[Federal Register Volume 69, Number 132 (Monday, July 12, 2004)]
[Rules and Regulations]
[Pages 41882-41894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15707]



[[Page 41881]]

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Part II





Department of Labor





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Employment and Training Administration



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20 CFR Parts 667 and 670

29 CFR Parts 2 and 37



Workforce Investment Act--Equal Treatment in Department of Labor 
Programs for Faith-Based Community Organizations; Protection of 
Religious Liberty, and Limitation on Employment of Participants; Final 
Rules

  Federal Register / Vol. 69, No. 132 / Monday, July 12, 2004 / Rules 
and Regulations  

[[Page 41882]]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Parts 667 and 670

Office of the Secretary

29 CFR Parts 2 and 37

RIN 1290-AA21


Equal Treatment in Department of Labor Programs for Faith-Based 
and Community Organizations; Protection of Religious Liberty of 
Department of Labor Social Service Providers and Beneficiaries

AGENCY: Employment and Training Administration and the Office of the 
Secretary, Labor.

ACTION: Final rule.

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SUMMARY: Consistent with constitutional guidelines, this final rule 
clarifies that faith-based and community organizations may participate 
in the United States Department of Labor (DOL or the Department) social 
service programs without regard to the organizations' religious 
character or affiliation, and are able to apply for and compete on an 
equal footing with other eligible organizations to receive DOL support. 
In addition, in order to consolidate the Department's regulations on 
religious activities, this final rule revises the Employment and 
Training Administration's (ETA) regulation on religious services at Job 
Corps centers and the Department's Workforce Investment Act of 1998 
(WIA) regulations relating to the use of WIA Title I financial 
assistance to support employment and training in religious activities, 
and employment at specified locations defined with reference to certain 
religious activities. The U.S. Department of Labor supports the 
participation of faith-based and community organizations in its social 
service programs.

DATES: Effective Date: August 11, 2004.

FOR FURTHER INFORMATION CONTACT: On the Office of the Secretary's 
general regulations, 29 CFR part 2, contact: Rhett Butler, Associate 
Director for Policy Development, DOL Center for Faith-Based and 
Community Initiatives (CFBCI), (202) 693-6450. On 20 CFR part 667, 
contact Maria K. Flynn, Acting Administrator, Office of Policy 
Development, Evaluation and Research, Employment and Training 
Administration, (202) 693-3700. On 20 CFR 670.555, contact: Grace 
Kilbane, Administrator of the National Office of Job Corps, (202) 693-
3000. On 29 CFR 37.6, contact Annabelle T. Lockhart, Director, Civil 
Rights Center (CRC), (202) 693-6500. Please note these are not toll-
free numbers. Individuals with hearing or speech impairments may access 
these telephone numbers via TTY by calling the toll-free Federal 
Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background--The March 9, 2004 Proposed Rule

    On March 9, 2004, the Department published a proposed rule (69 FR 
11234) to amend the Department's general regulations to make clear that 
faith-based and community organizations may participate in the 
Department's social service programs, including as recipients of 
Federal financial assistance. The proposed rule also set forth 
conditions for seeking, receiving, and using DOL support related to DOL 
programs. The proposed rule was part of the Department's effort to 
fulfill its responsibilities under two Executive Orders issued by 
President George W. Bush. The first of these Orders, Executive Order 
13198 (66 FR 8497), published in the Federal Register on January 31, 
2001, created Centers for Faith-Based and Community Initiatives in five 
cabinet departments--Education, Health and Human Services, Housing and 
Urban Development, Justice, and Labor--and directed these Centers to 
identify and eliminate regulatory, contracting, and other programmatic 
obstacles to the equal participation of faith-based and community 
organizations in the provision of social services by these Departments. 
The second of these Executive Orders, Executive Order 13279, published 
in the Federal Register on December 16, 2002 (67 FR 77141), charged 
executive branch agencies to give equal treatment to faith-based and 
community groups that apply for Federal financial assistance to meet 
social needs in America's communities. In the Order, President Bush 
called for an end to discrimination against faith-based organizations 
and ordered implementation of these policies throughout the executive 
branch in a manner consistent with the First Amendment to the United 
States Constitution. He further directed that faith-based organizations 
be allowed to retain their religious autonomy over their internal 
governance and composition of boards, and over their display of 
religious art, icons, scriptures, or other religious symbols, when 
participating in Federally-financed programs. The Administration 
believes that there should be an equal opportunity for all 
organizations--both faith-based and otherwise--to participate as 
partners in Federal programs.
    Consistent with the President's initiative, the Department's 
proposed rule of March 9, 2004, proposed to amend the Department's 
general regulations as well as the specific regulations governing Job 
Corps and implementing the Workforce Investment Act. The objective of 
the proposed rule was to ensure that DOL-supported social service 
programs were open to all qualified organizations, regardless of their 
religious character, and to establish clearly the proper uses of DOL 
support and the conditions for receipt of such support. In addition, 
this proposed rule was designed to ensure that the implementation of 
the Department's social service programs would be conducted in a manner 
consistent with the requirements of the Constitution, including the 
Religion Clauses of the First Amendment. The proposed rule had the 
following specific objectives:
    1. Participation by faith-based organizations in the Department of 
Labor's programs. The proposed rule clarified that organizations are 
eligible to participate in DOL social service programs without regard 
to their religious character or affiliation, and that organizations 
must not be excluded from competing for DOL support simply because they 
are faith-based. Specifically, the proposed rule included regulatory 
provisions specifying that faith-based organizations would be eligible 
to compete for DOL support on the same basis, and under the same 
eligibility requirements, as all other organizations. The proposed rule 
also included provisions designed to ensure that DOL, DOL social 
service providers, and State and local governments administering DOL 
support would be prohibited from discriminating for or against 
organizations on the basis of religion, religious belief, or religious 
character in the administration or distribution of DOL support, 
including grants, contracts, and cooperative agreements.
    2. Inherently religious activities. The proposed rule included 
requirements related to inherently religious activities in DOL-
supported social service programs. Specifically, under the proposed 
regulatory provisions, an organization could not use direct DOL support 
\1\ for inherently religious

[[Page 41883]]

