Government Contractor Compliance & Regulatory Update

OFCCP Announces Response to Revocation of Executive Order Limiting Diversity Trainings

As we previously reported, shortly after taking office, President Biden revoked the controversial Combatting Race and Sex Stereotyping Executive Order (the “Order”) as part of a new Executive Order focusing on “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.”  The new Order notes that “[i]t is . . . the policy of [this] Administration that the Federal Government should pursue a comprehensive approach to advancing equity for all,” and is just one mechanism through which the President has begun making his mark in ways that will impact the government contractor community.

In response to the revocation of the Order, OFCCP announced the following actions:

  • OFCCP has rescinded its Frequently Asked Questions regarding the Order.
  • OFCCP will completely shut down the phone hotline and email address that were created to accept complaints related to contractors’ alleged noncompliance with the Order. OFCCP had previously acknowledged that it was no longer accepting complaints after a nationwide preliminary injunction prohibited enforcement of the Order, but it has now taken the additional step of completely shutting down the hotline and email address.
  • OFCCP will administratively close all complaints regarding alleged noncompliance with the Order received through the hotline or any other means. For any complaints that were previously held in abeyance pursuant to the preliminary injunction, OFCCP will notify affected employers to the extent possible.
  • OFCCP will not enforce any of the Order’s requirements, including the requirement that contractors include certain flow down provisions in their subcontracts. To the extent contractors have already included the provisions required by the Order in their subcontracts, OFCCP will no longer take any action to enforce such provisions.  Further, OFCCP will not require contractors or subcontractors to provide notice of their commitments under the Order to their respective labor unions or employee representatives.
  • OFCCP will not publish any additional Requests for Information from any individual or entity regarding the training, workshops or programming provided to employees of government contractors or subcontractors with regard to compliance or noncompliance with the Order.

As always, we will continue to report on noteworthy developments impacting the federal government contractor community.  In addition, you can subscribe to Proskauer’s Law and the Workplace blog to stay current on the latest Biden Administration developments impacting your business.

Jenny Yang Will Be The Next OFCCP Director

As previously reported, the new Biden Administration is wasting no time in making changes impacting the government contractor community.  This now includes changing leadership at the OFCCP.  As was anticipated, and is now reflected on the agency’s website, Jenny Yang, who served as EEOC Chair during the Obama Administration, has been selected for the OFCCP Director post.

It is too soon to know exactly what Director Yang’s priorities will be as OFCCP Director, but from her tenure at the EEOC it is anticipated she will focus on pay equity and sexual orientation and gender identity rights.  We will report on any new developments as Director Yang begins to make her mark on the agency.

As has been detailed extensively in this blog, outgoing Director Craig Leen has had an incredibly active tenure in the post.  His time at the agency has been noted for its focus on transparency, new initiatives such as focused reviews, efforts to improve the department’s efficiency, a notable increase in the number of contractor audits, securing record-levels of back pay and interest recoveries, and improved relations with the contractor community.  On a personal note, in my interactions with Leen over the years I found him to be incredibly dedicated and passionate about his work and the agency’s mission, as well as accessible, thoughtful, creative and practical.

 

 

President Biden Revokes Controversial Executive Order Limiting Contactor Diversity Trainings Shortly After Taking Office

As predicted, just hours after taking office, President Biden revoked the controversial Combatting Race and Sex Stereotyping Executive Order (the “Order”) issued by his predecessor in September.  As previously reported, the Order, among other things, required new contracts entered into with the federal government to include a clause prohibiting federal contractors from including certain concepts in diversity and awareness trainings.  The Order included a variety of penalties and sanctions for non-compliance, including debarment.

The Order was controversial from the start.  Many viewed it as an effort to impede unconscious bias and societal privilege trainings that had become more prevalent in the wake of the country’s renewed focus on racial justice and equality.  Lawsuits were filed to stop its enforcement, eventually resulting in one court issuing a preliminary injunction enjoining its enforcement in December.

In a statement issued prior to his inauguration, President Biden called the Order “damaging” and promised that in addition to revoking the Order, he would take “[a]dditional actions in the coming weeks will restore and reinvigorate the federal government’s commitment to diversity, equity, inclusion, and accessibility.”

