On August 10, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued a new policy directive aimed at protecting the religious freedom of employees and ensuring a “level playing field” for religious organizations to compete for federal contracts.

While the 2014 Obama administration rule prohibiting discrimination based on sexual orientation and gender identity remains intact, the OFCCP will be updating its FAQ page on the “Religious Employers and Religious Exemption” as the previous content is no longer valid.

The new guidance is likely to expand the scope of federal contractors that are exempt from the prohibition on discrimination against employees and applicants based on sexual orientation and gender identity, and LGBTQ advocacy organizations have criticized the directive as a “license to discriminate.”

The OFCCP states that the directive is intended to update federal policy to incorporate recent developments in the law articulated in Supreme Court decisions, including Burwell v. Hobby Lobby Stores, Inc. That case, decided in 2014, held that for-profit closely held corporations are protected under the Religious Freedom Restoration Act and can object to certain legal requirements on religious grounds. In its June 2018 Masterpiece Cakeshop, Ltd. v. Colo. Civil Rights Comm’n opinion, the Supreme Court also held that a Colorado civil rights agency that investigated a Christian baker’s refusal to make cakes for same-sex weddings violated the First Amendment’s Free Exercise Clause by demonstrating hostility to his religious beliefs. (The same baker filed a lawsuit against a number of Colorado officials on August 14 over an investigation of his refusal to make a cake celebrating an individual’s gender transition.)

This directive is the latest step in the Trump administration’s focus on “religious freedom” and will likely lead to more contractors being able to rely on religious reasons to avoid non-discrimination obligations. This move is part of a broader effort to encourage more religious organizations and businesses to obtain federal contracts.

When processing complaints, conducting audits, and engaging in other enforcement activity, the new directive reminds OFFCP staff that:

• They “cannot act in a manner that passes judgment upon or presupposes the illegitimacy of religious beliefs and practices” and must “proceed in a manner neutral toward and tolerant of . . . religious beliefs.”
• They cannot “condition the availability of [opportunities] upon a recipient’s willingness to surrender his [or her] religiously impelled status.”
• “[A] federal regulation’s restriction on the activities of a for-profit closely held corporation must comply with [the Religious Freedom Restoration Act].”
• They must permit “faith-based and community organizations, to the fullest opportunity permitted by law, to compete on a level playing field for . . . [Federal] contracts.”
• They must respect the right of “religious people and institutions . . . to practice their faith without fear of discrimination or retaliation by the Federal Government.”

It remains to be seen how far this general guidance will go in changing the OFCCP’s compliance activities. In the meantime, it is important for federal contractors – like all employers – to avoid discrimination based on employees’ and applicants’ actual or suspected religious beliefs, and to accommodate their religious observances and practices unless doing so would impose an undue hardship.