activities, such as worship, religious instruction, or proselytization. 
If the organization engaged in such activities, the proposed provisions 
required the organization to offer those activities separately in time 
or location from the social service programs receiving direct DOL 
support, and participation by program beneficiaries in any such 
inherently religious activities would have to be voluntary. The 
proposed requirements ensured that direct DOL support would not be used 
to support inherently religious activities. Such support could not be 
used, for example, to conduct prayer meetings, worship services, or any 
other activity that is inherently religious.
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    \1\ As in the proposed rule, the term ``direct DOL support'' is 
used here to refer to DOL support provided directly to a religious 
or other non-governmental organization within the meaning of the 
Establishment Clause of the First Amendment. For example, direct DOL 
support may occur where the Federal Government, a State or local 
government administering DOL support, or a DOL intermediary social 
service provider selects an organization and obtains the needed 
services straight from the organization (e.g., via a grant or 
cooperative agreement).
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    The proposed rule clarified that this restriction would not mean 
that DOL social service providers could not engage in inherently 
religious activities, but only that such providers could not use direct 
DOL support for these activities. Under the proposed rule, such 
providers would have to take steps to separate in time or location 
their inherently religious activities from the services they offer with 
direct DOL support. The proposed rule further provided that these 
restrictions on inherently religious activities would not apply where 
DOL support was indirectly provided. The proposed rule clarified that 
indirect DOL support referred to DOL support that is indirect within 
the meaning of the Establishment Clause of the First Amendment to the 
Constitution. An organization receives indirect support if, for 
example, a program beneficiary redeems a voucher, coupon, certificate, 
or similar mechanism that was provided to that individual using DOL 
financial assistance under a program that was designed to give that 
individual a genuine and independent private choice among providers or 
program options.
    In addition, the proposed rule clarified that the legal 
restrictions applied to inherently religious activities in DOL social 
service programs within correctional facilities would sometimes be 
different from the legal restrictions that are applied to other DOL-
supported social service programs, because the degree of government 
control over correctional environments sometimes warrants affirmative 
steps by prison officials, in the form of chaplaincies and similar 
programs, to ensure that prisoners have opportunities to exercise their 
religion.
    The proposed rule also recognized that the legal restrictions 
applied to inherently religious activities in other DOL-supported 
social service programs under extensive government control, for example 
isolated residential Job Corps facilities, would sometimes be different 
from the legal restrictions applied to other DOL-supported social 
service programs. These restrictions would differ because the extensive 
government control over the environment of these DOL social service 
programs sometimes would require that affirmative steps be taken by 
program officials to ensure that the beneficiaries of these programs 
have the opportunity to exercise their religion. The proposed rule 
emphasized that any participation in such inherently religious 
activities would have to be voluntary and that nothing in the proposed 
rule was intended to restrict the exercise of rights or duties 
guaranteed by the Constitution. For example, the proposed rule 
specified that program officials, although permitted to impose 
reasonable time, place, and manner restrictions, would not be allowed 
to restrict program beneficiaries' ability to freely express their 
views and to exercise their right to religious freedom. In addition, 
the proposed rule specified that residential facilities receiving DOL 
support would be required to permit residents to engage in voluntary 
religious activities, including holding religious services, at such 
facilities (although reasonable time, place, and manner restrictions 
would be permitted).
    3. Independence of faith-based organizations. The proposed rule 
also clarified that a faith-based organization that is a DOL social 
service provider or that participates in DOL social service programs 
would retain its independence and could continue to carry out its 
mission, including the definition, development, practice, and 
expressions of its religious beliefs, although no organization, faith-
based or otherwise, could use direct DOL support for any inherently 
religious activities, such as worship, religious instruction, or 
proselytization. Among other things, the proposed rule included 
provisions that explicitly stated that a faith-based organization could 
use space in its facilities to provide DOL-supported social services 
without removing religious art, icons, scriptures, or other religious 
symbols. In addition, under the proposed rule, a DOL-supported faith-
based organization could retain its name (even if the name made a 
religious reference), select its board members and otherwise govern 
itself on a religious basis, and include religious references in its 
mission statements and other governing documents.
    4. Nondiscrimination in providing assistance. The proposed rule 
provided that DOL, DOL social service intermediary providers, DOL 
social service providers in their use of direct DOL support, and State 
and local governments could not, in providing social services 
(including outreach for such services), discriminate for or against a 
current or prospective program beneficiary on the basis of religion, 
religious belief, or absence thereof. The proposed rule clarified that 
organizations receiving DOL support indirectly (for example, as a 
result of the genuine and independent private choice of a beneficiary 
of a program offering choice among providers or program options) would 
not be prohibited from offering assistance that integrates faith and 
social services and requires participation in all aspects of the 
organizations' programs and activities, including the religious 
aspects.
    5. Assurance requirements. The proposed rule also prohibited, and 
directed the removal of, provisions in the Department's grant 
documents, agreements, covenants, memoranda of understanding, policies, 
or regulations that require only faith-based organizations applying for 
or receiving DOL support to provide assurances that they would not use 
such support for inherently religious activities. Under the proposed 
rule, all DOL social service providers, as well as State and local 
governments administering DOL support, would be required to carry out 
all DOL-supported activities in accordance with all program 
requirements and other applicable requirements governing the conduct of 
DOL-supported activities, including those requirements prohibiting the 
use of direct DOL support for inherently religious activities. In 
addition, to the extent that provisions in grant documents, agreements, 
covenants, memoranda of understanding, policies, or regulations used by 
DOL, or by a DOL social service intermediary provider or a State or 
local government administering DOL support, disqualify organizations 
from participating in DOL's programs because such organizations are 
motivated or influenced by religious faith to provide social services, 
or because of the organizations' religious character or affiliation, 
the proposed rule removed such restrictions, which are inconsistent 
with governing law.

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II. Discussion of Comments Received on the Proposed Rule

    The Department received comments on the proposed rule from 7 
commenters--two individuals, four civil or religious liberties 
organizations, and one State agency receiving financial assistance 
under the Workforce Investment Act (WIA). Some comments were generally 
supportive of the proposed rule; others were critical. The following is 
a summary of the comments, and the Department's responses.

Participation by Faith-Based Organizations in Department of Labor 
Social Service Programs

    Several commenters expressed appreciation and support for the 
Department's efforts to clarify the rules governing participation of 
religious organizations in its programs. Two commenters commended DOL, 
in particular, for explicitly stating that DOL, DOL social service 
providers, and State and local governments administering DOL-supported 
social service programs may not discriminate either for or against 
religious providers.
    Other commenters disagreed with the proposed rule, arguing that it 
would allow Federal financial assistance to be given to ``pervasively 
sectarian'' organizations in violation of what the commenters described 
as a constitutional principle that government may not fund programs 
that are so permeated by religion that their secular side cannot be 
separated from the sectarian. These commenters maintained that the rule 
places no limitations on the kinds of religious organizations that can 
receive financial assistance, and they requested that ``pervasively 
sectarian'' organizations be barred from receiving such assistance from 
the Department.
    We do not agree that the Constitution requires the Department to 
assess the overall religiousness of an organization and deny financial 
assistance to organizations that are ``pervasively sectarian.'' Rather, 
faith-based (and other) organizations that receive direct DOL support 
must not use such support for inherently religious activities, and they 
must ensure that such religious activities are separate in time or 
location from services directly supported by the Department and that 
participation in such activities by program beneficiaries is voluntary. 
Furthermore, under the proposed rule, such religious organizations are 
prohibited from discriminating for or against program beneficiaries on 
the basis of religion or religious belief, and participating 
organizations that violate these requirements are subject to applicable 
sanctions and penalties. The regulations would thus ensure that direct 
DOL support is not used for inherently religious activities, as 
required by current case law.
    Moreover, the Supreme Court's ``pervasively sectarian'' doctrine--
which held that there are certain religious institutions in which 
religion is so pervasive that no government aid may be provided to 
them, because their performance of even ``secular'' tasks will be 
infused with religious purpose--no longer enjoys the support of a 
majority of the Court. Four Justices expressly abandoned it in Mitchell 
v. Helms, 530 U.S. 793, 825-29 (2000) (plurality opinion), and Justice 
O'Connor's opinion in that case, joined by Justice Breyer, set forth 
reasoning that is inconsistent with its underlying premises, see id. at 
857-58 (O'Connor, J., concurring in judgment) (requiring proof of 
``actual diversion of public support to religious uses''). Thus, six 
members of the Court have rejected the view that aid provided to 
religious institutions will invariably advance the institutions' 
religious purposes. That view is the foundation of the ``pervasively 
sectarian'' doctrine. The Department therefore believes that under 
current precedent, the Department may provide DOL support to all social 
service providers, without regard to religion and without criteria that 
would require providers to abandon their religious expression or 
character. As a result, the Department declines to make the requested 
change.
    Another commenter expressed concern that section 2.32(a) of the 
proposed rule failed to circumscribe how and when religion could be 
accommodated. Section 2.32(a) states in pertinent part: ``DOL, DOL 
social service providers, as well as State and local governments 
administering DOL support, must not discriminate for or against an 
organization on the basis of the organization's religious character or 
affiliation, although this requirement does not preclude DOL, DOL 
social service providers, or State and local governments administering 
DOL support from accommodating religion in a manner consistent with the 
Establishment Clause.'' The commenter suggested that the Department 
revise the rule to set limits on permissible accommodation, for 
instance, by stating that accommodation must be handled in an even-
handed manner and not favor some faiths over others; by stating that 
accommodation is permissible only if it removes a substantial burden on 
religious exercise; and by ``prohibiting accommodations to religion 
that would vitiate the essence of the program, or which would work a 
hardship on participants.''
    The Department does not agree that the requested change is 
necessary. The purpose of the rule is to clarify that all 
organizations, both faith-based and otherwise, are eligible to 
participate in DOL social service programs without regard to their 
religious character or affiliation and to establish clearly the proper 
uses to which DOL support could be put and the conditions for receipt 
of such support. The rule is designed to ensure that the implementation 
of the Department's social service programs will be conducted in a 
manner consistent with the requirements of the Constitution, including 
the Religion Clauses of the First Amendment. All accommodations 
provided to religious individuals or organizations must be done within 
the confines of law. Such law includes statutory program requirements 
as well as the conditions set forth in this rule. The statement in the 
rule concerning accommodation simply clarifies that otherwise valid 
religious accommodations do not violate the religious nondiscrimination 
requirement of the rule.
    One commenter requested that the Department revise Sec.  2.32(c) to 
clarify that an organization may not be discriminated against because 
it lacks a faith-based component. This section as proposed stated in 
pertinent part: ``A grant document, agreement, covenant, memorandum of 
understanding, policy, or regulation that is used by DOL, a State or 
local government, or a DOL social service intermediary provider in 
administering a DOL social service program must not disqualify 
religious organizations from receiving DOL support or participating in 
DOL programs on the grounds that such organizations are motivated or 
influenced by religious faith to provide social services, or on the 
grounds that such organizations have a religious character or 
affiliation.''
    We believe the commenter's concerns are already addressed by Sec.  
2.32(a), which provides, inter alia, that ``DOL, DOL social service 
intermediary providers, as well as State and local governments 
administering DOL support, must not discriminate for or against an 
organization on the basis of the organization's religious character or 
affiliation'' (emphasis added). However, we have modified the language 
of the final rule to further address this concern and to make even more 
clear that it is impermissible to disqualify an organization from 
receiving DOL

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support based on the organization's religious faith, character, or 
affiliation, or because such organization lacks a religious component. 
Section 2.32(c) of the final rule reads: ``A grant document, agreement, 
covenant, memorandum of understanding, policy, or regulation that is 
used by DOL, a State or local government, or a DOL social service 
intermediary provider in administering a DOL social service program 
must not disqualify organizations from receiving DOL support or from 
participating in DOL programs on the grounds that such organizations 
are motivated or influenced by religious faith to provide social 
services, have a religious character or affiliation, or lack a 
religious component.''

