Department of Labor Rolls Back Protections for Religious Federal Contractors

John T. Melcon

The U.S. Department of Labor (DOL) has officially rescinded a controversial 2020 rule that expanded religious exemptions under Executive Order No. 11246 for certain federal government contractors. Although the change may have limited direct impact, it sheds light on broader controversies about the scope of religious exemptions in Title VII and other employment nondiscrimination laws.

The order prohibits federal contractors from discriminating against employees and job applicants on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin. For more than two decades, the order has contained a religious exemption based on the carveout for religious employers in Title VII of the Civil Rights Act.

During the waning months of the Trump administration, DOL promulgated the 2020 rule in a purported effort to take into account recent Supreme Court decisions and clarify that religious organizations were not disfavored as government contractors. Relying on judicial decisions from the Title VII context, the now-rescinded rule seemingly broadened the scope and meaning of the exemption. For example, the rule stated that some closely held for-profit contractors might fall within the exemption, such as a “substantially religious” kosher catering company that mainly provides meals to synagogues. Additionally, the rule provided that the religious exemption in the order “shall be construed in favor of a broad protection of religious exercise.”

DOL’s recent decision to repeal the 2020 rule follows several unresolved lawsuits challenging the rule. DOL now says the 2020 rule “departed” from Title VII precedent and “increased confusion and uncertainty.” With the 2020 rule off the books, DOL says it will return to its “longstanding reliance on Title VII principles and case law.”

Despite the controversy surrounding the 2020 rule — it received over 109,000 public comments when first revealed — its promulgation and rescission are mostly symbolic. Religious federal contractors are relatively few, and DOL has identified only one instance when EO No. 11246’s religious exemption was invoked.

More interesting is DOL’s current claim that the 2020 rule was at odds with Title VII case law, a claim that directly contradicts the agency’s assertions under the previous administration. Perhaps the best explanation for the tension is that courts continue to wrestle with the scope of Title VII’s religious exemption, especially in the wake of the Supreme Court’s 2020 Bostock decision expanding Title VII’s protections to include sexual orientation and gender identity. In particular, debate remains about the extent to which a religious employer can insist that employees adhere to its religious tenets if those tenets implicate Title VII’s other protected classes.

Religious employers — even those that are not government contractors — should stay connected with an experienced Sherman & Howard employment law attorney to evaluate their hiring practices in light of this developing area of law.