for purposes of RFRA. RFRA, in 42 U.S.C. 2000bb–2(4), defines ‘‘exercise of religion’’ to mean ‘‘religious exercise’’ as VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 defined in the Religious Land Use and Institutionalized Persons Act (RLUIPA), 42 U.S.C. 2000cc–5(7). RLUIPA, in turn, defines ‘‘religious exercise’’ as including ‘‘any exercise of religion, whether or not compelled by, or central to, a system of religious belief.’’ This definition is wellestablished and prevents problematic inquiries into the ‘‘centrality’’ of a religious practice, which are discussed later in this preamble. However, the phrase ‘‘exercise of religion’’ in the proposed rule appeared only as part of the proposed definition of Religious corporation, association, educational institution, or society. That definition has been changed to adhere more closely to Judge O’Scannlain’s concurrence in World Vision, and the words ‘‘exercise of religion’’ no longer appear in that prong of the definition. Thus there is no need for regulatory text to define them. With that said, OFCCP will look to general principles of First Amendment law and the RFRA– RLUIPA definition of ‘‘exercise of religion’’ when assessing whether an organization is engaging ‘‘in activity consistent with, and in furtherance of,’’ its religious purpose, and when assessing whether its employment action has a religious basis. Therefore, OFCCP addresses below the comments received on the proposed definition of Exercise of religion. Several commenters generally approved of the definition for the reasons stated in the NPRM, while others generally opposed the proposed definition. Those generally opposed asserted that RFRA was not a relevant authority given that it is a different statute, that the borrowed provision was vague and did not provide clarity but rather represented an attempt to ‘‘create new law,’’ and that the breadth of the definition did not provide ‘‘guardrails for the manner in which employers can require their employees to adhere to certain principles.’’ Others commenters raised more specific issues. A group of state attorneys’ general noted that the broad definition of religious exercise in RFRA is moderated by its substantial burden requirement, which the proposed definition did not include. Others noted issues with the term in the context of the ‘‘engages in’’ language directly preceding it; some believed the two in tandem were vague and overbroad, while one commenter sought specific guidance in the final rule that ‘‘religious speech’’ could be an exercise of religion. OFCCP has considered these comments and continues to believe that the RFRA–RLUIPA definition of ‘‘exercise of religion’’ is relevant in this context, although, for the reasons stated PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 79341 above, there is no need for the final rule to define the term. RFRA and RLUIPA are well-established laws regarding religious freedom that are broadly applicable, and they provide a familiar framework that will assist OFCCP in assessing both whether a contractor is engaging ‘‘in activity consistent with, and in furtherance of,’’ its religious purpose and whether its employment action has a religious basis. 4. Definition of Sincere The principles discussed above with regard to the definition of Exercise of religion are incorporated in the definition of Sincere that OFCCP proposed. In line with court precedent and OFCCP’s principles, the critical inquiry for OFCCP is whether a particular employment decision was in fact a sincere exercise of religion. Consistent with that inquiry, and for the reasons explained above, the final rule’s definition of Particular religion specifies that the religious tenets the contractor applies to its employees must be ‘‘sincere.’’ OFCCP, like courts, ‘‘merely asks whether a sincerely held religious belief actually motivated the institution’s actions.’’ Geary v. Visitation of Blessed Virgin Mary Parish Sch., 7 F.3d 324, 330 (3d Cir. 1993). The religious organization’s burden ‘‘to explain is considerably lighter than in a non-religious employer case,’’ since the organization, ‘‘at most, is called upon to explain the application of its own doctrines.’’ Id. ‘‘Such an explanation is no more onerous than is the initial burden of any institution in any First Amendment litigation to advance and explain a sincerely held religious belief as the basis of a defense or claim.’’ Id.; see United States v. Seeger, 380 U.S. 163, 185 (1965) (holding whether a belief is ‘‘truly held’’ is ‘‘a question of fact’’). The sincerity of religious exercise is often undisputed or stipulated. See, e.g., Hobby Lobby, 573 U.S. at 717 (‘‘The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs.’’); Holt, 574 U.S. at 361 (‘‘Here, the religious exercise at issue is the growing of a beard, which petitioner believes is a dictate of his religious faith, and the Department does not dispute the sincerity of petitioner’s belief.’’). Further, as the Supreme Court has repeatedly counseled, ‘‘religious beliefs need not be acceptable, logical, consistent, or comprehensible to others in order to merit First Amendment protection.’’ Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 531 (1993) (quoting Thomas, E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79342 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations 450 U.S. at 714) (internal quotation marks omitted); see also, e.g., United States v. Ballard, 322 U.S. 78, 86 (1944) (‘‘[People] may believe what they cannot prove. They may not be put to the proof of their religious doctrines or beliefs.’’). To merit protection, religious beliefs must simply be ‘‘sincerely held.’’ E.g., Frazee v. Ill. Dep’t of Emp’t Sec., 489 U.S. 829, 834 (1989); Seeger, 380 U.S. at 185. Courts have appropriately relied on the ‘‘sincerely held’’ standard when evaluating religious discrimination claims in the Title VII context. See, e.g., Davis v. Fort Bend Cnty., 765 F.3d 480, 485 (5th Cir. 2014); Philbrook v. Ansonia Bd. of Educ., 757 F.2d 476, 481–82 (2d Cir. 1985); Redmond v. GAF Corp., 574 F.2d 897, 901 n.12 (7th Cir. 1978). In such cases, a court must ‘‘vigilantly separate the issue of sincerity from the factfinder’s perception of the religious nature of the [employee’s] beliefs.’’ EEOC v. Union Independiente de la Autoridad de Acueductos y Alcantarillados, 279 F.3d 49, 57 (1st Cir. 2002) (alteration in original) (quoting Patrick v. LeFevre, 745 F.2d 153, 157 (2d Cir. 1984)) (internal quotation marks omitted). Some commenters opposed requiring only that exercise of religion be ‘‘sincere,’’ which they characterized as broadening the exemption. They warned that this expands exercise of religion beyond its current meaning and that sincerity cannot be reasonably applied. For example, a labor union stated that ‘‘sincerity’’ is not a concept that can sensibly be applied to organizations, much less to for-profit businesses that would be included in the scope of the religious exemption under the Proposed Rule. A group of state attorneys general commented that, by requiring only sincerity, OFCCP ‘‘seeks to expand RFRA’s already broad definition of ‘exercise of religion.’’’ An individual commenter wrote that the proposal would grant large for-profit government contractors a hiring exemption as long as they could articulate any strongly held belief. Other commenters expressed support for a sincerity test. For example, a religious liberties legal organization wrote: ‘‘Attempts to use religion to hide discriminatory intent are generally not successful.’’ OFCCP agrees with these commenters. Other commenters also expressed general support for the proposed definition, stating that it will help ensure that important protections against discrimination remain in place while at the same time preventing government overreach and protecting religious practice. For instance, the same religious liberties legal organization commented that legal VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 precedent regarding sincerity and the compelling government interest in preventing discrimination will survive without excessive government involvement. Many other commenters opposed the proposed, arguing that it would not require entities to be internally consistent in applying their selfproclaimed religious tenets to various groups. For instance, a group of U.S. Senators asserted that the proposed definition ‘‘does not require consistency in the application of policy based upon religious tenets’’ such that an entity opposed to body modification, for instance, could ignore tenets regarding tattoos but fire a transgender worker for seeking health care without triggering scrutiny. An LGBT rights advocacy organization echoed this concern. Some commenters also opposed OFCCP’s statement that ‘‘the sincerity of religious exercise is often undisputed or stipulated’’ because, they stated, it raised concerns regarding the depth of OFCCP’s inquiry under the proposed definition. A state civil rights organization commented, for instance, that this portion of the preamble seemed to signal that OFCCP will not inquire about sincerity, despite the fact that whether a belief is sincerely held can only be determined by weighing the strength of evidence. Likewise, an organization that advocates separation of church and state commented that the preamble’s discussion, particularly its ‘‘equivocal views’’ on policies aimed at determining the sincerity of an adverse employment action, creates uncertainty as to whether OFCCP will actually weigh factors intended to determine sincerity. An LGBT rights advocacy organization expressed substantially identical concerns. As noted in the NPRM, in assessing sincerity, OFCCP will take into account all relevant facts, including whether the contractor had a preexisting basis for its employment policy and whether the policy has been applied consistently to comparable persons, although absolute uniformity is not required. See Kennedy, 657 F.3d at 194 (noting that the Title VII religious exemption permits religious organizations to ‘‘consider some attempt at compromise’’); LeBoon, 503 F.3d at 229 (‘‘[R]eligious organizations need not adhere absolutely to the strictest tenets of their faiths to qualify for Section 702 protection.’’); see also Killinger v. Samford Univ., 113 F.3d 196, 199–200 (11th Cir. 1997). But despite commenters’ focus on the need for ‘‘internal consistency’’ in religious organizations’ doctrine—such as a rule that if tattoos are permitted, transgender medical procedures must be as well— PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 rather than consistency across similarly situated employees, OFCCP cannot assess the ‘‘relative severity of [religious] offenses’’ or otherwise weigh doctrinal matters, for that would ‘‘violate the First Amendment.’’ CurayCramer v. Ursuline Acad. of Wilmington, Del., Inc., 450 F.3d 130, 139 (3d Cir. 2006). OFCCP will also evaluate any evidence that indicates an insincere sham, such as acting ‘‘in a manner inconsistent with that belief’’ or ‘‘evidence that the adherent materially gains by fraudulently hiding secular interests behind a veil of religious doctrine.’’ Philbrook, 757 F.2d at 482 (quoting Int’l Soc’y for Krishna Consciousness, Inc. v. Barber, 650 F.2d 430, 441 (2d Cir. 1981)) (internal quotation marks omitted); cf., e.g., Hobby Lobby, 573 U.S. at 717 n.28 (‘‘To qualify for RFRA’s protection, an asserted belief must be ‘sincere’; a corporation’s pretextual assertion of a religious belief in order to obtain an exemption for financial reasons would fail.’’); United States v. Quaintance, 608 F.3d 717, 724 (10th Cir. 2010) (Gorsuch, J.) (‘‘[T]he record contains additional, overwhelming contrary evidence that the [defendants] were running a commercial marijuana business with a religious front . . . .’’). OFCCP’s application of the religious exemption is described in more detail below. Despite these assurances, several commenters who opposed the proposed definition said that it is vague or unworkable in practice. For instance, a group of state attorneys general expressed concern that the definition may increase confusion among contractors seeking to claim religious exemptions because the question of how a for-profit organization can demonstrate the sincerity of its religious beliefs is largely untested. Thus, according to the attorneys general, contractors will have to contend with a high level of uncertainty in addition to their obligations under Title VII. A religious legal organization that otherwise supported the proposed rule highlighted the fact that the proposed definition of sincere is ‘‘simply what courts determine ‘when ascertaining the sincerity of a party’s religious exercise or belief.’’’ The commenter expressed skepticism that courts could arrive at a concise and uniform test for the meaning of the term without more specific guidance from OFCCP. OFCCP disagrees that ascertaining the sincerity of an organization’s religious exercise, even a for-profit one, will foster confusion or that it presents insurmountable practical difficulties. Religious sincerity is a familiar and E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations well-developed legal principle. It has been applied in regards to a religious organization’s decisions under the Title VII religious exemption. See, e.g., Little v. Wuerl, 929 F.2d 944, 946 (3d Cir. 1991) (‘‘Little does not challenge the sincerity of the Parish’s asserted religious doctrine.’’). And the Supreme Court rejected a similar argument ‘‘that Congress could not have wanted RFRA to apply to for-profit corporations because it is difficult as a practical matter to ascertain the sincere ‘beliefs’ of a corporation.’’ Hobby Lobby, 573 U.S. at 717. Here, as there, questions of corporate religious beliefs are likely to arise only for closely held corporations, and ‘‘[s]tate corporate law provides a ready means for resolving any conflicts . . . .’’ Id. at 718. OFCCP also acknowledges the constitutional and prudential limitations on its inquiry that may come into play when religious matters are involved. OFCCP will not compare religious doctrines or practices in evaluating sincerity. See, e.g., CurayCramer, 450 F.3d at 139 (‘‘[A]ssess[ing] the relative severity of [religious] offenses . . . would violate the First Amendment.’’); Hall v. Baptist Mem’l Health Care Corp., 215 F.3d 618, 626 (6th Cir. 2000) (‘‘[T]he First Amendment does not permit federal courts to dictate to religious institutions how to carry out their religious missions or how to enforce their religious practices.’’). Nor will OFCCP require contractors to adhere to strict, uniform procedures to demonstrate sincerity. See Kennedy, 657 F.3d at 194; LeBoon, 503 F.3d at 229. And where ‘‘it is impossible to avoid inquiry into a religious employer’s religious mission or the plausibility of its religious justification for an employment decision,’’ then OFCCP will apply the E.O. 11246 religious exemption. Curay-Cramer, 450 F.3d at 141. Some commenters objected to OFCCP’s stated commitment to applying the ministerial exception. For instance, a city public advocate observed that OFCCP’s claim that it will evaluate any factors that indicate insincerity is undermined by the proposed rule’s commitment to the ministerial exception. Nevertheless, OFCCP respects and must apply the ministerial exception. The ministerial exception is an application of the Establishment and Free Exercise clauses of the First Amendment. See Our Lady of Guadalupe, 140 S. Ct. at 2060; HosannaTabor, 565 U.S. at 189–90 (finding that the ministerial exception bars ‘‘an employment discrimination suit brought on behalf of a minister’’ and observing that the exception ‘‘is not limited to the VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 head of a religious congregation,’’ nor subject to ‘‘a rigid formula for deciding when an employee qualifies as a minister’’). For the reasons described above and in the NPRM, and considering the comments received, OFCCP finalizes the proposed definition without modification. 5. Definition of Particular Religion In the NPRM, OFCCP proposed to define Particular religion to clarify that the religious exemption allows religious contractors not only to prefer in employment individuals who share their religion, but also to condition employment on acceptance of or adherence to religious tenets as understood by the employing contractor. The NPRM explained that this definition flows directly from the broad definition of Religion, discussed above, to include all aspects of religious belief, observance, and practice as understood by the employer, which would clarify past statements from OFCCP suggesting that the exemption was restricted solely to hiring coreligionists. The NPRM stated that the proposed definition was consistent with Title VII case law as well as Supreme Court case law holding that the government burdens religious exercise when it conditions benefits on the surrender of religious identity. The NPRM noted that the religious exemption does not permit religious employers to discriminate on other protected bases. The NPRM described how courts have used a variety of approaches and doctrines to distinguish claims of religious discrimination from other claims of discrimination while avoiding entangling inquiries under the First Amendment, and that OFCCP proposed to do the same. See 84 FR at 41679–81. In a later part of the NPRM describing the proposed terms Exercise of religion and Sincere, OFCCP gave additional detail on its proposed approach for applying the religious exemption. The NPRM noted that sincerity is the ‘‘touchstone’’ of religious exercise and that OFCCP would take into account all relevant facts when determining whether a sincere religious belief actually motivated an employment decision. The NRPM also proposed applying a but-for standard of causation when evaluating claims of discrimination by religious organizations based on protected characteristics other than religion. See 84 FR at 41684–85. OFCCP received comments on all these aspects of its proposal. In response to the comments, the agency has made PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 79343 some adjustments in its explanation regarding how it views and will apply this definition. These include changing to a motivating factor standard of causation and providing additional clarification, particularly on the interaction of the religious exemption with other protected categories, including the importance of RFRA. As to the regulatory text, the word ‘‘sincere’’ has been inserted into the phrase ‘‘acceptance of or adherence to sincere religious tenets as understood by the employer as a condition of employment,’’ to make clear both the requirement of sincerity and, by reference to the definition of Sincere, how sincerity is tested. Otherwise the definition is being finalized as proposed. Insofar as OFCCP’s view expressed here and in the proposed rule is a change from its prior position as to the definition of Particular religion under the exemption and the permissible practices of contractors and subcontractors who qualify as religious organizations, OFCCP believes the change is justified for all the reasons stated in the proposed rule and directly below. A broader view of the religious exemption is also consistent with one of OFCCP’s primary goals in this rulemaking, which is to increase economy and efficiency in government contracting by providing for a broader pool of government contractors and subcontractors. Issues specific to the EEOC’s view on this matter are discussed further in a separate part of this preamble. a. Burdens on Religious Organizations in Contracting As described in the NPRM, OFCCP’s approach here is consistent with Supreme Court decisions emphasizing that ‘‘condition[ing] the availability of benefits upon a recipient’s willingness to surrender his religiously impelled status effectively penalizes the free exercise of his constitutional liberties.’’ Trinity Lutheran, 137 S. Ct. at 2022 (alterations omitted) (quoting McDaniel v. Paty, 435 U.S. 618, 626 (1978) (plurality opinion)). These decisions naturally extend to include the right to compete on a level playing field for federal government contracts. See id. (holding the government burdens religious exercise when it so conditions ‘‘a benefit or privilege,’’ ‘‘eligibility for office,’’ ‘‘a gratuitous benefit,’’ or the ability ‘‘to compete with secular organizations for a grant’’ (quoted sources omitted)); accord E.O. 13831 § 1 (‘‘The executive branch wants faithbased and community organizations, to the fullest opportunity permitted by E:\FR\FM\09DER2.SGM 09DER2 79344 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 law, to compete on a level playing field for . . . contracts . . . and other Federal funding opportunities.’’). A few commenters praised OFCCP’s reliance on Trinity Lutheran to establish the principle that benefits cannot be conditioned on surrendering religious status. For example, a religious public policy women’s organization stated that no one should be forced to abandon their faith when operating their business or participating in government programs. Similarly, a religious liberty legal organization commented that religious contractors should be allowed to serve on equal terms as all other contractors, without having to compromise their faith-based identities. A few commenters stated that Trinity Lutheran and other Supreme Court cases discussed in the preamble to the NPRM do not support or require the proposed definition. For example, an organization that advocates separation of church and state commented that religious organizations are already eligible to compete for government contracts, which is all that is required by Trinity Lutheran. In addition, a religious organization commented that ‘‘the rule violates the Establishment Clause of the First Amendment by funding positions which require specific religious beliefs and customs.’’ OFCCP believes, however, that its interpretation of the scope of the religious exemption is consistent with the principles of religious freedom articulated in Trinity Lutheran and other Supreme Court cases. First, restricting religious organizations’ ability to employ those aligned with their mission burdens their religious exercise, even when those employees do not engage in expressly religious activity. As the Supreme Court recognized in Amos, the religious exemption’s protection for all activities of religious organizations alleviates the burden of government interference with those religious organizations’ missions. See Amos, 483 U.S. at 336. And as the Department of Justice’s Office of Legal Counsel has concluded: [T]he Court’s opinion in Amos, together with Justice Brennan’s concurring opinion in the case, indicates that prohibiting religious organizations from hiring only coreligionists can ‘ ‘‘impose a significant burden on their exercise of religion, even as applied to employees in programs that must, by law, refrain from specifically religious activities.’ ’’ The .’’ Mem. for Brett Kavanaugh, Assoc. Counsel to the Pres., from Sheldon T. Bradshaw, Deputy Ass’t Att’y Gen., Office of Legal Counsel further explained:, Re: Section 1994A (Charitable Choice) of H.R. 7, The Community Solutions Act at 4 (June 25, 2001) . . . . Many religious organizations and associations engage in VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 extensive social welfare and charitable activities, such as operating soup kitchens and day care centers or providing aid to the poor and the homeless. Even where the content of such activities is secular—in the sense that it does not include religious teaching, proselytizing, prayer or ritual—the religious organization’s performance of such functions is likely to be ‘‘infused with a religious purpose.’’ Amos, 483 U.S. at 342 (Brennan, J., concurring). And churches and other religious entities ‘‘often regard the provision of such services as a means of fulfilling religious duty and of providing an example of the way of life a church seeks to foster.’’ Id. at 344 (footnote omitted). In other words, the provision of ‘‘secular’’ social services and charitable works that do not involve ‘‘explicitly religious content’’ and are not ‘‘designed to inculcate the views of a particular religious faith,’’ Bowen v. Kendrick, 487 U.S. 589, 621 (1988), nevertheless may well be ‘‘religiously inspired,’’ id., and play an important part in the ‘‘furtherance of an organization’s religious mission.’’ Amos, 483 U.S. at 342 (Brennan, J., concurring). 31 O.L.C. 162, 172 172–73 (2007) Second, this burden exists even when not imposed directly. The Office of Legal Counsel, in the same opinion, further recognized that a burden on religious organizations’ free exercise of religion can occur not only through direct imposition of requirements but through conditions on grants or other benefits, citing many of the same cases cited in Trinity Lutheran for that proposition. See 31 O.L.C. at 174–75; Trinity Lutheran, 137 S. Ct. at 2022. Those concerns about burdening religious exercise through conditions naturally extend to conditions on contracts as well. See Office of the Att’y Gen., Memorandum for All Executive Departments and Agencies: Federal Law Protections for Religious Liberty at 2, 6, 8, 14a–16a (Oct. 6, 2017), available at www.justice.gov/opa/press-release/file/ 1001891/download. Third, the definition of Particular religion promulgated here attempts to alleviate that burden by permissibly accommodating religious organizations. ‘‘[T]he government may (and sometimes must) accommodate religious practices and . . . may do so without violating the Establishment Clause. . . . There is ample room under the Establishment Clause for ‘benevolent neutrality which will permit religious exercise to exist without sponsorship and without interference.’ ’’ Amos, 483 U.S. at 344 (quoting Walz v. Tax Comm’n, 397 U.S. 664, 673 (1970)). See also E.O. 13279 § 4; 68 FR at 56393 (codified at 41 CFR 60–1.5(a)(5)). This rule relieves religious organizations of government interference by permitting them to take into account their employees’ particular religion—including acceptance of or PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 adherence to religious tenets—to ensure their employees are committed to the religious organization. In some instances, as described below, RFRA may also come into play to require accommodations. Regarding the comment that the rule violates the Establishment Clause by funding positions that require specific religious beliefs or customs, that is a criticism of the E.O. 11246 religious exemption itself, which has been part of federal law for nearly twenty years and is not at issue in this rulemaking. This is addressed more below. b. The Exemption’s Scope: Coreligionists As explained in the NPRM, the religious exemption is not restricted to a purely denominational preference. The religious exemption allows religious contractors not only to prefer in employment individuals who share their religion, but also to condition employment on acceptance of or adherence to religious tenets as understood by the employing contractor. This definition flows directly from the broad definition of Religion, discussed above, to include all aspects of religious belief, observance, and practice as understood by the employer. It is also consistent with Title VII case law holding that ‘‘the permission to employ persons ‘of a particular religion’ includes permission to employ only persons whose beliefs and conduct are consistent with the employer’s religious precepts.’’ Little, 929 F.2d at 951; see also, e.g., Kennedy, 657 F.3d at 194 (‘‘Congress intended the explicit exemptions to Title VII to enable religious organizations to create and maintain communities composed solely of individuals faithful to their doctrinal practices, whether or not every individual plays a direct role in the organization’s ‘religious activities.’ ’’ (quoting Little, 929 F.2d at 951)); Hall, 215 F.3d at 624 (‘‘The decision to employ individuals ‘of a particular religion’ under [42 U.S.C.] § 2000e–1(a) and § 2000e–2(e)(2) has been interpreted to include the decision to terminate an employee whose conduct or religious beliefs are inconsistent with those of its employer.’’ (citing, inter alia, Little, 929 F.2d at 951)); Killinger, 113 F.3d at 200 (‘‘[T]he exemption [in 42 U.S.C. 2000e– 1(a)] allows religious institutions to employ only persons whose beliefs are consistent with the employer’s when the work is connected with carrying out the institution’s activities.’’). This approach is also consistent with Supreme Court decisions emphasizing that ‘‘condition[ing] the availability of benefits upon a recipient’s willingness E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations to surrender his religiously impelled status effectively penalizes the free exercise of his constitutional liberties.’’ Trinity Lutheran, 137 S. Ct. at 2022 (alterations omitted) (quoting McDaniel, 435 U.S. at 626 (plurality opinion)). These decisions naturally extend to include the right to compete on a level playing field for federal government contracts. See id. (holding the government burdens religious exercise when it so conditions ‘‘a benefit or privilege,’’ ‘‘eligibility for office,’’ ‘‘a gratuitous benefit,’’ or the ability ‘‘to compete with secular organizations for a grant’’ (quoted sources omitted)); accord E.O. 13831 § 1 (‘‘The executive branch wants faith-based and community organizations, to the fullest opportunity permitted by law, to compete on a level playing field for . . . contracts . . . and other Federal funding opportunities.’’). OFCCP believes this clarification will assist contractors that have looked for guidance on the religious exemption in OFCCP’s past statements. These past statements may have suggested that the exemption permits qualifying organizations only to prefer members of their own faith in their employment practices. See, e.g., OFCCP, Compliance Webinar (Mar. 25, 2015), available at https://www.dol.gov/ofccp/LGBT/FTS_ TranscriptEO13672_PublicWebinar_ES_ QA_508c.pdf (‘‘This exemption allows religious organizations to hire only members of their own faith.’’). OFCCP based such statements on guidance from the EEOC, the agency primarily responsible for enforcing Title VII. See, e.g., EEOC, EEOC Compliance Manual § 12–I.C.1 (July 22, 2008) (‘‘Under Title VII, religious organizations are permitted to give employment preference to members of their own religion.’’). However, with this final rule, OFCCP is clarifying that it applies the principles discussed above, permitting qualifying employers to take religion—defined more broadly than simply preferring coreligionists—into account in their employment decisions. The case law makes clear that qualifying employers ‘‘need not enforce an acrossthe-board policy of hiring only coreligionists.’’ LeBoon, 503 F.3d at 230; Killinger, 113 F.3d at 199–200 (‘‘We are also aware of no requirement that a religious educational institution engage in a strict policy of religious discrimination—such as always preferring Baptists in employment decisions—to be entitled to the exemption.’’). Some commenters expressed support for OFCCP’s proposal to extend the definition beyond preferring coreligionists, which they viewed as VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 overly narrow, to include acceptance of or adherence to religious tenets as a condition of employment. Many of these commenters agreed with OFCCP that the definition as proposed was necessary to ensure that religious organizations could carry out their missions without losing their identities. For example, a religious school association commented that being able to ensure that applicants and employees concur with its schools’ religion-based conduct expectations is essential to fulfilling the schools’ religious mission. Similarly, a religious civil rights organization commented that the entire ‘‘raison d’eˆtre’’ of religious non-profits would be undermined if employees could subvert their religious missions. Other commenters, including a religious medical organization, a religious liberty coalition, and a state religious public policy organization, echoed these sentiments in support of the proposal. A private religious university further asserted that the proposed definition would increase religious diversity, because its protections are not limited to hiring decisions based on co-religiosity but also allow organizations to hire based on applicants’ support for their religious missions. Many commenters asserted that the proposed definition conflicts with the EEOC’s interpretation, OFCCP’s previous interpretation, or both. For example, a civil liberties organization commented that the EEOC interprets the text of the Title VII religious exemption to mean that religious organizations may give employment preference to members of their own religion. Several commenters referred to OFCCP’s previous interpretation as reflected in its 2015 answers to FAQs regarding the E.O. 13672 Final Rule.18 For example, a legal think tank noted that in 2015, OFCCP issued guidance mirroring the EEOC’s interpretation of the Title VII religious exemption and confirming that the plain text of section 204(c) is limited to religious organizations with hiring preferences for coreligionists and to the ministerial exemption. Other commenters, including an LGBT legal services organization, a reproductive rights organization, and a public policy research and advocacy organization, made similar points. OFCCP appreciates the various comments received on this topic. After careful consideration, OFCCP disagrees with the comments arguing that the religious exemption should extend no 18 These 2015 FAQs are archived at https:// web.archive.org/web/20150709220056/http:/ www.dol.gov/ofccp/LGBT/LGBT_FAQs.html. PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 79345 further than a coreligionist preference for several reasons. First, a coreligionist preference could be construed narrowly, as some commenters seemed to urge, as allowing religious organizations to prefer those who share a religious identity in name but nothing more. OFCCP disagrees that the exemption should be construed to permit religious employers to prefer fellow members of their faith—or people who profess to be members of their faith—but forbid requiring their adherence to that faith’s tenets in word and deed. Religious employers can require more than nominal membership from their employees, as shown by Amos, where the plaintiffs were discharged for failing to qualify for a certificate showing that they were members of the employer’s church and met certain standards of religious conduct. See 483 U.S. at 330 n.4; Amos v. Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints, 594 F. Supp. 791, 796 (D. Utah 1984) (describing plaintiffs’ failure to meet church worthiness requirements), rev’d, 483 U.S. 327; see also Killinger, 113 F.3d at 198–200 (holding despite plaintiff’s claim that he subscribed to university’s ‘‘legitimate religious requirements,’’ including the requirement to ‘‘subscribe to the 1963 Baptist Statement of Faith and Message,’’ he was permissibly removed from a teaching post in the divinity school ‘‘because he did not adhere to and sometime[s] questioned the fundamentalist theology advanced by the [school’s] leadership’’ (first alteration in original)). Any other course would entangle OFCCP in deciding between competing views of a religion’s requirements—in essence, deciding for example, ‘‘who is and who is not a good Catholic.’’ Maguire v. Marquette Univ., 627 F. Supp. 1499, 1500 (E.D. Wis. 1986) (holding despite plaintiff’s claim to be Catholic, a Catholic religious university permissibly declined to hire her ‘‘because of her perceived hostility to the institutional church and its teachings’’), aff’d in part, vacated in part, 814 F.2d 1213 (7th Cir. 1987). OFCCP is not permitted to make such determinations. See Our Lady of Guadalupe, 140 S. Ct. at 2068–69 (‘‘[D]etermining whether a person is a ‘co-religionist’ will not always be easy. See Reply Brief 14 (‘Are Orthodox Jews and non-Orthodox Jews coreligionists? . . . Would Presbyterians and Baptists be similar enough? Southern Baptists and Primitive Baptists?’). Deciding such questions would risk judicial entanglement in religious issues.’’); Hall, 215 F.3d at 626–27 (‘‘If a particular E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79346 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations religious community wishes to differentiate between the severity of violating two tenets of its faith, it is not the province of the federal courts to say that such differentiation is discriminatory and therefore warrants Title VII liability.’’ (quoted source omitted)); Presbyterian Church in U.S. v. Mary Elizabeth Blue Hull Mem’l Presbyterian Church, 393 U.S. 440, 449– 50 (1969) (‘‘Plainly, the First Amendment forbids civil courts from playing such a role [in interpreting particular church doctrines and their importance to the religion].’’). In addition, some commenters argued that the religious exemption might allow religious employers to require faithfulness of a coreligionist employee, but the exemption does not permit them to impose religious requirements on their other employees. OFCCP declines to so narrow its interpretation of the exemption. The exemption was expanded decades ago to include employees engaged not just in the organization’s religious activities, but in any of its activities. And the purpose of the religious exemption is to preserve ‘‘the ability of religious organizations to define and carry out their religious missions.’’ Amos, 483 U.S. at 335. As other commenters stated, some religious organizations hire employees outside their faith tradition yet require those employees to follow at least some religious standards in order to preserve the organization’s integrity Courts have recognized the legitimacy of that view. See Kennedy, 657 F.3d at 190–91 (holding a religious nursing-care facility affiliated with the Roman Catholic Church was protected by the religious exemption when it took action against an employee of a different faith who refused to change her own religiously inspired garb); Little, 929 F.2d at 951 (‘‘[I]t does not violate Title VII’s prohibition of religious discrimination for a parochial school to discharge a Catholic or a non-Catholic teacher who has publicly engaged in conduct regarded by the school as inconsistent with its religious principles.’’ (emphasis added)). This view is also consistent with guidance from the U.S. Department of Justice. See Office of the Att’y Gen., Memorandum for All Executive Departments and Agencies: Federal Law Protections for Religious Liberty (Oct. 6, 2017), www.justice.gov/opa/pressrelease/file/1001891/download (stating that, under the Title VII religious exemption, ‘‘a Lutheran secondary school may choose to employ only practicing Lutherans, only practicing Christians, or only those willing to adhere to a code of conduct consistent VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 with the precepts of the Lutheran community sponsoring the school’’). Beyond compromising the integrity of religious organizations, OFCCP would be wary of drawing a line here between coreligionist employees and other employees for other reasons. As illustrated by the cases declining to decide ‘‘who is and who is not a good Catholic,’’ OFCCP does not believe it should or could in disputed cases decide who is a coreligionist. This would be especially difficult when the employer has no particular denomination, as there would be no simple denominational match between the employer and employee. Cases like World Vision and Little v. Wuerl show that a religious organization may require that its employees subscribe to certain precepts regardless of their particular religious affiliation, if they have any affiliation at all. OFCCP must, and should, treat these religious organizations equally with those that have a defined denominational membership. See World Vision, 633 F.3d at 731 (O’Scannlain, J., concurring). OFCCP also views an artificial line between coreligionists and noncoreligionists as presenting an unwelcome either-or dilemma for religious organizations. By declining to draw such a line, a religious organization would be permitted to require certain religious practices or conduct from its coreligionist employees, but not from its noncoreligionist employees; yet the religious organization would also be permitted to, for instance, decline to hire or promote that same noncoreligionist altogether. In other words, a religious organization could discriminate against a non-coreligionist altogether in hiring or promotion, but could not instead offer a job or promotion contingent on adherence to certain mission-oriented religious criteria. Religious organizations should be, and under this rule continue to be, permitted to use this middle ground. See Kennedy, 657 F.3d at 194. c. The Exemption’s Scope: Employment Practices In a related vein, commenters also shared their views on not only which employees should be covered by the exemption, but also which employment practices of religious organizations should be protected by the exemption. Some of these commenters asserted that the proposed definition was too broad. For example, a transgender civil rights organization commented that, because the proposed definition encompasses ‘‘all aspects of religious belief, PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 observance and practice as understood by the employer,’’ it would permit the subjective viewpoint of the employer to determine what constitutes religion. Similarly, a reproductive rights organization claimed that the proposed rule would expand the scope of the exemption in violation of federal law. As explained above in the discussion of the definition of Religion, OFCCP has chosen a definition that is wellestablished in federal law, including in the text of Title VII. See 42 U.S.C. 2000e(j). And as explained above in the discussion of the definition of Religious corporation, association, educational institution, or society, OFCCP has significant constitutional and practical concerns about substituting its own judgment for a contractor’s view—found to be sincere—that a particular activity, purpose, or belief has religious meaning. It bears repeating: Any other course would risk ‘‘[t]he prospect of church and state litigating in court about what does or does not have religious meaning [, which] touches the very core of the constitutional guarantee against religious establishment.’’ Cathedral Acad., 434 U.S. at 133. OFCCP will refrain from resolving disputes between employers and employees as to what has religious meaning or not, when the employer proves its sincere belief that something does have religious meaning. However, as explained in more detail below, just because an employment practice is religiously motivated does not mean that it is always protected by the exemption. This leads to a separate set of issues raised by commenters. Many commenters who opposed the proposed definition stated that it is inconsistent with Title VII in one or more respects. For example, a group of state attorneys general stated that the proposed definition is contrary to the text of Title VII and congressional intent. Specifically, the group pointed out that the plain language of the exemption covers only employer preferences based on a ‘‘particular religion,’’ meaning that religious employers cannot broadly discriminate on the basis of religion by, for instance, adopting policies such as ‘‘Jews and Muslims Need Not Apply.’’ Some commenters stated that the proposed definition is unsupported by Title VII case law. For example, a civil liberties organization criticized OFCCP for not citing to court decisions holding that the Title VII exemption is intended to shield employers from all religiously motivated discrimination, as opposed to discrimination that is ‘‘on the basis of E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 religion alone.’’ 19 A city commented that OFCCP’s reliance on Little, 929 F.2d 944; Kennedy, 657 F.3d 189; Hall, 215 F.3d 618; and Killinger, 113 F.3d 196, is misplaced and misleading because, in each of those cases, the courts found that a religious institution with a substantiated religious purpose could discriminate against an employee performing work connected in some manner to the institution’s religious mission. The NPRM did not suggest that the religious exemption would permit religious organizations to single out other religions for disfavor. No employer OFCCP is aware of holds such an exclusionary policy; no commenter identified such an employer; and such a policy would run contrary to the country’s experience under the Title VII religious exemption, where no litigant to OFCCP’s knowledge has asserted such a policy. Instead, the mine run of cases have involved a church, religious educational institution, or religious nonprofit raising the defense that it is only requiring employees or applicants—whether strictly defined as coreligionists or not 20—to follow its own religiously inspired standards of belief or conduct. The exemption historically has been a shield, not a sword, and it remains so under this rule. OFCCP also believes it has relied properly on cases like Little and Kennedy. As stated in the NPRM, these cases hold that the religious exemption ‘‘includes permission to employ only persons whose beliefs and conduct are consistent with the employer’s religious precepts.’’ Little, 929 F.2d at 951; see also, e.g., Kennedy, 657 F.3d at 194 (‘‘Congress intended the explicit exemptions to Title VII to enable religious organizations to create and maintain communities composed solely of individuals faithful to their doctrinal practices, whether or not every individual plays a direct role in the organization’s ‘religious activities.’ ’’) (quoting Little, 929 F.2d at 951); Hall, 215 F.3d at 624 (‘‘The decision to employ individuals ‘of a particular religion’ under [42 U.S.C.] § 2000e–1(a) and § 2000e–2(e)(2) has been interpreted to include the decision to terminate an employee whose conduct or religious beliefs are inconsistent with those of its employer.’’ (citing, inter alia, Little, 929 F.2d at 951)); Killinger, 113 F.3d at 200 (‘‘[T]he exemption [in 42 U.S.C. 2000e– 19 This point is addressed more fulsomely in the next section regarding E.O. 11246’s other protected bases. 20 For the reasons discussed earlier, OFCCP does not believe restricting the exemption to a purely coreligionist preference is required or the most reasonable approach. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 1(a)] allows religious institutions to employ only persons whose beliefs are consistent with the employer’s when the work is connected with carrying out the institution’s activities.’’); accord Att’y Gen., Memorandum for All Executive Departments and Agencies: Federal Law Protections for Religious Liberty (Oct. 6, 2017), www.justice.gov/opa/pressrelease/file/1001891/download (‘‘[R]eligious organizations may choose to employ only persons whose beliefs and conduct are consistent with the organizations’ religious precepts.’’). These cases were grounded in the basic principle that these religious employment criteria are permitted because they are necessary for the religious organization’s integrity. See Little, 929 F.2d at 950 (‘‘[T]he legislative history . . . suggests that the sponsors of the broadened exception were solicitous of religious organizations’ desire to create communities faithful to their religious principles.’’); Kennedy, 657 F.3d at 193 (finding the religious organization exemption ‘‘ ‘reflect[s] a decision by Congress that the government interest in eliminating religious discrimination by religious organizations is outweighed by the rights of those organizations to be free from government intervention.’ ’’ (alteration in original) (quoting Little, 929 F.2d at 951)); Killinger, 113 F.3d at 201 (‘‘[F]ederal court[s] must give disputes about what particulars should or should not be taught in theology schools a wide-berth. Congress, as we understand it, has told us to do so for purposes of Title VII.’’); Hall, 215 F.3d at 623 (‘‘In recognition of the constitutionally-protected interest of religious organizations in making religiously-motivated employment decisions . . . Title VII has expressly exempted religious organizations from the prohibition against discrimination on the basis of religion . . . .’’). That means that the religious employer must explain how its sincere religious beliefs translate into particular religious requirements for its employees and applicants. Cf. Geary, 7 F.3d at 330 (‘‘The institution, at most, is called upon to explain the application of its own doctrines.’’). But the exemption does not require the religious employer to further prove that a particular employee or applicant’s adherence to those religious requirements is necessary, in any contested instance, to further the religious organization’s mission. That added burden would be contrary to the 1972 amendment of the Title VII religious exemption, which expanded the exemption from employees who perform work PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 79347 connected to the organization’s religious activities to employees who perform work connected to any of the organization’s activities. As the Supreme Court observed, this expansion was aimed toward relieving religious organizations of the kind of burden sought by the commenters: [I]t is a significant burden on a religious organization to require it, on pain of substantial liability, to predict which of its activities a secular court will consider religious. The line is hardly a bright one, and an organization might understandably be concerned that a judge would not understand its religious tenets and sense of mission. Amos, 483 U.S. at 336 OFCCP shares the same concerns about requiring contractors to justify otherwise-protected employment decisions as additionally furthering the organization’s mission. Difficulties could arise were OFCCP to draw distinctions between religiously motivated employment decisions that further an employer’s religious mission and those that do not. Amos observed that difficulty, in which the district court had drawn an at-least questionable distinction between the termination of a truck driver at a church-affiliated workshop (protected) with the termination of a building engineer at a church-affiliated gymnasium (not protected). See id. at 330, 333 n.13, 336 n.14. The exemption does not require such hair-splitting—indeed, it appears to forbid it—and OFCCP sees no useful reason to attempt drawing such distinctions. See also Little, 929 F.2d at 951 (‘‘Congress intended the explicit exemptions to Title VII to enable religious organizations to create and maintain communities composed solely of individuals faithful to their doctrinal practices, whether or not every individual plays a direct role in the organization’s ‘religious activities.’ ’’). d. The Exemption’s Scope: Other Protected Bases i. Comments As is made clear by the text of section 204(c) of E.O. 11246 and the corresponding regulation at 41 CFR 60– 1.5(a)(5), the religious exemption itself does not exempt or excuse a contractor from complying with other applicable requirements. See E.O. 11246 § 204(c) (‘‘Such [religious] contractors and subcontractors are not exempted or excused from complying with other requirements contained in this Order.’’); 41 CFR 60–1.5(a)(5) (same). Thus, religious employers are not exempted from E.O. 11246’s requirements regarding antidiscrimination and affirmative action, generally speaking; E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79348 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations notices to applicants, employees, and labor unions; compliance with OFCCP’s implementing regulations; the furnishing of reports and records to the government; and flow-down clauses to subcontractors. See E.O. 11246 §§ 202– 203. Although Title VII does not contain a corresponding proviso, courts have generally interpreted the Title VII religious exemption to be similarly precise, so that religious employers are not exempted from Title VII’s other provisions protecting employees. See, e.g., Kennedy, 657 F.3d at 192; Rayburn v. Gen. Conference of Seventh-Day Adventists, 772 F.2d 1164, 1166 (4th Cir. 1985); cf. Hobby Lobby, 573 U.S. at 733 (rejecting ‘‘the possibility that discrimination in hiring, for example on the basis of race, might be cloaked as religious practice to escape legal sanction’’); Bob Jones Univ. v. United States, 461 U.S. 574, 604 (1983) (‘‘[T]he Government has a fundamental, overriding interest in eradicating racial discrimination in education . . . .’’). Many commenters nevertheless assumed that OFCCP would apply the proposed definition to allow religious contractors to discriminate on bases other than religion. Most of these commenters stated that doing so would be contrary to E.O. 11246, and they argued that OFCCP lacks authority to expand the existing exemption or grant any new exemption. For example, a civil liberties organization commented that the preamble indicates that OFCCP intends to authorize discrimination based even on other protected bases like sex or race, contrary to the text of E.O. 11246. Similarly, a group of U.S. Senators commented that the proposed rule would allow employers to discriminate against employees on bases other than religion by, for instance, permitting employers to justify sex discrimination based on their religious tenets. These commenters pointed to the second sentence of section 204(c) of E.O. 11246 as supporting their criticism. For example, a legal think tank commented that it was unclear how the proposed rule’s ‘‘expansive definition of ‘particular religion’ ’’ could be reconciled with its insistence that ‘‘an employer may not . . . invoke religion to discriminate on other bases protected by law.’’ Other commenters also stated that it would be inconsistent with Title VII case law to allow religious contractors to discriminate on bases other than religion. These commenters, including a legal think tank, a group of state attorneys general, a labor union, a civil liberties organization, and a VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 reproductive rights organization, cited cases in which, they asserted, courts prohibited religious employers from discriminating on bases other than religion. For example, the civil liberties organization commented that courts have consistently prohibited religious organizations from discriminating on other bases, including sex, even where that discrimination is motivated by the organization’s sincere religious beliefs (citing Rayburn, 772 F.2d at 1166; Kennedy, 657 F.3d at 192; EEOC v. Pac. Press Publ’g Ass’n, 676 F.2d 1272, 1277 (9th Cir. 1982), abrogated on other grounds by Alcazar v. Corp. of Catholic Archbishop of Seattle, 598 F.3d 668 (9th Cir. 2010); Elbaz v. Congregation Beth Judea, Inc., 812 F. Supp. 802, 807 (N.D. Ill. 1992); Dolter v. Wahlert High Sch., 483 F. Supp. 266, 269 (N.D. Iowa 1980); accord McClure v. Salvation Army, 460 F.2d 553, 558 (5th Cir. 1972)). Some commenters argued that religion has long been used as a way to justify discrimination. For example, an affirmative action professionals association asserted that religious freedom has historically been invoked to defend slavery, the denial of women’s suffrage, Jim Crow laws, and segregation. That commenter cited a recent news story in which a mixed-race couple was allegedly denied the use of a hall for a wedding because of the owner’s religious beliefs. Several commenters expressed concern specifically about the effect of the proposal on E.O. 11246’s protections from discrimination based on sexual orientation and gender identity. For example, an LGBT rights advocacy organization commented that it was troubled by the fact that OFCCP failed to cite sexual orientation and gender identity in the proposed rule as the protected characteristics most likely to be impacted by the rule. And a legal professional organization expressed concern that OFCCP may interpret E.O. 11246 to allow federal contractors to discriminate based on sexual orientation as long as they cite sincere religious reasons for doing so. On the other hand, as noted above, other commenters expressed support for the proposal because they believed it would exempt religious organizations from the prohibitions on discrimination based on sexual orientation and gender identify, which would provide them protection to staff their organizations consistent with their sincere religious beliefs. Some commenters requested guidance to resolve the perceived conflict. For example, an individual commenter asked whether protection for a client’s religion or protection for an applicant or PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 employee’s sexual orientation and/or gender identity would prevail under the proposed regulations. A pastoral membership organization stated that if the terms ‘‘sexual orientation’’ and ‘‘gender identity’’ include conduct, it is difficult to determine whether the prohibition on discrimination based on sexual orientation and gender identity or the protection for religiouslymotivated conduct applies. Many of these commenters criticized the proposal for not clearly stating how OFCCP would resolve the perceived contradiction between its assertion that religious contractors would not be permitted to discriminate on other protected bases and its inclusion in the proposed definition of ‘‘acceptance of or adherence to religious tenets as understood by the employer as a condition of employment.’’ For example, the legal think tank asserted that OFCCP does not explain how it will apply these two provisions in cases in which they appear to conflict, and observed that the proposed regulatory text does not limit its definition of ‘‘religious tenets’’ to tenets defined without reference to race, color, sex, sexual orientation, gender identity, or national origin. A state’s attorney general asserted that, because the proposed rule fails to define or limit the type of ‘‘conduct’’ that can form the basis of permissible discrimination by religious entities, it allows contractors to discriminate based on any arbitrary characteristic. Many supportive commenters recommended that OFCCP resolve the perceived conflict by clarifying that the non-discrimination requirements of Title VII and E.O. 11246 do not apply under the corresponding religious exemptions. For example, an anonymous commenter suggested that OFCCP clarify that religious organizations are permitted to discriminate on the bases of sexual orientation and gender identity because, in the commenter’s view, an action that falls within the religious exemption would be outside the bounds of Title VII and E.O. 11246, ‘‘regardless of whether it would otherwise be prohibited by other provisions.’’ Other supportive commenters offered a similar view, stating that the proposed definition provided helpful clarification. For example, a religious liberties legal organization criticized ‘‘the suggestion from the Obama administration’’ that the exemption should be limited to ‘‘religious people cannot be discriminatory for hiring only members of their own religion’’ rather than ‘‘nondiscrimination law does not apply in religious contexts’’ as provided under E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations the Civil Rights Act, and praised the proposed rule for affirming that requiring adherence to an employer’s religious tenets does not constitute discrimination. Similarly, a U.S. Senator commented that the proposed helpfully clarifies that religious employers that contract with the federal government retain the right to hire employees that support their religious mission, consistent with Title VII. Some supportive commenters also noted that the proposed definition was consistent with the First Amendment and Title VII case law. For example, a religious legal association and an association of evangelical churches and schools commented that the principle that religious employers should be allowed to require their employees to conduct themselves in accordance with the employers’ code of moral conduct has been ‘‘almost universally’’ accepted by courts, who have relied alternatively on Section 702(a) of Title VII, the First Amendment’s Religion Clauses, and other considerations recognizing that ‘‘religious organizations may have legitimate, nondiscriminatory reasons’’ for practicing their religious beliefs through employment decisions. In a joint comment, a religious legal association and an association of evangelical churches and schools commented that Section 204(c) of E.O. 11246 should be construed to exempt religious organizations from the nondiscrimination mandates of Section 202, except to the extent that a religious organization’s employment decision is based on race. To address these comments, OFCCP here first discusses the applicable Title VII principles established by case law, including how those principles may apply where religious organizations maintain sincerely held beliefs regarding matters such as marriage and intimacy, which may implicate protected classes under E.O. 11246. OFCCP then discusses its recognition that religious organizations in appropriate circumstances will be entitled to relief under the Religious Freedom Restoration Act. The public should bear in mind that this discussion is restricted solely to these difficult and sensitive questions raised by commenters. This rule does not affect the overwhelming majority of federal contractors and subcontractors, which are not religious, and OFCCP remains fully committed to enforcing all E.O. 11246 nondiscrimination requirements, including those protecting employees from discrimination on the bases of sexual orientation and gender identity. Even for religious organizations that serve as VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 government contractors or subcontractors, they too must comply with all of E.O. 11246’s nondiscrimination requirements except in some narrow respects under some reasonable circumstances recognized by law. This rule provides clarity on those circumstances, consistent with OFCCP’s obligations and desire to also respect and accommodate the free exercise of religion. ii. Legal Principles OFCCP acknowledges first and foremost the United States’ deeply rooted tradition of respect for religion and religious institutions. Religious individuals and organizations operate within and contribute to civil society and do not relinquish their religious freedom protections when they participate in the public square.21 With respect to commenters’ concerns and questions here, many relate to the interaction of two well-established Title VII principles: First, that religious organizations can take religion into account when making employment decisions; and second, that religious organizations cannot discriminate on other protected bases. Each of those two principles taken by itself has clear answers. Where an employment decision made on the basis of religion also implicates another protected basis, however, the law is less clear. As to the first principle, virtually all commenters agreed with what the plain text of the exemption provides: That religious organizations can consider an employee’s particular religion when taking employment action. As discussed elsewhere in this rule’s preamble, commenters disagreed as to the scope of that exemption—which employees it applies to, and which employer actions—but the basic principle was not disputed. As to the second principle, as many commenters recognized, E.O. 11246’s other employment protections apply to religious organizations. Protections on the basis of race, color, sex, sexual orientation, gender identity, and national origin do not categorically disappear when the employer is a religious organization. Thus the religious exemption does not permit religious organizations to engage in prohibited discrimination when there is no religious basis for the action. For instance, a religious organization that declined to promote a non-ministerial employee not for religious reasons, but 21 See Office of the Att’y Gen., Memorandum for All Executive Departments and Agencies: Federal Law Protections for Religious Liberty 1–2 (Oct. 6, 2017). PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 79349 because of animus borne of the employee’s country of birth or skin color, would violate E.O. 11246. Courts in the Title VII context have engaged in careful, fact-bound inquiries to determine whether a religious organization’s action was based on religion or instead on a prohibited basis.22 For instance, courts may inquire whether a plaintiff was subjected to adverse employment action because of his or her sex or because of a violation of religious tenets. See, e.g., Cline v. Catholic Diocese of Toledo, 206 F.3d 651, 655–56, 658 (6th Cir. 2000); cf. EEOC v. Miss. Coll., 626 F.2d 477, 485– 86 (5th Cir. 1980) (holding if religious organization shows that its decision was based on religion, the religious exemption prohibits a further inquiry into pretext). To that extent, courts are virtually uniform in the view that the religious exemption does not permit discrimination on bases other than religion.23 The question posed here, however, is the interaction of those two principles: Specifically, the outcome when a religion organization’s action is based on and motivated by the employee’s adherence to religious tenets yet implicates another category protected by E.O. 11246. OFCCP concludes, as explained in detail below, that the religious exemption itself, as interpreted by the courts, has left the question open, but that such activity would also give rise to an inquiry under RFRA, which must be assessed based on applicable case law and the specific facts presented. At the federal appellate court level, the question of the religious exemption’s interaction with other protected bases was left open in, for instance, EEOC v. Mississippi College, where an EEOC subpoena did ‘‘not clearly implicate any religious practices of the College.’’ 626 F.2d at 487. The court noted that the college had a scripturally rooted policy of hiring only men to teach courses in religion, but stated that ‘‘[b]efore the EEOC could require the College to alter that practice, the College would have an opportunity to litigate in a federal forum whether [the religious exemption] exempts or the first amendment protects that particular 22 See below for a more fulsome discussion of how courts have determined the applicability of the religious exemption. 23 This is separate from the question of whether application of Title VII in any particular instance is tolerable under the First Amendment or other law, such as where the employee is a minister, see Our Lady of Guadalupe, 140 S. Ct. 2049, or where the employment relationship is otherwise ‘‘so pervasively religious’’ that it raises First Amendment concerns, see DeMarco v. Holy Cross High Sch., 4 F.3d 166, 172 (2d Cir. 1993). E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79350 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations practice.’’ Id. The Seventh Circuit has similarly characterized the question of whether ‘‘the religious-employer exemptions in Title VII [are] applicable only to claims of religious discrimination’’ as ‘‘a question of first impression in this circuit.’’ Herx v. Diocese of Fort Wayne-South Bend, Inc., 772 F.3d 1085, 1087 (7th Cir. 2014). Other courts have indicated that the religious exemption may be preeminent in such a situation. See Little, 929 F.2d at 951 (‘‘[T]he permission to employ persons ‘of a particular religion’ includes permission to employ only persons whose beliefs and conduct are consistent with the employer’s religious precepts.’’); see also Kennedy, 657 F.3d at 194 (‘‘Congress intended the explicit exemptions to Title VII to enable religious organizations to create and maintain communities composed solely of individuals faithful to their doctrinal practices.’’ (quoting Little, 929 F.2d at 951)). The only two federal appellate-level cases with fact patterns involving the precise issue are a pair of Ninth Circuit cases from the 1980s. The first, EEOC v. Pacific Press Publishing Association, held as a statutory matter that Title VII’s prohibitions on sex discrimination and on retaliation applied to a religious organization. See 676 F.2d 1272, 1277 (9th Cir. 1982). But the court determined that the practice at issue that resulted in sex discrimination ‘‘does not and could not conflict with [the employer’s] religious doctrines, nor does it prohibit an activity rooted in religious belief.’’ Id. at 1279. Regarding retaliation, the court held as a constitutional matter that Title VII’s anti-retaliation provision should apply to the religious organization even when the employee was dismissed for violating church doctrine that prohibited members from bringing lawsuits against the church. See id. at 1280. The second decision, EEOC v. Fremont Christian School, 781 F.2d 1362 (9th Cir. 1986), is less instructive. It held in relevant part that Title VII could be applied to prohibit a religiously grounded health benefits program that benefited one sex more than the other. However, as a statutory matter, the court held that the religious exemption was not implicated because the employment practice did not concern the selection of employees based on their religion—the text of the exemption refers to ‘‘employment of individuals of a particular religion’’ 24— 24 As explained elsewhere in this preamble, the religious exemption is more than a mere hiring preference for coreligionists. OFCCP nonetheless VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 and as a constitutional matter noted that ‘‘[e]liminating the employment policy involved here would not interfere with religious belief and only minimally, if at all, with the practice of religion.’’ Id. at 1366, 1368. The Supreme Court also has not answered whether an employment action motivated by religion but implicating a protected classification violates Title VII. The Court’s cases offer no clear conclusion whether the religious exemption should be read so narrowly that its protections are overcome by the rest of E.O. 11246’s (or Title VII’s) protections when they are both at issue. For example, in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), the Court held that Title VII’s prohibition on discrimination because of sex includes discrimination on the basis of sexual orientation and transgender status. That holding itself is not particularly germane to OFCCP’s enforcement of E.O. 11246, which has expressly protected sexual orientation and gender identity since 2015. What is certainly germane is the Court’s recognition of the ‘‘fear that complying with Title VII’s requirement in cases like [Bostock] may require some employers to violate their religious convictions’’ and its assurance that it, too, was ‘‘deeply concerned with preserving the promise of the free exercise of religion enshrined in our Constitution; that guarantee lies at the heart of our pluralistic society.’’ Id. at 1753–54. The Court then noted that Title VII contains ‘‘an express statutory exception for religious organizations,’’ but did not explain whether an employment action motivated by religion that implicates a protected classification violates Title VII. Id. at 1754. Regardless, OFCCP ultimately does not need to answer this open question on the proper interpretation of the religious exemption in E.O. 11246, and declines to do so, because RFRA can guide the agency’s determination if and when a particular case presents a situation where a religiously motivated employment action implicates a classification protected under the Executive Order. As noted in Bostock, RFRA ‘‘prohibits the federal government from substantially burdening a person’s exercise of religion unless it demonstrates that doing so both furthers a compelling governmental interest and represents the least restrictive means of agrees that the policy in Fremont would not be covered by the religious exemption because it did not pertain to the employee’s particular religion. Nothing about the employee’s religious beliefs or conduct would affect the policy—only his or her sex. PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 furthering that interest. [42 U.S.C.] § 2000bb–1.’’ Id. Moreover, ‘‘[b]ecause RFRA operates as a kind of super statute, displacing the normal operation of other federal laws, it might supersede Title VII’s commands in appropriate cases. [42 U.S.C.] § 2000bb–3.’’ Id.25 Concerns raised by supportive commenters in this rulemaking have alerted the agency that application of E.O. 11246 may substantially burden their religious exercise, especially if the religious exemption does not clearly protect their ability to maintain employees faithful to their practices and beliefs. The ministerial exception offers religious organizations broad freedom in the selection of ministers, but that is only a subset of their employees. See generally Our Lady of Guadalupe, 140 S. Ct. 2049. In contrast, the religious exemption applies to all of a religious organization’s employees, but the scope of its protections is not settled when religious tenets implicate other protected classes. Thus, the Department should consider RFRA, since in some circumstances neither the ministerial exception nor the religious exemption may alleviate E.O. 11246’s burden on religious exercise. See Little Sisters of the Poor, 140 S. Ct. at 2383–84 (holding agencies should consider RFRA when it is an important aspect of the problem involved in the rulemaking). The discussion below addresses in general terms how OFCCP views its obligations under RFRA in the specific situation raised by commenters and addressed here: Where the religious organization takes employment action regarding an applicant or an employee, the employment action is motivated solely on the employee’s adherence to a sincere religious tenet, yet that tenet also implicates an E.O. 11246 protected category other than race (which is discussed separately). RFRA requires a fact-specific analysis, so the discussion here of necessity can speak only to OFCCP’s general approach; specific situations involving specific parties will require consideration of any additional, unique facts. And of course the contractor or subcontractor involved will need to demonstrate its religious sincerity and burden so that it falls within this rubric. Nonetheless, OFCCP believes its RFRA analysis here will provide clarity for religious contractors and subcontractors, regardless of how future cases may interpret the interplay of the religious exemption in and of itself with other protected classes under Title VII or E.O. 11246. 25 RFRA was not raised before the Court in Bostock. Thus, the Court left that ‘‘question[ ] for future cases.’’ 140 S. Ct. at 1754. E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 iii. Application of the Religious Freedom Restoration Act ‘‘Congress enacted RFRA in 1993 in order to provide very broad protection of religious liberty.’’ Hobby Lobby, 573 U.S. at 693. RFRA responded to ‘‘Employment Division v. Smith, 494 U.S. 872 (1990) [in which] the Supreme Court virtually eliminated the requirement that the government justify burdens on religious exercise imposed by laws neutral toward religion’’ under the First Amendment, and restored by statute ‘‘the compelling interest test as set forth in Sherbert v. Verner, 374 U.S. 398 (1963) and Wisconsin v. Yoder, 406 U.S. 205 (1972).’’ 42 U.S.C. 2000bb(a)(4), (b)(1); see Hobby Lobby, 573 U.S. at 693–95. Under RFRA, the federal government may not ‘‘substantially burden a person’s exercise of religion.’’ 42 U.S.C. 2000bb–1(a). Government is excepted from this requirement only if it ‘‘demonstrates that application of the burden to the person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling government interest.’’ Id. 2000bb–1(b). RFRA ‘‘applies to all Federal law, and the implementation of that law, whether statutory or otherwise, and whether adopted before or after November 16, 1993,’’ Id. 2000bb–3(a), including agency regulations, see Little Sisters of the Poor, 140 S. Ct. at 2383. As ‘‘Federal law, and the implementation of that law,’’ E.O. 11246 fits within that scope as well. (1) Substantial Burden The question of whether government action substantially burdens an employer’s exercise of religion can be separated into two parts. See Hobby Lobby, 573 U.S. at 720–26; Little Sisters of the Poor, 140 S. Ct. at 2389 (Alito, J., concurring). First, the government must ask whether the consequences of noncompliance put substantial pressure on the objecting party to comply. See Hobby Lobby, 573 U.S. at 720–23. Second, the government must ask whether compliance with the regulation would violate or modify the objecting party’s sincerely-held religious exercise (as the objecting party understands that exercise and any underlying beliefs), including the party’s ‘‘ability . . . to conduct business in accordance with [its] religious beliefs.’’ Hobby Lobby, 573 U.S. at 724; see also Sherbert, 374 U.S. at 405–06.26 If the answer to both 26 Case law is clear that RFRA’s substantial burden test does not insist that a challenged government action require an objecting party to VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 questions is yes, then the regulation substantially burdens the exercise of religion. On the first question, noncompliance with the nondiscrimination requirements of E.O. 11246 could have substantial adverse consequences on religious organizations that participate in government contracting. One private religious university supportive of the proposed rule stated that it is ‘‘a large research university with dozens of active federal contracts at any given time,’’ while another stated that ‘‘religious organizations have long been significant participants in federal procurement programs.’’ Noncompliance with E.O. 11246 can result in awards of back pay and other make-whole relief to affected employees and applicants, cancellation or suspension of the contract, and even suspension or debarment. See E.O. 11246 § 202(7); 41 CFR 60–1.26. That is substantial pressure. Indeed, it is a substantial burden for the government to compel someone ‘‘to choose between the exercise of a First Amendment right and participation in an otherwise available public program.’’ Thomas, 450 U.S. at 716; Sherbert, 374 U.S. at 404 (‘‘It is too late in the day to doubt that the liberties of religion and expression may be infringed by the denial of or placing of conditions upon a benefit or privilege.’’). ‘‘Governmental imposition of such a choice puts the same kind of burden upon the free exercise of religion as would a fine imposed’’ for engaging in religious action. Sherbert, 374 U.S. at 404. ‘‘Where the state conditions receipt of an important benefit upon conduct proscribed by a religious faith, or where it denies such a benefit because of conduct mandated by religious belief, thereby putting substantial pressure on an adherent to modify his behavior and to violate his beliefs, a burden upon violate its religious beliefs. Instead, substantial pressure on a party to modify its religiously motivated practice is also sufficient to establish a substantial burden. See, e.g., Archdiocese of Wash. v. Wash. Metro. Area Transit Auth., 897 F.3d 314, 333 (D.C. Cir. 2018) (defining ‘‘substantial burden’’ under RFRA as ‘‘substantial pressure on an adherent to modify his behavior and to violate his beliefs’’) (quoting Thomas v. Review Bd., 450 U.S. 707, 718 (1981)); EEOC v. Catholic Univ. of Am., 83 F.3d 455, 467 (D.C. Cir. 1996) (finding that government’s interest in eliminating employment discrimination at Catholic university was outweighed by university’s right of autonomy in its own domain); Jolly v. Coughlin, 76 F.3d 468, 477 (2d Cir. 1996) (finding that right to free exercise of religion is ‘‘substantially burdened’’ within meaning of RFRA where state puts substantial pressure on adherent to modify his behavior and to violate his beliefs); In re Young, 82 F.3d 1407, 1418 (8th Cir. 1996) (‘‘[D]efining substantial burden broadly to include religiously motivated as well as religiously compelled conduct is consistent with the RFRA’s purpose to restore pre-Smith free exercise case law.’’). PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 79351 religion exists. While the compulsion may be indirect, the infringement upon free exercise is nonetheless substantial.’’). Thomas, 450 U.S. at 717– 18. On the second question, the Supreme Court emphasized in Hobby Lobby that, in determining whether compliance with a particular mandate would substantially burden the objecting party’s ability to operate in accordance with its religious beliefs, the federal government must ‘‘not presume to determine the plausibility of a religious claim.’’ Hobby Lobby, 573 U.S. at 724 (quoting Smith, 494 U.S. at 887). It is not for a court, or for OFCCP, to say whether a particular set of religious beliefs is ‘‘mistaken or insubstantial.’’ Hobby Lobby, 573 U.S. at 725. Furthermore, religious exercise means more than being able to express particular views—a right to freedom of religion requires the right to act in conformance with that religion. See Espinoza, 140 S. Ct. at 2277 (Gorsuch, J., concurring) (‘‘The right to be religious without the right to do religious things would hardly amount to a right at all.’’). It is this right to engage in conduct consistent with sincerely held belief— and a right to be free of demands to engage in conduct conflicting with those sincerely held beliefs—that RFRA protects. See Little Sisters of the Poor, 140 S. Ct. at 2390. Compliance with the nondiscrimination provisions in E.O. 11246, if interpreted to apply when an employment action is motivated by religion yet also implicates a protected classification, could force religious organizations to violate their sincerely held religious beliefs or to compromise their religious integrity or mission by placing substantial pressure on them to violate or modify their religious tenets related to their employees and their religious communities. The comments on the proposed rule made this clear. For example, a private religious university noted the importance for religious employers to be able to ‘‘employ[ ] persons whose beliefs and conduct are consistent with [their] religious precepts.’’ Similarly, a nationwide ecclesiastical organization stated in its comment that faith-based organizations should be able to ‘‘lawfully prefer for employment those who, by word and conduct, accept and adhere to that faith as the organization understands it, regardless of the applicant’s or employee’s religious affiliation.’’ An association of religious universities echoed these sentiments, stating that ‘‘[o]ur schools are committed to upholding their religionbased standards by aligning E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79352 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations employment expectations exclusively with applicants and employees who concur with these expectations. These expectations are essential to fulfilling our religious mission.’’ While the commenter explained that generally its associated ‘‘schools do not accept direct government funding,’’ it highlighted the importance for its members that ‘‘no organization should be excluded by the government from competing for contracts or other funds simply because the religious organization is serious about maintaining its religious identity and religious practices.’’ The case law also indicates that certain E.O. 11246 obligations may impose a burden on religious organizations. Bostock expressly acknowledged that enforcing certain nondiscrimination provisions could pose challenges for religious employers under RFRA. See 140 S. Ct. at 1754. And many cases show instances of religious employers seeking to apply religiously inspired codes of conduct that pertain to matters of marriage and sexual intimacy. See Little, 929 F.2d at 946 (upholding termination of employee for violations of ‘‘Cardinal’s Clause,’’ which included ‘‘entry by the teacher into a marriage which is not recognized by the Catholic Church’’ (emphasis in original)); Cline, 206 F.3d at 666 (holding fact issue remained as to whether plaintiff was terminated for pregnancy or for whether she had ‘‘violated her clear duties as a teacher by engaging in premarital sex’’); Boyd v. Harding Acad. of Memphis, Inc., 88 F.3d 410, 414 (6th Cir. 1996) (upholding district court’s determination that the defendant ‘‘articulated a legitimate, nondiscriminatory reason for plaintiff’s termination when it stated that plaintiff was fired not for being pregnant, but for having sex outside of marriage in violation of Harding’s code of conduct’’ and rejecting claim of pretext when school’s president ‘‘had terminated at least four individuals, both male and female, who had engaged in extramarital sexual relationships that did not result in pregnancy’’); Gosche v. Calvert High Sch., 997 F. Supp. 867, 872 (N.D. Ohio 1998) (dismissing Title VII claim of plaintiff fired for having affair and concluding that ‘‘[w]hatever Plaintiff’s own post-hoc claims may be regarding the relevance of her sexual conduct to her employment at a Catholic school, it is clear that the Diocese and Parish considered her sexual conduct to be relevant to her employment’’); Ganzy v. Allen Christian Sch., 995 F. Supp. 340, 359–60 (E.D.N.Y. 1998) (noting in case with similar facts and holding as Cline that ‘‘[r]eligious institutions . . . are VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 provided leeway under federal constitutional and statutory law in regulating the sexual conduct of those in their employ in keeping with their religious views’’); Dolter v. Wahlert High Sch., 483 F. Supp. 266, 270 (N.D. Iowa 1980) (‘‘Nor does the court quarrel with defendant’s contention that it can define moral precepts and prescribe a code of moral conduct that its teachers . . . must follow.’’).27 Of particular concern here as well is that ‘‘[f]ear of potential liability might affect the way an organization carried out what it understood to be its religious mission.’’ Amos, 483 U.S. at 336; cf. Hosanna-Tabor, 565 U.S. at 197 (Thomas, J., concurring) (‘‘[U]ncertainty about whether its ministerial designation will be rejected, and a corresponding fear of liability, may cause a religious group to conform its beliefs and practices regarding ‘ministers’ to the prevailing secular understanding.’’). Here, out of fear of violating E.O. 11246’s requirements, a religious organization might simply choose to forsake certain of its religious tenets related to employment. That is a religious burden in itself. And that change could in turn result in the organization hiring and retaining employees who, by word or deed, undermine the religious organization’s character and purpose—but which the organization would feel compelled to accept rather than risk liability. That is a second religious burden, which in particular may pose a risk to smaller or nontraditional religious groups. Cf. Hosanna-Tabor, 565 U.S. at 197 (Thomas, J., concurring) (noting that a bright-line test or multifactor analysis for the definition of ‘‘minister’’ ‘‘risk[s] disadvantaging those religious groups whose beliefs, practices, and membership are outside of the ‘mainstream’ or unpalatable to some,’’ including by ‘‘caus[ing] a religious group to conform its beliefs and practices regarding ‘ministers’ to the prevailing secular understanding’’). Alternatively, to avoid this problem, the religious organization might consider drawing stricter lines around those it considers ‘‘coreligionists,’’ for even the narrowest reading of the 27 Amos also implicated such facts. The appellee had been discharged for failing to ‘‘qualify for a temple recommend, that is, a certificate that he is a member of the Church and eligible to attend its temples,’’ which ‘‘are issued only to individuals who observe the Church’s standards in such matters as regular church attendance, tithing, and abstinence from coffee, tea, alcohol, and tobacco.’’ Amos, 483 U.S. at 330 & n.4. The plaintiffs below had alleged that those standards necessitated employer inquiries into their ‘‘sexual activities’’ and ‘‘moral cleanliness and purity.’’ Amos, 594 F. Supp. at 830. PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 religious exemption permits religious organizations to prefer ‘‘coreligionists’’ in employment decisions. In that case, religious organizations would draw strict lines by stating that certain behaviors, beliefs, or statements are anathema to the religion and take one outside the religious community. That way, employment action would be more readily identified as resting solely on religious grounds as a preference against a non-coreligionist. See Mississippi College, 626 F.2d at 484–85; cf. Amos, 483 U.S. at 343 (Brennan, J., concurring) (‘‘A religious organization therefore would have an incentive to characterize as religious only those activities about which there likely would be no dispute, even if it genuinely believe that religious commitment was important in performing other tasks as well.’’). Here, the religious burden would be government pressure on how the religious organization defines who is and who is not a member of its religious community. Demonstrating burden is necessarily fact-dependent. There may be instances where the organization sincerely believes as a religious matter that it can tolerate some kinds of religious noncompliance from some of its employees without seriously compromising its religious mission or identity. That may be the case especially for employees in less prominent roles or who have little interaction with students or the public. But there may be other instances where, in the sincere view of the organization, a nonministerial employee must adhere to the organization’s religious tenets as an important part of furthering the organization’s religious mission and maintaining its religious identity, and where strict enforcement of certain E.O. 11246 requirements would substantially burden those aims. (2) Compelling Interest Many courts have recognized the importance of the government’s interest in enforcing Title VII’s nondiscrimination provisions. See, e.g., Rayburn, 772 F.2d at 1169; Pacific Press, 676 F.2d at 1280. The following RFRA analysis does not address OFCCP’s enforcement program broadly, including the context of a religious organization’s discriminating on the basis of a protected characteristic other than religion for non-religious reasons. OFCCP will continue to fully enforce E.O. 11246’s requirements in those contexts. Rather, the compelling-interest analysis here focuses solely on the questions raised by commenters regarding a situation in which a religious organization takes employment E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations action based solely on sincerely held religious tenets that also implicate a protected classification. To satisfy RFRA, OFCCP must do more than assert a generalized compelling interest on a ‘‘categorical’’ basis. O Centro, 546 U.S. at 431. Instead, ‘‘RFRA requires the Government to demonstrate that the compelling interest test is satisfied through application of the challenged law ‘to the person’—the particular claimant whose sincere exercise of religion is being substantially burdened.’’ Id. at 430–31 (quoting 42 U.S.C. 2000bb–1(b)). This requires ‘‘look[ing] beyond broadly formulated interests justifying the general applicability of government mandates and scrutiniz[ing] the asserted harm of granting specific exemptions to particular religious claimants.’’ Id. at 431. Thus OFCCP must demonstrate that it has a compelling governmental interest in enforcing a nondiscrimination requirement against ‘‘particular religious claimants’’ (e.g., particular contractors who qualify for the religious exemption) when doing so places a substantial burden on the ability of those particular contractors to freely exercise their religion. Id. This statutory requirement is reflected in OFCCP’s current RFRA policy, under which ‘‘OFCCP will consider’’ a contractor’s request for ‘‘an exemption to E.O. 11246 pursuant to RFRA . . . based on the facts of the particular case.’’ OFCCP, Religious Employers and Religious Exemption, www.dol.gov/agencies/ ofccp/faqs/religious-employersexemption. As explained below, OFCCP has determined on the basis of several independent reasons that it has less than a compelling interest in enforcing nondiscrimination requirements— except for protections on the basis of race—when enforcement would seriously infringe the religious mission or identity of a religious organization. Exceptions provided other contractors. OFCCP’s general interest in enforcing E.O. 11246 is less than compelling in the religious context addressed here, given the numerous exceptions from its nondiscrimination requirements it has authority to grant, and has granted, in nonreligious contexts. Granting accommodations in nonreligious contexts strongly suggests that OFCCP does not have a compelling interest in disfavoring religious contractors by refusing to grant accommodations in religious contexts. See O Centro, 546 U.S. at 436 (‘‘RFRA operates by mandating consideration, under the compelling interest test, of exceptions to ‘rule[s] of general applicability.’ ’’ (quoting 42 U.S.C. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 2000bb–1(a))). When ‘‘[t]he proffered objectives are not pursued with respect to analogous nonreligious conduct,’’ those exceptions suggest that ‘‘those interests could be achieved by narrower ordinances that burdened religion to a far lesser degree.’’ Holt, 574 U.S. at 367. The President has granted OFCCP broad authority and discretion to exempt contracts from the requirements of E.O. 11246. Most prominent is section 204(a) of E.O. 11246, which authorizes the Secretary of Labor to grant exemptions from any or all of the equal opportunity clause’s requirements ‘‘when the Secretary deems that special circumstances in the national interest so require.’’ This is not the kind of language government typically uses when it seeks a policy of absolute enforcement. Rather, it is the kind of language government uses when granting highly discretionary power. Cf. Webster v. Doe, 486 U.S. 592, 600 (1988) (removing an employee ‘‘whenever the Director ‘shall deem such termination necessary or advisable in the interests of the United States’ ’’ is a standard that ‘‘fairly exudes deference to the Director’’ (quoting National Security Act § 102(c)). The Executive Order contains many other exceptions as well. Section 204(b) authorizes the Secretary to exempt contracts that are to be performed outside the United States, contracts that are for standard commercial supplies or raw materials, contracts that do not meet certain thresholds (dollar amounts or numbers of employees), and subcontracts below a specified tier. Section 204(d) authorizes the Secretary to exempt a contractor’s facilities that are separate and distinct from activities related to the performance of the contract, as long as ‘‘such an exemption will not interfere with or impede the effectuation of the purposes of this Order.’’ OFCCP’s implementing regulations contain exemptions as well. OFCCP has implemented section 204(b) to the maximum extent possible by exempting all contracts and subcontracts for work performed outside the United States by employees not recruited in the United States. See 41 CFR 60–1.5(3). OFCCP’s regulations also contain a religious exemption for religious educational institutions and permit a preference for ‘‘Indians living on or near an Indian reservation in connection with employment opportunities on or near an Indian reservation.’’ 41 CFR 60–1.5(6)–(7). On several occasions OFCCP has used its power to exempt contracts ‘‘in the national interest.’’ ‘‘Prior administrations granted [national interest exemptions] for Hurricanes PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 79353 Sandy and Katrina,’’ 28 and OFCCP has granted temporary exemptions from some E.O. 11246 requirements in response to more recent national disasters. OFCCP has similarly granted an exemption during the COVID–19 pandemic. See OFCCP, National Interest Exemptions, https://www.dol.gov/ agencies/ofccp/national-interestexemption. And the National Interest Exemptions that OFCCP has granted can be quite broad, applying, for example, to all new contracts providing coronavirus relief during the applicable time period. See OFCCP, Coronavirus National Interest Exemption Frequently Asked Questions, https://www.dol.gov/ agencies/ofccp/faqs/covid-19#Q1. OFCCP has also issued a final rule effecting a permanent exemption from all OFCCP authority for healthcare providers that participate in the TRICARE program and have no otherwise covered contracts. The final rule expressed OFCCP’s view that a 2011 statute removed whatever authority OFCCP may have had over TRICARE providers and did not replace it with a separate nondiscrimination provision; Congress’ action indicates that OFCCP’s interest is less than compelling interest. See 85 FR 39834, 39837–39 (July 2, 2020). Additionally, the final rule exempted TRICARE providers on the alternative ground of a national interest exemption, citing its concern that ‘‘the prospect of exercising authority over TRICARE providers is affecting or will affect the government’s ability to provide health care to uniformed service members, veterans, and their families,’’ a determination that ‘‘pursuing enforcement efforts against TRICARE providers is not the best use of its resources’’ given a history of litigation and legal uncertainty in the area, and the need to ‘‘provide uniformity and certainty in the health care community with regard to legal obligations concerning participation in TRICARE.’’ Id. at 39839. The various exemptions that OFCCP can and does provide in secular settings show that its interest in enforcing E.O. 11246’s requirements can give way to other considerations. Many of those same considerations exist here, so OFCCP’s enforcement interest should similarly give way to religious accommodation. For example, many of the same reasons underlying OFCCP’s exemption for TRICARE providers apply here as well: Conservation of resources in an area that could lead to protracted 28 OFCCP, ‘‘Coronavirus National Interest Exemption Frequently Asked Questions,’’ Question #12, https://www.dol.gov/agencies/ofccp/faqs/ covid-19#Q12. E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79354 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations litigation; the need to bring clarity to a group of potential contractors under a cloud of legal uncertainty; and a goal of improving the government’s access to certain services. In the TRICARE rule, the goal was to foster access to care for veterans and their families. In this rule, it is the goal of fostering the equal participation of religious organizations in government contracting and subcontracting in order to increase the contracting pool’s competition and diversity and thus improve economy and efficiency in procurement. Likewise OFCCP’s limited exemptions during emergencies and the pandemic demonstrate the agency’s judgment that securing services for the government can override aspects of E.O. 11246’s obligations. Here, too, a limited religious accommodation may encourage religious organizations to begin or continue participating in government contracting and subcontracting. And like those other exemptions, a religious accommodation here would be limited. It would be limited to employment action grounded in a sincere religious belief with respect to the employee’s religion. It would not excuse religious organizations from their antidiscrimination obligations otherwise and never on the basis of race, nor from their affirmative-action obligations, reporting requirements, or other requirements under E.O. 11246. E.O. 11246’s many available exemptions, and OFCCP’s history of recognizing exemptions, also undercuts the idea that individualized religious exemptions would undermine the agency’s overall enforcement of E.O. 11246 or that their denial would be equitable to religious organizations. See Holt, 574 U.S. at 368 (‘‘At bottom, this argument is but another formulation of the ‘classic rejoinder . . . : If I make an exception for you, I’ll have to make one for everybody, so no exceptions.’ We have rejected a similar argument in analogous contexts, and we reject it again today.’’) (internal citations omitted) (quoting O Centro, 546 U.S. at 436); Fraternal Order of Police Newark Lodge No. 12 v. City of Newark, 170 F.3d 359, 365 (3d Cir. 1999) (‘‘[W]e conclude that the Department’s decision to provide medical exemptions while refusing religious exemptions is sufficiently suggestive of discriminatory intent so as to trigger heightened scrutiny.’’). Recognizing the value that religious contractors provide, OFCCP has determined that it has less than a compelling interest in enforcing E.O. 11246 when a religious organization takes employment action solely on the basis of sincerely held religious tenets VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 that also implicate a protected classification, other than race. OFCCP has determined that, in these circumstances, it should instead appropriately accommodate religion, especially when doing so (as with national interest exemptions) would foster a more competitive pool of government contractors. See Boyle v. United Techs. Corp., 487 U.S. 500, 506 (1988) (noting that ‘‘the Federal Government’s interest in the procurement of equipment is implicated’’ where ‘‘[t]he imposition of liability on Government contractors’’ will cause the contractors to ‘‘decline to manufacture’’ a good or to ‘‘raise its price’’). Establishment Clause concerns. OFCCP’s interest in enforcing E.O. 11246 is attenuated when doing so seriously risks violating the Establishment Clause. But as noted earlier, strict application of all E.O. 11246 requirements to religious organizations could, in some instances, chill their protected religiously based requirements for employment out of fear of liability. It could also chill religious organizations from taking employment action despite an employee, by word or deed, undermining the religious organization’s tenets and purposes. Alternatively, it could incentivize religious organizations, because of the risk that the government might misunderstand the organization’s motivations, to draw stricter lines around who it considers a coreligionist. In this situation, the religious organization would first take some form of purely religious action against an employee to designate the employee as no longer a part of the religious community, and then take employment action, so that employment action would be more readily identified as resting solely on grounds of religious preference. And it poses a risk to smaller or nontraditional religious groups, whose membership practices may not be as readily understood by the government. Cf. Hosanna-Tabor, 565 U.S. at 197 (Thomas, J., concurring). Such government pressure on religious organizations’ membership and doctrinal decisions would raise serious concerns under not only the Free Exercise Clause, but the Establishment Clause as well. ‘‘[T]he Religion Clauses protect the right of churches and other religious institutions to decide matters ‘of faith and doctrine’ without government intrusion. . . . [A]ny attempt by government to dictate or even to influence such matters would constitute one of the central attributes of an establishment of religion.’’ Our Lady of Guadalupe, 140 S. Ct. at 2060 PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 (emphasis added) (quoting HosannaTabor, 565 U.S. at 186 (opinion for the court)); see also Hosanna-Tabor, 565 U.S. at 197 (Thomas, J., concurring) (‘‘These are certainly dangers that the First Amendment was designed to guard against.’’). In essence, such an approach could have the unfortunate consequence of pushing religious organizations to extremes to avoid liability. Religious organizations could do so either by forsaking their religiously based requirements for employment, or by engaging in more definitive religious actions to demonstrate their religious disassociation from someone who breaches a religiously based requirement for employment. OFCCP also has concerns about inter-religious discrimination, since some bona fide religious organizations require adherence to a common set of beliefs or tenets but do not have a formal membership structure, see World Vision, 633 F.3d at 728 (O’Scannlain, J., concurring), so they may have more difficulty than traditional churches in showing that an employee or applicant is not (or is no longer) a coreligionist. OFCCP cannot avoid this Establishment Clause problem by attempting to determine whether a religious organization’s decision to deem someone a non-coreligionist was motivated by discriminatory animus rather than a sincere application of religious tenets. Unlike the fact-finding to determine the reason for an employment decision, which does not always raise Establishment Clause concerns, this would be fact-finding to determine the reason for a religious decision on community membership. Testing the basis of that decision would most likely violate the First Amendment. It would violate the religious organization’s right to choose its membership free of government influence, and the process of inquiry alone into such a sensitive area ‘‘would risk judicial entanglement in religious issues.’’ Our Lady of Guadalupe, 140 S. Ct. at 2069; see Catholic Bishop, 440 U.S. at 502. The absence of a clear command. Finally, a compelling interest ought to be one that is clearly spelled out by the government. For instance, in his concurrence in Little Sisters of the Poor, Justice Alito observed that it was highly significant that Congress itself had not treated free access to contraception as a compelling government interest. See Little Sisters of the Poor, 140 S. Ct. at 2392–93 (Alito, J., concurring). Here, however, the scope of the religious exemption is unsettled. As discussed above, courts have consistently interpreted the religious exemption to E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 prohibit religious organizations from discriminating on bases other than religion. But Bostock left open the scope of the exemption’s protection for religious discrimination, and only two federal court of appeal decisions have addressed a fact pattern in which a religious organization’s religious tenets conflicted with a non-religious Title VII protection. See Fremont, 781 F.2d at 1368 (finding challenged religious practice outside the scope of the religious exemption and changing the practice would pose little interference with the organization’s religious belief and practice); Pacific Press, 676 F.2d at 1279 (determining that the EEOC’s action ‘‘does not and could not conflict with [the employer’s] religious doctrines, nor does it prohibit an activity rooted in religious belief’’). Without stronger legal evidence that the religious exemption’s protections are cabined by E.O. 11246’s other protections (and thus may seriously infringe religious freedom), OFCCP is hesitant to describe that theory as furthering a compelling government interest. (3) Least Restrictive Means In the third step of the RFRA analysis, OFCCP assesses whether its application of the religious burden to the person ‘‘is the least restrictive means of furthering that compelling government interest.’’ 42 U.S.C. 2000bb–1(b)(2). Because OFCCP believes that it has less than a compelling interest in enforcing E.O. 11246 in the circumstances contemplated for purposes of this general RFRA analysis it need not consider whether that foreclosed enforcement would be by the least restrictive means. When the Supreme Court has found a regulation violated RFRA, the Court has permitted the regulatory agency to determine the correct remedy. See, e.g., Hobby Lobby, 573 U.S. at 726, 731, 736; 79 FR 51118 (Aug. 27, 2014) (proposed modification in light of Hobby Lobby). As a result, OFCCP has discretion to determine an appropriate accommodation without having to also determine the least restrictive alternative. As Justice Alito recently explained, RFRA ‘‘does not require . . . that an accommodation of religious belief be narrowly tailored to further a compelling interest. . . . Nothing in RFRA requires that a violation be remedied by the narrowest permissible corrective.’’ Little Sisters of the Poor, 140 S. Ct. at 2396 (Alito, J., concurring). OFCCP further believes the RFRA approach outlined here is an appropriate accommodation, which applies only to bona fide religious employers and which permits only VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 employment actions based on sincere religious tenets; employees remain protected from discrimination motivated by animus or any other nonreligious reason, and employment actions based on race always remain prohibited. 79355 center of the Harris case was not a religious organization. See 884 F.3d at 581. Unlike the religious employers that are OFCCP’s focus here, the funeral home had ‘‘virtually no religious characteristics,’’ id. at 582: No religiously inspired code of conduct, no doctrinal statement, and no other (4) The Harris Case religious requirement for employees. OFCCP does not view the Sixth Nor did the funeral home through its Circuit’s opinion in EEOC v. R.G. &. work seek to advance the values of a particular religion. See id. Indeed, the G.R. Harris Funeral Homes, Inc., 884 funeral home was clearly outside the F.3d 560 (6th Cir. 2018), aff’d, Bostock v. Clayton Cnty., 140 S. Ct. 1731 (2020), scope of OFCCP’s religious exemption— as requiring a different analysis here. In which exists to prevent E.O. 11246’s nondiscrimination provisions from that case (one of three consolidated in Bostock), an employee of a funeral home interfering with a religious organization’s freedom to employ informed the funeral home’s owner of the employee’s intention to present as a ‘‘individuals of a particular religion’’— and furthermore the funeral home’s own member of the opposite sex while at testimony indicated that its conduct was work. The owner stated that he would motivated by commercial rather than violate his religious beliefs were he to religious concerns. See id. at 576 n.5, permit the employee to do so and terminated the employee. See id. at 568– 586, 589 n.10. Bearing those key factual differences 69. In the ensuing litigation, the funeral home raised a RFRA defense. The Sixth in mind, OFCCP disagrees that, at least as applied to religious organizations Circuit held that Title VII regulated by OFCCP, ‘‘tolerating’’ discrimination claims ‘‘will necessarily employee conduct that is contrary to the defeat’’ RFRA defenses to such organization’s sincerely held religious discrimination. Id. at 595. The court tenets can never constitute a substantial addressed each element of RFRA. burden under RFRA, as the court held Regarding substantial burden, the court held in relevant part that the employer’s in Harris. Id. at 588. That holding is, at the very least, in tension with Little mere toleration of the employee’s Sisters of the Poor, Hobby Lobby, and conduct to comply with Title VII is not the Free Exercise Clause precedents an endorsement of it, so it was not a they rested on. See Hobby Lobby, 573 substantial burden. Regarding the furtherance of a compelling interest, the U.S. at 723–25; see also Little Sisters of the Poor, 140 S. Ct. at 2383 (‘‘[In Hobby court held that failure to enforce Title Lobby,] we made it abundantly clear VII would result in the employee that, under RFRA, the Departments suffering discrimination, ‘‘an outcome must accept the sincerely held directly contrary to the EEOC’s complicity-based objections of religious compelling interest in combating entities.’’); id. at 2390 (Alito, J., discrimination in the workforce.’’ Id. at concurring) (observing that ‘‘federal 592. Regarding least-restrictive means, courts have no business addressing the court held that enforcement of Title whether the religious belief asserted in VII is itself the least-restrictive means a RFRA case is reasonable,’’ including for eradicating employment religious beliefs underlying complicitydiscrimination on the basis of sex. See based objections). When government id. at 593–97. requires conduct proscribed by religious The defendant in Harris did not raise faith on pain of substantial penalty, the RFRA issue to the Supreme Court, there is a burden upon religious but the Court in Bostock nonetheless exercise. See Sherbert, 374 U.S. at 404. observed that, ‘‘[b]ecause RFRA operates Additionally, the burden is even as a kind of super statute . . . it might clearer for an objecting religious supersede Title VII’s commands in organization than it was for the funeral appropriate cases.’’ 29 Bostock, 140 S. Ct. home in Harris. Unlike a secular at 1754. To the extent Harris remains employer, a religious organization has a good law, OFCCP does not view the religious foundation and purpose and Sixth Circuit’s RFRA analysis as may select its employees on the basis of applicable here, as the facts of the case their religious adherence. Requiring are readily distinguishable from this religious employers to maintain rule’s protections for religious employees who disregard the organizations. The funeral home at the organization’s religious tenets thus more seriously threatens to undermine the 29 The Court also observed that ‘‘other employers organization’s mission and integrity. in other cases may raise free exercise arguments This gives even more credence to a that merit careful consideration.’’ Bostock, 140 S. Ct. at 1754. claim that forcing a religious employer PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 E:\FR\FM\09DER2.SGM 09DER2 79356 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 to maintain such an employee would substantially burden its religious exercise. OFCCP also does not view Harris’s treatment of the compelling-interest prong of RFRA as persuasive when applied to religious organizations regulated by OFCCP. First, because the defendant was not a religious organization, the Harris court did not consider the antecedent question of whether the government has a compelling interest in applying nondiscrimination laws to a religious organization when doing so would threaten to compromise the organization’s integrity or mission, with its attendant more-severe infringements on religious free exercise and establishment problems. As discussed above, there are instances where that could occur, so accordingly in that situation the RFRA analysis is different. Additionally, E.O. 11246 contains additional and discretionary exceptions that Title VII does not have, which further alter the compelling-interest balance. (5) OFCCP’s Compelling Interest in Prohibiting Racial Discrimination In response to commenters who raised the issue, OFCCP reiterates here that it has a compelling interest in eradicating racial discrimination, even as against religious organizations. To be sure, OFCCP is currently unaware of any contractor contending that its religious beliefs required it to take employment actions that implicate race, and commenters supplied no evidence of that occurring. Nonetheless, in response to commenters’ broader concerns, OFCCP makes clear here that its overwhelming interest in eradicating racial discrimination would defeat RFRA claims in the context addressed in this section of the rule’s preamble. OFCCP will enforce E.O. 11246 against any contractor or subcontractor that takes employment actions on the basis of race, even if religiously motivated. At least one commenter that strongly supported the proposed rule likewise recognized that the religious exemption should not protect ‘‘a religious organization’s employment decision . . . based on racial status.’’ OFCCP treats racial discrimination as unique because the Constitution does as well. The Supreme Court recognizes that ‘‘[r]acial bias is distinct.’’ PenaRodriguez v. Colorado, 137 S. Ct. 855, 868 (2017). Indeed, a long history of the Court’s ‘‘decisions demonstrate that racial bias implicates unique historical, constitutional, and institutional concerns.’’ Id. (emphasis added). Although this final rule recognizes that VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 religious accommodations may be necessary in certain other contexts regarding considerations of sex, ‘‘discrimination on the basis of race, ‘odious in all aspects, is especially pernicious in the administration of justice.’ ’’ Id. (quoting Rose v. Mitchell, 443 U.S. 545, 555 (1979)). The Supreme Court has elsewhere recognized the government’s unique interest in eradicating racial discrimination. In Hobby Lobby, the Court considered ‘‘the possibility that discrimination in hiring, for example on the basis of race, might be cloaked as religious practice to escape legal sanction,’’ but explained that ‘‘[t]he Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal.’’ 573 U.S. at 733. In Bob Jones University, the Court similarly concluded that the government had a ‘‘compelling’’ interest—described as ‘‘a fundamental overriding interest’’—‘‘in eradicating racial discrimination,’’ and further explained the ‘‘governmental interest’’ in eradicating racial discrimination ‘‘substantially outweighs whatever burden’’ the government action in that case ‘‘place[d] on petitioners’ exercise of their religious beliefs.’’ Bob Jones, 461 U.S. at 604; see also Newman v. Piggie Park Enters., Inc., 390 U.S. 400, 402 n.5 (1968) (describing as ‘‘patently frivolous’’ the argument that a prohibition on racial discrimination ‘‘was invalid because it contravenes the will of God and constitutes an interference with the free exercise of the Defendant’s religion’’) (internal quotation marks omitted). The government’s heightened interest in eradicating racial discrimination is further exhibited by the Supreme Court’s jurisprudence regarding the Equal Protection Clause of the Fourteenth Amendment. In Equal Protection Clause cases, the Court applies ‘‘strict scrutiny’’ to instances of race-based classifications, meaning that ‘‘all racial classifications, imposed by whatever federal, state, or local governmental actor . . . are constitutional only if they are narrowly tailored measures that further compelling governmental interests.’’ Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227 (1995). Strict scrutiny presents a more pressing standard than the ‘‘intermediate scrutiny’’ that the Court applies in Equal Protection Clause cases to instances of sex-based classifications, see, e.g., Craig v. Boren, 429 U.S. 190, 197 (1976)) (‘‘[C]lassifications by gender must serve PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 important governmental objectives and must be substantially related to achievement of those objectives.’’); id. at 218 (Rehnquist, J., dissenting) (referring to the majority approach as ‘‘intermediate’’ scrutiny), and the ‘‘rational-basis scrutiny’’ that the Court has sometimes applied to classifications based on sexual orientation, see Lawrence v. Texas, 539 U.S. 558, 578 (2003); Romer v. Evans, 517 U.S. 620, 631–32 (1996). The Supreme Court has further recognized that traditional views on marriage do not suggest bigotry or invidious discrimination but instead are held ‘‘in good faith by reasonable and sincere people here and throughout the world.’’ Obergefell v. Hodges, 576 U.S. 644, 657 (2015).30 The Constitution, as interpreted by the Supreme Court, is more protective of race than other protected classifications. Thus, the Court’s long-established Equal Protection jurisprudence supports the conclusion that although the government has an interest in eradicating discrimination on the bases of all protected classes, the governmental interest in eradicating racial discrimination is particularly strong. This final rule is consistent with that framework. e. Application of the Religious Exemption As explained in the proposed rule, when evaluating allegations of discrimination on bases other than religion against employers that are entitled to the Title VII religious exemption, courts carefully evaluate whether the employment action was permissibly based on the ‘‘particular religion’’ of the employee. The particulars vary. In the absence of direct evidence of discrimination on a protected basis other than religion, courts generally invoke the burdenshifting framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), to determine whether a religious employer’s invocation of religion (or a religiously motivated policy) in making an employment decision was genuine or, instead, was merely a pretext for discrimination prohibited under Title VII. See Cline, 206 F.3d 651; Boyd, 88 F.3d 410; cf. Geary, 7 F.3d 324 (applying McDonnell Douglas in assessing religious-exemption defense to claim under the Age Discrimination in Employment Act). At least one other 30 Cf. Masterpiece Cakeshop, 138 S. Ct. at 1727 (stating that a clergy member’s refusal to perform a gay marriage ‘‘would be well understood in our constitutional order as an exercise of religion, an exercise that gay persons could recognize and accept without serious diminishment to their own dignity and worth’’). E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations case has noted that ‘‘[o]ne way’’ to show discriminatory intent using circumstantial evidence ‘‘is through the burden-shifting framework set out in McDonnell Douglas,’’ but another way is to ‘‘show enough non-comparison circumstantial evidence to raise a reasonable inference of intentional discrimination.’’ Hamilton v. Southland Christian Sch., Inc., 680 F.3d 1316, 1320 (11th Cir. 2012). In undertaking this evaluation, OFCCP, like courts, ‘‘merely asks whether a sincerely held religious belief actually motivated the institution’s actions.’’ Geary, 7 F.3d at 330. The religious organization’s burden ‘‘to explain is considerably lighter than in a non-religious employer case,’’ since the organization, ‘‘at most, is called upon to explain the application of its own doctrines.’’ Id. ‘‘Such an explanation is no more onerous than is the initial burden of any institution in any First Amendment litigation to advance and explain a sincerely held religious belief as the basis of a defense or claim.’’ Id.; see Seeger, 380 U.S. at 185 (holding whether a belief is ‘‘truly held’’ is ‘‘a question of fact’’). The sincerity of religious exercise is often undisputed or stipulated. See, e.g., Hobby Lobby, 573 U.S. at 717 (‘‘The companies in the case before us are closely held corporations, each owned and controlled by a single family, and no one has disputed the sincerity of their religious beliefs.’’); Holt, 574 U.S. at 361 (‘‘Here, the religious exercise at issue is the growing of a beard, which petitioner believes is a dictate of his religious faith, and the Department does not dispute the sincerity of petitioner’s belief.’’). In assessing sincerity, OFCCP takes into account all relevant facts, including whether the contractor had a preexisting basis for its employment policy and whether the policy has been applied consistently to comparable persons, although absolute uniformity is not required. See Kennedy, 657 F.3d at 194 (noting that the Title VII religious exemption permits religious organizations to ‘‘consider some attempt at compromise’’); LeBoon, 503 F.3d at 229 (‘‘[R]eligious organizations need not adhere absolutely to the strictest tenets of their faiths to qualify for Section 702 protection.’’); see also Killinger, 113 F.3d at 199–200. OFCCP will also evaluate any factors that indicate an insincere sham, such as acting ‘‘in a manner inconsistent with that belief’’ or ‘‘evidence that the adherent materially gains by fraudulently hiding secular interests behind a veil of religious doctrine.’’ Philbrook, 757 F.2d at 482 (quoting Barber, 650 F.2d at 441) VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 (internal quotation mark omitted); cf., e.g., Hobby Lobby, 573 U.S. at 117 n.28 (‘‘To qualify for RFRA’s protection, an asserted belief must be ‘sincere’; a corporation’s pretextual assertion of a religious belief in order to obtain an exemption for financial reasons would fail.’’); Quaintance, 608 F.3d at 724 (Gorsuch, J.) (‘‘[T]he record contains additional, overwhelming contrary evidence that the [defendants] were running a commercial marijuana business with a religious front.’’). Other decisions have not used the McDonnell Douglas framework, particularly when an inquiry into purported pretext would risk entangling the court in the internal affairs of a religious organization or require a court or jury to assess religious doctrine or the relative weight of religious considerations. See Geary, 7 F.3d at 330–31 (discussing cases). Depending on the circumstances, such an inquiry by a court or an agency could impermissibly infringe on the First Amendment rights of the employer. This arises most prominently in the context of the ministerial exception, a judicially recognized exemption grounded in the First Amendment from employment-discrimination laws for decisions regarding employees who ‘‘minister to the faithful.’’ HosannaTabor, 565 U.S. at 189; see also Our Lady of Guadalupe, 140 S. Ct. at 2060. The exemption ‘‘is not limited to the head of a religious congregation,’’ nor subject to ‘‘a rigid formula for deciding when an employee qualifies as a minister.’’ Hosanna-Tabor, 565 U.S. at 190; see also Our Lady of Guadalupe, 140 S. Ct. at 2067. ‘‘The interest of society in the enforcement of employment discrimination statutes is undoubtedly important. But so too is the interest of religious groups in choosing who will preach their beliefs, teach their faith, and carry out their mission.’’ Hosanna-Tabor, 565 U.S. at 189. The ministerial exception thus bars ‘‘an employment discrimination suit brought on behalf of a minister.’’ Id.; see also Our Lady of Guadalupe, 140 S. Ct. at 2073. In such a situation, it is dispositive that the employee is a minister; there is no further inquiry into the employer’s motive. See HosannaTabor, 565 U.S. at 706 (‘‘By imposing an unwanted minister, the state infringes the Free Exercise Clause . . . and the Establishment Clause’’); see, e.g., Rayburn, 772 F.2d at 1169 (‘‘In ‘quintessentially religious’ matters, the free exercise clause of the First Amendment protects the act of decision rather than a motivation behind it.’’ PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 79357 (quoting Serbian E. Orthodox Diocese v. Milivojevich, 426 U.S. 696, 720 (1976))). Some commenters, such as a religious legal association and an association of evangelical churches and schools, agreed with OFCCP that governmental inquiry into religious employers’ practices could violate the First Amendment. A religious legal organization commended OFCCP for deferring to religious organizations on matters of doctrine and religious observance, and commented that doing otherwise could lead to unconstitutional entanglement with religion. These are the constitutional concerns that likewise constrain courts’ analyses when an employer makes an employment decision based on religious criteria, yet the employee disputes the religious criteria. In those situations, courts have stated that ‘‘if a religious institution . . . presents convincing evidence that the challenged employment practice resulted from discrimination on the basis of religion, § 702 deprives the EEOC of jurisdiction to investigate further to determine whether the religious discrimination was a pretext for some other form of discrimination.’’ Little, 929 F.2d at 948 (quoting Mississippi College, 626 F.2d at 485). Courts have noted the constitutional dangers of ‘‘choos[ing] between parties’ competing religious visions’’ and entangling themselves in deciding whether the employer or the employee has the better reading of doctrine, or which tenets an employee must follow or believe to remain in employment. Geary, 7 F.3d at 330; see Curay-Cramer, 450 F.3d at 141 (‘‘While it is true that the plaintiff in Little styled her allegation as one of religious discrimination whereas [this plaintiff] alleges gender discrimination, we do not believe the difference is significant in terms of whether serious constitutional questions are raised by applying Title VII. Comparing [plaintiff] to other Ursuline employees who have committed ‘offenses’ against Catholic doctrine would require us to engage in just the type of analysis specifically foreclosed by Little.’’); Little, 929 F.2d at 949 (‘‘In this case, the inquiry into the employer’s religious mission is not only likely, but inevitable, because the specific claim is that the employee’s beliefs or practices make her unfit to advance that mission. It is difficult to imagine an area of the employment relationship less fit for scrutiny by secular courts.’’); Maguire, 627 F. Supp. at 1507 (‘‘Despite [plaintiff’s] protests that she is a Catholic, ‘of a particular religion,’ the determination of who fits into that category is for religious E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79358 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations authorities and not for the government to decide.’’). Some commenters criticized OFCCP’s description of the extent to which it would be permissible to inquire into whether a religious employer’s adverse employment action was based on religion or on another protected characteristic. Many of these commenters believed OFCCP’s proposed approach is inconsistent with courts’ inquiry in Title VII cases. For example, a group of state attorneys general asserted that, unlike the definition in the proposed rule, Title VII jurisprudence and case law has required nuanced and fact-dependent inquiry into whether a religious employer discriminated against a worker based on his or her ‘‘particular religion’’ or on another protected basis. An LGBT rights advocacy organization criticized OFCCP for rejecting the traditional burdenshifting framework set forth in McDonnell Douglas and instead placing the burden on workers. Some of these commenters stated that OFCCP’s proposed inquiry would not be adequately rigorous. For example, a civil liberties and human rights legal advocacy organization asserted that OFCCP’s approach as described in the preamble ‘‘allows religion to serve as a pretext for discrimination, and creates roadblocks for individuals seeking to bring claims of discrimination against federal contractors.’’ An organization that advocates separation of church and state asserted that a more rigorous inquiry would not violate the First Amendment and stated that OFCCP’s concerns about impermissible entanglement are overblown and cannot justify its refusal to engage in any investigation of religious employers at all. An anti-bigotry religious organization similarly asserted that a more rigorous inquiry would not violate RFRA, citing Hobby Lobby, 573 U.S. at 733. Some commenters believed the proposal did not clearly describe the inquiry that OFCCP would undertake to determine whether an adverse action was based on religion or another protected characteristic. For example, a legal think tank commented that OFCCP’s failure to meaningfully address various cases discussing the issue of pretext on the basis that they ‘‘turn on their individual facts’’ contravenes OFCCP’s stated goal of ‘‘bringing clarity and certainty to federal contractors.’’ OFCCP disagrees with these commenters’ characterization of the NPRM, but reiterates—and to the extent necessary, clarifies for their benefit— that OFCCP intends to apply the religious exemption as it has been VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 applied in the mine run of Title VII cases. In line with those cases, there are indeed aspects of the discrimination inquiry that are necessarily and rightly nuanced and fact-dependent, and there are aspects where inquiry can infringe upon religious organizations’ autonomy and are either prohibited or must be performed with care. The principles set out in those cases are reiterated below. First, if a contractor raises the defense that an employee or applicant is covered by the ministerial exception, OFCCP can inquire whether that is in fact so. But if so, then that is the end of the inquiry. OFCCP will not apply the executive order in those circumstances. See Our Lady of Guadalupe, 140 S. Ct. at 2060– 61; Hosanna–Tabor, 565 U.S. at 194–95. Second, when the ministerial exception does not apply and the employee or applicant suffers adverse employment action by a contractor that is entitled to the religious exemption, OFCCP will apply traditional Title VII tools to ascertain whether the action was impermissible discrimination. In the absence of direct evidence of discrimination on a protected basis other than religion, this will typically involve application of the familiar McDonnell Douglas framework, in which (1) OFCCP must establish a prima facie case of discrimination on a protected basis other than religion; (2) the employer can respond with a nondiscriminatory reason, such as an explanation that its action was permitted under the religious exemption as pertaining to the individual’s particular religion; and (3) OFCCP, to find a violation, must rebut that explanation as a mere pretext. See McDonnell Douglas, 411 U.S. 792. Third, ascertaining whether unlawful discrimination motivated an employer’s action requires consideration of all relevant facts and circumstances. OFCCP will consider all available evidence as to whether a religious organization’s employment action was in fact sincerely motivated by the applicant’s or employee’s particular religion—such as, for instance, their adherence to the organization’s religious tenets—or whether that was a mere pretext for impermissible discrimination. Fourth, while OFCCP can inquire into the sincerity of the employer’s religious belief, it is constitutionally prohibited from refereeing internal religious matters of contractors that are entitled to the religious exemption. Thus OFCCP cannot decide, when the matter is disputed, whether the employer or the employee has the better reading of religious doctrine; whether an employee should be considered a faithful member PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 of a religious organization’s community; whether some religious offenses or requirements are more important than others and should merit particular employment responses; whether the employer’s sincerely held religious view is internally consistent or logically appealing; and similar issues. Fifth, OFCCP believes these principles will cover the vast majority of scenarios, but there may be rare instances where an inquiry by a court or an agency into employment practices otherwise threatens First Amendment rights. See DeMarco v. Holy Cross High Sch., 4 F.3d 166, 172 (2d Cir. 1993) (‘‘There may be cases involving lay employees in which the relationship between employee and employer is so pervasively religious that it is impossible to engage in an agediscrimination inquiry without serious risk of offending the Establishment Clause.’’). Commenters argued that this final caveat detracted from the clarity of the proposed rule. OFCCP disagrees. This observation merely notes, as have courts, that there may be instances outside the ministerial exception where a discrimination case might involve the kinds of questions prohibited by the First Amendment. See id. (finding employee’s failed religious duties were ‘‘easily isolated and defined,’’ so a trial could be conducted ‘‘without putting into issue the validity or truthfulness of Catholic religious teaching’’). Instructive here are the sorts of questions found constitutionally offensive by the Supreme Court in Catholic Bishop, in which a hearing officer tested a witness’s memory and knowledge of Catholic liturgies and masses. See Catholic Bishop, 440 U.S. at 502 & n.10; id. at 507–08 (appendix); see also Great Falls, 278 F.3d at 1343. OFCCP believes these cases provide sufficient principles for the agency to properly guide its inquiry if and when needful. f. Causation OFCCP proposed to apply a but-for standard of causation when evaluating claims of discrimination by religious organizations based on protected characteristics other than religion. Specifically, where a contractor that is entitled to the religious exemption claims that its challenged employment action was based on religion, OFCCP proposed finding a violation of E.O. 11246 only if it could prove by a preponderance of the evidence that a protected characteristic other than religion was a but-for cause of the adverse action. See Univ. of Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 362– 63 (2013); Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 180 (2009). OFCCP stated E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations that this approach was necessary in situations where a religious organization, acting on a sincerely held belief, took adverse action against an employee on the basis of the employee’s religion. OFCCP believed that application of the motivating factor framework in such cases might result in inappropriate encroachment upon the organization’s religious integrity. However, the NPRM recognized that in prior notice-and-comment rulemaking implementing Executive Order 13665, 79 FR 20749 (Apr. 11, 2014) (amending E.O. 11246 to include pay transparency nondiscrimination), OFCCP rejected comments stating that a but-for causation standard was required and instead adopted the motivating factor framework as expressed in the Title VII post-1991 Civil Rights Act for analyzing causation. See 80 FR 54934, 54944–46 (Sept. 11, 2015). A few commenters encouraged OFCCP to adopt the proposed but-for causation standard because they felt it would reduce government encroachment on religious autonomy. For instance, a private religious university commented that the proposed but-for standard is in line with statutory and First Amendment jurisprudence requiring the use of the least restrictive means to achieve government objectives that impinge on the exercise of religion. Another private religious university echoed this sentiment and added that the proposed but-for standard would enable religious entities to make employment decisions consistent with their sincerely held religious beliefs while still participating fully in the marketplace. However, the majority of commenters who addressed the proposed but-for standard opposed it, and many recommended that OFCCP instead continue to apply the motivating-factor standard of causation to all claims of discrimination under E.O. 11246. These commenters cited a wide variety of concerns related to the proposed but-for standard. Several commenters stated that the proposed standard would be too deferential to employers and/or impose too heavy a burden on employees. For instance, a national interfaith organization commented that, as long as an employer can cite another plausible reason for its actions, an employee cannot prove that discrimination occurred. The organization noted that under this standard, employees are far less likely to prevail. Other commenters expressed skepticism at OFCCP’s proffered rationale for departing from its established policy and practice of VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 interpreting the nondiscrimination requirements of E.O. 11246 in a manner consistent with Title VII principles. For instance, a national reproductive rights organization commented that, for decades, courts have resolved claims of employment discrimination by religious organizations without implicating the concerns OFCCP cites. The organization added that OFCCP’s concerns about impermissible entanglement are overblown and unsupported by case law. A transgender legal professional organization expressed similar concerns. Relatedly, a number of commenters opposed the proposed but-for standard on the basis that it conflicts with Title VII and related case law. Several of these commenters criticized OFCCP’s reliance on Nassar, 570 U.S. at 362–63, and Gross, 557 U.S. at 180, and argued that these cases do not bridge the gap between the proposed but-for standard and Title VII principles. For instance, a contractor association commented: ‘‘The Supreme Court has adopted the ‘but for’ standard for retaliation claims under Title VII (Nassar) and for ADEA claims (Gross); it has not done so for discrimination claims under Title VII.’’ Similarly, an LGBT rights advocacy organization commented the two cases cited by OFCCP did not adopt a but-for causation requirement for Title VII or E.O. 11246 cases. Additionally, multiple commenters expressed concern that the proposed but-for standard would run contrary to E.O. 11246’s prohibition on discrimination and/or OFCCP’s core mission of enforcing the Executive Order. For instance, a group of state attorneys general commented that the proposed but-for standard is contrary to law and exceeds OFCCP’s authority because it impermissibly interprets the Executive Order’s anti-discrimination provisions. And a national health policy organization commented: ‘‘The new proposed rule threatens to jeopardize the very mission of OFCCP and the original intent of the E.O. 11246 to protect workers from discrimination . . . .’’ Finally, several commenters raised practical objections to the proposed butfor standard. For instance, an atheist civil liberties organization commented that applying different causation standards to cases involving similarly situated employers would ‘‘make it challenging for contractors seeking to comply with federal law, resulting in extra expense and legal confusion for workers and employers.’’ An organization that advocates separation of church and state expressed similar concerns, arguing that ‘‘status-based PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 79359 discrimination claims based on identical conduct would be evaluated according to different standards of proof.’’ Considering the comments received, OFCCP will apply the motivating-factor analysis to all claims of discrimination, including discrimination by religious organizations based on protected characteristics other than religion. OFCCP agrees that it can avoid impermissible entanglement while applying a motivating-factor standard of causation. See, e.g., Curay-Cramer, 450 F.3d at 139 (‘‘[A]s long as the plaintiff did not challenge the validity or plausibility of the religious doctrine said to support her dismissal, but only questioned whether it was the actual motivation, excessive entanglement questions were not raised.’’) (citing Geary, 7 F.3d at 330); DeMarco, 4 F.3d at 170–71)). Where there is a dispute as to whether an employment action was motivated by the employee’s adherence to religious tenets, or instead was motivated by impermissible discrimination—a ‘‘one or the other’’ scenario—OFCCP will apply the principles just discussed in subsection II.A.5.e, ‘‘Application of the Religious Exemption.’’ Where instead an employment action is motivated by the employee’s adherence or non-adherence to religious tenets that implicate another protected category, OFCCP will assess the action on a case-by-case basis in accordance with the general RFRA analysis discussed earlier. The approach adopted in this final rule is consistent with OFCCP’s longstanding policy and practice as well as Title VII principles and case law. f. Conclusion For the reasons described above and in the NPRM, and considering the comments received, OFCCP finalizes the proposed definition of Particular religion without modification. B. Section 60–1.5 Exemptions This rule proposed to add paragraph (e) to 41 CFR 60–1.5 to establish a rule of construction for subpart A of 41 CFR part 60–1 that provides for the broadest protection of religious exercise permitted by the Constitution and laws, including RFRA. This rule of construction is adapted from RLUIPA, 42 U.S.C. 2000cc–3(g). Significantly, RFRA applies to all government conduct, not just to legislation or regulation. 42 U.S.C. 2000bb–1. Paragraph (e) is clarifying, since the Constitution and federal law, including RFRA, already bind OFCCP. Some commenters expressed general support for the proposed rule of E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79360 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations construction based on the importance of protecting religious freedom, including constitutional protections. For example, a religious leadership and policy organization approved of the fact that the proposal gives religious freedom due deference by advocating for a broad and robust interpretation of its protections. In a joint comment, a religious legal association and an association of evangelical churches and schools commented that the proposed rule of construction reflects longstanding religious freedom principles recognized by Congress and protected by the First Amendment. A pastoral membership organization commented that the proposed rule of construction gives religious exercise the special protection required by the constitutional text and history. A religious professional education association commented that the proposed rule of construction provided clarity regarding the meaning, scope, and application of the religious exemption. Additional supportive commenters, including an evangelical chaplains’ advocacy organization, stated that the rule of construction is consistent with executive orders and the Attorney General’s memorandum on religious liberty. Other commenters opposed the proposed rule of construction for a variety of reasons, including arguing that its application in this context would actually be inconsistent with the U.S. Constitution and federal laws. For example, a labor organization commented that the interpretation goes beyond the Constitution and law, including RFRA. An anti-bigotry religious organization further noted, with regard to RFRA, the Supreme Court’s holding in Hobby Lobby that ‘‘anti-discrimination prohibitions are the least restrictive means of achieving the government’s compelling interest in providing equality in the workplace,’’ and commented that this principle applied with greater force to employment by federal contractors. Other commenters, including a group of state attorneys general and a transgender advocacy organization, cautioned that construing the religious exemption broadly would ‘‘exceed[ ] statutory and judicial limits’’ and conflict with the purpose and text of federal equal employment laws to provide maximum nondiscrimination protections for workers. A talent management assessment company commented that the ‘‘maximum extent permitted by law’’ standard was vague and left too much discretion to the agency charged with enforcement. OFCCP did not intend, in proposing the rule of construction at § 60–1.5(e), to VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 create any new legal obligation or proscription on the rights of workers, but rather sought only to reaffirm existing protections found in federal law that already apply to OFCCP. The parallel rule of construction in RLUIPA has been in place for nearly 20 years and has proved to be a workable legal standard. OFCCP emphasizes that this rule of construction provides for broad protection of both employers’ and employees’ religious exercise. Moreover, by its terms, the provision limits the agency’s interpretation of this protection to what is permitted under the U.S. Constitution, RFRA, and other applicable laws. It thus reflects the Supreme Court’s recognition that, within the religion clauses of the First Amendment, there is ‘‘room for play in the joints productive of a benevolent neutrality which will permit religious exercise to exist without sponsorship and without interference.’’ Walz, 397 U.S. at 669. Accordingly, for the reasons described above and in the NPRM, considering the comments received, OFCCP finalizes the proposed rule of construction without modification. C. Severability The Department has decided to include severability provisions as part of this final rule. To the extent that any provision of this final rule is declared invalid by a court of competent jurisdiction, the Department intends for all other provisions that are capable of operating in the absence of the specific provision that has been invalidated to remain in effect. Severability clauses have been added at the end of 41 CFR 60–1.3 and as a new paragraph, 41 CFR 60–1.5(f). III. Other Comments Numerous commenters raised a variety of other general points about the proposed rule. A. Religious Liberty for Employees Several commenters opposed the proposed rule as undermining or failing to promote religious liberty. For instance, a group of U.S. Senators commented that the proposed rule will allow employers to refuse to interview even highly qualified candidates simply because they do not regularly attend religious services in their employer’s faith. According to the Senators, this could create a situation in which religious employers are allowed to discriminate against workers ‘‘who practice their faith differently—a fundamental right guaranteed by the Constitution.’’ A religious women’s organization echoed this concern and also stated that the proposed rule would PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 promote one interpretation of one religion—namely, evangelical Christianity—at the expense of religious liberty more broadly. Some commenters stated that the proposal would allow contractors to compel employees to follow their religious practices, which they argued directly violates Title VII and even the Constitution. A group of state attorneys general commented that, under the proposed rule, employers’ religious freedom would come at the cost of the loss of the religious freedom of employees forced to abide by their employers’ religious beliefs. A legal professional organization commented that the proposed rule would protect for-profit or nominally religious employers’ right to require employees to participate in prayer or other religious practices. A religious organization commented that employers could invoke the religious exemption to coerce their workers into participating in certain religious practices under the threat of termination. Several other commenters, including a legal professional association, an organization that advocates separation of church and state, an anti-bigotry religious organization, and a migrants’ rights organization, expressed general concern that the proposed rule would weaken religious liberty. OFCCP believes that the final rule’s overall effect will be to promote religious liberty. See, e.g., Hobby Lobby, 573 U.S. at 707 (‘‘[P]rotecting the freeexercise rights of corporations like Hobby Lobby, Conestoga, and Mardel protects the religious liberty of the humans who own and control those companies.’’). The Supreme Court has described the expansion of the Title VII religious exemption as ‘‘lifting a regulation that burdens the exercise of religion.’’ Amos, 483 U.S. 327, 338 (1987). As described above, the proposed definitions have been altered in the final rule to respond to commenters’ concerns that nominally religious employers might qualify for the exemption, as well as to clarify the steps OFCCP will take in analyzing claims of discrimination by religious contractors. To the extent that commenters believe that the religious exemption itself increases employers’ religious liberty at the expense of employees’ religious liberty, OFCCP reiterates that it is required to administer the religious exemption as part of E.O. 11246. The President, following Congress’s lead, has already decided how to balance the religious liberty of religious employers and their employees, and OFCCP cannot modify that. Additionally, claiming the E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 religious exemption and taking employment action under its protections is purely optional for employers; the government does not require any employment action that may be protected by the exemption. B. Establishment Clause and Other Constitutional Questions Several commenters stated that the proposal violates constitutional prohibitions on aiding private actors that discriminate. This concern was shared by an affirmative action professionals association, a civil liberties organization, a professional organization of educators, and an organization that advocates separation of church and state, among others. The civil liberties organization commented, for instance, that the proposed rule would permit contractors to discriminate with federal funds, thus putting the government’s imprimatur on discrimination in violation of the Equal Protection and Establishment Clauses. A variety of commenters opposed the proposed rule on the basis that it violates the Establishment Clause and/ or general church-state separation principles. For instance, an atheist civil liberties organization commented that the proposed rule will violate the Constitution’s religion clauses by involving the government in religious practice, promoting dominant religious practices, burdening unpopular religious practices, and harming third parties. Similarly, a labor union raised concerns that the rule crosses into territory proscribed by the Establishment Clause by authorizing federal contractors to advance their religious preferences and practices through the receipt of federal funds and the performance of public functions. Other commenters stated that the proposed rule violates separation of powers. For instance, an LGBT rights advocacy organization stated that since 2001, Congress has repeatedly rejected efforts to extend the Title VII exemption to government-funded entities. Likewise, a consortium of federal contractors and subcontractors asserted that it would be inappropriate for OFCCP to regulate the religious exemption without direct and actual legislative or constitutional guidance. Finally, several commenters, including an anti-bigotry religious organization and a civil liberties and human rights legal advocacy organization, raised concerns that the proposal violates a variety of other constitutional principles, including the no-religious-tests clause, the free speech clause, and the constitutional right of privacy. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 Other commenters supported the proposed rule as consistent with constitutional principles. These commenters stated, among other things, that the proposal appropriately respects freedom of religion, helpfully clarifies that religious hiring protections apply even when federal funding is involved, and is consistent with the Establishment Clause. A religious liberties legal organization commented, for instance, that the proposed rule adheres to the traditional understanding that ‘‘the Constitution [does not] require complete separation of church and state; it affirmatively mandates accommodation, not merely tolerance, of all religions, and forbids hostility toward any’’ (quoting Lynch v. Donnelly, 465 U.S. 668, 668 (1984)). A religious leadership and policy organization commented that the proposal reflects an accurate understanding of the free exercise of religion and ‘‘its place in our society.’’ OFCCP agrees with the commenters who stated that the proposal is consistent with constitutional principles. As noted in the NPRM and above, OFCCP believes that the final rule is supported by recent Supreme Court decisions that protect religionexercising organizations and individuals under the U.S. Constitution and federal law. See, e.g., Little Sisters of the Poor, 140 S. Ct. 2367; Espinoza, 140 S. Ct. 2246; Our Lady of Guadalupe, 140 S. Ct. 2049; Masterpiece Cakeshop, 138 S. Ct. 1719; Trinity Lutheran, 137 S. Ct. 2012; Hobby Lobby, 573 U.S. 682; HosannaTabor, 565 U.S. 171. These decisions make clear, among other constitutional principles, that ‘‘condition[ing] the availability of benefits upon a recipient’s willingness to surrender his religiously impelled status effectively penalizes the free exercise of his constitutional liberties.’’ Trinity Lutheran, 137 S. Ct. at 2022 (alterations omitted) (quoting McDaniel, 435 U.S. at 626 (plurality opinion)); see also Espinoza, 140 S. Ct. at 2256. OFCCP believes that the final rule achieves consistency with these landmark Supreme Court decisions and is constitutionally valid. Moreover, the definitions and rule of construction adopted in the final rule will help OFCCP avoid the ‘‘constitutional minefield’’ into which some courts have fallen when adjudicating Title VII claims against religious organizations. World Vision, 633 F.3d at 730 (O’Scannlain, J., concurring). The final rule will enable OFCCP to apply the religious exemption without engaging in an analysis that would be inherently subjective and indeterminate, outside its competence, susceptible to PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 79361 discrimination among religions, or prone to entanglement with religious activity. See, e.g., Mitchell v. Helms, 530 U.S. 793, 828 (2000) (plurality opinion); Colo. Christian Univ. v. Weaver, 534 F.3d 1245, 1261–62 (10th Cir. 2008); Great Falls, 278 F.3d at 1342–43. We address these points in more detail next. 1. Neutrality Toward Religion The rule does not impermissibly favor religion. In Bowen v. Kendrick, 487 U.S. 589 (1988), the Supreme Court held that a religious organization is not disqualified from government programs that fund religious and nonreligious entities alike on a neutral basis. A ‘‘neutral basis’’ means that the criteria are neutral and secular, with no preference for religious institutions because of their religious character. Id.; see also Rosenberger v. Rector & Visitors of Univ. of Va., 515 U.S. 819 (1995) (‘‘A central lesson of our decisions is that a significant factor in upholding governmental programs in the face of Establishment Clause attack is their neutrality towards religion.’’); U.S. Dep’t of Justice, Office of Legal Counsel, Religious Restrictions on Capital Financing for Historically Black Colleges and Universities, 2019 WL 4565486 (Aug. 15, 2019) (‘‘Religious Restrictions’’) (‘‘The neutrality principle runs throughout the Court’s decisions, and is broadly consistent with a tradition of federal support for religious institutions that dates from the time of the Founding.’’). This rule is motivated by legitimate secular purposes: To expand the eligible pool of federal contractors to include religious organizations, so that the federal government may choose from among competing vendors the best combination of price, quality, reliability, and other purely secular criteria; to clarify the law for religious organizations and thus reduce compliance burdens; to correct any misperception that religious organizations are disfavored in government contracting; and ‘‘to alleviate significant governmental interference with the ability of religious organizations to define and carry out their religious missions,’’ Amos, 483 U.S. at 336, by appropriately protecting their autonomy to hire employees who will further their religious missions. The final rule also has a religion-neutral effect. Under the final rule, both religious and secular organizations will retain the ability to bid on government contracts. Proposed vendors will have to compete solely on the basis of secular criteria. The use of sectarian criteria remains forbidden; nothing in the E:\FR\FM\09DER2.SGM 09DER2 79362 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 proposed rule sanctions the use of sectarian criteria for contract awards. 2. Secular and Sectarian Activities Nothing in the final rule sanctions direct federal funding of religious activities. In Kendrick, the Court forbade such direct funding of religious activity but upheld a statute authorizing payments to religious organizations that sought to eliminate or reduce the social and economic problems caused by teenage sexuality because the services to be provided under the statute were ‘‘not religious in character.’’ Kendrick, 487 U.S. at 605; see also U.S. Dep’t of Justice, Office of Legal Counsel, Department of Housing and Urban Development Restrictions on Grants to Religious Organizations that Provide Secular Social Services, 12 Op. O.L.C. 190, 199 (1998) (concluding that the government can fund a religious organization’s secular activities if they can be meaningfully and reasonably separated from the sectarian activities). Likewise here, in the relatively rare circumstances in which a proposed vendor both qualifies as a religious organization and receives a federal contract, the federal funds will pay the organization to fulfill the terms of the secular contract, not to pray or to proselytize. Moreover, the Establishment Clause does not forbid the federal government from contracting with religious organizations for a secular purpose, even if the receipt of the contract incidentally helps the religious organization advance its sectarian purpose. As Kendrick explained, ‘‘Nothing in our previous cases prevents Congress from . . . recognizing the important part that religion or religious organizations may play in resolving certain secular problems. . . . To the extent that this congressional recognition has any effect of advancing religion, the effect is at most ‘incidental and remote.’ ’’ 487 U.S. at 607; see, e.g., Roemer v. Bd. of Pub. Works of Md., 426 U.S. 736 (1976) (‘‘[R]eligious institutions need not be quarantined from public benefits that are neutrally available to all.’’); Barnes-Wallace v. City of San Diego, 704 F.3d 1067 (9th Cir. 2012) (finding no Establishment Clause violation where city leased land to both secular and sectarian organizations). Here, as in Kendrick, nothing in the final rule ‘‘indicates that a significant proportion of the federal funds will be disbursed to ‘pervasively sectarian’ institutions.’’ Kendrick, 487 U.S. at 610. There are also no concerns that funds will be used for an ‘‘essentially religious endeavor’’; rather, funds will be used to fulfill the VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 government’ secular contracting requirements. Espinoza, 140 S. Ct. at 225. The rule simply allows religious organizations to compete with secular organizations on the basis of secular criteria without being forced to compromise their religious purpose. Commenters objecting on this basis are dissatisfied with the existence of the exemption. 3. Respecting the First Amendment Of great significance to OFCCP, the rule’s clarifications and accommodations better comport with the Free Exercise Clause by affording religious organizations an appropriate level of autonomy in their hiring decisions while still permitting them to engage in federal contracting. As the Court explained in Trinity Lutheran, 137 S. Ct. at 2022, the government violates the Free Exercise Clause when it conditions a generally available public benefit on an entity’s giving up its religious character, unless that condition withstands the strictest scrutiny. ‘‘[D]enying a generally available benefit solely on account of religious identity imposes a penalty on the free exercise of religion that can be justified only by a state interest of the highest order.’’ Id.; see also Locke v. Davey, 540 U.S. 712 (2004) (holding government may not deny generally available funding to a sectarian institution because of its religious character); Trinity Lutheran, 137 S. Ct. at 2021 (‘‘The Department’s policy expressly discriminates against otherwise eligible recipients by disqualifying them from a public benefit solely because of their religious character. . . . [S]uch a policy imposes a penalty on the free exercise of religion that triggers the most exacting scrutiny.’’ (citing Lukumi, 508 U.S. at 546)). When the government conditions a program in this way, the government ‘‘has punished the free exercise of religion. ‘‘To condition the availability of benefits . . . upon [a recipient’s] willingness to . . . surrender[] his religiously impelled [status] effectively penalizes the free exercise of his constitutional liberties.’’ Id. at 2022 (quoting McDaniel, 435 U.S. at 626 (plurality opinion)); cf. Trinity Lutheran, 137 S. Ct. at 2022 (citing Ne. Fla. Chapter, Associated Gen. Contractors of Am. v. Jacksonville, 508 U.S. 656, 666 (1993) (‘‘[T]he ‘injury in fact’ is the inability to compete on an equal footing in the bidding process, not the loss of a contract.’’)). In a recent opinion, the Department of Justice’s Office of Legal Counsel concluded that the government violates the Free Exercise Clause by denying sectarian organizations an opportunity PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 to compete on equal footing for federal dollars. See Religious Restrictions, 2019 WL 4565486. As an initial matter, OLC explained that ‘‘[t]he Establishment Clause permits the government to include religious institutions, along with secular ones, in a generally available aid program that is secular in content. There is nothing inherently religious in character about loans for capital improvement projects; this is not a program in which the government is ‘dol[ing] out crosses or Torahs to [its] citizens.’ ’’ Id. at *6 (citing Am. Atheists, Inc. v. City of Detroit Downtown Dev. Auth., 567 F.3d 278, 292 (6th Cir. 2009)). Because the capital-financing program at issue was a secular, neutral aid program, it did not violate the Establishment Clause. On the other hand, the government would violate the Free Exercise Clause by denying loans to an institution ‘‘in which a substantial portion of its functions is subsumed in a religious mission,’’ because such a restriction ‘‘discriminates based on the religious character of an institution.’’ OLC concluded that the appropriate balance was to deny loans under the program only for facilities that are predominantly used for devotional religious activity, or for facilities that offer only programs of instruction devoted to vocational religious education. Here, some commenters made clear that the federal government’s current practice presented religious organizations with a dubious choice: They may participate in the government contracting process or retain their religious integrity, but not both. As one commenter noted, ‘‘If the best service provider or subcontractor happens to be a religious entity, they are often unwilling to comply with the federal anti-discrimination laws for fear that they will no longer be able to preserve the integrity of their organizations. This is a direct result of the uncertainty in the applicability of the religious exemption under the current law.’’ Similarly, another commenter, an association of medical professionals, recently surveyed health professional members working in faith-based organizations overseas and found that almost half, 49%, feel that the U.S. government is not inclined to work with faith-based organizations. The final rule thus removes any such concerns raised by contractors and instead provides appropriate religious accommodation. 4. Use of Federal Funds Some commenters expressed concern that the rule would allow employers to use federal funds to discriminate against job applicants and employees on the E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations basis of religion. That is a critique of the E.O. 11246 religious exemption itself, not this rule. OFCCP cannot and does not by this rule reopen that determination by the President. Additionally, as noted earlier, claiming the religious exemption and taking employment action under its protections is purely optional for employers; the government does not require any employment action that may be protected by the exemption. Regardless, as the Department of Justice’s Office of Legal Counsel has pointed out, the federal government has repeatedly permitted religious organizations to receive federal funds while also maintaining autonomy over their hiring practices. See 31 O.L.C. 162, 185–86 (2007); accord Office of the Att’y Gen., Memorandum for All Executive Departments and Agencies: Federal Law Protections for Religious Liberty at 6 (Oct. 6, 2017), available at www.justice.gov/opa/press-release/file/ 1001891/download. Likewise, the proposed rule does not run afoul of the Establishment Clause merely because of the possibility that, in some rare instance, a court may determine that a particular contract award to a religious organization impermissibly endorses religion. ‘‘[W]hile religious discrimination in employment might be germane to the question whether an organization’s secular and religious activities are separable in a governmentfunded program, that factor is not legally dispositive.’’ U.S. Dep’t of Justice, Office of Legal Counsel, Memorandum for William P. Marshall from Randolph D. Moss at 20 (Oct. 12, 2000), available at justice.gov/olc/page/ file/936211/download. To the contrary, if the government ‘‘is generally indifferent to the criteria by which a private organization chooses its employees and to the identity and characteristics of those employees, there would be less likelihood that the government could reasonably be perceived to endorse the organization’s use of religious criteria in employment decisions.’’ Id. at 25. And in some situations, the religious exemption ‘‘might be a permissible religious accommodation that alleviates special burdens rather than an impermissible religious preference.’’ Id. at 30. For instance, the Office of Legal Counsel concluded that RFRA in one instance required the Department’s grant-making arm to exempt a religious organization from the religious nondiscrimination provisions of Title VII. See id.; see also 31 O.L.C. 162, 190 (2007). Here, several religious organizations commented that the current contracting rules erect a VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 barrier to participation by eroding their ability to hire members of their particular faith. Generally speaking, then, OFCCP, in line with case law from Amos to Trinity Lutheran, views this rule as merely providing permissible accommodation rather than impermissibly establishing religion. 5. Effects on Applicants and Employees Finally, several commenters opposed the proposed rule on the basis that it would increase discrimination against contractors’ employees and applicants. Some cited historical discrimination against disadvantaged groups, warning that the proposal would cause a regression in civil rights protections, and stated that religion has often been used as a way to justify discrimination. For example, an affirmative action professionals association asserted that employment discrimination permitted by the proposed rule could eliminate the civil rights protections that minorities and women have enjoyed for decades. Commenters also gave examples of how potential discrimination could play out. For example, an organization advocating for the separation of church and state commented that, for instance, an evangelical Christian might refuse to hire a gay man, but agree to hire a twicedivorced, thrice-married man, even though both homosexuality and divorce are prohibited by evangelical Christianity. An LGBT civil rights organization argued that even a construction company, janitorial service, or low-level healthcare provider could claim a religious mission and refuse to hire or provide services to single parents or individuals who become pregnant outside marriage or within a same-sex relationship. Many commenters warned that adoption of the proposed rule would increase discrimination against lesbian, gay, bisexual, transgender, and queer (LGBTQ) individuals, specifically. Some commenters alleged that the proposed rule was part of a concerted effort to roll back the rights of LGBTQ individuals and other disadvantaged groups. Several commenters stated that transgender employees in particular already face high rates of discrimination and poverty, and that this proposal would leave them even more vulnerable. A transgender civil rights and advocacy organization commented specifically that transgender people are already far more likely to be unemployed, and that approximately 1 in 4 earn less than $24,000 per year. A women and family rights advocacy organization wrote that, currently, almost half of LGBTQ workers report actively concealing their PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 79363 identity out of fear of discrimination, and that the proposal would exacerbate this issue. Commenters wrote that effects might include LGBTQ individuals being less inclined to seek HIV care and services for the aging, as well as facing increased vulnerability to trafficking. Others stated that the proposal would permit contractors to discriminate against people in same-sex relationships, including refusing to hire applicants, terminating employees when they marry someone of the same sex, or denying spousal benefits. Several commenters stated that even LGBTQ people of faith would be discriminated against. Commenters also asserted that the proposed rule could increase discrimination against women and pregnant people based on religious beliefs about work, family roles, and reproduction. This included the possibility of discrimination against women for becoming pregnant outside of marriage, using contraception, using in vitro fertilization, seeking abortions, or getting divorced. An organization combatting hunger wrote that even facially neutral practices may ‘‘disproportionately’’ harm women, because when an employer opposes ‘‘sexual practices out of wedlock, those who bear the physical evidence— pregnancy—are going to be the ones that get fired.’’ Several commenters also stated that employers may discriminate against women based on religious beliefs that women should not work outside the home. For example, a women and family rights advocacy organization commented that some employers may refuse to hire women altogether, and that women may also be denied health insurance, professional growth opportunities, or other benefits because of an employer’s belief that women are not the ‘‘head of the household’’ and therefore do not need such benefits. Additionally, an interfaith policy and advocacy organization commented that an employer could cite a belief that women should not be alone with men they are not married to in order to deny female employees access to mentorship, training opportunities, and senior leadership positions in the workplace. Commenters also asserted that the proposal would increase discrimination against religious minorities and/or atheists. Many stated that federal contractors should not be permitted to categorically exclude applicants of a particular religion. A transgender civil rights and advocacy organization commented that the proposed rule would promote sectarianism by allowing people of different faiths to E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79364 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations discriminate against one another. A number of commenters, including a civil liberties advocacy group and an interfaith policy and advocacy organization, commented: ‘‘Federal contractors should not be allowed to hang a sign that says ‘Jews, Sikhs, Catholics, Latter-day Saints need not apply.’ ’’ Many commenters asserted that the proposal could allow racial discrimination as well. An organization combatting hunger claimed that discrimination would occur by citing a 2014 study in their comment which found that only 10% of Americans were comfortable permitting a small business to refuse service to African-Americans based on a religious reason. Commenters including an LGBTQ wellness organization also warned that, under the proposal, a religious contractor will be permitted to discriminate against interracial couples if it believes that marriage should be between a man and a woman of the same race. A legal think tank commented that employers could require employees to join a majority- or exclusively-white church, for instance, or to share particular religious beliefs that have racial implications and/or are more common among white Christians. Some commenters argued that federal funds should not be used by contractors who may commit hiring discrimination. For example, a transgender advocacy organization commented that people should not be legally compelled to financially support entities that would refuse to employ them because of their identities, and noted that religious employers who seek to employ only ‘‘their own kind’’ should seek out nonfederal funding. Other commenters stated that U.S. federal government contracting serves as a model for the private sector or foreign nations, which may emulate discriminatory practices permitted by this proposal. As explained above, the religious exemption generally speaking does not excuse a contractor from complying with E.O. 11246’s requirements regarding antidiscrimination and affirmative action; notices to applicants, employees, and labor unions; compliance with OFCCP’s implementing regulations; the furnishing of reports and records to the government; and flow-down clauses to subcontractors. See E.O. 11246 §§ 202– 203. Religious organizations that serve as government contractors must comply with all of E.O. 11246’s nondiscrimination requirements except in some narrow respects, under some narrow and reasonable circumstances recognized under law, where religious VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 organizations maintain, for instance, sincerely held religious tenets regarding matters such as marriage and intimacy which may implicate certain protected classes under E.O. 11246. Some commenters argued that the proposed rule would violate the Establishment Clause specifically because of the increased discrimination they believed it would permit. Most of these commenters argued that potential discrimination will unconstitutionally burden third parties, including employees, applicants, and beneficiaries of contracting services. A labor union wrote that granting employers a broad religious exemption would harm employees and applicants based on their own religious beliefs and practices (or lack thereof), in violation of the Establishment Clause. As noted above, the Supreme Court upheld Title VII’s religious exemption, on which E.O. 11246’s exemption is modeled, against an Establishment Clause challenge. Amos, 483 U.S. at 330. It did so in spite of the fact that the application of the exemption ‘‘had some adverse effect on those holding or seeking employment with those organizations.’’ Tex. Monthly, Inc. v. Bullock, 489 U.S. 1, 18 n.8 (1989); cf. Amos, 483 U.S. at 338–39 (rejecting the claim that the religious exemption ‘‘offends equal protection principles by giving less protection to the employees of religious employers than to the employees of secular employers’’ in part because the exemption had ‘‘a permissible purpose of limiting governmental interference with the exercise of religion’’). If the E.O. 11246 religious exemption similarly affects some third parties, it does so to ‘‘prevent[ ] potentially serious encroachments on protected religious freedoms.’’ Texas Monthly, 489 U.S. at 18 n.8. Some commenters stated that what they viewed as the proposal’s failure to consider the effects of increased discrimination made the proposed rule inconsistent with OFCCP’s previous rulemakings. Multiple commenters stated that previous rulemakings identified discrimination as wasteful of taxpayers’ money, and that this proposal failed to address this issue. For example, a state civil liberties organization commented that, in prior rules, OFCCP has consistently stated that discrimination in government contracting wastes taxpayer funds by preventing the hiring of the best talent, increasing turnover, and decreasing productivity. In addition, several commenters, including a women and family rights advocacy organization, referred to the rule as an ‘‘abrupt PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 departure’’ from OFCCP’s previous EEO enforcement. A civil liberties organization commented that the ‘‘Department itself has previously acknowledged the harms of discrimination to the country as a whole, but ignores them entirely in the Proposed Rule.’’ An LGBT legal services organization commented that the proposed rule indicates that OFCCP will not enforce the relevant protections sufficiently. Some commenters noted more specifically that they believe the proposal is inconsistent with the agency’s rule implementing E.O. 13672, which added sexual orientation and gender identity to the bases protected by E.O. 11246. For example, a legal think tank commented that, in its rule on sexual orientation and gender identity, OFCCP took into account the benefits of nondiscrimination—meaning that it would be arbitrary and capricious for OFCCP to ignore these benefits of nondiscrimination ‘‘in the present rulemaking.’’ A watchdog organization wrote that ‘‘undoing these protections could have adverse long-term effects on the federal contracting system, including lower-quality goods and services, and impaired federal programs and missions.’’ Commenters also criticized the proposal as purportedly inconsistent with OFCCP’s 2016 sex discrimination rule. A civil liberties organization commented that, in that rule, the agency cited social science research supporting the need for effective nondiscrimination enforcement. Similarly, a legal think tank wrote that, in its sex discrimination rulemaking, OFCCP specifically cited research indicating that employment discrimination against transgender workers is pervasive. These commenters asserted that OFCCP ignored such statistics in proposing the current rule. OFCCP continues to believe that discrimination by federal contractors generally has a negative impact on the economy and efficiency of government contracting. Indeed, that is one of the primary justifications for E.O. 11246. However, it has long been recognized that a religious exemption in the Executive Order is also warranted, Congress has determined that accommodations under RFRA are sometimes required, and OFCCP’s policy is to respect the religious dignity of employers and employees to the maximum extent permissible by law. Further, OFCCP believes that this rule will have a net benefit to the economy and efficiency of government contracting. For those current and potential federal contractors and subcontractors interested in the E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 exemption, this rule will help them understand its scope and requirements and may encourage a broader pool of organizations to compete for government contracts and more of them, which will inure to the government’s benefit. Commenters’ concerns here are also exaggerated. As explained above, OFCCP does not anticipate this rule will affect the vast majority of contractors or the agency’s regulation of them, since they do not and would not seek to qualify for the religious exemption. As commenters noted, religious organizations do not appear to be a large portion of federal contractors. And even for them, adherence to E.O. 11246’s nondiscrimination provisions is required except in those circumstances well-established under law, including the religious exemption, the ministerial exception, and RFRA. OFCCP also reemphasizes that the proposed definitions have been altered in the final rule to respond to commenters’ concerns that nominally religious employers might qualify for the exemption, as well as to clarify the steps OFCCP will take in analyzing claims of discrimination by religious contractors. As explained in more detail in the Regulatory Procedures section below, OFCCP has considered the possible adverse effects of the rule and believes they will be minimal and will be outweighed by the benefits. C. The Equal Employment Opportunity Commission Some commenters raised concerns about this rule’s compatibility with the positions of the EEOC. Different aspects of this concern have been described and addressed in earlier parts of this preamble. OFCCP consolidates those concerns and addresses them here as well. Those concerns included general concerns that the proposed rule would undermine the EEOC’s efforts by taking positions contrary to the EEOC or that the proposed rule would introduce confusion by subjecting federal contractors to conflicting or at least different legal regimes. Commenters also objected to specific aspects of the rule on grounds that they differed from the EEOC’s position, including the proposed rule’s inclusion of for-profit entities as among those able to qualify for the religious exemption, the proposed rule’s disagreement that the exemption’s scope is limited to a coreligionist preference, and the proposed rule’s but-for causation standard. OFCCP has a decades-long partnership with the EEOC and works closely with it to ensure equal VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 employment opportunity for American workers. OFCCP rejects the idea that this rule would undermine that longstanding and constructive partnership. The EEOC reviewed the proposed rule and this final rule. This final rule applies only to government contractors and subcontractors, not the broader swath of U.S. employers that the EEOC regulates. Within that smaller segment of employers, it applies only to that small minority of contractors and subcontractors that qualify or may seek to qualify for the religious exemption. Among that group, they would need to have 15 or more employees to be covered by the EEOC. And within that group, there would still need to be a situation in which any differences between the views of OFCCP and EEOC would cause a different result. In short, OFCCP doubts this rule will create any systemic disharmony between the agencies’ enforcement programs. For the small universe of employers remaining as defined above, the differences that may exist are minor. At the outset, OFCCP notes that EEOC does not have substantive rulemaking authority under Title VII, see EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 257 (1991), and the EEOC statements on this issue are in nonbinding subregulatory guidance. As to the specifics of that guidance, the differences that do exist are small. OFCCP has revised its approach in the final rule to adopt a motivating-factor standard of causation, so a difference there, assuming there was one, no longer exists. Regarding OFCCP’s definition of Religious corporation, association, educational institution, or society, the EEOC’s current subregulatory guidance on this topic has not been updated since 2008, before World Vision and Hobby Lobby were decided.31 Contrary to some commenters’ assertions, this guidance treats for-profit status as a significant factor, but not as dispositive; this final rule does the same. Notably, the EEOC very recently issued a proposal to update its compliance manual on religious discrimination.32 This rule is not inconsistent with the proposal 31 See EEOC, Questions and Answers: Religious Discrimination in the Workplace (July 22, 2008), www.eeoc.gov/laws/guidance/questions-andanswers-religious-discrimination-workplace; EEOC, EEOC Compliance Manual § 12–I.C.1 (July 22, 2008), www.eeoc.gov/laws/guidance/section-12religious-discrimination. The EEOC’s website states for both these documents that, ‘‘[a]s a result of the Supreme Court’s decision in Our Lady of Guadalupe School v. Morrissey-Berru, we are currently working on updating this web page.’’ Id. 32 See EEOC, ‘‘PROPOSED Updated Compliance Manual on Religious Discrimination’’ (Nov. 17, 2020), https://beta.regulations.gov/document/ EEOC-2020-0007-0001 (last accessed November 18, 2020). PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 79365 either, which notes that ‘‘[t]he religious organization exemption under Title VII does not mention nonprofit and forprofit status’’ and states that ‘‘[w]hether a for-profit corporation can constitution a religious corporation under Title VII is an open question.’’ 33 The EEOC’s 2008 guidance states that the exception is only for organizations that are primarily religious. Its recently proposed guidance describes the inquiry as one into ‘‘whether an entity is religious.’’ 34 OFCCP’s test also seeks to identify organizations that are primarily religious—through an appropriately guided, reliable, and objective inquiry. The EEOC’s 2008 guidance (and its proposed guidance) suggests an openended set of non-dispositive factors, while this final rule uses a set of clearly defined factors that are sufficient for non-profit entities; regarding for-profit entities, additional evidence compatible with some of the additional factors listed by the EEOC’s 2008 guidance may come into play. Insofar as any difference still remains between this final rule and EEOC’s 2008 guidance, OFCCP believes that difference is tolerable when weighed against the subsequent developments in the case law, the reasoning of which OFCCP finds persuasive, and OFCCP’s desire for a more structured test, especially given OFCCP’s unique contract-based regulatory structure. Regarding OFCCP’s definition of Particular religion, the same EEOC guidance documents from 2008 state that the religious exemption ‘‘only allows religious organizations to prefer to employ individuals who share their religion.’’ It then addresses two religiously based views that are not protected by the exemption: Racial discrimination and differences in fringe benefits between men and women. This final rule is fully compatible with both those examples. As discussed earlier in this preamble, OFCCP always has a compelling interest in enforcing prohibitions on racial discrimination, and OFCCP endorses the result in Fremont, 781 F.2d 1362. This final rule, however, does provide an exemption broader than a mere coreligionist hiring preference. OFCCP believes, for the reasons stated earlier in this preamble, that that view is sufficiently supported by the Title VII case law, and in fact is the more persuasive view of the law. OFCCP also believes that a broader view is more likely to encourage religious organizations to enter the pool of competitors for government contracts, which benefits the government. For 33 Id. 34 Id. E:\FR\FM\09DER2.SGM at 21. at 20. 09DER2 79366 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 these reasons, OFCCP believes that any issues arising from any differences with the EEOC’s views as stated in subregulatory guidance from 2008 are outweighed by the benefits of adopting a broader view of the exemption. Additionally, OFCCP believes any differences on this issue may be resolved in the near future. The EEOC’s proposed guidance is even more consistent with OFCCP’s final rule. The proposed guidance states that ‘‘the exemption allows religious organizations to prefer to employ individuals who share their religion, defined not by the self-identified religious affiliation of the employee, but broadly by the employer’s religious observances, practices, and beliefs.’’ 35 The guidance goes on to state that ‘‘[t]he prerogative of a religious organization to employ individuals ‘‘ ‘of a particular religion’ . . . has been interpreted to include the decision to terminate an employee whose conduct or religious beliefs are inconsistent with those of its employer.’’ 36 OFCCP also believes some commenters mischaracterize any differences between the OFCCP and EEOC in this area as presenting contractors with conflicting liability. OFCCP’s final rule is at least as, or more, protective of religious organizations than the view stated in the EEOC’s guidance. A contractor can choose to adhere to the view articulated by the EEOC in 2008 and be in full compliance under the view of both agencies. Finally, OFCCP must balance its coordination with the EEOC with its need to follow directives from the President and the U.S. Department of Justice. Section 4 of Executive Order 13798 states that ‘‘[i]n order to guide all agencies in complying with relevant Federal law, the Attorney General shall, as appropriate, issue guidance interpreting religious liberty protections in Federal law.’’ The Attorney General issued such guidance on October 6, 2017, ‘‘to guide all administrative agencies and executive departments in the executive branch.’’ Office of the Att’y Gen., Memorandum for All Executive Departments and Agencies: Federal Law Protections for Religious Liberty at 1 (Oct. 6, 2017), available at www.justice.gov/opa/press-release/file/ 1001891/download. This rule is fully compatible with that guidance: Religious corporations, associations, educational institutions, and societies—that 35 EEOC, ‘‘PROPOSED Updated Compliance Manual on Religious Discrimination’’ at 24. 36 Id. (citing Hall, 215 F.3d at 625; Little, 929 F.3d at 951). VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 is, entities that are organized for religious purposes and engage in activity consistent with, and in furtherance of, such purposes— have an express statutory exemption from Title VII’s prohibition on religious discrimination in employment. Under that exemption, religious organizations may choose to employ only persons whose beliefs and conduct are consistent with the organizations’ religious precepts. For example, a Lutheran secondary school may choose to employ only practicing Lutherans, only practicing Christians, or only those willing to adhere to a code of conduct consistent with the precepts of the Lutheran community sponsoring the school. Indeed, even in the absence of the Title VII exemption, religious employers might be able to claim a similar right under RFRA or the Religion Clauses of the Constitution. Id. at 6; see also id. at 12a–13a IV. Regulatory Procedures A. Executive Order 12866 (Regulatory Planning and Review), Executive Order 13563 (Improving Regulation and Regulatory Review), and Executive Order 13771 (Reducing Regulation and Controlling Regulatory Costs) Under Executive Order 12866 (E.O. 12866), OMB’s Office of Information and Regulatory Affairs (OIRA) determines whether a regulatory action is significant and, therefore, subject to the requirements of E.O. 12866 and OMB review. Section 3(f) of E.O. 12866 defines a ‘‘significant regulatory action’’ as an action that is likely to result in a rule that: (1) Has an annual effect on the economy of $100 million or more, or adversely affects in a material way a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities (also referred to as economically significant); (2) creates serious inconsistency or otherwise interferes with an action taken or planned by another agency; (3) materially alters the budgetary impacts of entitlement grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or (4) raises novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in E.O. 12866. This final rule has been designated a ‘‘significant regulatory action’’ although not economically significant, under section 3(f) of E.O. 12866. The Office of Management and Budget has reviewed this final rule. Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), OIRA designated this rule as not a ‘‘major rule,’’ as defined by 5 U.S.C. 804(2). Executive Order 13563 (E.O. 13563) directs agencies to adopt a regulation only upon a reasoned determination that its benefits justify its costs; tailor PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 the regulation to impose the least burden on society, consistent with obtaining the regulatory objectives; and in choosing among alternative regulatory approaches, select those approaches that maximize net benefits. E.O. 13563 recognizes that some benefits are difficult to quantify and provides that, where appropriate and permitted by law, agencies may consider and discuss qualitatively values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts. This final rule is an E.O. 13771 deregulatory action because it is expected to reduce compliance costs and potentially the cost of litigation for regulated entities. 1. The Need for the Regulation As discussed in the preamble, OFCCP received numerous comments addressing the need for the regulation. Some commenters stated the proposal was necessary to ensure religious entities could contract with the federal government without compromising their religious identities or missions. Some commenters also agreed with OFCCP’s observation that religious organizations have been reluctant to participate as federal contractors because of the lack of clarity or perceived narrowness of the E.O. 11246 religious exemption. OFCCP also received comments objecting to the proposal because they claimed it would permit taxpayer- or government-funded discrimination. Commenters argued that the Government should not allow federal contractors to fire or refuse to hire qualified individuals because they do not regularly attend religious services or adhere to the ‘‘right’’ religion. Additionally, commenters expressed skepticism about religious organizations’ reluctance to participate as federal contractors. Many of these commenters stated that OFCCP provided no evidence to support its claim or asserted that the proposed rule would increase rather than reduce confusion. In addition, several commenters cited a report from a progressive policy institute concluding that faith-based organizations that had objected to the lack of an expanded religious exemption in E.O. 13672 continued to be awarded government contracts. OFCCP disagrees with commenters’ characterization of the rule as discriminatory. OFCCP is committed to enforcing all of E.O. 11246’s protections, including those protecting employees from discrimination on the basis of religion. OFCCP emphasizes again that E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 this rule will have no effect on the overwhelming majority of federal contractors. Even for religious organizations that serve as government contractors, they too must comply with all of E.O. 11246’s nondiscrimination requirements except in some narrow respects under some narrow and reasonable circumstances recognized under law. This rule provides clarity on those circumstances, consistent with OFCCP’s obligations to also respect and accommodate the free exercise of religion. OFCCP agrees with the comments stating that the religious exemption contained in section 204(c) of E.O. 11246 is necessary to ensure religious organizations can contract with the federal government without compromising their religious identities or missions. The fact that some faithbased organizations have been willing to enter into federal contracts does not mean that other faith-based organizations have not been reluctant to do so. Indeed, a few commenters offered evidence that religious organizations have been reluctant to contract with or receive grants from the federal government because of the lack of clarity regarding religious exemptions in federal law. In addition, although some commenters objected to the provision of any religious exemption for federal contractors, the religious exemption is part of E.O. 11246 that OFCCP is obligated to administer and enforce and has been part of the Executive Order for nearly two decades. OFCCP is publishing this final rule to clarify the scope and application of the religious exemption. The intent is to provide certainty and make clear that the exemption includes not only churches but 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. OFCCP believes that the rule will promote consistency in OFCCP’s administration and that it will be clearer for contractors to follow. Further, OFCCP believes it will help achieve consistency with the administration policy to enforce federal law’s robust protections of religious freedom. 2. Discussion of Impacts In this section, OFCCP presents a summary of the costs associated with the new definitions in § 60–1.3 and the new rule of construction in § 60–1.5. While this rule will only apply to federal contractors that are religious, OFCCP lacks data to determine the number of contractors that would fall VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 within that definition and thus evaluates the impacts using data for the entire contractor universe despite the fact this number significantly overstates the number of religious contractors. Prior to publication of the NPRM, OFCCP surveyed the list of contractors in the General Service Administration’s System for Award Management (SAM) to identify organizations whose North American Industry Classification System (NAICS) descriptions or names included the word ‘‘religious,’’ ‘‘church,’’ ‘‘mosque,’’ etc. This survey was not a useful or appropriate proxy for the number of potentially affected entities for several reasons. First, not all organizations with ‘‘religious’’ NAICS codes or names would qualify for the exemption, given that any formulation of the religious-organization test is factintensive and requires much more than that the organization simply have (what is commonly understood to be) a religious term in its name. This holds true under any formulation of the test, whether that used in a case like LeBoon or the test set out in the NPRM and refined in the final rule. Second, and similarly, many religious organizations that could qualify for the religious employer exemption at issue here may not include one of those three specific descriptors in their NAICS description much like many religious organizations do not include one of those three words in their legal names. Third, the religious exemption is an optional accommodation. Organizations that qualify for it may choose to use it, or not, and OFCCP has no reliable way of determining which will do so. Fourth, OFCCP believes that, as a government agency, it would be a fraught matter for it to search for potentially religious organizations based on its own view of what sorts of terms are religious, assess the results in the abstract, and attempt to attribute religious characteristics to the organizations found. This rule elsewhere rejects that sort of approach. For all these reasons, OFCCP has chosen to use broader estimates of the contractor universe. Further, OFCCP anticipates that many contractors would affirmatively disclaim any religious basis and thus OFCCP recognizes that the following analysis will be an overestimate, but uses it out of an abundance of caution. OFCCP determined that there are approximately 435,000 entities registered in the SAM database.37 37 U.S. General Services Administration, System for Award Management, data released in monthly files, available at https://sam.gov. The SAM database is an estimate with the most recent download of data occurring November 2020. PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 79367 Entities registered in the SAM database consist of contractor firms and other entities (such as state and local governments and other organizations) that are interested in federal contracting opportunities and other forms of federal financial assistance. The total number of entities in the SAM database fluctuates and is posted on a monthly basis. The current database includes approximately 435,000 entities. Thus, OFCCP determines that 435,000 entities is a reasonable representation of the number of entities that may be affected by the final rule.38 OFCCP recognizes that this SAM number likely results in an overestimation for two reasons: The system captures firms that do not meet the jurisdictional dollar thresholds for the three laws that OFCCP enforces, and it captures contractor firms for work performed outside the United States by individuals hired outside the United States, over which OFCCP does not have authority. Further, because this rule only applies to religious contractors, OFCCP is confident that this estimate overstates the true universe of contractors affected by the rule. OFCCP anticipates three main groups that potentially will be impacted: Religious organizations that decide to become federal contractors because of this final rule’s clarity on the scope and application of the religious exemption, religious organizations that are already federal contractors, and all current federal contractors. OFCCP is unable to reasonably quantify the costs, benefits, and transfers for these three groups of organizations, but provides the following qualitative analysis. Though religious organizations new to federal contracting will likely incur upfront costs and compliance costs associated with becoming a federal contractor, it is reasonable to assume they believe that becoming a federal contractor will further their goals, which will result in benefits to the organization (whether increased revenues, more financial stability, or better market access). In addition, if the new potential contractors are awarded government contracts, the government and the public will receive better quality or lower-cost services because most federal contracts are rewarded through competitive bidding which selects (generally speaking) either the lowest 38 While the final rule may result in more religious corporations, associations, educational institutions or societies entering into federal contracting or subcontracting, there is no way to estimate the volume of increase. As noted above, OFCCP does not anticipate that the number of religious contractors will grow to be equal to nonreligious contractors, but uses this estimate due to the lack of data. E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79368 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations cost per unit or highest quality unit at a specific price. As the number of potential federal contractors rises, the competitive process should result in better quality and prices for goods and services which will enhance the societal benefits of federal contracting. If total costs from contracting with the new organization are lower than the status quo, the result will be a transfer to taxpayers. Religious organizations which are already federal contractors will see a minimal cost for rule familiarization and compliance and will continue to efficiently provide services to the U.S. government. The clear boundaries of the religious exemption may permit these contractors to more freely seek the religious exemption with assurance that they are complying with their legal obligations under Executive Order 11246, and they may revisit their employment practices accordingly. OFCCP cannot determine quantitatively the direction or magnitude of any changes in employment but believes the overall effects will be quite small at these organizations, as most employees at them were likely attracted to them because of a shared sense of religious mission, and extremely small when considering the entire contractor universe or the economy as a whole. On one hand, religious employers may feel more free to hire those that are not denominational coreligionists, given this final rule’s explanation, consistent with law, that an organization does not forfeit the exemption when it hires outside strict denominational boundaries, and that an organization may require acceptance of or adherence to particular religious tenets as part of the employment relationship regardless of employees’ denominational membership. On the other hand, given this clarity, religious employers may also feel more confident in their ability to hire and retain employees based on religious criteria. Additionally, OFCCP believes these assurances for religious organizations will result in reduced legal costs for both the religious contractors and OFCCP. All current federal contractors may face additional competition as new potential competitors enter the market. Since the total amount of available government contracts is not anticipated to change, the increased competition may provide better prices for the government, but may also result in a reallocation of the contracts. Should this occur, it is possible that revenues will be transferred between various government contractors or from current contractors to new entrants. VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 3. Public Comments In this section, OFCCP addresses the public comments specifically received on the Regulatory Impact Analysis. One commenter, a public policy research and advocacy organization, asserted that OFCCP underestimated the wage rate of the employees who would likely review the rule. The commenter asserted that the employee would likely be an attorney rather than a human resource manager. The commenter suggested that most contractors would consult in-house or outside counsel to help with rule familiarization. The commenter also provided an alternate fully loaded hourly compensation rate for Lawyers (SOC 23–1011). OFCCP acknowledges that some contractors may have in-house counsel review the final rule. However, some contractors do not have in-house counsel, and their review will be conducted by human resource managers. Taking into consideration this comment, OFCCP has adjusted its wage rate to reflect review by either in-house counsel or human resource managers. Several commenters addressed the time needed for a contractor to become familiar with the final rule. These commenters asserted that the estimate of one half-hour was too low. One commenter provided no additional information or alternative calculation. The remaining two provided alternative estimates ranging from 1.5 hours to 2.5 hours to become familiar with the final rule. OFCCP acknowledges that the precise amount of time each company will take to become familiar with understanding the new regulations is difficult to estimate. However, the elements that OFCCP uses in its calculation take into account the length and complexity of the final rule. The final rule adds definitions to the existing regulations implementing E.O. 11246 and clarifies the exemption contained in section 204(c) of E.O. 11246. As such, the final rule clarifies requirements and reduces burdens on contractors trying to understand their obligations and responsibilities of complying with E.O. 11246. Thus, OFCCP has decided to retain its initial estimate of one half-hour for rule familiarization. This estimate accounts for the time needed to read the final rule or participate in an OFCCP webinar about the final rule. Many commenters asserted that OFCCP did not address the potential costs of the final rule on employees, taxpayers, and minority groups, including LGBT individuals, women, and religious minorities. The commenters asserted that OFCCP failed PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 to address the economic and noneconomic costs to employees in the form of lost wages and benefits, out of pocket medical expenses, job searches, and negative mental and physical health consequences of discrimination. Two commenters, a civil liberties organization and a labor union, mentioned that there are 25 states without explicit statutory protections barring employment discrimination based on gender identity and sexual orientation and asserted that workers in these states are not otherwise covered by statutory protections. The commenters who made these assertions provided no additional information or data to support their assertions. Additionally, given Bostock’s holding that Title VII’s prohibition on sex discrimination includes discrimination on the basis of sexual orientation and transgender status, these concerns seem lessened. OFCCP has reviewed these comments and notes that any attempt to project costs to employees would necessarily require OFCCP to speculate that certain workers will face discrimination only once this rule is finalized. Further, the commenters ignore the possibility that contractors may choose to hire individuals of greater religious diversity as a result of this rule because their incentive to only hire coreligionists will be diminished. Absent data regarding the number of individuals who are not discriminated against in the status quo but would be discriminated against when this rule is finalized, and noncoreligionist individuals who will be hired by a contractor as a result of this rule that OFCCP cannot assess the mere possibility that some workers could face different costs. Likewise, OFCCP lacks data for the number of new contractors that may enter the market and the number of employees that work for such companies. As such, OFCCP does not estimate the benefits to the employees of those new contractors. Commenters also said that OFCCP failed to address the costs to taxpayers in the form of a restricted labor pool, decreased productivity, employee turnover, and increased health care costs related to employment discrimination and increased social stigma. In addition, some commenters mentioned that OFCCP did not account for intangible costs related to reductions in equity, fairness, and personal freedom that would result from allowing businesses and organizations receiving taxpayer dollars to opt out of critical nondiscrimination provisions that protect employees based on gender identity and sexual orientation. The commenters who made these assertions E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations provided no additional information or data to support their assertions. Further, the commenters provide no additional support for their assertion that the rule will increase costs to taxpayers and ignore the possibility that the rule will expand the pool of federal contractors, thereby saving taxpayers money. Similarly, several commenters addressed the potential impact of the rule on state and local governments. Three commenters, a city attorney, a state’s attorney, and a civil liberties and human rights legal advocacy organization, mentioned that state and local governments may lose important tax revenue if people relocate or choose to withdraw from the workforce because of the final rule. Another commenter mentioned that state and local governments that serve victims of discrimination will need to contribute to, provide, and administer more public benefits programs for vulnerable populations. These comments are assume that the rule will impose costs on workers and that those costs will in turn be imposed upon the communities in which those workers live. None of these commenters provided additional information or data to support their statements. One individual commenter asserted that OFCCP did not properly determine the rule’s economic significance. The commenter asserted that the Regulatory Impact Analysis in the NPRM did not take into account ‘‘the actual monetary impact of the regulation.’’ Using all available information and data, OFCCP has addressed the quantifiable and qualitative costs and benefits of this final rule as required. It provides an assessment of the costs associated with rule familiarization and concludes that the addition of definitions and clarification of an exemption do not create additional burdens for the regulated community. As stated in the preamble, the intent of the final rule is to clarify the scope of the religious exemption and promote consistency in OFCCP’s administration of it. The commenter also asserted that OFCCP did not account for the impact on larger contractors. The Regulatory Flexibility Act requires agencies to consider the impact of a regulation on a wide range of small entities, including small businesses, nonprofit organizations, and small governmental jurisdictions. It does not address larger corporations. However, OFCCP’s assessment reflects 79369 that it does not anticipate any costs beyond rule familiarization for contractors. Taking the Regulatory Impact Analysis comments into consideration, OFCCP has assessed the costs and benefits of the final rule as follows. OFCCP believes that either a Human Resource Manager (SOC 11–3121) or a Lawyer (SOC 23–1011) would review the final rule. OFCCP estimates that 50% of the reviewers would be human resource managers and 50% would be in-house counsel. Thus, the mean hourly wage rate reflects a 50/50 split between human resource managers and lawyers. The mean hourly wage of human resource managers is $62.29 and the mean hourly wage of lawyers is $69.86.39 Therefore, the average hourly wage rate is $66.08 (($62.29 + $69.86)/ 2). OFCCP adjusted this wage rate to reflect fringe benefits such as health insurance and retirement benefits, as well as overhead costs such as rent, utilities, and office equipment. OFCCP used a fringe benefits rate of 46% 40 and an overhead rate of 17%,41 resulting in a fully loaded hourly compensation rate of $107.71 ($66.08 + ($66.08 × 46%) + ($66.08 × 17%)). TABLE 1—LABOR COST Major occupational groups Average hourly wage rate Fringe benefit rate (%) Overhead rate (%) Fully loaded hourly compensation Human Resources Managers and Lawyers .................................................... $66.08 46 17 $107.71 4. Cost of Regulatory Familiarization OFCCP acknowledges that 5 CFR 1320.3(b)(1)(i) requires agencies to include in the burden analysis the estimated time it will take for contractors to review and understand the instructions for compliance. In order to minimize the burden, OFCCP will publish compliance assistance materials, such as fact sheets and answers to frequently asked questions. OFCCP may also host webinars for interested persons that describe the new regulations and conduct listening sessions to identify any specific challenges contractors believe they face, or may face, when complying with the new regulations. OFCCP notes that such informal compliance guidance is not binding. OFCCP believes that human resource managers or lawyers at each contractor firm would be the employees responsible for understanding the new regulations. OFCCP further estimates that it will take a minimum of one halfhour for a human resource professional or lawyer at each contractor firm to read the rule, read the compliance assistance materials provided by OFCCP, or participate in an OFCCP webinar to learn the new requirements.42 Consequently, the estimated burden for rule familiarization would be 217,500 hours (435,000 contractor firms × 1⁄2 hour). OFCCP calculates the total estimated cost of rule familiarization as $23,426,925 (217,500 hours × $107.71/ hour) in the first year, which amounts to a 10-year annualized cost of $2,666,359 at a discount rate of 3% (which is $6.13 per contractor firm) or $3,117,259 at a discount rate of 7% (which is $7.17 per contractor firm). TABLE 2—REGULATORY FAMILIARIZATION COSTS jbell on DSKJLSW7X2PROD with RULES2 Total number of contractors ............................................................................................................................................................. Time to review rule ........................................................................................................................................................................... 39 BLS, Occupational Employment Statistics, Occupational Employment and Wages, May 2019, https://www.bls.gov/oes/current/oes_nat.htm. 40 BLS, Employer Costs for Employee Compensation, https://www.bls.gov/ncs/data.htm. Wages and salaries averaged $24.26 per hour VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 worked in 2017, while benefit costs averaged $11.26, which is a benefits rate of 46%. 41 Cody Rice, U.S. Environmental Protection Agency, ‘‘Wage Rates for Economic Analyses of the Toxics Release Inventory Program’’ (June 10, 2002), https://www.regulations.gov/document?D=EPA-HQOPPT-2014-0650-0005. PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 435,000. 30 minutes. 42 OFCCP believes that contractor firms that may be potentially affected by the rule may take more time to review the final rule, while contractor firms that may not be affected may take less time, so the one half-hour reflects an estimated average for all contractor firms. E:\FR\FM\09DER2.SGM 09DER2 79370 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations TABLE 2—REGULATORY FAMILIARIZATION COSTS—Continued Human resources manager and lawyer fully loaded hourly compensation ..................................................................................... Regulatory familiarization cost .......................................................................................................................................................... Annualized cost with 3% discounting ............................................................................................................................................... Annualized cost per contractor with 3% discounting ....................................................................................................................... Annualized cost with 7% discounting ............................................................................................................................................... Annualized cost per contractor with 7% discounting ....................................................................................................................... jbell on DSKJLSW7X2PROD with RULES2 5. Cost Savings OFCCP expects that contractors impacted by the rule will experience cost savings. Specifically, the clarity provided in the new definitions and the interpretation provided will reduce the risk of noncompliance to contractors and the potential legal costs that findings of noncompliance with OFCCP’s requirements might impose. One mass mail campaign of commenters asserted that allowing religious organizations to continue to provide a variety of services, such as assisting victims of sexual abuse, the hungry, and the homeless, is effective because it saves taxpayer dollars through contracting instead of expanding government bureaucracy. Some commenters argued that the rule will decrease clarity and will thus increase costs for contractors, especially if those contractors believe their obligations under the EEOC conflict with their obligations under the final rule. First, OFCCP believes that the E.O. 11246 nondiscrimination obligations it enforces remain in force and that the rule is sufficiently consistent with Title VII case law and principles and that it will promote consistency in administration. Second, even assuming for purposes of this analysis that contractors’ obligations under EEOC and E.O. 11246 differ (e.g., that the exemption in E.O. 11246 permits an action forbidden under the EEOC’s view of Title VII), a contractor remains obligated to abide by Title VII and any exemption from E.O. 11246 simply prevents additional liability before OFCCP for the same action. Accordingly, only those contractors that wish to rely on the E.O. 11246 exemption need consider it, and we expect that the additional costs incurred by such organizations to understand the exemption beyond their existing compliance costs will be minimal. 6. Benefits E.O. 13563 recognizes that some rules have benefits that are difficult to quantify or monetize but are important, and states that agencies may consider such benefits. This final rule improves equity and fairness by giving contractors clear guidance on the scope and application of the religious exemption VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 to E.O. 11246. It also increases religious freedom for religious employers. The final rule increases clarity for federal contractors. This impact most likely yields a benefit to taxpayers (if contractor fees decrease because they do not need to engage third-party representatives to interpret OFCCP’s requirements). While some commenters expressed concern that the rule was not clear, OFCCP believes that the rule is sufficiently consistent with Title VII case law and principles and that it will promote consistency in administration. Furthermore, by increasing clarity for both contractors and for OFCCP enforcement, the final rule may reduce the number and costs of enforcement proceedings by making it clearer to both sides at the outset what is required under the regulations. This would also most likely represent a benefit to taxpayers (since fewer resources would be spent in OFCCP administrative litigation). OFCCP notes that some commenters asserted that OFCCP did not provide evidence that faith-based organizations have been reluctant to contract with the federal government because of the lack of certainty about the religious exemption. The fact that some small number of faith-based organizations have been willing to enter into federal contracts does not mean that other faithbased organizations have not been reluctant to do so. OFCCP believes that providing clarity to the religious exemption currently included under E.O. 11246 will promote clarity and certainty for all contractors. Moreover, a few commenters confirmed OFCCP’s observation that religious organizations have been reluctant to participate as federal contractors because of the lack of clarity or perceived narrowness of the E.O. 11246 religious exemption. One individual commenter described his experience with religious organizations’ reluctance to contract or subcontract with the federal government, and two other commenters offered examples or evidence of religious organizations’ reluctance to participate in other contexts, such as federal grants. Thus, OFCCP expects that the number of new contractors may increase because religious entities may be more willing to PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 $107.71. $23,426,925. $2,666,359. $6.13. $3,117,259. $7.17. contract with the government after the religious exemption is clarified. A further benefit of this rule would be that some religious contractors will increase the diversity of their workforce. Under some prior interpretations, the religious exemption was only provided to contractors who hired co-religionists (e.g., a Catholic company hiring only Catholics; a Latter-day Saint contractor hiring only Latter-day Saints; etc.) and thus religious contractors were incentivized to limit their hiring to only co-religionists. Once this rule is finalized, such religious contractors will no longer be required to limit their hiring. The likely outcome of this change is that the workforces of religious employers will become more diverse. B. Regulatory Flexibility Act and Executive Order 13272 (Consideration of Small Entities) The agency did not receive any public comments on the Regulatory Flexibility Analysis. The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., establishes ‘‘as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation.’’ Public Law 96–354, 2(b). The RFA requires agencies to consider the impact of a regulation on a wide range of small entities, including small businesses, nonprofit organizations, and small governmental jurisdictions. Agencies must review whether a final rule would have a significant economic impact on a substantial number of small entities. See 5 U.S.C. 603. If the rule would, then the agency must prepare a regulatory flexibility analysis as described in the RFA. See id. However, if the agency determines that the rule would not be expected to have a significant economic impact on a substantial number of small entities, then the head of the agency may so certify and the RFA does not require a regulatory flexibility analysis. See 5 U.S.C. 605. The certification must provide the factual basis for this determination. E:\FR\FM\09DER2.SGM 09DER2 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations OFCCP does not expect the final rule to have a significant economic impact on a substantial number of small entities and does not believe the final rule has any recurring costs. The regulatory familiarization cost discounted at a 7% rate of $50.33 per contractor or $7.17 annualized is a de minimis cost. Therefore, the first year and annualized burdens as a percentage of the smallest employer’s revenue would be far less than 1%. Accordingly, OFCCP certifies that the final rule would not have a significant economic impact on a substantial number of small entities. That is consistent with the Department’s analysis in the NPRM. C. Paperwork Reduction Act The Paperwork Reduction Act of 1995 requires that OFCCP consider the impact of paperwork and other information collection burdens imposed on the public. See 44 U.S.C. 3507(d). An agency may not collect or sponsor the collection of information or impose an information collection requirement unless the information collection instrument displays a currently valid OMB control number. See 5 CFR 1320.5(b)(1). OFCCP has determined that there is no new requirement for information collection associated with this final rule. The final rule provides definitions and a rule of construction to clarify the scope and application of current law. The information collections contained in the existing E.O. 11246 regulations are currently approved under OMB Control Number 1250–0001 (Construction Recordkeeping and Reporting Requirements) and OMB Control Number 1250–0003 (Recordkeeping and Reporting Requirements—Supply and Service). Consequently, this final rule does not require review by the Office of Management and Budget under the authority of the Paperwork Reduction Act. jbell on DSKJLSW7X2PROD with RULES2 D. Unfunded Mandates Reform Act of 1995 For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, this final rule does not include any federal mandate that may result in excess of $100 million in expenditures by state, local, and tribal governments in the aggregate or by the private sector. E. Executive Order 13132 (Federalism) OFCCP has reviewed this final rule in accordance with Executive Order 13132 regarding federalism. OFCCP recognizes that there may be some existing costs that may shift from the federal government to state or local VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 governments; however, the agency believes that these effects will be neither direct nor substantial. Thus, OFCCP has determined that it does not have ‘‘federalism implications.’’ This rule will not ‘‘have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.’’ F. Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments) This final rule does not have tribal implications under Executive Order 13175 that would require a tribal summary impact statement. The final rule will not ‘‘have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.’’ List of Subjects in 41 CFR Part 60–1 Civil rights, Employment, Equal employment opportunity, Government contracts, Government procurement, Investigations, Labor, and Reporting and recordkeeping requirements. Craig E. Leen, Director, OFCCP. For the reasons set forth in the preamble, OFCCP revises 41 CFR part 60–1 as follows: PART 60–1—OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS 1. The authority citation for part 60– 1 continues to read as follows: ■ Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964–1965 Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966–1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p. 230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O. 13672, 79 FR 42971. 2. Amend § 60–1.3 by a. Adding in alphabetical order the definitions of ‘‘Particular religion,’’ ‘‘Religion,’’ ‘‘Religious corporation, association, educational institution, or society,’’ and ‘‘Sincere,’’ and ■ b. Adding paragraph (a) and adding and reserving paragraph (b). The revisions read as follows: ■ ■ § 60–1.3 Definitions. * * * * * Particular religion means the religion of a particular individual, corporation, association, educational institution, society, school, college, university, or PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 79371 institution of learning, including acceptance of or adherence to sincere religious tenets 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. * * * * * Religion includes all aspects of religious observance and practice, as well as belief. * * * * * Religious corporation, association, educational institution, or society. (1) Religious corporation, association, educational institution, or society means a corporation, association, educational institution, society, school, college, university, or institution of learning that: (i) Is organized for a religious purpose; (ii) Holds itself out to the public as carrying out a religious purpose; (iii) Engages in activity consistent with, and in furtherance of, that religious purpose; and (iv)(A) Operates on a not-for-profit basis; or (B) Presents other strong evidence that its purpose is substantially religious. (2) Whether an organization’s engagement in activity is consistent with, and in furtherance of, its religious purpose is determined by reference to the organization’s own sincere understanding of its religious tenets. (3) To qualify as religious a corporation, association, educational institution, society, school, college, university, or institution of learning may, or may not: Have a mosque, church, synagogue, temple, or other house of worship; or be supported by, be affiliated with, identify with, or be composed of individuals sharing, any single religion, sect, denomination, or other religious tradition. (4) The following examples apply this definition to various scenarios. It is assumed in each example that the employer is a federal contractor subject to Executive Order 11246. (i)(A) Example. A closely held forprofit manufacturer makes and sells metal candlesticks and other decorative items. The manufacturer’s mission statement asserts that it is committed to providing high-quality candlesticks and similar items to all of its customers, a majority of which are churches and synagogues. Some of the manufacturer’s items are also purchased by federal agencies for use during diplomatic events and presentations. The manufacturer regularly consults with E:\FR\FM\09DER2.SGM 09DER2 jbell on DSKJLSW7X2PROD with RULES2 79372 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Rules and Regulations ministers and rabbis regarding new designs to ensure that they conform to any religious specifications. The manufacturer also advertises heavily in predominantly religious publications and donates a portion of each sale to charities run by churches and synagogues. (B) Application. The manufacturer likely does not qualify as a religious organization. Although the manufacturer provides goods predominantly for religious communities, the manufacturer’s fundamental purpose is secular and pecuniary, not religious, as evidenced by its mission statement. Because the manufacturer lacks a religious purpose, it cannot carry out activity consistent with that (nonexistent) religious purpose. And while the manufacturer advertises heavily in religious publications and consults with religious functionaries on its designs, the manufacturer does not identify itself, as opposed to its customers, as religious. Finally, given that the manufacturer is a for-profit entity, it would need to make a strong evidentiary showing that it is a religious organization, which it has not. (ii)(A) Example. A nonprofit organization enters government contracts to provide chaplaincy services to military and federal law-enforcement organizations around the country. The contractor is organized as a non-profit, but it charges the military and other clients a fee, similar to fees charged by other staffing organizations, and its manager and employees all collect a market-rate salary. The organization’s articles of incorporation state that its purpose is to provide religious services to members of the same faith wherever they may be in the world, and to educate other individuals about the faith. Similar statements of purpose appear on the organization’s website and in its bid responses to government requests for proposals. All employees receive weekly emails, and occasionally videos, about ways to promote faith in the workplace. The employee handbook contains several requirements regarding personal and workplace conduct to ensure ‘‘a Christian atmosphere where the Spirit of the Lord can guide the organization’s work.’’ (B) Application. Under these facts, the contractor likely qualifies as a religious organization. The contractor’s organizing documents expressly state that its mission is primarily religious in nature. Moreover, the contractor exercises religion through its business activities, which is providing chaplaincy services, and through its hiring and training practices. Through VerDate Sep<11>2014 17:33 Dec 08, 2020 Jkt 253001 its emails and other communications, the contractor holds itself out as a religious organization to its employees, applicants, and clients. Finally, notwithstanding that the contractor collects a placement fee similar to nonreligious staffing companies, it is organized as a non-profit. (iii)(A) Example. A small catering company provides kosher meals primarily to synagogues and for various events in the Jewish community, but other customers, including federal agencies, sometimes hire the caterer to provide meals for conferences and other events. The company’s two owners are Hasidic Jews and its six employees, while not exclusively Jewish, receive instruction in kosher food preparation to ensure such preparation comports with Jewish laws and customs. This additional work raises the company’s operating costs higher than were it to provide non-kosher meals. The company’s mission statement, which has remained substantially the same since the company was organized, describes its purpose as fulfilling a religious mandate to strengthen the Jewish community and ensure Jewish persons can participate fully in public life by providing kosher meals. The company’s ‘‘about us’’ page on its website states that above all else, the company seeks to ‘‘honor G-d’’ and maintain the strength of the Jewish religion through its kosher meal services. The company also donates a portion of its proceeds to charitable projects sponsored by local Jewish congregations. In its advertising and on its website, the company prominently includes religious symbols and text. (B) Application. The company likely qualifies as a religious organization. The company’s mission statement and other materials show a religious purpose. Its predominant business activity of providing kosher meals directly furthers and is wholly consistent with that selfidentified religious purpose, as are its hiring and training practices. Through its advertising and website, the company holds itself out as a religious organization. Finally, although the company operates on a for-profit basis, the other facts here show strong evidence that the company operates as a religious organization. (iv)(A) Example. A for-profit collector business sells a wide variety of artistic, cultural, religious, and archeological items. The government purchases some of these from time to time for research or aesthetic purposes. The business’s mission statement provides that its purpose is to curate the world’s treasures to perpetuate its historic, cultural, and religious legacy. Most of PO 00000 Frm 00050 Fmt 4701 Sfmt 9990 the business’s customers are private individuals or museums interested in the items as display pieces or for their cultural value. The business’s marketing materials include examples of religious iconography and artifacts from a variety of world religions, as well as various cultural and artistic items. (B) Application. The business likely does not qualify as a religious organization. Its mission statement references an arguably religious purpose, namely perpetuating the world’s religious legacy, but in context that appears to have more to do with religion’s historic value rather than evidencing a religious conviction of the business or its owner. Similarly, it is at best unclear whether the business is engaging in activities in furtherance of this purpose when most of its sales serve no religious purpose. Finally, while the business displays some religious items, these appear to be a minor part of the business’s overall presentation and do not convey that the business has a religious identity. The factors to qualify as a religious organization do not appear to be met, especially given that the business as a for-profit entity would need to make a strong evidentiary showing that it is a religious organization. * * * * * 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. * * * * * (a) Severability. Should a court of competent jurisdiction hold any provision(s) of this section to be invalid, such action will not affect any other provision of this section. (b) [Reserved] 3. Amend § 60–1.5 by adding paragraphs (e) and (f) to read as follows: ■ § 60–1.5 Exemptions. * * * * * (e) Broad interpretation. This subpart shall 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, as amended, 42 U.S.C. 2000bb et seq. (f) Severability. Should a court of competent jurisdiction hold any provision(s) of this section to be invalid, such action will not affect any other provision of this section. [FR Doc. 2020–26418 Filed 12–8–20; 8:45 am] BILLING CODE 4510–45–P E:\FR\FM\09DER2.SGM 09DER2

