Why the Law Does Not (and Should Not) Allow Religiously Motivated Contractors to Discriminate Against Their LGBT Employees

by vaughn_admin  //  

June 30, 2016

On July 21, 2014, President Obama signed an executive order amending two Equal Employment Opportunity clauses, including “gender identity” as a category of unlawful employment discrimination. (Read the full text of the order here.) Despite the petitions of many religious leaders, faith-based organizations, academics, and legal scholars, the order did not contain any references to religious freedom protections.

By: Martin Lederman

Since 1998, it has been the policy of the U.S. government to prohibit discrimination in civilian federal employment on the basis of sexual orientation, just as it prohibits discrimination on the basis of race, color, religion, sex, national origin, handicap and age for such federal jobs. Sometimes, of course, the federal government does not perform federal functions itself, but instead contracts out that work. It therefore makes perfect sense that, in making its highly selective contracting decisions, the federal government would not want to choose bidders that discriminate among their employees in a way that the federal government itself could not do.

Accordingly, in 1965 President Johnson signed Executive Order 11246, which Presidents have regularly amended since then to prohibit most federal contractors from discriminating in employment decisions on certain grounds that are off-limits to the federal government itself: race, color, religion, sex, national origin—and now, pursuant to President Obama’s amendment of the Order last week, sexual orientation and gender identity, as well.

As President Obama’s order explains, the purposes of E.O. 11246 are twofold: not only (i) “to provide for a uniform policy for the Federal Government to prohibit discrimination,” but also (ii) “to promote economy and efficiency in Federal Government procurement.” After all, work on a federal contract is liable to be less effective if the contractor arbitrarily excludes from its work force an entire category of qualified and talented employees simply on the basis of a characteristic that has nothing whatsoever to do with their ability to do the work. As the President said in his announcement, “equality in the workplace is not only the right thing to do, it turns out to be good business…. It’s also about attracting and retaining the best talent.”

It was therefore somewhat disconcerting that many groups and individuals urged the President to include in the Order an unprecedented exemption that would have allowed certain federal contractors to discriminate against gay, lesbian, bisexual and transgender individuals. Think about what that would mean in practice. Say, for instance, that a federal agency is considering bids for a highly coveted, competitive contract for highway construction or provision of social services, and one of the bidders has a policy of excluding gays and lesbians from its workforce, or of denying spousal benefits for some of its employees based upon their sexual orientation. It would be quite alarming and counterproductive—most would say unfair, and even offensive—for the agency to award the contract to that bidder, knowing that qualified individuals would thereby be precluded from working on the federal project because of their sexual orientation.

And so it makes all the sense in the world that the President formally precluded such a result once and for all, and rejected the calls for a religious exemption. 

Professor Carl Esbeck argues on Cornerstone that, even after the new order goes into effect, certain contractors will be legally entitled to engage in such discrimination. Not surprisingly, however, the law does not afford anyone the right to use federal contracting dollars to discriminate in such a way. Nor is it a close question. 

For starters, Title VII of the 1964 Civil Rights Act might already prohibit such discrimination by employers with 15 or more employees, whether they receive federal contracts or not. The Equal Employment Opportunity Commission has recently concluded that discrimination against lesbian, gay, bisexual and transgender individuals is discrimination on the basis of sex, which Title VII prohibits. And just a few months ago, one federal judge concurred (see pp. 20-21). It remains to be seen whether appellate courts will affirm the EEOC’s sex discrimination argument; but if they do, then such discrimination will be off-limits to most employers, regardless of the E.O., and regardless of whether Congress enacts the Employment Non-Discrimination Act. 

Even if Title VII doesn’t more broadly prohibit such discrimination, however, President Obama’s order ensures that LGBT discrimination is now off limits for federal contractors. In support of his argument that some contractors can nevertheless engage in such discrimination, Professor Esbeck principally relies upon a Title VII exemption that already appears in E.O. 11246. Section 702(a) of the Civil Rights Act provides that 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.” Section 204(c) of E.O. 11246 (which was not affected by President Obama’s recent amendment) incorporates that same “coreligionist” exemption for government contractors. 

The purpose of this exemption is to afford certain religious entities limited relief from the basic rule that employers cannot discriminate among employees on the basis of religion. It does not give them the freedom to discriminate against any particular religion (a “We will not hire Muslims” policy, for example, remains off limits), but it does allow them to prefer coreligionists, i.e., “individuals of a particular religion.” A Catholic church, for example, may prefer Catholics for employment positions. The Section 702 exemption thereby reflects what Justice Brennan called a “solicitude” for “a means by which a religious community defines itself” in cases where the organization determines that its activities “are in furtherance of an organization’s religious mission, and that only those committed to that mission should conduct them.” (For purposes of this post I’ll assume that the exemption is constitutional as applied to employment under federal contracts, although it raises serious constitutional questions as applied in at least some contractual contexts.) 

In order even to qualify as a “religious corporation, association, educational institution, or society” eligible for this exemption, an entity must be “primarily religious,” which requires at a minimum that the entity be (i) a nonprofit organization that (ii) is organized for a religious purpose, (iii) is engaged primarily in carrying out that religious purpose, (iv) holds itself out to the public as an entity for carrying out that religious purpose, and (v) does not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts. Perhaps some federal grant recipients might satisfy these criteria, but it is unlikely many potential contractors would do so. 

