[Federal Register Volume 69, Number 132 (Monday, July 12, 2004)]
[Rules and Regulations]
[Pages 41894-41900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15708]


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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 37

RIN 1291-AA29


Limitation on Employment of Participants Under Title I of the 
Workforce Investment Act of 1998

AGENCY: Office of the Secretary, Labor.

ACTION: Final rule.

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SUMMARY: This final rule amends the Department of Labor's (the 
Department's or DOL's) regulations that implement section 188(a)(3) of 
the Workforce Investment Act of 1998 (WIA). That statutory section 
delimits the circumstances under which WIA title I participants may be 
employed to carry out the construction, operation, or maintenance of 
any part of any facility that is used, or to be used, for religious 
instruction or as a place for religious worship. The amendments make 
the relevant regulatory language adhere more closely to the language of 
section 188(a)(3).

DATES: This rule is effective August 11, 2004.

FOR FURTHER INFORMATION CONTACT: Annabelle T. Lockhart, Director, Civil 
Rights Center (CRC), (202) 693-6500. Please note that this is not a 
toll-free number. Individuals who do not use voice telephones may 
contact Ms. Lockhart via TTY/TDD by calling the toll-free Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:
    This section of the preamble to this final rule is organized as 
follows:

    I. Background.
    II. Differences Between the September 30, 2003, Proposed Rule 
and the Final Rule.
    III. Comments Received on the Proposed Rule and DOL's Responses.
    IV. Regulatory Procedure.

I. Background

A. WIA and DOL's Implementing Regulations

    WIA superseded the Job Training Partnership Act (JTPA) as DOL's 
primary mechanism for providing financial assistance for a 
comprehensive system of employment and training services for adults and 
dislocated workers, and comprehensive youth activities for eligible 
youth. That system is known as the One Stop Career Center system. DOL's 
Employment and Training Administration (ETA) administers the One Stop 
Career Center system.
    WIA section 188 contains certain nondiscrimination, equal 
opportunity, and other requirements applicable to recipients of WIA 
financial assistance. DOL's Civil Rights Center (CRC) administers these 
requirements.
    Section 188(a)(3) of WIA prohibits the employment of WIA 
participants to carry out construction, operation, and maintenance at 
specified locations, with a limited exception for maintenance. 
Specifically, this section provides as follows:

    Participants shall not be employed under this title to carry out 
the construction, operation, or maintenance of any part of any 
facility that is used or to be used for sectarian instruction or as 
a place for religious worship (except with respect to the 
maintenance of a facility that is not primarily or inherently 
devoted to sectarian instruction or religious worship, in a case in 
which the organization operating the facility is part of a program 
or activity providing services to participants). 29 U.S.C. 
2938(a)(3).

Section 188(e) of WIA authorizes the Secretary to issue regulations 
necessary to implement this section. 29 U.S.C. 2938(e). Both ETA and 
CRC have published rules relating to WIA section 188(a)(3).
    CRC on November 12, 1999, published an Interim Final Rule (IFR) 
entitled ``Implementation of the Nondiscrimination and Equal 
Opportunity Provisions of the Workforce Investment Act of 1998,'' to 
implement Section 188 of WIA. 64 FR 61692. That IFR, which was codified 
at 29 CFR part 37 and remains in effect, generally carried over the 
nondiscrimination and equal opportunity-related policies and procedures 
promulgated in the JTPA regulations.
    Section 37.6(f) of CRC's IFR contained several paragraphs--
specifically, paragraphs (f)(1), (2), and (3)--that related to 
religious activities. Although the preamble to the IFR stated that 
``[p]aragraph 37.6(f) * * * is directly based on, and implements, 
section 188(a)(3) of WIA,'' the actual language of Sec.  37.6(f) 
differed from the statute in several significant respects. 64 FR 61691. 
First, Sec.  37.6(f)(1) carried over a prohibition on employment and 
training in sectarian activities that had appeared in the JTPA 
regulations at 20 CFR 627.210(b). This prohibition was not related to 
the limitations in WIA section 188(a)(3) on employing participants to 
carry out construction, operation, or maintenance, and was not based on 
either the JTPA statute or the WIA statute. See section I(B) of this 
preamble, below. Second, although paragraphs 37.6(f)(2) and (3) did 
deal with the subject matter of WIA section 188(a)(3), the language of 
these paragraphs departed from the statutory language and organization, 
containing several ``structural, stylistic, and phrasing changes'' 
intended to ``enhance the readability of the rule.'' 64 FR 61691.
    ETA had published on April 15, 1999, prior to CRC's IFR, an IFR 
implementing WIA title I and III, including section 188(a)(3). 64 FR 
18661. That IFR included a new part 667 of title 20 of the Code of 
Federal Regulations, which ``assemble[d] all of the administrative 
requirements from the various parts of the Act and other applicable 
sources in order to facilitate the administrative management of WIA 
programs.'' Id. This new part 667 included two sections--Sec. Sec.  
667.266 and 667.275--that related to WIA section 188(a)(3). Section 
667.266(b) tracked the language of the statutory section almost 
exactly, while Sec.  667.275(b) referred only to the statute's 
maintenance exception. After CRC promulgated its November 12, 1999 IFR, 
ETA on August 11, 2000, published a Final Rule based on ETA's April 15, 
1999 IFR. The preamble to this Final Rule noted that CRC had published 
an IFR in the interim, and stated that changes had been made to ETA's 
Final Rule ``for consistency with the [CRC] regulations implementing * 
* * WIA Section 188.'' With respect to Sec. Sec.  667.266 and 667.275, 
however, the Final Rule's preamble described only changes relating to 
cross-references. Except for the addition of these cross references, 
one technical change (``funds'' was changed to ``financial 
assistance''), and some rearranging of phrase ordering, ETA's Final 
Rule did not alter the relevant initial language of either Sec.  
667.266(b) or Sec.  667.275(b).