The new President is already making his mark in ways that directly affect the federal government contractor community, and more changes are clearly in store.  For some predictions of what additional actions may be forthcoming, check out my presentation with Dr. Rick Holt of Resolution Economics from earlier this month recapping major OFCCP developments from 2020 and what we believe may be in store for 2021, available here.

And, as always, you can continue to rely on us to report on consequential developments impacting the federal government contractor community.  Stay tuned for an eventful 2021.

 

 

 

OFCCP Publishes Opinion Letter on Protections for Religious Liberty in (and out of) the Workplace

On January 8, 2020, the Office of Federal Contract Compliance Programs (“OFCCP”) published an opinion letter responding to an unidentified religious organization’s request for clarification on the “scope of the legal protections for religious liberty in the workplace.” The organization’s request stemmed from its concern that “employees in the technology, education, public, and other sectors may face discrimination at work based on faith-related activities and beliefs.”

Executive Order 11246 applies to federal contractors and subcontractors and, through its equal opportunity clause included in federal contracts, prohibits employment discrimination on a variety of characteristics, including religion. However, the executive order includes an exemption for religious corporations, associations, educational institutions, and societies with respect to the employment of individuals of a certain religion. OFCCP recently finalized regulations expanding the scope of this exemption.

Nonetheless, in its opinion letter, OFCCP noted that a contractor falling under the religious exemption often still has an affirmative obligation to provide religious accommodations and “should evaluate its processes to make sure it is not failing to provide religious accommodations when legally required to do so. If a proposed religious accommodation would impose an undue hardship, the contractor should work with the applicant or employee to attempt to identify a reasonable accommodation that would not impose such a hardship.” Further, the letter advises that contractors “should develop reasonable internal procedures to ensure that their obligation [to provide equal opportunities to members of all religious faiths (or no religious faith) and to provide appropriate accommodations] is being fully implemented.”

The opinion letter addresses six hypothetical scenarios of religious discrimination and assumes in its response that the employer agreed to the requirements of Executive Order 11246 and was not entitled to a religious exemption:

  • Where an applicant or employee suffers an adverse employment action because the employer assumes the individual has religious values that others may find offensive (e.g., wearing a hijab or attending an Orthodox synagogue where seating is separated by sex), that adverse employment action would be unlawful.
  • Where an applicant or employee suffers an adverse employment action because of his or her membership in a religious group that has taken public policy positions that others may find offensive (e.g., supporting or opposing the State of Israel or opposing late-term abortions), that adverse employment action would be unlawful.
  • Where an applicant or employee suffers an adverse employment action for: (1) attending or supporting a synagogue/church-sponsored cause or event (that is part of the individual’s religion); (2) the cause or event is one that others may find offensive (e.g., an anti-war rally, the March for Life, or a rally opposing anti-Semitism); (3) and the attendance takes place during non-work hours, that adverse employment action would be unlawful.
  • Where an employee suffers an adverse employment action for stating, during a company-provided rest break, that he or she has religious views that others may find offensive (e.g., supporting only traditional marriage or, conversely, supporting an expanded definition of the family), that adverse employment action would be unlawful. The opinion letter notes that it assumes for this hypothetical that the employee was not told that the comments were unwelcome and the employee stated his or her view respectfully, in a non-hostile way.
  • Where an applicant or employee suffers an adverse employment action after informing the employer he or she requires a religious accommodation (e.g., the inability to work on religious holy days or the need to have a personal microwave for kosher food), that adverse employment action would be unlawful. Further, the letter notes that “if the employer made no effort to act on the . . . accommodation request, it will likely be unable to demonstrate that the proposed accommodation would actually have posed an undue hardship.”
  • Where an applicant or recently hired employee is let go because he or she requested a religious accommodation (e.g., needing to leave work early in observance of the Sabbath), and was given no opportunity to discuss the requested accommodation with the employer, that termination is unlawful. Although the employer may not be required to provide an accommodation, the opinion letter again notes that if the employer does not act on the request, it will be difficult to show that the accommodation would pose an undue hardship.