More importantly, even if some bidders for federal contracts could satisfy that demanding threshold test, the exemption would not authorize
them to discriminate against LGBT employees. 

As Professor Esbeck notes, some courts have held that the exemption allows a qualifying religious entity not only to favor employees who belong to a particular church or denomination, but also to insist that employees adhere to particular religious tenets. It remains to be seen whether any potential contractors would have the audacity to argue that an employee is not “of” the employer’s “particular religion” just because that employee is gay, or is transgender, or has slept with or married someone of the same sex. There is no case law addressing that statutory question. But that unresolved question hardly matters, because even if we assume that discrimination against that employee would otherwise constitute a preference for employees “of a particular religion,” Rose Saxe is correct that the coreligionist exemption would not offer any support to the employer in such a case: The case law firmly establishes that employers cannot invoke that exemption to engage in a form of discrimination that is otherwise proscribed by Title VII or E.O. 11246 (i.e., apart from the ban on religious discrimination). 

For example, if the entity’s religion teaches that women shouldn’t work outside the home (or that men should receive higher wages) because men are the proper heads of households, that would not entitle the employer to discriminate against female employees . If the entity’s religion prohibits adherents from suing their employers for discrimination, that would not be a valid reason for retaliating against an employee who files such a suit. And even if an employer’s religion prohibits interracial marriage, the employer would not have any right to fire a black employee for marrying a white spouse. (This doctrine is described in greater detail at pages 30-32 of this 2000 opinion of the Office of Legal Counsel . I am not aware of any post-2000 cases—and Professor Esbeck does not cite any—that have called into question this well-established understanding of Title VII.) 

Likewise, now that Executive Order 11246 (and perhaps Title VII itself) prohibits contractors from discriminating on the basis of sexual orientation and gender identity, the coreligionist exemption will not justify discrimination against LGBT employees, even as applied to a qualifying organization that opposes homosexuality on religious grounds. 

Professor Esbeck also suggests that some employers could be entitled to an exemption from the new prohibition pursuant to the Religious Freedom Restoration Act, which applies to all federal law. The RFRA argument, however, is even weaker than the coreligionist exemption argument. 

For one thing, a person seeking a RFRA exemption must demonstrate that the law imposes a substantial burden on her exercise of religion. Placing a condition on receipt of an important government benefit—such as subsistence-level unemployment compensation—can in some cases impose “substantial pressure” on an individual to violate his religious beliefs, and where it does so this condition might significantly burden the person’s religious exercise . On the other hand, the Supreme Court held in Locke v. Davey (2004) that requiring a student to attend a different, second undergraduate institution for his theology studies as a condition of receiving an important state scholarship for study at his primary place of education imposed only a “relatively minor burden” on his religious exercise, despite the obvious incentive such a condition would create for the student to foreswear his theology studies. If the Court was right in Davey, it’s hard to see how a contractor could demonstrate a substantial burden in a RFRA challenge to E.O. 11246: Unlike general entitlement benefits—but like the scholarships at issue in Davey—federal contracts are awarded very selectively. Moreover, it would be a very rare case in which a federal contractor could claim that its religion required it to discriminate against LGBT employees. These factors explain why there are (as far as I’m aware) no reported cases in which a plaintiff has shown that a condition on government contracts of the sort at issue here imposed a “significant burden” on its religious exercise. 

In support of his argument that there could be a “substantial burden” here, Professor Esbeck cites the 2007 OLC “World Vision” opinion. That opinion merely concluded, however, that it would be within the “legal discretion” of a component of the Department of Justice to find a RFRA substantial burden with respect to a condition on a grant that OLC (dubiously) characterized as so “broadly available” as to be “arguably more analogous to a general entitlement than to a discretionary grant whose availability is limited and speculative.” OLC did not consider the question in the context of highly competitive contracts, the award of which is “limited and speculative”—indeed, even with respect to an allegedly “broadly available” grant, OLC did not conclude that the nondiscrimination condition at issue there would in fact impose a substantial burden on an applicant’s religious exercise. Moreover, even on its own terms, the analysis of the World Vision opinion is questionable, to say the least, as Chip Lupu and Bob Tuttle explain at pages 33-37 of this report; nor has it been “defended” by President Obama, contrary to what Professor Esbeck writes. 

In any case, in the unlikely event a bidder for a federal contract demonstrated a substantial burden under RFRA, the government should be able to easily defeat the claim by demonstrating that denial of an exemption would advance compelling governmental interests—namely, ensuring that federal dollars for the performance of federal functions are expended in a way that does not undermine equal opportunity for all qualified persons, (see Bob Jones University), and “promot[ing] economy and efficiency in Federal Government procurement.” 

For these reasons, I think it’s safe to say that President Obama’s action has guaranteed that the law will no longer afford any federal contractors the right to use federal contracting dollars to discriminate against lesbian, gay, bisexual and transgender employees. 

Marty Lederman is an associate professor at the Georgetown University Law Center. He worked on issues related to religious liberty as deputy assistant attorney general in the Department of Justice’s Office of Legal Counsel from 2009 to 2010, and as an attorney advisor in OLC from 1994-2002.

This piece was originally authored on July 31, 2014 for the Religious Freedom Project at Georgetown’s Berkley Center for Religion, Peace, and World Affair.