DOL Replaces Contractor Religious Exemption Rule

On February 28, the Department of Labor’s (DOL’s) Office of Federal Contract Compliance Programs (OFCCP) released a memo on religious exemption. By and large, the document explains the rescission of a previous 2020 rule that applied religious exemption to federal contractors and subcontractors. That rule, “Implementing Legal Requirements Regarding the Equal Opportunity Clause’s Religious Exemption,” became effective January 8th, 2021. Previously, in January 2023, the DOL released its inflation adjustments for civil monetary fines.

Executive Order 11246 and the Religious Exemption

Generally, Executive Order 11246 (EO 11246) affects federal contractors and federally‐assisted construction contractors and subcontractors who do over $10,000 in government business in one year. Under EO 11246, these entities cannot discriminate in employment decisions based on race, color, religion, sex, sexual orientation, gender identity, or national origin. Since 2002, EO 11246 has contained a religious exemption based on Title VII of the Civil Rights Act of 1964 (Title VII). Overall, that exemption permits federal contractors that are qualifying religious organizations to hire individuals of a particular religion.

Background of the 2020 Rule

Basically, the 2020 rule clarified the exemption by adding definitions and a rule of construction and severability clause. The OFCCP (at the time under President Donald J. Trump) stated that the final rule would acknowledge case law permitting religious organizations to apply religious belief defenses to claims of alleged unlawful employment discrimination. Some, however, believed that the final rule would infringe on the rights of the LGBTQ+ community. Additionally, in this new memo, the OFCCP claims the 2020 rule increased confusion and uncertainty about the exemption because it diverged from previous governmental approaches. As a result, in November 2021, the OFCCP (now under the President Joseph R. Biden administration) proposed rescinding the rule. After receiving 761 unique comments and 4,464 form letter comments, the agency decided to finalize the rescission.

State of Executive Order 11246 Today

Henceforth, the OFCCP is rescinding the entire 2020 rule. Subsequently, there will be a return to the agency’s prior approach of aligning the religious exemption with Title VII. Moreover, according to the OFCCP, the rescission does not change religious entities’ ability to pursue federal contracts. On March 1st, 2023, the 2020 rule’s rescission will go into effect and be published in the Federal Register.