Here is the regulatory language on contracts with religious entities. §60-1.5 Exemptions. (a)(5) (5) Contracts with religious entities. Section 202 of Executive Order 11246, as amended, 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. Such contractors and subcontractors are not exempted or excused from complying with the other requirements contained in this Order. Here is OFCCP FAQs on EO 13672 that may also clarify: https://www.dol.gov/ofccp/LGBT/LGBT_FAQs.html#Q9 Religious Employers and Religious Exemption How does Executive Order 11246 apply to religious organizations? Executive Order 11246, as amended, only applies to employers that are federal contractors or federally–assisted construction contractors. A religious organization will only be subject to the Final Rule if it enters into a new covered federal contract or subcontract, or modifies an existing covered federal contract or subcontract, on or after the Final Rule’s effective date of April 8, 2015. Religious organizations that are not contractors, but recipients of grant funds, for example, the Senior Farmers’ Market Nutrition Program, the Office of Refugee Resettlement Voluntary Agencies Matching Grant Program, and the Community Development Block Grant (CDBG) program, are not subject to Executive Order 11246. On the other hand, if a religious organization does hold a covered contract, it is prohibited from discriminating on any of the protected bases listed in Executive Order 11246, as amended, including the newly added categories of sexual orientation and gender identity. The Executive Order and OFCCP regulations do provide, though, an exception that permits religious organizations to prefer to employ only members of a particular religion. The so–called “ministerial exception,” also discussed below, may apply as well. Does the Final Rule alter the existing religious exemption in EO 11246 in any way? No. EO 13672 did not change the existing religious exemption, which was added to EO 11246 by President Bush in 2002, allowing religiously affiliated contractors (religious corporations, associations, educational institutions, or societies) to favor individuals of a particular religion when making employment decisions. The regulation implementing that exemption is located at 41 CFR 60–1.5(a)(5). That regulation states that the nondiscrimination obligations of Executive Order 11246 “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. Such contractors and subcontractors are not exempted or excused from complying with the other requirements contained in this Order.” In addition, the Supreme Court has recognized that the First Amendment to the Constitution requires a “ministerial exception” from employment discrimination laws, which prohibits the Government from interfering with the ability of a religious organization to make employment decisions about its “ministers,” a category that includes, but is not limited to, clergy. What kinds of organizations are covered by the religious exemption of Executive Order 11246? Under section 204(c) of Executive Order 11246 and 41 CFR 60–1.5(a)(5), the Executive Order does 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 of the organization’s activities. This language mirrors the religious exemption of Title VII of the Civil Rights Act of 1964, and OFCCP will follow EEOC and courts’ interpretations of Title VII when determining which organizations can claim the exemption and how it applies. Under established case law, this exemption applies only to those institutions whose purpose and character are primarily religious. In determining whether a contractor qualifies for this exemption, OFCCP will consider all significant religious and secular characteristics of the organization, with each case turning on its own facts. Although no one factor is dispositive, significant factors that courts have considered to determine whether an employer is a religious organization for purposes of Title VII include: whether the contractor is not for profit, whether its day–to–day operations are religious (e.g., are the services the contractor performs, the product it produces, or the educational curriculum it provides directed toward propagation of the religion?); whether the contractor’s articles of incorporation or other pertinent documents state a religious purpose; whether it is owned, affiliated with or financially supported by a formally religious entity such as a church or other religious organization; whether a formally religious entity participates in the management, for instance by having representatives on the board of trustees; whether the contractor holds itself out to the public as secular or sectarian; whether the contractor regularly includes prayer or other forms of worship in its activities; whether it includes religious instruction in its curriculum, to the extent it is an educational institution; and whether its membership is made up of coreligionists. How can contractors invoke the religious exemption under 41 CFR 60–1.5(a)(5)? Executive Order 11246 and 41 CFR 60–1.5(a)(5) do not require contractors to obtain pre–approval from OFCCP to take advantage of the religious exemption. In the past, though, some contractors have submitted written requests for exemptions to OFCCP’s Division of Program Operations, explaining why they qualify for the exemption. Contractors can also invoke the exemption in connection with an OFCCP compliance evaluation, or when they enter into a covered contract or subcontract. OFCCP carefully considers each of these requests in coordination with the Solicitor of Labor. How does EO 11246’s exemption for religious organizations operate in light of the addition of the new protected categories? In general, this exemption allows religious organizations to prefer to employ only members of a particular faith, but it does not allow religious organizations to discriminate in employment on the basis of race, color, sex, sexual orientation, gender identity, or national origin. How does the “ministerial exception” interact with Executive Order 11246? The Supreme Court has recognized that the First Amendment requires a “ministerial exception” from employment discrimination laws, which prohibits the government from interfering with the ability of a religious organization to make employment decisions about its “ministers,” a category that includes, but is not limited to, clergy. In determining whether the ministerial exception applies to an employer’s decision in a particular case under Executive Order 11246, OFCCP, as guided by Supreme Court precedent, makes an assessment of all of the facts and circumstances of employment, including the functions performed by the employee, the job title given to and used by the employee, and the amount of time the employee spends on particular activities.

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