A federal court of appeals ruled last week that religious businesses may be partially exempt from Title VII — a statute that prohibits workplace discrimination because of sexual orientation, gender identity, and other protected characteristics — if they have faith-based policies about “homosexual and transgender conduct.” 

A for-profit Christian-owned healthcare business prohibited its employees from engaging in “sexually immoral” conduct and had a “sex-specific dress code that disallows gender non-conforming behavior.” The Fifth Circuit Court of Appeals (which covers Texas, Louisiana, and Mississippi) held that the Religious Freedom Restoration Act (RFRA), a Clinton-era law aimed at bolstering religious liberty protections, would prevent the Equal Employment Opportunity Commission (EEOC) from requiring the business to abandon these policies. Forcing the business to “employ someone to represent the company who behaves in a manner directly violative of the company’s convictions” would violate RFRA by substantially burdening the business’ religious exercise, the court reasoned.

The ruling stands in tension with a 2018 decision by the Sixth Circuit holding that RFRA did not exempt a Christian-run funeral home from Title VII with respect to the funeral home’s gender-specific dress code. That case later reached the U.S. Supreme Court, which did not address the RFRA question. Last week's Fifth Circuit opinion accused the high court of "punting" on the issue.

Yet, the Fifth Circuit did some punting of its own. In considering the applicability of Title VII to churches and other religious nonprofits (as opposed to for-profit businesses), the court affirmed that such organizations are generally covered by an express religious exemption within Title VII itself, but the court did not address the specific scope of that exemption — a hotly debated issue.

Although the Fifth Circuit’s decision ostensibly expands religious liberty protections for some faith-based businesses, it is important to remember that RFRA only applies to federal laws such as Title VII. It does not create an exemption from state or local nondiscrimination laws, many of which prohibit discrimination because of sexual orientation and gender identity. Religious business owners should consult with an attorney experienced in RFRA and other religious liberty laws regarding any faith-based employment policies or practices.