These hypotheticals provide clearer guidance on the protections for religiously observant employees and clarify the freedom many employees must be afforded for expressing potentially controversial religious views. However, given the incoming new Administration, it is unclear whether this opinion letter and other developments regarding the religious exemption will be amended or even rescinded. Further, it is unclear whether OFCCP under the new Administration will continue to issue opinion letters. The practice was introduced in 2018, but in subsequent years has resulted in only a handful of opinion letters.

We will continue to report on note-worthy opinion letters as they become available as well as other OFCCP developments.

OFCCP Proposes Accommodations and Promotions Focused Review Scheduling Letters

As we previously reported, when OFCCP released its latest Corporate Scheduling Announcement List (“CSAL”) in September 2020, it identified contractors selected for the agency’s new reviews focused on promotions and accommodations.  Little was known about the reviews, although the agency provided some additional detail later that month when it launched two websites devoted to the new focused reviews.

However, the agency was not able to initiate such focused reviews as it had not proposed or received approval of scheduling letters for the reviews.  The agency has now begun that process, submitting to the Office of Management and Budget (“OMB”) proposed scheduling letters for the two new reviews.

The proposed scheduling letters must still be approved by the OMB before OFCCP may use them to schedule the new focused reviews.  Given the upcoming change in Administration, it is difficult to predict when, or even if, these letters will be approved, and what changes may be implemented in any final versions.  However, contractors selected for these reviews should be familiar with and follow developments regarding these letters as they provide the first real sense of the burden associated with such audits.

Below we summarize some of the key components of the proposed letters.  As discussed, the proposed letters seek information from contractors that go well beyond the stated focused purpose of the reviews and differ from the narrow scope of other focused review scheduling letters.  From this it appears these new focused reviews may be more like traditional establishment reviews with some additional lines of inquiry.  We will continue to monitor and report on this and other noteworthy OFCCP developments.

Proposed Accommodations Focused Review Scheduling Letter

OFCCP’s website on Accommodations Focused Reviews states that these reviews will look at review “contractor’s policies and procedures related solely to religious and disability accommodations.”  However, the scheduling letter seeks a plethora of materials and information that go well beyond this narrow stated scope.  Notable documents and information the proposed letter seeks to require contractors to submit, include:

  • A copy of their Executive Order 11246, Section 503 and VEVRAA AAPs;
  • Analyses of utilization of individuals with disabilities;
  • Information on contractors’ Executive Order 11246 affirmative action goals and progress toward goals;
  • Applicant, hiring, promotion and termination data. In addition to promotions data, contractors must include “a definition of ‘promotion’ as used by [their] company and the basis on which [the promotions] were compiled (e.g. promotions to the job group, from and/or within the job group, etc.).”
  • Compensation data; and
  • Copies of reasonable accommodation policies and documentation of any accommodation requests received and their resolution.

Proposed Promotions Focused Review Scheduling Letter

Similarly, the proposed Promotions Focused Review Scheduling Letter seeks information that goes beyond OFCCP’s prior statements concerning the scope of these new reviews.  On its website, OFCCP informed contractors these reviews would examine “contractor data, policies, and procedures related to promotions to ensure that federal contractors are meeting their equal employment opportunity obligations.”  However, like the proposed accommodations focused review scheduling letter, the proposed promotions focused review scheduling letter seeks to have contractors submit data and documents that go well beyond the stated focus of the review, such as hiring and termination data, and detailed compensation data.

Check back here for more information on the proposed scheduling letters and new accommodations and promotions focused reviews.

Join Our Annual OFCCP Year-in-Review Webinar

On Thursday, January 7, 2021, we will host our annual webinar, reviewing the significant Office of Federal Contract Compliance Programs (OFCCP) developments from last year and looking forward to what federal contractors can expect from the OFCCP in 2021. Partner Guy Brenner and labor economist Dr. Rick Holt, a Partner at Resolution Economics, will address topics ranging from new regulations and initiatives, to the latest trends in compliance evaluations, including:

  • The Combatting Race and Sex Stereotyping Executive Order and new OFCCP Hotline
  • New Regulations on PDNs and NOVs and Guidance on Non-Binary Employees
  • New Scheduling Letters
  • New Promotions and Accommodations Focused Reviews
  • Lessons learned from recent OFCCP settlements and litigation
  • Anticipated developments in 2021 under the Biden Administration

Click here to register and find more information.