B. The September 30, 2003, Proposed Rule

    On December 12, 2002, President Bush issued Executive Order 13279, 
published in the Federal Register on December 16, 2002 (67 FR 77141).

[[Page 41895]]

Executive Order 13279 charges executive branch agencies with giving 
equal treatment to faith-based and community organizations that apply 
for or receive Federal financial assistance to meet social needs in 
America's communities. Consistent with, and to assist in implementing, 
the principles underlying this Executive Order, the Department 
published a Notice of Proposed Rule-Making (NPRM) on September 30, 
2003. See 68 FR 56386, 56388. The NPRM proposed to amend the regulatory 
provisions promulgated by CRC, codified at 29 CFR 37.6(f), as well as 
the provisions promulgated by ETA, codified at 20 CFR 667.266 and 
667.275, that referenced Sec.  37.6(f). The proposed amendments fell 
into two main categories: first, amendments intended to eliminate 
inappropriate restrictions on the use of indirect WIA financial 
assistance; and second, amendments intended to clarify the language of 
the various regulatory provisions related to WIA section 188(a)(3).
1. Use of Indirect Federal Financial Assistance
    As explained in the preamble to the September 30, 2003, NPRM, among 
the Department's primary reasons for proposing the amendments was to 
eliminate inappropriate regulatory restrictions, set forth in the 
original language of 29 CFR 37.6(f)(1) and referenced in original 
paragraphs 20 CFR 667.266(b)(1) and 667.275(b), on the use of indirect 
Federal financial assistance to employ or train participants in 
religious activities. 29 CFR 37.6(f)(1) has precluded recipients from 
permitting participants ``to be employed or trained in sectarian 
activities,'' regardless of whether the financial assistance at issue 
is direct or indirect. Similarly, 20 CFR 667.266(b)(1) has stated that 
``WIA title I financial assistance may not be spent on the employment 
or training of participants in sectarian activities'' (referring 
readers to 29 CFR 37.6(f)(1) for further information), and 20 CFR 
667.275(b) has stated, in pertinent part, that ``[u]nder 29 CFR 
37.6(f)(1), the employment or training of participants in sectarian 
activities is prohibited.''
    These restrictions, which were carried over from the JTPA 
nondiscrimination regulations, were not based on any specific statutory 
authority conferred by either WIA or JTPA, and are inconsistent with 
current law as articulated by the U.S. Supreme Court. 68 FR at 56387. 
The Court has clarified in a number of cases issued since JTPA was 
enacted that the use of indirect financial assistance to provide 
religious training is permitted by the Establishment Clause of the 
First Amendment to the Constitution where certain requirements are 
satisfied. For example, assistance is indirect in cases in which 
participants are given a genuine and independent private choice among 
training providers or program options, and freely elect to receive 
training in religious activities. Of course, the training offered must 
otherwise satisfy the requirements of the governmental program through 
which the financial assistance is provided. 68 FR at 56387-88. For this 
reason, and to permit participants in WIA title I-financially assisted 
programs and activities more choice and greater freedom while obtaining 
essential employment and training skills, the Department proposed in 
the September 30, 2003, NPRM to amend 20 CFR 667.266(b)(1), 20 CFR 
667.275(b), and 29 CFR 37.6(f)(1), to add a new 29 CFR 37.6(f)(2), and 
to renumber 37.6(f)(2) and (3) as (f)(3) and (4), respectively. These 
proposed revisions are discussed in detail in the preamble to the 
September 30, 2003, NPRM (see 68 FR at 56387-89).
2. General Prohibition on Employment of Participants for Construction, 
Operation, or Maintenance at Specified Locations Defined With Reference 
to Certain Religious Activities; Maintenance Exception
    In the same September 30, 2003, NPRM, the Department proposed 
revisions to those portions of CRC's and ETA's regulations that related 
to WIA section 188(a)(3). These revisions were intended both to clarify 
these paragraphs and to adhere more closely to the statute.
    With regard to CRC's regulations, the NPRM proposed changes to 29 
CFR 37.6(f)(2) and (3). The original language of these paragraphs broke 
the language of WIA section 188(a)(3) down into separate elements in an 
effort to make the statutory requirements easier to understand. 
However, in the course of drafting the September 30, 2003, NPRM, DOL 
determined that these paragraphs should be further revised to make them 
easier to understand and to adhere more closely to the language of WIA 
section 188(a)(3). See 68 FR at 56388. Therefore, in the September 30, 
2003, NPRM, the Department proposed to renumber the paragraphs in 
accordance with the proposed revisions described in Subsection I(B)(1) 
of this preamble, and to revise the language of the paragraphs as 
follows:

    (3) Except under the circumstances described in paragraph (f)(4) 
below, a recipient must not permit participants to engage in 
employment or training activities that involve the construction, 
operation, or maintenance of any facility, or any part of a 
facility, that is used, or will be used, for religious instruction 
or as a place of religious worship.
    (4) A recipient may permit participants to engage in employment 
or training activities that involve the maintenance of a facility 
that is used, or will be used, for religious instruction or 
religious worship,
    (i) To the extent that the facility is not primarily or 
inherently devoted to religious instruction or religious worship, 
and
    (ii) Provided that the organization operating the facility is 
part of a program or activity providing services to participants.

68 FR at 56390. The proposed revisions were intended to make these 
paragraphs easier to understand, and to adhere more closely to the 
language of the statute. 68 FR at 56388. As explained in section II of 
this preamble, however, the language of this proposal also diverged in 
several respects from the language of the statute. This final rule 
returns to the statutory language in order to better ensure close 
adherence to the intent of Congress.
    The Department also proposed to revise 20 CFR 667.266(b)(2) to 
correct the cross-references contained therein. As explained in the 
September 30, 2003, NPRM, the Department had determined, upon 
examination, that the insertion of the cross-references in this 
paragraph of ETA's August 11, 2000, Final Rule had been done 
erroneously. The cross-reference in the first sentence of Sec.  
667.266(b)(2), instead of referring to Sec.  37.6(f)(2), referred to 
Sec.  37.6(f)(1). The cross-reference in the second sentence of Sec.  
667.266(b)(2), instead of referring to Sec.  37.6(f)(3), had referred 
to Sec.  37.6(f)(2). The Department proposed to correct these two 
cross-references without otherwise altering the language of Sec.  
667.266.
    Finally, the September 30, 2003, NPRM also proposed to revise 20 
CFR 667.275(b) in two respects. First, as noted in section I(B)(1) of 
this preamble, the flat prohibition on the employment of participants 
in ``sectarian activities'' was revised to permit such employment when 
financial assistance is provided indirectly. Second, the paragraph was 
revised so that it referred to the entire prohibition in section 
188(a)(3), rather than just the maintenance exemption. The proposed 
revisions to this paragraph contained minor language differences from 
the statute and from the proposed CRC revisions to Sec.  37.6(f)(2) and 
(3). These differences were not intended to alter the meaning of the 
statute or to diverge from the meaning of the corresponding provisions 
of the relevant ETA and CRC regulations.

[[Page 41896]]

3. Comments on the Proposed Rule
    The closing date for comments on the September 30, 2003, NPRM was 
December 1, 2003. 68 FR at 56386. DOL received a total of 11 sets of 
comments on the proposed rule, six sets from civil or religious 
liberties organizations or other stakeholders and five sets from 
individual members of the public. All of the comments were received by 
the closing date.
    Two commenters expressed general support for the revisions proposed 
in the NPRM, without reservation or suggestions for change. Seven 
commenters expressed opposition to those revisions, and two commenters 
either took no position on, raised questions about, or suggested 
changes or alternatives to, the various proposed revisions.
    The majority of comments dealt with the issue of the use of 
indirect financial assistance to employ or train participants in 
religious activities. As explained earlier in this section of this 
preamble, however, that issue is now addressed in a separate NPRM, 
published on March 9, 2004, that proposed revisions to 29 CFR part 2, 
as well as conforming revisions to 29 CFR part 37 and 20 CFR part 667. 
Therefore, this preamble will not address those comments. Comments on 
the March 9, 2004, NPRM, which is discussed in the next section of this 
preamble, were solicited separately. The final rule that addresses the 
proposals made in the March 9, 2004, NPRM is published elsewhere in 
today's Federal Register. The comments received that are relevant to 
this final rule will be discussed below in section III of this 
preamble.