Agencies

[Federal Register Volume 85, Number 237 (Wednesday, December 9, 2020)]
[Rules and Regulations]
[Pages 79324-79372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26418]



[[Page 79323]]

Vol. 85

Wednesday,

No. 237

December 9, 2020

Part III





Department of Labor





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Office of Federal Contract Compliance Programs





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41 CFR Part 60-1





Implementing Legal Requirements Regarding the Equal Opportunity 
Clause's Religious Exemption; Final Rule

Federal Register / Vol. 85 , No. 237 / Wednesday, December 9, 2020 / 
Rules and Regulations

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DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Part 60-1

RIN 1250-AA09


Implementing Legal Requirements Regarding the Equal Opportunity 
Clause's Religious Exemption

AGENCY: Office of Federal Contract Compliance Programs, Labor.

ACTION: Final rule.

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SUMMARY: The U.S. Department of Labor's (DOL's) Office of Federal 
Contract Compliance Programs (OFCCP) publishes this final rule to 
clarify the scope and application of the religious exemption. These 
clarifications to the religious exemption will help organizations with 
federal government contracts and subcontracts and federally assisted 
construction contracts and subcontracts better understand their 
obligations.

DATES: Effective Date: These regulations are effective January 8, 2021.

FOR FURTHER INFORMATION CONTACT: Tina Williams, Director, Division of 
Policy and Program Development, Office of Federal Contract Compliance 
Programs, 200 Constitution Avenue NW, Room C-3325, Washington, DC 
20210. Telephone: (202) 693-0104 (voice) or (202) 693-1337 (TTY).

SUPPLEMENTARY INFORMATION:

I. Executive Summary

    On August 15, 2019, OFCCP issued a notice of proposed rulemaking 
(NPRM) to clarify the scope and application of Executive Order 11246's 
(E.O. 11246) religious exemption consistent with recent legal 
developments. 84 FR 41677. During the 30-day public comment period, 
OFCCP received 109,726 comments on the proposed rule.\1\ This total 
included over 90,000 comments generated by organized comment-writing 
efforts. Comments came from individuals and from a wide variety of 
organizations, including religious organizations, universities, civil 
rights and advocacy organizations, contractor associations, legal 
organizations, labor organizations, and members of Congress. Comments 
addressed all aspects of the NPRM. OFCCP appreciates the public's 
robust participation in this rulemaking, and the agency has revised 
certain aspects of this regulation in response to commenters' concerns.
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    \1\ Of the 109,726 comments, 35 comments were inadvertently 
posted on Regulations.gov before redactions were made. The posted 
comments were withdrawn, redacted, and then reposted. When the 
comments were reposted, the number of comments on Regulations.gov 
increased to 109,761.
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    As stated in the NPRM, on July 2, 1964, President Lyndon B. Johnson 
signed the landmark Civil Rights Act of 1964. See Public Law 88-352, 78 
Stat. 241. This legislation prohibited discrimination on various 
grounds in many of the most important aspects of civic life. Its Title 
VII extended these protections to employment opportunity, prohibiting 
discrimination on the basis of race, color, religion, sex, or national 
origin. In Title VII, Congress also provided a critical accommodation 
for religious employers. Congress permitted religious employers to take 
religion into account for employees performing religious activities: 
``This title shall not apply . . . to a religious corporation, 
association, or society with respect to the employment of individuals 
of a particular religion to perform work connected with the carrying on 
by such corporation, association, or society of its religious 
activities . . . .'' Public Law 88-352, 702(a), 78 Stat. 241, 255 
(codified as amended at 42 U.S.C. 2000e-1(a)). Congress provided a 
similar exemption for religious educational institutions. See id. Sec.  
703(e)(2), 78 Stat. at 256 (codified at 42 U.S.C. 2000e-2(e)(2)).
    Title VII's protections for religious organizations were expanded 
by Congress in 1972 into their current form. Congress added a broad 
definition of ``religion'': ``The term `religion' includes all aspects 
of religious observance and practice, as well as belief, unless an 
employer demonstrates that he is unable to reasonably accommodate to an 
employee's or prospective employee's religious observance or practice 
without undue hardship on the conduct of the employer's business.'' 
Equal Employment Opportunity Act of 1972, Public Law 92-261, 2(7), 86 
Stat. 103 (codified at 42 U.S.C. 2000e(j)). Congress also added 
educational institutions to the list of those eligible for section 
702's exemption. In addition, Congress broadened the scope of the 
section 702 exemption to cover not just religious activities, but all 
activities of a religious organization: ``This title [VII] shall not 
apply . . . to a religious corporation, association, educational 
institution, or society 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.'' Id. Sec.  3, 86 Stat. at 104 (codified at 42 
U.S.C. Sec.  2000e-1(a)). The Supreme Court unanimously upheld this 
expansion of the religious exemption to all activities of religious 
organizations against an Establishment Clause challenge. See Corp. of 
the Presiding Bishop of the Church of Jesus Christ of Latter-day Saints 
v. Amos, 483 U.S. 327, 330 (1987).\2\
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    \2\ Justice White wrote the majority opinion for five justices. 
Justices O'Connor, Blackmun, and Brennan (with Justice Marshall 
joining) wrote opinions concurring in the judgment.
---------------------------------------------------------------------------

    One year after President Johnson signed the Civil Rights Act, he 
signed E.O. 11246, requiring equal employment opportunity in federal 
government contracting. The order mandated that all government 
contracts include a provision stating that ``[t]he contractor will not 
discriminate against any employee or applicant for employment because 
of race, creed, color, or national origin.'' Exec. Order No. 11246, 
Sec.  202, 30 FR 12319, 12320 (Sept. 28, 1965). Two years later, 
President Johnson expressly acknowledged Title VII of the Civil Rights 
Act when expanding E.O. 11246 to prohibit, as does Title VII, 
discrimination on the bases of sex and religion. See Exec. Order No. 
11375, Sec.  3, 32 FR 14303-04 (Oct. 17, 1967). In 1978, the 
responsibilities for enforcing E.O. 11246 were consolidated in DOL. See 
Exec. Order No. 12086, 43 FR 46501 (Oct. 5, 1978). In its implementing 
regulations, DOL imported Title VII's exemption for religious 
educational institutions. See 43 FR 49240, 49243 (Oct. 20, 1978) (now 
codified at 41 CFR 60-1.5(a)(6)); cf. 42 U.S.C. 2000e-2(e)(2). In 2002, 
President George W. Bush amended E.O. 11246 by expressly importing 
Title VII's exemption for religious organizations, which likewise has 
since been implemented by DOL's regulations. See Exec. Order No. 13279, 
Sec.  4, 67 FR 77143 (Dec. 16, 2002) (adding E.O. 11246 Sec.  202(c)); 
68 FR 56392 (Sept. 30, 2003) (codified at 41 CFR 60-1.5(a)(5)); cf. 42 
U.S.C. 2000e-1(a).
    Because the exemption administered by OFCCP springs directly from 
the Title VII exemption, it should be given a parallel interpretation, 
consistent with the Supreme Court's repeated counsel that the decision 
to borrow statutory text in a new statute is a ``strong indication that 
the two statutes should be interpreted pari passu.'' Northcross v. Bd. 
of Educ. of Memphis City Sch., 412 U.S. 427, 428 (1973) (per curiam). 
OFCCP thus generally interprets the nondiscrimination provisions of 
E.O. 11246 consistent with the principles of Title VII. Because OFCCP 
regulates federal contractors rather than private employers generally, 
OFCCP must apply Title VII principles in a manner that

[[Page 79325]]

best fit its unique field of regulation, including when applying the 
religious exemption.
    With that said, there has been some variation among federal courts 
of appeals in interpreting the scope and application of the Title VII 
religious exemption, and many of the relevant Title VII court opinions 
predate Supreme Court decisions and executive orders that shed light on 
the proper interpretation. The purpose of this final rule is to clarify 
the contours of the E.O. 11246 religious exemption and the related 
obligations of federal contractors and subcontractors to ensure that 
OFCCP respects religious employers' free exercise rights, protects 
workers from prohibited discrimination, and defends the values of a 
pluralistic society. See, e.g., Bostock v. Clayton Cnty., 140 S. Ct. 
1731, 1754 (2020) (``[T]he promise of the free exercise of religion . . 
. lies at the heart of our pluralistic society.''). This 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.
    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. See, e.g., Masterpiece Cakeshop, Ltd. v. Colo. Civil 
Rights Comm'n, 138 S. Ct. 1719, 1731 (2018) (holding 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, 
2022 (2017) (holding 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, 719 (2014) (holding the 
Religious Freedom Restoration Act applies to federal regulation of the 
activities of for-profit closely held corporations); Hosanna-Tabor 
Evangelical Lutheran Church & Sch. v. EEOC, 565 U.S. 171, 196 (2012) 
(holding the ministerial exception, grounded in the Establishment and 
Free Exercise clauses of the First Amendment, bars an employment-
discrimination suit brought on behalf of a minister against the 
religious school for which she worked). Recent executive orders have 
done the same. See Exec. Order No. 13831, 83 FR 20 715 (May 8, 2018); 
Exec. Order No. 13798, 82 FR 21 675 (May 9, 2017). Additional decisions 
from the Supreme Court, issued after the NPRM, have likewise extended 
Title VII's protections while affirming the importance of religious 
freedom. See Bostock, 140 S. Ct. at 1754 (holding Title VII's 
prohibition on discrimination because of sex prohibits ``fir[ing] an 
individual merely for being gay or transgender''); Little Sisters of 
the Poor Saints Peter & Paul Home v. Pennsylvania, 140 S. Ct. 2367, 
2379-84 (2020) (holding the Departments of Labor, Health and Human 
Services, and the Treasury had authority to promulgate religious and 
conscience exemptions from the Affordable Care Act's contraceptive 
mandate); Espinoza v. Mont. Dep't of Revenue, 140 S. Ct. 2246 (2020) (a 
state ``cannot disqualify some private schools [from a subsidy program] 
solely because they are religious'' without violating the Free Exercise 
clause); and Our Lady of Guadalupe Sch. v. Morrissey-Berru, 140 S. Ct. 
2049, 2069 (2020) (holding the ministerial exception applies ``[w]hen a 
school with a religious mission entrusts a teacher with the 
responsibility of educating and forming students in the faith''). These 
decisions are discussed in the final rule's analysis as appropriate and 
applicable.
    In this final rule, OFCCP has sought to follow the principles 
articulated by these recent decisions and orders, and has interpreted 
older federal appellate-level case law in light of them as applicable. 
OFCCP 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.

A. Title VII and the EEOC Generally

    Some commenters on the NPRM agreed that OFCCP's proposal was 
appropriately consistent with Title VII principles. For example, a 
faith-based advocacy organization commented that the religious employer 
exemption in federal contracting regulations is modeled on Title VII, 
and should therefore be understood ``in the strong way'' the Title VII 
exemptions have traditionally been understood.
    Other commenters asserted that OFCCP's proposal was inconsistent 
with Title VII overall. Some of these commenters stated that the 
proposal's interpretation of the exemption was contrary to 
congressional intent. For example, an affirmative action professionals 
association commented that Congress has repeatedly declined to extend 
the Title VII exemption to government-funded entities. A lesbian, gay, 
bisexual, and transgender (LGBT) rights advocacy organization commented 
that, at the time Title VII was enacted, Congress could not have 
envisioned that religious organizations that would qualify for the 
Title VII exemption would also seek to contract with the federal 
government, ``let alone be given a broad right to discriminate based on 
religion while accepting federal funding.''
    In a related vein, OFCCP also received comments objecting generally 
to the provision of a religious exemption for federal contractors or 
specifically to OFCCP's proposal. Most of these commenters 
characterized the religious exemption as taxpayer- or government-funded 
discrimination that was contrary to the purpose of E.O. 11246. For 
example, an affirmative action professionals association commented that 
``[t]he Federal Government should not be in the business of funding 
employment discrimination'' and emphasized that religious organizations 
should not expect to maintain autonomy and independence from the 
government when they solicit and accept government contracts. An 
international labor organization submitted a similar comment, stating 
that organizations that choose to accept government funding through 
government contracts should not be allowed to conduct what it described 
as discrimination against qualified job applicants and employees.
    Relatedly, a public policy research and advocacy organization 
commented that no one should be disqualified from a taxpayer-funded job 
because they are the ``wrong'' religion or do not adhere to any 
religion. A technology company commented that the proposal conflicted 
with the spirit of nondiscrimination law. A group of U.S. Senators 
commented: ``The government cannot use religious exemptions as a 
pretext to permit discrimination against or harm others.''
    Some religious organizations were among the commenters that opposed 
the provision of a religious exemption for federal contractors. One 
religious organization commented that, in line with its commitment to 
religious freedom, it opposed granting government contracts to 
organizations that, in its words, discriminate against qualified 
individuals based on their practices and beliefs. One religious 
organization commented that barring people from taxpayer-funded jobs 
based on their faith violates principles of equality and meritocracy. 
Another faith-

[[Page 79326]]

based organization cited First Amendment separation of church and state 
principles, and commented that, while some religious organizations hire 
staff based on religion, accommodations for religious hiring should not 
be applied broadly in the federal contracts context, as federal 
contracts are not provided to advance religious ends. Other commenters 
stated that the proposal's expansion of the exemption was contrary to 
Title VII case law or principles. For example, an international labor 
organization commented that, in its view, the proposed rule 
mischaracterized federal case law in order to transform provisions 
designed to protect workers from religious discrimination into 
exemptions that would allow federally funded employers to discriminate 
against workers for religious reasons.
    Some commenters stated that the proposal was inconsistent with the 
interpretation of Title VII by the EEOC, the agency primarily 
responsible for enforcing Title VII. A group of state attorneys general 
commented that OFCCP should not undermine the EEOC's efforts, ``as 
would occur under the Proposed Rule, which takes positions contrary to 
the EEOC.'' The state attorneys general asserted that the proposal 
would not increase clarity because it would create two separate legal 
standards for federal contractors and OFCCP staff--one under Title VII 
and one under E.O. 11246. A contractor association asserted that 
``federal contractors could face the Hobson's choice of determining 
whether compliance with an OFCCP regulation will result in liability 
under Title VII.'' Other commenters stated that the overall proposal 
departed from OFCCP's prior interpretation, which they asserted had 
been consistent with the EEOC's interpretation of Title VII prior to 
August 2018, when OFCCP issued Directive 2018-03, concerning the 
religious exemption in section 204(c) of E.O. 11246. For example, a 
public policy research and advocacy organization asserted that, until 
August 2018, the Department consistently interpreted the E.O. 11246 
religious exemption narrowly to permit preferences for coreligionists 
by certain religious organizations, and applied the ``motivating 
factor'' test to evaluate claims of discrimination.
    OFCCP agrees with the comments stating that the rule will provide 
necessary clarity for contractors and potential contractors about the 
scope of the E.O. 11246 religious exemption. Regarding comments that a 
religious exemption protecting government contractors is contrary to 
congressional intent or that such an exemption is misplaced in the 
government contracting context, that question is not at issue in this 
rulemaking. The religious exemption was added to E.O. 11246 almost 
twenty years ago, and OFCCP's implementing regulations are nearly as 
old. The existence of the exemption itself is not at issue in this 
rulemaking.
    Regarding comments that the rule deviates from the EEOC's 
interpretation of the Title VII religious exemption or creates two 
separate standards, OFCCP believes these concerns are unfounded. This 
rule is restricted to the application of the religious exemption. The 
vast majority of contractors and their employees, as well as OFCCP's 
enforcement program, will be unaffected by this rule. As for the 
religious exemption specifically, OFCCP has followed the Title VII case 
law it finds most persuasive, especially in light of the principles of 
religious equality and autonomy reinforced by recent executive orders 
and Supreme Court decisions. OFCCP has also adapted Title VII 
principles to ensure a proper fit in the government contracting 
context. OFCCP's specific choices in this regard and how they compare 
to the EEOC's stated views are explained more fully in the section-by-
section discussion and a section at the end of this preamble. OFCCP has 
also made some revisions to align this rule even more closely with 
Title VII. But even assuming any variation with the EEOC as to the 
exemption, this rule does not create a ``Hobson's choice'' for 
government contractors. The exemption, to describe it most broadly, is 
an optional accommodation for religious organizations, not a 
requirement mandating compliance. In the rare, hypothetical instance 
where a contractor would be entitled to the E.O. 11246 exemption but 
not the Title VII exemption, the contractor would not face conflicting 
liability regardless of its choice: Rather, it would face potential 
liability under one enforcement scheme rather than two. OFCCP 
acknowledges that it is often helpful to regulated parties for 
regulators to try to harmonize their approaches when enforcing related 
legal requirements. OFCCP believes its approach here is consistent with 
Title VII and religious-accommodation principles, adapted appropriately 
to its own regulatory context and the government contracting community.
    OFCCP also is not concerned about this rule purportedly decreasing 
clarity by creating two standards for additional reasons. For one, it 
was not a concern primarily raised by commenters who may qualify for 
the E.O. 11246 religious exemption. Those commenters--the ones who 
would actually need to negotiate the purportedly two different 
standards--were by and large supportive of the rule and did not raise 
this concern. For another, OFCCP believes that this rule, which 
incorporates many recent Supreme Court decisions and other case law and 
is in accord with recent Executive Orders and guidance from the 
Department of Justice, offers clarity as compared to less recent 
guidance from EEOC that does not incorporate these more recent 
developments.

B. The Relevance of Recent Supreme Court Cases

    Commenters both supported and opposed OFCCP's acknowledgement of 
recent Supreme Court cases granting antidiscrimination protections for 
persons bringing religious claims in a variety of contexts. These cases 
included Hobby Lobby, Trinity Lutheran, and Masterpiece Cakeshop. 
Supreme Court decisions in employment and religion cases issued after 
the proposed rule's publication are addressed elsewhere in the preamble 
as appropriate.
    Some commenters expressed support for OFCCP's interpretations of 
these Supreme Court cases and their application to the proposal in 
general. For example, a group of members of the U.S. House of 
Representatives noted approvingly that the proposed rule was consistent 
with these cases, each of which ``came with the cost'' of religious 
Americans shouldering the material, emotional, and spiritual burdens 
associated with litigating issues related to their faith. Discussing 
Masterpiece Cakeshop, a religious public policy women's organization 
commented that the Supreme Court in that case acknowledged ``the 
blatant, systematic government bias'' against the owner of Masterpiece 
Cakeshop for refusing to participate in a same-sex wedding ceremony, 
noting that the owner continues to be harassed for his faith ``to this 
day.'' The commenter stated that this and other such cases prove that 
further clarification regarding existing First Amendment protections 
are necessary. Addressing Trinity Lutheran, a religious public policy 
advocacy organization asserted that the Supreme Court in that case made 
clear that Trinity Lutheran Church's status as a church did not prevent 
it from participating on an equal playing field with secular 
organizations in seeking government grants. The commenter continued 
that OFCCP's proposed rule simply reaffirmed a principle the

[[Page 79327]]

Supreme Court had held to be consistent with the First Amendment.
    Other commenters criticized OFCCP's reliance on these Supreme Court 
cases. Many of these commenters stated that the cases were inapplicable 
because they did not involve federal contractors. For example, a 
secular humanist advocacy organization criticized the proposed rule for 
its reliance on case law unrelated to employment discrimination laws or 
the text of E.O. 11246. Many of the commenters stated that the cases 
cited, if interpreted properly, did not provide support for OFCCP's 
proposal. For example, a labor union commented that the decisions cited 
did not authorize ``the expansive view that the Proposed Rule seeks to 
support.'' A group of U.S. Senators commented: ``The Court has long 
held federally-funded employers cannot use religion to discriminate. 
Each of the cases cited in the proposed rule are consistent with that 
approach.''
    Many of the commenters who criticized OFCCP's discussion of 
Masterpiece Cakeshop pointed to this sentence from the Court's opinion: 
``While . . . religious and philosophical objections are protected, it 
is a general rule that such objections do not allow business owners and 
other actors in the economy and in society to deny protected persons 
equal access to goods and services under a neutral and generally 
applicable public accommodations law.'' 138 S. Ct. at 1727. A labor 
union asserted that Masterpiece Cakeshop was irrelevant in the 
``entirely secular'' context of federal contracting, and argued that 
the Establishment Clause dictates that federal contracting must be 
entirely secular. A transgender civil rights organization commented 
that, in the proposed rule, OFCCP did not suggest that its existing 
requirements or prior conduct reflect the sort of hostility to 
religious beliefs that the Court was concerned with in Masterpiece 
Cakeshop, and noted that, on the contrary, ``EEO requirements for 
federal contractors fall squarely within the `general rule' stated by 
the Court.'' A group of state attorneys general commented that, if 
anything, Masterpiece Cakeshop stands for the proposition that overly 
broad religious objections to civil rights laws of general 
applicability are inappropriate.
    Commenters also criticized OFCCP's discussion of Trinity Lutheran. 
Many of these commenters read the decision narrowly--as holding that 
``the state violated the First Amendment by denying a public benefit to 
an otherwise eligible recipient solely on account of its religious 
status,'' as one contractor association described it--and asserted that 
the decision was therefore inapplicable to OFCCP's proposal. Some of 
these commenters pointed to a footnote in the Court's opinion limiting 
it to ``express discrimination based on religious identity with respect 
to playground resurfacing.'' Trinity Lutheran, 137 S. Ct. at 2024 n.3. 
Many commenters stated that there are legally significant distinctions 
between government grant programs and government contracts. A labor 
union argued, regarding the Supreme Court's decision, that it would 
have been perfectly lawful for the government to deny grants to 
religious applicants who restricted access to their playgrounds on the 
basis of sexual orientation, for example. The union also asserted that 
``Federal contracting is not a generally available public benefit, but 
a reticulated system for the funding and delivery of governmental 
functions and services by private parties.'' A religious organization 
commented that Trinity Lutheran did not address whether a religious 
institution can discriminate with public funds, and stressed that the 
government's interest in prohibiting discrimination in taxpayer-funded 
jobs is ``of the highest order.'' A group of state attorneys general 
commented that the Court's decision drew a careful distinction between 
situations where a benefit is denied to an entity based solely that 
entity's religious identity and situations involving neutral and 
generally applicable laws that restrict an entity's actions. The group 
asserted that E.O. 11246's anti-discrimination provisions are directed 
toward the latter. An LGBT rights advocacy organization commented that, 
because the decision involved a religious grant applicant that had 
agreed to abide by certain nondiscrimination provisions, its holding 
was inapplicable in the federal contracting context where funding is 
awarded on a competitive basis, as well as in situations where the 
contractor has no intention of complying with governing 
nondiscrimination rules.
    Some commenters similarly criticized OFCCP's discussion of Hobby 
Lobby. Many of these commenters quoted or paraphrased the following 
paragraph from the Supreme Court's decision:

    The principal dissent raises the possibility that discrimination 
in hiring, for example on the basis of race, might be cloaked as 
religious practice to escape legal sanction. . . . Our decision 
today provides no such shield. The Government has a compelling 
interest in providing an equal opportunity to participate in the 
workforce without regard to race, and prohibitions on racial 
discrimination are precisely tailored to achieve that critical goal.

Hobby Lobby, 573 U.S. at 733. For example, a city public advocate 
argued that the Hobby Lobby decision affirmed that securing equal 
access to workplace participation is a compelling interest. A civil 
liberties and human rights legal advocacy organization commented that 
the Court in Hobby Lobby expressly declined to promulgate a rule 
authorizing for-profit corporations that willingly enter into contracts 
with the federal government to discriminate against workers ``because 
of who they are.'' A contractor organization commented that it is ``not 
at all clear'' that Hobby Lobby supports the idea that religious rights 
override any other legal rights, given that the decision concerns only 
the availability of government programs.
    Finally, some commenters criticized OFCCP's discussion of Hosanna-
Tabor. Many of these commenters pointed out that this case applied the 
(constitutionally grounded) ministerial exception developed by courts 
and not the (statutory) Title VII religious exemption enacted by 
Congress. Some commenters expressed doubt that the ministerial 
exception was applicable to federal contractors. For example, a 
transgender legal professional organization commented that, though the 
ministerial exception bars ministers from pursuing employment 
discrimination cases, most federal contractors are unlikely to employ 
ministers or others who ``preach or teach the faith.'' Other commenters 
expressed concern that OFCCP intended to broaden the scope of the 
religious exemption to mimic the ministerial exception and asserted 
that Hosanna-Tabor did not support such an expansion. For example, a 
labor union commented that the decision could not be read to extend the 
ministerial exception to lay people employed by religious institutions, 
or to private for-profit businesses whose owners may also hold 
religious beliefs.
    OFCCP believes the critical comments here are misplaced because 
OFCCP did not acknowledge these Supreme Court cases for the 
propositions that commenters said the agency did. OFCCP acknowledged in 
the NPRM that these Supreme Court cases did not specifically address 
government contracting. And indeed, with the exception of Hosanna-
Tabor, they did not specifically address employment law, Title VII, or 
E.O. 11246. Rather, OFCCP noted the recent Supreme Court cases for the 
general and commonsense propositions that the government must

[[Page 79328]]

be careful when its actions may infringe private persons' religious 
beliefs and that it certainly cannot target religious persons for 
disfavor. These principles are not new, but these recent cases show 
that those principles remain vital. That is especially important when 
government at times has been callous in its treatment of religious 
persons.\3\ Those general themes of caution, permissible accommodation, 
and equality for religious persons have informed the policy approach in 
this rule. Where specific holdings or language in these Supreme Court 
decisions--and additional Supreme Court decisions issued since--suggest 
answers to specific aspects of this rule, they are noted in the 
section-by-section analysis. Comments on those more specific issues are 
addressed there as well.
---------------------------------------------------------------------------

    \3\ See, e.g., Nat'l Inst. of Family & Life Advocates v. 
Becerra, 138 S. Ct. 2361, 2368 (2018); Masterpiece Cakeshop, 138 S. 
Ct. at 1729-30; Holt v. Hobbs, 574 U.S. 352, 359 (2015).
---------------------------------------------------------------------------

C. Clarity and Need for the Rule

    The NPRM noted that prior to its publication, some religious 
organizations provided feedback to OFCCP that they were reluctant to 
participate as federal contractors because of uncertainty regarding the 
scope of the religious exemption contained in section 204(c) of E.O. 
11246 and codified in OFCCP's regulations. The NPRM also noted that 
while ``only a subset of contractors and would-be contractors may wish 
to seek this exemption, the Supreme Court, Congress, and the President 
have each affirmed the importance of protecting religious liberty for 
those organizations who wish to exercise it.'' 84 FR at 41679. The NPRM 
also noted throughout OFCCP's desire to provide clarity in this area of 
regulation.
    OFCCP received numerous comments addressing the need for the 
proposed rule. Some commenters stated that the proposal was necessary 
to ensure that religious entities could contract with the federal 
government without compromising their religious identities or missions. 
Many of these commenters noted the important services provided by 
religious organizations. For example, a religious school association 
encouraged the federal government to protect religious staffing ``in 
all forms of federal funding,'' asserting that doing so would enable 
religious organizations to expand the critical services they provide. A 
religious liberties legal organization likewise commented that 
religious organizations are often uniquely equipped to respond to the 
needs of the communities they serve and predicted that the proposal 
would allow religious contractors to better ``order[ ] their affairs.'' 
A religious convention commission approved of the rule on the basis 
that the government should not be in the business of judging theology 
or privileging certain religious beliefs over others.
    A few commenters expressed support for the proposal specifically 
because they believed it would exempt religious organizations from the 
prohibitions on discrimination based on sexual orientation and gender 
identity that were added when E.O. 11246 was amended by Executive Order 
13672 (E.O. 13672). 79 FR 42971 (July 23, 2014). For example, a faith-
based advocacy organization praised OFCCP for ``the important positive 
precedent that will be set by the proposed strong protection of the 
religious staffing freedom in the context of the requirement of no 
sexual-orientation or gender-identity employment discrimination in 
federal contracting.'' An evangelical chaplains' advocacy organization 
commented that ``E.O. 13672 . . . prohibited military chaplains from 
selecting religious support contractors who did not affirm sexual 
orientation, same-sex marriage and gender identity'' in violation of 
these chaplains' free exercise rights.
    Some commenters agreed with OFCCP's observation that religious 
organizations have been reluctant to provide the government with goods 
or services as federal contractors because of the lack of clarity or 
perceived narrowness of the E.O. 11246 religious exemption. One 
individual commenter who identified himself as a legal adviser to 
federal contractors noted that imposing ``pass through'' contracting 
obligations on subcontractors can be challenging, as religious 
subcontractors often fear that complying with federal anti-
discrimination laws will require them to compromise their religious 
integrity. Two other commenters offered examples or evidence of 
religious organizations' reluctance to participate in other contexts, 
such as federal grants. A religious medical organization cited a survey 
suggesting that many individuals working in faith-based organizations 
(FBOs) overseas feel that the government is not inclined to work with 
FBOs, and called for outreach programs to correct this perception.
    A religious legal organization referenced an audit of the 
Department of Justice's Office of Justice Programs (OJP) which revealed 
that, though religious organizations were interested in participating 
in many programs, ``the percentage of OJP funds distributed to 
religious organizations to help the public through these programs was 
abysmally small--0.0025%.'' The organization cited the concern of 
religious organizations that their right to hire members of their faith 
would be eroded as one of the reasons for this discrepancy.
    Many commenters expressed skepticism that religious organizations 
have been reluctant to participate as federal contractors because of 
the lack of clarity or perceived narrowness of the religious exemption. 
Most of these commenters stated that OFCCP had provided no evidence to 
support its claim. For example, a legal think tank commented that the 
proposal was ``a regulation in search of a problem,'' and criticized 
OFCCP for failing to provide data regarding the number of religious 
organizations reluctant to enter into federal contracts, the number of 
contractors that have invoked the Section 204(c) exemption in the past, 
and the number of contractors expected to avail themselves of the 
``expanded exemption'' in the proposed rule. A labor union commented: 
``[T]here is no evidence that the current, settled interpretation of 
the E.O. 11246 religious exemption has deterred organizations from 
submitting competitive bids for federal contracts or prevented them 
from obtaining such contracts. At best, the Proposed Rule is an 
unjustified rulemaking solution in search of a problem.''
    A few commenters stated that the proposal was unnecessary given the 
applicability of Title VII case law. For example, a contractor 
association commented that the extent to which religious employers can 
condition employment on religion has been addressed by a long line of 
Title VII cases, rendering an executive rulemaking on this topic 
unnecessary. Some commenters cited evidence that federal contracts are 
being awarded to faith-based organizations. For example, a group of 
state attorneys general cited the 2016 congressional testimony of 
Oklahoma Representative Steve Russell, who explained that more than 
2,000 federal government contracts were being awarded to religious 
organizations and contractors per year. As examples of faith-based 
organizations that were awarded contracts in the previous year, the 
state attorneys general listed the following:

    Army World Service Office ($27.5 million), Mercy Hospital 
Springfield ($14.4 million), Young Women's Christian Association of 
Greater Los Angeles California ($10.2 million), City of Faith Prison 
Ministries ($5.2 million), Riverside Christian Ministries, Inc. 
($2.7 million), Jewish Child and Family

[[Page 79329]]

Services ($2.1 million), Catholic Charities, various affiliates 
(over $1 million in sum total), to name a few.\4\
---------------------------------------------------------------------------

    \4\ The commenter cited USASPENDING.GOV, https://www.usaspending.gov/#/recipient.

In addition, several commenters cited a report from a progressive 
policy institute noting that some religious organizations continue to 
be federal contractors despite their objections to a lack of an 
expanded religious exemption in E.O. 13672.
    Some commenters expressed skepticism that the proposal would 
encourage participation in federal contracting because, they asserted, 
the rule as proposed would increase rather than reduce confusion. For 
example, a contractor association commented that OFCCP's proposal would 
create more confusion than clarity for federal contractors. An atheist 
civil liberties organization echoed this concern, commenting that the 
proposal would increase confusion because, in its view, the proposed 
rule deviated from decades of Title VII law. Other commenters stated 
that the proposal would have negative effects because of increased 
uncertainty about or expansion of the exemption. These commenters 
stated that the proposal would undercut other entities' enforcement of 
nondiscrimination obligations, increase EEOC enforcement actions, 
increase contractors' noncompliance, and strain OFCCP's resources. For 
example, a group of state attorneys general commented that, given the 
prevalence of workplace discrimination, expanding E.O. 11246's 
religious organization exemption to lessen OFCCP's oversight could 
result in employers claiming the exemption in bad faith when faced with 
charges of discrimination. The state attorneys general commented that 
the proposed rule had the potential to strain OFCCP's limited resources 
due to employers requesting determinations of whether they are exempt, 
and challenging the applicability of OFCCP enforcement actions already 
underway.
    OFCCP appreciates the comments supporting its view that clarity 
regarding the exemption would be useful, and notes their accounts of 
religious organizations that are hesitant to participate as government 
contractors, as well as their evidence of a perception among faith-
based organizations that the federal government could do more to 
demonstrate that it will select the best organizations for its 
partners, whether faith-based or not. Given certain statements by these 
commenters regarding discrimination on the basis of sexual orientation 
or gender identity, OFCCP repeats here as it did many times in the NPRM 
that the religious exemption does not permit discrimination on the 
basis of other protected categories. The section-by-section analysis of 
Particular religion addresses the application of the religious 
exemption and other legal requirements to E.O. 11246's other 
protections including those pertaining to sexual orientation and gender 
identity, and the application of the Religious Freedom Restoration Act 
(RFRA) in certain situations.
    Regarding comments that the rule is unnecessary because religious 
organizations are not presently deterred from contracting with the 
government, OFCCP believes that clarifying the law for current 
contractors is a valuable goal in itself, regardless of whether more 
religious organizations would participate as federal contractors or 
subcontractors. The disputes among commenters over the proper 
interpretation of the Title VII case law suggests as well that the 
guidance provided by this rule would be valuable to the contracting 
community. And in fact, as just noted, other commenters offered 
evidence that faith-based organizations have indeed been reluctant to 
contract with the federal government because of the lack of certainty 
about the religious exemption. The fact that some faith-based 
organizations have been willing to enter into federal contracts or 
subcontracts does not mean that other faith-based organizations have 
not been reluctant to do so. Admittedly, OFCCP cannot perfectly 
ascertain how many religious organizations are government contractors, 
or would like to become such, and how those numbers compare to the 
whole of the contracting pool. But neither does OFCCP find persuasive 
commenters' assertions that faith-based organizations are already well-
represented among government contractors, when those assertions are 
based on examples showing contracting awards to them totaling only tens 
of millions, when the federal government expended $926.5 billion on 
contractual services in fiscal year 2019 \5\ and, according to one 
estimate, faith-based organizations account for hundreds of billions of 
dollars of economic activity annually in the United States.\6\ OFCCP 
disagrees that the rule will introduce confusion. OFCCP anticipates 
this rule will have no effect on the vast majority of contractors or 
the agency's regulation of them, since they do not and would not claim 
the religious exemption. As commenters noted, religious organizations 
do not appear to be a large portion of federal contractors. While this 
rule may add clarity that encourages more religious organizations to 
seek to become federal contractors and subcontractors, OFCCP does not 
believe the increase will greatly influence the composition or behavior 
of the contractor pool that it regulates. The exemption is a helpful 
accommodation for this small minority of religious organizations that 
may seek its protection. For them specifically, the rule is intended to 
bring clarity. For instance, as explained below, this rule provides a 
clear three-part test for determining whether an entity can qualify for 
the exemption. Contrary to the assertions of some commenters, and as 
described more fully below, Title VII case law offers differing tests 
on a jurisdiction-by-jurisdiction basis, and some of those tests 
provide little guidance at all. As another example, this rule provides 
a clear approach to determining when a religious employer is 
appropriately taking action on the basis of an employee's particular 
religion, another area where the case law is not uniform.
---------------------------------------------------------------------------

    \5\ See USA Spending, Spending Explorer (select Object Class, 
Fiscal Year 2019), https://www.usaspending.gov/#/explorer/object_class.
    \6\ See Brian J. Grim and Melissa E. Grim, ``The Socio-economic 
Contribution of Religion to American Society: An Empirical 
Analysis,'' Interdisciplinary Journal of Research on Religion, vol. 
12 (2016), article 3, p. 10, 25, (describing revenues of faith-based 
charities, congregations, healthcare networks, educational 
institutions, and other organizations), www.religjournal.com/pdf/ijrr12003.pdf.
---------------------------------------------------------------------------

    OFCCP also disagrees that this rule will impede the agency's 
enforcement efforts. OFCCP promulgates this rule from a position of 
familiarity with its own enforcement resources, priorities, and budget. 
For the reasons just stated above, OFCCP does not see this rule as 
significantly affecting the vast majority of its work. OFCCP also does 
not anticipate a flood of employers claiming the exemption in bad faith 
when faced with discrimination claims. That has not been the experience 
under the Title VII exemption thus far: The number of reported cases 
involving the exemption since 1964 are in the dozens, not the 
thousands. And in those cases, the employer may or may not have 
succeeded in claiming the exemption or defending against a 
discrimination claim, but in nearly all the employer did not appear to 
invoke the exemption nefariously, in bad faith. OFCCP is also 
optimistic given the federal government's experience under the RFRA. 
This law provides generous accommodation for religious claims and

[[Page 79330]]

strict boundaries for the federal government, yet neither the courts 
nor OFCCP have been inundated with claims.\7\
---------------------------------------------------------------------------

    \7\ See 42 U.S.C. 2000bb(a)(5) (``[T]he compelling interest test 
as set forth in prior Federal court rulings is a workable test for 
striking sensible balances between religious liberty and competing 
prior government interests.''); Holt, 574 U.S. at 368 (rejecting the 
argument that the only workable rule is one of no exceptions); 
Gonzales v. O Centro Esp[iacute]rita Beneficente Uni[atilde]o do 
Vegetal, 546 U.S. 418, 436 (2006) (rejecting ``slippery-slope 
argument'' that RFRA-mandated exceptions would become unworkable).
---------------------------------------------------------------------------

    OFCCP appreciates all comments received, and for the reasons stated 
believes that proceeding with a final rule clarifying the religious 
exemption is warranted. For the small minority of current and potential 
federal contractors and subcontractors interested in the exemption, 
this will help them understand its scope and requirements and may 
encourage a broader pool of organizations to compete for government 
contracts, which will inure to the government's benefit. For the vast 
majority of contractors, OFCCP does not expect this rule to affect 
their operations or OFCCP's monitoring and enforcement.
    This final rule is an Executive Order 13771 (E.O. 13771) 
deregulatory action because it is expected to reduce compliance costs 
and potentially the cost of litigation for regulated entities. Pursuant 
to the Congressional Review Act (5 U.S.C. 801 et seq.), OIRA determined 
that this rule is not a ``major rule,'' as defined by 5 U.S.C. 804(2). 
Details on the estimated costs of this rule can be found in the 
economic analysis below.

II. Section-by-Section Analysis

    The NPRM proposed five new definitions to clarify key terms used in 
OFCCP's religious exemption: Exercise of religion; Particular religion; 
Religion; Religious corporation, association, educational institution, 
or society; and Sincere. The regulatory codification of the underlying 
exemption itself--which is not at issue in this rulemaking--is found at 
41 CFR 60-1.5(a)(5). The new definitions were proposed to be placed 
with the rest of the regulations' generally applicable definitions at 
41 CFR 60-1.3. The NPRM also proposed adding a rule of construction to 
Sec.  60-1.5 to provide the maximum legally permissible protection of 
religious exercise.
    This final rule retains the same basic structure as the NPRM, with 
a few changes. First, there have been some modifications to some of the 
definitions, and one proposed definition, for Exercise of religion, is 
not included in the final rule, as explained below. Second, this final 
rule adds several illustrative examples within the definition of 
Religious corporation, association, educational institution, or society 
to better illustrate which organizations qualify for the religious 
exemption. Third, this final rule adds a severability clause.

A. Section 60-1.3 Definitions

    The definitions added to Sec.  60-1.3 are interrelated, so they are 
discussed below in a particular order. This order is different from 
that presented in the NPRM. The change in order is not substantive. The 
change is intended only to make the rule as a whole easier to 
understand.
1. Definition of Religion
    OFCCP's proposed definition of Religion provided that the term is 
not limited to religious belief but also includes all aspects of 
religious observance and practice. The proposed definition was 
identical to the first part of the definition of ``religion'' in Title 
VII: ``The term `religion' includes all aspects of religious observance 
and practice, as well as belief . . . .'' 42 U.S.C. 2000e(j). The 
proposed definition omitted the second portion of the Title VII 
definition, which refers to an employer's accommodation of an 
employee's religious observance or practice, because that would have 
been redundant with OFCCP's existing regulations. OFCCP's regulations 
at 41 CFR part 60-50, Guidelines on Discrimination Because of Religion 
or National Origin, contain robust religious protections for employees, 
including accommodation language substantially the same as that in the 
portion of the Title VII definition omitted here. Compare 42 U.S.C. 
2000e(j), with 41 CFR 60-50.3. Those provisions continue to govern 
contractors' obligations to accommodate employees' and potential 
employees' religious observance and practice.
    The proposed definition of Religion is used by other agencies. It 
is identical to the definition used by the Department of Justice in 
grant regulations implementing section 815(c) of the Justice System 
Improvement Act of 1979. See 28 CFR 42.202(m). The Small Business 
Administration has used the same definition as well in its grant 
regulations. See 13 CFR 113.2(c).
    Some commenters generally supported the proposed definition, noting 
that it is legally sound, as it tracks the Title VII definition and 
provides broad protection for religious entities. Commenters also noted 
that the definition is sensible and will aid contractors in 
understanding the exemption.
    Other commenters argued that importing the definition from Title 
VII is inappropriate because the context of Title VII is protection of 
an employee's individual religious beliefs in the workplace, not those 
of the employer. A legal professional organization raised the concern 
that this definition is overbroad as applied to the employer, 
particularly where it could allow a government-funded employer to make 
faith-based employment decisions beyond those currently allowed under 
Title VII and E.O. 11246. Commenters also objected to the omission of 
the second part of the Title VII definition, arguing that the weighing 
of the burden that an employee's request for religious accommodations 
places on an employer is an important limitation on Congress's intent 
to accommodate religion in the workplace. Commenters stated that, in 
their view, an employee's requested accommodations may impose no more 
than a de minimis burden on the employer. Commenters argued that 
OFCCP's proposed definition is broader than Congress intended in that 
it does not consider the burden the employer's assertion of the 
religious exemption would impose on employees, thus allowing religious 
employers to take adverse actions against employees based on religious 
belief no matter the hardship it causes them. Some commenters argued 
that partially importing the Title VII definition would ``muddy the 
waters'' rather than provide clarity.
    Other commenters requested clarification on the proposed definition 
of Religion. Specifically, some commenters proposed that the final rule 
clarify that ``observance and practice'' includes refraining from 
certain activities. Another commenter noted that the proposed rule did 
not explain the extent to which it might displace employees' right to 
reasonable accommodation of their religious beliefs and practices if 
such accommodation conflicts with the contractor's religion.
    For the reasons described above and in the NPRM, and considering 
the comments received, OFCCP is finalizing the proposed definition of 
Religion without modification. No change is needed to make clear that 
inaction or omission can be a form of ``observance and practice.'' See, 
e.g., Emp't Div., Dep't of Human Res. of Or. v. Smith, 494 U.S. 872, 
877 (1990) (holding the ``exercise'' of religion protected by the First 
Amendment ``involves not only belief and profession but the performance 
of (or abstention from) physical acts''); see also Espinoza, 140

[[Page 79331]]

S. Ct. at 2277 (Gorsuch, J., concurring) (``The right to be religious 
without the right to do religious things would hardly amount to a right 
at all.'').
    OFCCP disagrees with commenters who argued that the definition of 
Religion is overbroad and would permit contractors to make faith-based 
employment decisions beyond those permitted by law. The definition is 
the same as that used in other federal regulations and the same as that 
used in Title VII when read in conjunction with the rest of OFCCP's 
regulations. The definition must also be construed in harmony with 
those regulations, the requirements of which remain in force just as 
strongly as before this regulation's promulgation.
    OFCCP also disagrees that it should import the second half of Title 
VII's definition of religion into its general list of definitions in 
Sec.  60-1.3. OFCCP's regulations in part 60-50 governing protection of 
employees' religion and national origin already contain this language 
and remain in force, and employers must continue to comply with them. 
The definition of Religion added to Sec.  60-1.3 is intended to apply 
generally, to both employers and employees.
    Regarding comments about burden on employees' exercise of religion, 
OFCCP looks to the functioning of the religious exemption. E.O. 11246, 
like Title VII, requires employers to accommodate employees' religious 
practices to a prescribed extent. But the religious exemption is 
precisely that: An exemption that relieves ``religious organizations 
from Title VII's [or E.O. 11246's] prohibition against discrimination 
in employment on the basis of religion.'' Amos, 483 U.S. at 329. That 
logically includes a lesser exemption from the duty to accommodate 
religious practice. While religious organizations can accommodate 
employees' religious practices, and in many instances may find that 
desirable, under the exemption, they are not required to do so. See 
Kennedy v. St. Joseph's Ministries, Inc., 657 F.3d 189, 194 (4th Cir. 
2011).
2. Definition of Religious Corporation, Association, Educational 
Institution, or Society
    One of the primary objectives of this rulemaking is to clarify the 
conditions of eligibility for the religious exemption. Thus the NRPM 
proposed a definition of Religious corporation, association, 
educational institution, or society. This term is used in E.O. 11246 
section 204(c) and 41 CFR 60-1.5(a)(5), and it is the same term used in 
the Title VII religious exemption at 42 U.S.C. 2000e-1(a). The 
definition as proposed would apply to a corporation, association, 
educational institution, society, school, college, university, or 
institution of learning.\8\
---------------------------------------------------------------------------

    \8\ The words ``school, college, university, or institution of 
learning'' also appear in 41 CFR 60-1.5(a)(6), the exemption for 
religious educational organizations. They were included in the 
definition to make clear that the definition's listing of 
``educational institution'' includes schools, colleges, 
universities, and institutions of learning. Depending on the facts, 
an educational organization may qualify under the Sec.  60-1.5(a)(5) 
exemption, the Sec.  60-1.5(a)(6) exemption, both, or neither. The 
inclusion of educational organizations is maintained in the final 
rule.
---------------------------------------------------------------------------

    As explained in the NPRM, clarity on this topic is essential 
because federal courts of appeals have used a confusing variety of 
tests, and the tests themselves often involve unclear or 
constitutionally suspect criteria. The NPRM favored, with some 
modifications, the test used by the U.S. Court of Appeals for the Ninth 
Circuit in Spencer v. World Vision, Inc., 633 F.3d 723 (9th Cir. 2011) 
(per curiam). This was for several reasons, including because the World 
Vision test generally prevents invasive inquiries into matters of 
faith, the uncertainty and subjectivity of a multifactor balancing 
test, and the inherently difficult and constitutionally suspect 
exercise of measuring the quantum of an organization's religiosity. See 
84 FR 41681-84.
    The controlling per curiam opinion in World Vision offered a four-
pronged test for determining an entity's qualification for the 
religious exemption:
an entity is eligible for the . . . exemption, at least, if it is 
[1] organized for a religious purpose, [2] is engaged primarily in 
carrying out that religious purpose, [3] holds itself out to the 
public as an entity for carrying out that religious purpose, and [4] 
does not engage primarily or substantially in the exchange of goods 
or services for money beyond nominal amounts.

World Vision, 633 F.3d at 724 (per curiam).
    This four-pronged test reflects the overlap of agreement between 
the two judges in the majority, Judges O'Scannlain and Kleinfeld, who 
also each wrote separate concurrences that laid out their own preferred 
tests. Both judges agreed on the first two prongs, that the entity be 
organized for a religious purpose\9\ and hold itself out to the public 
as carrying out that religious purpose. The third and fourth prongs 
reflect Judge Kleinfeld's view. See id. at 748 (Kleinfeld, J., 
concurring). Regarding the third prong, Judge O'Scannlain would have 
employed a broader formulation, requiring that the employer engage ``in 
activity consistent with, and in furtherance of, those [founding] 
religious purposes.'' Id. at 734 (O'Scannlain, J., concurring). As to 
the fourth prong, Judge Kleinfeld restricted the exemption to 
organizations that charge little or nothing for their goods or 
services, regardless of their formal incorporation as a nonprofit 
organization. See id. at 745-47 (Kleinfeld, J., concurring). Judge 
O'Scannlain would have broadened the fourth prong (in most instances) 
by requiring nonprofit status, including nonprofit organizations that 
charge market rates for their goods or services. See id. at 734 
(O'Scannlain, J., concurring).
---------------------------------------------------------------------------

    \9\ To be precise, Judge O'Scannlain's formulation was that the 
entity be ``organized for a self-identified religious purpose (as 
evidenced by Articles of Incorporation or similar foundational 
documents).'' World Vision, 633 F.3d at 734 (O'Scannlain, J., 
concurring). Judge Kleinfeld noted that some people organize in 
religious bodies ``with no corporate apparatus'' and expressed 
concerns about the exemption being defeated by an ``[a]bsence of 
corporate papers.'' Id. at 745 (Kleinfeld, J., concurring). Judge 
Kleinfeld wrote that this ``narrowness problem may be repairable by 
a tweak in the test,'' id., which may be why the per curiam opinion 
does not include Judge O'Scannlain's parenthetical referring to 
Articles of Incorporation. The difference is slight--a ``tweak.'' 
OFCCP's approach to this first factor, including the necessary 
evidence to satisfy it, is discussed below in this preamble.
---------------------------------------------------------------------------

    The NPRM proposed to follow a modified World Vision test. The NPRM 
proposed adopting the first two prongs of the per curiam opinion. The 
NPRM favored Judge O'Scannlain's formulation of the second prong given 
the significant constitutional difficulties that accompany determining 
whether an organization is ``primarily'' religious. The NPRM also 
proposed to revise Judge O'Scannlain's phraseology, that the entity be 
engaged ``in activity'' consistent with those religious purposes, with 
the requirement that the entity be engaged ``in exercise of religion'' 
consistent with a religious purpose. No material change was intended by 
this adjustment; it was meant to capture in succinct regulatory text 
Judge O'Scannlain's lengthy discussion that the kind of activity 
contemplated under this prong is religious exercise. See 84 FR at 
41683; see also World Vision, 633 F.3d at 737-38 (O'Scannlain, J., 
concurring). Finally, the NPRM proposed not to adopt the fourth prong 
of the test, on grounds that a no-charging rule would exclude many bona 
fide religious organizations, especially in the government contracting 
context, and that an absolute bar on for-profit organizations was 
tenuous given other court decisions and the Supreme Court's more recent 
decision in Hobby Lobby. See 84 FR at

[[Page 79332]]

41684. The proposed rule could also be viewed as essentially following 
Judge O'Scannlain's concurrence save for his requirement that the 
entity be nonprofit to qualify for the exemption.
    In response to comments and a subsequent reevaluation of World 
Vision and other case law, OFCCP is revising the proposed regulatory 
text in this final rule. The final rule's test can be viewed as 
generally adopting Judge O'Scannlain's concurrence in World Vision, 
including by adopting a fourth prong. Satisfaction of this test will be 
sufficient to qualify for the exemption, and OFCCP believes that this 
is the means by which most organizations interested in the exemption 
will qualify. However, OFCCP acknowledges that in certain rare 
circumstances, an organization might not satisfy the non-profit prong 
of the World Vision test yet still present strong evidence that it 
possesses a substantial religious purpose. Thus the regulatory text 
includes an alternative means of satisfying the fourth prong: When an 
organization does not operate on a not-for-profit basis, it must 
present ``other strong evidence that it possesses a substantial 
religious purpose.'' The final rule also adds several examples to 
illustrate how the test will be applied. The final rule also adds a 
clarifying provision regarding the meaning of ``consistent with and in 
furtherance of'' a religious purpose, a phrase used in one of the 
test's prongs. The Department does not anticipate many for-profit 
organizations claiming the exemption, and as explained through the 
examples and their accompanying discussion, it may be quite difficult 
for such organizations to do so.
    This section of the preamble addresses this topic as well as other 
comments regarding OFCCP's proposed definition of Religious 
corporation, association, educational institution, or society. OFCCP 
believes its definition is reasonable in light of Title VII and Supreme 
Court case law and that it will contribute to one of OFCCP's primary 
goals in this rulemaking, which is to increase economy and efficiency 
in government contracting by providing for a broader pool of government 
contractors and subcontractors. Issues specific to the EEOC's view on 
this matter are also discussed below and later in a separate part of 
this preamble.
a. The Selection of World Vision as the Basis for the Religious 
Organization Test
    OFCCP received numerous public comments on its proposed definition, 
including comments on OFCCP's discussion of the shortcomings in some 
Title VII case law. Some commenters agreed that OFCCP should reject 
non-World Vision tests based on these shortcomings. For example, a 
religious legal organization commented that the proposed test 
``eliminates the subjectivity inherent in the LeBoon tests. It further 
eliminates the Establishment Clause violation present when a court 
determines whether an organization is `religious enough,' and it also 
prevents inter-religion discrimination.''
    Some commenters who supported OFCCP's proposed definition commented 
that it provided important clarification that would be helpful to 
religious organizations in meeting their missions. For example, a 
religious school association commented that the proposal is especially 
important considering that local control and leadership are central to 
many of its participating schools' beliefs. A religious charities 
organization commented that the proposed definition would help it 
advance its mission of providing essential services to people in need--
a mission rooted in its religious convictions.
    Other commenters disagreed with OFCCP's characterization of the 
existing religious employer tests in Title VII case law. For example, a 
legal professional organization noted that courts have generally agreed 
that the following factors are relevant in deciding whether an 
organization qualifies for the religious exemption: (1) The purpose or 
mission of the organization; (2) the ownership, affiliation, or source 
of financial support of the organization; (3) requirements placed upon 
staff and members of the organization; and (4) the extent of religious 
practices in or the religious nature of products and services offered 
by the organization.
    Other commenters opposed the proposed definition because they 
viewed it as too broad and unsupported by Title VII case law. For 
example, an organization that advocates separation of church and state 
asserted that the definition in the proposed rule has not been proposed 
or used by any federal court and represents an attempt by OFCCP to 
vastly expand the scope of the existing narrow exemption. A labor 
organization likewise commented that, in its view, the definition in 
the proposed rule is contrary to law and does not reflect the Title VII 
definition.
    Some commenters objected generally to OFCCP's selection or 
modification of the World Vision test. For example, one contractor 
association commented that the proposed rule removes critical limits on 
the standard set forth by Judge O'Scannlain. Another contractor 
association emphasized that World Vision involved the removal of two 
employees by a religious organization based on the employees' failure 
to adhere to the organization's religious views. Therefore, according 
to the association, the World Vision test should not apply to for-
profit organizations holding themselves out as religiously motivated. A 
group of U.S. Senators criticized the proposal not only for adopting 
the test set forth in the concurrence, but also for modifying part of 
that test.
    A legal think tank asserted that OFCCP appeared to have created its 
own test, designed to qualify more types of contractors for the 
exemption. This commenter went on to say that the ``exceedingly more 
expansive criteria'' proposed by OFCCP are untethered to Title VII case 
law and not in line with the ``measured'' exemption required by the 
Establishment Clause, quoting Cutter v. Wilkinson, 544 U.S. 709, 722 
(2005) (``Our decisions indicate that an accommodation [of religious 
observances] must be measured so that it does not override other 
significant interests.'').
    As explained in the NPRM, OFCCP believes that a LeBoon-type test 
invites subjectivity and uncertainty. See LeBoon v. Lancaster Jewish 
Cmty. Ctr. Ass'n, 503 F.3d 217 (3d Cir. 2007). That is problematic in 
any circumstance, but especially so in the context of government 
contracting, where parties' obligations should be as clear as possible. 
OFCCP also declines to attempt to write a definition that purports to 
synthesize all the Title VII case law on this subject. OFCCP is 
doubtful that such a task could be done, especially given Judge 
O'Scannlain's observation (with which Judge Kleinfeld agreed) that 
several factors used by other courts are constitutionally suspect, 
including, contrary to the commenter's suggestion above, an assessment 
of the religious nature of an organization's products and services. See 
World Vision, 633 F.3d at 730-32 (O'Scannlain, J., concurring); id. at 
741 (Kleinfeld, J., concurring). OFCCP's approach in the final rule, 
like World Vision, instead requires consideration of a discrete set of 
factors that can be reliably ascertained in each case.
    OFCCP acknowledges that the definition it is promulgating here 
modifies the World Vision test in some respects, or alternatively can 
be viewed as following Judge O'Scannlain's concurrence with one 
addition. OFCCP describes those modifications in more detail below 
along with its reasons for making them, including the need to provide 
clarity to contractors and enforcement staff. OFCCP disputes the

[[Page 79333]]

relevance of commenters' assertions that these modifications are being 
made for the purpose of qualifying more organizations for the 
exemption. OFCCP acknowledges that the modifications may allow 
marginally more organizations to qualify for the exemption and that the 
final rule is intended to increase the pool of federal contractors. 
But, as described herein, OFCCP believes the test adopted by this final 
rule is appropriately measured and serves the purpose of qualifying 
only genuinely religious organizations for the exemption.
b. OFCCP's Application of the Definition Generally
    The NPRM proposed how OFCCP would apply the factors in its proposed 
test for religious organizations. The NPRM stated ``that it would be 
inappropriate and constitutionally suspect for OFCCP to contradict a 
claim, found to be sincere, that a particular activity or purpose has 
religious meaning''; that ``all the factors . . . are determined with 
reference to the contractor's own sincerely held view of its religious 
purposes and the religious meaning (or not) of its practices''; and 
that the proposed three-factor test would be exclusive ``stand-alone 
components and not factors guiding an ultimate inquiry into whether an 
organizations is `primarily religious' or secular as a whole.'' 84 FR 
at 41682-83.
    The NPRM proposed this approach for several reasons. The NPRM 
relied on World Vision's concerns about courts' substituting their own 
judgment for what has religious meaning when the question is disputed: 
``The very act of making that determination . . . runs counter to the 
`core of the constitutional guarantee against religious establishment.' 
'' World Vision, 633 F.3d at 731 (O'Scannlain, J., concurring) (quoting 
New York v. Cathedral Acad., 434 U.S. 125, 133 (1977)). ``[I]nquiry 
into . . . religious views . . . is not only unnecessary but also 
offensive. It is well established . . . that courts should refrain from 
trolling through a person's or institution's religious beliefs.'' Id. 
(alterations in original) (quoting Mitchell v. Helms, 530 U.S. 793, 828 
(2000) (plurality opinion) (internal quotation marks omitted)). 
Further, such inquiries could lead to discrimination among religions. 
See id. at 732 & n.8. The NPRM also drew on Supreme Court and Title VII 
case law showing the constitutional and practical difficulties of 
determining whether a particular religious belief is ``central'' to 
one's faith or whether an organization is ``primarily'' religious. See 
84 FR at 41682-83.
    Commenters expressed a variety of views on the NPRM's proposed 
approach. Some were supportive. For instance, a religious legal 
organization commented that Judge O'Scannlain's test requires little 
judicial ```trolling' through'' an organization's religious beliefs, 
because it is based exclusively on information the organization makes 
public. Relatedly, the same commenter observed that OFCCP staff can 
easily and consistently apply the test, with positive implications for 
the rule of law. Other commenters objected generally to OFCCP's 
description of how it would determine whether a contractor had met the 
test. For example, a civil liberties organization expressed concern 
that OFCCP would not enforce baseline evidentiary standards in 
determining whether an entity meets the test's factors. A contractor 
association commented that the modified World Vision test ``is unclear 
on its face and problematic in application.'' A transgender civil 
rights organization commented that the test relies on ill-defined 
criteria that must be measured from the perspective of the employer.
    Many of the commenters who opposed the proposed definition 
expressed concern that it would have negative consequences. For 
example, a legal professional association asserted that the proposal 
would allow even nominally religious entities to discriminate on the 
basis of religion in hiring, potentially exposing them to legal 
liability under federal and state law despite their ability to retain 
their status as federal contractors. A group of state attorneys general 
stated that OFCCP's proposed test represents a sharp departure from 
precedent and thus would be difficult for OFCCP staff and adjudicators 
to apply. The attorneys general also commented that the test would 
likely cause non-compliance by increasing legal uncertainty about which 
organizations qualify.
    Other commenters requested clarity. Regarding the NPRM's statement 
that the three factors would be standalone provisions rather than 
factors guiding an ultimate ``primarily religious'' inquiry, a 
contractor association commented that, in its view, the statement was 
unclear and did not lend credence to OFCCP's assertion that the test 
would be easy to apply or likely to be consistent in application. The 
commenter asked for clarification as to how OFCCP would apply the 
factors of the test as standalone factors, rather than as factors 
leading to the ultimate determination whether the contractor is 
primarily religious or secular. The commenter sought explanation from 
OFCCP as to how it could easily conduct the required analysis when even 
the courts struggle to do so. The commenter requested more specific 
examples of how the proposed test will apply and asked that the 
contractor community be consulted before a test is adopted.
    OFCCP appreciates these comments and has re-reviewed World Vision 
and other relevant case law in light of them. World Vision and its 
antecedent cases in the Ninth Circuit, as well as LeBoon in the Third 
Circuit, begin from the premise that the religious exemption should 
cover only organizations that are, in fact, primarily religious. But 
courts have labored over how to operationalize that requirement into a 
set of factors that can be applied neutrally, objectively, and with 
minimal constitutional entanglement. See World Vision, 633 F.3d at 729 
(O'Scannlain, J., concurring) (``Though our precedent provides us with 
the fundamental question--whether the general picture of World Vision 
is primarily religious--we must assess the manner in which we are to 
answer that question in the case at hand.''); LeBoon, 503 F.3d at 226. 
That does not mean that courts have dispensed with an organization's 
need to present evidence in order to claim the exemption. Rather, it 
means that the evidence required must be of a kind that courts are 
competent to evaluate and that avoids entanglement. See World Vision, 
633 F.3d at 730-33 (O'Scannlain, J., concurring); cf. NLRB v. Catholic 
Bishop of Chi., 440 U.S. 490, 502 & n.10 (1979); id. at 507-08 
(appendix). Indeed, one of the purposes of Congress's expansion of the 
Title VII religious exemption to cover all of an employer's activities, 
rather than simply its religious activities, was to avoid difficult 
line-drawing between religious and secular activities and the 
interference with religious organizations that could result. See Amos, 
483 U.S. at 336. In OFCCP's view, World Vision generally, and Judge 
O'Scannlain's concurrence in particular, has done the best job of 
formulating a test that meets the competing and delicately balanced 
goals of giving the exemption only its proper reach while employing 
useable and constitutionally proper inquiries.
    With that in mind, OFCCP clarifies here its general approach to 
applying the exemption, addresses the particular evidence needed for 
each factor, and adds to the regulatory text examples with accompanying 
explanation to further illustrate its approach. First, OFCCP 
acknowledges the need to clarify and revise its statement that the 
factors are ``stand-alone components and not factors guiding an 
ultimate inquiry'' in order to make clear the agency's intent. 84 FR at 
41683. OFCCP agrees with