Court Enjoins Enforcement of Combatting Race and Sex Stereotyping Executive Order for Federal Contractors and Grantees

Quick Hit:

On December 22, 2020, a federal judge issued a nationwide preliminary injunction enjoining sections of President Trump’s recent “Combatting Race and Sex Stereotyping” Executive Order (the “Executive Order”) that limit government contractors’ anti-discrimination and diversity trainings.  The injunction prohibits the Defendants from enforcing the Executive Order as it pertains to federal government contractors and grantees.

Key Takeaways:

The Executive Order has garnered a lot of attention and raised significant concerns among federal government contractors and grantees.  The Court’s Order gives these stakeholders some relief.  However, the Judge’s ruling is not a final adjudication.  Although the government is currently prohibited from enforcing the sections of the Executive Order applying to federal contractors and federal grantees, unless and until a final injunction is issued or the Executive Order is rescinded, contractors and grantees may still have to deal with the Executive Order in the future.

More Detail:

As we previously reported, LGBT advocacy groups filed this lawsuit challenging the Executive Order, and alleged that the Executive Order “plainly discriminates against speech on the basis of . . . content and viewpoint . . . and constitutes a clear violation of the First Amendment.”  Plaintiffs sought a preliminary injunction, which Judge Beth Labson Freeman of the United States District Court for the Northern District of California granted.

In conducting its analysis, the Court applied a balancing test, weighing the government’s interests as a federal contractor against the Plaintiffs’ First Amendment rights.  When a government entity is acting in its role as an employer, as is the case here, it has “broader discretion to restrict speech;” however, the restrictions “must be directed at speech that has some potential to affect the entity’s operations.”  Here, the Court found that the Government’s interest was outweighed by the effect of the Executive Order on the Plaintiffs’ “freedom to deliver the diversity training and advocacy that they deem necessary to train their own employees.”  Further, the Government has conditioned grant funding “on a speech restriction that is outside the confines of the grant program.”  The Court ruled that the prohibition goes too far to restrict speech, as the Executive Order effectively curtails the voices of scholars and intellects and “inhibits th[e] advancement” of “intellectual progress.”

With respect to the Plaintiffs’ allegations that the Executive Order is unconstitutionally vague, the Court not only agreed that the Executive Order contains much ambiguity with respect to what conduct is prohibited, but also noted that “the Government’s own interpretation of the reach of the Executive Order provides even more uncertainty about the scope of prohibited conduct.”  As such, the Court found that the Plaintiffs’ met their burden in demonstrating the Executive Order’s vagueness.

Ultimately, because the Plaintiffs were able to show that the Executive Order has a “significant adverse impact on their organizations and clients,” and the Government was not able to show that a preliminary injunction would “prejudice it or harm the public interest,” the Court granted Plaintiffs preliminary injunctive relief.

We will continue to advise our readers of any further noteworthy developments in this lawsuit.

OFCCP Issues Certainty Directive

Quick Hit:  On December 15, 2020, OFCCP announced the release of Directive 2021-02, Certainty in OFCCP Policies and Practices (the “Directive”).  The Directive generally “reaffirms” a number of certainty initiatives previously announced in agency publications, such as timely and efficient progress of compliance evaluations, professional conduct by OFCCP staff, and neutral scheduling of compliance evaluations.  The only additional commitments made by the agency in the Directive are to conduct ongoing reviews of its policies and practices to ensure they are clear and certain to the stakeholder community, and to provide a process by which contractors can seek clarification or disclosure of a policy or practice to ensure greater certainty.

