A January 13, 2023 rule proposed by nine federal agencies, including the Department of Labor, seeks to amend an assortment of regulations in order to clarify the rights and obligations of faith-based and community organizations under the Civil Rights Act of 1964 (“CRA”). Most notably, the proposed rule would affirm that religious organizations are subject to anti-discrimination law governed by Title VII of the CRA (“Title VII”).[1]

This proposed rule follows several 2020 rule changes to various agency regulations including one which affirmatively stated that a religious organization’s exemption from the federal prohibition on employment discrimination under section 702(a) of the CRA (“702 exemption”) continues to apply when such organizations receive federal financial assistance.

One of these changes provided that, “[a]n organization qualifying for [a 702] exemption may select its employees on the basis of their acceptance of or adherence to the religious tenets of the organization.”[2] This sentence, added in accordance with Executive Order 13831 issued by former President Donald Trump, could be read as an exception for religious organizations to discriminate against employees based on certain classifications, for example, sexual orientation or gender identity.[3]

In short, this rule changed the previous standard, which provided that religious organizations did not inherently forfeit their exemption exclusively by receiving federal funding, but did not affirmatively state that that it would continue to apply.[4]

In response to various federal decisions weakening the enforcement of Title VII in the wake of the Bostock v. Clayton County ruling, the instant January 2023 proposed rule would return the enforcement of Title VII to its pre-2020 interpretation.[5] More specifically, it would remove the inserted sentence pertaining to an employee’s adherence to religious tenets.[6] This would clarify that the 702 exemption does not allow organizations to discriminate against workers for other protected characteristics, such as sexual orientation or gender identity, even when the discrimination is based upon sincerely held religious tenets.[7]

This new rule is not absolute, however, as these anti-discrimination laws are subject to constitutional limitations, including an exemption from Title VII for ministerial employees. Further, the rule notes that the balance between religious liberties and Title VII protections is still an ongoing question to be analyzed by the courts.[8]

Public comment on this matter will be available through March 14, 2023.