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The Obama Government Contractor Executive Order

Posted on: July 19th, 2014 by Art Leonard No Comments

The White House has announced that President Barack Obama will sign an executive order on July 21, 2014, amending Executive Order 11246 to add “sexual orientation” and “gender identity” as prohibited grounds of discrimination by government contractors.  Announcements emanating from the White House suggest that the addition of these terms to the existing executive order are the only substantive changes that will be made.  The non-discrimination requirements will be included in new federal contracts made after the Labor Department has published final regulations implementing the amendments, probably beginning early in 2015.  Only new contracts entered after that date will be affected by the amendments.  [Update: The Order was signed this morning, July 21, and in addition to amending EO 11246, also amends EO 11478, which establishes non-discrimination policy within the Executive Branch, by addition “gender identity” to the categories already listed in the EO, which was originally adopted in 1969 by President Richard M. Nixon and was amended by Bill Clinton to add “sexual orientation” during the 1990s.]

EO 11246 was signed by President Lyndon B. Johnson on September 24, 1965, just a few months after Title VII of the Civil Rights Act of 1964 went into effect at the beginning of July 1965.  EO 11246 charged the Labor Department, through its Office of Federal Contract Compliance Programs (OFCCP), to oversee a program under which “government contracting agencies” would include in every contract (with some exceptions) a provision under which the contractor agreed not to discriminate in employment because of race, color, religion, sex or national origin, the categories of forbidden discrimination under Title VII, and agreed to abide by rules, regulations and relevant orders promulgated by the Labor Department to enforce this requirement.  Contractors are required generally to include similar provisions in any subcontracts they make as part of their performance of their federal contracts.  The penalty for “noncompliance” with these requirements could be cancellation, termination or suspension of the contract, and ineligibility for future contracts.  Complaints about noncompliance are handled administratively; the president does not have the power to enact laws that can be enforced by individual plaintiffs in the federal courts.  Generally EO 11246 charges the Labor Department to investigate complaints, to try to facilitate settlements, and to refer cases that involve violations of federal statutes to the appropriate enforcement agencies, such as the Equal Employment Opportunity Commission (EEOC).  Of course, the EEOC would only have jurisdiction to initiate enforcement action over complaints involving forms of discrimination prohibited by the statutes that agency is charged with enforcing, such as Title VII.

In 2002, President George W. Bush amended the executive order to provide that “this Order shall not apply to a Government contractor or subcontractor that is a religious corporation, association, educational institution, or society, 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, the Order states, “Such contractors or subcontractors are not exempted or excused from complying with the other requirements contained in this Order.”

According to advance word from the White House, President Obama’s amendments will not change this 2002 religious exemption and will not expand it in any way.  That is to say, religious corporations, associations, educational institutions or societies that contract with the federal government to provide services or goods will have to agree not to discriminate in their employment practices on the ground of sexual orientation or gender identity, which may present some of those organizations with particular challenges in light of the religious doctrines to which they adhere.  This raises immediate questions about whether religious organizations might plausibly argue that they cannot recognize a gay person as a member in good standing of their faith, regardless of that person’s professed beliefs?  Who gets to decide, for example, whether an individual professing to be Catholic but also being openly gay can be denied employment by a Catholic agency under contract to the federal government to provide social welfare services to the public, because the agency does not believe that an openly gay person can be deemed to be a practicing Catholic?

The First Amendment’s Free Exercise Clause generally protects religious organizations from interference by the government in their religious activities.  The Supreme Court has held that organizations of any type do not have a constitutional right to refuse to comply with laws of general application that do not single out religious practices for prohibition.  At the same time, the Court has held that free exercise of religion includes giving religious organizations free reign in their employment policies regarding “ministers,” persons to be employed to carry out the religious mission of the organization.  There is some controversy about who can be deemed a ministerial employee, litigation tending to focus on teachers and administrators in religious schools who teach secular subjects but are deemed by the schools to be “ministers” nonetheless and required to sign employment contracts that commit them to avoiding conduct that violates the tenets of the religion.

After the Supreme Court issued its key ruling about the requirement to comply with laws of general application, Congress passed the Religious Freedom Restoration Act (RFRA), providing that persons with religious objections to complying with laws of general application could claim a religious exemption unless the government could show that the government had a compelling interest supporting the general law and that the law provided the least restrictive alternative to achieving that interest.  In effect, Congress wanted to restore prior Supreme Court case law to the extent possible through a statute by imposing upon itself and the federal regulatory apparatus a limitation on its ability to compel people to comply with legal requirements that would violate their religious beliefs.  Many states passed similar laws placing the same restrictions on their own legislative and regulatory functions.