Inherently Religious Activities

    Some commenters suggested that the proposed rule does not 
sufficiently detail the scope of religious content that must be omitted 
from programs receiving DOL support. For example, two commenters 
suggested that the explanation given of ``inherently religious 
activities'' as ``worship, religious instruction, or proselytization'' 
is unclear or incomplete. Relatedly, one commenter suggested that the 
proposed rule would authorize conduct that would impermissibly convey 
the message that government endorses religious content. Another 
commenter suggested that the Department modify the proposed rule to 
make clear that the government may not disburse public funds to 
organizations that convey religious messages or in any way advance 
religion. Another commenter suggested that the rule define 
``participation'' to provide guidance as to whether ``compelled but 
passive presence at religious activities * * * constitute[s] coerced 
participation.'' Finally, one commenter requested clarification whether 
it would be permissible for a DOL social services provider to engage in 
inherently religious activity at a beneficiary's request before or 
following the provision of social services that receive direct 
financial assistance.
    The Department disagrees with these comments and declines to make 
the requested changes. Concerning the rule's definition of ``inherently 
religious activities,'' it would be difficult, if not impossible, to 
establish a complete list of all inherently religious activities. 
Inevitably, a regulatory definition would exclude some inherently 
religious activities while including activities that arguably may not 
be inherently religious. Rather than attempt to establish an exhaustive 
regulatory definition, the Department has decided to retain the 
language of the proposed rule, which provides examples of prohibited 
activities. This approach is consistent with Supreme Court precedent, 
which likewise has not comprehensively defined inherently religious 
activities. In response to the suggestion that the rule will indicate 
or create the appearance that the Department endorses religious 
content, it again merits emphasis that the rule forbids the use of 
direct government assistance for inherently religious activities and 
states that any such activities must be voluntary for participants and 
separated in time or location from activities directly supported by the 
Department. As to the suggestion that the government must exclude from 
its programs those organizations that convey religious messages or 
advance religion with their own funds, the Department finds no 
constitutional support for this view. As noted above, the Supreme Court 
has held that the Constitution forbids the use of direct Federal 
financial assistance for inherently religious activities, but the Court 
has rejected the presumption that religious organizations will 
inevitably divert such assistance for their own religious activities. 
The Department likewise rejects the view that faith-based organizations 
cannot be trusted to fulfill their written promises to adhere to grant 
or contract requirements.
    Moreover, for reasons similar to those articulated above regarding 
``inherently religious activities,'' the Department does not believe 
that it would be appropriate to provide a more detailed definition of 
``participation.'' Nonetheless, we reaffirm that a beneficiary's 
participation in any religious activities offered by a recipient of DOL 
support must be entirely voluntary and further, that such activities 
must be offered separately in time or location from social service 
programs receiving direct DOL support. We recommend that DOL social 
service providers, including State and local governments administering 
DOL-supported programs, help to ensure that beneficiaries and 
prospective beneficiaries of their programs understand their rights by 
having literature available for the beneficiaries explaining their 
rights.
    Finally, in response to commenter's request for further 
clarification of the ``separate, in time or location'' requirement, the 
Department declines to revise this portion of the rule, because the 
Department does not believe that it is ambiguous or necessitates 
additional regulation for proper adherence. Regarding the example posed 
by the commenter, the Department believes it would be permissible under 
the rule for staff of a DOL-supported social services provider to 
engage in inherently religious activity with a beneficiary at a 
beneficiary's request before or after the provision of social service 
activities directly supported by DOL. Such activity would be permitted 
because it would be voluntary (because it was at the beneficiary's 
request) and separate in time from any social service activity 
receiving direct DOL support (because it took place before or after, 
but not during, the social service activities directly supported by 
DOL). Under the rule, an organization receiving direct DOL support is 
responsible for maintaining a distinction between the social service 
activities directly supported by DOL and any privately-supported 
inherently religious activities. Of course, no direct DOL support can 
be used for inherently religious activities.

Voucher-Style Programs Under the Rule

    Two commenters claimed that the proposed rule would authorize the 
use of voucher programs to provide assistance to faith-based 
organizations without instituting adequate ``constitutional 
safeguards,'' and requested that the rule be revised to comply with the 
framework instituted by Zelman v. Simmons-Harris, 536 U.S. 639 (2002). 
These commenters emphasized the need for program beneficiaries to have 
a ``real choice'' of their social service provider and suggested there 
was ``no * * * social service structure in place to ensure a real 
choice.'' One commenter requested clarification whether inherently 
religious activities conducted by a service provider receiving both 
direct and indirect support must be separate in time and location from 
DOL program services. This commenter also requested reconciliation 
between, as the commenter described it, the rule's requirement that 
service providers receiving vouchers must satisfy ``all legal and 
programmatic requirements'' (see 2.32(c) and 2.33(c), both referring to 
``all applicable legal and programmatic requirements'') and the rule's 
implication that the Department may ``dispense with programmatic 
requirements where doing so relieves a substantial burden on religious 
practice.'' Last, one commenter requested a rule change that would make 
the nondiscrimination provision of Sec.  2.33(a) applicable to service 
providers receiving indirect support.
    The Department respectfully declines to adopt the recommendations 
of the commenters requesting incorporation of

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additional requirements by regulation. The proposed rule clearly states 
that any organization receiving indirect DOL support, whether through a 
voucher-style program or other qualifying program offered by the 
Department, must comply with Federal law. Such law includes 
constitutional requirements. The Department thus believes that the 
proposed rule adequately addresses these commenters' constitutional 
concerns.
    Regarding the inquiry whether inherently religious activities 
conducted by a social service provider receiving both direct and 
indirect support must be separate in time and location from DOL program 
services, Sec.  2.33(b)(1) of the rule plainly prohibits service 
providers from using direct DOL support to conduct inherently religious 
activities. Using any direct support to conduct such activities would 
violate this prohibition, even if the organization also received 
indirect support. Religious activity need not be restricted, however, 
when related to services (or part of programs) that receive only 
indirect DOL support.
    The Department also disagrees with the suggestion that the rule is 
inconsistent in requiring faith-based organizations to meet applicable 
legal and programmatic requirements but also permitting constitutional 
accommodations for certain religious practices. One fundamental purpose 
of this rule is to allow organizations to be eligible for Department 
programs without regard to their religious character or affiliation and 
to prevent the exclusion of organizations from competing for DOL 
support simply because of their religious character. Thus, faith-based 
organizations are eligible to compete for DOL support on the same 
basis, and under the same eligibility requirements, as all other 
organizations. The statement in the proposed rule that indicated 
accommodations to religion may be permitted, ``in a manner consistent 
with the Establishment Clause,'' does not signify that discrimination 
against or preferential treatment for religion is permissible, but 
rather acknowledges the special circumstances involved when DOL 
provides support to religious organizations. Necessarily included 
within these special circumstances are any accommodations for religious 
practices that are consistent with the Free Exercise and Establishment 
Clauses of the Constitution.
    The Department also disagrees with the commenter's request to 
extend the proposed rule's nondiscrimination provision (Sec.  2.33(a)) 
to religious organizations receiving indirect DOL support. As an 
initial matter, this final rule does not alter any nondiscrimination 
provisions of existing statutes, including statutes governing programs 
providing DOL support. See section of preamble entitled Applicability 
and Notice of Nondiscrimination Requirements. Thus, to the extent that 
such statutes restrict the activities of indirectly funded 
organizations, those restrictions remain in effect under this rule. 
Questions regarding the applicability of these other statutes may be 
addressed to the appropriate DOL program official or the DOL's Civil 
Rights Center. See Sec.  2.35 of this final rule. Additionally, the 
religious freedom of beneficiaries in a program receiving indirect 
support is protected by the guarantee of genuine and independent 
private choice. Officials administering public support under a program 
providing indirect assistance have an obligation to ensure that every 
eligible applicant receives services from some provider, and no 
beneficiary may be required to receive services from a provider to 
which the beneficiary has a religious objection. In other words, DOL-
supported vouchers and other mechanisms for providing indirect support 
must be available to all participants regardless of their religious 
belief, and those who object to a religious provider have a right to 
services from some alternative provider.