C. The March 9, 2004, Proposed Rule

    After the September 30, 2003, NPRM was published, the Department 
determined that in order to implement more fully the principles of 
Executive Order 13279, DOL would revise its general regulations at 29 
CFR part 2 to clarify that faith-based and community organizations are 
able both to participate in all DOL social service programs for which 
they are otherwise eligible--not just those financially assisted under 
WIA title I--without regard to the organizations' religious character 
or affiliation, and to apply for and compete on an equal footing with 
other organizations to receive DOL support. Accordingly, on March 9, 
2004, DOL published an NPRM that proposed adding to 29 CFR part 2 a new 
subpart D, to be entitled ``Equal Treatment in Department of Labor 
Programs for Religious Organizations; Protection of Religious Liberty 
of Department of Labor Social Service Providers and Beneficiaries.'' 69 
FR 11234, 11235.
    At the same time, the Department also determined that, in order to 
ensure uniformity and consistency in implementing the principles of 
these Executive Orders throughout DOL, the regulations dealing with 
faith-based and community organizations, and with religious activities, 
should to the extent possible be consolidated in one place. 69 FR 
11234. The Department further determined that the new subpart D should 
not be program-specific, but should apply to all organizations 
receiving DOL support, except where the implementing statute imposed 
particular requirements. Accordingly, in the March 9, 2004, NPRM, the 
Department proposed new revisions to 29 CFR 37.6(f)(1), as well as to 
20 CFR 667.266(b)(1) and (2) and 667.275(b). Instead of the language 
proposed in the September 30, 2003, NPRM, the March 9, 2004, NPRM 
proposed that each of these regulatory provisions cross-reference 29 
CFR part 2, subpart D. See 69 FR at 11237, 11238, 11241. The March 9, 
2004, NPRM also proposed similar revisions to the relevant provision of 
the regulations governing Job Corps, at 20 CFR 670.555(c). See 69 FR at 
11237, 11238.
    The March 9, 2004, NPRM contained no proposals for revisions to 29 
CFR 37.6(f)(2) and (3), for two reasons. First, as discussed in section 
I(B)(2) of this preamble, those two paragraphs are program-specific: 
they effectuate a specific paragraph of WIA section 188 that applies 
only to recipients of financial assistance under WIA title I, and not 
to recipients of other types of DOL support. See 29 U.S.C. 2938(a)(3); 
see also 29 CFR 37.2(b)(1), ``Limitation of Application.''
    Second, careful analysis reveals that the statutory and regulatory 
provisions at issue do not genuinely deal with ``religious 
activities.'' Instead, the ``activities'' they address are the 
employment of participants in the nonreligious skills of construction, 
operation, and maintenance. The provisions at issue merely limit the 
physical locations in which such employment may take place: 
participants may not be employed to carry out 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, except that 
participants may be employed to carry out maintenance of a facility 
that is not primarily or inherently devoted to religious instruction or 
worship when the organization operating the facility is part of a 
program or activity providing services to participants. See 29 U.S.C. 
2938(a)(3); see also new paragraphs 37.6(f)(2) and (3) below. 
Therefore, it would be inappropriate for these issues to be addressed 
by amendments or additions to DOL's general regulations at 29 CFR part 
2.
    For these reasons, the Department has chosen to publish this final 
rule amending 29 CFR 37.6(f)(2) and (3). As noted in section I(C) of 
this preamble, a separate final rule amending those provisions 
addressed in the March 9, 2004, NPRM is published elsewhere in today's 
Federal Register.

D. Proposed Amendments Dealing With Indirect Federal Financial 
Assistance

    The Department is withdrawing the portions of the September 30, 
2003, NPRM that proposed amending 29 CFR 37.6(f)(1), as well as 20 CFR 
667.266(b)(1) and 20 CFR 667.275(b), to eliminate inappropriate 
restrictions on the use of indirect Federal financial assistance for 
religious activities. As explained in section I(C) of this preamble, 
these restrictions are now eliminated by the other final rule, 
published elsewhere in today's Federal Register, that finalizes the 
rules proposed in the March 9, 2004, NPRM. An additional document, 
withdrawing those portions of the September 30, 2003, NPRM now dealt 
with by that new rule, is published in the proposed rule section of 
today's Federal Register.

II. Differences Between the September 30, 2003, Proposed Rule and This 
Final Rule

    As described above, the amendments to 29 CFR 37.6(f)(1), as well as 
20 CFR 667.266(b)(1) and (2), and 20 CFR 667.275(b), proposed in the 
September 30, 2003, NPRM were superseded by the amendments to those 
paragraphs that were proposed in the March 9, 2004, NPRM. Therefore, 
this final rule does not include amendments to those regulatory 
provisions.
    In addition, upon consideration, the Department has concluded that 
the language of 29 CFR 37.6(f)(2) and (3) that was proposed in the 
September 30, 2003, NPRM did not adequately track the language of WIA 
section 188(a)(3). Therefore, in the final rule, these two paragraphs 
have been revised to track the statutory language more closely and 
thereby ensure that the meaning of WIA section 188(a)(3) is not 
changed. Such revisions are necessary in order to fulfill the intent of 
the September 30, 2003, NPRM, which stated that a primary purpose of 
the proposed revisions was to adhere more closely to Congressional 
language. Comments and responses regarding the substantive effects of 
these