More Detail:  In 2018, OFCCP adopted the principles of Certainty, Efficiency, Recognition, and Transparency (the “CERT Principles”).  OFCCP subsequently issued three directives related to the CERT Principles – Directive 2018-03, Transparency in OFCCP Compliance Activities, Directive 2018-06, Contractor Recognition Program, and Directive 2020-02, Efficiency in Compliance Evaluations.  The Directive is the final directive related to the four CERT Principles. Its stated purpose is “[t]o reaffirm OFCCP’s commitment to a number of certainty initiatives and principles, and establish a process to facilitate the continued provision of clarity and certainty in OFCCP policies and practices.”

The Directive incorporates and attaches guidance the agency previously published entitled “What Federal Contractors Can Expect” (referred to as the “Contractors Bill of Rights”).  In that document, OFCCP set forth the following eight commitments:

  1. Access to Accurate Compliance Assistance Materials
  2. Timely Responses to Compliance Assistance Questions
  3. Opportunities to Provide Meaningful Feedback and Collaborate
  4. Professional Conduct by OFCCP’s Compliance Staff
  5. Neutral Scheduling of Compliance Evaluations
  6. Reasonable Opportunity to Discuss Compliance Evaluation Concerns
  7. Timely and Efficient Progress of Compliance Evaluations
  8. Confidentiality

Accordingly, the Directive does little more than repackage prior commitments in a more formal way.  The Directive, does however, break some new ground, providing that “the agency is now adding a commitment to conduct ongoing reviews of its policies and practices to ensure they are clear and certain to the stakeholder community, and to provide for a process by which a member of the stakeholder community can seek clarification or disclosure of a policy or practice to ensure greater certainty.”

The Directive also highlights the following agency actions as evidence of its focus on increasing certainty:

The promulgation of the agency’s final rule on Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination.

OFCCP New Rule On Procedures for Resolving Alleged Findings of Discrimination Goes Into Effect December 10, 2020

Quick Hit:  OFCCP has published its final rule codifying the process by which it determines and notifies contractors of findings of discrimination.  The rule, which goes into effect on December 10, 2020, adds significant detail regarding the evidence on which OFCCP must base such findings and what must be communicated to contractors when OFCCP seeks to pursue such findings.

Key Takeaways:  The new rule is a welcome development for contractors, imposing significant new requirements before OFCCP can issue findings of discrimination.

First, any new findings must be reviewed by the Director or acting agency head to ensure they contain sufficient quantitative evidence that is practically significant, as well as qualitative evidence supporting the findings of discrimination.  The involvement of the national office in this process will hopefully create some consistency in the manner in which the agency determines and pursues discrimination findings.  Further, the detailed evidentiary predicate necessary for such findings will hopefully prevent compliance officers from pursuing discrimination findings grounded in inadequate evidentiary support.

Second, the agency cannot pursue the discrimination findings without first issuing the contractor a Predetermination Notice (“PDN”) which provides notice of this evidence in sufficient detail to permit a meaningful response.  PDNs cannot be issued without approval of the Director or the acting agency head.  Codification of the PDN process, previously introduced in an agency directive, provides the contractor with meaningful notice of a potential finding of discrimination, the bases for that potential finding, and the opportunity to respond before the issuance of a Notice of Violation (“NOV”).  Notably, upon request, OFCCP must provide the contractor with the model and variables used in any statistical analysis and an explanation for the exclusion from the analysis of any variables proposed by the contractor.  In the past, the agency would often issue NOVs without prior notice to the contractor.  In our experience, NOVs would often be driven by errors and misunderstandings, but OFCCP would rarely if ever admit a mistake – often creating an odd circumstance where OFCCP would not change its position that the contractor discriminated, but was willing to enter into a conciliation agreement which would negate that finding either through silence or practically via a negligible backpay remedy.  Now, contactors have the ability to demonstrate to OFCCP its preliminary finding is erroneous before the issuance of an NOV.

Third, OFCCP may not issue an NOV until after the 30-day period provided for the contractor to respond to the PDN.  Moreover, the NOV must provide the same evidentiary detail provided in the PDN as well as address any of the issues raised by the contractor in its response to the PDN.

While this process should avoid some of the error-ridden NOVs issued in the past, it is possible that results-oriented compliance officers will use the contractor’s PDN response to develop alternative bases for reaching the same (erroneous) result.

