On December 9, 2020, the Office of Federal Contract Compliance Programs (OFCCP) published the final rule “Implementing Legal Requirements Regarding the Equal Opportunity Clause’s Religious Exemption” in the Federal Register. The final rule clarifies the scope and application of the religious exemption contained in section 204(c) of Executive Order 11246 by adding definitions of key terms in 41 CFR 60-1.3 and a rule of construction in 41 CFR 60-1.5. The final rule will go in effect on January 8, 2021.

General Information

  1. What is the religious exemption to the equal opportunity clause?
  2. What prompted OFCCP to issue the final rule?
  3. What are the major changes made by the final rule?
  4. What impact does the final rule have on OFCCP’s Guidelines on Discrimination Because of Religion or National Origin?
  5. 5. Are contractors that are entitled to the religious exemption exempt from all of Executive Order 11246’s nondiscrimination requirements?

Obtaining the Religious Exemption

  1. What are the conditions of eligibility for the religious exemption?
  2. How does OFCCP determine whether a contractor “is organized for a religious purpose”?
  3. How does OFCCP determine whether a contractor “holds itself out to the public as carrying out a religious purpose”?
  4. How does OFCCP determine whether a contractor “engages in activity consistent with, and in furtherance of, its religious purpose”?
  5. Can a for-profit organization be considered a religious organization that is entitled to the religious exemption?
  6. What is the process for requesting an OFCCP determination that we are a religious entity that qualifies for the religious exemption?

Definitions

  1. What does the term “Particular religion” mean?
  2. What does the term “Religion” mean?
  3. What does the term “Religious corporation, association, educational institution, or society” mean?
  4. Does the final rule include examples of applications of the definition of “Religious corporation, association, educational institution, or society”?
  5. What does the term “Sincere” mean?

General Information

1. What is the religious exemption to the equal opportunity clause?

Section 202 of Executive Order 11246 requires that federal contracting agencies include in all covered contracts, and that contractors include in their subcontracts, an equal opportunity clause. Though they must still comply with other requirements in Executive Order 11246, section 204(c) exempts certain religious organizations from section 202 “with respect to the employment of individuals of a particular religion to perform work connected with the carrying on” of those religious organizations’ activities. The exemption is codified in OFCCP’s regulations at 41 CFR 60-1.5(a)(5).

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2. What prompted OFCCP to issue the final rule?

The religious exemption in section 204(c) of Executive Order 11246 and at 41 CFR 60-1.5(a)(5) parallels the religious exemption in section 702(a) of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. 2000e-1(a). OFCCP generally interprets the nondiscrimination provisions of Executive Order 11246 consistent with the principles of Title VII. However, the scope and application of the Title VII religious exemption have not been given a uniform interpretation across the federal circuit courts, and many of the relevant Title VII decisions predate recent and relevant Supreme Court precedent, leading to a corresponding lack of clarity regarding the scope and application of the Executive Order 11246 religious exemption. OFCCP issued the final rule to provide greater clarity on the scope and application of the Executive Order 11246 religious exemption, consistent with relevant legal developments.

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3. What are the major changes made by the final rule?

The final rule amends 41 CFR 60-1.3 by adding definitions of the following key terms: “Particular religion”; “Religion”; “Religious corporation, association, educational institution, or society”; and “Sincere.” The final rule adds several examples within the definition of “Religious corporation, association, educational institution, or society” to illustrate the types of contractors that may qualify for the religious exemption. The final rule also adds a rule of construction in 41 CFR 60-1.5 to provide the maximum legal protection of religious exercise permitted by the Constitution and laws including the Religious Freedom Restoration Act.

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4. What impact does the final rule have on OFCCP’s Guidelines on Discrimination Because of Religion or National Origin?

OFCCP’s regulations at 41 CFR part 60-50, Guidelines on Discrimination Because of Religion or National Origin, contain robust religious protections for employees. They continue to govern federal contractors’ obligations to accommodate applicants’ and employees’ religious observance and practice.

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5. Are contractors that are entitled to the religious exemption exempt from all of Executive Order 11246’s nondiscrimination requirements?

No. Executive Order 11246 and its implementing regulations permit religious organizations to make employment decisions on the basis of an employee’s particular religion. Religious organizations can never make employment decisions on the basis of other protected characteristics unrelated to religious considerations. If Executive Order 11246’s requirements substantially burden a religious organization’s exercise of religion, it may be entitled to relief under the Religious Freedom Restoration Act. That may be the case when, for instance, an 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. However, even there, the religious exemption never permits employment discrimination on the basis of race, even if purportedly justified on religious grounds: “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.” Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682, 733 (2014).