[[Page 41897]]

provisions are discussed in section III of this preamble.
    Finally, as a result of the amendments proposed in the March 9, 
2004, NPRM, the Department has decided that paragraphs 37.6(f)(2) and 
(3) will retain their original numbers.
    The following changes have been made to the language proposed in 
the September 30, 2003, NPRM for these two paragraphs:

A. ``Permit'' vs. ``Employ''

    The proposed revisions of 29 CFR 37.6(f)(2) and (3) stated that a 
recipient ``must not permit'' participants to engage in the activities 
prohibited by the statute. This language was different from the 
language of WIA section 188(a)(3), which states that participants 
``shall not be employed'' in prohibited activities. Recipients are not 
expected, and this section of the statute does not authorize them, to 
control the work activities of participants except when such work is 
financially assisted under WIA title I. To ensure that these paragraphs 
do not alter the meaning of WIA section 188(a)(3), and that they 
effectuate Congressional intent more closely, we have changed the 
language of the final rule to use the phrase ``must not employ.''

B. ``Engage in Employment or Training Activities That Involve'' vs. 
``Employed * * * To Carry Out''

    The proposed revisions of 29 CFR 37.6(f)(2) and (3) required 
recipients not to permit participants to ``engage in employment or 
training activities that involve'' construction, operation, or 
maintenance. This language was different from the language of WIA 
section 188(a)(3), which provides only that participants must not be 
``employed * * * to carry out'' such construction, operation, or 
maintenance. For the reasons expressed in section II(A) of this 
preamble, as well as to ensure that these paragraphs do not alter the 
meaning of WIA section 188(a)(3) and that they effectuate Congressional 
intent more closely, we have changed the language of the final rule to 
use the phrase ``employ * * * to carry out.''

C. ``Any Facility, or Any Part of a Facility'' vs. ``Any Part of Any 
Facility''

    Similarly, the proposed revision of 29 CFR 37.6(f)(2) used the 
language ``any facility, or any part of a facility,'' to discuss which 
facilities were covered by the provision. This language was different 
from the language of WIA section 188(a)(3), which used the phrase ``any 
part of any facility.'' To ensure that this provision of the final rule 
does not alter the meaning of WIA section 188(a)(3) and that it 
effectuates Congressional intent more closely, we have changed the 
paragraph to use language identical to that in the statute.

D. ``Used, or Will Be Used'' vs. ``Used, or To Be Used''

    In the same vein, the proposed revisions of 29 CFR 37.6(f)(2) and 
(3) referred to any part of any facility that is ``used, or will be 
used,'' for religious instruction or as a place for religious worship. 
This language was different from the language of WIA section 188(a)(3), 
which used the phrase ``used or to be used.'' To ensure that these 
paragraphs do not alter the meaning of WIA section 188(a)(3) and that 
they effectuate Congressional intent more closely, we have changed the 
language of the final rule to employ the phrase ``used, or to be 
used.''

E. ``Place of Worship'' vs. ``Place For Religious Worship''

    Furthermore, the proposed revision of 29 CFR 37.6(f)(2) referred to 
any part of any facility that is a place ``of worship.'' This language 
was different from WIA section 188(a)(3), which referred to a place 
``for religious worship.'' To ensure that this paragraph does not alter 
the meaning of WIA section 188(a)(3) and that it effectuates 
Congressional intent more closely, we have changed the language of the 
final rule to use the phrase ``for religious worship.''

F. Separate Paragraphs vs. One Paragraph

    The proposed revision of 29 CFR 37.6(f)(3) separated that paragraph 
into two subparagraphs. To adhere more closely to the statute, the 
final rule uses a single paragraph to set forth the relevant 
requirements.

III. Comments Received on the September 30, 2003, Proposed Rule and 
DOL's Responses

    As noted in section II of this preamble, the amendments to 20 CFR 
667.266(b)(1) and (2), 20 CFR 667.275(b), and 29 CFR 37.6(f)(1) 
proposed in the September 30, 2003, NPRM were superseded by the 
amendments to those paragraphs that were proposed in the NPRM published 
March 9, 2004, and the Department is withdrawing the portions of the 
September 30, 2003, NPRM that proposed amending those provisions to 
eliminate inappropriate restrictions on the use of indirect Federal 
financial assistance for religious activities. Therefore, this preamble 
will not address the comments that were submitted regarding the 
proposed amendments to those provisions. As noted above, the final rule 
that addresses the proposals contained in the March 9, 2004, NPRM is 
published elsewhere in today's Federal Register. Other comments 
received are summarized and discussed below.