Contractors should become familiar with these new requirements and ensure OFCCP complies with them in any compliance evaluation.  The rule is a positive step towards establishing a more transparent, efficient and fair process that, if implemented in good faith, should help contractors avoid having to fight with OFCCP over erroneous NOVs.  Time will tell.

More Detail:

OFCCP has stated its new rule is meant to “increase clarity and transparency for Federal contractors, establish clear parameters for OFCCP resolution procedures, and enhance the efficient enforcement of equal employment opportunity laws.”  This is accomplished through detailed rules for issuing PDNs and NOVs.

PDN Process and Requirements:

The rule codifies the use of PDNs “if a compliance review . . . indicates evidence sufficient to support a preliminary finding of disparate treatment and/or disparate impact discrimination” and sets forth the required contents of PDNs.  In other words, discrimination findings may not be pursued unless and until OFCCP engages in a process with contractors, which begins with the issuance of a PDN.  Notably, OFCCP may not issue a PDN without approval of the Director or acting agency head, which should provide some manner of consistency and quality checking for PDNs.

In implicit recognition of the fact the agency’s discrimination findings have not always appreciated the difference between disparate impact and disparate treatment theories of discrimination and the evidentiary burdens associated with each, the rule instructs that PDNs must indicate which theory the preliminary discrimination finding is based upon and identify certain evidentiary support for the preliminary finding depending on the theory pursued.

  • For disparate treatment-based findings, the PDN must include:

(i) “quantitative evidence” (discussed below)

(ii) demonstrate that the unexplained disparity is “practically significant,” and

(iii) provide “qualitative evidence” (discussed below) that when combined with quantitative evidence, “supports both a finding of discriminatory intent by the contractor and a finding that the contractor’s discriminatory intent caused the disparate impact.”

  • For disparate impact-based findings, the PDN must include the three components required for disparate treatment-based findings, unless the qualitative evidence alone is “sufficient to support a preliminary finding of disparate treatment,” the evidence of disparity “is so extraordinarily compelling that by itself it is sufficient to support a preliminary finding of disparate treatment,” or the quantitative evidence of a disparity is practically significant but the contractor has denied OFCCP access to sources of evidence “that may be relevant to a preliminary finding of discriminatory intent.” Further, the PDN must identify “the specific policy or practice of the contractor causing the adverse impact, unless OFCCP can demonstrate that the elements of the contractor’s selection procedures are incapable of separation for analysis.”

“Quantitative evidence” is defined by the rule as including “hypothesis testing, controlling for the major, measurable parameters, and variables used by the contractor . . . related to the probability of outcomes occurring by chance and/or analyses reflecting statements concluding that a disparity in employment selection rates or rates of compensation is statistically significant.”  Statistically significance is met by (i) a “standard deviation of two or more,” (ii) a “Z statistic [with] a value greater than two,” or (iii) a “probability value [of] less than 0.05.”  Quantitative evidence is not limited to statistical analyses, but applies to cohort or other analyses of small groups of individuals.  The rule defines “qualitative evidence” as including (but not being limited to) “testimony, interview statements, and documents about” discriminatory beliefs, intent, statements or acts, employment practices, compliance with legal obligations, and other relevant matters.  The rule makes clear that qualitative evidence supporting a PDN “may not be based solely on subjective inferences or the mere fact of supervisory discretion in employment decisions.”

The PDN must disclose the quantitative and qualitative evidence “in sufficient detail to allow contractors to investigate allegations and meaningfully respond.”  In addition, upon request, the agency must provide “the model and variables used in any statistical analysis and an explanation for why any variable proposed by the contractor was excluded from that analysis.”  Although OFCCP has been increasingly transparent in recent years with regard to its modeling, as reflected in its 2018 transparency directive, the requirement that it not only disclose its methodology, but also explain why it did not employ the contractor’s is a significant development.  To be candid, based on past experience, OFCCP’s explanations in this regard are not always satisfying, but at least under the new regulation the agency will be forced to acknowledge and address contrary viewpoints at the pre-NOV stage.

Contractors will have 30 days to provide a response to the PDN.