Exceptions for Chaplains and Certain DOL-Supported Social Service 
Programs From the Restriction on Direct Funding of ``Inherently 
Religious'' Activities

    Some commenters objected to the exception from the ``inherently 
religious activities'' restrictions for religious or other 
organizations assisting chaplains in carrying out their duties in 
prisons, detention facilities, or community correction centers. Others 
criticized the rule for excepting certain DOL-supported social service 
programs--i.e., those that involve a high degree of government control 
over the program environment--from the restriction on direct financial 
assistance of inherently religious activities, asserting that there is 
no legal basis for such an exception. One commenter suggested modifying 
the proposed rule to clarify that religious accommodation at remote Job 
Corps centers must be available to all participants and not limited to 
participants of dominant religions. Still another commenter criticized 
the rule for lacking clarity, and expressed concern that too much 
discretion was being given to the government in determining which 
programs have a high degree of government control.
    The Department respectfully disagrees with these comments. As noted 
in the proposed rule, the legal restrictions that apply to religious 
programs within correctional facilities will sometimes be different 
from legal restrictions that govern other Department programs. That is 
because correctional institutions are heavily regulated, and this 
extensive government control over the prison environment means that 
prison officials must sometimes take affirmative steps, in the form of 
chaplaincies and similar programs, to provide an opportunity for 
prisoners to exercise their religion. Without such efforts, religious 
freedom would not exist for Federal prisoners. See Cruz v. Beto, 450 
U.S. 319, 322 n.2 (1972) (explaining that ``reasonable opportunities 
must be afforded to all prisoners to exercise the religious freedom 
guaranteed by the First and Fourteenth Amendments without fear of 
penalty''); Abington School District v. Schempp, 374 U.S. 203, 299 
(1963) (Brennan, J., concurring) (observing that ``hostility, not 
neutrality, would characterize the refusal to provide chaplains and 
places of worship for prisoners . . . cut off by the State from all 
civilian opportunities for public communion''). Of course, religious 
activities must be voluntary for the inmates.
    Sometimes the activities of chaplains and those assisting them will 
be inherently religious. For example, a chaplain might conduct a 
voluntary worship service or administer sacraments. The rule does not 
effect any change in the professional or legal responsibilities of 
chaplains or those persons or organizations assisting them. Nor does it 
diminish the fact that chaplains' duties often include the provision of 
secular counseling. Rather, the rule is intended simply to make clear 
that the rule's otherwise-applicable restrictions on the use of direct 
DOL support for inherently religious activities do not apply to 
chaplains in correctional facilities or those functioning in similar 
roles. Accordingly, the rule as stated reflects the law and requires no 
change.
    For similar reasons, the legal restrictions that apply to religious 
activities within some DOL-supported social service programs, such as 
isolated residential Job Corps facilities, may sometimes be different 
from the legal restrictions that govern other DOL programs. This is 
because where there is extensive government control over the 
environment of a DOL-supported social service program, like an isolated 
residential Job Corps facility, program officials must sometimes take 
affirmative steps, in the form of access to ministers and similar 
programs, to ensure that program beneficiaries may

[[Page 41887]]

exercise their religious freedom. Cf. Katcoff v. Marsh, 755 F.2d 223, 
234 (2d Cir. 1985) (finding it ``readily apparent'' that government is 
obligated by the First Amendment to make religion available to members 
of the Army who otherwise would not have access to their religion 
because they are often in isolated areas without access to religious 
opportunities). Without such efforts, religious freedom would not exist 
for these DOL program beneficiaries. Of course, participation in such 
activities must be voluntary. In response to the suggestion that the 
rule be modified to clarify that any religious accommodation at Job 
Corps centers must not be limited to participants from dominant faiths, 
the Department rejects the suggestion as unnecessary. Of course, 
religious activities on Job Corps Centers must be permitted for all 
beneficiaries of such DOL programs regardless of faith. The rule 
already provides that there can be no ``discriminat[ion] for or against 
a current or prospective program beneficiary on the basis of religious 
or religious belief.'' The Department believes that the proposed rule 
requires no change in this regard.

Applicability and Notice of Nondiscrimination Requirements

    Three commenters suggested that the rule should explain the scope 
of applicable independent statutory provisions requiring grantees not 
to discriminate on the basis of religion, rather than simply referring 
grantees to appropriate Department program offices. One commenter 
further suggested that the proposed rule be amended to provide specific 
directions on which programs statutorily bar religious discrimination.
    The Department understands that organizations participating in DOL 
programs need to be aware of such provisions, but declines to adopt the 
suggested recommendation because the Department believes such 
information is most easily obtained and best explained by the 
appropriate Department offices. The purpose of this rulemaking is to 
eliminate undue administrative barriers that the Department has imposed 
to the participation of religious organizations in Department programs; 
it is not to alter existing statutory requirements, which apply to 
Department programs to the same extent that they applied under the 
prior rule.

State and Local Diversity Requirements and Preemption

    Two commenters expressed concern that the proposed rule will exempt 
religious organizations from State and local diversity and 
nondiscrimination requirements. Both commenters suggested that the 
proposed rule be modified to provide that State and local laws will not 
be preempted by the rule. Conversely, one commenter indicated that the 
rule should clearly state that it preempts all such State and local 
requirements.
    The requirements that govern financial assistance under the 
Department programs at issue in these regulations do not address 
preemption of State or local diversity or nondiscrimination laws. 
Federal financial assistance, however, carries Federal obligations. The 
Federal obligations continue to be applicable even when Federal 
financial assistance is first given to the States or localities through 
block grants and the latter are then responsible for disbursing the 
Federal financial assistance. No organization is required to apply for 
assistance under these programs, but organizations that apply and are 
selected for assistance must comply with the applicable legal and 
programmatic requirements. As discussed below, these Federal 
requirements apply not only to Federal financial assistance but also to 
State matching funds and to State funds that are commingled with the 
Federal assistance.

Applicability of Rule to State, Local, and ``Commingled'' Funds

    One commenter stated that the proposed rule was unclear on whether 
it applied to funds supplied by the States. Two commenters stated that 
the Department lacked the statutory or constitutional authority to 
require States to waive, for their own funds, State law that is 
inconsistent with the rule. A third commenter requested a rule change 
that would make State matching funds that are not commingled subject to 
the rule's requirements.
    The Department disagrees with these objections, but has modified 
the regulatory text slightly for clarification. The rule makes clear 
that when States and local governments voluntarily choose to contribute 
their own funds to supplement program activities, they have the option 
of commingling their funds with Federal funds or to separate out their 
funds from Federal funds. The rule applies to State funds in the former 
instance, but not the latter. To the extent a Department program may 
explicitly require that Federal rules apply to State matching funds (or 
other grantee contributions) or may require State matching funds to be 
part of the program grant budget, these State matching funds are 
considered to be commingled and thus subject to the requirements of 
this rule. The Department also disagrees that it lacks statutory or 
constitutional authority to require States to comply with this rule for 
commingled State funds when State law is inconsistent with the rule. 
Neither States nor localities are obligated to participate in 
Department programs, but should they choose to do so, they must comply 
with Federal requirements. Valid Federal requirements may be imposed 
through, among other means, statute or agency rulemaking, as was done 
here. And, of course, where no statute requires commingling of funds, 
States remain free to separate their funds from Federal funds, and 
Federal requirements do not apply to segregated State funds.

Organizations' Display of Religious Art or Symbols

    Three commenters objected to the provisions allowing faith-based 
organizations conducting DOL-supported social service programs in their 
facilities to retain religious art, icons, scriptures, or other 
religious symbols in their facilities.
    The Department disagrees with these comments. A number of Federal 
statutes affirm the principle embodied in this rule. See, e.g., 42 
U.S.C. 290kk-1(d)(2)(B). Moreover, for no other service providers do 
Department regulations prescribe the types of artwork or symbols that 
may be placed within the structures or room in which DOL-supported 
social services are provided. In addition, a prohibition on the use of 
religious icons would make it more difficult for many religious 
organizations to participate in Department programs than other 
organizations by forcing them to procure additional space. It would 
thus be an inappropriate and excessive restriction, typical of the 
types of regulatory barriers that this final rule seeks to eliminate. 
Consistent with constitutional church-state guidelines, a religious 
organization that participates in Department programs retains its 
independence and may continue to carry out its mission, although it 
must not use direct DOL support to support any inherently religious 
activities. Accordingly, this final rule continues to provide that 
religious organizations may use space in their facilities to provide 
DOL-supported services, without removing religious art, icons, 
scriptures, or other religious symbols.