A. Comments and Questions Regarding ``Carry[ing] 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,'' 
and the Maintenance Exemption

    1. Comment: The proposed rule could unconstitutionally allow 
religious institutions to use public funds to make capital improvements 
to structures used for religious activities.
    Several commenters asserted that it would violate the Constitution 
if recipients' efforts were to increase the monetary value of, or 
result in an improvement to, facilities used by such institutions, ``at 
least in part,'' for religious instruction or worship. Commenters 
suggested that the regulation be amended to prohibit any such result.
    Additionally, several commenters raised questions about the 
constitutionality of the proposed maintenance exception. These 
commenters contend that the exception is unconstitutional, because in 
their view maintenance might result in capital improvements to 
structures owned by religious institutions. In the view of these 
commenters, public funds may be used by religious institutions for 
capital improvements only when the improved structures are wholly and 
permanently dedicated to secular use.
    DOL response: We do not agree with the contention that paragraphs 
Sec.  37.6(f)(2) and (3) (or WIA section 188(a)(3) itself) will allow 
religious institutions to use WIA financial assistance to make 
impermissible capital improvements to, or to otherwise increase the 
value of, facilities used for religious activity. These statutory and 
regulatory provisions may not be viewed in isolation. Rather, they must 
be considered in the broader context not only of the WIA administrative 
system, but also of the entire Federal system for providing and 
administering domestic financial assistance.
    Section 188(a)(3) clearly prohibits the employment of participants 
to carry out construction, or even the operation, of ``any part of any 
facility that is used or to be used for sectarian instruction or 
religious worship.'' Thus, the range of activities permitted under 
Section 188(a)(3), and the implementing regulation finalized today, 
does not exceed constitutional boundaries.

[[Page 41898]]

    With respect to maintenance, under the statutory scheme established 
by Congress, the only type of work that participants may be employed 
under WIA title I to carry out in any part of any facility that is used 
or to be used for religious instruction or worship is ``maintenance.'' 
See 29 U.S.C. 2938(a)(3); see also new paragraph 37.6(f)(3) below. Even 
such ``maintenance'' work is permitted only in specific, well-
delineated circumstances: the facility must not be ``primarily or 
inherently devoted to religious instruction or religious worship,'' and 
the organization operating the facility must be part of a program or 
activity providing services to participants. Id. The provisions 
relating to maintenance must be read in conjunction with the remainder 
of ETA's general WIA regulations, as well as with DOL's regulations 
establishing uniform administrative requirements for Federal grants and 
agreements with nonprofit organizations. See 20 CFR 667.200; 29 CFR 
part 95. Both of these sets of regulations require that the 
allowability of costs incurred by nonprofit organizations receiving 
Federal financial assistance be determined in accordance with the 
provisions of Office of Management and Budget (OMB) Circular A-122, 
``Cost Principles for Non-Profit Organizations.'' 20 CFR 667.200; 29 
CFR 95.27.
    Circular A-122 explicitly describes ``maintenance and repair 
costs'' as ``costs incurred for necessary maintenance, repair, or 
upkeep of buildings and equipment * * * which neither add to the 
permanent value of the property nor appreciably prolong its intended 
life, but keep it in an efficient operating condition.'' Circular No. 
A-122, Attachment B, ``Selected Items of Cost,'' paragraph 27. The 
Circular further provides that ``[c]osts incurred for improvements 
which add to the permanent value of the buildings and equipment or 
appreciably prolong their intended life shall be treated as capital 
expenditures.'' Id.
    Maintenance and repair costs, according to the Circular, are 
allowable; by contrast, capital expenditures are generally unallowable 
as direct costs, except with the prior approval of the awarding agency. 
Circular No. A-122, Attachment B, ``Selected Items of Cost,'' paragraph 
15. Thus, the administrative system is designed to ensure that a 
recipient cannot receive reimbursement for capital expenditures by 
attempting to characterize them as ``maintenance'' expenditures. 
Because of the limitations already in place to prevent the use of 
``maintenance'' work to increase capital value, there is no need to 
make additional changes to the regulation to address the commenter's 
concern that maintenance work might unconstitutionally increase capital 