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Obtaining the Religious Exemption

1. What are the conditions of eligibility for the religious exemption?

To qualify for the religious exemption, a corporation, association, educational institution, society, school, college, university, or institution of learning must be organized for a religious purpose; hold itself out to the public as carrying out a religious purpose; engage in activity consistent with, and in furtherance of, that religious purpose; and either operate on a not-for-profit basis or present other strong evidence that its purpose is substantially religious.

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2. How does OFCCP determine whether a contractor “is organized for a religious purpose”?

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. An organization may have other foundational documents, such as a statement of faith, company code of conduct, business policies, or other 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.

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3. How does OFCCP determine whether a contractor “holds itself out to the public as carrying out a religious purpose”?

A contractor satisfies this requirement when the contractor makes it reasonably clear to the public that it has a religious purpose. A contractor can demonstrate to OFCCP that it holds itself out to the public as carrying out a religious purpose based on the contractor’s website, publications, advertisements, letterhead, or other public-facing materials, and in statements to members of the public. It can also provide religiously inspired logos, mottos, or the like and religious art, texts, music, or other displays of religion found 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 documentation is required or, most likely, sufficient. But together the evidence must show that the contractor is presenting itself to the outside world as religious.

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4. How does OFCCP determine whether a contractor “engages in activity consistent with, and in furtherance of, its religious purpose”?

OFCCP’s 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 included text in the definition 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.” Additionally, the activity consistent with the contractor’s religious purpose must be a substantial aspect of the contractor’s operations, reflecting more than occasional or half-hearted efforts.

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5. Can a for-profit organization be considered a religious organization that is entitled to the religious exemption?

Because for-profit corporations can exercise religion and further religious objectives as well as pecuniary ones, OFCCP determined it should not categorically exclude such contractors from qualification as religious organizations under the religious exemption. There may be rare situations where a contractor is legally constituted as a for-profit enterprise yet infused with religious purpose. In those situations, the contractor 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 included examples within the regulatory definition of “Religious corporation, association, educational institution, or society” to illustrate some of these rare instances, such as a kosher caterer that supplies meals for federal events.

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6. What is the process for requesting an OFCCP determination that we are a religious entity that qualifies for the religious exemption?

There is no specific process to request an exemption from OFCCP. Whether the religious exemption applies is a highly fact-specific inquiry that depends on the particular employment scenario at issue, and OFCCP would typically only make such an inquiry during the course of a compliance evaluation or complaint investigation based on the facts present. However, OFCCP is committed to providing compliance assistance whenever possible to contractors with questions about their obligations, and has a created and supported a variety of ways to contact the agency to seek that assistance. Contractors with questions about their obligations in light of this final rule can avail themselves of these avenues, such as submitting a question to the OFCCP Help Desk. Depending on the nature of the question, contractors may also want to seek advice from their legal counsel to ensure any employment preferences extended do not permit discrimination based on other protected classes.

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Definitions

1. What does the term “Particular religion” mean?

The term “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.

This definition clarifies that the religious exemption allows religious contractors not only to prefer in employment individuals who share their religion, but also to condition employment on individuals’ acceptance of or adherence to religious tenets as understood by the employing contractor. As explained below, “Religion” includes all aspects of religious belief, observance, and practice as understood by the employer.

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2. What does the term “Religion” mean?

The term “Religion” includes all aspects of religious observance and practice, as well as belief. The definition applies generally, to both employers and employees.

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3. What does the term “Religious corporation, association, educational institution, or society” mean?

A “Religious corporation, association, educational institution, or society” means a corporation, association, educational institution, society, school, college, university, or institution of learning that:

  • is organized for a religious purpose;
  • holds itself out to the public as carrying out a religious purpose;
  • engages in activity consistent with, and in furtherance of, that religious purpose; and
  • either operates on a not-for-profit basis or presents other strong evidence that its purpose is substantially religious.

Note: To qualify as religious, a contractor 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.

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4. Does the final rule include examples of applications of the definition of “Religious corporation, association, educational institution, or society”?

Yes. The final rule illustrates applications of the definition of “Religious corporation, association, educational institution, or society” to various scenarios. It is assumed in each example that the employer is a federal contractor subject to Executive Order 11246. The following is one example provided in the final rule. Other examples may be found in the definition of “Religious corporation, association, educational institution, or society” at 41 CFR 60-1.3.
 

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 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.

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.

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5. What does the term “Sincere” mean?

The final rule’s definition of “Particular religion” specifies that the religious tenets the contractor applies to its employees must be “sincere.” The term “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.

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.

Last updated on January 8, 2021