[[Page 79334]]

commenters that the aim of any test in this context is to determine 
whether the organization qualifies as a religious organization, and 
that any components are intended to guide or define that ultimate 
inquiry. The NPRM's statement was intended to mean that OFCCP would 
apply the proposed three factors as the exclusive elements for 
ascertaining whether an organization qualifies for the religious 
exemption, rather than as mere considerations to be weighed along with 
other facts and circumstances.
    OFCCP affirms that approach here as the predominant path by which 
organizations are anticipated to qualify for the exemption. This 
approach is consistent with World Vision. The per curiam opinion and 
both concurrences provided slightly different factors, but in each 
instance the factors were presented as sufficient to determine an 
organization's entitlement to the exemption. See World Vision, 633 F.3d 
at 724 (per curiam) (holding ``an entity is eligible for the . . . 
exemption, at least, if it'' meets four factors (emphasis added)); id. 
at 734 (O'Scannlain, J., concurring) (holding ``a nonprofit entity 
qualifies for the . . . exemption if it establishes that it'' satisfies 
three factors (footnote omitted)); id. at 748 (Kleinfeld, J., 
concurring) (``To determine whether an entity is a `religious 
corporation, association, or society,' determine whether it [satisfies 
the four factors].'').
    Second, the World Vision-derived test promulgated here is not a 
subjective one. OFCCP shares commenters' concern about contractors 
attempting to claim the exemption with little evidence other than their 
own testimony that theirs is a religious organization. (Though OFCCP is 
also skeptical that many contractors would attempt to do so. As noted 
above, bad-faith claims to the Title VII exemption have been rare.) The 
World Vision factors have been selected because they provide objective 
criteria for determining an organization's religious status without the 
need for intrusive religious inquiries. See id. at 733 (O'Scannlain, 
J., concurring) (holding where religious activities or purposes are 
``hotly contested, . . . we should stay our hand and rely on 
considerations that do not require us to engage in constitutionally 
precarious inquiries''). The World Vision factors are similar to a test 
used in the National Labor Relations Act context, which similarly 
``avoids . . . constitutional infirmities'' while providing ``some 
assurance that the institutions availing themselves of the Catholic 
Bishop exemption are bona fide religious institutions.'' Univ. of Great 
Falls v. NLRB, 278 F.3d 1335, 1344 (D.C. Cir. 2002); see also Duquesne 
Univ. of the Holy Spirit v. NLRB, 947 F.3d 824, 831 (D.C. Cir. 2020).
    It is true that in applying the World Vision factors, OFCCP will 
not substitute its own judgment for a contractor's view--found to be 
sincere--that a particular activity, purpose, or belief has religious 
meaning. For instance, OFCCP would not contradict a drug-rehabilitation 
center's view, found to be sincere, that its work is a religious 
healing ministry by stating that its work is merely secular healthcare 
delivery. See Amos, 483 U.S. at 344 (Brennan, J., concurring) (finding 
religious organizations ``often regard the provision of [community] 
services as a means of fulfilling religious duty''); cf. World Vision, 
633 F.3d at 745 (Kleinfeld, J., concurring) (``Religious missionaries 
and Peace Corps volunteers both perform humanitarian work, but only the 
latter is secular.''). Any other course would risk severe 
constitutional difficulties. ``The prospect of church and state 
litigating in court about what does or does not have religious meaning 
touches the very core of the constitutional guarantee against religious 
establishment . . . .'' New York v. Cathedral Acad., 434 U.S. 125, 133 
(1977). But a contractor must prove its sincerity, which is a question 
of fact to be proved or disproved in the same manner as any other 
question of fact. And questions about religious characterization apply 
to only some aspects of the test. For instance, whether an organization 
operates on a nonprofit basis is a factual determination to which 
religious characterizations have little if any relevance. Similarly, as 
clarified in this final rule, an organization's holding itself out as 
religious requires an objective evidentiary showing. Finally, OFCCP 
does not defer to any contractor's assessment that it is entitled to 
the exemption itself. Whether an organization is a religious 
corporation, association, educational institution, or society under 
E.O. 11246 is a legal determination based on whether the organization 
satisfies the relevant factors.
    OFCCP next addresses specific issues related to each factor, 
including the evidence necessary to satisfy each factor.
c. The First Factor: The Organization's Religious Purpose
    As stated in the NPRM, to qualify for the religious exemption, a 
contractor must be organized for a religious purpose, meaning that it 
was conceived with a self-identified religious purpose. This need not 
be the contractor's only purpose. Cf. Universidad Cent. de Bayamon v. 
NLRB, 793 F.2d 383, 401 (1st Cir. 1985) (finding no NLRB jurisdiction 
when, among other things, an educational institution's mission had 
``admittedly religious functions but whose predominant higher education 
mission is to provide . . . students with a secular education''). A 
religious purpose can be shown by articles of incorporation or other 
founding documents, but that is not the only type of evidence that can 
be used. See World Vision, 633 F.3d at 736 (O'Scannlain, J., 
concurring); id. at 745 (Kleinfeld, J., concurring) (noting that some 
religious entities have ``no corporate apparatus''). And finally, ``the 
decision whether an organization is `religious' for purposes of the 
exemption cannot be based on its conformity to some preconceived notion 
of what a religious organization should do, but must be measured with 
reference to the particular religion identified by the organization.'' 
Id. at 735-36 (O'Scannlain, J., concurring) (quoting LeBoon, 503 F.3d 
at 226-27).
    Some commenters objected that this factor, as described in the NPRM 
and summarized above, was too relaxed or that OFCCP was proposing to 
accept insufficient evidence. Many of these commenters stated that the 
proposal was inconsistent with Judge O'Scannlain's requirement of 
demonstrating religious purpose through ``Articles of Incorporation or 
similar foundational documents.'' Id. at 734. For example, a labor 
union asserted that OFCCP's implementation of this factor would be 
``more lax than Judge O'Scannlain's concurrence.'' A contractor 
association stated that the test was vague and overly simple. An 
individual commenter requested more guidance as to what types of 
evidence OFCCP would accept to prove a contractor's organization for a 
religious purpose. An organization that advocates separation of church 
and state commented that an organization that fails to document a 
religious purpose in any of its foundational documents was likely not 
organized for a religious purpose.
    OFCCP appreciates these comments and is revising its approach in 
response. OFCCP agrees that additional clarity is needed here and that 
this factor should require documentary evidence of an organization's 
religious purpose in its foundational documents. Judge O'Scannlain's 
concurrence examined World Vision's Articles of Incorporation, bylaws, 
core values, and mission statement. See id. at 736. An organization may 
have other foundational documents, such as a statement of faith, 
company code of conduct, business policies, or other

[[Page 79335]]

governance documents demonstrating a religious purpose. No one 
particular document is necessary. For instance, some federal 
contractors may be unincorporated proprietorships or partnerships and 
thus not have formal corporate-formation documents. But the 
organization must be able to show a religious purpose in documents that 
are central to the organization's identity and purpose. OFCCP believes 
this requirement for documentary evidence will reduce uncertainty, 
provide objective means for the agency to confirm an organization's 
satisfaction of this factor of the test, and help contractors better 
understand the kind of showing they will need to make to satisfy this 
factor.
    OFCCP emphasizes that it will not challenge a sincere claim 
characterizing a document's statements as religious in the contractor's 
view. See id. at 735-36. But OFCCP will rarely be able to find a claim 
of religious purpose to be sincere where the documents themselves are 
no different from standard corporate documents or where an organization 
adds a religious purpose to its documents after it becomes aware of 
potential discrimination liability or government scrutiny, including 
through an OFCCP compliance review. Sincerity is a factual 
determination, so each case where sincerity is at issue will turn on 
its own particular circumstances.\10\
---------------------------------------------------------------------------

    \10\ As noted in the proposed rule, see 84 FR at 41685, 
sincerity is often not at issue.
---------------------------------------------------------------------------

d. The Second Factor: Engages in Activity Consistent With, and in 
Furtherance of, Its Religious Purpose
    Second, the contractor must engage in activity consistent with, and 
in furtherance of, its religious purpose. Here too, ``religious 
purpose'' means religious as ``measured with reference to the 
particular religion identified by the contractor.'' Id. This factor is 
adopted from Judge O'Scannlain's World Vision concurrence rather than 
the per curiam opinion. Cf. id. at 734. The regulatory text of the 
final rule has been slightly revised from the proposed language to more 
closely reflect Judge O'Scannlain's formulation. This factor is now the 
second factor in the test rather than the third. No material change is 
intended. This factor also now states that the organization must 
exercise religion consistent with, and in furtherance of, ``its'' 
religious purpose, rather than ``a'' religious purpose. OFCCP does not 
view this change as significant, since a religious organization is 
quite unlikely to further a religious purpose other than its own.
    As explained in the NPRM, OFCCP proposed not to follow the World 
Vision per curiam opinion's formulation of this factor for both 
practical and legal reasons. The per curiam opinion would require a 
contractor to be ``engaged primarily in carrying out [its] religious 
purpose.'' Id. at 724 (per curiam) (emphasis added). But such a 
formulation would invite OFCCP to balance things that cannot be 
balanced consistently and leave contractors without the kind of clarity 
that ought to prevail in contractual relations. Further, the Supreme 
Court and lower courts have cautioned against drawing lines between 
religious activity or belief that is ``central'' or ``primary'' and 
religious activity or belief that is not. See 84 FR at 41682, 41683.
    Also as explained in the NPRM, OFCCP proposed to use the phrase 
``engages in exercise of religion'' rather than Judge O'Scannlain's 
phrase, ``engages in activity.'' See World Vision, 633 F.3d at 734 
(O'Scannlain, J., concurring) (``engaged in activity consistent with, 
and in furtherance of, those religious purposes''). No material change 
was intended by this adjustment; it was meant to capture in succinct 
regulatory text Judge O'Scannlain's lengthy discussion that the kind of 
activity contemplated under this prong is religious exercise. See 84 FR 
at 41683; see also World Vision, 633 F.3d at 737-38.
    OFCCP received many comments on this aspect of the NPRM. A 
religious organization asked OFCCP to clarify that ``consistent'' as 
used in the third factor does not mean that OFCCP will be assessing 
``the coherence or consistency of the contractor's religious beliefs, 
see Thomas v. Review Bd., 450 U.S. 707 (1981) (forbidding such an 
inquiry), but only [making] a determination that the contractor is 
engaged in activity reflecting a religious, as opposed to a secular, 
purpose.'' OFCCP confirms that its intent in including this element is 
to determine whether the contractor's exercise of religion is 
consistent with its religious purpose, not to test the internal 
consistency of a contractor's religious beliefs. To make this point as 
clear as possible, OFCCP has added regulatory text explaining that 
``[w]hether an organization's engagement in activity is consistent 
with, and in furtherance of, its religious purpose is determined by 
reference to the organization's own sincere understanding of its 
religious tenets.''
    As with other factors, some commenters asserted that this factor, 
as described in the NPRM and summarized above, was too relaxed or that 
OFCCP was proposing to accept insufficient evidence. Many of these 
commenters stated that the incorporation of ``exercise of religion'' as 
defined in RFRA into this factor further loosened the standard. For 
example, a group of state attorneys general asserted that incorporation 
of the RFRA standard revealed confusion on the part of OFCCP as to the 
fundamental difference between the religious organization exemption and 
RFRA. The state attorneys general stated that the religious 
organization exemption is triggered only when an organization's 
exercise of religion is so significant that the organization's overall 
identity becomes religious and criticized the proposed rule for 
focusing instead on whether an organization engages in exercises of 
religion generally. A civil liberties organization characterized the 
preamble as mistakenly stating that inquiry into the religious nature 
of entities' actions is impermissible. A labor union commented that 
this aspect of OFCCP's proposal could lead businesses to feign 
religiosity solely for the purpose of cloaking discriminatory activity.
    Some commenters also criticized the exclusion from OFCCP's proposed 
test of the requirement that a contractor be ``primarily religious,'' 
or ``engaged primarily in carrying out that religious purpose.'' Some 
of these comments stated that OFCCP did not persuasively explain why it 
was excluding this element from the definition. A contractor 
association commented that Title VII's religious organization exception 
has traditionally been limited to institutions whose ``purpose and 
character are primarily religious,'' and that OFCCP has no basis to 
depart from this principle. An anti-bigotry religious organization 
commented that OFCCP should consider all relevant circumstances in 
determining whether a contractor is indeed religious, as OFCCP proposed 
to do for Sincere (that is, taking into account all relevant facts). 
The organization commented that the Supreme Court in Hosanna-Tabor 
reviewed the employee's religious and secular functions, undermining 
OFCCP's claim that it cannot engage in a similar type of balancing.
    OFCCP disagrees with the idea that this factor, either as proposed 
or as adopted in the final rule, confuses the religious exemption with 
RFRA. An organization that exercises religion under RFRA may not 
satisfy this factor of the test, yet even if it did, that alone would 
not satisfy the other factors of the test necessary to claim the E.O. 
11246 religious exemption. Further, as will be discussed shortly, OFCCP 
has revised this prong to adhere to Judge

[[Page 79336]]

O'Scannlain's formulation, which should alleviate any confusion 
regarding RFRA.\11\
---------------------------------------------------------------------------

    \11\ Because of this change, the phrase ``exercises religion'' 
no longer appears in this prong. Thus, as explained later in this 
preamble, the definition for Exercise of religion is no longer 
needed and has been removed from the final rule.
---------------------------------------------------------------------------

    OFCCP agrees with commenters that activity consistent with the 
contractor's religious purpose must be a substantial aspect of the 
contractor's operations. Insofar as the NPRM could be read to suggest 
that a one-time or de minimis amount of religious activity would be 
sufficient, OFCCP clarifies that understanding here. The need for a 
material amount of religious activity flows from the text used in the 
regulation, that the entity ``engage in religious activity.'' To engage 
is ``[t]o employ or involve oneself; to take part in; to embark on,'' 
Black's Law Dictionary (11th ed. 2019), or to ``involve oneself or 
become occupied; participate,'' American Heritage Dictionary (5th ed. 
2020). It suggests more than occasional or half-hearted efforts. The 
case law further illustrates that there must be a significant level of 
religious activity. For instance, World Vision easily satisfied that 
requirement since activity consistent with its religious purpose was 
``essentially all World Vision appears to do.'' World Vision, 633 F.3d 
at 737-38 (O'Scannlain, J., concurring). The examples added to the 
final regulatory text also help illustrate the religious activity 
needed to qualify for the exemption.
    OFCCP disagrees with commenters to the extent they argue that an 
organization must engage solely in religious activity (and explains 
below that such an inquiry would be difficult and constitutionally 
imprudent). When an organization engages in other, secular, activities, 
that alone does not diminish its ability to satisfy this factor of the 
test. See LeBoon, 503 F.3d at 229; cf. Univ. of Great Falls, 278 F.3d 
at 1342. This is made clear by the text of the religious exemption. The 
Title VII exemption was expanded in 1972 (and that expanded language is 
used in E.O. 11246) to cover religious organizations' employees engaged 
in any of the organization's activities, rather than only employees 
engaged in the organization's religious activities. Thus the exemption 
contemplates that religious organizations will engage in activities 
that are not religious, and it makes clear that religious organizations 
do not forfeit the exemption simply because they do.
    OFCCP also disagrees with commenters who argued that the 
organization's religious activity under this factor must be shown to 
``constitute a comprehensive religious identity.'' That is simply a 
rephrasing of the ultimate inquiry underlying the World Vision test. 
This factor has a crucial role to play in that inquiry, but it should 
not be mistaken for the whole of it. One of the most useful aspects of 
the World Vision test is that it provides a step-by-step framework for 
assessing an organization's religious nature, including this factor, 
rather than leaving the inquiry an open-ended assessment in which a 
religious organization is simply known when it is seen. Cf. Jacobellis 
v. State of Ohio, 378 U.S. 184, 197 (1964) (Stewart, J., concurring).
    Regarding comments that applying Judge O'Scannlain's concurrence 
rather than a ``primarily engaged'' factor is an unjustified departure 
from Title VII jurisprudence or reflects an overly prophylactic view of 
religious inquiry, OFCCP respectfully disagrees. OFCCP's position 
requires being mindful of the distinction between the test's underlying 
inquiry and the factors used to ascertain the answer to that inquiry. 
The test's underlying inquiry is whether an organization's ``purpose 
and character are primarily religious.'' See, e.g., World Vision, 633 
F.3d at 726 (O'Scannlain, J., concurring). But World Vision 
operationalized that inquiry into four factors. Thus any constitutional 
or practical problems regarding the inquiry's ``primarily religious'' 
formulation are academic because OFCCP will be answering the inquiry by 
means of applying the factors. That is one of the reasons why OFCCP 
prefers the World Vision test to other formulations.
    When it comes to those four factors, however, the World Vision per 
curiam opinion carried forward a ``primarily'' inquiry in two of the 
factors: The organization must be ``engaged primarily in carrying out 
[its] religious purpose'' and must ``not engage primarily or 
substantially in the exchange of goods or services for money beyond 
nominal amounts.'' Id. at 724 (per curiam). Judge O'Scannlain's well-
reasoned concurrence used an alternative formulation that avoids the 
``primarily'' questions. OFCCP believes the better choice is to adopt 
the concurrence. The main problem with determining whether an 
organization is ``primarily'' engaged in its religious purpose--as 
opposed to substantially or materially or genuinely engaged in its 
religious purpose--is not that it requires a determination that the 
organization is engaged in significant religious activity, something 
that can be ascertained easily enough, but rather that it requires 
comparison between the amount of religious and secular activity at an 
organization. In essence, the organization must engage in a greater 
quantum of religious activity than secular activity, though without 
specifying whether the ratio must be 51:49, 70:30, or 99:1. However, 
any attempt to so compare religious and secular activity leads to 
additional problems: Some activities do not clearly fall on one side of 
the line or the other, and a court's or an agency's attempts to 
determine on which side of the line those activities fall can lead to 
constitutionally intrusive inquiries. See, e.g., Cathedral Acad., 434 
U.S. at 133 (observing the ``excessive state involvement in religious 
affairs'' that may result from litigation over ``what does or does not 
have religious meaning''). Moreover, even when all activities are 
properly categorized, it is unclear what weight each should have. See, 
e.g., Univ. of Great Falls, 278 F.3d at 1343 (observing that a test 
that requires ascertaining an entity's ``substantial religious 
character'' or lack thereof ``boils down to `is it sufficiently 
religious?'''). OFCCP avoids these problems by adopting Judge 
O'Scannlain's formulation of this prong.
    OFCCP agrees with commenters that some courts have nonetheless 
undertaken the task of comparing secular and religious activity when 
examining the religious exemption. See LeBoon, 503 F.3d 217; Kamehameha 
Sch., 990 F.2d 458; Boydston v. Mercy Hosp. Ardmore, Inc., No. CIV-18-
444-G, 2020 WL 1448112 (W.D. Okla. Mar. 25, 2020). OFCCP disagrees that 
it also must do so when Judge O'Scannlain's concurrence provides a 
viable alternative. That alternative is especially attractive to OFCCP 
as an enforcement agency and as a regulator of government contractors. 
In both instances a factor that offers more clarity than another gives 
better notice to contractors, better guidance to field staff, and 
crisper lines to the bargain between the two parties.
e. The Third Factor: Holding Itself Out as Religious
    Third, the contractor must hold itself out to the public as 
carrying out a religious purpose. Again here, and as explained in the 
NPRM, ``religious purpose'' ``must be measured with reference to the 
particular religion identified by the contractor.'' World Vision, 633 
F.3d at 736 (O'Scannlain, J., concurring). The NPRM proposed that a 
contractor could satisfy this requirement in a variety of ways, 
including by evidence of a religious purpose on its website, 
publications, advertisements, letterhead, or other public-facing

[[Page 79337]]

materials, or by affirming a religious purpose in response to inquiries 
from a member of the public or a government entity. See 84 FR at 41683.
    Again, some commenters stated that this factor, as described in the 
NRPM and summarized above, was too relaxed or that OFCCP was proposing 
to accept insufficient evidence. Many of these commenters criticized 
OFCCP's proposal for allowing a contractor to meet this requirement by 
declaring its religious purpose in response to an inquiry from a 
government entity such as OFCCP itself. Commenters asserted that, as a 
result, almost any employer could designate itself a religious 
organization. Commenters also stated that taxpayers, employees, and 
applicants therefore would not necessarily have notice that the 
religious exemption could be applied. Commenters stated that this 
factor would thus not serve as the ``market check'' that Judge 
O'Scannlain envisioned. World Vision, 633 F.3d at 735 (O'Scannlain, J., 
concurring) (quoting Univ. of Great Falls, 278 F.3d at 1344). A group 
of state attorneys general, for example, criticized OFCCP's proposal 
for purportedly relaxing Judge O'Scannlain's `` `market check' that 
would come from requiring an organization to hold itself out to the 
public as religious,'' which ``could come at a cost in terms of broader 
public support.'' One contractor association remarked that, under the 
proposed rule, a federal contractor could satisfy this factor simply by 
responding to an OFCCP inquiry, whereas World Vision had always 
identified itself as a Christian organization, requiring its descriptor 
statement on all its communications. Another contractor association 
commented: ``Making such a showing [for example, in response to an 
inquiry] is very easy and may or may not actually align with actual 
corporate purpose.''
    OFCCP appreciates these comments and, here too, is clarifying its 
approach in response. OFCCP agrees that a contractor could not satisfy 
this factor simply by affirming a religious purpose in response to one 
public or government inquiry, if that was all the contractor could put 
forward as evidence. More would be needed to show that the public was 
on notice of the organization's religious nature.
    How much more is a factual question that cannot be defined with 
complete specificity, but the case law provides some guideposts. World 
Vision easily satisfied this requirement: Its logo was a stylized 
cross; religious artwork and texts were displayed throughout its 
campus; its communications guidelines required references to its 
Christian identity in all external communications; and its employment 
guidelines expressly required subscription to particular Christian 
beliefs. See id. at 738-40. Very recently, a district court held that a 
Catholic hospital and its affiliates satisfied the requirement when 
they held ``themselves out to the public as sectarian through their 
display of religious symbols in their facilities and through their 
sectarian mission statement and values statements displayed on [their] 
public website.'' Boydston, 2020 WL 1448112, at *5. In the analogous 
NLRA context, a university satisfied the test when, ``in its course 
catalogue, mission statement, student bulletin, and other public 
documents, it unquestionably holds itself out to students, faculty, and 
the broader community as providing an education that, although 
primarily secular, is presented in an overtly religious, Catholic 
environment.'' Univ. of Great Falls, 278 F.3d at 1345. The university 
also filled its campus, classrooms, and offices ``with Catholic icons, 
not merely as art, but it claims as an expression of faith.'' Id.
    In short, a contractor satisfies this requirement when the 
contractor makes it reasonably clear to the public that it has a 
religious purpose. As noted in the NPRM, evidence of a religious 
purpose can come from the contractor's website, publications, 
advertisements, letterhead, or other public-facing materials, and in 
statements to members of the public. Evidence can also include 
religiously inspired logos, mottos, or the like; and religious art, 
texts, music, or other displays of religion in the workplace. 
Statements to the government in the ordinary course of business, such 
as corporate documents or tax filings, can also be probative. Such 
statements should be distinguished from statements to the government 
made in the course of an investigation or litigation in which the 
contractor's religious purpose is at issue. No one piece of evidence is 
required or, most likely, sufficient. But together the evidence must 
show that the contractor is presenting itself to the outside world as 
religious.
f. The Fourth Factor: Operating on a Not-for-Profit Basis
    OFCCP proposed not to adopt the fourth factor set out in World 
Vision: That the entity seeking exemption ``not engage primarily or 
substantially in the exchange of goods or services for money beyond 
nominal amounts.'' 633 F.3d at 724 (per curiam). The NPRM proposed this 
course for several reasons: Many religious entities may operate 
discount retail stores or otherwise engage in the marketplace; \12\ 
religiously oriented hospitals, senior-living facilities, and hospices 
may engage in substantial and frequent financial exchanges; \13\ the 
religious exemption in E.O. 11246 pertains to government contracting, 
an economic activity in which most participants are for-profit 
entities; \14\ other courts have not considered dispositive an 
organization's for-profit or nonprofit status, or the volume or amount 
of its financial transactions; Amos left open the question of whether 
for-profit organizations could qualify for the exemption; and the 
Supreme Court's more recent decision in Hobby Lobby, which held that 
for-profit organizations can exercise religion, counseled against an 
absolute prohibition on allowing for-profit organizations to qualify 
for the exemption.
---------------------------------------------------------------------------

    \12\ See Brian J. Grim and Melissa E. Grim, ``The Socio-economic 
Contribution of Religion to American Society: An Empirical 
Analysis,'' Interdisciplinary Journal of Research on Religion, vol. 
12 (2016), article 3, pp. 10, 24, https://www.religjournal.com/pdf/ijrr12003.pdf.
    \13\ See id. at 7.
    \14\ See General Service Administration, System for Award 
Management, Advanced Search--Entity (listing 410,021 active for-
profit entities and 99,781 nonprofit and/or other-not-for-profit 
entities), sam.gov/SAM/pages/public/searchRecords/advancedEMRSearch.jsf (last accessed Oct. 2, 2020).
---------------------------------------------------------------------------

    OFCCP received a wide variety of comments on this aspect of the 
NPRM. Some commenters agreed with OFCCP's reasons for declining to 
require that a contractor ``not engage primarily or substantially in 
the exchange of goods or services for money beyond nominal amounts.'' 
For example, a religious liberties organization commented that federal 
contractors typically engage in substantial exchanges of goods and 
services, and therefore religious organizations would be categorically 
denied the section 204(c) exemption if they became federal contractors. 
Other commenters opposed the exclusion of the requirement that a 
contractor ``not engage primarily or substantially in the exchange of 
goods or services for money beyond nominal amounts.'' A group of U.S. 
Senators commented that the existence of a financial motive constitutes 
strong evidence that the exercise of religion is not the objective of 
the entity. Some of these commenters stated that OFCCP did not 
persuasively explain why it was excluding this element from the 
definition.
    OFCCP declines to restrict the exemption to those religious 
entities that charge little or nothing for their services. Contra World 
Vision, 633 F.3d at 724 (per curiam); id. at 747 (Kleinfeld, J., 
concurring). First, E.O. 11246 governs federal contractors, not 
grantees. Contractors by definition charge for

[[Page 79338]]

their goods and services, even if they are nonprofits. E.O. 11246's 
religious exemption would be a virtual nullity were it restricted to 
contractors that do not charge. Second, OFCCP agrees with Judge 
O'Scannlain that nonprofit status is a sufficiently reliable proxy for 
religious identity,\15\ without the need to restrict this factor 
further to only those organizations that do not charge. Judge 
O'Scannlain explained that nonprofit status, and its restrictions on 
monetary gain, is reliable evidence that the organization has religious 
aims rather than purely pecuniary ones, see id. at 734-35 (O'Scannlain, 
J., concurring), and OFCCP agrees. Plus, the narrower formulation would 
exclude many bona fide religious organizations, like certain hospitals 
and care facilities, that engage in substantial and frequent market 
transactions, including by charging sums to beneficiaries of their 
goods and services. And while religious educational institutions have 
their own particular exemption, it would seem odd to think that their 
charging for books, tuitions, and dormitories would call into question 
their religious status. Third, one of the reasons OFCCP is promulgating 
this rule is to encourage broader participation in government 
contracting and subcontracting. Restrictions that would unduly restrict 
the exemption's availability could affect the size of the pool, to the 
detriment of the government's interests in a competitive and diverse 
field of potential contractors.
---------------------------------------------------------------------------

    \15\ In the next few paragraphs, this preamble explains further 
why and how OFCCP is limiting the exemption to nonprofit 
organizations in most circumstances.
---------------------------------------------------------------------------

    OFCCP also received many comments on its proposal to remove the 
requirement that organizations be nonprofit to qualify for the 
exemption. As mentioned above, OFCCP has substantially revised this 
aspect of the rule in response to commenters' concerns. Some commenters 
agreed with the proposal that it was not necessary for a contractor to 
``be nonprofit.'' For example, a religious civil rights organization 
commended the proposal for affirming that the owners of for-profit 
entities do not have to forfeit their religious convictions. Those 
commenters agreed with OFCCP's explanation that Hobby Lobby counsels 
against a stark distinction between nonprofit and for-profit 
corporations. For example, a religious legal organization commented: 
``[A]s the Supreme Court noted in Hobby Lobby, a for-profit corporation 
substantially engaged in an exchange of goods and services can exercise 
religion.''
    Other commenters opposed the proposal not to make nonprofit status 
a determinative factor. For example, an anti-bigotry religious 
organization emphasized that Judge O'Scannlain's concurrence in World 
Vision focused on whether the employer's purpose is non-pecuniary, 
while Judge Kleinfeld's analysis focused on whether the employer 
provided services at no cost or for a nominal fee. The organization 
criticized the proposed rule for rejecting both factors. Commenters 
asserted that OFCCP's proposal not to make nonprofit status a 
determinative factor would unacceptably broaden the exemption. A 
religious organization asserted that the proposed rule would allow for-
profit corporations to exploit faith in order to justify 
discrimination, and that the spirit of religious institutions would be 
diminished if houses of worship were placed in the same category as 
for-profit institutions.
    Some commenters stated that the proposal would allow discrimination 
by contractors that should not be entitled to the religious exemption. 
A labor organization commented that even for-profit companies, whose 
primary purpose is, by definition, to make a profit, could protect 
themselves from discrimination claims by claiming to have a religious 
purpose.
    Some commenters stated that the proposed removal of the nonprofit 
requirement was inconsistent with Title VII case law interpreting the 
same term, including Judge O'Scannlain's own test. Many of these 
commenters stated that OFCCP had not cited any Title VII cases in which 
a court had found a for-profit entity to qualify for the religious 
exemption. For example, a contractor association commented that Judge 
O'Scannlain considered non-profit status to be an ``especially 
significant'' consideration, which was consistent with the reasoning in 
numerous Title VII cases. Some commenters stated that the proposed 
removal of the nonprofit requirement was inconsistent with guidance 
from the EEOC or was a reversal of OFCCP's previous position. Many of 
these commenters stated that OFCCP gave inadequate reasons for the 
deviation. For example, a group of state attorneys general commented 
that the proposed reversal was not justified by the executive branch's 
contracting authority, which ``must be exercised within the boundaries 
of Title VII's prohibitions.'' A contractor association commented that 
omitting a legal requirement because it could be difficult to apply 
does not align with OFCCP's stated commitment to follow the rule of law 
and to apply Title VII principles.
    Some commenters specifically objected to OFCCP's reliance on Hobby 
Lobby as justifying or requiring the proposed removal of the nonprofit 
status factor. Most of these commenters stated that Hobby Lobby was 
inapplicable because it centered not on the Title VII religious 
exemption but on RFRA, specifically on that statute's definition of 
``person.'' For example, a civil liberties organization commented that 
the Supreme Court in Hobby Lobby focused its analysis on the definition 
of the word ``person'' in RFRA and offered no insight into the 
definition or scope of the phrase ``religious corporation'' in the 
religious exemption context. A gender equality advocacy organization 
commented that RFRA goes far beyond what is constitutionally required 
by subjecting any laws burdening religious exercise to strict scrutiny 
and, thus, the question of RFRA's application should not dictate a 
company's eligibility for a Title VII religious exemption.
    Some commenters also stated that Hobby Lobby has not been applied 
in subsequent Title VII religious exemption cases. These commenters 
typically cited Garcia v. Salvation Army, 918 F.3d 997 (9th Cir. 2019). 
In that case, the Ninth Circuit found that the Salvation Army satisfied 
the requirement that it ``not engage primarily or substantially in the 
exchange of goods or services for money beyond nominal amounts'' both 
because it is a nonprofit (Judge O'Scannlain's approach) and because it 
gives away or charges only nominal fees for its services (Judge 
Kleinfeld's approach). Id. at 1004.
    In addition to distinguishing Hobby Lobby on the ground that it 
addressed RFRA and not the Title VII religious exemption, commenters 
also stated that key limitations present in Hobby Lobby were not 
reflected in OFCCP's proposal. In particular, they stated, Hobby Lobby 
held that only closely held for-profit corporations could invoke RFRA, 
but OFCCP's proposal included no such limitation, and the Court in 
Hobby Lobby considered harms an exemption would impose on third 
parties, but OFCCP did not consider third-party harms the commenters 
believed the proposal would cause. Commenters also stated that Hobby 
Lobby did not address government contractors. For example, a women's 
rights advocacy organization commented that, while Hobby Lobby dealt 
with a general requirement on all non-grandfathered insurance plans, 
the proposed rule deals with businesses that willingly enter contracts 
with the federal government. According to the organization, ``[a]n 
entity does not have

[[Page 79339]]

a right to a contract that it is unwilling to perform.''
    In consideration of these comments, OFCCP is revising the 
definition of Religious corporation, association, educational 
institution, or society in the final rule. OFCCP recognizes that, as 
Judge O'Scannlain observed, nonprofit status is ``strong evidence'' 
that an organization has a nonpecuniary purpose. World Vision, 633 F.3d 
at 734-35 (O'Scannlain, J., concurring); see also Amos, 483 U.S. at 344 
(1987) (Brennan, J., concurring). Nonprofit status also allows a 
determination of religious purpose to be made objectively and without 
engaging in a more searching inquiry. With that said, OFCCP recognizes 
that, in certain rare circumstances, an organization might be for-
profit yet still be fairly considered a religious rather than secular 
organization.
    Thus the final rule adds a fourth requirement: That the contractor 
either ``(A) operates on a not-for-profit basis; or (B) presents other 
strong evidence that it possesses a substantial religious purpose.'' 
Paragraph (A) has been written in a manner that covers federal 
contractors that do not have formal tax-exempt status under 26 U.S.C. 
501(c)(3) but operate in substantial compliance with 501(c)(3)'s 
requirements. See World Vision, 633 F.3d at 745 (Kleinfeld, J., 
concurring) (noting the need for a small adjustment to the test to 
cover small groups that do not formally incorporate). Paragraph (A) 
meets the goals of certainty and clarity in contracting for what OFCCP 
believes will be the vast majority of contractors interested in the 
exemption. Paragraph (B) is a helpful contingency for situations where 
a contractor may not satisfy this prong of the test but in all fairness 
should be considered a qualifying religious organization. This 
alternative test is consistent with World Vision and the more recent 
Ninth Circuit case highlighted by commenters, Salvation Army, 918 F.3d 
997. World Vision's brief per curiam opinion stated that an 
organization is eligible for the exemption ``at least'' when it meets 
the four factors. 633 F.3d at 724 (per curiam) (emphasis added). Judge 
O'Scannlain's opinion stated that other factors may be relevant in 
other cases. See id. at 729-30 (O'Scannlain, J., concurring). In 
Salvation Army, the court applied an ``all significant religious and 
secular characteristics'' standard as well as noted that the Salvation 
Army satisfied the World Vision test. See Salvation Army, 918 F.3d at 
1003-04.
    In his World Vision concurrence, Judge O'Scannlain described 
nonprofit status as ``especially significant'' because of its 
evidentiary value. He wrote that nonprofit status ``bolsters a claim 
that [an organization's] purpose is nonpecuniary,'' ``provides strong 
evidence that its purpose is purely nonpecuniary,'' ``makes colorable a 
claim that it is not purely secular in orientation,'' and ``bolster[s] 
a `contention that an entity is not operated simply in order to 
generate revenues . . . , but that the activities themselves are 
infused with a religious purpose.' '' World Vision, 633 F.3d at 734-35 
(O'Scannlain, J., concurring) (quoting Amos, 483 U.S. at 344 (Brennan, 
J., concurring)).\16\ OFCCP agrees with these observations, which is 
why it has adopted nonprofit status as a sufficient means for 
satisfying this factor of the test.
---------------------------------------------------------------------------

    \16\ These varying statements span the range from ``not purely 
secular'' to ``purely nonpecuniary.'' OFCCP's regulatory text 
attempts to strike a balance down the middle, using the phrase 
``possesses a substantial religious purpose.''
---------------------------------------------------------------------------

    There may be rare situations, however, where an organization is 
legally constituted as a for-profit enterprise yet infused with 
religious purpose. In those situations, the organization would need to 
come forward with strong evidence that its goals are religious rather 
than pecuniary--evidence comparable in probative weight to nonprofit 
status. OFCCP has added examples within the regulatory definition of 
Religious corporation, association, educational institution, or society 
to illustrate some of these rare instances, including a contractor that 
provides chaplaincy services to the military and a kosher caterer that 
supplies meals for federal events. OFCCP doubts that an entity that is 
not closely held could ever satisfy this requirement, especially since 
such an entity would have multiple and disparate shareholders. See 
Hobby Lobby, 573 U.S. at 717 (``[T]he idea that unrelated 
shareholders--including institutional investors with their own set of 
stakeholders--would agree to run a corporation under the same religious 
beliefs seems improbable.''). OFCCP likewise doubts that an entity 
could qualify if it predominantly provides undifferentiated marketplace 
goods or services that are not associated with an expressly religious 
purpose or a charitable, educational, humanitarian, or other 
eleemosynary purpose.
    OFCCP has also modified the NPRM's definition of Religious 
corporation, association, educational institution, or society to 
reflect these considerations. Unlike the proposed rule, which stated 
only that a religious organization need not be nonprofit, the final 
rule now requires that the organization, if for-profit, present ``other 
strong evidence that it possesses a substantial religious purpose.'' 
This formulation attempts to synthesize the various statements in World 
Vision and Amos as to the quantum of religious purpose an organization 
must have, and recognizes their reasoning that nonprofit status serves 
as a valuable evidentiary proxy for religious purpose. Thus the final 
rule requires a for-profit organization to put forward strong evidence 
to demonstrate that it does indeed have a substantial religious 
commitment rather than serve solely as a vehicle to facilitate profit-
making or other secular ends. This formulation recognizes that an 
organization may have more than one purpose, but its religious one must 
be substantial. It would not be enough, for instance, that an 
organization feature a scriptural quote in marketing materials or make 
a brief reference to religious values on its ``About Us'' web page. The 
examples in the regulatory text may be instructive to readers on this 
point.
    This new regulatory text is also consistent with Hobby Lobby's 
observation that a corporation need not choose absolutely between 
financial objectives and other objectives:

    While it is certainly true that a central objective of for-
profit corporations is to make money, modern corporate law does not 
require for-profit corporations to pursue profit at the expense of 
everything else, and many do not do so. . . . If for-profit 
corporations may pursue such worthy objectives [as supporting 
charitable causes, environmental measures, or working conditions 
beyond those required by law], there is no apparent reason why they 
may not further religious objectives as well.

    Hobby Lobby Stores, 573 U.S. at 711. OFCCP believes that the 
approach promulgated here, which has been modified from that in the 
NPRM, is consistent with Title VII case law. Again, World Vision set 
out a four-factor test that, if satisfied, is sufficient for 
organizations to qualify for the exemption. But as Salvation Army and 
other cases show, there are other ways to qualify for the exemption. 
See Salvation Army, 918 F.3d 997; EEOC v. Townley Eng'g & Mfg. Co., 859 
F.2d 610 (9th Cir. 1988). In these other cases, nonprofit or for-profit 
status has been treated as an important factor, but not as dispositive. 
That is similar to this final rule's approach.
    For the same reason, OFCCP disagrees that its approach is an 
unjustified change in agency position. Until this rulemaking, OFCCP had 
not set forth the specific factors it would use to decide which 
organizations qualify for E.O. 11246's religious exemption; rather, in

[[Page 79340]]

withdrawn subregulatory guidance OFCCP stated that it would follow EEOC 
and court interpretations of Title VII and apply an all-facts-and-
circumstances test. To the extent that withdrawn statement could be 
considered the position of the agency, for the reasons stated in this 
preamble, OFCCP now believes such a test is too indeterminate and 
involves potential legal infirmities, and that a more-defined test will 
give better clarity to contractors and foster a broader pool of 
potential contractors and subcontractors. It is certainly true, as 
commenters asserted, that OFCCP's general position is to follow Title 
VII principles when interpreting E.O. 11246. For the reasons stated in 
this preamble OFCCP believes its approach is consistent with Title VII 
principles and Supreme Court case law, and better furthers the goals of 
this rulemaking. The minor differences between the EEOC's approach to 
determining which organizations can claim the exemption and OFCCP's 
definition of Religious corporation, association, educational 
institution, or society are addressed later in this preamble.
    OFCCP also disagrees with commenters who argued that Hobby Lobby is 
irrelevant to this issue. Certainly Hobby Lobby was not a Title VII 
case. But Hobby Lobby's holding that for-profit corporations qualify as 
``persons'' who can exercise religion under RFRA is hard to square with 
a rule that a for-profit entity can never be a religious organization 
eligible for E.O. 11246's religious exemption. And much of its 
reasoning has broader implications. The Supreme Court observed that 
furthering the religious freedom of corporations, whether for-profit or 
nonprofit, furthers individual religious freedom. See Hobby Lobby, 573 
U.S. at 707. The Supreme Court found no reason to distinguish between 
for-profit sole proprietorships--which had brought Free Exercise claims 
before the Supreme Court in earlier cases--and for-profit closely held 
corporations. See id. at 709-10. And as just stated, the Supreme Court 
noted that every U.S. jurisdiction permits corporations to be formed 
``for any lawful purpose or business,'' id. at 711 (internal quotation 
marks omitted), including a religious one, see id. at 710-11.
    OFCCP is required to give some consideration to that language in 
formulating its own test here. If for-profit corporations can exercise 
religion and further religious objectives as well as pecuniary ones, 
then OFCCP should consider carefully whether they should be 
categorically excluded from qualification as religious organizations 
under the religious exemption. Hobby Lobby does not demand a result one 
way or the other on that issue, but OFCCP has found the case to be an 
important data point in support of its approach here.
    Regarding commenters' concerns that a removal of the nonprofit 
requirement would unacceptably broaden the exemption, OFCCP has revised 
the regulatory text as described above. OFCCP does not anticipate many 
for-profit organizations seeking to qualify for the exemption, and 
those that do will need to satisfy the other three prongs--which 
themselves contain significant evidentiary requirements--plus provide 
strong evidence of their religious nature. OFCCP believes this test 
will ensure that only bona fide religious organizations will qualify.
    Finally, regarding comments about so-called third-party harms, 
OFCCP recognizes that Cutter v. Wilkinson stated that government must 
adequately account for accommodations' burdens on others. 544 U.S. 709, 
720 (2005). OFCCP believes it has adequately accounted for any burdens 
on others that this rule may cause, and on balance believes that the 
vindication of the law's religious protections, the need for clarity in 
this area of contracting, and the potential expansion of the 
government's contracting pool justify any burdens on third parties. See 
infra section III.B.5.
    Further, under controlling Supreme Court precedent, the 
Establishment Clause allows accommodations that remove a burden of 
government rules from religious organizations, reduce the chilling on 
religious conduct, or reduce government entanglement. See Amos, 483 
U.S. at 334-39. Any third party burdens that might result from such 
accommodations are attributable to the organization that benefits from 
the accommodation, not to the government, and, as a result, do not 
violate the Establishment Clause. Id. at 337 n.15. In the Sherbert line 
of Free Exercise Clause cases that later became the basis of RFRA, 
dissents and concurrences routinely pointed to such burdens on third 
parties but did not persuade the majorities of any Establishment Clause 
violation.\17\
---------------------------------------------------------------------------

    \17\ See, e.g., Thomas, 450 U.S. at 723 n.1 (Rehnquist, J., 
dissenting) (citing several burdens on the system and other 
beneficiaries, including that ``[w]e could surely expect the State's 
limited funds allotted for unemployment insurance to be quickly 
depleted''); Wisconsin v. Yoder, 406 U.S. 205, 240 (1972 (White, J., 
concurring) (outlining the state's legitimate interest in educating 
Amish children, especially ones that leave their community but 
finding the evidence of harm insufficient); Yoder, 406 U.S. at 245 
(Douglas, J., dissenting) (arguing that the decision ``imperiled'' 
the ``future'' of the Amish children, not their parents).
---------------------------------------------------------------------------

    The Supreme Court has applied this principle to allow 
accommodations that litigants claimed caused significant third-party 
harms. For example, the Supreme Court upheld the Title VII exemption 
for religious employers--discussed in Section 8--despite the alleged 
significant harms of expressly permitting discrimination against 
employees on the basis of religion. See Tex. Monthly, 489 U.S. 1, 18 
n.8 (1989) (citing Amos). This is consistent with Hobby Lobby, which 
expressly held that a burden lawfully may be removed from a religious 
organization even if it allows such a religious objector to withhold a 
benefit from third parties. Hobby Lobby, 573 U.S. at 729 n.37 
(``Nothing in the text of RFRA or its basic purposes supports giving 
the Government an entirely free hand to impose burdens on religious 
exercise so long as those burdens confer a benefit on other 
individuals.''). Ultimately, government action that removes such a 
benefit merely leaves the third party in the same position in which it 
would have been had government not regulated the religious objector in 
the first place. Otherwise, any accommodation could be framed as 
burdening a third party. That would ``render[ ] RFRA meaningless.'' 
Hobby Lobby, 573 U.S. at 729 n.37. ``[F]or example, the Government 
could decide that all supermarkets must sell alcohol for the 
convenience of customers (and thereby exclude Muslims with religious 
objections from owning supermarkets), or it could decide that all 
restaurants must remain open on Saturdays to give employees an 
opportunity to earn tips (and thereby exclude Jews with religious 
objections from owning restaurants).'' Id.; see also Attorney General's 
Memorandum, Principle 15, 82 FR at 49670.
    Finally, OFCCP views these comments as addressed more to the 
religious exemption itself, which is not at issue here, than to this 
rule. Congress decided in enacting Title VII, and the President decided 
in amending E.O. 11246, that preserving the integrity of religious 
organizations merited an exemption from the religious-neutrality 
requirements that would otherwise apply to their employees. OFCCP does 
not and could not question those judgments. Further, insofar as 
commenters argued that the test expands the number of contractors that 
might qualify for the exemption, that fact alone does not show any 
third-party harm. Indeed, among the rule's intended purposes is 
expanding the pool of

[[Page 79341]]

contractors while avoiding religious entanglement. No contractor is 
compelled to seek the exemption, and no contractor so exempted is 
compelled by receipt of the exemption to take any particular employment 
action. See Amos, 337 n.15. To the contrary, the Title VII case law 
confirms that religious employers have flexibility to accommodate 
employees' religious preferences if they so choose. See Kennedy, 657 
F.3d at 194. Additionally, OFCCP discusses below, regarding the scope 
of the exemption, how this rule interacts with other protected classes 
and the proper balance between employers' and employees' freedoms and 
rights. OFCCP believes it has provided an accommodation that reasonably 
addresses these interests.
g. Other Features
    The final rule retains two proposed non-determinative features in 
the definition of Religious corporation, association, educational 
institution, or society. Those are the statements that the organization 
``may or may not'' ``have a mosque, church, synagogue, temple, or other 
house of worship'' or ``be supported by, be affiliated with, identify 
with, or be composed of individuals sharing, any single religion, sect, 
denomination, or other religious tradition.'' With regard to these 
features, some commenters expressed support, and other commenters 
expressed opposition. For example, one religious education association 
commented, in support of the absence of a requirement that the 
contractor ``[h]ave a mosque, church, synagogue, temple, or other house 
of worship'' that religious schools that are controlled by a body of 
religious leaders directly connected to the school are no less 
``controlled by a religious organization'' than are schools controlled 
by hierarchical religious denominations. OFCCP continues to believe 
that requiring these features could lead the agency to discriminate 
among religions, which could violate the First Amendment's 
Establishment Clause. See World Vision, 633 F.3d at 732 & n.9 
(O'Scannlain, J., concurring). For these reasons and the reasons 
described in the preamble to the proposed rule, see 84 FR at 41684, 
OFCCP agrees with the commenters who stated that it is appropriate not 
to require that contractors have these features to be deemed religious.
3. Definition of Exercise of Religion
    OFCCP proposed to define Exercise of religion as the term is 
defined for purposes of RFRA. RFRA, in 42 U.S.C. 2000bb-2(4), defines 
``exercise of religion'' to mean ``religious exercise'' as defined in 
the Religious Land Use and Institutionalized Persons Act (RLUIPA), 42 
U.S.C. 2000cc-5(7). RLUIPA, in turn, defines ``religious exercise'' as 
including ``any exercise of religion, whether or not compelled by, or 
central to, a system of religious belief.'' This definition is well-
established and prevents problematic inquiries into the ``centrality'' 
of a religious practice, which are discussed later in this preamble. 
However, the phrase ``exercise of religion'' in the proposed rule 
appeared only as part of the proposed definition of Religious 
corporation, association, educational institution, or society. That 
definition has been changed to adhere more closely to Judge 
O'Scannlain's concurrence in World Vision, and the words ``exercise of 
religion'' no longer appear in that prong of the definition. Thus there 
is no need for regulatory text to define them. With that said, OFCCP 
will look to general principles of First Amendment law and the RFRA-
RLUIPA definition of ``exercise of religion'' when assessing whether an 
organization is engaging ``in activity consistent with, and in 
furtherance of,'' its religious purpose, and when assessing whether its 
employment action has a religious basis. Therefore, OFCCP addresses 
below the comments received on the proposed definition of Exercise of 
religion.
    Several commenters generally approved of the definition for the 
reasons stated in the NPRM, while others generally opposed the proposed 
definition. Those generally opposed asserted that RFRA was not a 
relevant authority given that it is a different statute, that the 
borrowed provision was vague and did not provide clarity but rather 
represented an attempt to ``create new law,'' and that the breadth of 
the definition did not provide ``guardrails for the manner in which 
employers can require their employees to adhere to certain 
principles.'' Others commenters raised more specific issues. A group of 
state attorneys' general noted that the broad definition of religious 
exercise in RFRA is moderated by its substantial burden requirement, 
which the proposed definition did not include. Others noted issues with 
the term in the context of the ``engages in'' language directly 
preceding it; some believed the two in tandem were vague and overbroad, 
while one commenter sought specific guidance in the final rule that 
``religious speech'' could be an exercise of religion.
    OFCCP has considered these comments and continues to believe that 
the RFRA-RLUIPA definition of ``exercise of religion'' is relevant in 
this context, although, for the reasons stated above, there is no need 
for the final rule to define the term. RFRA and RLUIPA are well-
established laws regarding religious freedom that are broadly 
applicable, and they provide a familiar framework that will assist 
OFCCP in assessing both whether a contractor is engaging ``in activity 
consistent with, and in furtherance of,'' its religious purpose and 
whether its employment action has a religious basis.
4. Definition of Sincere
    The principles discussed above with regard to the definition of 
Exercise of religion are incorporated in the definition of Sincere that 
OFCCP proposed. In line with court precedent and OFCCP's principles, 
the critical inquiry for OFCCP is whether a particular employment 
decision was in fact a sincere exercise of religion. Consistent with 
that inquiry, and for the reasons explained above, the final rule's 
definition of Particular religion specifies that the religious tenets 
the contractor applies to its employees must be ``sincere.'' OFCCP, 
like courts, ``merely asks whether a sincerely held religious belief 
actually motivated the institution's actions.'' Geary v. Visitation of 
Blessed Virgin Mary Parish Sch., 7 F.3d 324, 330 (3d Cir. 1993). The 
religious organization's burden ``to explain is considerably lighter 
than in a non-religious employer case,'' since the organization, ``at 
most, is called upon to explain the application of its own doctrines.'' 
Id. ``Such an explanation is no more onerous than is the initial burden 
of any institution in any First Amendment litigation to advance and 
explain a sincerely held religious belief as the basis of a defense or 
claim.'' Id.; see United States v. Seeger, 380 U.S. 163, 185 (1965) 
(holding whether a belief is ``truly held'' is ``a question of fact''). 
The sincerity of religious exercise is often undisputed or stipulated. 
See, e.g., Hobby Lobby, 573 U.S. at 717 (``The companies in the cases 
before us are closely held corporations, each owned and controlled by 
members of a single family, and no one has disputed the sincerity of 
their religious beliefs.''); Holt, 574 U.S. at 361 (``Here, the 
religious exercise at issue is the growing of a beard, which petitioner 
believes is a dictate of his religious faith, and the Department does 
not dispute the sincerity of petitioner's belief.'').
    Further, as the Supreme Court has repeatedly counseled, ``religious 
beliefs need not be acceptable, logical, consistent, or comprehensible 
to others in order to merit First Amendment protection.'' Church of the 
Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 531 (1993) 
(quoting Thomas,

[[Page 79342]]

450 U.S. at 714) (internal quotation marks omitted); see also, e.g., 
United States v. Ballard, 322 U.S. 78, 86 (1944) (``[People] may 
believe what they cannot prove. They may not be put to the proof of 
their religious doctrines or beliefs.''). To merit protection, 
religious beliefs must simply be ``sincerely held.'' E.g., Frazee v. 
Ill. Dep't of Emp't Sec., 489 U.S. 829, 834 (1989); Seeger, 380 U.S. at 
185. Courts have appropriately relied on the ``sincerely held'' 
standard when evaluating religious discrimination claims in the Title 
VII context. See, e.g., Davis v. Fort Bend Cnty., 765 F.3d 480, 485 
(5th Cir. 2014); Philbrook v. Ansonia Bd. of Educ., 757 F.2d 476, 481-
82 (2d Cir. 1985); Redmond v. GAF Corp., 574 F.2d 897, 901 n.12 (7th 
Cir. 1978). In such cases, a court must ``vigilantly separate the issue 
of sincerity from the factfinder's perception of the religious nature 
of the [employee's] beliefs.'' EEOC v. Union Independiente de la 
Autoridad de Acueductos y Alcantarillados, 279 F.3d 49, 57 (1st Cir. 
2002) (alteration in original) (quoting Patrick v. LeFevre, 745 F.2d 
153, 157 (2d Cir. 1984)) (internal quotation marks omitted).
    Some commenters opposed requiring only that exercise of religion be 
``sincere,'' which they characterized as broadening the exemption. They 
warned that this expands exercise of religion beyond its current 
meaning and that sincerity cannot be reasonably applied. For example, a 
labor union stated that ``sincerity'' is not a concept that can 
sensibly be applied to organizations, much less to for-profit 
businesses that would be included in the scope of the religious 
exemption under the Proposed Rule. A group of state attorneys general 
commented that, by requiring only sincerity, OFCCP ``seeks to expand 
RFRA's already broad definition of `exercise of religion.''' An 
individual commenter wrote that the proposal would grant large for-
profit government contractors a hiring exemption as long as they could 
articulate any strongly held belief.
    Other commenters expressed support for a sincerity test. For 
example, a religious liberties legal organization wrote: ``Attempts to 
use religion to hide discriminatory intent are generally not 
successful.'' OFCCP agrees with these commenters. Other commenters also 
expressed general support for the proposed definition, stating that it 
will help ensure that important protections against discrimination 
remain in place while at the same time preventing government overreach 
and protecting religious practice. For instance, the same religious 
liberties legal organization commented that legal precedent regarding 
sincerity and the compelling government interest in preventing 
discrimination will survive without excessive government involvement.
    Many other commenters opposed the proposed, arguing that it would 
not require entities to be internally consistent in applying their 
self-proclaimed religious tenets to various groups. For instance, a 
group of U.S. Senators asserted that the proposed definition ``does not 
require consistency in the application of policy based upon religious 
tenets'' such that an entity opposed to body modification, for 
instance, could ignore tenets regarding tattoos but fire a transgender 
worker for seeking health care without triggering scrutiny. An LGBT 
rights advocacy organization echoed this concern. Some commenters also 
opposed OFCCP's statement that ``the sincerity of religious exercise is 
often undisputed or stipulated'' because, they stated, it raised 
concerns regarding the depth of OFCCP's inquiry under the proposed 
definition. A state civil rights organization commented, for instance, 
that this portion of the preamble seemed to signal that OFCCP will not 
inquire about sincerity, despite the fact that whether a belief is 
sincerely held can only be determined by weighing the strength of 
evidence. Likewise, an organization that advocates separation of church 
and state commented that the preamble's discussion, particularly its 
``equivocal views'' on policies aimed at determining the sincerity of 
an adverse employment action, creates uncertainty as to whether OFCCP 
will actually weigh factors intended to determine sincerity. An LGBT 
rights advocacy organization expressed substantially identical 
concerns.
    As noted in the NPRM, in assessing sincerity, OFCCP will take into 
account all relevant facts, including whether the contractor had a 
preexisting basis for its employment policy and whether the policy has 
been applied consistently to comparable persons, although absolute 
uniformity is not required. See Kennedy, 657 F.3d at 194 (noting that 
the Title VII religious exemption permits religious organizations to 
``consider some attempt at compromise''); LeBoon, 503 F.3d at 229 
(``[R]eligious organizations need not adhere absolutely to the 
strictest tenets of their faiths to qualify for Section 702 
protection.''); see also Killinger v. Samford Univ., 113 F.3d 196, 199-
200 (11th Cir. 1997). But despite commenters' focus on the need for 
``internal consistency'' in religious organizations' doctrine--such as 
a rule that if tattoos are permitted, transgender medical procedures 
must be as well--rather than consistency across similarly situated 
employees, OFCCP cannot assess the ``relative severity of [religious] 
offenses'' or otherwise weigh doctrinal matters, for that would 
``violate the First Amendment.'' Curay-Cramer v. Ursuline Acad. of 
Wilmington, Del., Inc., 450 F.3d 130, 139 (3d Cir. 2006).
    OFCCP will also evaluate any evidence that indicates an insincere 
sham, such as acting ``in a manner inconsistent with that belief'' or 
``evidence that the adherent materially gains by fraudulently hiding 
secular interests behind a veil of religious doctrine.'' Philbrook, 757 
F.2d at 482 (quoting Int'l Soc'y for Krishna Consciousness, Inc. v. 
Barber, 650 F.2d 430, 441 (2d Cir. 1981)) (internal quotation marks 
omitted); cf., e.g., Hobby Lobby, 573 U.S. at 717 n.28 (``To qualify 
for RFRA's protection, an asserted belief must be `sincere'; a 
corporation's pretextual assertion of a religious belief in order to 
obtain an exemption for financial reasons would fail.''); United States 
v. Quaintance, 608 F.3d 717, 724 (10th Cir. 2010) (Gorsuch, J.) 
(``[T]he record contains additional, overwhelming contrary evidence 
that the [defendants] were running a commercial marijuana business with 
a religious front . . . .''). OFCCP's application of the religious 
exemption is described in more detail below.
    Despite these assurances, several commenters who opposed the 
proposed definition said that it is vague or unworkable in practice. 
For instance, a group of state attorneys general expressed concern that 
the definition may increase confusion among contractors seeking to 
claim religious exemptions because the question of how a for-profit 
organization can demonstrate the sincerity of its religious beliefs is 
largely untested. Thus, according to the attorneys general, contractors 
will have to contend with a high level of uncertainty in addition to 
their obligations under Title VII. A religious legal organization that 
otherwise supported the proposed rule highlighted the fact that the 
proposed definition of sincere is ``simply what courts determine `when 
ascertaining the sincerity of a party's religious exercise or 
belief.''' The commenter expressed skepticism that courts could arrive 
at a concise and uniform test for the meaning of the term without more 
specific guidance from OFCCP.
    OFCCP disagrees that ascertaining the sincerity of an 
organization's religious exercise, even a for-profit one, will foster 
confusion or that it presents insurmountable practical difficulties. 
Religious sincerity is a familiar and

[[Page 79343]]

well-developed legal principle. It has been applied in regards to a 
religious organization's decisions under the Title VII religious 
exemption. See, e.g., Little v. Wuerl, 929 F.2d 944, 946 (3d Cir. 1991) 
(``Little does not challenge the sincerity of the Parish's asserted 
religious doctrine.''). And the Supreme Court rejected a similar 
argument ``that Congress could not have wanted RFRA to apply to for-
profit corporations because it is difficult as a practical matter to 
ascertain the sincere `beliefs' of a corporation.'' Hobby Lobby, 573 
U.S. at 717. Here, as there, questions of corporate religious beliefs 
are likely to arise only for closely held corporations, and ``[s]tate 
corporate law provides a ready means for resolving any conflicts . . . 
.'' Id. at 718.
    OFCCP also acknowledges the constitutional and prudential 
limitations on its inquiry that may come into play when religious 
matters are involved. OFCCP will not compare religious doctrines or 
practices in evaluating sincerity. See, e.g., Curay-Cramer, 450 F.3d at 
139 (``[A]ssess[ing] the relative severity of [religious] offenses . . 
. would violate the First Amendment.''); Hall v. Baptist Mem'l Health 
Care Corp., 215 F.3d 618, 626 (6th Cir. 2000) (``[T]he First Amendment 
does not permit federal courts to dictate to religious institutions how 
to carry out their religious missions or how to enforce their religious 
practices.''). Nor will OFCCP require contractors to adhere to strict, 
uniform procedures to demonstrate sincerity. See Kennedy, 657 F.3d at 
194; LeBoon, 503 F.3d at 229. And where ``it is impossible to avoid 
inquiry into a religious employer's religious mission or the 
plausibility of its religious justification for an employment 
decision,'' then OFCCP will apply the E.O. 11246 religious exemption. 
Curay-Cramer, 450 F.3d at 141.
    Some commenters objected to OFCCP's stated commitment to applying 
the ministerial exception. For instance, a city public advocate 
observed that OFCCP's claim that it will evaluate any factors that 
indicate insincerity is undermined by the proposed rule's commitment to 
the ministerial exception. Nevertheless, OFCCP respects and must apply 
the ministerial exception. The ministerial exception is an application 
of the Establishment and Free Exercise clauses of the First Amendment. 
See Our Lady of Guadalupe, 140 S. Ct. at 2060; Hosanna-Tabor, 565 U.S. 
at 189-90 (finding that the ministerial exception bars ``an employment 
discrimination suit brought on behalf of a minister'' and observing 
that the exception ``is not limited to the head of a religious 
congregation,'' nor subject to ``a rigid formula for deciding when an 
employee qualifies as a minister'').
    For the reasons described above and in the NPRM, and considering 
the comments received, OFCCP finalizes the proposed definition without 
modification.
5. Definition of Particular Religion
    In the NPRM, OFCCP proposed to define Particular religion to 
clarify that the religious exemption allows religious contractors not 
only to prefer in employment individuals who share their religion, but 
also to condition employment on acceptance of or adherence to religious 
tenets as understood by the employing contractor. The NPRM explained 
that this definition flows directly from the broad definition of 
Religion, discussed above, to include all aspects of religious belief, 
observance, and practice as understood by the employer, which would 
clarify past statements from OFCCP suggesting that the exemption was 
restricted solely to hiring coreligionists. The NPRM stated that the 
proposed definition was consistent with Title VII case law as well as 
Supreme Court case law holding that the government burdens religious 
exercise when it conditions benefits on the surrender of religious 
identity.
    The NPRM noted that the religious exemption does not permit 
religious employers to discriminate on other protected bases. The NPRM 
described how courts have used a variety of approaches and doctrines to 
distinguish claims of religious discrimination from other claims of 
discrimination while avoiding entangling inquiries under the First 
Amendment, and that OFCCP proposed to do the same. See 84 FR at 41679-
81.
    In a later part of the NPRM describing the proposed terms Exercise 
of religion and Sincere, OFCCP gave additional detail on its proposed 
approach for applying the religious exemption. The NPRM noted that 
sincerity is the ``touchstone'' of religious exercise and that OFCCP 
would take into account all relevant facts when determining whether a 
sincere religious belief actually motivated an employment decision. The 
NRPM also proposed applying a but-for standard of causation when 
evaluating claims of discrimination by religious organizations based on 
protected characteristics other than religion. See 84 FR at 41684-85.
    OFCCP received comments on all these aspects of its proposal. In 
response to the comments, the agency has made some adjustments in its 
explanation regarding how it views and will apply this definition. 
These include changing to a motivating factor standard of causation and 
providing additional clarification, particularly on the interaction of 
the religious exemption with other protected categories, including the 
importance of RFRA. As to the regulatory text, the word ``sincere'' has 
been inserted into the phrase ``acceptance of or adherence to sincere 
religious tenets as understood by the employer as a condition of 
employment,'' to make clear both the requirement of sincerity and, by 
reference to the definition of Sincere, how sincerity is tested. 
Otherwise the definition is being finalized as proposed.
    Insofar as OFCCP's view expressed here and in the proposed rule is 
a change from its prior position as to the definition of Particular 
religion under the exemption and the permissible practices of 
contractors and subcontractors who qualify as religious organizations, 
OFCCP believes the change is justified for all the reasons stated in 
the proposed rule and directly below. A broader view of the religious 
exemption is also consistent with one of OFCCP's primary goals in this 
rulemaking, which is to increase economy and efficiency in government 
contracting by providing for a broader pool of government contractors 
and subcontractors. Issues specific to the EEOC's view on this matter 
are discussed further in a separate part of this preamble.
a. Burdens on Religious Organizations in Contracting
    As described in the NPRM, OFCCP's approach here is consistent with 
Supreme Court decisions emphasizing that ``condition[ing] the 
availability of benefits upon a recipient's willingness to surrender 
his religiously impelled status effectively penalizes the free exercise 
of his constitutional liberties.'' Trinity Lutheran, 137 S. Ct. at 2022 
(alterations omitted) (quoting McDaniel v. Paty, 435 U.S. 618, 626 
(1978) (plurality opinion)). These decisions naturally extend to 
include the right to compete on a level playing field for federal 
government contracts. See id. (holding the government burdens religious 
exercise when it so conditions ``a benefit or privilege,'' 
``eligibility for office,'' ``a gratuitous benefit,'' or the ability 
``to compete with secular organizations for a grant'' (quoted sources 
omitted)); accord E.O. 13831 Sec.  1 (``The executive branch wants 
faith-based and community organizations, to the fullest opportunity 
permitted by

[[Page 79344]]

law, to compete on a level playing field for . . . contracts . . . and 
other Federal funding opportunities.'').
    A few commenters praised OFCCP's reliance on Trinity Lutheran to 
establish the principle that benefits cannot be conditioned on 
surrendering religious status. For example, a religious public policy 
women's organization stated that no one should be forced to abandon 
their faith when operating their business or participating in 
government programs. Similarly, a religious liberty legal organization 
commented that religious contractors should be allowed to serve on 
equal terms as all other contractors, without having to compromise 
their faith-based identities.
    A few commenters stated that Trinity Lutheran and other Supreme 
Court cases discussed in the preamble to the NPRM do not support or 
require the proposed definition. For example, an organization that 
advocates separation of church and state commented that religious 
organizations are already eligible to compete for government contracts, 
which is all that is required by Trinity Lutheran. In addition, a 
religious organization commented that ``the rule violates the 
Establishment Clause of the First Amendment by funding positions which 
require specific religious beliefs and customs.'' OFCCP believes, 
however, that its interpretation of the scope of the religious 
exemption is consistent with the principles of religious freedom 
articulated in Trinity Lutheran and other Supreme Court cases.
    First, restricting religious organizations' ability to employ those 
aligned with their mission burdens their religious exercise, even when 
those employees do not engage in expressly religious activity. As the 
Supreme Court recognized in Amos, the religious exemption's protection 
for all activities of religious organizations alleviates the burden of 
government interference with those religious organizations' missions. 
See Amos, 483 U.S. at 336. And as the Department of Justice's Office of 
Legal Counsel has concluded:

[T]he Court's opinion in Amos, together with Justice Brennan's 
concurring opinion in the case, indicates that prohibiting religious 
organizations from hiring only coreligionists can ` ``impose a 
significant burden on their exercise of religion, even as applied to 
employees in programs that must, by law, refrain from specifically 
religious activities.' '' The .'' Mem. for Brett Kavanaugh, Assoc. 
Counsel to the Pres., from Sheldon T. Bradshaw, Deputy Ass't Att'y 
Gen., Office of Legal Counsel further explained:, Re: Section 1994A 
(Charitable Choice) of H.R. 7, The Community Solutions Act at 4 
(June 25, 2001) . . . . Many religious organizations and 
associations engage in extensive social welfare and charitable 
activities, such as operating soup kitchens and day care centers or 
providing aid to the poor and the homeless. Even where the content 
of such activities is secular--in the sense that it does not include 
religious teaching, proselytizing, prayer or ritual--the religious 
organization's performance of such functions is likely to be 
``infused with a religious purpose.'' Amos, 483 U.S. at 342 
(Brennan, J., concurring). And churches and other religious entities 
``often regard the provision of such services as a means of 
fulfilling religious duty and of providing an example of the way of 
life a church seeks to foster.'' Id. at 344 (footnote omitted). In 
other words, the provision of ``secular'' social services and 
charitable works that do not involve ``explicitly religious 
content'' and are not ``designed to inculcate the views of a 
particular religious faith,'' Bowen v. Kendrick, 487 U.S. 589, 621 
(1988), nevertheless may well be ``religiously inspired,'' id., and 
play an important part in the ``furtherance of an organization's 
religious mission.'' Amos, 483 U.S. at 342 (Brennan, J., 
concurring).