Religious Freedom Restoration Act

    One commenter requested that the Department include language in the 
regulation stating that the Religious

[[Page 41888]]

Freedom Restoration Act (``RFRA''), 42 U.S.C. 2000bb et seq., may 
provide relief from otherwise applicable statutory provisions 
prohibiting employment discrimination on the basis of religion. The 
commenter noted that, for example, the Department of Health and Human 
Services has recognized RFRA's ability to provide relief from certain 
employment nondiscrimination requirements in the final regulations it 
promulgated governing its substance abuse and mental health programs 
(e.g., 42 CFR 54.6).
    The Department notes that RFRA, which applies to all Federal law 
and its implementation, 42 U.S.C. 4000bb-3, 4000bb-2(1), is applicable 
regardless of whether it is specifically mentioned in this rule. 
Whether a party is entitled to an exemption or other relief under RFRA 
simply depends upon whether the party satisfies the RFRA's statutory 
requirements. The Department therefore declines to adopt this 
recommendation at this time.

Recognition of Religious Organizations' Title VII Exemption

    The Department received three comments expressing views on the 
rule's provision that, absent statutory authority to the contrary, 
religious organizations do not forfeit their Title VII exemption by 
receiving financial assistance from the Department. One commenter 
approved of the retention of the Title VII exemption, but urged 
renaming the section with a more expansive title, such as ``Preserving 
the Freedom of Faith-Based Organizations in Employment Decisions.'' Two 
commenters stated that the rule ``improperly extends [the] Title VII'' 
exemption because ``Congress has never authorized [the] exemption'' for 
DOL programs. These commenters further assert that providing Federal 
financial assistance for the provision of social services to an 
organization that considers religion in its employment decisions is 
unconstitutional.
    The Department disagrees with the objections to the rule's 
recognition that a religious organization does not forfeit its Title 
VII exemption when administering DOL-supported social services. As an 
initial matter, applicable statutory nondiscrimination requirements are 
not altered by this rule. Congress establishes the conditions under 
which religious organizations are exempt from Title VII. This rule 
simply recognizes that the Title VII exemption, including its 
limitations, is fully applicable to Federally-assisted organizations 
unless Congress says otherwise.
    As to the suggestion that the Constitution restricts the government 
from providing support for social services to religious organizations 
that consider faith in hiring, that view does not accurately represent 
the law. As noted below, the employment decisions of organizations that 
receive extensive public financial assistance are not attributable to 
the State, see Rendell-Baker v. Kohn, 457 U.S. 830 (1982), and it has 
been settled for more than 100 years that the Establishment Clause does 
not bar the provision of direct Federal grants to organizations that 
are controlled and operated exclusively by members of a single faith. 
See Bradfield v. Roberts, 175 U.S. 291 (1899); see also Bowen v. 
Kendrick, 487 U.S. 589, 609 (1988). Finally, the Department notes that 
allowing religious organizations to consider faith in hiring when they 
receive government support is much like allowing a Federally-supported 
environmental organization to hire those who share its views on 
protecting the environment--both types of organization are allowed to 
consider ideology and missions, which improves the organizations' 
effectiveness and preserves their integrity. Thus, the Department 
declines to amend the final rule to require religious organizations to 
forfeit their Title VII rights.
    The Department also rejects the request to give this section a more 
expansive title. The section relates most directly to the retention of 
the Title VII exemption, and the proposed title accurately reflects the 
section's scope and purpose.

Nondiscrimination in Providing Assistance

    Commenters have requested a number of rule changes that would 
provide express protections for beneficiaries who object to the 
religious character of an assigned service provider. One commenter 
requested a revision to make clear that the right to religious freedom 
includes the right to be free from religion. Other commenters have 
requested provisions that would require notice to beneficiaries that 
they may object to a religious service provider and obtain a secular 
alternative; that participation in religious activity is voluntary, and 
pressure or coercion, even subtly applied, is prohibited; and that the 
failure to participate in religious activities will not impact the 
receipt of social services. These commenters additionally requested the 
creation of a grievance process and remedies for violations of these 
rights.
    The Department declines to adopt these recommendations, because it 
believes that the rule's existing language prohibiting organizations 
from discriminating for or against program beneficiaries on the basis 
of religion or religious belief encompasses beneficiaries who hold no 
religious belief or who desire to be free of religion. Such a 
prohibition is straightforward and requires no further elaboration. In 
addition, the rule provides that organizations may not use direct DOL 
support for inherently religious activities and that any such 
activities must be offered separately in time or location and must be 
voluntary for program beneficiaries. These requirements further protect 
the rights of program beneficiaries. The Department also declines to 
adopt the recommendation that the rule create a grievance process that 
is specific to the requirements contained in this rule, because 
traditional channels of airing grievances or filing complaints are 
already generally available.

Assurance Requirements

    One commenter, in order to mitigate constitutional concerns raised 
by the proposed rule, opposed the removal of any existing requirements 
that faith-based organizations provide assurances that direct DOL 
support will not be used for inherently religious activities. This 
commenter, and one other, stated that the proposed rule should include 
additional assurances and safeguards to ``prevent religious use of 
[Department] funds.'' Still another commenter requested that the rule 
require State and local governments to provide assurances that they 
will follow the equal treatment principles of this rule.
    The Department disagrees with the commenters and declines to adopt 
their recommendations. Once this rule comes into effect, each 
prospective DOL social service provider, including State and local 
governments, must certify in its application for assistance that it 
will comply with various laws applicable to recipients of Federal 
financial assistance, including this final rule and its prohibitions on 
the use of direct DOL support for inherently religious activities and 
on discrimination either for or against religious organizations. 
Additional assurances, such as those that are being removed and 
prohibited by this rule, only perpetuate an unfair presumption that 
program requirements applicable to all DOL providers are insufficient 
to bind faith-based organizations and that additional requirements and 
assurances must be imposed on these organizations.
    The Department believes that no additional requirements above and 
beyond those imposed on all participating organizations are needed.

[[Page 41889]]

In issuing this rule, the Department's general approach is that faith-
based organizations are not a category of applicants or service 
providers that require additional requirements or oversight in order to 
ensure compliance with program regulations. Rather, the Department 
presumes that faith-based organizations, like other recipients of DOL 
support, fully understand the restrictions on the support they receive, 
including the restriction that inherently religious activities cannot 
be undertaken with direct DOL support and must remain separate from the 
Federally-supported activities. The requirements for use of DOL support 
under a Department program apply to, and are binding on, all Department 
social service providers.
    One commenter requested that the proposed rule require monthly 
reports and periodic site visits of all Department grantees to ensure 
compliance with the Establishment Clause.
    The Department respectfully declines to adopt this recommendation. 
Ordinary enforcement and monitoring procedures are sufficient to ensure 
that faith-based organizations, like other participating organizations, 
do not violate program restrictions, including those concerning 
unauthorized uses of financial assistance. The need for enforcement of 
Department regulations does not increase simply because some service 
providers are faith-based organizations. The Department has a 
responsibility to ensure that all DOL support is used in accordance 
with program-specific regulations and any government-wide requirements. 
Compliance with the Establishment Clause is just one aspect of 
compliance with legal and programmatic requirements. We believe the 
monitoring mechanisms currently in place are sufficient to address 
whatever compliance issues may arise.
    Another commenter suggested that the Department amend the proposed 
rule regarding assurances to clarify that Sec.  2.32(c) is not limited 
to grant documents and applies equally to contracts. The commenter 
noted that State and local governments frequently administer federally-
financed social service programs by issuing contracts with service 
providers rather than grants.
    The Department believes that no change is required. Section 2.32(c) 
applies to ``a grant document, agreement, covenant, memorandum of 
understanding, policy, or regulation.'' The language is broadly 
sweeping and the use of the term ``agreement'' includes by definition 
``contracts.'' However, in an effort to further clarify the regulation, 
the Department has made the requested change.

Employment or Training Activities That Involve the Maintenance of a 
Building Used for Religious Activities

    One commenter objected that the proposed rule purportedly 
``incorporates by reference an earlier proposed rule'' proposing 
revisions to 29 CFR 37.6(f)(2). The commenter stated that the proposed 
revision to 37.6(f)(2) would lead to confusion and possible 
unconstitutional use of Federal funds for capital improvements to 
religious buildings. The Department notes that, contrary to the 
commenter's assertions, the rule proposed on March 9 did not include 
proposed changes to 29 CFR 37.6(f)(2). As a result, the Department has 
responded in detail to this and similar objections in its notice of 
final rulemaking for 29 CFR part 37, published elsewhere in the Federal 
Register today.

