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

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.

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.

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 The posted comments were withdrawn, redacted, and then reposted.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.

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 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

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, § 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

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-

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

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

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

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

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 Espírita Beneficente União 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 § 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 § 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

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 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 § 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.

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

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

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

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

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

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

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,

http://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

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

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

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

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,

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

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 § 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.”).

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 § 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 emplo

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