31 O.L.C. 162, 172 172-73 (2007)
    Second, this burden exists even when not imposed directly. The 
Office of Legal Counsel, in the same opinion, further recognized that a 
burden on religious organizations' free exercise of religion can occur 
not only through direct imposition of requirements but through 
conditions on grants or other benefits, citing many of the same cases 
cited in Trinity Lutheran for that proposition. See 31 O.L.C. at 174-
75; Trinity Lutheran, 137 S. Ct. at 2022. Those concerns about 
burdening religious exercise through conditions naturally extend to 
conditions on contracts as well. See Office of the Att'y Gen., 
Memorandum for All Executive Departments and Agencies: Federal Law 
Protections for Religious Liberty at 2, 6, 8, 14a-16a (Oct. 6, 2017), 
available at www.justice.gov/opa/press-release/file/1001891/download. 
Third, the definition of Particular religion promulgated here attempts 
to alleviate that burden by permissibly accommodating religious 
organizations. ``[T]he government may (and sometimes must) accommodate 
religious practices and . . . may do so without violating the 
Establishment Clause. . . . There is ample room under the Establishment 
Clause for `benevolent neutrality which will permit religious exercise 
to exist without sponsorship and without interference.' '' Amos, 483 
U.S. at 344 (quoting Walz v. Tax Comm'n, 397 U.S. 664, 673 (1970)). See 
also E.O. 13279 Sec.  4; 68 FR at 56393 (codified at 41 CFR 60-
1.5(a)(5)). This rule relieves religious organizations of government 
interference by permitting them to take into account their employees' 
particular religion--including acceptance of or adherence to religious 
tenets--to ensure their employees are committed to the religious 
organization. In some instances, as described below, RFRA may also come 
into play to require accommodations.
    Regarding the comment that the rule violates the Establishment 
Clause by funding positions that require specific religious beliefs or 
customs, that is a criticism of the E.O. 11246 religious exemption 
itself, which has been part of federal law for nearly twenty years and 
is not at issue in this rulemaking. This is addressed more below.
b. The Exemption's Scope: Coreligionists
    As explained in the NPRM, the religious exemption is not restricted 
to a purely denominational preference. The religious exemption allows 
religious contractors not only to prefer in employment individuals who 
share their religion, but also to condition employment on acceptance of 
or adherence to religious tenets as understood by the employing 
contractor. This definition flows directly from the broad definition of 
Religion, discussed above, to include all aspects of religious belief, 
observance, and practice as understood by the employer. It is also 
consistent with Title VII case law holding that ``the permission to 
employ persons `of a particular religion' includes permission to employ 
only persons whose beliefs and conduct are consistent with the 
employer's religious precepts.'' Little, 929 F.2d at 951; see also, 
e.g., Kennedy, 657 F.3d at 194 (``Congress intended the explicit 
exemptions to Title VII to enable religious organizations to create and 
maintain communities composed solely of individuals faithful to their 
doctrinal practices, whether or not every individual plays a direct 
role in the organization's `religious activities.' '' (quoting Little, 
929 F.2d at 951)); Hall, 215 F.3d at 624 (``The decision to employ 
individuals `of a particular religion' under [42 U.S.C.] Sec.  2000e-
1(a) and Sec.  2000e-2(e)(2) has been interpreted to include the 
decision to terminate an employee whose conduct or religious beliefs 
are inconsistent with those of its employer.'' (citing, inter alia, 
Little, 929 F.2d at 951)); Killinger, 113 F.3d at 200 (``[T]he 
exemption [in 42 U.S.C. 2000e-1(a)] allows religious institutions to 
employ only persons whose beliefs are consistent with the employer's 
when the work is connected with carrying out the institution's 
activities.'').
    This approach is also consistent with Supreme Court decisions 
emphasizing that ``condition[ing] the availability of benefits upon a 
recipient's willingness

[[Page 79345]]

to surrender his religiously impelled status effectively penalizes the 
free exercise of his constitutional liberties.'' Trinity Lutheran, 137 
S. Ct. at 2022 (alterations omitted) (quoting McDaniel, 435 U.S. at 626 
(plurality opinion)). These decisions naturally extend to include the 
right to compete on a level playing field for federal government 
contracts. See id. (holding the government burdens religious exercise 
when it so conditions ``a benefit or privilege,'' ``eligibility for 
office,'' ``a gratuitous benefit,'' or the ability ``to compete with 
secular organizations for a grant'' (quoted sources omitted)); accord 
E.O. 13831 Sec.  1 (``The executive branch wants faith-based and 
community organizations, to the fullest opportunity permitted by law, 
to compete on a level playing field for . . . contracts . . . and other 
Federal funding opportunities.'').
    OFCCP believes this clarification will assist contractors that have 
looked for guidance on the religious exemption in OFCCP's past 
statements. These past statements may have suggested that the exemption 
permits qualifying organizations only to prefer members of their own 
faith in their employment practices. See, e.g., OFCCP, Compliance 
Webinar (Mar. 25, 2015), available at https://www.dol.gov/ofccp/LGBT/FTS_TranscriptEO13672_PublicWebinar_ES_QA_508c.pdf (``This exemption 
allows religious organizations to hire only members of their own 
faith.''). OFCCP based such statements on guidance from the EEOC, the 
agency primarily responsible for enforcing Title VII. See, e.g., EEOC, 
EEOC Compliance Manual Sec.  12-I.C.1 (July 22, 2008) (``Under Title 
VII, religious organizations are permitted to give employment 
preference to members of their own religion.''). However, with this 
final rule, OFCCP is clarifying that it applies the principles 
discussed above, permitting qualifying employers to take religion--
defined more broadly than simply preferring coreligionists--into 
account in their employment decisions. The case law makes clear that 
qualifying employers ``need not enforce an across-the-board policy of 
hiring only coreligionists.'' LeBoon, 503 F.3d at 230; Killinger, 113 
F.3d at 199-200 (``We are also aware of no requirement that a religious 
educational institution engage in a strict policy of religious 
discrimination--such as always preferring Baptists in employment 
decisions--to be entitled to the exemption.'').
    Some commenters expressed support for OFCCP's proposal to extend 
the definition beyond preferring coreligionists, which they viewed as 
overly narrow, to include acceptance of or adherence to religious 
tenets as a condition of employment. Many of these commenters agreed 
with OFCCP that the definition as proposed was necessary to ensure that 
religious organizations could carry out their missions without losing 
their identities. For example, a religious school association commented 
that being able to ensure that applicants and employees concur with its 
schools' religion-based conduct expectations is essential to fulfilling 
the schools' religious mission. Similarly, a religious civil rights 
organization commented that the entire ``raison d'[ecirc]tre'' of 
religious non-profits would be undermined if employees could subvert 
their religious missions. Other commenters, including a religious 
medical organization, a religious liberty coalition, and a state 
religious public policy organization, echoed these sentiments in 
support of the proposal. A private religious university further 
asserted that the proposed definition would increase religious 
diversity, because its protections are not limited to hiring decisions 
based on co-religiosity but also allow organizations to hire based on 
applicants' support for their religious missions.
    Many commenters asserted that the proposed definition conflicts 
with the EEOC's interpretation, OFCCP's previous interpretation, or 
both. For example, a civil liberties organization commented that the 
EEOC interprets the text of the Title VII religious exemption to mean 
that religious organizations may give employment preference to members 
of their own religion. Several commenters referred to OFCCP's previous 
interpretation as reflected in its 2015 answers to FAQs regarding the 
E.O. 13672 Final Rule.\18\ For example, a legal think tank noted that 
in 2015, OFCCP issued guidance mirroring the EEOC's interpretation of 
the Title VII religious exemption and confirming that the plain text of 
section 204(c) is limited to religious organizations with hiring 
preferences for coreligionists and to the ministerial exemption. Other 
commenters, including an LGBT legal services organization, a 
reproductive rights organization, and a public policy research and 
advocacy organization, made similar points.
---------------------------------------------------------------------------

    \18\ These 2015 FAQs are archived at https://web.archive.org/web/20150709220056/http:/www.dol.gov/ofccp/LGBT/LGBT_FAQs.html.
---------------------------------------------------------------------------

    OFCCP appreciates the various comments received on this topic. 
After careful consideration, OFCCP disagrees with the comments arguing 
that the religious exemption should extend no further than a 
coreligionist preference for several reasons.
    First, a coreligionist preference could be construed narrowly, as 
some commenters seemed to urge, as allowing religious organizations to 
prefer those who share a religious identity in name but nothing more. 
OFCCP disagrees that the exemption should be construed to permit 
religious employers to prefer fellow members of their faith--or people 
who profess to be members of their faith--but forbid requiring their 
adherence to that faith's tenets in word and deed. Religious employers 
can require more than nominal membership from their employees, as shown 
by Amos, where the plaintiffs were discharged for failing to qualify 
for a certificate showing that they were members of the employer's 
church and met certain standards of religious conduct. See 483 U.S. at 
330 n.4; Amos v. Corp. of Presiding Bishop of Church of Jesus Christ of 
Latter-Day Saints, 594 F. Supp. 791, 796 (D. Utah 1984) (describing 
plaintiffs' failure to meet church worthiness requirements), rev'd, 483 
U.S. 327; see also Killinger, 113 F.3d at 198-200 (holding despite 
plaintiff's claim that he subscribed to university's ``legitimate 
religious requirements,'' including the requirement to ``subscribe to 
the 1963 Baptist Statement of Faith and Message,'' he was permissibly 
removed from a teaching post in the divinity school ``because he did 
not adhere to and sometime[s] questioned the fundamentalist theology 
advanced by the [school's] leadership'' (first alteration in 
original)). Any other course would entangle OFCCP in deciding between 
competing views of a religion's requirements--in essence, deciding for 
example, ``who is and who is not a good Catholic.'' Maguire v. 
Marquette Univ., 627 F. Supp. 1499, 1500 (E.D. Wis. 1986) (holding 
despite plaintiff's claim to be Catholic, a Catholic religious 
university permissibly declined to hire her ``because of her perceived 
hostility to the institutional church and its teachings''), aff'd in 
part, vacated in part, 814 F.2d 1213 (7th Cir. 1987). OFCCP is not 
permitted to make such determinations. See Our Lady of Guadalupe, 140 
S. Ct. at 2068-69 (``[D]etermining whether a person is a `co-
religionist' will not always be easy. See Reply Brief 14 (`Are Orthodox 
Jews and non-Orthodox Jews coreligionists? . . . Would Presbyterians 
and Baptists be similar enough? Southern Baptists and Primitive 
Baptists?'). Deciding such questions would risk judicial entanglement 
in religious issues.''); Hall, 215 F.3d at 626-27 (``If a particular

[[Page 79346]]

religious community wishes to differentiate between the severity of 
violating two tenets of its faith, it is not the province of the 
federal courts to say that such differentiation is discriminatory and 
therefore warrants Title VII liability.'' (quoted source omitted)); 
Presbyterian Church in U.S. v. Mary Elizabeth Blue Hull Mem'l 
Presbyterian Church, 393 U.S. 440, 449-50 (1969) (``Plainly, the First 
Amendment forbids civil courts from playing such a role [in 
interpreting particular church doctrines and their importance to the 
religion].'').
    In addition, some commenters argued that the religious exemption 
might allow religious employers to require faithfulness of a 
coreligionist employee, but the exemption does not permit them to 
impose religious requirements on their other employees. OFCCP declines 
to so narrow its interpretation of the exemption. The exemption was 
expanded decades ago to include employees engaged not just in the 
organization's religious activities, but in any of its activities. And 
the purpose of the religious exemption is to preserve ``the ability of 
religious organizations to define and carry out their religious 
missions.'' Amos, 483 U.S. at 335. As other commenters stated, some 
religious organizations hire employees outside their faith tradition 
yet require those employees to follow at least some religious standards 
in order to preserve the organization's integrity Courts have 
recognized the legitimacy of that view. See Kennedy, 657 F.3d at 190-91 
(holding a religious nursing-care facility affiliated with the Roman 
Catholic Church was protected by the religious exemption when it took 
action against an employee of a different faith who refused to change 
her own religiously inspired garb); Little, 929 F.2d at 951 (``[I]t 
does not violate Title VII's prohibition of religious discrimination 
for a parochial school to discharge a Catholic or a non-Catholic 
teacher who has publicly engaged in conduct regarded by the school as 
inconsistent with its religious principles.'' (emphasis added)). This 
view is also consistent with guidance from the U.S. Department of 
Justice. See Office of the Att'y Gen., Memorandum for All Executive 
Departments and Agencies: Federal Law Protections for Religious Liberty 
(Oct. 6, 2017), www.justice.gov/opa/press-release/file/1001891/download 
(stating that, under the Title VII religious exemption, ``a Lutheran 
secondary school may choose to employ only practicing Lutherans, only 
practicing Christians, or only those willing to adhere to a code of 
conduct consistent with the precepts of the Lutheran community 
sponsoring the school'').
    Beyond compromising the integrity of religious organizations, OFCCP 
would be wary of drawing a line here between coreligionist employees 
and other employees for other reasons. As illustrated by the cases 
declining to decide ``who is and who is not a good Catholic,'' OFCCP 
does not believe it should or could in disputed cases decide who is a 
coreligionist. This would be especially difficult when the employer has 
no particular denomination, as there would be no simple denominational 
match between the employer and employee. Cases like World Vision and 
Little v. Wuerl show that a religious organization may require that its 
employees subscribe to certain precepts regardless of their particular 
religious affiliation, if they have any affiliation at all. OFCCP must, 
and should, treat these religious organizations equally with those that 
have a defined denominational membership. See World Vision, 633 F.3d at 
731 (O'Scannlain, J., concurring).
    OFCCP also views an artificial line between coreligionists and non-
coreligionists as presenting an unwelcome either-or dilemma for 
religious organizations. By declining to draw such a line, a religious 
organization would be permitted to require certain religious practices 
or conduct from its coreligionist employees, but not from its non-
coreligionist employees; yet the religious organization would also be 
permitted to, for instance, decline to hire or promote that same non-
coreligionist altogether. In other words, a religious organization 
could discriminate against a non-coreligionist altogether in hiring or 
promotion, but could not instead offer a job or promotion contingent on 
adherence to certain mission-oriented religious criteria. Religious 
organizations should be, and under this rule continue to be, permitted 
to use this middle ground. See Kennedy, 657 F.3d at 194.
c. The Exemption's Scope: Employment Practices
    In a related vein, commenters also shared their views on not only 
which employees should be covered by the exemption, but also which 
employment practices of religious organizations should be protected by 
the exemption. Some of these commenters asserted that the proposed 
definition was too broad. For example, a transgender civil rights 
organization commented that, because the proposed definition 
encompasses ``all aspects of religious belief, observance and practice 
as understood by the employer,'' it would permit the subjective 
viewpoint of the employer to determine what constitutes religion. 
Similarly, a reproductive rights organization claimed that the proposed 
rule would expand the scope of the exemption in violation of federal 
law.
    As explained above in the discussion of the definition of Religion, 
OFCCP has chosen a definition that is well-established in federal law, 
including in the text of Title VII. See 42 U.S.C. 2000e(j). And as 
explained above in the discussion of the definition of Religious 
corporation, association, educational institution, or society, OFCCP 
has significant constitutional and practical concerns about 
substituting its own judgment for a contractor's view--found to be 
sincere--that a particular activity, purpose, or belief has religious 
meaning. It bears repeating: Any other course would risk ``[t]he 
prospect of church and state litigating in court about what does or 
does not have religious meaning [, which] touches the very core of the 
constitutional guarantee against religious establishment.'' Cathedral 
Acad., 434 U.S. at 133. OFCCP will refrain from resolving disputes 
between employers and employees as to what has religious meaning or 
not, when the employer proves its sincere belief that something does 
have religious meaning. However, as explained in more detail below, 
just because an employment practice is religiously motivated does not 
mean that it is always protected by the exemption.
    This leads to a separate set of issues raised by commenters. Many 
commenters who opposed the proposed definition stated that it is 
inconsistent with Title VII in one or more respects. For example, a 
group of state attorneys general stated that the proposed definition is 
contrary to the text of Title VII and congressional intent. 
Specifically, the group pointed out that the plain language of the 
exemption covers only employer preferences based on a ``particular 
religion,'' meaning that religious employers cannot broadly 
discriminate on the basis of religion by, for instance, adopting 
policies such as ``Jews and Muslims Need Not Apply.'' Some commenters 
stated that the proposed definition is unsupported by Title VII case 
law. For example, a civil liberties organization criticized OFCCP for 
not citing to court decisions holding that the Title VII exemption is 
intended to shield employers from all religiously motivated 
discrimination, as opposed to discrimination that is ``on the basis of

[[Page 79347]]

religion alone.'' \19\ A city commented that OFCCP's reliance on 
Little, 929 F.2d 944; Kennedy, 657 F.3d 189; Hall, 215 F.3d 618; and 
Killinger, 113 F.3d 196, is misplaced and misleading because, in each 
of those cases, the courts found that a religious institution with a 
substantiated religious purpose could discriminate against an employee 
performing work connected in some manner to the institution's religious 
mission.
---------------------------------------------------------------------------

    \19\ This point is addressed more fulsomely in the next section 
regarding E.O. 11246's other protected bases.
---------------------------------------------------------------------------

    The NPRM did not suggest that the religious exemption would permit 
religious organizations to single out other religions for disfavor. No 
employer OFCCP is aware of holds such an exclusionary policy; no 
commenter identified such an employer; and such a policy would run 
contrary to the country's experience under the Title VII religious 
exemption, where no litigant to OFCCP's knowledge has asserted such a 
policy. Instead, the mine run of cases have involved a church, 
religious educational institution, or religious nonprofit raising the 
defense that it is only requiring employees or applicants--whether 
strictly defined as coreligionists or not \20\--to follow its own 
religiously inspired standards of belief or conduct. The exemption 
historically has been a shield, not a sword, and it remains so under 
this rule.
---------------------------------------------------------------------------

    \20\ For the reasons discussed earlier, OFCCP does not believe 
restricting the exemption to a purely coreligionist preference is 
required or the most reasonable approach.
---------------------------------------------------------------------------

    OFCCP also believes it has relied properly on cases like Little and 
Kennedy. As stated in the NPRM, these cases hold that the religious 
exemption ``includes permission to employ only persons whose beliefs 
and conduct are consistent with the employer's religious precepts.'' 
Little, 929 F.2d at 951; see also, e.g., Kennedy, 657 F.3d at 194 
(``Congress intended the explicit exemptions to Title VII to enable 
religious organizations to create and maintain communities composed 
solely of individuals faithful to their doctrinal practices, whether or 
not every individual plays a direct role in the organization's 
`religious activities.' '') (quoting Little, 929 F.2d at 951); Hall, 
215 F.3d at 624 (``The decision to employ individuals `of a particular 
religion' under [42 U.S.C.] Sec.  2000e-1(a) and Sec.  2000e-2(e)(2) 
has been interpreted to include the decision to terminate an employee 
whose conduct or religious beliefs are inconsistent with those of its 
employer.'' (citing, inter alia, Little, 929 F.2d at 951)); Killinger, 
113 F.3d at 200 (``[T]he exemption [in 42 U.S.C. 2000e-1(a)] allows 
religious institutions to employ only persons whose beliefs are 
consistent with the employer's when the work is connected with carrying 
out the institution's activities.''); accord Att'y Gen., Memorandum for 
All Executive Departments and Agencies: Federal Law Protections for 
Religious Liberty (Oct. 6, 2017), www.justice.gov/opa/press-release/file/1001891/download (``[R]eligious organizations may choose to employ 
only persons whose beliefs and conduct are consistent with the 
organizations' religious precepts.'').
    These cases were grounded in the basic principle that these 
religious employment criteria are permitted because they are necessary 
for the religious organization's integrity. See Little, 929 F.2d at 950 
(``[T]he legislative history . . . suggests that the sponsors of the 
broadened exception were solicitous of religious organizations' desire 
to create communities faithful to their religious principles.''); 
Kennedy, 657 F.3d at 193 (finding the religious organization exemption 
`` `reflect[s] a decision by Congress that the government interest in 
eliminating religious discrimination by religious organizations is 
outweighed by the rights of those organizations to be free from 
government intervention.' '' (alteration in original) (quoting Little, 
929 F.2d at 951)); Killinger, 113 F.3d at 201 (``[F]ederal court[s] 
must give disputes about what particulars should or should not be 
taught in theology schools a wide-berth. Congress, as we understand it, 
has told us to do so for purposes of Title VII.''); Hall, 215 F.3d at 
623 (``In recognition of the constitutionally-protected interest of 
religious organizations in making religiously-motivated employment 
decisions . . . Title VII has expressly exempted religious 
organizations from the prohibition against discrimination on the basis 
of religion . . . .''). That means that the religious employer must 
explain how its sincere religious beliefs translate into particular 
religious requirements for its employees and applicants. Cf. Geary, 7 
F.3d at 330 (``The institution, at most, is called upon to explain the 
application of its own doctrines.''). But the exemption does not 
require the religious employer to further prove that a particular 
employee or applicant's adherence to those religious requirements is 
necessary, in any contested instance, to further the religious 
organization's mission. That added burden would be contrary to the 1972 
amendment of the Title VII religious exemption, which expanded the 
exemption from employees who perform work connected to the 
organization's religious activities to employees who perform work 
connected to any of the organization's activities. As the Supreme Court 
observed, this expansion was aimed toward relieving religious 
organizations of the kind of burden sought by the commenters:

[I]t is a significant burden on a religious organization to require 
it, on pain of substantial liability, to predict which of its 
activities a secular court will consider religious. The line is 
hardly a bright one, and an organization might understandably be 
concerned that a judge would not understand its religious tenets and 
sense of mission.

Amos, 483 U.S. at 336
    OFCCP shares the same concerns about requiring contractors to 
justify otherwise-protected employment decisions as additionally 
furthering the organization's mission. Difficulties could arise were 
OFCCP to draw distinctions between religiously motivated employment 
decisions that further an employer's religious mission and those that 
do not. Amos observed that difficulty, in which the district court had 
drawn an at-least questionable distinction between the termination of a 
truck driver at a church-affiliated workshop (protected) with the 
termination of a building engineer at a church-affiliated gymnasium 
(not protected). See id. at 330, 333 n.13, 336 n.14. The exemption does 
not require such hair-splitting--indeed, it appears to forbid it--and 
OFCCP sees no useful reason to attempt drawing such distinctions. See 
also Little, 929 F.2d at 951 (``Congress intended the explicit 
exemptions to Title VII to enable religious organizations to create and 
maintain communities composed solely of individuals faithful to their 
doctrinal practices, whether or not every individual plays a direct 
role in the organization's `religious activities.' '').
d. The Exemption's Scope: Other Protected Bases
i. Comments
    As is made clear by the text of section 204(c) of E.O. 11246 and 
the corresponding regulation at 41 CFR 60-1.5(a)(5), the religious 
exemption itself does not exempt or excuse a contractor from complying 
with other applicable requirements. See E.O. 11246 Sec.  204(c) (``Such 
[religious] contractors and subcontractors are not exempted or excused 
from complying with other requirements contained in this Order.''); 41 
CFR 60-1.5(a)(5) (same). Thus, religious employers are not exempted 
from E.O. 11246's requirements regarding antidiscrimination and 
affirmative action, generally speaking;

[[Page 79348]]

notices to applicants, employees, and labor unions; compliance with 
OFCCP's implementing regulations; the furnishing of reports and records 
to the government; and flow-down clauses to subcontractors. See E.O. 
11246 Sec. Sec.  202-203.
    Although Title VII does not contain a corresponding proviso, courts 
have generally interpreted the Title VII religious exemption to be 
similarly precise, so that religious employers are not exempted from 
Title VII's other provisions protecting employees. See, e.g., Kennedy, 
657 F.3d at 192; Rayburn v. Gen. Conference of Seventh-Day Adventists, 
772 F.2d 1164, 1166 (4th Cir. 1985); cf. Hobby Lobby, 573 U.S. at 733 
(rejecting ``the possibility that discrimination in hiring, for example 
on the basis of race, might be cloaked as religious practice to escape 
legal sanction''); Bob Jones Univ. v. United States, 461 U.S. 574, 604 
(1983) (``[T]he Government has a fundamental, overriding interest in 
eradicating racial discrimination in education . . . .'').
    Many commenters nevertheless assumed that OFCCP would apply the 
proposed definition to allow religious contractors to discriminate on 
bases other than religion. Most of these commenters stated that doing 
so would be contrary to E.O. 11246, and they argued that OFCCP lacks 
authority to expand the existing exemption or grant any new exemption. 
For example, a civil liberties organization commented that the preamble 
indicates that OFCCP intends to authorize discrimination based even on 
other protected bases like sex or race, contrary to the text of E.O. 
11246. Similarly, a group of U.S. Senators commented that the proposed 
rule would allow employers to discriminate against employees on bases 
other than religion by, for instance, permitting employers to justify 
sex discrimination based on their religious tenets.
    These commenters pointed to the second sentence of section 204(c) 
of E.O. 11246 as supporting their criticism. For example, a legal think 
tank commented that it was unclear how the proposed rule's ``expansive 
definition of `particular religion' '' could be reconciled with its 
insistence that ``an employer may not . . . invoke religion to 
discriminate on other bases protected by law.''
    Other commenters also stated that it would be inconsistent with 
Title VII case law to allow religious contractors to discriminate on 
bases other than religion. These commenters, including a legal think 
tank, a group of state attorneys general, a labor union, a civil 
liberties organization, and a reproductive rights organization, cited 
cases in which, they asserted, courts prohibited religious employers 
from discriminating on bases other than religion. For example, the 
civil liberties organization commented that courts have consistently 
prohibited religious organizations from discriminating on other bases, 
including sex, even where that discrimination is motivated by the 
organization's sincere religious beliefs (citing Rayburn, 772 F.2d at 
1166; Kennedy, 657 F.3d at 192; EEOC v. Pac. Press Publ'g Ass'n, 676 
F.2d 1272, 1277 (9th Cir. 1982), abrogated on other grounds by Alcazar 
v. Corp. of Catholic Archbishop of Seattle, 598 F.3d 668 (9th Cir. 
2010); Elbaz v. Congregation Beth Judea, Inc., 812 F. Supp. 802, 807 
(N.D. Ill. 1992); Dolter v. Wahlert High Sch., 483 F. Supp. 266, 269 
(N.D. Iowa 1980); accord McClure v. Salvation Army, 460 F.2d 553, 558 
(5th Cir. 1972)).
    Some commenters argued that religion has long been used as a way to 
justify discrimination. For example, an affirmative action 
professionals association asserted that religious freedom has 
historically been invoked to defend slavery, the denial of women's 
suffrage, Jim Crow laws, and segregation. That commenter cited a recent 
news story in which a mixed-race couple was allegedly denied the use of 
a hall for a wedding because of the owner's religious beliefs.
    Several commenters expressed concern specifically about the effect 
of the proposal on E.O. 11246's protections from discrimination based 
on sexual orientation and gender identity. For example, an LGBT rights 
advocacy organization commented that it was troubled by the fact that 
OFCCP failed to cite sexual orientation and gender identity in the 
proposed rule as the protected characteristics most likely to be 
impacted by the rule. And a legal professional organization expressed 
concern that OFCCP may interpret E.O. 11246 to allow federal 
contractors to discriminate based on sexual orientation as long as they 
cite sincere religious reasons for doing so.
    On the other hand, as noted above, other commenters expressed 
support for the proposal because they believed it would exempt 
religious organizations from the prohibitions on discrimination based 
on sexual orientation and gender identify, which would provide them 
protection to staff their organizations consistent with their sincere 
religious beliefs.
    Some commenters requested guidance to resolve the perceived 
conflict. For example, an individual commenter asked whether protection 
for a client's religion or protection for an applicant or employee's 
sexual orientation and/or gender identity would prevail under the 
proposed regulations. A pastoral membership organization stated that if 
the terms ``sexual orientation'' and ``gender identity'' include 
conduct, it is difficult to determine whether the prohibition on 
discrimination based on sexual orientation and gender identity or the 
protection for religiously-motivated conduct applies.
    Many of these commenters criticized the proposal for not clearly 
stating how OFCCP would resolve the perceived contradiction between its 
assertion that religious contractors would not be permitted to 
discriminate on other protected bases and its inclusion in the proposed 
definition of ``acceptance of or adherence to religious tenets as 
understood by the employer as a condition of employment.'' For example, 
the legal think tank asserted that OFCCP does not explain how it will 
apply these two provisions in cases in which they appear to conflict, 
and observed that the proposed regulatory text does not limit its 
definition of ``religious tenets'' to tenets defined without reference 
to race, color, sex, sexual orientation, gender identity, or national 
origin. A state's attorney general asserted that, because the proposed 
rule fails to define or limit the type of ``conduct'' that can form the 
basis of permissible discrimination by religious entities, it allows 
contractors to discriminate based on any arbitrary characteristic.
    Many supportive commenters recommended that OFCCP resolve the 
perceived conflict by clarifying that the non-discrimination 
requirements of Title VII and E.O. 11246 do not apply under the 
corresponding religious exemptions. For example, an anonymous commenter 
suggested that OFCCP clarify that religious organizations are permitted 
to discriminate on the bases of sexual orientation and gender identity 
because, in the commenter's view, an action that falls within the 
religious exemption would be outside the bounds of Title VII and E.O. 
11246, ``regardless of whether it would otherwise be prohibited by 
other provisions.'' Other supportive commenters offered a similar view, 
stating that the proposed definition provided helpful clarification. 
For example, a religious liberties legal organization criticized ``the 
suggestion from the Obama administration'' that the exemption should be 
limited to ``religious people cannot be discriminatory for hiring only 
members of their own religion'' rather than ``non-discrimination law 
does not apply in religious contexts'' as provided under

[[Page 79349]]

the Civil Rights Act, and praised the proposed rule for affirming that 
requiring adherence to an employer's religious tenets does not 
constitute discrimination. Similarly, a U.S. Senator commented that the 
proposed helpfully clarifies that religious employers that contract 
with the federal government retain the right to hire employees that 
support their religious mission, consistent with Title VII. Some 
supportive commenters also noted that the proposed definition was 
consistent with the First Amendment and Title VII case law. For 
example, a religious legal association and an association of 
evangelical churches and schools commented that the principle that 
religious employers should be allowed to require their employees to 
conduct themselves in accordance with the employers' code of moral 
conduct has been ``almost universally'' accepted by courts, who have 
relied alternatively on Section 702(a) of Title VII, the First 
Amendment's Religion Clauses, and other considerations recognizing that 
``religious organizations may have legitimate, nondiscriminatory 
reasons'' for practicing their religious beliefs through employment 
decisions.
    In a joint comment, a religious legal association and an 
association of evangelical churches and schools commented that Section 
204(c) of E.O. 11246 should be construed to exempt religious 
organizations from the nondiscrimination mandates of Section 202, 
except to the extent that a religious organization's employment 
decision is based on race.
    To address these comments, OFCCP here first discusses the 
applicable Title VII principles established by case law, including how 
those principles may apply where religious organizations maintain 
sincerely held beliefs regarding matters such as marriage and intimacy, 
which may implicate protected classes under E.O. 11246. OFCCP then 
discusses its recognition that religious organizations in appropriate 
circumstances will be entitled to relief under the Religious Freedom 
Restoration Act.
    The public should bear in mind that this discussion is restricted 
solely to these difficult and sensitive questions raised by commenters. 
This rule does not affect the overwhelming majority of federal 
contractors and subcontractors, which are not religious, and OFCCP 
remains fully committed to enforcing all E.O. 11246 nondiscrimination 
requirements, including those protecting employees from discrimination 
on the bases of sexual orientation and gender identity. Even for 
religious organizations that serve as government contractors or 
subcontractors, they too must comply with all of E.O. 11246's 
nondiscrimination requirements except in some narrow respects under 
some reasonable circumstances recognized by law. This rule provides 
clarity on those circumstances, consistent with OFCCP's obligations and 
desire to also respect and accommodate the free exercise of religion.
ii. Legal Principles
    OFCCP acknowledges first and foremost the United States' deeply 
rooted tradition of respect for religion and religious institutions. 
Religious individuals and organizations operate within and contribute 
to civil society and do not relinquish their religious freedom 
protections when they participate in the public square.\21\
---------------------------------------------------------------------------

    \21\ See Office of the Att'y Gen., Memorandum for All Executive 
Departments and Agencies: Federal Law Protections for Religious 
Liberty 1-2 (Oct. 6, 2017).
---------------------------------------------------------------------------

    With respect to commenters' concerns and questions here, many 
relate to the interaction of two well-established Title VII principles: 
First, that religious organizations can take religion into account when 
making employment decisions; and second, that religious organizations 
cannot discriminate on other protected bases. Each of those two 
principles taken by itself has clear answers. Where an employment 
decision made on the basis of religion also implicates another 
protected basis, however, the law is less clear.
    As to the first principle, virtually all commenters agreed with 
what the plain text of the exemption provides: That religious 
organizations can consider an employee's particular religion when 
taking employment action. As discussed elsewhere in this rule's 
preamble, commenters disagreed as to the scope of that exemption--which 
employees it applies to, and which employer actions--but the basic 
principle was not disputed.
    As to the second principle, as many commenters recognized, E.O. 
11246's other employment protections apply to religious organizations. 
Protections on the basis of race, color, sex, sexual orientation, 
gender identity, and national origin do not categorically disappear 
when the employer is a religious organization. Thus the religious 
exemption does not permit religious organizations to engage in 
prohibited discrimination when there is no religious basis for the 
action. For instance, a religious organization that declined to promote 
a non-ministerial employee not for religious reasons, but because of 
animus borne of the employee's country of birth or skin color, would 
violate E.O. 11246. Courts in the Title VII context have engaged in 
careful, fact-bound inquiries to determine whether a religious 
organization's action was based on religion or instead on a prohibited 
basis.\22\ For instance, courts may inquire whether a plaintiff was 
subjected to adverse employment action because of his or her sex or 
because of a violation of religious tenets. See, e.g., Cline v. 
Catholic Diocese of Toledo, 206 F.3d 651, 655-56, 658 (6th Cir. 2000); 
cf. EEOC v. Miss. Coll., 626 F.2d 477, 485-86 (5th Cir. 1980) (holding 
if religious organization shows that its decision was based on 
religion, the religious exemption prohibits a further inquiry into 
pretext). To that extent, courts are virtually uniform in the view that 
the religious exemption does not permit discrimination on bases other 
than religion.\23\
---------------------------------------------------------------------------

    \22\ See below for a more fulsome discussion of how courts have 
determined the applicability of the religious exemption.
    \23\ This is separate from the question of whether application 
of Title VII in any particular instance is tolerable under the First 
Amendment or other law, such as where the employee is a minister, 
see Our Lady of Guadalupe, 140 S. Ct. 2049, or where the employment 
relationship is otherwise ``so pervasively religious'' that it 
raises First Amendment concerns, see DeMarco v. Holy Cross High 
Sch., 4 F.3d 166, 172 (2d Cir. 1993).
---------------------------------------------------------------------------

    The question posed here, however, is the interaction of those two 
principles: Specifically, the outcome when a religion organization's 
action is based on and motivated by the employee's adherence to 
religious tenets yet implicates another category protected by E.O. 
11246. OFCCP concludes, as explained in detail below, that the 
religious exemption itself, as interpreted by the courts, has left the 
question open, but that such activity would also give rise to an 
inquiry under RFRA, which must be assessed based on applicable case law 
and the specific facts presented.
    At the federal appellate court level, the question of the religious 
exemption's interaction with other protected bases was left open in, 
for instance, EEOC v. Mississippi College, where an EEOC subpoena did 
``not clearly implicate any religious practices of the College.'' 626 
F.2d at 487. The court noted that the college had a scripturally rooted 
policy of hiring only men to teach courses in religion, but stated that 
``[b]efore the EEOC could require the College to alter that practice, 
the College would have an opportunity to litigate in a federal forum 
whether [the religious exemption] exempts or the first amendment 
protects that particular

[[Page 79350]]

practice.'' Id. The Seventh Circuit has similarly characterized the 
question of whether ``the religious-employer exemptions in Title VII 
[are] applicable only to claims of religious discrimination'' as ``a 
question of first impression in this circuit.'' Herx v. Diocese of Fort 
Wayne-South Bend, Inc., 772 F.3d 1085, 1087 (7th Cir. 2014). Other 
courts have indicated that the religious exemption may be preeminent in 
such a situation. See Little, 929 F.2d at 951 (``[T]he permission to 
employ persons `of a particular religion' includes permission to employ 
only persons whose beliefs and conduct are consistent with the 
employer's religious precepts.''); see also Kennedy, 657 F.3d at 194 
(``Congress intended the explicit exemptions to Title VII to enable 
religious organizations to create and maintain communities composed 
solely of individuals faithful to their doctrinal practices.'' (quoting 
Little, 929 F.2d at 951)).
    The only two federal appellate-level cases with fact patterns 
involving the precise issue are a pair of Ninth Circuit cases from the 
1980s. The first, EEOC v. Pacific Press Publishing Association, held as 
a statutory matter that Title VII's prohibitions on sex discrimination 
and on retaliation applied to a religious organization. See 676 F.2d 
1272, 1277 (9th Cir. 1982). But the court determined that the practice 
at issue that resulted in sex discrimination ``does not and could not 
conflict with [the employer's] religious doctrines, nor does it 
prohibit an activity rooted in religious belief.'' Id. at 1279. 
Regarding retaliation, the court held as a constitutional matter that 
Title VII's anti-retaliation provision should apply to the religious 
organization even when the employee was dismissed for violating church 
doctrine that prohibited members from bringing lawsuits against the 
church. See id. at 1280.
    The second decision, EEOC v. Fremont Christian School, 781 F.2d 
1362 (9th Cir. 1986), is less instructive. It held in relevant part 
that Title VII could be applied to prohibit a religiously grounded 
health benefits program that benefited one sex more than the other. 
However, as a statutory matter, the court held that the religious 
exemption was not implicated because the employment practice did not 
concern the selection of employees based on their religion--the text of 
the exemption refers to ``employment of individuals of a particular 
religion'' \24\--and as a constitutional matter noted that 
``[e]liminating the employment policy involved here would not interfere 
with religious belief and only minimally, if at all, with the practice 
of religion.'' Id. at 1366, 1368.
---------------------------------------------------------------------------

    \24\ As explained elsewhere in this preamble, the religious 
exemption is more than a mere hiring preference for coreligionists. 
OFCCP nonetheless agrees that the policy in Fremont would not be 
covered by the religious exemption because it did not pertain to the 
employee's particular religion. Nothing about the employee's 
religious beliefs or conduct would affect the policy--only his or 
her sex.
---------------------------------------------------------------------------

    The Supreme Court also has not answered whether an employment 
action motivated by religion but implicating a protected classification 
violates Title VII. The Court's cases offer no clear conclusion whether 
the religious exemption should be read so narrowly that its protections 
are overcome by the rest of E.O. 11246's (or Title VII's) protections 
when they are both at issue. For example, in Bostock v. Clayton County, 
140 S. Ct. 1731 (2020), the Court held that Title VII's prohibition on 
discrimination because of sex includes discrimination on the basis of 
sexual orientation and transgender status. That holding itself is not 
particularly germane to OFCCP's enforcement of E.O. 11246, which has 
expressly protected sexual orientation and gender identity since 2015. 
What is certainly germane is the Court's recognition of the ``fear that 
complying with Title VII's requirement in cases like [Bostock] may 
require some employers to violate their religious convictions'' and its 
assurance that it, too, was ``deeply concerned with preserving the 
promise of the free exercise of religion enshrined in our Constitution; 
that guarantee lies at the heart of our pluralistic society.'' Id. at 
1753-54. The Court then noted that Title VII contains ``an express 
statutory exception for religious organizations,'' but did not explain 
whether an employment action motivated by religion that implicates a 
protected classification violates Title VII. Id. at 1754.
    Regardless, OFCCP ultimately does not need to answer this open 
question on the proper interpretation of the religious exemption in 
E.O. 11246, and declines to do so, because RFRA can guide the agency's 
determination if and when a particular case presents a situation where 
a religiously motivated employment action implicates a classification 
protected under the Executive Order. As noted in Bostock, RFRA 
``prohibits the federal government from substantially burdening a 
person's exercise of religion unless it demonstrates that doing so both 
furthers a compelling governmental interest and represents the least 
restrictive means of furthering that interest. [42 U.S.C.] Sec.  
2000bb-1.'' Id. Moreover, ``[b]ecause RFRA operates as a kind of super 
statute, displacing the normal operation of other federal laws, it 
might supersede Title VII's commands in appropriate cases. [42 U.S.C.] 
Sec.  2000bb-3.'' Id.\25\ Concerns raised by supportive commenters in 
this rulemaking have alerted the agency that application of E.O. 11246 
may substantially burden their religious exercise, especially if the 
religious exemption does not clearly protect their ability to maintain 
employees faithful to their practices and beliefs. The ministerial 
exception offers religious organizations broad freedom in the selection 
of ministers, but that is only a subset of their employees. See 
generally Our Lady of Guadalupe, 140 S. Ct. 2049. In contrast, the 
religious exemption applies to all of a religious organization's 
employees, but the scope of its protections is not settled when 
religious tenets implicate other protected classes. Thus, the 
Department should consider RFRA, since in some circumstances neither 
the ministerial exception nor the religious exemption may alleviate 
E.O. 11246's burden on religious exercise. See Little Sisters of the 
Poor, 140 S. Ct. at 2383-84 (holding agencies should consider RFRA when 
it is an important aspect of the problem involved in the rulemaking).
---------------------------------------------------------------------------

    \25\ RFRA was not raised before the Court in Bostock. Thus, the 
Court left that ``question[ ] for future cases.'' 140 S. Ct. at 
1754.
---------------------------------------------------------------------------

    The discussion below addresses in general terms how OFCCP views its 
obligations under RFRA in the specific situation raised by commenters 
and addressed here: Where the religious organization takes employment 
action regarding an applicant or an employee, the employment action is 
motivated solely on the employee's adherence to a sincere religious 
tenet, yet that tenet also implicates an E.O. 11246 protected category 
other than race (which is discussed separately). RFRA requires a fact-
specific analysis, so the discussion here of necessity can speak only 
to OFCCP's general approach; specific situations involving specific 
parties will require consideration of any additional, unique facts. And 
of course the contractor or subcontractor involved will need to 
demonstrate its religious sincerity and burden so that it falls within 
this rubric. Nonetheless, OFCCP believes its RFRA analysis here will 
provide clarity for religious contractors and subcontractors, 
regardless of how future cases may interpret the interplay of the 
religious exemption in and of itself with other protected classes under 
Title VII or E.O. 11246.

[[Page 79351]]

iii. Application of the Religious Freedom Restoration Act
    ``Congress enacted RFRA in 1993 in order to provide very broad 
protection of religious liberty.'' Hobby Lobby, 573 U.S. at 693. RFRA 
responded to ``Employment Division v. Smith, 494 U.S. 872 (1990) [in 
which] the Supreme Court virtually eliminated the requirement that the 
government justify burdens on religious exercise imposed by laws 
neutral toward religion'' under the First Amendment, and restored by 
statute ``the compelling interest test as set forth in Sherbert v. 
Verner, 374 U.S. 398 (1963) and Wisconsin v. Yoder, 406 U.S. 205 
(1972).'' 42 U.S.C. 2000bb(a)(4), (b)(1); see Hobby Lobby, 573 U.S. at 
693-95.
    Under RFRA, the federal government may not ``substantially burden a 
person's exercise of religion.'' 42 U.S.C. 2000bb-1(a). Government is 
excepted from this requirement only if it ``demonstrates that 
application of the burden to the person--(1) is in furtherance of a 
compelling governmental interest; and (2) is the least restrictive 
means of furthering that compelling government interest.'' Id. 2000bb-
1(b).
    RFRA ``applies to all Federal law, and the implementation of that 
law, whether statutory or otherwise, and whether adopted before or 
after November 16, 1993,'' Id. 2000bb-3(a), including agency 
regulations, see Little Sisters of the Poor, 140 S. Ct. at 2383. As 
``Federal law, and the implementation of that law,'' E.O. 11246 fits 
within that scope as well.
(1) Substantial Burden
    The question of whether government action substantially burdens an 
employer's exercise of religion can be separated into two parts. See 
Hobby Lobby, 573 U.S. at 720-26; Little Sisters of the Poor, 140 S. Ct. 
at 2389 (Alito, J., concurring). First, the government must ask whether 
the consequences of noncompliance put substantial pressure on the 
objecting party to comply. See Hobby Lobby, 573 U.S. at 720-23. Second, 
the government must ask whether compliance with the regulation would 
violate or modify the objecting party's sincerely-held religious 
exercise (as the objecting party understands that exercise and any 
underlying beliefs), including the party's ``ability . . . to conduct 
business in accordance with [its] religious beliefs.'' Hobby Lobby, 573 
U.S. at 724; see also Sherbert, 374 U.S. at 405-06.\26\ If the answer 
to both questions is yes, then the regulation substantially burdens the 
exercise of religion.
---------------------------------------------------------------------------

    \26\ Case law is clear that RFRA's substantial burden test does 
not insist that a challenged government action require an objecting 
party to violate its religious beliefs. Instead, substantial 
pressure on a party to modify its religiously motivated practice is 
also sufficient to establish a substantial burden. See, e.g., 
Archdiocese of Wash. v. Wash. Metro. Area Transit Auth., 897 F.3d 
314, 333 (D.C. Cir. 2018) (defining ``substantial burden'' under 
RFRA as ``substantial pressure on an adherent to modify his behavior 
and to violate his beliefs'') (quoting Thomas v. Review Bd., 450 
U.S. 707, 718 (1981)); EEOC v. Catholic Univ. of Am., 83 F.3d 455, 
467 (D.C. Cir. 1996) (finding that government's interest in 
eliminating employment discrimination at Catholic university was 
outweighed by university's right of autonomy in its own domain); 
Jolly v. Coughlin, 76 F.3d 468, 477 (2d Cir. 1996) (finding that 
right to free exercise of religion is ``substantially burdened'' 
within meaning of RFRA where state puts substantial pressure on 
adherent to modify his behavior and to violate his beliefs); In re 
Young, 82 F.3d 1407, 1418 (8th Cir. 1996) (``[D]efining substantial 
burden broadly to include religiously motivated as well as 
religiously compelled conduct is consistent with the RFRA's purpose 
to restore pre-Smith free exercise case law.'').
---------------------------------------------------------------------------

    On the first question, noncompliance with the nondiscrimination 
requirements of E.O. 11246 could have substantial adverse consequences 
on religious organizations that participate in government contracting. 
One private religious university supportive of the proposed rule stated 
that it is ``a large research university with dozens of active federal 
contracts at any given time,'' while another stated that ``religious 
organizations have long been significant participants in federal 
procurement programs.'' Noncompliance with E.O. 11246 can result in 
awards of back pay and other make-whole relief to affected employees 
and applicants, cancellation or suspension of the contract, and even 
suspension or debarment. See E.O. 11246 Sec.  202(7); 41 CFR 60-1.26. 
That is substantial pressure. Indeed, it is a substantial burden for 
the government to compel someone ``to choose between the exercise of a 
First Amendment right and participation in an otherwise available 
public program.'' Thomas, 450 U.S. at 716; Sherbert, 374 U.S. at 404 
(``It is too late in the day to doubt that the liberties of religion 
and expression may be infringed by the denial of or placing of 
conditions upon a benefit or privilege.''). ``Governmental imposition 
of such a choice puts the same kind of burden upon the free exercise of 
religion as would a fine imposed'' for engaging in religious action. 
Sherbert, 374 U.S. at 404. ``Where the state conditions receipt of an 
important benefit upon conduct proscribed by a religious faith, or 
where it denies such a benefit because of conduct mandated by religious 
belief, thereby putting substantial pressure on an adherent to modify 
his behavior and to violate his beliefs, a burden upon religion exists. 
While the compulsion may be indirect, the infringement upon free 
exercise is nonetheless substantial.''). Thomas, 450 U.S. at 717-18.
    On the second question, the Supreme Court emphasized in Hobby Lobby 
that, in determining whether compliance with a particular mandate would 
substantially burden the objecting party's ability to operate in 
accordance with its religious beliefs, the federal government must 
``not presume to determine the plausibility of a religious claim.'' 
Hobby Lobby, 573 U.S. at 724 (quoting Smith, 494 U.S. at 887). It is 
not for a court, or for OFCCP, to say whether a particular set of 
religious beliefs is ``mistaken or insubstantial.'' Hobby Lobby, 573 
U.S. at 725. Furthermore, religious exercise means more than being able 
to express particular views--a right to freedom of religion requires 
the right to act in conformance with that religion. See Espinoza, 140 
S. Ct. at 2277 (Gorsuch, J., concurring) (``The right to be religious 
without the right to do religious things would hardly amount to a right 
at all.''). It is this right to engage in conduct consistent with 
sincerely held belief--and a right to be free of demands to engage in 
conduct conflicting with those sincerely held beliefs--that RFRA 
protects. See Little Sisters of the Poor, 140 S. Ct. at 2390.
    Compliance with the nondiscrimination provisions in E.O. 11246, if 
interpreted to apply when an employment action is motivated by religion 
yet also implicates a protected classification, could force religious 
organizations to violate their sincerely held religious beliefs or to 
compromise their religious integrity or mission by placing substantial 
pressure on them to violate or modify their religious tenets related to 
their employees and their religious communities. The comments on the 
proposed rule made this clear. For example, a private religious 
university noted the importance for religious employers to be able to 
``employ[ ] persons whose beliefs and conduct are consistent with 
[their] religious precepts.'' Similarly, a nationwide ecclesiastical 
organization stated in its comment that faith-based organizations 
should be able to ``lawfully prefer for employment those who, by word 
and conduct, accept and adhere to that faith as the organization 
understands it, regardless of the applicant's or employee's religious 
affiliation.'' An association of religious universities echoed these 
sentiments, stating that ``[o]ur schools are committed to upholding 
their religion-based standards by aligning

[[Page 79352]]

employment expectations exclusively with applicants and employees who 
concur with these expectations. These expectations are essential to 
fulfilling our religious mission.'' While the commenter explained that 
generally its associated ``schools do not accept direct government 
funding,'' it highlighted the importance for its members that ``no 
organization should be excluded by the government from competing for 
contracts or other funds simply because the religious organization is 
serious about maintaining its religious identity and religious 
practices.''
    The case law also indicates that certain E.O. 11246 obligations may 
impose a burden on religious organizations. Bostock expressly 
acknowledged that enforcing certain nondiscrimination provisions could 
pose challenges for religious employers under RFRA. See 140 S. Ct. at 
1754. And many cases show instances of religious employers seeking to 
apply religiously inspired codes of conduct that pertain to matters of 
marriage and sexual intimacy. See Little, 929 F.2d at 946 (upholding 
termination of employee for violations of ``Cardinal's Clause,'' which 
included ``entry by the teacher into a marriage which is not recognized 
by the Catholic Church'' (emphasis in original)); Cline, 206 F.3d at 
666 (holding fact issue remained as to whether plaintiff was terminated 
for pregnancy or for whether she had ``violated her clear duties as a 
teacher by engaging in premarital sex''); Boyd v. Harding Acad. of 
Memphis, Inc., 88 F.3d 410, 414 (6th Cir. 1996) (upholding district 
court's determination that the defendant ``articulated a legitimate, 
non-discriminatory reason for plaintiff's termination when it stated 
that plaintiff was fired not for being pregnant, but for having sex 
outside of marriage in violation of Harding's code of conduct'' and 
rejecting claim of pretext when school's president ``had terminated at 
least four individuals, both male and female, who had engaged in 
extramarital sexual relationships that did not result in pregnancy''); 
Gosche v. Calvert High Sch., 997 F. Supp. 867, 872 (N.D. Ohio 1998) 
(dismissing Title VII claim of plaintiff fired for having affair and 
concluding that ``[w]hatever Plaintiff's own post-hoc claims may be 
regarding the relevance of her sexual conduct to her employment at a 
Catholic school, it is clear that the Diocese and Parish considered her 
sexual conduct to be relevant to her employment''); Ganzy v. Allen 
Christian Sch., 995 F. Supp. 340, 359-60 (E.D.N.Y. 1998) (noting in 
case with similar facts and holding as Cline that ``[r]eligious 
institutions . . . are provided leeway under federal constitutional and 
statutory law in regulating the sexual conduct of those in their employ 
in keeping with their religious views''); Dolter v. Wahlert High Sch., 
483 F. Supp. 266, 270 (N.D. Iowa 1980) (``Nor does the court quarrel 
with defendant's contention that it can define moral precepts and 
prescribe a code of moral conduct that its teachers . . . must 
follow.'').\27\
---------------------------------------------------------------------------

    \27\ Amos also implicated such facts. The appellee had been 
discharged for failing to ``qualify for a temple recommend, that is, 
a certificate that he is a member of the Church and eligible to 
attend its temples,'' which ``are issued only to individuals who 
observe the Church's standards in such matters as regular church 
attendance, tithing, and abstinence from coffee, tea, alcohol, and 
tobacco.'' Amos, 483 U.S. at 330 & n.4. The plaintiffs below had 
alleged that those standards necessitated employer inquiries into 
their ``sexual activities'' and ``moral cleanliness and purity.'' 
Amos, 594 F. Supp. at 830.
---------------------------------------------------------------------------