Definitions

    The Department received several comments relating to definitions 
for terms used in the proposed rule. Two comments focused on the 
definition of ``social service program,'' which the Department defined 
as including, inter alia, childcare services and literacy and mentoring 
programs. One commenter expressed concern that the proposed rule 
subsequently failed to address how a religious childcare service 
provider would be able to ensure that children as young as three or 
four, or perhaps even younger, would have a choice as to whether to 
participate in inherently religious activities of the childcare center. 
Likewise, the commenter was concerned that such children would be 
unable to separate out the religious childcare center's views from the 
instruction provided.
    The Department disagrees that changes to the rule are necessary in 
response to this comment. As with the definition of ``inherently 
religious activities'' discussed earlier in this preamble, it would be 
difficult, if not impossible, to craft regulatory language that would 
address the specific circumstances of every activity covered by the 
rule. In the Department's view, the language of the rule is 
sufficiently broad to cover the circumstances suggested by the 
commenter. That language requires recipients to operate their DOL-
supported programs in a manner consistent with applicable Federal law. 
Such law, of course, includes the Constitution.
    The same commenter questioned whether a ban on using direct DOL 
support for inherently religious activities would apply to volunteer 
mentors who were not paid with government money. The commenter wondered 
whether such mentors could engage in religious activities with the 
children they mentored in an activity receiving direct DOL support.
    DOL social service providers may not use direct DOL support for 
inherently religious activities. As is discussed below, DOL support 
includes more than money. Thus, in a program receiving any form of 
direct DOL support, a DOL social service provider--including one 
staffed by volunteer mentors--must comply with this rule's restrictions 
on inherently religious activities. Of course, where volunteer mentors 
are acting outside the scope of a DOL-supported program, they are not 
subject to such restrictions on their religious activities.
    One commenter suggested that the Department provide a definition 
for ``religious organization'' or ``faith-based organization,'' 
reasoning that a common definition across Federal programs would 
maximize opportunities for these organizations. The Department declines 
to adopt this suggestion. One of the objectives of this rule is to move 
away from unnecessary Federal inquiry into the religious nature, or 
absence of religious nature, of an organization seeking DOL support or 
participation in a DOL social service program. The Department believes 
the focus should always be on (1) whether the organization is eligible 
as defined by the program in question; and (2) whether the organization 
commits to abide, and does abide, by all legal and programmatic 
requirements that govern that support.
    Finally, a commenter suggested that ``Federal financial 
assistance'' should be defined to include non-financial assistance that 
might be provided by DOL or by State or local governments using DOL 
funds. The Department declines to amend the definition. Historically, 
Federal regulations have used similar, if not identical, language to 
define Federal financial assistance. Through the course of time, it has 
been clearly established that such assistance includes more than money. 
See U.S. Dep't of Transp. v. Paralyzed Veterans, 477 U.S. 597, 607 n.11 
(1986) (noting that Federal financial assistance may take non-monetary 
form). Federal financial assistance may include, for example, the use 
or rent of Federal land or property at below market value, Federal 
training, a loan of Federal personnel, subsidies, or other arrangements 
with the intention of providing assistance. See Delmonte v. Department 
of Bus. & Prof'l Regulation,

[[Page 41890]]

877 F. Supp. 1563 (S.D. Fla. 1995) (training of city police officers by 
Federal personnel considered to be Federal financial assistance).

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, local, and tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year.
    One commenter suggested that the rule met the unfunded mandate 
requirement only because the rule failed to mandate that alternative 
secular providers must be made available for beneficiaries who object 
to the religious character of an organization. Contrary to the 
commenter's suggestion, the Department has determined that this rule 
would not impose a mandate that will result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of more than $100 million in any one year. This is 
largely because these regulations impact only Federal financial 
assistance. Although State or local governments may commingle their 
funds with Federal funds, the rule does not require them to do so.

Amendments to Job Corps and WIA Regulations

    Except to the extent discussed above, the Department did not 
receive comments concerning the portions of the proposed rule that 
proposed to amend the Job Corps and WIA regulations. The Department has 
revised the language of these portions of the proposed rule to improve 
their clarity and consistency with the part of the proposed rule that 
is now the new subpart D of DOL's final general regulation at 29 CFR 
part 2. The Department has also revised the language of the proposed 
WIA regulations in order to ensure greater conformity with the language 
of WIA section 188(a)(3).

II. Findings and Certifications

Executive Order 12866

    The Office of Management and Budget (OMB) determined that this rule 
is a ``significant regulatory action'' as defined in section 3(f) of 
the Order (although not an economically significant regulatory action 
under the Order). OMB reviewed this final rule under Executive Order 
12866, Regulatory Planning and Review. Any changes made to the rule as 
a result of that review are identified in the docket file, which is 
available for public inspection in the office of the Center for Faith-
Based and Community Initiatives, U.S. Department of Labor, 200 
Constitution Avenue, NW., Room S-2235, Washington, DC 20210.

Regulatory Flexibility Act

    The Secretary of Labor, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), has reviewed and approved this final 
rule and in so doing certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The final rule will not impose any new costs, or modify existing costs, 
applicable to recipients of DOL support. Rather, the purpose of the 
rule is to clarify that DOL's social service programs are open to all 
qualified organizations, regardless of their religious character, and 
to establish clearly the permissible uses to which DOL support may be 
put. Notwithstanding the Secretary's determination that this rule will 
not have a significant economic effect on a substantial number of small 
entities, the Department specifically invited comments regarding any 
less burdensome alternatives to this rule that will meet the 
Department's objectives as described in this preamble. No such comments 
were received.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments, and on the private sector. This final rule does not impose 
any Federal mandates on any State, local, or tribal governments, or the 
private sector, within the meaning of the Unfunded Mandates Reform Act 
of 1995.

Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because this rule does 
not contain any information collection requirements that require the 
approval of the Office of Management and Budget.

Executive Order 13132, Federalism

    Executive Order 13132, Federalism, prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. Consistent with Executive Order 
13132, the Department specifically solicited comments from State and 
local government officials on this proposed rule, and no comments from 
these entities were submitted that raised federalism concerns.

List of Subjects

20 CFR Part 667

    Employment; Grant programs--labor; Reporting and recordkeeping 
requirements.

20 CFR Part 670

    Employment; Grant programs--labor; Job Corps; Religious 
discrimination.

29 CFR Part 2

    Administrative practice and procedure; Claims; Courts; Government 
employees; Religious discrimination.

29 CFR Part 37

    Administrative practice and procedure; Aged; Aliens; Civil rights; 
Discrimination; Equal educational opportunity; Equal employment 
opportunity; Grant programs-labor; Individuals with disabilities; 
Investigations; Manpower training programs; Political affiliation 
discrimination; Religious discrimination; Reporting and recordkeeping 
requirements; Sex discrimination.

    Signed at Washington, DC, this 7th day of July, 2004.
Elaine L. Chao,
Secretary of Labor.
Emily S. DeRocco,
Assistant Secretary for Employment and Training.

0
For the reasons set forth in the preamble, the Department of Labor 
amends 20 CFR Part 667; 20 CFR Part 670; 29 CFR Part 2; and 29 CFR Part 
37 as set forth below.

Title 20--Employees' Benefits

Chapter V--Employment and Training Administration, Department of Labor

PART 667--ADMINISTRATIVE PROVISIONS UNDER TITLE I OF THE WORKFORCE 
INVESTMENT ACT

0
1. The authority citation for part 667 is revised to read as follows:

    Authority: Subtitle C of Title I, Sec. 506(c), Pub. L. 105-220, 
112 Stat. 936 (20 U.S.C. 9276(c)); Executive Order 13198, 66 FR 
8497, 3 CFR 2001 Comp., p. 750; Executive Order 13279, 67 FR 77141, 
3 CFR 2002 Comp., p. 258.

[[Page 41891]]


0
2. In Sec.  667.266, paragraph (b) and the section heading are revised 
to read as follows:


Sec.  667.266  What are the limitations related to religious 
activities?

* * * * *
    (b)(1) 29 CFR part 2, subpart D governs the circumstances under 
which DOL support, including WIA Title I financial assistance, may be 
used to employ or train participants in religious activities. Under 
that subpart, such assistance may be used for such employment or 
training only when the assistance is provided indirectly within the 
meaning of the Establishment Clause of the U.S. Constitution, and not 
when the assistance is provided directly. As explained in that subpart, 
assistance provided through an Individual Training Account is generally 
considered indirect, and other mechanisms may also be considered 
indirect. See also 20 CFR 667.275 and 29 CFR 37.6(f)(1). 29 CFR part 2, 
subpart D also contains requirements related to equal treatment in 
Department of Labor programs for religious organizations, and to 
protecting the religious liberty of Department of Labor social service 
providers and beneficiaries.
    (2) Limitations on the employment of participants under WIA Title I 
to carry out the construction, operation, or maintenance of any part of 
any facility used or to be used for religious instruction or as a place 
for religious worship are described at 29 CFR 37.6(f)(2).