value.
    Overall, then, the various regulatory and administrative 
requirements described above are sufficient to make clear that no WIA 
title I financial assistance will be used to employ participants to 
make impermissible capital improvements to any part of any facility 
used or to be used for religious instruction or as a place for 
religious worship. Therefore, the Department has not revised the final 
rule in response to this comment.
    2. Comment: The proposed rule could result in excessive 
entanglement with religion, in violation of the Establishment Clause of 
the First Amendment.
    One commenter noted that proposed paragraphs 37.6(f)(3) and (f)(4) 
(paragraphs 37.6(f)(2) and (3) of the final rule) authorize the 
employment of participants under WIA title I ``for maintenance of a 
facility on the conditions that the facility is not `primarily or 
inherently devoted to religious instruction or religious worship * * *' 
'' This commenter was therefore concerned that the rule ``raise[s] the 
specter of the government monitoring pervasively sectarian institutions 
to determine on a case-by-case basis whether a facility is actually 
used for sectarian purposes or whether facility usage is primarily 
religious. This monitoring will put government officials in the 
problematic position of determining what acts constitute religion,'' 
likely resulting in Establishment Clause violations on the basis of 
excessive entanglement with religion.
    DOL response: The Department does not agree that the rule will lead 
to excessive governmental entanglement in the affairs of recipients 
that are religious organizations. The existing WIA regulations--both 
the nondiscrimination regulations promulgated by CRC at 29 CFR part 37 
and the programmatic regulations promulgated by ETA--impose numerous 
limitations on the use of WIA financial assistance. See, e.g., 20 CFR 
667.260-667.270. The Department will monitor the compliance of 
recipients that ``employ participants to carry out'' the activities 
covered by the statute in the same way that it monitors the compliance 
of other recipients. See 29 CFR 37.60, 37.62-37.66. Similarly, the 
Department will investigate and resolve complaints alleging violations 
of these regulatory provisions in the same manner, and following the 
same procedures, that have been established for investigating 
complaints alleging violations of the other nondiscrimination 
provisions of WIA. See 29 CFR 37.70-37.75, 37.80-37.89. In addition, 
violations of the provisions preventing maintenance expenditures from 
being used for capital improvements will be investigated and resolved 
in accordance with the procedures set forth in 20 CFR part 667. The 
amount of oversight and monitoring needed to ensure that WIA financial 
assistance is not used impermissibly is no greater than that involved 
in monitoring to ensure compliance with other regulatory requirements.
    Finally, the Department is already obliged, to a certain extent, to 
determine ``what acts constitute religion,'' in the course of 
investigating allegations of unlawful religious-based discrimination 
(and, for that matter, in the course of ensuring that direct DOL 
assistance is not used to support inherently religious activities). Cf. 
29 CFR part 1605, Equal Employment Opportunity Commission (EEOC) 
Guidelines on Discrimination Because of Religion, section 1605.1, 
``Religious nature of a practice or belief.'' In the Department's view, 
determinations as to ``whether a facility is actually used for 
sectarian purposes'' or ``whether facility usage is primarily 
religious'' will not require a greater amount of ``entanglement with 
religion'' than the determination of whether a particular 
participant's, applicant's, or employee's beliefs should be protected 
as ``religious'' beliefs.
    For these reasons, the Department has not revised the final rule in 
response to this comment.
    3. Comment: Violations of these provisions ``could raise difficult 
remedial questions.''
    The commenter who raised this issue inquired, ``Will the Department 
of Labor * * * remove a structure from an offending institution? Will 
it place liens on houses of worship?''
    DOL response: The WIA regulations at 29 CFR part 37 provide that if 
compliance is not achieved through the procedures set forth in the 
regulations, the Secretary of Labor may take the following actions: 
``(1) After opportunity for a hearing, suspend, terminate, deny or 
discontinue the [recipient's] WIA Title I financial assistance, in 
whole or in part; (2) Refer the matter to the Attorney General with a 
recommendation that an appropriate civil action be instituted; or (3) 
Take such action as may be provided by law.'' 29 CFR 37.110(a). The 
Department does not view the ``remedial questions'' raised by the 
regulatory provisions