    Of particular concern here as well is that ``[f]ear of potential 
liability might affect the way an organization carried out what it 
understood to be its religious mission.'' Amos, 483 U.S. at 336; cf. 
Hosanna-Tabor, 565 U.S. at 197 (Thomas, J., concurring) 
(``[U]ncertainty about whether its ministerial designation will be 
rejected, and a corresponding fear of liability, may cause a religious 
group to conform its beliefs and practices regarding `ministers' to the 
prevailing secular understanding.''). Here, out of fear of violating 
E.O. 11246's requirements, a religious organization might simply choose 
to forsake certain of its religious tenets related to employment. That 
is a religious burden in itself. And that change could in turn result 
in the organization hiring and retaining employees who, by word or 
deed, undermine the religious organization's character and purpose--but 
which the organization would feel compelled to accept rather than risk 
liability. That is a second religious burden, which in particular may 
pose a risk to smaller or nontraditional religious groups. Cf. Hosanna-
Tabor, 565 U.S. at 197 (Thomas, J., concurring) (noting that a bright-
line test or multifactor analysis for the definition of ``minister'' 
``risk[s] disadvantaging those religious groups whose beliefs, 
practices, and membership are outside of the `mainstream' or 
unpalatable to some,'' including by ``caus[ing] a religious group to 
conform its beliefs and practices regarding `ministers' to the 
prevailing secular understanding'').
    Alternatively, to avoid this problem, the religious organization 
might consider drawing stricter lines around those it considers 
``coreligionists,'' for even the narrowest reading of the religious 
exemption permits religious organizations to prefer ``coreligionists'' 
in employment decisions. In that case, religious organizations would 
draw strict lines by stating that certain behaviors, beliefs, or 
statements are anathema to the religion and take one outside the 
religious community. That way, employment action would be more readily 
identified as resting solely on religious grounds as a preference 
against a non-coreligionist. See Mississippi College, 626 F.2d at 484-
85; cf. Amos, 483 U.S. at 343 (Brennan, J., concurring) (``A religious 
organization therefore would have an incentive to characterize as 
religious only those activities about which there likely would be no 
dispute, even if it genuinely believe that religious commitment was 
important in performing other tasks as well.''). Here, the religious 
burden would be government pressure on how the religious organization 
defines who is and who is not a member of its religious community.
    Demonstrating burden is necessarily fact-dependent. There may be 
instances where the organization sincerely believes as a religious 
matter that it can tolerate some kinds of religious noncompliance from 
some of its employees without seriously compromising its religious 
mission or identity. That may be the case especially for employees in 
less prominent roles or who have little interaction with students or 
the public. But there may be other instances where, in the sincere view 
of the organization, a non-ministerial employee must adhere to the 
organization's religious tenets as an important part of furthering the 
organization's religious mission and maintaining its religious 
identity, and where strict enforcement of certain E.O. 11246 
requirements would substantially burden those aims.
(2) Compelling Interest
    Many courts have recognized the importance of the government's 
interest in enforcing Title VII's nondiscrimination provisions. See, 
e.g., Rayburn, 772 F.2d at 1169; Pacific Press, 676 F.2d at 1280. The 
following RFRA analysis does not address OFCCP's enforcement program 
broadly, including the context of a religious organization's 
discriminating on the basis of a protected characteristic other than 
religion for non-religious reasons. OFCCP will continue to fully 
enforce E.O. 11246's requirements in those contexts. Rather, the 
compelling-interest analysis here focuses solely on the questions 
raised by commenters regarding a situation in which a religious 
organization takes employment

[[Page 79353]]

action based solely on sincerely held religious tenets that also 
implicate a protected classification.
    To satisfy RFRA, OFCCP must do more than assert a generalized 
compelling interest on a ``categorical'' basis. O Centro, 546 U.S. at 
431. Instead, ``RFRA requires the Government to demonstrate that the 
compelling interest test is satisfied through application of the 
challenged law `to the person'--the particular claimant whose sincere 
exercise of religion is being substantially burdened.'' Id. at 430-31 
(quoting 42 U.S.C. 2000bb-1(b)). This requires ``look[ing] beyond 
broadly formulated interests justifying the general applicability of 
government mandates and scrutiniz[ing] the asserted harm of granting 
specific exemptions to particular religious claimants.'' Id. at 431.
    Thus OFCCP must demonstrate that it has a compelling governmental 
interest in enforcing a nondiscrimination requirement against 
``particular religious claimants'' (e.g., particular contractors who 
qualify for the religious exemption) when doing so places a substantial 
burden on the ability of those particular contractors to freely 
exercise their religion. Id. This statutory requirement is reflected in 
OFCCP's current RFRA policy, under which ``OFCCP will consider'' a 
contractor's request for ``an exemption to E.O. 11246 pursuant to RFRA 
. . . based on the facts of the particular case.'' OFCCP, Religious 
Employers and Religious Exemption, www.dol.gov/agencies/ofccp/faqs/religious-employers-exemption. As explained below, OFCCP has determined 
on the basis of several independent reasons that it has less than a 
compelling interest in enforcing nondiscrimination requirements--except 
for protections on the basis of race--when enforcement would seriously 
infringe the religious mission or identity of a religious organization.
    Exceptions provided other contractors. OFCCP's general interest in 
enforcing E.O. 11246 is less than compelling in the religious context 
addressed here, given the numerous exceptions from its 
nondiscrimination requirements it has authority to grant, and has 
granted, in nonreligious contexts. Granting accommodations in 
nonreligious contexts strongly suggests that OFCCP does not have a 
compelling interest in disfavoring religious contractors by refusing to 
grant accommodations in religious contexts. See O Centro, 546 U.S. at 
436 (``RFRA operates by mandating consideration, under the compelling 
interest test, of exceptions to `rule[s] of general applicability.' '' 
(quoting 42 U.S.C. 2000bb-1(a))). When ``[t]he proffered objectives are 
not pursued with respect to analogous nonreligious conduct,'' those 
exceptions suggest that ``those interests could be achieved by narrower 
ordinances that burdened religion to a far lesser degree.'' Holt, 574 
U.S. at 367.
    The President has granted OFCCP broad authority and discretion to 
exempt contracts from the requirements of E.O. 11246. Most prominent is 
section 204(a) of E.O. 11246, which authorizes the Secretary of Labor 
to grant exemptions from any or all of the equal opportunity clause's 
requirements ``when the Secretary deems that special circumstances in 
the national interest so require.'' This is not the kind of language 
government typically uses when it seeks a policy of absolute 
enforcement. Rather, it is the kind of language government uses when 
granting highly discretionary power. Cf. Webster v. Doe, 486 U.S. 592, 
600 (1988) (removing an employee ``whenever the Director `shall deem 
such termination necessary or advisable in the interests of the United 
States' '' is a standard that ``fairly exudes deference to the 
Director'' (quoting National Security Act Sec.  102(c)). The Executive 
Order contains many other exceptions as well. Section 204(b) authorizes 
the Secretary to exempt contracts that are to be performed outside the 
United States, contracts that are for standard commercial supplies or 
raw materials, contracts that do not meet certain thresholds (dollar 
amounts or numbers of employees), and subcontracts below a specified 
tier. Section 204(d) authorizes the Secretary to exempt a contractor's 
facilities that are separate and distinct from activities related to 
the performance of the contract, as long as ``such an exemption will 
not interfere with or impede the effectuation of the purposes of this 
Order.'' OFCCP's implementing regulations contain exemptions as well. 
OFCCP has implemented section 204(b) to the maximum extent possible by 
exempting all contracts and subcontracts for work performed outside the 
United States by employees not recruited in the United States. See 41 
CFR 60-1.5(3). OFCCP's regulations also contain a religious exemption 
for religious educational institutions and permit a preference for 
``Indians living on or near an Indian reservation in connection with 
employment opportunities on or near an Indian reservation.'' 41 CFR 60-
1.5(6)-(7).
    On several occasions OFCCP has used its power to exempt contracts 
``in the national interest.'' ``Prior administrations granted [national 
interest exemptions] for Hurricanes Sandy and Katrina,'' \28\ and OFCCP 
has granted temporary exemptions from some E.O. 11246 requirements in 
response to more recent national disasters. OFCCP has similarly granted 
an exemption during the COVID-19 pandemic. See OFCCP, National Interest 
Exemptions, https://www.dol.gov/agencies/ofccp/national-interest-exemption. And the National Interest Exemptions that OFCCP has granted 
can be quite broad, applying, for example, to all new contracts 
providing coronavirus relief during the applicable time period. See 
OFCCP, Coronavirus National Interest Exemption Frequently Asked 
Questions, https://www.dol.gov/agencies/ofccp/faqs/covid-19#Q1.
---------------------------------------------------------------------------

    \28\ OFCCP, ``Coronavirus National Interest Exemption Frequently 
Asked Questions,'' Question #12, https://www.dol.gov/agencies/ofccp/faqs/covid-19#Q12.
---------------------------------------------------------------------------

    OFCCP has also issued a final rule effecting a permanent exemption 
from all OFCCP authority for healthcare providers that participate in 
the TRICARE program and have no otherwise covered contracts. The final 
rule expressed OFCCP's view that a 2011 statute removed whatever 
authority OFCCP may have had over TRICARE providers and did not replace 
it with a separate nondiscrimination provision; Congress' action 
indicates that OFCCP's interest is less than compelling interest. See 
85 FR 39834, 39837-39 (July 2, 2020). Additionally, the final rule 
exempted TRICARE providers on the alternative ground of a national 
interest exemption, citing its concern that ``the prospect of 
exercising authority over TRICARE providers is affecting or will affect 
the government's ability to provide health care to uniformed service 
members, veterans, and their families,'' a determination that 
``pursuing enforcement efforts against TRICARE providers is not the 
best use of its resources'' given a history of litigation and legal 
uncertainty in the area, and the need to ``provide uniformity and 
certainty in the health care community with regard to legal obligations 
concerning participation in TRICARE.'' Id. at 39839.
    The various exemptions that OFCCP can and does provide in secular 
settings show that its interest in enforcing E.O. 11246's requirements 
can give way to other considerations. Many of those same considerations 
exist here, so OFCCP's enforcement interest should similarly give way 
to religious accommodation. For example, many of the same reasons 
underlying OFCCP's exemption for TRICARE providers apply here as well: 
Conservation of resources in an area that could lead to protracted

[[Page 79354]]

litigation; the need to bring clarity to a group of potential 
contractors under a cloud of legal uncertainty; and a goal of improving 
the government's access to certain services. In the TRICARE rule, the 
goal was to foster access to care for veterans and their families. In 
this rule, it is the goal of fostering the equal participation of 
religious organizations in government contracting and subcontracting in 
order to increase the contracting pool's competition and diversity and 
thus improve economy and efficiency in procurement. Likewise OFCCP's 
limited exemptions during emergencies and the pandemic demonstrate the 
agency's judgment that securing services for the government can 
override aspects of E.O. 11246's obligations. Here, too, a limited 
religious accommodation may encourage religious organizations to begin 
or continue participating in government contracting and subcontracting. 
And like those other exemptions, a religious accommodation here would 
be limited. It would be limited to employment action grounded in a 
sincere religious belief with respect to the employee's religion. It 
would not excuse religious organizations from their antidiscrimination 
obligations otherwise and never on the basis of race, nor from their 
affirmative-action obligations, reporting requirements, or other 
requirements under E.O. 11246.
    E.O. 11246's many available exemptions, and OFCCP's history of 
recognizing exemptions, also undercuts the idea that individualized 
religious exemptions would undermine the agency's overall enforcement 
of E.O. 11246 or that their denial would be equitable to religious 
organizations. See Holt, 574 U.S. at 368 (``At bottom, this argument is 
but another formulation of the `classic rejoinder . . . : If I make an 
exception for you, I'll have to make one for everybody, so no 
exceptions.' We have rejected a similar argument in analogous contexts, 
and we reject it again today.'') (internal citations omitted) (quoting 
O Centro, 546 U.S. at 436); Fraternal Order of Police Newark Lodge No. 
12 v. City of Newark, 170 F.3d 359, 365 (3d Cir. 1999) (``[W]e conclude 
that the Department's decision to provide medical exemptions while 
refusing religious exemptions is sufficiently suggestive of 
discriminatory intent so as to trigger heightened scrutiny.'').
    Recognizing the value that religious contractors provide, OFCCP has 
determined that it has less than a compelling interest in enforcing 
E.O. 11246 when a religious organization takes employment action solely 
on the basis of sincerely held religious tenets that also implicate a 
protected classification, other than race. OFCCP has determined that, 
in these circumstances, it should instead appropriately accommodate 
religion, especially when doing so (as with national interest 
exemptions) would foster a more competitive pool of government 
contractors. See Boyle v. United Techs. Corp., 487 U.S. 500, 506 (1988) 
(noting that ``the Federal Government's interest in the procurement of 
equipment is implicated'' where ``[t]he imposition of liability on 
Government contractors'' will cause the contractors to ``decline to 
manufacture'' a good or to ``raise its price'').
    Establishment Clause concerns. OFCCP's interest in enforcing E.O. 
11246 is attenuated when doing so seriously risks violating the 
Establishment Clause. But as noted earlier, strict application of all 
E.O. 11246 requirements to religious organizations could, in some 
instances, chill their protected religiously based requirements for 
employment out of fear of liability. It could also chill religious 
organizations from taking employment action despite an employee, by 
word or deed, undermining the religious organization's tenets and 
purposes.
    Alternatively, it could incentivize religious organizations, 
because of the risk that the government might misunderstand the 
organization's motivations, to draw stricter lines around who it 
considers a coreligionist. In this situation, the religious 
organization would first take some form of purely religious action 
against an employee to designate the employee as no longer a part of 
the religious community, and then take employment action, so that 
employment action would be more readily identified as resting solely on 
grounds of religious preference. And it poses a risk to smaller or 
nontraditional religious groups, whose membership practices may not be 
as readily understood by the government. Cf. Hosanna-Tabor, 565 U.S. at 
197 (Thomas, J., concurring).
    Such government pressure on religious organizations' membership and 
doctrinal decisions would raise serious concerns under not only the 
Free Exercise Clause, but the Establishment Clause as well. ``[T]he 
Religion Clauses protect the right of churches and other religious 
institutions to decide matters `of faith and doctrine' without 
government intrusion. . . . [A]ny attempt by government to dictate or 
even to influence such matters would constitute one of the central 
attributes of an establishment of religion.'' Our Lady of Guadalupe, 
140 S. Ct. at 2060 (emphasis added) (quoting Hosanna-Tabor, 565 U.S. at 
186 (opinion for the court)); see also Hosanna-Tabor, 565 U.S. at 197 
(Thomas, J., concurring) (``These are certainly dangers that the First 
Amendment was designed to guard against.''). In essence, such an 
approach could have the unfortunate consequence of pushing religious 
organizations to extremes to avoid liability. Religious organizations 
could do so either by forsaking their religiously based requirements 
for employment, or by engaging in more definitive religious actions to 
demonstrate their religious disassociation from someone who breaches a 
religiously based requirement for employment. OFCCP also has concerns 
about inter-religious discrimination, since some bona fide religious 
organizations require adherence to a common set of beliefs or tenets 
but do not have a formal membership structure, see World Vision, 633 
F.3d at 728 (O'Scannlain, J., concurring), so they may have more 
difficulty than traditional churches in showing that an employee or 
applicant is not (or is no longer) a coreligionist.
    OFCCP cannot avoid this Establishment Clause problem by attempting 
to determine whether a religious organization's decision to deem 
someone a non-coreligionist was motivated by discriminatory animus 
rather than a sincere application of religious tenets. Unlike the fact-
finding to determine the reason for an employment decision, which does 
not always raise Establishment Clause concerns, this would be fact-
finding to determine the reason for a religious decision on community 
membership. Testing the basis of that decision would most likely 
violate the First Amendment. It would violate the religious 
organization's right to choose its membership free of government 
influence, and the process of inquiry alone into such a sensitive area 
``would risk judicial entanglement in religious issues.'' Our Lady of 
Guadalupe, 140 S. Ct. at 2069; see Catholic Bishop, 440 U.S. at 502.
    The absence of a clear command. Finally, a compelling interest 
ought to be one that is clearly spelled out by the government. For 
instance, in his concurrence in Little Sisters of the Poor, Justice 
Alito observed that it was highly significant that Congress itself had 
not treated free access to contraception as a compelling government 
interest. See Little Sisters of the Poor, 140 S. Ct. at 2392-93 (Alito, 
J., concurring). Here, however, the scope of the religious exemption is 
unsettled. As discussed above, courts have consistently interpreted the 
religious exemption to

[[Page 79355]]

prohibit religious organizations from discriminating on bases other 
than religion. But Bostock left open the scope of the exemption's 
protection for religious discrimination, and only two federal court of 
appeal decisions have addressed a fact pattern in which a religious 
organization's religious tenets conflicted with a non-religious Title 
VII protection. See Fremont, 781 F.2d at 1368 (finding challenged 
religious practice outside the scope of the religious exemption and 
changing the practice would pose little interference with the 
organization's religious belief and practice); Pacific Press, 676 F.2d 
at 1279 (determining that the EEOC's action ``does not and could not 
conflict with [the employer's] religious doctrines, nor does it 
prohibit an activity rooted in religious belief''). Without stronger 
legal evidence that the religious exemption's protections are cabined 
by E.O. 11246's other protections (and thus may seriously infringe 
religious freedom), OFCCP is hesitant to describe that theory as 
furthering a compelling government interest.
(3) Least Restrictive Means
    In the third step of the RFRA analysis, OFCCP assesses whether its 
application of the religious burden to the person ``is the least 
restrictive means of furthering that compelling government interest.'' 
42 U.S.C. 2000bb-1(b)(2). Because OFCCP believes that it has less than 
a compelling interest in enforcing E.O. 11246 in the circumstances 
contemplated for purposes of this general RFRA analysis it need not 
consider whether that foreclosed enforcement would be by the least 
restrictive means. When the Supreme Court has found a regulation 
violated RFRA, the Court has permitted the regulatory agency to 
determine the correct remedy. See, e.g., Hobby Lobby, 573 U.S. at 726, 
731, 736; 79 FR 51118 (Aug. 27, 2014) (proposed modification in light 
of Hobby Lobby). As a result, OFCCP has discretion to determine an 
appropriate accommodation without having to also determine the least 
restrictive alternative. As Justice Alito recently explained, RFRA 
``does not require . . . that an accommodation of religious belief be 
narrowly tailored to further a compelling interest. . . . Nothing in 
RFRA requires that a violation be remedied by the narrowest permissible 
corrective.'' Little Sisters of the Poor, 140 S. Ct. at 2396 (Alito, 
J., concurring). OFCCP further believes the RFRA approach outlined here 
is an appropriate accommodation, which applies only to bona fide 
religious employers and which permits only employment actions based on 
sincere religious tenets; employees remain protected from 
discrimination motivated by animus or any other non-religious reason, 
and employment actions based on race always remain prohibited.
(4) The Harris Case
    OFCCP does not view the Sixth Circuit's opinion in EEOC v. R.G. &. 
G.R. Harris Funeral Homes, Inc., 884 F.3d 560 (6th Cir. 2018), aff'd, 
Bostock v. Clayton Cnty., 140 S. Ct. 1731 (2020), as requiring a 
different analysis here. In that case (one of three consolidated in 
Bostock), an employee of a funeral home informed the funeral home's 
owner of the employee's intention to present as a member of the 
opposite sex while at work. The owner stated that he would violate his 
religious beliefs were he to permit the employee to do so and 
terminated the employee. See id. at 568-69. In the ensuing litigation, 
the funeral home raised a RFRA defense. The Sixth Circuit held that 
Title VII discrimination claims ``will necessarily defeat'' RFRA 
defenses to such discrimination. Id. at 595. The court addressed each 
element of RFRA. Regarding substantial burden, the court held in 
relevant part that the employer's mere toleration of the employee's 
conduct to comply with Title VII is not an endorsement of it, so it was 
not a substantial burden. Regarding the furtherance of a compelling 
interest, the court held that failure to enforce Title VII would result 
in the employee suffering discrimination, ``an outcome directly 
contrary to the EEOC's compelling interest in combating discrimination 
in the workforce.'' Id. at 592. Regarding least-restrictive means, the 
court held that enforcement of Title VII is itself the least-
restrictive means for eradicating employment discrimination on the 
basis of sex. See id. at 593-97.
    The defendant in Harris did not raise the RFRA issue to the Supreme 
Court, but the Court in Bostock nonetheless observed that, ``[b]ecause 
RFRA operates as a kind of super statute . . . it might supersede Title 
VII's commands in appropriate cases.'' \29\ Bostock, 140 S. Ct. at 
1754. To the extent Harris remains good law, OFCCP does not view the 
Sixth Circuit's RFRA analysis as applicable here, as the facts of the 
case are readily distinguishable from this rule's protections for 
religious organizations. The funeral home at the center of the Harris 
case was not a religious organization. See 884 F.3d at 581. Unlike the 
religious employers that are OFCCP's focus here, the funeral home had 
``virtually no religious characteristics,'' id. at 582: No religiously 
inspired code of conduct, no doctrinal statement, and no other 
religious requirement for employees. Nor did the funeral home through 
its work seek to advance the values of a particular religion. See id. 
Indeed, the funeral home was clearly outside the scope of OFCCP's 
religious exemption--which exists to prevent E.O. 11246's 
nondiscrimination provisions from interfering with a religious 
organization's freedom to employ ``individuals of a particular 
religion''--and furthermore the funeral home's own testimony indicated 
that its conduct was motivated by commercial rather than religious 
concerns. See id. at 576 n.5, 586, 589 n.10.
---------------------------------------------------------------------------

    \29\ The Court also observed that ``other employers in other 
cases may raise free exercise arguments that merit careful 
consideration.'' Bostock, 140 S. Ct. at 1754.
---------------------------------------------------------------------------

    Bearing those key factual differences in mind, OFCCP disagrees 
that, at least as applied to religious organizations regulated by 
OFCCP, ``tolerating'' employee conduct that is contrary to the 
organization's sincerely held religious tenets can never constitute a 
substantial burden under RFRA, as the court held in Harris. Id. at 588. 
That holding is, at the very least, in tension with Little Sisters of 
the Poor, Hobby Lobby, and the Free Exercise Clause precedents they 
rested on. See Hobby Lobby, 573 U.S. at 723-25; see also Little Sisters 
of the Poor, 140 S. Ct. at 2383 (``[In Hobby Lobby,] we made it 
abundantly clear that, under RFRA, the Departments must accept the 
sincerely held complicity-based objections of religious entities.''); 
id. at 2390 (Alito, J., concurring) (observing that ``federal courts 
have no business addressing whether the religious belief asserted in a 
RFRA case is reasonable,'' including religious beliefs underlying 
complicity-based objections). When government requires conduct 
proscribed by religious faith on pain of substantial penalty, there is 
a burden upon religious exercise. See Sherbert, 374 U.S. at 404.
    Additionally, the burden is even clearer for an objecting religious 
organization than it was for the funeral home in Harris. Unlike a 
secular employer, a religious organization has a religious foundation 
and purpose and may select its employees on the basis of their 
religious adherence. Requiring religious employers to maintain 
employees who disregard the organization's religious tenets thus more 
seriously threatens to undermine the organization's mission and 
integrity. This gives even more credence to a claim that forcing a 
religious employer

[[Page 79356]]

to maintain such an employee would substantially burden its religious 
exercise.
    OFCCP also does not view Harris's treatment of the compelling-
interest prong of RFRA as persuasive when applied to religious 
organizations regulated by OFCCP. First, because the defendant was not 
a religious organization, the Harris court did not consider the 
antecedent question of whether the government has a compelling interest 
in applying nondiscrimination laws to a religious organization when 
doing so would threaten to compromise the organization's integrity or 
mission, with its attendant more-severe infringements on religious free 
exercise and establishment problems. As discussed above, there are 
instances where that could occur, so accordingly in that situation the 
RFRA analysis is different. Additionally, E.O. 11246 contains 
additional and discretionary exceptions that Title VII does not have, 
which further alter the compelling-interest balance.
(5) OFCCP's Compelling Interest in Prohibiting Racial Discrimination
    In response to commenters who raised the issue, OFCCP reiterates 
here that it has a compelling interest in eradicating racial 
discrimination, even as against religious organizations. To be sure, 
OFCCP is currently unaware of any contractor contending that its 
religious beliefs required it to take employment actions that implicate 
race, and commenters supplied no evidence of that occurring. 
Nonetheless, in response to commenters' broader concerns, OFCCP makes 
clear here that its overwhelming interest in eradicating racial 
discrimination would defeat RFRA claims in the context addressed in 
this section of the rule's preamble. OFCCP will enforce E.O. 11246 
against any contractor or subcontractor that takes employment actions 
on the basis of race, even if religiously motivated. At least one 
commenter that strongly supported the proposed rule likewise recognized 
that the religious exemption should not protect ``a religious 
organization's employment decision . . . based on racial status.''
    OFCCP treats racial discrimination as unique because the 
Constitution does as well. The Supreme Court recognizes that ``[r]acial 
bias is distinct.'' Pena-Rodriguez v. Colorado, 137 S. Ct. 855, 868 
(2017). Indeed, a long history of the Court's ``decisions demonstrate 
that racial bias implicates unique historical, constitutional, and 
institutional concerns.'' Id. (emphasis added). Although this final 
rule recognizes that religious accommodations may be necessary in 
certain other contexts regarding considerations of sex, 
``discrimination on the basis of race, `odious in all aspects, is 
especially pernicious in the administration of justice.' '' Id. 
(quoting Rose v. Mitchell, 443 U.S. 545, 555 (1979)).
    The Supreme Court has elsewhere recognized the government's unique 
interest in eradicating racial discrimination. In Hobby Lobby, the 
Court considered ``the possibility that discrimination in hiring, for 
example on the basis of race, might be cloaked as religious practice to 
escape legal sanction,'' but explained that ``[t]he Government has a 
compelling interest in providing an equal opportunity to participate in 
the workforce without regard to race, and prohibitions on racial 
discrimination are precisely tailored to achieve that critical goal.'' 
573 U.S. at 733. In Bob Jones University, the Court similarly concluded 
that the government had a ``compelling'' interest--described as ``a 
fundamental overriding interest''--``in eradicating racial 
discrimination,'' and further explained the ``governmental interest'' 
in eradicating racial discrimination ``substantially outweighs whatever 
burden'' the government action in that case ``place[d] on petitioners' 
exercise of their religious beliefs.'' Bob Jones, 461 U.S. at 604; see 
also Newman v. Piggie Park Enters., Inc., 390 U.S. 400, 402 n.5 (1968) 
(describing as ``patently frivolous'' the argument that a prohibition 
on racial discrimination ``was invalid because it contravenes the will 
of God and constitutes an interference with the free exercise of the 
Defendant's religion'') (internal quotation marks omitted).
    The government's heightened interest in eradicating racial 
discrimination is further exhibited by the Supreme Court's 
jurisprudence regarding the Equal Protection Clause of the Fourteenth 
Amendment. In Equal Protection Clause cases, the Court applies ``strict 
scrutiny'' to instances of race-based classifications, meaning that 
``all racial classifications, imposed by whatever federal, state, or 
local governmental actor . . . are constitutional only if they are 
narrowly tailored measures that further compelling governmental 
interests.'' Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227 
(1995). Strict scrutiny presents a more pressing standard than the 
``intermediate scrutiny'' that the Court applies in Equal Protection 
Clause cases to instances of sex-based classifications, see, e.g., 
Craig v. Boren, 429 U.S. 190, 197 (1976)) (``[C]lassifications by 
gender must serve important governmental objectives and must be 
substantially related to achievement of those objectives.''); id. at 
218 (Rehnquist, J., dissenting) (referring to the majority approach as 
``intermediate'' scrutiny), and the ``rational-basis scrutiny'' that 
the Court has sometimes applied to classifications based on sexual 
orientation, see Lawrence v. Texas, 539 U.S. 558, 578 (2003); Romer v. 
Evans, 517 U.S. 620, 631-32 (1996). The Supreme Court has further 
recognized that traditional views on marriage do not suggest bigotry or 
invidious discrimination but instead are held ``in good faith by 
reasonable and sincere people here and throughout the world.'' 
Obergefell v. Hodges, 576 U.S. 644, 657 (2015).\30\ The Constitution, 
as interpreted by the Supreme Court, is more protective of race than 
other protected classifications. Thus, the Court's long-established 
Equal Protection jurisprudence supports the conclusion that although 
the government has an interest in eradicating discrimination on the 
bases of all protected classes, the governmental interest in 
eradicating racial discrimination is particularly strong. This final 
rule is consistent with that framework.
---------------------------------------------------------------------------

    \30\ Cf. Masterpiece Cakeshop, 138 S. Ct. at 1727 (stating that 
a clergy member's refusal to perform a gay marriage ``would be well 
understood in our constitutional order as an exercise of religion, 
an exercise that gay persons could recognize and accept without 
serious diminishment to their own dignity and worth'').
---------------------------------------------------------------------------

e. Application of the Religious Exemption
    As explained in the proposed rule, when evaluating allegations of 
discrimination on bases other than religion against employers that are 
entitled to the Title VII religious exemption, courts carefully 
evaluate whether the employment action was permissibly based on the 
``particular religion'' of the employee. The particulars vary. In the 
absence of direct evidence of discrimination on a protected basis other 
than religion, courts generally invoke the burden-shifting framework of 
McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), to determine 
whether a religious employer's invocation of religion (or a religiously 
motivated policy) in making an employment decision was genuine or, 
instead, was merely a pretext for discrimination prohibited under Title 
VII. See Cline, 206 F.3d 651; Boyd, 88 F.3d 410; cf. Geary, 7 F.3d 324 
(applying McDonnell Douglas in assessing religious-exemption defense to 
claim under the Age Discrimination in Employment Act). At least one 
other

[[Page 79357]]

case has noted that ``[o]ne way'' to show discriminatory intent using 
circumstantial evidence ``is through the burden-shifting framework set 
out in McDonnell Douglas,'' but another way is to ``show enough non-
comparison circumstantial evidence to raise a reasonable inference of 
intentional discrimination.'' Hamilton v. Southland Christian Sch., 
Inc., 680 F.3d 1316, 1320 (11th Cir. 2012).
    In undertaking this evaluation, OFCCP, like courts, ``merely asks 
whether a sincerely held religious belief actually motivated the 
institution's actions.'' Geary, 7 F.3d at 330. The religious 
organization's burden ``to explain is considerably lighter than in a 
non-religious employer case,'' since the organization, ``at most, is 
called upon to explain the application of its own doctrines.'' Id. 
``Such an explanation is no more onerous than is the initial burden of 
any institution in any First Amendment litigation to advance and 
explain a sincerely held religious belief as the basis of a defense or 
claim.'' Id.; see Seeger, 380 U.S. at 185 (holding whether a belief is 
``truly held'' is ``a question of fact''). The sincerity of religious 
exercise is often undisputed or stipulated. See, e.g., Hobby Lobby, 573 
U.S. at 717 (``The companies in the case before us are closely held 
corporations, each owned and controlled by a single family, and no one 
has disputed the sincerity of their religious beliefs.''); Holt, 574 
U.S. at 361 (``Here, the religious exercise at issue is the growing of 
a beard, which petitioner believes is a dictate of his religious faith, 
and the Department does not dispute the sincerity of petitioner's 
belief.''). In assessing sincerity, OFCCP takes into account all 
relevant facts, including whether the contractor had a preexisting 
basis for its employment policy and whether the policy has been applied 
consistently to comparable persons, although absolute uniformity is not 
required. See Kennedy, 657 F.3d at 194 (noting that the Title VII 
religious exemption permits religious organizations to ``consider some 
attempt at compromise''); LeBoon, 503 F.3d at 229 (``[R]eligious 
organizations need not adhere absolutely to the strictest tenets of 
their faiths to qualify for Section 702 protection.''); see also 
Killinger, 113 F.3d at 199-200. OFCCP will also evaluate any factors 
that indicate an insincere sham, such as acting ``in a manner 
inconsistent with that belief'' or ``evidence that the adherent 
materially gains by fraudulently hiding secular interests behind a veil 
of religious doctrine.'' Philbrook, 757 F.2d at 482 (quoting Barber, 
650 F.2d at 441) (internal quotation mark omitted); cf., e.g., Hobby 
Lobby, 573 U.S. at 117 n.28 (``To qualify for RFRA's protection, an 
asserted belief must be `sincere'; a corporation's pretextual assertion 
of a religious belief in order to obtain an exemption for financial 
reasons would fail.''); Quaintance, 608 F.3d at 724 (Gorsuch, J.) 
(``[T]he record contains additional, overwhelming contrary evidence 
that the [defendants] were running a commercial marijuana business with 
a religious front.'').
    Other decisions have not used the McDonnell Douglas framework, 
particularly when an inquiry into purported pretext would risk 
entangling the court in the internal affairs of a religious 
organization or require a court or jury to assess religious doctrine or 
the relative weight of religious considerations. See Geary, 7 F.3d at 
330-31 (discussing cases). Depending on the circumstances, such an 
inquiry by a court or an agency could impermissibly infringe on the 
First Amendment rights of the employer. This arises most prominently in 
the context of the ministerial exception, a judicially recognized 
exemption grounded in the First Amendment from employment-
discrimination laws for decisions regarding employees who ``minister to 
the faithful.'' Hosanna-Tabor, 565 U.S. at 189; see also Our Lady of 
Guadalupe, 140 S. Ct. at 2060. The exemption ``is not limited to the 
head of a religious congregation,'' nor subject to ``a rigid formula 
for deciding when an employee qualifies as a minister.'' Hosanna-Tabor, 
565 U.S. at 190; see also Our Lady of Guadalupe, 140 S. Ct. at 2067. 
``The interest of society in the enforcement of employment 
discrimination statutes is undoubtedly important. But so too is the 
interest of religious groups in choosing who will preach their beliefs, 
teach their faith, and carry out their mission.'' Hosanna-Tabor, 565 
U.S. at 189. The ministerial exception thus bars ``an employment 
discrimination suit brought on behalf of a minister.'' Id.; see also 
Our Lady of Guadalupe, 140 S. Ct. at 2073. In such a situation, it is 
dispositive that the employee is a minister; there is no further 
inquiry into the employer's motive. See Hosanna-Tabor, 565 U.S. at 706 
(``By imposing an unwanted minister, the state infringes the Free 
Exercise Clause . . . and the Establishment Clause''); see, e.g., 
Rayburn, 772 F.2d at 1169 (``In `quintessentially religious' matters, 
the free exercise clause of the First Amendment protects the act of 
decision rather than a motivation behind it.'' (quoting Serbian E. 
Orthodox Diocese v. Milivojevich, 426 U.S. 696, 720 (1976))).
    Some commenters, such as a religious legal association and an 
association of evangelical churches and schools, agreed with OFCCP that 
governmental inquiry into religious employers' practices could violate 
the First Amendment. A religious legal organization commended OFCCP for 
deferring to religious organizations on matters of doctrine and 
religious observance, and commented that doing otherwise could lead to 
unconstitutional entanglement with religion. These are the 
constitutional concerns that likewise constrain courts' analyses when 
an employer makes an employment decision based on religious criteria, 
yet the employee disputes the religious criteria. In those situations, 
courts have stated that ``if a religious institution . . . presents 
convincing evidence that the challenged employment practice resulted 
from discrimination on the basis of religion, Sec.  702 deprives the 
EEOC of jurisdiction to investigate further to determine whether the 
religious discrimination was a pretext for some other form of 
discrimination.'' Little, 929 F.2d at 948 (quoting Mississippi College, 
626 F.2d at 485). Courts have noted the constitutional dangers of 
``choos[ing] between parties' competing religious visions'' and 
entangling themselves in deciding whether the employer or the employee 
has the better reading of doctrine, or which tenets an employee must 
follow or believe to remain in employment. Geary, 7 F.3d at 330; see 
Curay-Cramer, 450 F.3d at 141 (``While it is true that the plaintiff in 
Little styled her allegation as one of religious discrimination whereas 
[this plaintiff] alleges gender discrimination, we do not believe the 
difference is significant in terms of whether serious constitutional 
questions are raised by applying Title VII. Comparing [plaintiff] to 
other Ursuline employees who have committed `offenses' against Catholic 
doctrine would require us to engage in just the type of analysis 
specifically foreclosed by Little.''); Little, 929 F.2d at 949 (``In 
this case, the inquiry into the employer's religious mission is not 
only likely, but inevitable, because the specific claim is that the 
employee's beliefs or practices make her unfit to advance that mission. 
It is difficult to imagine an area of the employment relationship less 
fit for scrutiny by secular courts.''); Maguire, 627 F. Supp. at 1507 
(``Despite [plaintiff's] protests that she is a Catholic, `of a 
particular religion,' the determination of who fits into that category 
is for religious

[[Page 79358]]

authorities and not for the government to decide.'').
    Some commenters criticized OFCCP's description of the extent to 
which it would be permissible to inquire into whether a religious 
employer's adverse employment action was based on religion or on 
another protected characteristic. Many of these commenters believed 
OFCCP's proposed approach is inconsistent with courts' inquiry in Title 
VII cases. For example, a group of state attorneys general asserted 
that, unlike the definition in the proposed rule, Title VII 
jurisprudence and case law has required nuanced and fact-dependent 
inquiry into whether a religious employer discriminated against a 
worker based on his or her ``particular religion'' or on another 
protected basis. An LGBT rights advocacy organization criticized OFCCP 
for rejecting the traditional burden-shifting framework set forth in 
McDonnell Douglas and instead placing the burden on workers. Some of 
these commenters stated that OFCCP's proposed inquiry would not be 
adequately rigorous. For example, a civil liberties and human rights 
legal advocacy organization asserted that OFCCP's approach as described 
in the preamble ``allows religion to serve as a pretext for 
discrimination, and creates roadblocks for individuals seeking to bring 
claims of discrimination against federal contractors.'' An organization 
that advocates separation of church and state asserted that a more 
rigorous inquiry would not violate the First Amendment and stated that 
OFCCP's concerns about impermissible entanglement are overblown and 
cannot justify its refusal to engage in any investigation of religious 
employers at all. An anti-bigotry religious organization similarly 
asserted that a more rigorous inquiry would not violate RFRA, citing 
Hobby Lobby, 573 U.S. at 733.
    Some commenters believed the proposal did not clearly describe the 
inquiry that OFCCP would undertake to determine whether an adverse 
action was based on religion or another protected characteristic. For 
example, a legal think tank commented that OFCCP's failure to 
meaningfully address various cases discussing the issue of pretext on 
the basis that they ``turn on their individual facts'' contravenes 
OFCCP's stated goal of ``bringing clarity and certainty to federal 
contractors.'' OFCCP disagrees with these commenters' characterization 
of the NPRM, but reiterates--and to the extent necessary, clarifies for 
their benefit--that OFCCP intends to apply the religious exemption as 
it has been applied in the mine run of Title VII cases. In line with 
those cases, there are indeed aspects of the discrimination inquiry 
that are necessarily and rightly nuanced and fact-dependent, and there 
are aspects where inquiry can infringe upon religious organizations' 
autonomy and are either prohibited or must be performed with care. The 
principles set out in those cases are reiterated below.
    First, if a contractor raises the defense that an employee or 
applicant is covered by the ministerial exception, OFCCP can inquire 
whether that is in fact so. But if so, then that is the end of the 
inquiry. OFCCP will not apply the executive order in those 
circumstances. See Our Lady of Guadalupe, 140 S. Ct. at 2060-61; 
Hosanna-Tabor, 565 U.S. at 194-95.
    Second, when the ministerial exception does not apply and the 
employee or applicant suffers adverse employment action by a contractor 
that is entitled to the religious exemption, OFCCP will apply 
traditional Title VII tools to ascertain whether the action was 
impermissible discrimination. In the absence of direct evidence of 
discrimination on a protected basis other than religion, this will 
typically involve application of the familiar McDonnell Douglas 
framework, in which (1) OFCCP must establish a prima facie case of 
discrimination on a protected basis other than religion; (2) the 
employer can respond with a nondiscriminatory reason, such as an 
explanation that its action was permitted under the religious exemption 
as pertaining to the individual's particular religion; and (3) OFCCP, 
to find a violation, must rebut that explanation as a mere pretext. See 
McDonnell Douglas, 411 U.S. 792.
    Third, ascertaining whether unlawful discrimination motivated an 
employer's action requires consideration of all relevant facts and 
circumstances. OFCCP will consider all available evidence as to whether 
a religious organization's employment action was in fact sincerely 
motivated by the applicant's or employee's particular religion--such 
as, for instance, their adherence to the organization's religious 
tenets--or whether that was a mere pretext for impermissible 
discrimination.
    Fourth, while OFCCP can inquire into the sincerity of the 
employer's religious belief, it is constitutionally prohibited from 
refereeing internal religious matters of contractors that are entitled 
to the religious exemption. Thus OFCCP cannot decide, when the matter 
is disputed, whether the employer or the employee has the better 
reading of religious doctrine; whether an employee should be considered 
a faithful member of a religious organization's community; whether some 
religious offenses or requirements are more important than others and 
should merit particular employment responses; whether the employer's 
sincerely held religious view is internally consistent or logically 
appealing; and similar issues.
    Fifth, OFCCP believes these principles will cover the vast majority 
of scenarios, but there may be rare instances where an inquiry by a 
court or an agency into employment practices otherwise threatens First 
Amendment rights. See DeMarco v. Holy Cross High Sch., 4 F.3d 166, 172 
(2d Cir. 1993) (``There may be cases involving lay employees in which 
the relationship between employee and employer is so pervasively 
religious that it is impossible to engage in an age-discrimination 
inquiry without serious risk of offending the Establishment Clause.''). 
Commenters argued that this final caveat detracted from the clarity of 
the proposed rule. OFCCP disagrees. This observation merely notes, as 
have courts, that there may be instances outside the ministerial 
exception where a discrimination case might involve the kinds of 
questions prohibited by the First Amendment. See id. (finding 
employee's failed religious duties were ``easily isolated and 
defined,'' so a trial could be conducted ``without putting into issue 
the validity or truthfulness of Catholic religious teaching''). 
Instructive here are the sorts of questions found constitutionally 
offensive by the Supreme Court in Catholic Bishop, in which a hearing 
officer tested a witness's memory and knowledge of Catholic liturgies 
and masses. See Catholic Bishop, 440 U.S. at 502 & n.10; id. at 507-08 
(appendix); see also Great Falls, 278 F.3d at 1343. OFCCP believes 
these cases provide sufficient principles for the agency to properly 
guide its inquiry if and when needful.
f. Causation
    OFCCP proposed to apply a but-for standard of causation when 
evaluating claims of discrimination by religious organizations based on 
protected characteristics other than religion. Specifically, where a 
contractor that is entitled to the religious exemption claims that its 
challenged employment action was based on religion, OFCCP proposed 
finding a violation of E.O. 11246 only if it could prove by a 
preponderance of the evidence that a protected characteristic other 
than religion was a but-for cause of the adverse action. See Univ. of 
Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 362-63 (2013); Gross v. FBL 
Fin. Servs., Inc., 557 U.S. 167, 180 (2009). OFCCP stated

[[Page 79359]]

that this approach was necessary in situations where a religious 
organization, acting on a sincerely held belief, took adverse action 
against an employee on the basis of the employee's religion. OFCCP 
believed that application of the motivating factor framework in such 
cases might result in inappropriate encroachment upon the 
organization's religious integrity. However, the NPRM recognized that 
in prior notice-and-comment rulemaking implementing Executive Order 
13665, 79 FR 20749 (Apr. 11, 2014) (amending E.O. 11246 to include pay 
transparency nondiscrimination), OFCCP rejected comments stating that a 
but-for causation standard was required and instead adopted the 
motivating factor framework as expressed in the Title VII post-1991 
Civil Rights Act for analyzing causation. See 80 FR 54934, 54944-46 
(Sept. 11, 2015).
    A few commenters encouraged OFCCP to adopt the proposed but-for 
causation standard because they felt it would reduce government 
encroachment on religious autonomy. For instance, a private religious 
university commented that the proposed but-for standard is in line with 
statutory and First Amendment jurisprudence requiring the use of the 
least restrictive means to achieve government objectives that impinge 
on the exercise of religion. Another private religious university 
echoed this sentiment and added that the proposed but-for standard 
would enable religious entities to make employment decisions consistent 
with their sincerely held religious beliefs while still participating 
fully in the marketplace.
    However, the majority of commenters who addressed the proposed but-
for standard opposed it, and many recommended that OFCCP instead 
continue to apply the motivating-factor standard of causation to all 
claims of discrimination under E.O. 11246. These commenters cited a 
wide variety of concerns related to the proposed but-for standard.
    Several commenters stated that the proposed standard would be too 
deferential to employers and/or impose too heavy a burden on employees. 
For instance, a national interfaith organization commented that, as 
long as an employer can cite another plausible reason for its actions, 
an employee cannot prove that discrimination occurred. The organization 
noted that under this standard, employees are far less likely to 
prevail.
    Other commenters expressed skepticism at OFCCP's proffered 
rationale for departing from its established policy and practice of 
interpreting the nondiscrimination requirements of E.O. 11246 in a 
manner consistent with Title VII principles. For instance, a national 
reproductive rights organization commented that, for decades, courts 
have resolved claims of employment discrimination by religious 
organizations without implicating the concerns OFCCP cites. The 
organization added that OFCCP's concerns about impermissible 
entanglement are overblown and unsupported by case law. A transgender 
legal professional organization expressed similar concerns.
    Relatedly, a number of commenters opposed the proposed but-for 
standard on the basis that it conflicts with Title VII and related case 
law. Several of these commenters criticized OFCCP's reliance on Nassar, 
570 U.S. at 362-63, and Gross, 557 U.S. at 180, and argued that these 
cases do not bridge the gap between the proposed but-for standard and 
Title VII principles. For instance, a contractor association commented: 
``The Supreme Court has adopted the `but for' standard for retaliation 
claims under Title VII (Nassar) and for ADEA claims (Gross); it has not 
done so for discrimination claims under Title VII.'' Similarly, an LGBT 
rights advocacy organization commented the two cases cited by OFCCP did 
not adopt a but-for causation requirement for Title VII or E.O. 11246 
cases.
    Additionally, multiple commenters expressed concern that the 
proposed but-for standard would run contrary to E.O. 11246's 
prohibition on discrimination and/or OFCCP's core mission of enforcing 
the Executive Order. For instance, a group of state attorneys general 
commented that the proposed but-for standard is contrary to law and 
exceeds OFCCP's authority because it impermissibly interprets the 
Executive Order's anti-discrimination provisions. And a national health 
policy organization commented: ``The new proposed rule threatens to 
jeopardize the very mission of OFCCP and the original intent of the 
E.O. 11246 to protect workers from discrimination . . . .''
    Finally, several commenters raised practical objections to the 
proposed but-for standard. For instance, an atheist civil liberties 
organization commented that applying different causation standards to 
cases involving similarly situated employers would ``make it 
challenging for contractors seeking to comply with federal law, 
resulting in extra expense and legal confusion for workers and 
employers.'' An organization that advocates separation of church and 
state expressed similar concerns, arguing that ``status-based 
discrimination claims based on identical conduct would be evaluated 
according to different standards of proof.''
    Considering the comments received, OFCCP will apply the motivating-
factor analysis to all claims of discrimination, including 
discrimination by religious organizations based on protected 
characteristics other than religion. OFCCP agrees that it can avoid 
impermissible entanglement while applying a motivating-factor standard 
of causation. See, e.g., Curay-Cramer, 450 F.3d at 139 (``[A]s long as 
the plaintiff did not challenge the validity or plausibility of the 
religious doctrine said to support her dismissal, but only questioned 
whether it was the actual motivation, excessive entanglement questions 
were not raised.'') (citing Geary, 7 F.3d at 330); DeMarco, 4 F.3d at 
170-71)). Where there is a dispute as to whether an employment action 
was motivated by the employee's adherence to religious tenets, or 
instead was motivated by impermissible discrimination--a ``one or the 
other'' scenario--OFCCP will apply the principles just discussed in 
subsection II.A.5.e, ``Application of the Religious Exemption.'' Where 
instead an employment action is motivated by the employee's adherence 
or non-adherence to religious tenets that implicate another protected 
category, OFCCP will assess the action on a case-by-case basis in 
accordance with the general RFRA analysis discussed earlier. The 
approach adopted in this final rule is consistent with OFCCP's 
longstanding policy and practice as well as Title VII principles and 
case law.
f. Conclusion
    For the reasons described above and in the NPRM, and considering 
the comments received, OFCCP finalizes the proposed definition of 
Particular religion without modification.

B. Section 60-1.5 Exemptions

    This rule proposed to add paragraph (e) to 41 CFR 60-1.5 to 
establish a rule of construction for subpart A of 41 CFR part 60-1 that 
provides for the broadest protection of religious exercise permitted by 
the Constitution and laws, including RFRA. This rule of construction is 
adapted from RLUIPA, 42 U.S.C. 2000cc-3(g). Significantly, RFRA applies 
to all government conduct, not just to legislation or regulation. 42 
U.S.C. 2000bb-1. Paragraph (e) is clarifying, since the Constitution 
and federal law, including RFRA, already bind OFCCP.
    Some commenters expressed general support for the proposed rule of

[[Page 79360]]

construction based on the importance of protecting religious freedom, 
including constitutional protections. For example, a religious 
leadership and policy organization approved of the fact that the 
proposal gives religious freedom due deference by advocating for a 
broad and robust interpretation of its protections. In a joint comment, 
a religious legal association and an association of evangelical 
churches and schools commented that the proposed rule of construction 
reflects longstanding religious freedom principles recognized by 
Congress and protected by the First Amendment. A pastoral membership 
organization commented that the proposed rule of construction gives 
religious exercise the special protection required by the 
constitutional text and history. A religious professional education 
association commented that the proposed rule of construction provided 
clarity regarding the meaning, scope, and application of the religious 
exemption. Additional supportive commenters, including an evangelical 
chaplains' advocacy organization, stated that the rule of construction 
is consistent with executive orders and the Attorney General's 
memorandum on religious liberty.
    Other commenters opposed the proposed rule of construction for a 
variety of reasons, including arguing that its application in this 
context would actually be inconsistent with the U.S. Constitution and 
federal laws. For example, a labor organization commented that the 
interpretation goes beyond the Constitution and law, including RFRA. An 
anti-bigotry religious organization further noted, with regard to RFRA, 
the Supreme Court's holding in Hobby Lobby that ``anti-discrimination 
prohibitions are the least restrictive means of achieving the 
government's compelling interest in providing equality in the 
workplace,'' and commented that this principle applied with greater 
force to employment by federal contractors. Other commenters, including 
a group of state attorneys general and a transgender advocacy 
organization, cautioned that construing the religious exemption broadly 
would ``exceed[ ] statutory and judicial limits'' and conflict with the 
purpose and text of federal equal employment laws to provide maximum 
nondiscrimination protections for workers. A talent management 
assessment company commented that the ``maximum extent permitted by 
law'' standard was vague and left too much discretion to the agency 
charged with enforcement.
    OFCCP did not intend, in proposing the rule of construction at 
Sec.  60-1.5(e), to create any new legal obligation or proscription on 
the rights of workers, but rather sought only to reaffirm existing 
protections found in federal law that already apply to OFCCP. The 
parallel rule of construction in RLUIPA has been in place for nearly 20 
years and has proved to be a workable legal standard. OFCCP emphasizes 
that this rule of construction provides for broad protection of both 
employers' and employees' religious exercise. Moreover, by its terms, 
the provision limits the agency's interpretation of this protection to 
what is permitted under the U.S. Constitution, RFRA, and other 
applicable laws. It thus reflects the Supreme Court's recognition that, 
within the religion clauses of the First Amendment, there is ``room for 
play in the joints productive of a benevolent neutrality which will 
permit religious exercise to exist without sponsorship and without 
interference.'' Walz, 397 U.S. at 669. Accordingly, for the reasons 
described above and in the NPRM, considering the comments received, 
OFCCP finalizes the proposed rule of construction without modification.

C. Severability

    The Department has decided to include severability provisions as 
part of this final rule. To the extent that any provision of this final 
rule is declared invalid by a court of competent jurisdiction, the 
Department intends for all other provisions that are capable of 
operating in the absence of the specific provision that has been 
invalidated to remain in effect. Severability clauses have been added 
at the end of 41 CFR 60-1.3 and as a new paragraph, 41 CFR 60-1.5(f).

III. Other Comments

    Numerous commenters raised a variety of other general points about 
the proposed rule.

A. Religious Liberty for Employees

    Several commenters opposed the proposed rule as undermining or 
failing to promote religious liberty. For instance, a group of U.S. 
Senators commented that the proposed rule will allow employers to 
refuse to interview even highly qualified candidates simply because 
they do not regularly attend religious services in their employer's 
faith. According to the Senators, this could create a situation in 
which religious employers are allowed to discriminate against workers 
``who practice their faith differently--a fundamental right guaranteed 
by the Constitution.'' A religious women's organization echoed this 
concern and also stated that the proposed rule would promote one 
interpretation of one religion--namely, evangelical Christianity--at 
the expense of religious liberty more broadly. Some commenters stated 
that the proposal would allow contractors to compel employees to follow 
their religious practices, which they argued directly violates Title 
VII and even the Constitution. A group of state attorneys general 
commented that, under the proposed rule, employers' religious freedom 
would come at the cost of the loss of the religious freedom of 
employees forced to abide by their employers' religious beliefs. A 
legal professional organization commented that the proposed rule would 
protect for-profit or nominally religious employers' right to require 
employees to participate in prayer or other religious practices. A 
religious organization commented that employers could invoke the 
religious exemption to coerce their workers into participating in 
certain religious practices under the threat of termination. Several 
other commenters, including a legal professional association, an 
organization that advocates separation of church and state, an anti-
bigotry religious organization, and a migrants' rights organization, 
expressed general concern that the proposed rule would weaken religious 
liberty.
    OFCCP believes that the final rule's overall effect will be to 
promote religious liberty. See, e.g., Hobby Lobby, 573 U.S. at 707 
(``[P]rotecting the free-exercise rights of corporations like Hobby 
Lobby, Conestoga, and Mardel protects the religious liberty of the 
humans who own and control those companies.''). The Supreme Court has 
described the expansion of the Title VII religious exemption as 
``lifting a regulation that burdens the exercise of religion.'' Amos, 
483 U.S. 327, 338 (1987). As described above, the proposed definitions 
have been altered in the final rule to respond to commenters' concerns 
that nominally religious employers might qualify for the exemption, as 
well as to clarify the steps OFCCP will take in analyzing claims of 
discrimination by religious contractors. To the extent that commenters 
believe that the religious exemption itself increases employers' 
religious liberty at the expense of employees' religious liberty, OFCCP 
reiterates that it is required to administer the religious exemption as 
part of E.O. 11246. The President, following Congress's lead, has 
already decided how to balance the religious liberty of religious 
employers and their employees, and OFCCP cannot modify that. 
Additionally, claiming the

[[Page 79361]]

religious exemption and taking employment action under its protections 
is purely optional for employers; the government does not require any 
employment action that may be protected by the exemption.