0
3. In Sec.  667.275, paragraph (b) and the section heading are revised 
to read as follows:


Sec.  667.275  What are a recipient's obligations to ensure 
nondiscrimination and equal opportunity, and what are a recipient's 
obligations with respect to religious activities?

* * * * *
    (b) 29 CFR part 2, subpart D governs the circumstances under which 
recipients may use DOL support, including WIA Title I financial 
assistance, to employ or train participants in religious activities. 
Under that subpart, such assistance may be used for such employment or 
training only when the assistance is provided indirectly within the 
meaning of the Establishment Clause of the U.S. Constitution, and not 
when the assistance is provided directly. As explained in that subpart, 
assistance provided through an Individual Training Account is generally 
considered indirect, and other mechanisms may also be considered 
indirect. See also 20 CFR 667.266 and 29 CFR 37.6(f)(1). 29 CFR part 2, 
subpart D also contains requirements related to equal treatment of 
religious organizations in Department of Labor programs, and to 
protection of religious liberty of Department of Labor social service 
providers and beneficiaries. Limitations on the employment of 
participants under WIA Title I to carry out the construction, 
operation, or maintenance of any part of any facility used or to be 
used for religious instruction or as a place of religious worship are 
described at 29 CFR 37.6(f)(2). See section 188(a)(3) of the Workforce 
Investment Act of 1998, 29 U.S.C. 2938(a)(3).

PART 670--THE JOB CORPS UNDER TITLE I OF THE WORKFORCE INVESTMENT 
ACT

0
4. The authority citation for part 670 is revised to read as follows:

    Authority: Subtitle C of title I, sec. 506(c), Pub. L. 105-220, 
112 Stat. 936 (20 U.S.C. 2881 et seq. and 9276(c)); 5 U.S.C. 301; 
Executive Order 13198, 66 FR 8497, 3 CFR 2001 Comp., p. 750); 
Executive Order 13279, 67 FR 77141, 3 CFR 2002 Comp., p. 258.

0
5. Section 670.555 is amended by removing paragraph (b), redesignating 
paragraph (d) as paragraph (b), and revising paragraph (c) to read as 
follows:


Sec.  670.555  What are the center's responsibilities in ensuring that 
students' religious rights are respected?

* * * * *
    (c) Requirements related to equal treatment of religious 
organizations in Department of Labor programs, and to protection of 
religious liberty of Department of Labor social service providers and 
beneficiaries, are found at subpart D of 29 CFR part 2. See also 
Sec. Sec.  667.266 and 667.275 of 20 CFR; 29 CFR part 37.

Title 29--Labor

Chapter I--Office of the Secretary of Labor

PART 2--GENERAL REGULATIONS

0
7. The authority citation for part 2 is revised to read as follows:

    Authority: 5 U.S.C. 301; Executive Order 13198, 66 FR 8497, 3 
CFR 2001 Comp., p. 750; Executive Order 13279, 67 FR 77141, 3 CFR 
2002 Comp., p. 258.


0
8. Part 2 is amended by adding a new subpart D to read as follows:

PART 2--GENERAL REGULATIONS

* * * * *

Subpart D--Equal Treatment in Department of Labor Programs for 
Religious Organizations; Protection of Religious Liberty of 
Department of Labor Social Service Providers and Beneficiaries

Sec.
2.30 Purpose.
2.31 Definitions.
2.32 Equal participation of religious organizations.
2.33 Responsibilities of DOL, DOL social service providers and State 
and local governments administering DOL support.
2.34 Application to State and local funds.
2.35 Effect of DOL support on Title VII employment nondiscrimination 
requirements and on other existing statutes.
2.36 Status of nonprofit organizations.


Sec.  2.30  Purpose.

    The purpose of the regulations in this subpart is to ensure that 
DOL-supported social service programs are open to all qualified 
organizations, regardless of the organizations' religious character, 
and to establish clearly the permissible uses to which DOL support for 
social service programs may be put, and the conditions for receipt of 
such support. In addition, this proposed rule is designed to ensure 
that the Department's social service programs are implemented in a 
manner consistent with the requirements of the Constitution, including 
the Religion Clauses of the First Amendment.


Sec.  2.31  Definitions.

    As used in the regulations in this subpart:
    (a) The term Federal financial assistance means assistance that 
non-Federal entities (including State and local governments) receive or 
administer in the form of grants, contracts, loans, loan guarantees, 
property, cooperative agreements, direct appropriations, or other 
direct or indirect assistance, but does not include a tax credit, 
deduction or exemption.
    (b) The term social service program means a program that is 
administered or supported by the Federal Government, or by a State or 
local government using Federal financial assistance, and that provides 
services directed at reducing poverty, improving opportunities for low-
income children, revitalizing low-income communities, empowering low-
income families and low-income individuals to become self-sufficient, 
or otherwise helping people in need. Such programs include, but are not 
limited to, the following:
    (1) Child care services and services to meet the special needs of 
children, older individuals, and individuals with

[[Page 41892]]

disabilities (including physical, mental, or emotional disabilities);
    (2) Job training and related services, and employment services;
    (3) Information, referral, and counseling services;
    (4) Literacy and mentoring programs; and
    (5) Services for the prevention and treatment of juvenile 
delinquency and substance abuse, services for the prevention of crime 
and the provision of assistance to the victims and the families of 
criminal offenders, and services related to intervention in, and 
prevention of domestic violence.
    (c) The term DOL means the U.S. Department of Labor.
    (d) The term DOL-supported social service program, DOL social 
service program, or DOL program means a social service program, as 
defined in paragraph (b) of this section, that is administered by or 
for DOL with DOL support. Such programs include, but are not limited 
to, the One Stop Career Center System, the Job Corps, and other 
programs supported through the Workforce Investment Act.
    (e) The term DOL social service provider means any non-Federal 
organization, other than a State or local government, that seeks or 
receives DOL support as defined in paragraph (g) of this section, or 
participates in DOL programs other than as the ultimate beneficiary of 
such programs.
    (f) The term DOL social service intermediary provider means any DOL 
social service provider that, as part of its duties, selects 
subgrantees to receive DOL support or subcontractors to provide DOL-
supported services, or has the same duties under this part as a 
governmental entity.
    (g) The term DOL support means Federal financial assistance, as 
well as procurement funding provided to a non-Federal organization, 
including a State or local government, to support the organization's 
administration of or participation in a DOL social service program as 
defined in paragraph (d) of this section.


Sec.  2.32  Equal participation of religious organizations.

    (a) Religious organizations must be eligible, on the same basis as 
any other organization, to seek DOL support or participate in DOL 
programs for which they are otherwise eligible. DOL, DOL social service 
intermediary providers, as well as State and local governments 
administering DOL support, must not discriminate for or against an 
organization on the basis of the organization's religious character or 
affiliation, although this requirement does not preclude DOL, DOL 
social service providers, or State and local governments administering 
DOL support from accommodating religion in a manner consistent with the 
Establishment Clause. In addition, because this rule does not affect 
existing constitutional requirements, DOL, DOL social service providers 
(insofar as they may otherwise be subject to any constitutional 
requirements), and State and local governments administering DOL 
support must continue to comply with otherwise applicable 
constitutional principles, including, among others, those articulated 
in the Establishment, Free Speech, and Free Exercise Clauses of the 
First Amendment to the Constitution.
    (b) A religious organization that is a DOL social service provider 
retains its independence from Federal, State, and local governments and 
must be permitted to continue to carry out its mission, including the 
definition, practice, and expression of its religious beliefs, subject 
to the provisions of Sec.  2.33 of this subpart. Among other things, 
such a religious organization must be permitted to:
    (1) Use its facilities to provide DOL-supported social services 
without removing or altering religious art, icons, scriptures, or other 
religious symbols from those facilities; and
    (2) Retain its authority over its internal governance, including 
retaining religious terms in its name, selecting its board members on a 
religious basis, and including religious references in its mission 
statements and other governing documents.
    (c) A grant document, contract or other agreement, covenant, 
memorandum of understanding, policy, or regulation that is used by DOL, 
a State or local government administering DOL support, or a DOL social 
service intermediary provider must not require only religious 
organizations to provide assurances that they will not use direct DOL 
support for inherently religious activities. Any such requirements must 
apply equally to both religious and other organizations. All 
organizations, including religious ones, that are DOL social service 
providers must carry out DOL-supported activities in accordance with 
all applicable legal and programmatic requirements, including those 
prohibiting the use of direct DOL support for inherently religious 
activities. A grant document, contract or other agreement, covenant, 
memorandum of understanding, policy, or regulation that is used by DOL, 
a State or local government, or a DOL social service intermediary 
provider in administering a DOL social service program must not 
disqualify organizations from receiving DOL support or participating in 
DOL programs on the grounds that such organizations are motivated or 
influenced by religious faith to provide social services, have a 
religious character or affiliation, or lack a religious component.