NOV Process and Requirements

If OFCCP, after reviewing any response to its PDN, believes it “has evidence sufficient to support a finding of disparate treatment and/or disparate impact discrimination,” as required by the rule, or otherwise violated its obligations, the agency may issue an NOV requiring corrective action and inviting the contractor to conciliate the matter.  Like the PDN, the NOV must disclose the qualitative and quantitative evidence upon which it is based, as well as its statistical models.  In addition, the NOV must address “all relevant concerns and defenses raised by the contractor in response to the [PDN].”

Department of Labor Issues Final Rule “Clarifying” The Religious Entity Exemption

Quick Hit:

On December 7, 2020, the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) issued its final rule enhancing the religious exemption for federal government contractors already contained in its regulations (the “Rule”).  The Rule, through the addition of definitions, adds detail to and arguably expands the already existing exemption on religious entities’ compliance with the anti-discrimination provisions of Executive Order 11246.  The Rule becomes effective January 8, 2021.

Key Takeaways:

As a practical matter, the Rule will have minimal impact on the contractor community.  Most government contractors do not fall within the scope of the entities covered by the exemption, even as clarified by the Rule.  Further, religious discrimination is not typically a focal point of OFCCP compliance evaluations.  However, with the agency’s new accommodation focused reviews, which will include an assessment of religious accommodations, the Rule may have more practical import for those entities covered by the enhanced exemption.  Furthermore, to the extent religious entities were discouraged from entering into federal government contracts due to fear of OFCCP review of their employment practices containing religious components, the new Rule will likely reduce any such concerns.

Even for those contractors that fall within the exemption, OFCCP makes clear that the exemption does not relieve them of all or even most of OFCCP’s requirements.  As the agency notes, “[e]ven for religious organizations that serve as government contractors or subcontractors, they too must comply with all of E.O. 11246’s nondiscrimination requirements except in some narrow respects under some reasonable circumstances recognized by law.”

More Detail:

On August 15, 2019, OFCCP issued a notice of proposed rulemaking regarding the scope of the religious exemption already contained in its regulations.  OFCCP’s regulations exempted any federal contractor that was a “religious corporation, association, educational institution, or society” from complying with the anti-discrimination provisions of the Order “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.”  However, many of the terms contained in the exemption were previously undefined.  By adding definitions, OFCCP contends the new Rule clarifies the religious exemption and “ensure[s] that OFCCP respects religious employers’ free exercise rights, protects workers from prohibited discrimination, and defends the values of a pluralistic society.”

Specifically, the Rule adds a definition of “religion” that includes not only religious beliefs, but also “all aspects of religious observance and practice.”  In addition to the term “religion,” the Rule provides new definitions for the terms “particular religion;” “religious corporation, association, educational institution, or society;” and “sincere,” as follows:

Particular religion is defined by the Rule as “the religion of a particular individual, corporation, association, educational institution, society, school, college, university, or institution of learning, including acceptance of or adherence to sincere religious tenets as understood by the employer as a condition of employment, whether or not the particular religion of an individual employee or applicant is the same as the particular religion of his or her employer or prospective employer.”

Religious corporation, association, educational institution, or society is defined by the Rule as “a corporation, association, educational institution, society, school, college, university, or institution of learning that:

(i) Is organized for a religious purpose;

(ii) Holds itself out to the public as carrying out a religious purpose;

(iii) Engages in activity consistent with, and in furtherance of, that religious purpose; and

(iv) (A) Operates on a not-for-profit basis; or (B) Presents other strong evidence that its purpose is substantially religious.”

The Rule also provides a list of illustrative examples of entities that meet and do not meet this definition.

Sincere is defined by the Rule as “sincere under the law applied by the courts of the United States when ascertaining the sincerity of a party’s religious exercise or belief.”

The Rule is intended to be “construed in favor of a broad protection of religious exercise, to the maximum extent permitted by the U.S. Constitution and law, including the Religious Freedom Restoration Act of 1993, as amended, 42 U.S.C. 2000bb et seq.”  It is scheduled to become effective on January 8, 2021.

We will continue to monitor and keep our readers updated on any noteworthy developments.

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