B. Establishment Clause and Other Constitutional Questions

    Several commenters stated that the proposal violates constitutional 
prohibitions on aiding private actors that discriminate. This concern 
was shared by an affirmative action professionals association, a civil 
liberties organization, a professional organization of educators, and 
an organization that advocates separation of church and state, among 
others. The civil liberties organization commented, for instance, that 
the proposed rule would permit contractors to discriminate with federal 
funds, thus putting the government's imprimatur on discrimination in 
violation of the Equal Protection and Establishment Clauses.
    A variety of commenters opposed the proposed rule on the basis that 
it violates the Establishment Clause and/or general church-state 
separation principles. For instance, an atheist civil liberties 
organization commented that the proposed rule will violate the 
Constitution's religion clauses by involving the government in 
religious practice, promoting dominant religious practices, burdening 
unpopular religious practices, and harming third parties. Similarly, a 
labor union raised concerns that the rule crosses into territory 
proscribed by the Establishment Clause by authorizing federal 
contractors to advance their religious preferences and practices 
through the receipt of federal funds and the performance of public 
functions.
    Other commenters stated that the proposed rule violates separation 
of powers. For instance, an LGBT rights advocacy organization stated 
that since 2001, Congress has repeatedly rejected efforts to extend the 
Title VII exemption to government-funded entities. Likewise, a 
consortium of federal contractors and subcontractors asserted that it 
would be inappropriate for OFCCP to regulate the religious exemption 
without direct and actual legislative or constitutional guidance.
    Finally, several commenters, including an anti-bigotry religious 
organization and a civil liberties and human rights legal advocacy 
organization, raised concerns that the proposal violates a variety of 
other constitutional principles, including the no-religious-tests 
clause, the free speech clause, and the constitutional right of 
privacy.
    Other commenters supported the proposed rule as consistent with 
constitutional principles. These commenters stated, among other things, 
that the proposal appropriately respects freedom of religion, helpfully 
clarifies that religious hiring protections apply even when federal 
funding is involved, and is consistent with the Establishment Clause. A 
religious liberties legal organization commented, for instance, that 
the proposed rule adheres to the traditional understanding that ``the 
Constitution [does not] require complete separation of church and 
state; it affirmatively mandates accommodation, not merely tolerance, 
of all religions, and forbids hostility toward any'' (quoting Lynch v. 
Donnelly, 465 U.S. 668, 668 (1984)). A religious leadership and policy 
organization commented that the proposal reflects an accurate 
understanding of the free exercise of religion and ``its place in our 
society.''
    OFCCP agrees with the commenters who stated that the proposal is 
consistent with constitutional principles. As noted in the NPRM and 
above, OFCCP believes that the final rule is supported by recent 
Supreme Court decisions that protect religion-exercising organizations 
and individuals under the U.S. Constitution and federal law. See, e.g., 
Little Sisters of the Poor, 140 S. Ct. 2367; Espinoza, 140 S. Ct. 2246; 
Our Lady of Guadalupe, 140 S. Ct. 2049; Masterpiece Cakeshop, 138 S. 
Ct. 1719; Trinity Lutheran, 137 S. Ct. 2012; Hobby Lobby, 573 U.S. 682; 
Hosanna-Tabor, 565 U.S. 171. These decisions make clear, among other 
constitutional principles, that ``condition[ing] the availability of 
benefits upon a recipient's willingness to surrender his religiously 
impelled status effectively penalizes the free exercise of his 
constitutional liberties.'' Trinity Lutheran, 137 S. Ct. at 2022 
(alterations omitted) (quoting McDaniel, 435 U.S. at 626 (plurality 
opinion)); see also Espinoza, 140 S. Ct. at 2256. OFCCP believes that 
the final rule achieves consistency with these landmark Supreme Court 
decisions and is constitutionally valid. Moreover, the definitions and 
rule of construction adopted in the final rule will help OFCCP avoid 
the ``constitutional minefield'' into which some courts have fallen 
when adjudicating Title VII claims against religious organizations. 
World Vision, 633 F.3d at 730 (O'Scannlain, J., concurring). The final 
rule will enable OFCCP to apply the religious exemption without 
engaging in an analysis that would be inherently subjective and 
indeterminate, outside its competence, susceptible to discrimination 
among religions, or prone to entanglement with religious activity. See, 
e.g., Mitchell v. Helms, 530 U.S. 793, 828 (2000) (plurality opinion); 
Colo. Christian Univ. v. Weaver, 534 F.3d 1245, 1261-62 (10th Cir. 
2008); Great Falls, 278 F.3d at 1342-43. We address these points in 
more detail next.
1. Neutrality Toward Religion
    The rule does not impermissibly favor religion. In Bowen v. 
Kendrick, 487 U.S. 589 (1988), the Supreme Court held that a religious 
organization is not disqualified from government programs that fund 
religious and nonreligious entities alike on a neutral basis. A 
``neutral basis'' means that the criteria are neutral and secular, with 
no preference for religious institutions because of their religious 
character. Id.; see also Rosenberger v. Rector & Visitors of Univ. of 
Va., 515 U.S. 819 (1995) (``A central lesson of our decisions is that a 
significant factor in upholding governmental programs in the face of 
Establishment Clause attack is their neutrality towards religion.''); 
U.S. Dep't of Justice, Office of Legal Counsel, Religious Restrictions 
on Capital Financing for Historically Black Colleges and Universities, 
2019 WL 4565486 (Aug. 15, 2019) (``Religious Restrictions'') (``The 
neutrality principle runs throughout the Court's decisions, and is 
broadly consistent with a tradition of federal support for religious 
institutions that dates from the time of the Founding.'').
    This rule is motivated by legitimate secular purposes: To expand 
the eligible pool of federal contractors to include religious 
organizations, so that the federal government may choose from among 
competing vendors the best combination of price, quality, reliability, 
and other purely secular criteria; to clarify the law for religious 
organizations and thus reduce compliance burdens; to correct any 
misperception that religious organizations are disfavored in government 
contracting; and ``to alleviate significant governmental interference 
with the ability of religious organizations to define and carry out 
their religious missions,'' Amos, 483 U.S. at 336, by appropriately 
protecting their autonomy to hire employees who will further their 
religious missions. The final rule also has a religion-neutral effect. 
Under the final rule, both religious and secular organizations will 
retain the ability to bid on government contracts. Proposed vendors 
will have to compete solely on the basis of secular criteria. The use 
of sectarian criteria remains forbidden; nothing in the

[[Page 79362]]

proposed rule sanctions the use of sectarian criteria for contract 
awards.
2. Secular and Sectarian Activities
    Nothing in the final rule sanctions direct federal funding of 
religious activities. In Kendrick, the Court forbade such direct 
funding of religious activity but upheld a statute authorizing payments 
to religious organizations that sought to eliminate or reduce the 
social and economic problems caused by teenage sexuality because the 
services to be provided under the statute were ``not religious in 
character.'' Kendrick, 487 U.S. at 605; see also U.S. Dep't of Justice, 
Office of Legal Counsel, Department of Housing and Urban Development 
Restrictions on Grants to Religious Organizations that Provide Secular 
Social Services, 12 Op. O.L.C. 190, 199 (1998) (concluding that the 
government can fund a religious organization's secular activities if 
they can be meaningfully and reasonably separated from the sectarian 
activities). Likewise here, in the relatively rare circumstances in 
which a proposed vendor both qualifies as a religious organization and 
receives a federal contract, the federal funds will pay the 
organization to fulfill the terms of the secular contract, not to pray 
or to proselytize.
    Moreover, the Establishment Clause does not forbid the federal 
government from contracting with religious organizations for a secular 
purpose, even if the receipt of the contract incidentally helps the 
religious organization advance its sectarian purpose. As Kendrick 
explained, ``Nothing in our previous cases prevents Congress from . . . 
recognizing the important part that religion or religious organizations 
may play in resolving certain secular problems. . . . To the extent 
that this congressional recognition has any effect of advancing 
religion, the effect is at most `incidental and remote.' '' 487 U.S. at 
607; see, e.g., Roemer v. Bd. of Pub. Works of Md., 426 U.S. 736 (1976) 
(``[R]eligious institutions need not be quarantined from public 
benefits that are neutrally available to all.''); Barnes-Wallace v. 
City of San Diego, 704 F.3d 1067 (9th Cir. 2012) (finding no 
Establishment Clause violation where city leased land to both secular 
and sectarian organizations). Here, as in Kendrick, nothing in the 
final rule ``indicates that a significant proportion of the federal 
funds will be disbursed to `pervasively sectarian' institutions.'' 
Kendrick, 487 U.S. at 610. There are also no concerns that funds will 
be used for an ``essentially religious endeavor''; rather, funds will 
be used to fulfill the government' secular contracting requirements. 
Espinoza, 140 S. Ct. at 225. The rule simply allows religious 
organizations to compete with secular organizations on the basis of 
secular criteria without being forced to compromise their religious 
purpose. Commenters objecting on this basis are dissatisfied with the 
existence of the exemption.
3. Respecting the First Amendment
    Of great significance to OFCCP, the rule's clarifications and 
accommodations better comport with the Free Exercise Clause by 
affording religious organizations an appropriate level of autonomy in 
their hiring decisions while still permitting them to engage in federal 
contracting. As the Court explained in Trinity Lutheran, 137 S. Ct. at 
2022, the government violates the Free Exercise Clause when it 
conditions a generally available public benefit on an entity's giving 
up its religious character, unless that condition withstands the 
strictest scrutiny. ``[D]enying a generally available benefit solely on 
account of religious identity imposes a penalty on the free exercise of 
religion that can be justified only by a state interest of the highest 
order.'' Id.; see also Locke v. Davey, 540 U.S. 712 (2004) (holding 
government may not deny generally available funding to a sectarian 
institution because of its religious character); Trinity Lutheran, 137 
S. Ct. at 2021 (``The Department's policy expressly discriminates 
against otherwise eligible recipients by disqualifying them from a 
public benefit solely because of their religious character. . . . 
[S]uch a policy imposes a penalty on the free exercise of religion that 
triggers the most exacting scrutiny.'' (citing Lukumi, 508 U.S. at 
546)). When the government conditions a program in this way, the 
government ``has punished the free exercise of religion. ``To condition 
the availability of benefits . . . upon [a recipient's] willingness to 
. . . surrender[] his religiously impelled [status] effectively 
penalizes the free exercise of his constitutional liberties.'' Id. at 
2022 (quoting McDaniel, 435 U.S. at 626 (plurality opinion)); cf. 
Trinity Lutheran, 137 S. Ct. at 2022 (citing Ne. Fla. Chapter, 
Associated Gen. Contractors of Am. v. Jacksonville, 508 U.S. 656, 666 
(1993) (``[T]he `injury in fact' is the inability to compete on an 
equal footing in the bidding process, not the loss of a contract.'')).
    In a recent opinion, the Department of Justice's Office of Legal 
Counsel concluded that the government violates the Free Exercise Clause 
by denying sectarian organizations an opportunity to compete on equal 
footing for federal dollars. See Religious Restrictions, 2019 WL 
4565486. As an initial matter, OLC explained that ``[t]he Establishment 
Clause permits the government to include religious institutions, along 
with secular ones, in a generally available aid program that is secular 
in content. There is nothing inherently religious in character about 
loans for capital improvement projects; this is not a program in which 
the government is `dol[ing] out crosses or Torahs to [its] citizens.' 
'' Id. at *6 (citing Am. Atheists, Inc. v. City of Detroit Downtown 
Dev. Auth., 567 F.3d 278, 292 (6th Cir. 2009)). Because the capital-
financing program at issue was a secular, neutral aid program, it did 
not violate the Establishment Clause. On the other hand, the government 
would violate the Free Exercise Clause by denying loans to an 
institution ``in which a substantial portion of its functions is 
subsumed in a religious mission,'' because such a restriction 
``discriminates based on the religious character of an institution.'' 
OLC concluded that the appropriate balance was to deny loans under the 
program only for facilities that are predominantly used for devotional 
religious activity, or for facilities that offer only programs of 
instruction devoted to vocational religious education.
    Here, some commenters made clear that the federal government's 
current practice presented religious organizations with a dubious 
choice: They may participate in the government contracting process or 
retain their religious integrity, but not both. As one commenter noted, 
``If the best service provider or subcontractor happens to be a 
religious entity, they are often unwilling to comply with the federal 
anti-discrimination laws for fear that they will no longer be able to 
preserve the integrity of their organizations. This is a direct result 
of the uncertainty in the applicability of the religious exemption 
under the current law.'' Similarly, another commenter, an association 
of medical professionals, recently surveyed health professional members 
working in faith-based organizations overseas and found that almost 
half, 49%, feel that the U.S. government is not inclined to work with 
faith-based organizations. The final rule thus removes any such 
concerns raised by contractors and instead provides appropriate 
religious accommodation.
4. Use of Federal Funds
    Some commenters expressed concern that the rule would allow 
employers to use federal funds to discriminate against job applicants 
and employees on the

[[Page 79363]]

basis of religion. That is a critique of the E.O. 11246 religious 
exemption itself, not this rule. OFCCP cannot and does not by this rule 
reopen that determination by the President. Additionally, as noted 
earlier, claiming the religious exemption and taking employment action 
under its protections is purely optional for employers; the government 
does not require any employment action that may be protected by the 
exemption.
    Regardless, as the Department of Justice's Office of Legal Counsel 
has pointed out, the federal government has repeatedly permitted 
religious organizations to receive federal funds while also maintaining 
autonomy over their hiring practices. See 31 O.L.C. 162, 185-86 (2007); 
accord Office of the Att'y Gen., Memorandum for All Executive 
Departments and Agencies: Federal Law Protections for Religious Liberty 
at 6 (Oct. 6, 2017), available at www.justice.gov/opa/press-release/file/1001891/download. Likewise, the proposed rule does not run afoul 
of the Establishment Clause merely because of the possibility that, in 
some rare instance, a court may determine that a particular contract 
award to a religious organization impermissibly endorses religion. 
``[W]hile religious discrimination in employment might be germane to 
the question whether an organization's secular and religious activities 
are separable in a government-funded program, that factor is not 
legally dispositive.'' U.S. Dep't of Justice, Office of Legal Counsel, 
Memorandum for William P. Marshall from Randolph D. Moss at 20 (Oct. 
12, 2000), available at justice.gov/olc/page/file/936211/download. To 
the contrary, if the government ``is generally indifferent to the 
criteria by which a private organization chooses its employees and to 
the identity and characteristics of those employees, there would be 
less likelihood that the government could reasonably be perceived to 
endorse the organization's use of religious criteria in employment 
decisions.'' Id. at 25. And in some situations, the religious exemption 
``might be a permissible religious accommodation that alleviates 
special burdens rather than an impermissible religious preference.'' 
Id. at 30. For instance, the Office of Legal Counsel concluded that 
RFRA in one instance required the Department's grant-making arm to 
exempt a religious organization from the religious nondiscrimination 
provisions of Title VII. See id.; see also 31 O.L.C. 162, 190 (2007). 
Here, several religious organizations commented that the current 
contracting rules erect a barrier to participation by eroding their 
ability to hire members of their particular faith. Generally speaking, 
then, OFCCP, in line with case law from Amos to Trinity Lutheran, views 
this rule as merely providing permissible accommodation rather than 
impermissibly establishing religion.
5. Effects on Applicants and Employees
    Finally, several commenters opposed the proposed rule on the basis 
that it would increase discrimination against contractors' employees 
and applicants. Some cited historical discrimination against 
disadvantaged groups, warning that the proposal would cause a 
regression in civil rights protections, and stated that religion has 
often been used as a way to justify discrimination. For example, an 
affirmative action professionals association asserted that employment 
discrimination permitted by the proposed rule could eliminate the civil 
rights protections that minorities and women have enjoyed for decades.
    Commenters also gave examples of how potential discrimination could 
play out. For example, an organization advocating for the separation of 
church and state commented that, for instance, an evangelical Christian 
might refuse to hire a gay man, but agree to hire a twice-divorced, 
thrice-married man, even though both homosexuality and divorce are 
prohibited by evangelical Christianity. An LGBT civil rights 
organization argued that even a construction company, janitorial 
service, or low-level healthcare provider could claim a religious 
mission and refuse to hire or provide services to single parents or 
individuals who become pregnant outside marriage or within a same-sex 
relationship.
    Many commenters warned that adoption of the proposed rule would 
increase discrimination against lesbian, gay, bisexual, transgender, 
and queer (LGBTQ) individuals, specifically. Some commenters alleged 
that the proposed rule was part of a concerted effort to roll back the 
rights of LGBTQ individuals and other disadvantaged groups. Several 
commenters stated that transgender employees in particular already face 
high rates of discrimination and poverty, and that this proposal would 
leave them even more vulnerable. A transgender civil rights and 
advocacy organization commented specifically that transgender people 
are already far more likely to be unemployed, and that approximately 1 
in 4 earn less than $24,000 per year. A women and family rights 
advocacy organization wrote that, currently, almost half of LGBTQ 
workers report actively concealing their identity out of fear of 
discrimination, and that the proposal would exacerbate this issue. 
Commenters wrote that effects might include LGBTQ individuals being 
less inclined to seek HIV care and services for the aging, as well as 
facing increased vulnerability to trafficking. Others stated that the 
proposal would permit contractors to discriminate against people in 
same-sex relationships, including refusing to hire applicants, 
terminating employees when they marry someone of the same sex, or 
denying spousal benefits. Several commenters stated that even LGBTQ 
people of faith would be discriminated against.
    Commenters also asserted that the proposed rule could increase 
discrimination against women and pregnant people based on religious 
beliefs about work, family roles, and reproduction. This included the 
possibility of discrimination against women for becoming pregnant 
outside of marriage, using contraception, using in vitro fertilization, 
seeking abortions, or getting divorced. An organization combatting 
hunger wrote that even facially neutral practices may 
``disproportionately'' harm women, because when an employer opposes 
``sexual practices out of wedlock, those who bear the physical 
evidence--pregnancy--are going to be the ones that get fired.'' Several 
commenters also stated that employers may discriminate against women 
based on religious beliefs that women should not work outside the home. 
For example, a women and family rights advocacy organization commented 
that some employers may refuse to hire women altogether, and that women 
may also be denied health insurance, professional growth opportunities, 
or other benefits because of an employer's belief that women are not 
the ``head of the household'' and therefore do not need such benefits. 
Additionally, an interfaith policy and advocacy organization commented 
that an employer could cite a belief that women should not be alone 
with men they are not married to in order to deny female employees 
access to mentorship, training opportunities, and senior leadership 
positions in the workplace.
    Commenters also asserted that the proposal would increase 
discrimination against religious minorities and/or atheists. Many 
stated that federal contractors should not be permitted to 
categorically exclude applicants of a particular religion. A 
transgender civil rights and advocacy organization commented that the 
proposed rule would promote sectarianism by allowing people of 
different faiths to

[[Page 79364]]

discriminate against one another. A number of commenters, including a 
civil liberties advocacy group and an interfaith policy and advocacy 
organization, commented: ``Federal contractors should not be allowed to 
hang a sign that says `Jews, Sikhs, Catholics, Latter-day Saints need 
not apply.' ''
    Many commenters asserted that the proposal could allow racial 
discrimination as well. An organization combatting hunger claimed that 
discrimination would occur by citing a 2014 study in their comment 
which found that only 10% of Americans were comfortable permitting a 
small business to refuse service to African-Americans based on a 
religious reason. Commenters including an LGBTQ wellness organization 
also warned that, under the proposal, a religious contractor will be 
permitted to discriminate against interracial couples if it believes 
that marriage should be between a man and a woman of the same race. A 
legal think tank commented that employers could require employees to 
join a majority- or exclusively-white church, for instance, or to share 
particular religious beliefs that have racial implications and/or are 
more common among white Christians.
    Some commenters argued that federal funds should not be used by 
contractors who may commit hiring discrimination. For example, a 
transgender advocacy organization commented that people should not be 
legally compelled to financially support entities that would refuse to 
employ them because of their identities, and noted that religious 
employers who seek to employ only ``their own kind'' should seek out 
non-federal funding. Other commenters stated that U.S. federal 
government contracting serves as a model for the private sector or 
foreign nations, which may emulate discriminatory practices permitted 
by this proposal.
    As explained above, the religious exemption generally speaking does 
not excuse a contractor from complying with E.O. 11246's requirements 
regarding antidiscrimination and affirmative action; notices to 
applicants, employees, and labor unions; compliance with OFCCP's 
implementing regulations; the furnishing of reports and records to the 
government; and flow-down clauses to subcontractors. See E.O. 11246 
Sec. Sec.  202-203. Religious organizations that serve as government 
contractors must comply with all of E.O. 11246's nondiscrimination 
requirements except in some narrow respects, under some narrow and 
reasonable circumstances recognized under law, where religious 
organizations maintain, for instance, sincerely held religious tenets 
regarding matters such as marriage and intimacy which may implicate 
certain protected classes under E.O. 11246.
    Some commenters argued that the proposed rule would violate the 
Establishment Clause specifically because of the increased 
discrimination they believed it would permit. Most of these commenters 
argued that potential discrimination will unconstitutionally burden 
third parties, including employees, applicants, and beneficiaries of 
contracting services. A labor union wrote that granting employers a 
broad religious exemption would harm employees and applicants based on 
their own religious beliefs and practices (or lack thereof), in 
violation of the Establishment Clause.
    As noted above, the Supreme Court upheld Title VII's religious 
exemption, on which E.O. 11246's exemption is modeled, against an 
Establishment Clause challenge. Amos, 483 U.S. at 330. It did so in 
spite of the fact that the application of the exemption ``had some 
adverse effect on those holding or seeking employment with those 
organizations.'' Tex. Monthly, Inc. v. Bullock, 489 U.S. 1, 18 n.8 
(1989); cf. Amos, 483 U.S. at 338-39 (rejecting the claim that the 
religious exemption ``offends equal protection principles by giving 
less protection to the employees of religious employers than to the 
employees of secular employers'' in part because the exemption had ``a 
permissible purpose of limiting governmental interference with the 
exercise of religion''). If the E.O. 11246 religious exemption 
similarly affects some third parties, it does so to ``prevent[ ] 
potentially serious encroachments on protected religious freedoms.'' 
Texas Monthly, 489 U.S. at 18 n.8.
    Some commenters stated that what they viewed as the proposal's 
failure to consider the effects of increased discrimination made the 
proposed rule inconsistent with OFCCP's previous rulemakings. Multiple 
commenters stated that previous rulemakings identified discrimination 
as wasteful of taxpayers' money, and that this proposal failed to 
address this issue. For example, a state civil liberties organization 
commented that, in prior rules, OFCCP has consistently stated that 
discrimination in government contracting wastes taxpayer funds by 
preventing the hiring of the best talent, increasing turnover, and 
decreasing productivity. In addition, several commenters, including a 
women and family rights advocacy organization, referred to the rule as 
an ``abrupt departure'' from OFCCP's previous EEO enforcement. A civil 
liberties organization commented that the ``Department itself has 
previously acknowledged the harms of discrimination to the country as a 
whole, but ignores them entirely in the Proposed Rule.'' An LGBT legal 
services organization commented that the proposed rule indicates that 
OFCCP will not enforce the relevant protections sufficiently.
    Some commenters noted more specifically that they believe the 
proposal is inconsistent with the agency's rule implementing E.O. 
13672, which added sexual orientation and gender identity to the bases 
protected by E.O. 11246. For example, a legal think tank commented 
that, in its rule on sexual orientation and gender identity, OFCCP took 
into account the benefits of nondiscrimination--meaning that it would 
be arbitrary and capricious for OFCCP to ignore these benefits of non-
discrimination ``in the present rulemaking.'' A watchdog organization 
wrote that ``undoing these protections could have adverse long-term 
effects on the federal contracting system, including lower-quality 
goods and services, and impaired federal programs and missions.''
    Commenters also criticized the proposal as purportedly inconsistent 
with OFCCP's 2016 sex discrimination rule. A civil liberties 
organization commented that, in that rule, the agency cited social 
science research supporting the need for effective nondiscrimination 
enforcement. Similarly, a legal think tank wrote that, in its sex 
discrimination rulemaking, OFCCP specifically cited research indicating 
that employment discrimination against transgender workers is 
pervasive. These commenters asserted that OFCCP ignored such statistics 
in proposing the current rule.
    OFCCP continues to believe that discrimination by federal 
contractors generally has a negative impact on the economy and 
efficiency of government contracting. Indeed, that is one of the 
primary justifications for E.O. 11246. However, it has long been 
recognized that a religious exemption in the Executive Order is also 
warranted, Congress has determined that accommodations under RFRA are 
sometimes required, and OFCCP's policy is to respect the religious 
dignity of employers and employees to the maximum extent permissible by 
law. Further, OFCCP believes that this rule will have a net benefit to 
the economy and efficiency of government contracting. For those current 
and potential federal contractors and subcontractors interested in the

[[Page 79365]]

exemption, this rule will help them understand its scope and 
requirements and may encourage a broader pool of organizations to 
compete for government contracts and more of them, which will inure to 
the government's benefit.
    Commenters' concerns here are also exaggerated. As explained above, 
OFCCP does not anticipate this rule will affect the vast majority of 
contractors or the agency's regulation of them, since they do not and 
would not seek to qualify for the religious exemption. As commenters 
noted, religious organizations do not appear to be a large portion of 
federal contractors. And even for them, adherence to E.O. 11246's 
nondiscrimination provisions is required except in those circumstances 
well-established under law, including the religious exemption, the 
ministerial exception, and RFRA. OFCCP also reemphasizes that the 
proposed definitions have been altered in the final rule to respond to 
commenters' concerns that nominally religious employers might qualify 
for the exemption, as well as to clarify the steps OFCCP will take in 
analyzing claims of discrimination by religious contractors. As 
explained in more detail in the Regulatory Procedures section below, 
OFCCP has considered the possible adverse effects of the rule and 
believes they will be minimal and will be outweighed by the benefits.

C. The Equal Employment Opportunity Commission

    Some commenters raised concerns about this rule's compatibility 
with the positions of the EEOC. Different aspects of this concern have 
been described and addressed in earlier parts of this preamble. OFCCP 
consolidates those concerns and addresses them here as well. Those 
concerns included general concerns that the proposed rule would 
undermine the EEOC's efforts by taking positions contrary to the EEOC 
or that the proposed rule would introduce confusion by subjecting 
federal contractors to conflicting or at least different legal regimes. 
Commenters also objected to specific aspects of the rule on grounds 
that they differed from the EEOC's position, including the proposed 
rule's inclusion of for-profit entities as among those able to qualify 
for the religious exemption, the proposed rule's disagreement that the 
exemption's scope is limited to a coreligionist preference, and the 
proposed rule's but-for causation standard.
    OFCCP has a decades-long partnership with the EEOC and works 
closely with it to ensure equal employment opportunity for American 
workers. OFCCP rejects the idea that this rule would undermine that 
longstanding and constructive partnership. The EEOC reviewed the 
proposed rule and this final rule. This final rule applies only to 
government contractors and subcontractors, not the broader swath of 
U.S. employers that the EEOC regulates. Within that smaller segment of 
employers, it applies only to that small minority of contractors and 
subcontractors that qualify or may seek to qualify for the religious 
exemption. Among that group, they would need to have 15 or more 
employees to be covered by the EEOC. And within that group, there would 
still need to be a situation in which any differences between the views 
of OFCCP and EEOC would cause a different result. In short, OFCCP 
doubts this rule will create any systemic disharmony between the 
agencies' enforcement programs.
    For the small universe of employers remaining as defined above, the 
differences that may exist are minor. At the outset, OFCCP notes that 
EEOC does not have substantive rulemaking authority under Title VII, 
see EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 257 (1991), and the EEOC 
statements on this issue are in nonbinding subregulatory guidance. As 
to the specifics of that guidance, the differences that do exist are 
small. OFCCP has revised its approach in the final rule to adopt a 
motivating-factor standard of causation, so a difference there, 
assuming there was one, no longer exists. Regarding OFCCP's definition 
of Religious corporation, association, educational institution, or 
society, the EEOC's current subregulatory guidance on this topic has 
not been updated since 2008, before World Vision and Hobby Lobby were 
decided.\31\ Contrary to some commenters' assertions, this guidance 
treats for-profit status as a significant factor, but not as 
dispositive; this final rule does the same. Notably, the EEOC very 
recently issued a proposal to update its compliance manual on religious 
discrimination.\32\ This rule is not inconsistent with the proposal 
either, which notes that ``[t]he religious organization exemption under 
Title VII does not mention nonprofit and for-profit status'' and states 
that ``[w]hether a for-profit corporation can constitution a religious 
corporation under Title VII is an open question.'' \33\ The EEOC's 2008 
guidance states that the exception is only for organizations that are 
primarily religious. Its recently proposed guidance describes the 
inquiry as one into ``whether an entity is religious.'' \34\ OFCCP's 
test also seeks to identify organizations that are primarily 
religious--through an appropriately guided, reliable, and objective 
inquiry. The EEOC's 2008 guidance (and its proposed guidance) suggests 
an open-ended set of non-dispositive factors, while this final rule 
uses a set of clearly defined factors that are sufficient for non-
profit entities; regarding for-profit entities, additional evidence 
compatible with some of the additional factors listed by the EEOC's 
2008 guidance may come into play. Insofar as any difference still 
remains between this final rule and EEOC's 2008 guidance, OFCCP 
believes that difference is tolerable when weighed against the 
subsequent developments in the case law, the reasoning of which OFCCP 
finds persuasive, and OFCCP's desire for a more structured test, 
especially given OFCCP's unique contract-based regulatory structure.
---------------------------------------------------------------------------

    \31\ See EEOC, Questions and Answers: Religious Discrimination 
in the Workplace (July 22, 2008), www.eeoc.gov/laws/guidance/questions-and-answers-religious-discrimination-workplace; EEOC, EEOC 
Compliance Manual Sec.  12-I.C.1 (July 22, 2008), www.eeoc.gov/laws/guidance/section-12-religious-discrimination. The EEOC's website 
states for both these documents that, ``[a]s a result of the Supreme 
Court's decision in Our Lady of Guadalupe School v. Morrissey-Berru, 
we are currently working on updating this web page.'' Id.
    \32\ See EEOC, ``PROPOSED Updated Compliance Manual on Religious 
Discrimination'' (Nov. 17, 2020), https://beta.regulations.gov/document/EEOC-2020-0007-0001 (last accessed November 18, 2020).
    \33\ Id. at 21.
    \34\ Id. at 20.
---------------------------------------------------------------------------

    Regarding OFCCP's definition of Particular religion, the same EEOC 
guidance documents from 2008 state that the religious exemption ``only 
allows religious organizations to prefer to employ individuals who 
share their religion.'' It then addresses two religiously based views 
that are not protected by the exemption: Racial discrimination and 
differences in fringe benefits between men and women. This final rule 
is fully compatible with both those examples. As discussed earlier in 
this preamble, OFCCP always has a compelling interest in enforcing 
prohibitions on racial discrimination, and OFCCP endorses the result in 
Fremont, 781 F.2d 1362. This final rule, however, does provide an 
exemption broader than a mere coreligionist hiring preference. OFCCP 
believes, for the reasons stated earlier in this preamble, that that 
view is sufficiently supported by the Title VII case law, and in fact 
is the more persuasive view of the law. OFCCP also believes that a 
broader view is more likely to encourage religious organizations to 
enter the pool of competitors for government contracts, which benefits 
the government. For

[[Page 79366]]

these reasons, OFCCP believes that any issues arising from any 
differences with the EEOC's views as stated in subregulatory guidance 
from 2008 are outweighed by the benefits of adopting a broader view of 
the exemption. Additionally, OFCCP believes any differences on this 
issue may be resolved in the near future. The EEOC's proposed guidance 
is even more consistent with OFCCP's final rule. The proposed guidance 
states that ``the exemption allows religious organizations to prefer to 
employ individuals who share their religion, defined not by the self-
identified religious affiliation of the employee, but broadly by the 
employer's religious observances, practices, and beliefs.'' \35\ The 
guidance goes on to state that ``[t]he prerogative of a religious 
organization to employ individuals `` `of a particular religion' . . . 
has been interpreted to include the decision to terminate an employee 
whose conduct or religious beliefs are inconsistent with those of its 
employer.'' \36\
---------------------------------------------------------------------------

    \35\ EEOC, ``PROPOSED Updated Compliance Manual on Religious 
Discrimination'' at 24.
    \36\ Id. (citing Hall, 215 F.3d at 625; Little, 929 F.3d at 
951).
---------------------------------------------------------------------------

    OFCCP also believes some commenters mischaracterize any differences 
between the OFCCP and EEOC in this area as presenting contractors with 
conflicting liability. OFCCP's final rule is at least as, or more, 
protective of religious organizations than the view stated in the 
EEOC's guidance. A contractor can choose to adhere to the view 
articulated by the EEOC in 2008 and be in full compliance under the 
view of both agencies.
    Finally, OFCCP must balance its coordination with the EEOC with its 
need to follow directives from the President and the U.S. Department of 
Justice. Section 4 of Executive Order 13798 states that ``[i]n order to 
guide all agencies in complying with relevant Federal law, the Attorney 
General shall, as appropriate, issue guidance interpreting religious 
liberty protections in Federal law.'' The Attorney General issued such 
guidance on October 6, 2017, ``to guide all administrative agencies and 
executive departments in the executive branch.'' Office of the Att'y 
Gen., Memorandum for All Executive Departments and Agencies: Federal 
Law Protections for Religious Liberty at 1 (Oct. 6, 2017), available at 
www.justice.gov/opa/press-release/file/1001891/download. This rule is 
fully compatible with that guidance:

    Religious corporations, associations, educational institutions, 
and societies--that is, entities that are organized for religious 
purposes and engage in activity consistent with, and in furtherance 
of, such purposes--have an express statutory exemption from Title 
VII's prohibition on religious discrimination in employment. Under 
that exemption, religious organizations may choose to employ only 
persons whose beliefs and conduct are consistent with the 
organizations' religious precepts. For example, a Lutheran secondary 
school may choose to employ only practicing Lutherans, only 
practicing Christians, or only those willing to adhere to a code of 
conduct consistent with the precepts of the Lutheran community 
sponsoring the school. Indeed, even in the absence of the Title VII 
exemption, religious employers might be able to claim a similar 
right under RFRA or the Religion Clauses of the Constitution.

Id. at 6; see also id. at 12a-13a

IV. Regulatory Procedures

A. Executive Order 12866 (Regulatory Planning and Review), Executive 
Order 13563 (Improving Regulation and Regulatory Review), and Executive 
Order 13771 (Reducing Regulation and Controlling Regulatory Costs)

    Under Executive Order 12866 (E.O. 12866), OMB's Office of 
Information and Regulatory Affairs (OIRA) determines whether a 
regulatory action is significant and, therefore, subject to the 
requirements of E.O. 12866 and OMB review. Section 3(f) of E.O. 12866 
defines a ``significant regulatory action'' as an action that is likely 
to result in a rule that: (1) Has an annual effect on the economy of 
$100 million or more, or adversely affects in a material way a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local or tribal governments or 
communities (also referred to as economically significant); (2) creates 
serious inconsistency or otherwise interferes with an action taken or 
planned by another agency; (3) materially alters the budgetary impacts 
of entitlement grants, user fees, or loan programs, or the rights and 
obligations of recipients thereof; or (4) raises novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in E.O. 12866. This final rule has been 
designated a ``significant regulatory action'' although not 
economically significant, under section 3(f) of E.O. 12866. The Office 
of Management and Budget has reviewed this final rule. Pursuant to the 
Congressional Review Act (5 U.S.C. 801 et seq.), OIRA designated this 
rule as not a ``major rule,'' as defined by 5 U.S.C. 804(2).
    Executive Order 13563 (E.O. 13563) directs agencies to adopt a 
regulation only upon a reasoned determination that its benefits justify 
its costs; tailor the regulation to impose the least burden on society, 
consistent with obtaining the regulatory objectives; and in choosing 
among alternative regulatory approaches, select those approaches that 
maximize net benefits. E.O. 13563 recognizes that some benefits are 
difficult to quantify and provides that, where appropriate and 
permitted by law, agencies may consider and discuss qualitatively 
values that are difficult or impossible to quantify, including equity, 
human dignity, fairness, and distributive impacts.
    This final rule is an E.O. 13771 deregulatory action because it is 
expected to reduce compliance costs and potentially the cost of 
litigation for regulated entities.
1. The Need for the Regulation
    As discussed in the preamble, OFCCP received numerous comments 
addressing the need for the regulation. Some commenters stated the 
proposal was necessary to ensure religious entities could contract with 
the federal government without compromising their religious identities 
or missions. Some commenters also agreed with OFCCP's observation that 
religious organizations have been reluctant to participate as federal 
contractors because of the lack of clarity or perceived narrowness of 
the E.O. 11246 religious exemption.
    OFCCP also received comments objecting to the proposal because they 
claimed it would permit taxpayer- or government-funded discrimination. 
Commenters argued that the Government should not allow federal 
contractors to fire or refuse to hire qualified individuals because 
they do not regularly attend religious services or adhere to the 
``right'' religion. Additionally, commenters expressed skepticism about 
religious organizations' reluctance to participate as federal 
contractors. Many of these commenters stated that OFCCP provided no 
evidence to support its claim or asserted that the proposed rule would 
increase rather than reduce confusion. In addition, several commenters 
cited a report from a progressive policy institute concluding that 
faith-based organizations that had objected to the lack of an expanded 
religious exemption in E.O. 13672 continued to be awarded government 
contracts.
    OFCCP disagrees with commenters' characterization of the rule as 
discriminatory. OFCCP is committed to enforcing all of E.O. 11246's 
protections, including those protecting employees from discrimination 
on the basis of religion. OFCCP emphasizes again that

[[Page 79367]]

this rule will have no effect on the overwhelming majority of federal 
contractors. Even for religious organizations that serve as government 
contractors, they too must comply with all of E.O. 11246's 
nondiscrimination requirements except in some narrow respects under 
some narrow and reasonable circumstances recognized under law. This 
rule provides clarity on those circumstances, consistent with OFCCP's 
obligations to also respect and accommodate the free exercise of 
religion.
    OFCCP agrees with the comments stating that the religious exemption 
contained in section 204(c) of E.O. 11246 is necessary to ensure 
religious organizations can contract with the federal government 
without compromising their religious identities or missions. The fact 
that some faith-based organizations have been willing to enter into 
federal contracts does not mean that other faith-based organizations 
have not been reluctant to do so. Indeed, a few commenters offered 
evidence that religious organizations have been reluctant to contract 
with or receive grants from the federal government because of the lack 
of clarity regarding religious exemptions in federal law. In addition, 
although some commenters objected to the provision of any religious 
exemption for federal contractors, the religious exemption is part of 
E.O. 11246 that OFCCP is obligated to administer and enforce and has 
been part of the Executive Order for nearly two decades.
    OFCCP is publishing this final rule to clarify the scope and 
application of the religious exemption. The intent is to provide 
certainty and make clear that the exemption includes not only churches 
but 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. 
OFCCP believes that the rule will promote consistency in OFCCP's 
administration and that it will be clearer for contractors to follow. 
Further, OFCCP believes it will help achieve consistency with the 
administration policy to enforce federal law's robust protections of 
religious freedom.
2. Discussion of Impacts
    In this section, OFCCP presents a summary of the costs associated 
with the new definitions in Sec.  60-1.3 and the new rule of 
construction in Sec.  60-1.5. While this rule will only apply to 
federal contractors that are religious, OFCCP lacks data to determine 
the number of contractors that would fall within that definition and 
thus evaluates the impacts using data for the entire contractor 
universe despite the fact this number significantly overstates the 
number of religious contractors. Prior to publication of the NPRM, 
OFCCP surveyed the list of contractors in the General Service 
Administration's System for Award Management (SAM) to identify 
organizations whose North American Industry Classification System 
(NAICS) descriptions or names included the word ``religious,'' 
``church,'' ``mosque,'' etc. This survey was not a useful or 
appropriate proxy for the number of potentially affected entities for 
several reasons. First, not all organizations with ``religious'' NAICS 
codes or names would qualify for the exemption, given that any 
formulation of the religious-organization test is fact-intensive and 
requires much more than that the organization simply have (what is 
commonly understood to be) a religious term in its name. This holds 
true under any formulation of the test, whether that used in a case 
like LeBoon or the test set out in the NPRM and refined in the final 
rule. Second, and similarly, many religious organizations that could 
qualify for the religious employer exemption at issue here may not 
include one of those three specific descriptors in their NAICS 
description much like many religious organizations do not include one 
of those three words in their legal names. Third, the religious 
exemption is an optional accommodation. Organizations that qualify for 
it may choose to use it, or not, and OFCCP has no reliable way of 
determining which will do so. Fourth, OFCCP believes that, as a 
government agency, it would be a fraught matter for it to search for 
potentially religious organizations based on its own view of what sorts 
of terms are religious, assess the results in the abstract, and attempt 
to attribute religious characteristics to the organizations found. This 
rule elsewhere rejects that sort of approach. For all these reasons, 
OFCCP has chosen to use broader estimates of the contractor universe.
    Further, OFCCP anticipates that many contractors would 
affirmatively disclaim any religious basis and thus OFCCP recognizes 
that the following analysis will be an overestimate, but uses it out of 
an abundance of caution. OFCCP determined that there are approximately 
435,000 entities registered in the SAM database.\37\ Entities 
registered in the SAM database consist of contractor firms and other 
entities (such as state and local governments and other organizations) 
that are interested in federal contracting opportunities and other 
forms of federal financial assistance. The total number of entities in 
the SAM database fluctuates and is posted on a monthly basis. The 
current database includes approximately 435,000 entities. Thus, OFCCP 
determines that 435,000 entities is a reasonable representation of the 
number of entities that may be affected by the final rule.\38\ OFCCP 
recognizes that this SAM number likely results in an overestimation for 
two reasons: The system captures firms that do not meet the 
jurisdictional dollar thresholds for the three laws that OFCCP 
enforces, and it captures contractor firms for work performed outside 
the United States by individuals hired outside the United States, over 
which OFCCP does not have authority. Further, because this rule only 
applies to religious contractors, OFCCP is confident that this estimate 
overstates the true universe of contractors affected by the rule.
---------------------------------------------------------------------------

    \37\ U.S. General Services Administration, System for Award 
Management, data released in monthly files, available at https://sam.gov. The SAM database is an estimate with the most recent 
download of data occurring November 2020.
    \38\ While the final rule may result in more religious 
corporations, associations, educational institutions or societies 
entering into federal contracting or subcontracting, there is no way 
to estimate the volume of increase. As noted above, OFCCP does not 
anticipate that the number of religious contractors will grow to be 
equal to non-religious contractors, but uses this estimate due to 
the lack of data.
---------------------------------------------------------------------------

    OFCCP anticipates three main groups that potentially will be 
impacted: Religious organizations that decide to become federal 
contractors because of this final rule's clarity on the scope and 
application of the religious exemption, religious organizations that 
are already federal contractors, and all current federal contractors. 
OFCCP is unable to reasonably quantify the costs, benefits, and 
transfers for these three groups of organizations, but provides the 
following qualitative analysis. Though religious organizations new to 
federal contracting will likely incur upfront costs and compliance 
costs associated with becoming a federal contractor, it is reasonable 
to assume they believe that becoming a federal contractor will further 
their goals, which will result in benefits to the organization (whether 
increased revenues, more financial stability, or better market access). 
In addition, if the new potential contractors are awarded government 
contracts, the government and the public will receive better quality or 
lower-cost services because most federal contracts are rewarded through 
competitive bidding which selects (generally speaking) either the 
lowest

[[Page 79368]]

cost per unit or highest quality unit at a specific price. As the 
number of potential federal contractors rises, the competitive process 
should result in better quality and prices for goods and services which 
will enhance the societal benefits of federal contracting. If total 
costs from contracting with the new organization are lower than the 
status quo, the result will be a transfer to taxpayers.
    Religious organizations which are already federal contractors will 
see a minimal cost for rule familiarization and compliance and will 
continue to efficiently provide services to the U.S. government. The 
clear boundaries of the religious exemption may permit these 
contractors to more freely seek the religious exemption with assurance 
that they are complying with their legal obligations under Executive 
Order 11246, and they may revisit their employment practices 
accordingly. OFCCP cannot determine quantitatively the direction or 
magnitude of any changes in employment but believes the overall effects 
will be quite small at these organizations, as most employees at them 
were likely attracted to them because of a shared sense of religious 
mission, and extremely small when considering the entire contractor 
universe or the economy as a whole. On one hand, religious employers 
may feel more free to hire those that are not denominational 
coreligionists, given this final rule's explanation, consistent with 
law, that an organization does not forfeit the exemption when it hires 
outside strict denominational boundaries, and that an organization may 
require acceptance of or adherence to particular religious tenets as 
part of the employment relationship regardless of employees' 
denominational membership. On the other hand, given this clarity, 
religious employers may also feel more confident in their ability to 
hire and retain employees based on religious criteria. Additionally, 
OFCCP believes these assurances for religious organizations will result 
in reduced legal costs for both the religious contractors and OFCCP.
    All current federal contractors may face additional competition as 
new potential competitors enter the market. Since the total amount of 
available government contracts is not anticipated to change, the 
increased competition may provide better prices for the government, but 
may also result in a reallocation of the contracts. Should this occur, 
it is possible that revenues will be transferred between various 
government contractors or from current contractors to new entrants.
3. Public Comments
    In this section, OFCCP addresses the public comments specifically 
received on the Regulatory Impact Analysis.
    One commenter, a public policy research and advocacy organization, 
asserted that OFCCP underestimated the wage rate of the employees who 
would likely review the rule. The commenter asserted that the employee 
would likely be an attorney rather than a human resource manager. The 
commenter suggested that most contractors would consult in-house or 
outside counsel to help with rule familiarization. The commenter also 
provided an alternate fully loaded hourly compensation rate for Lawyers 
(SOC 23-1011). OFCCP acknowledges that some contractors may have in-
house counsel review the final rule. However, some contractors do not 
have in-house counsel, and their review will be conducted by human 
resource managers. Taking into consideration this comment, OFCCP has 
adjusted its wage rate to reflect review by either in-house counsel or 
human resource managers.
    Several commenters addressed the time needed for a contractor to 
become familiar with the final rule. These commenters asserted that the 
estimate of one half-hour was too low. One commenter provided no 
additional information or alternative calculation. The remaining two 
provided alternative estimates ranging from 1.5 hours to 2.5 hours to 
become familiar with the final rule. OFCCP acknowledges that the 
precise amount of time each company will take to become familiar with 
understanding the new regulations is difficult to estimate. However, 
the elements that OFCCP uses in its calculation take into account the 
length and complexity of the final rule. The final rule adds 
definitions to the existing regulations implementing E.O. 11246 and 
clarifies the exemption contained in section 204(c) of E.O. 11246. As 
such, the final rule clarifies requirements and reduces burdens on 
contractors trying to understand their obligations and responsibilities 
of complying with E.O. 11246. Thus, OFCCP has decided to retain its 
initial estimate of one half-hour for rule familiarization. This 
estimate accounts for the time needed to read the final rule or 
participate in an OFCCP webinar about the final rule.
    Many commenters asserted that OFCCP did not address the potential 
costs of the final rule on employees, taxpayers, and minority groups, 
including LGBT individuals, women, and religious minorities. The 
commenters asserted that OFCCP failed to address the economic and non-
economic costs to employees in the form of lost wages and benefits, out 
of pocket medical expenses, job searches, and negative mental and 
physical health consequences of discrimination. Two commenters, a civil 
liberties organization and a labor union, mentioned that there are 25 
states without explicit statutory protections barring employment 
discrimination based on gender identity and sexual orientation and 
asserted that workers in these states are not otherwise covered by 
statutory protections. The commenters who made these assertions 
provided no additional information or data to support their assertions. 
Additionally, given Bostock's holding that Title VII's prohibition on 
sex discrimination includes discrimination on the basis of sexual 
orientation and transgender status, these concerns seem lessened.
    OFCCP has reviewed these comments and notes that any attempt to 
project costs to employees would necessarily require OFCCP to speculate 
that certain workers will face discrimination only once this rule is 
finalized. Further, the commenters ignore the possibility that 
contractors may choose to hire individuals of greater religious 
diversity as a result of this rule because their incentive to only hire 
coreligionists will be diminished. Absent data regarding the number of 
individuals who are not discriminated against in the status quo but 
would be discriminated against when this rule is finalized, and non-
coreligionist individuals who will be hired by a contractor as a result 
of this rule that OFCCP cannot assess the mere possibility that some 
workers could face different costs. Likewise, OFCCP lacks data for the 
number of new contractors that may enter the market and the number of 
employees that work for such companies. As such, OFCCP does not 
estimate the benefits to the employees of those new contractors.
    Commenters also said that OFCCP failed to address the costs to 
taxpayers in the form of a restricted labor pool, decreased 
productivity, employee turnover, and increased health care costs 
related to employment discrimination and increased social stigma. In 
addition, some commenters mentioned that OFCCP did not account for 
intangible costs related to reductions in equity, fairness, and 
personal freedom that would result from allowing businesses and 
organizations receiving taxpayer dollars to opt out of critical 
nondiscrimination provisions that protect employees based on gender 
identity and sexual orientation. The commenters who made these 
assertions

[[Page 79369]]

provided no additional information or data to support their assertions. 
Further, the commenters provide no additional support for their 
assertion that the rule will increase costs to taxpayers and ignore the 
possibility that the rule will expand the pool of federal contractors, 
thereby saving taxpayers money.
    Similarly, several commenters addressed the potential impact of the 
rule on state and local governments. Three commenters, a city attorney, 
a state's attorney, and a civil liberties and human rights legal 
advocacy organization, mentioned that state and local governments may 
lose important tax revenue if people relocate or choose to withdraw 
from the workforce because of the final rule. Another commenter 
mentioned that state and local governments that serve victims of 
discrimination will need to contribute to, provide, and administer more 
public benefits programs for vulnerable populations. These comments are 
assume that the rule will impose costs on workers and that those costs 
will in turn be imposed upon the communities in which those workers 
live. None of these commenters provided additional information or data 
to support their statements.
    One individual commenter asserted that OFCCP did not properly 
determine the rule's economic significance. The commenter asserted that 
the Regulatory Impact Analysis in the NPRM did not take into account 
``the actual monetary impact of the regulation.'' Using all available 
information and data, OFCCP has addressed the quantifiable and 
qualitative costs and benefits of this final rule as required. It 
provides an assessment of the costs associated with rule 
familiarization and concludes that the addition of definitions and 
clarification of an exemption do not create additional burdens for the 
regulated community. As stated in the preamble, the intent of the final 
rule is to clarify the scope of the religious exemption and promote 
consistency in OFCCP's administration of it. The commenter also 
asserted that OFCCP did not account for the impact on larger 
contractors. The Regulatory Flexibility Act requires agencies to 
consider the impact of a regulation on a wide range of small entities, 
including small businesses, nonprofit organizations, and small 
governmental jurisdictions. It does not address larger corporations. 
However, OFCCP's assessment reflects that it does not anticipate any 
costs beyond rule familiarization for contractors.
    Taking the Regulatory Impact Analysis comments into consideration, 
OFCCP has assessed the costs and benefits of the final rule as follows.
    OFCCP believes that either a Human Resource Manager (SOC 11-3121) 
or a Lawyer (SOC 23-1011) would review the final rule. OFCCP estimates 
that 50% of the reviewers would be human resource managers and 50% 
would be in-house counsel. Thus, the mean hourly wage rate reflects a 
50/50 split between human resource managers and lawyers. The mean 
hourly wage of human resource managers is $62.29 and the mean hourly 
wage of lawyers is $69.86.\39\ Therefore, the average hourly wage rate 
is $66.08 (($62.29 + $69.86)/2). OFCCP adjusted this wage rate to 
reflect fringe benefits such as health insurance and retirement 
benefits, as well as overhead costs such as rent, utilities, and office 
equipment. OFCCP used a fringe benefits rate of 46% \40\ and an 
overhead rate of 17%,\41\ resulting in a fully loaded hourly 
compensation rate of $107.71 ($66.08 + ($66.08 x 46%) + ($66.08 x 
17%)).
---------------------------------------------------------------------------

    \39\ BLS, Occupational Employment Statistics, Occupational 
Employment and Wages, May 2019, https://www.bls.gov/oes/current/oes_nat.htm.
    \40\ BLS, Employer Costs for Employee Compensation, https://www.bls.gov/ncs/data.htm. Wages and salaries averaged $24.26 per 
hour worked in 2017, while benefit costs averaged $11.26, which is a 
benefits rate of 46%.
    \41\ Cody Rice, U.S. Environmental Protection Agency, ``Wage 
Rates for Economic Analyses of the Toxics Release Inventory 
Program'' (June 10, 2002), https://www.regulations.gov/document?D=EPA-HQ-OPPT-2014-0650-0005.

                                               Table 1--Labor Cost
----------------------------------------------------------------------------------------------------------------
                                                                                                   Fully loaded
          Major occupational groups            Average hourly   Fringe benefit   Overhead rate        hourly
                                                 wage rate         rate (%)           (%)          compensation
----------------------------------------------------------------------------------------------------------------
Human Resources Managers and Lawyers........          $66.08               46               17          $107.71
----------------------------------------------------------------------------------------------------------------

4. Cost of Regulatory Familiarization
    OFCCP acknowledges that 5 CFR 1320.3(b)(1)(i) requires agencies to 
include in the burden analysis the estimated time it will take for 
contractors to review and understand the instructions for compliance. 
In order to minimize the burden, OFCCP will publish compliance 
assistance materials, such as fact sheets and answers to frequently 
asked questions. OFCCP may also host webinars for interested persons 
that describe the new regulations and conduct listening sessions to 
identify any specific challenges contractors believe they face, or may 
face, when complying with the new regulations. OFCCP notes that such 
informal compliance guidance is not binding.
    OFCCP believes that human resource managers or lawyers at each 
contractor firm would be the employees responsible for understanding 
the new regulations. OFCCP further estimates that it will take a 
minimum of one half-hour for a human resource professional or lawyer at 
each contractor firm to read the rule, read the compliance assistance 
materials provided by OFCCP, or participate in an OFCCP webinar to 
learn the new requirements.\42\ Consequently, the estimated burden for 
rule familiarization would be 217,500 hours (435,000 contractor firms x 
\1/2\ hour). OFCCP calculates the total estimated cost of rule 
familiarization as $23,426,925 (217,500 hours x $107.71/hour) in the 
first year, which amounts to a 10-year annualized cost of $2,666,359 at 
a discount rate of 3% (which is $6.13 per contractor firm) or 
$3,117,259 at a discount rate of 7% (which is $7.17 per contractor 
firm).
---------------------------------------------------------------------------

    \42\ OFCCP believes that contractor firms that may be 
potentially affected by the rule may take more time to review the 
final rule, while contractor firms that may not be affected may take 
less time, so the one half-hour reflects an estimated average for 
all contractor firms.

                Table 2--Regulatory Familiarization Costs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total number of contractors..................  435,000.
Time to review rule..........................  30 minutes.

[[Page 79370]]

 
Human resources manager and lawyer fully       $107.71.
 loaded hourly compensation.
Regulatory familiarization cost..............  $23,426,925.
Annualized cost with 3% discounting..........  $2,666,359.
Annualized cost per contractor with 3%         $6.13.
 discounting.
Annualized cost with 7% discounting..........  $3,117,259.
Annualized cost per contractor with 7%         $7.17.
 discounting.
------------------------------------------------------------------------

5. Cost Savings
    OFCCP expects that contractors impacted by the rule will experience 
cost savings. Specifically, the clarity provided in the new definitions 
and the interpretation provided will reduce the risk of noncompliance 
to contractors and the potential legal costs that findings of 
noncompliance with OFCCP's requirements might impose. One mass mail 
campaign of commenters asserted that allowing religious organizations 
to continue to provide a variety of services, such as assisting victims 
of sexual abuse, the hungry, and the homeless, is effective because it 
saves taxpayer dollars through contracting instead of expanding 
government bureaucracy.
    Some commenters argued that the rule will decrease clarity and will 
thus increase costs for contractors, especially if those contractors 
believe their obligations under the EEOC conflict with their 
obligations under the final rule. First, OFCCP believes that the E.O. 
11246 nondiscrimination obligations it enforces remain in force and 
that the rule is sufficiently consistent with Title VII case law and 
principles and that it will promote consistency in administration. 
Second, even assuming for purposes of this analysis that contractors' 
obligations under EEOC and E.O. 11246 differ (e.g., that the exemption 
in E.O. 11246 permits an action forbidden under the EEOC's view of 
Title VII), a contractor remains obligated to abide by Title VII and 
any exemption from E.O. 11246 simply prevents additional liability 
before OFCCP for the same action. Accordingly, only those contractors 
that wish to rely on the E.O. 11246 exemption need consider it, and we 
expect that the additional costs incurred by such organizations to 
understand the exemption beyond their existing compliance costs will be 
minimal.
6. Benefits
    E.O. 13563 recognizes that some rules have benefits that are 
difficult to quantify or monetize but are important, and states that 
agencies may consider such benefits. This final rule improves equity 
and fairness by giving contractors clear guidance on the scope and 
application of the religious exemption to E.O. 11246. It also increases 
religious freedom for religious employers.
    The final rule increases clarity for federal contractors. This 
impact most likely yields a benefit to taxpayers (if contractor fees 
decrease because they do not need to engage third-party representatives 
to interpret OFCCP's requirements). While some commenters expressed 
concern that the rule was not clear, OFCCP believes that the rule is 
sufficiently consistent with Title VII case law and principles and that 
it will promote consistency in administration. Furthermore, by 
increasing clarity for both contractors and for OFCCP enforcement, the 
final rule may reduce the number and costs of enforcement proceedings 
by making it clearer to both sides at the outset what is required under 
the regulations. This would also most likely represent a benefit to 
taxpayers (since fewer resources would be spent in OFCCP administrative 
litigation).
    OFCCP notes that some commenters asserted that OFCCP did not 
provide evidence that faith-based organizations have been reluctant to 
contract with the federal government because of the lack of certainty 
about the religious exemption. The fact that some small number of 
faith-based organizations have been willing to enter into federal 
contracts does not mean that other faith-based organizations have not 
been reluctant to do so. OFCCP believes that providing clarity to the 
religious exemption currently included under E.O. 11246 will promote 
clarity and certainty for all contractors. Moreover, a few commenters 
confirmed OFCCP's observation that religious organizations have been 
reluctant to participate as federal contractors because of the lack of 
clarity or perceived narrowness of the E.O. 11246 religious exemption. 
One individual commenter described his experience with religious 
organizations' reluctance to contract or subcontract with the federal 
government, and two other commenters offered examples or evidence of 
religious organizations' reluctance to participate in other contexts, 
such as federal grants. Thus, OFCCP expects that the number of new 
contractors may increase because religious entities may be more willing 
to contract with the government after the religious exemption is 
clarified.
    A further benefit of this rule would be that some religious 
contractors will increase the diversity of their workforce. Under some 
prior interpretations, the religious exemption was only provided to 
contractors who hired co-religionists (e.g., a Catholic company hiring 
only Catholics; a Latter-day Saint contractor hiring only Latter-day 
Saints; etc.) and thus religious contractors were incentivized to limit 
their hiring to only co-religionists. Once this rule is finalized, such 
religious contractors will no longer be required to limit their hiring. 
The likely outcome of this change is that the workforces of religious 
employers will become more diverse.

B. Regulatory Flexibility Act and Executive Order 13272 (Consideration 
of Small Entities)

    The agency did not receive any public comments on the Regulatory 
Flexibility Analysis.
    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objectives of the rule and applicable 
statutes, to fit regulatory and informational requirements to the scale 
of the businesses, organizations, and governmental jurisdictions 
subject to regulation.'' Public Law 96-354, 2(b). The RFA requires 
agencies to consider the impact of a regulation on a wide range of 
small entities, including small businesses, nonprofit organizations, 
and small governmental jurisdictions.
    Agencies must review whether a final rule would have a significant 
economic impact on a substantial number of small entities. See 5 U.S.C. 
603. If the rule would, then the agency must prepare a regulatory 
flexibility analysis as described in the RFA. See id. However, if the 
agency determines that the rule would not be expected to have a 
significant economic impact on a substantial number of small entities, 
then the head of the agency may so certify and the RFA does not require 
a regulatory flexibility analysis. See 5 U.S.C. 605. The certification 
must provide the factual basis for this determination.

[[Page 79371]]

    OFCCP does not expect the final rule to have a significant economic 
impact on a substantial number of small entities and does not believe 
the final rule has any recurring costs. The regulatory familiarization 
cost discounted at a 7% rate of $50.33 per contractor or $7.17 
annualized is a de minimis cost. Therefore, the first year and 
annualized burdens as a percentage of the smallest employer's revenue 
would be far less than 1%. Accordingly, OFCCP certifies that the final 
rule would not have a significant economic impact on a substantial 
number of small entities. That is consistent with the Department's 
analysis in the NPRM.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 requires that OFCCP consider 
the impact of paperwork and other information collection burdens 
imposed on the public. See 44 U.S.C. 3507(d). An agency may not collect 
or sponsor the collection of information or impose an information 
collection requirement unless the information collection instrument 
displays a currently valid OMB control number. See 5 CFR 1320.5(b)(1).
    OFCCP has determined that there is no new requirement for 
information collection associated with this final rule. The final rule 
provides definitions and a rule of construction to clarify the scope 
and application of current law. The information collections contained 
in the existing E.O. 11246 regulations are currently approved under OMB 
Control Number 1250-0001 (Construction Recordkeeping and Reporting 
Requirements) and OMB Control Number 1250-0003 (Recordkeeping and 
Reporting Requirements--Supply and Service). Consequently, this final 
rule does not require review by the Office of Management and Budget 
under the authority of the Paperwork Reduction Act.

D. Unfunded Mandates Reform Act of 1995

    For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532, this final rule does not include any federal mandate that may 
result in excess of $100 million in expenditures by state, local, and 
tribal governments in the aggregate or by the private sector.

E. Executive Order 13132 (Federalism)

    OFCCP has reviewed this final rule in accordance with Executive 
Order 13132 regarding federalism. OFCCP recognizes that there may be 
some existing costs that may shift from the federal government to state 
or local governments; however, the agency believes that these effects 
will be neither direct nor substantial. Thus, OFCCP has determined that 
it does not have ``federalism implications.'' This rule will not ``have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.''

F. Executive Order 13175 (Consultation and Coordination With Indian 
Tribal Governments)

    This final rule does not have tribal implications under Executive 
Order 13175 that would require a tribal summary impact statement. The 
final rule will not ``have substantial direct effects on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.''

List of Subjects in 41 CFR Part 60-1

    Civil rights, Employment, Equal employment opportunity, Government 
contracts, Government procurement, Investigations, Labor, and Reporting 
and recordkeeping requirements.

Craig E. Leen,
Director, OFCCP.

    For the reasons set forth in the preamble, OFCCP revises 41 CFR 
part 60-1 as follows:

PART 60-1--OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS

0
1. The authority citation for part 60-1 continues to read as follows:

    Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965 
Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p. 
230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O. 
13672, 79 FR 42971.


0
2. Amend Sec.  60-1.3 by
0
a. Adding in alphabetical order the definitions of ``Particular 
religion,'' ``Religion,'' ``Religious corporation, association, 
educational institution, or society,'' and ``Sincere,'' and
0
b. Adding paragraph (a) and adding and reserving paragraph (b).
    The revisions read as follows:


Sec.  60-1.3  Definitions.

* * * * *
    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 tenets 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.
* * * * *
    Religion includes all aspects of religious observance and practice, 
as well as belief.
* * * * *
    Religious corporation, association, educational institution, or 
society. (1) Religious corporation, association, educational 
institution, or society means a corporation, association, educational 
institution, society, school, college, university, or institution of 
learning that:
    (i) Is organized for a religious purpose;
    (ii) Holds itself out to the public as carrying out a religious 
purpose;
    (iii) Engages in activity consistent with, and in furtherance of, 
that religious purpose; and
    (iv)(A) Operates on a not-for-profit basis; or
    (B) Presents other strong evidence that its purpose is 
substantially religious.
    (2) Whether an organization's engagement in activity is consistent 
with, and in furtherance of, its religious purpose is determined by 
reference to the organization's own sincere understanding of its 
religious tenets.
    (3) To qualify as religious a corporation, association, educational 
institution, society, school, college, university, or institution of 
learning may, or may not: Have a mosque, church, synagogue, temple, or 
other house of worship; or be supported by, be affiliated with, 
identify with, or be composed of individuals sharing, any single 
religion, sect, denomination, or other religious tradition.
    (4) The following examples apply this definition to various 
scenarios. It is assumed in each example that the employer is a federal 
contractor subject to Executive Order 11246.
    (i)(A) Example. A closely held for-profit manufacturer makes and 
sells metal candlesticks and other decorative items. The manufacturer's 
mission statement asserts that it is committed to providing high-
quality candlesticks and similar items to all of its customers, a 
majority of which are churches and synagogues. Some of the 
manufacturer's items are also purchased by federal agencies for use 
during diplomatic events and presentations. The manufacturer regularly 
consults with

[[Page 79372]]

ministers and rabbis regarding new designs to ensure that they conform 
to any religious specifications. The manufacturer also advertises 
heavily in predominantly religious publications and donates a portion 
of each sale to charities run by churches and synagogues.
    (B) Application. The manufacturer likely does not qualify as a 
religious organization. Although the manufacturer provides goods 
predominantly for religious communities, the manufacturer's fundamental 
purpose is secular and pecuniary, not religious, as evidenced by its 
mission statement. Because the manufacturer lacks a religious purpose, 
it cannot carry out activity consistent with that (nonexistent) 
religious purpose. And while the manufacturer advertises heavily in 
religious publications and consults with religious functionaries on its 
designs, the manufacturer does not identify itself, as opposed to its 
customers, as religious. Finally, given that the manufacturer is a for-
profit entity, it would need to make a strong evidentiary showing that 
it is a religious organization, which it has not.
    (ii)(A) Example. A nonprofit organization enters government 
contracts to provide chaplaincy services to military and federal law-
enforcement organizations around the country. The contractor is 
organized as a non-profit, but it charges the military and other 
clients a fee, similar to fees charged by other staffing organizations, 
and its manager and employees all collect a market-rate salary. The 
organization's articles of incorporation state that its purpose is to 
provide religious services to members of the same faith wherever they 
may be in the world, and to educate other individuals about the faith. 
Similar statements of purpose appear on the organization's website and 
in its bid responses to government requests for proposals. All 
employees receive weekly emails, and occasionally videos, about ways to 
promote faith in the workplace. The employee handbook contains several 
requirements regarding personal and workplace conduct to ensure ``a 
Christian atmosphere where the Spirit of the Lord can guide the 
organization's work.''
    (B) Application. Under these facts, the contractor likely qualifies 
as a religious organization. The contractor's organizing documents 
expressly state that its mission is primarily religious in nature. 
Moreover, the contractor exercises religion through its business 
activities, which is providing chaplaincy services, and through its 
hiring and training practices. Through its emails and other 
communications, the contractor holds itself out as a religious 
organization to its employees, applicants, and clients. Finally, 
notwithstanding that the contractor collects a placement fee similar to 
nonreligious staffing companies, it is organized as a non-profit.
    (iii)(A) Example. A small catering company provides kosher meals 
primarily to synagogues and for various events in the Jewish community, 
but other customers, including federal agencies, sometimes hire the 
caterer to provide meals for conferences and other events. The 
company's two owners are Hasidic Jews and its six employees, while not 
exclusively Jewish, receive instruction in kosher food preparation to 
ensure such preparation comports with Jewish laws and customs. This 
additional work raises the company's operating costs higher than were 
it to provide non-kosher meals. The company's mission statement, which 
has remained substantially the same since the company was organized, 
describes its purpose as fulfilling a religious mandate to strengthen 
the Jewish community and ensure Jewish persons can participate fully in 
public life by providing kosher meals. The company's ``about us'' page 
on its website states that above all else, the company seeks to ``honor 
G-d'' and maintain the strength of the Jewish religion through its 
kosher meal services. The company also donates a portion of its 
proceeds to charitable projects sponsored by local Jewish 
congregations. In its advertising and on its website, the company 
prominently includes religious symbols and text.
    (B) Application. The company likely qualifies as a religious 
organization. The company's mission statement and other materials show 
a religious purpose. Its predominant business activity of providing 
kosher meals directly furthers and is wholly consistent with that self-
identified religious purpose, as are its hiring and training practices. 
Through its advertising and website, the company holds itself out as a 
religious organization. Finally, although the company operates on a 
for-profit basis, the other facts here show strong evidence that the 
company operates as a religious organization.
    (iv)(A) Example. A for-profit collector business sells a wide 
variety of artistic, cultural, religious, and archeological items. The 
government purchases some of these from time to time for research or 
aesthetic purposes. The business's mission statement provides that its 
purpose is to curate the world's treasures to perpetuate its historic, 
cultural, and religious legacy. Most of the business's customers are 
private individuals or museums interested in the items as display 
pieces or for their cultural value. The business's marketing materials 
include examples of religious iconography and artifacts from a variety 
of world religions, as well as various cultural and artistic items.
    (B) Application. The business likely does not qualify as a 
religious organization. Its mission statement references an arguably 
religious purpose, namely perpetuating the world's religious legacy, 
but in context that appears to have more to do with religion's historic 
value rather than evidencing a religious conviction of the business or 
its owner. Similarly, it is at best unclear whether the business is 
engaging in activities in furtherance of this purpose when most of its 
sales serve no religious purpose. Finally, while the business displays 
some religious items, these appear to be a minor part of the business's 
overall presentation and do not convey that the business has a 
religious identity. The factors to qualify as a religious organization 
do not appear to be met, especially given that the business as a for-
profit entity would need to make a strong evidentiary showing that it 
is a religious organization.
* * * * *
    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.
* * * * *
    (a) Severability. Should a court of competent jurisdiction hold any 
provision(s) of this section to be invalid, such action will not affect 
any other provision of this section.
    (b) [Reserved]

0
3. Amend Sec.  60-1.5 by adding paragraphs (e) and (f) to read as 
follows:


Sec.  60-1.5  Exemptions.

* * * * *
    (e) Broad interpretation. This subpart shall 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, as amended, 42 U.S.C. 2000bb et seq.
    (f) Severability. Should a court of competent jurisdiction hold any 
provision(s) of this section to be invalid, such action will not affect 
any other provision of this section.

[FR Doc. 2020-26418 Filed 12-8-20; 8:45 am]
 BILLING CODE 4510-45-P