Sec.  2.33  Responsibilities of DOL, DOL social service providers and 
State and local governments administering DOL support.

    (a) DOL, DOL social service intermediary providers, DOL social 
service providers in their use of direct DOL support, and State and 
local governments administering DOL support must not, when providing 
social services, discriminate for or against a current or prospective 
program beneficiary on the basis of religion or religious belief. This 
requirement does not preclude DOL, DOL social service intermediary 
providers, or State or local governments administering DOL support from 
accommodating religion in a manner consistent with the Establishment 
Clause of the First Amendment to the Constitution.
    (b)(1) DOL, DOL social service providers, and State and local 
governments administering DOL support must ensure that they do not use 
direct DOL support for inherently religious activities such as worship, 
religious instruction, or proselytization. DOL social service providers 
must be permitted to offer inherently religious activities so long as 
they offer those activities separately in time or location from social 
services receiving direct DOL support, and participation in the 
inherently religious activities is voluntary for the beneficiaries of 
social service programs receiving direct DOL support. For example, 
participation in an inherently religious activity must not be a 
condition for participating in a directly-supported social service 
program.
    (2) This regulation is not intended to and does not restrict the 
exercise of rights or duties guaranteed by the Constitution. For 
example, program officials must not impermissibly restrict the ability 
of program beneficiaries or DOL social service providers to freely 
express their views and to exercise their right to religious freedom. 
Additionally, subject to reasonable and permissible time, place and 
manner restrictions, residential facilities that receive DOL support 
must permit residents to engage in voluntary religious activities, 
including holding religious services, at these facilities.
    (3) Notwithstanding the requirements of paragraph (b)(1), and to 
the extent

[[Page 41893]]

otherwise permitted by Federal law (including constitutional 
requirements), direct DOL support may be used to support inherently 
religious activities, and such activities need not be provided 
separately in time or location from other DOL-supported activities, 
under the following circumstances:
    (i) Where DOL support is provided to chaplains to work with inmates 
in prisons, detention facilities, or community correction centers 
through social service programs;
    (ii) Where DOL support is provided to social service programs in 
prisons, detention facilities, or community correction centers, in 
which social service organizations assist chaplains in carrying out 
their duties; or
    (iii) Where DOL-supported social service programs involve such a 
degree of government control over the program environment that 
religious exercise would be significantly burdened absent affirmative 
steps by DOL or its social service providers.
    (c) To the extent otherwise permitted by Federal law, the 
restrictions set forth in this section regarding the use of direct DOL 
support do not apply to social service programs where DOL support is 
provided to a religious or other non-governmental organization 
indirectly within the meaning of the Establishment Clause of the First 
Amendment to the Constitution. Religious or other non-governmental 
organizations will be considered to have received support indirectly, 
for example, if as a result of a program beneficiary's genuine and 
independent choice the beneficiary redeems a voucher, coupon, or 
certificate that allows the beneficiary to choose the service provider, 
or some other mechanism is provided to ensure that beneficiaries have a 
genuine and independent choice among providers or program options. All 
organizations must, however, satisfy all applicable legal and 
programmatic requirements.


Sec.  2.34  Application to State and local funds.

    If a State or local government voluntarily contributes its own 
funds to supplement activities carried out under the applicable 
programs, the State or local government has the option to separate out 
the Federal funds or commingle them. If the funds are commingled, then 
the provisions of this subpart apply to all of the commingled funds in 
the same manner, and to the same extent, as the provisions apply to the 
Federal assistance. State funds that are contributed pursuant to the 
requirements of a matching or grant agreement are considered to be 
commingled funds.


Sec.  2.35  Effect of DOL support on Title VII employment 
nondiscrimination requirements and on other existing statutes.

    A religious organization's exemption from the Federal prohibition 
on employment discrimination on the basis of religion, set forth in 
Sec.  702(a) of the Civil Rights Act of 1964, 42 U.S.C. Sec.  2000e-1, 
is not forfeited when the organization receives direct or indirect DOL 
support. Some DOL programs, however, were established through Federal 
statutes containing independent statutory provisions requiring that 
recipients refrain from discriminating on the basis of religion. 
Accordingly, to determine the scope of any applicable requirements, 
recipients and potential recipients should consult with the appropriate 
DOL program official or with the Civil Rights Center, U.S. Department 
of Labor, 200 Constitution Avenue, NW., Room N4123, Washington, DC 
20210, (202) 693-6500. Individuals with hearing or speech impairments 
may access this telephone number via TTY by calling the toll-free 
Federal Information Relay Service at 1-800-877-8339.


Sec.  2.36  Status of nonprofit organizations.

    (a) In general, DOL does not require that an organization, 
including a religious organization, obtain tax-exempt status under 
section 501(c)(3) of the Internal Revenue Code in order to be eligible 
for Federal financial assistance under DOL social service programs. 
Many such programs, however, do require an organization to be a 
``nonprofit organization'' in order to be eligible for such support. 
Individual solicitations that require organizations to have nonprofit 
status must specifically so indicate in the eligibility section of the 
solicitation. In addition, any solicitation for a program that requires 
an organization to maintain tax-exempt status must expressly state the 
statutory authority for requiring such status. For assistance with 
questions about a particular solicitation, applicants should contact 
the DOL program office that issued the solicitation.
    (b) Unless otherwise provided by statute, in DOL programs in which 
an applicant must show that it is a nonprofit organization, the 
applicant must be permitted to do so by any of the following means:
    (1) Proof that the Internal Revenue Service currently recognizes 
the applicant as tax exempt under section 501(c)(3) of the Internal 
Revenue Code;
    (2) A statement from a State taxing body or the State Secretary of 
State certifying that:
    (i) the organization is a nonprofit organization operating within 
the State; and
    (ii) no part of its net earnings may lawfully benefit any private 
shareholder or individual;
    (3) A certified copy of the applicant's certificate of 
incorporation or similar document that clearly establishes the 
nonprofit status of the applicant; or
    (4) Any item described in paragraphs (b)(1) through (b)(3) of this 
section, if that item applies to a State or national parent 
organization, together with a statement by the State or national parent 
organization that the applicant is a local nonprofit affiliate of the 
organization.

PART 37--IMPLEMENTATION OF THE NONDISCRIMINATION AND EQUAL 
OPPORTUNITY PROVISIONS OF THE WORKFORCE INVESTMENT ACT OF 1998 
(WIA)

0
9. The authority citation for part 37 is revised to read as follows:

    Authority: Sections 134(b), 136(d)(2)(F), 136(e), 172(a), 
183(c), 185(d)(1)(E), 186, 187 and 188 of the Workforce Investment 
Act of 1998, 29 U.S.C. 2801, et seq.; Title VI of the Civil Rights 
Act of 1964, as amended, 42 U.S.C. 2000d, et seq.; Section 504 of 
the Rehabilitation Act of 1973, as amended, 29 U.S.C. 794; the Age 
Discrimination Act of 1975, as amended, 42 U.S.C. 6101; Title IX of 
the Education Amendments of 1972, as amended, 29 U.S.C. 1681; 
Executive Order 13198, 66 FR 8497, 3 CFR 2001 Comp., p. 750; and 
Executive Order 13279, 67 FR 77141, 3 CFR 2002 Comp., p. 258.


0
10. In Sec.  37.6, paragraph (f)(1) and the section heading are revised 
to read as follows:


Sec.  37.6  What specific discriminatory actions, based on prohibited 
grounds other than disability, are prohibited by this part, and what 
limitations are there related to religious activities?

* * * * *
    (f)(1) 29 CFR part 2, subpart D governs the circumstances under 
which DOL support, including WIA Title I financial assistance, may be 
used to employ or train participants in religious activities. Under 
that subpart, such assistance may be used for such employment or 
training only when the assistance is provided indirectly within the 
meaning of the Establishment Clause of the U.S. Constitution, and not 
when the assistance is provided directly. As explained in that subpart, 
assistance provided through an Individual Training Account is generally 
considered indirect, and other mechanisms may also be considered 
indirect. See also Sec. Sec.  667.266 and 667.275 of 20 CFR. 29 CFR 
part 2, subpart D also contains requirements

[[Page 41894]]

related to equal treatment of religious organizations in Department of 
Labor programs, and to protection of religious liberty for Department 
of Labor social service providers and beneficiaries.
* * * * *
[FR Doc. 04-15707 Filed 7-8-04; 8:45 am]
BILLING CODE 4510-23-P