Last month, the Supreme Court ruled in Burwell v. Hobby Lobby Stores that the federal Dictionary Act’s definition of “person” to include corporations applies to RFRA, in a case where two closely-held family-owned business corporations claimed an exemption from complying with regulations under the Affordable Care Act requiring them to cover certain contraceptive methods in health insurance for their employees.  The Court went on to hold that, assuming the government had a compelling reason for including these contraceptive methods in its coverage requirements, requiring these employers to arrange for and pay for the coverage was not the least restrictive method of achieving the coverage goal, as the government could provide the coverage directly itself, or could provide some other mechanism that would make the coverage available without imposing on the objecting corporation.  Another example of a less restrictive alternative cited by the Court was a regulation that the administration had adopted for religiously-identified non-profit corporations, who could signify their objections to the specific items of coverage on a form provided by the government that they would submit to their health insurer, which would then be required to provide the coverage and seek reimbursement from the government.  (That regulation is under attack by some religious non-profit corporations, that claim that executing the form and sending it t0 their insurer substantially burdens their free exercise rights as well.)

The Court’s Hobby Lobby ruling raised immediate fears about whether corporations owned or operated by individuals with religious objections to homosexuality and/or same sex marriage might claim exemptions from employing or serving gay people or same-sex couples.  In her dissenting opinion, Justice Ruth Bader Ginsburg cited two cases on this point, in which state courts had rejected religious exemption claims from state public accommodations laws by a Minnesota health club, which did not want to have gay members, and a New Mexico wedding photographer, who had rejected a job preparing a wedding album for a lesbian couple.  The New Mexico case also involved that state’s version of RFRA, which the New Mexico Supreme Court held was not violated by application of the public accommodations law to a small business.  Similarly, there is litigation pending in Colorado involving a baker who rejected an order to provide a cake for the wedding celebration of a gay male couple.  These are not the kinds of businesses that would likely contract with the federal government, but the nature of the problem is clear.

Under the Executive Order, for example, could a closely-held family-owned company that produces certain technology that the federal government wants to buy, or that provides consulting services that the federal government wants to obtain, insist that for religious reasons it cannot employ gay people, or more particularly cannot continue to employee gay people who marry same-sex partners?  (There are many reports now of Catholic schools that have employed gay people as teachers and administrators for many years suddenly terminating their employment after learning that these people are marrying or have married a same-sex partner.)  Could a federal contractor refuse to include the same-sex spouse of an employee in its employee benefits plan on the same-basis that it includes different-sex spouses, because of religious objections to same-sex marriage?  EO 11246, as amended on July 21 by President Obama, would probably say no.  But if the protesting contractor sought protection from the non-discrimination requirement under RFRA, how would it fare?

These questions are difficult to answer prospectively.  In his opinion for the Court in Hobby Lobby, Justice Alito said that the court was ruling on the case before it, focusing on whether a closely-held family-owned business with religious objections to some forms of contraception was entitled to an exemption from ACA coverage requirements, at least to the extent that non-profit religiously-affiliated organizations had already been accorded by the Obama Administration in its regulations.  The Court, according to Alito, was not purporting to establish a wide-ranging exception to all legal obligations for all business corporations.  Alito commented that an employer could not rely on its religious beliefs to  seek exemption from the race discrimination requirements of Title VII.  But we don’t know whether that comment implicitly relied on the status of race as a suspect classification under the Equal Protection Clause, or the fact that Title VII recognizes a bona fide occupational qualification defense in cases involving religion, national origin or sex discrimination but not in cases involving race or color.  Did Alito mean to suggest more broadly that the RFRA exemption would not extend to any discrimination claims?  Justice Ginsburg was concerned about this in her dissent when she cited the two gay-specific examples from prior case law.  She might well have also noted the Supreme Court’s decision in Boy Scouts of America v. Dale, where the majority found that the Boy Scouts’ 1st Amendment freedom of expression and association rights took priority over whatever interest the state of New Jersey had in forbidding public accommodations such as the Boy Scouts from discriminating based on sexual orientation.  What would the Supreme Court majority think about the relative weight of an executive order banning sexual orientation or gender identity discrimination as opposed to statutory protection for free exercise of religion in RFRA?  Statutes would logically outweigh executive orders when there is a conflict between the two.  Can a presidential executive order that is not effectuating a policy adopted by Congress (as the original 11246 was effectuating the policy of Title VII, albeit going beyond it by applying the non-discrimination requirement to businesses exempt from coverage under Title VII due to their size or the nature of their business) signify a compelling government interest, or does Congress have the sole authority to establish compelling government interests, since the President’s Executive Orders as a matter of law and custom are aimed at the internal policies of the Executive Branch?

When religious opponents of the LGBT executive order suggest that it is going to lead to litigation, they are not making empty threats.  It is likely that some contractor who loses or fails to obtain a contract because they will not comply on religious grounds with the non-discrimination requirement will go to court seeking injunctive relief, and the question will be squarely presented whether RFRA applies to the situation and whether a compelling state interest can be based on an executive order that is not effectuating a policy decision by Congress?

Other questions arise about the pending version of the Employment Non-Discrimination Act, approved last year by the Senate, which provides a rather broad religious exemption beyond the narrow exemption now found in Title VII, the ministerial exemption, or the Bush amendments to EO 11246.  In the wake of Hobby Lobby, one has to ask whether a narrower exemption, similar to that in Title VII, would survive challenge under RFRA?  Questions for which there are at present no firm answers…