[[Page 41899]]

amended by this final rule as any more ``difficult'' than those raised 
with regard to possible violations of other regulatory provisions. 
Therefore, the Department has not revised the final rule in response to 
this comment.
    4. Comment: Providing financial assistance under WIA to 
``pervasively sectarian'' organizations or institutions violates the 
Establishment Clause of the First Amendment.
    The commenter that raised this issue noted that under the proposed 
regulatory provisions, ``WIA Title I funds could be used for 
construction, operation, or maintenance of a facility used by a 
pervasively sectarian organization for non-religious purposes.'' In 
this commenter's view, such use would violate the Establishment Clause. 
Therefore, the commenter recommended that the provisions be amended to 
``prohibit the use of WIA Title I funds for construction, operation, or 
maintenance of facilities owned or operated by pervasively sectarian 
institutions.''
    DOL response: The Department does not agree with the commenter's 
analysis. 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, 825-829 (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 857-858 
(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, and that view is the foundation of the ``pervasively 
sectarian'' doctrine. Therefore, under current precedent, the 
Department may provide financial assistance to all service providers, 
without regard to religion, so long as the providers meet eligibility 
requirements and the assistance is not otherwise precluded. The 
Department therefore declines to adopt the recommended change.

B. General Comments Regarding the Proposed Rule

    1. Comment: The terms ``faith-based'' and ``religious 
organization'' should be ``clearly defined'' in the regulations.
    The commenter that made this suggestion provided no reasons for 
adding these definitions to the regulations.
    DOL response: The Department declines to adopt the recommended 
change in this final rule. Such definitions are unnecessary, because 
these terms are not used in 29 CFR part 37 as amended by this final 
rule.
    2. Comment: The regulations should be amended to require faith-
based organizations ``to abide by * * * state and local civil rights 
laws.''
    One commenter strongly suggested that the rule should make clear 
that nothing in the new regulations affected state and local non-
discrimination laws covering sexual orientation and gender identity/
expression.
    DOL response: In the Department's view, the recommended change is 
unnecessary. The WIA regulations at 29 CFR part 37 already contain a 
provision that explicitly states that the IFR ``does not preempt 
consistent State and local requirements.'' 29 CFR 37.3(f). As a result, 
unless specific provisions of State or local civil rights laws conflict 
with the requirements set forth in the rule, those provisions will 
continue to apply to recipients of WIA title I financial assistance. 
The Department therefore declines to make the suggested change.
    3. Comment: The regulations should be amended to bar discrimination 
on the basis of sexual orientation and gender identity.
    The commenter that made this suggestion stated that ``Federal 
policy expanding the application of charitable choice provisions should 
prohibit discrimination on the basis of religion and sexual orientation 
and gender identity--discrimination against those organizations 
applying for a federal grant or contract, employees of the grantee, as 
well as the ultimate beneficiary of the program or service.'' (Emphases 
in original.)
    DOL response: The Department declines to adopt the recommended 
change. The WIA regulations at 29 CFR part 37 implement section 188 of 
WIA; therefore, they address only discrimination on bases prohibited by 
that statutory section. Neither sexual orientation nor gender identity 
is included among these bases, see 29 U.S.C. 2938(a)(2), and we decline 
to impose a prohibition on such discrimination by regulation.
    4. Comment: The rule should contain administrative requirements to 
ensure that government funds are not used to support religious 
activities.
    One commenter recommended that ``faith-based and community-based 
organizations * * * be held as accountable as any other non-profit 
entity that receives taxpayer dollars'' and that ``firewalls * * * be 
[put] in place prohibiting federal money from being used to fund 
religious materials.''
    Additionally, the commenter recommended that Federal funds 
``supplement and not supplant existing money.'' Two additional 
commenters made similar recommendations.
    DOL response: In the Department's view, the Federal reporting, 
financial management, and other administrative requirements that are 
already in place, and that are applicable to all recipients of WIA 
title I financial assistance, are sufficient to ensure that faith-based 
and community organizations are held as accountable as any other 
recipient of federal assistance. Some of these requirements are 
described above in section II(A)(1) of this preamble. Faith-based and 
community organizations are not exempt from these requirements. See 20 
CFR part 667; 29 CFR part 95; OMB Circulars Nos. A-110, ``Uniform 
Administrative Requirements for Grants and Other Agreements with 
Institutions of Higher Education, Hospitals, and Other Nonprofit 
Organizations,'' A-122, ``Cost Principles for Nonprofit 
Organizations,'' and A-133, ``Audits of States, Local Governments, and 
Non-Profit Organizations.'' Furthermore, the Department believes that 
new subpart D to 29 CFR part 2, published in today's Federal Register, 
sets up appropriate constitutional safeguards regarding the use of DOL 
assistance. For example, with regard to direct financial assistance, 
new subpart D makes clear that such assistance must not be used for 
inherently religious activities. The Department therefore declines to 
impose additional changes related to accountability.
    With regard to the comments that federal funds must ``supplement 
and not supplant existing money,'' we would simply note that WIA 
already provides that title I financial assistance must only be used 
for activities that ``are in addition to those that would otherwise be 
available in the local area in the absence of such funds.'' WIA section 
195(2); 29 U.S.C. 2945(2). We disagree, therefore, that any additional 
such requirements must be included in this regulation.
    5. Comment: The proposed rules ``fail to take any steps to prevent 
government

[[Page 41900]]

money from flowing to anti-Semitic, racist and bigoted organizations.''
    DOL response: The WIA regulations at 29 CFR part 37 that are 
already in place contain several provisions designed to ensure that 
organizations that discriminate on prohibited grounds--including race, 
color, national origin, and religion--are barred from receiving 
financial assistance under WIA. The regulations contain a broad 
provision stating that ``[n]o individual in the United States'' may be 
``excluded from participation in, denied the benefits of, subjected to 
discrimination under, or denied employment in the administration of or 
in connection with'' any WIA title I-financially assisted program or 
activity on any prohibited basis, including race, color, national 
origin, or religion. 29 CFR 37.5. In addition, the regulations 
explicitly prohibit recipients from ``[a]id[ing] or perpetuat[ing] 
discrimination by providing significant assistance to an agency, 
organization, or person that discriminates on a prohibited ground 
[including race, color, national origin, or religion] in providing any 
aid, benefits, services, or training to registrants, applicants, or 
participants in a WIA Title I-funded program or activity.'' 29 CFR 
37.6(c)(1). This provision bars not only direct assistance to persons 
or entities that discriminate, but also bars assistance provided 
``through contractual, licensing, or other arrangements.'' 29 CFR 
37.6(c). Recipients that provide such assistance are themselves 
violating the nondiscrimination requirements, and can be subjected to 
the sanctions listed in 29 CFR 37.110. These provisions contain no 
exemption for religious organizations. See generally 29 CFR part 37. 
Therefore, in the Department's view, no additional regulatory 
provisions ``to prevent government money from flowing to anti-Semitic, 
racist and bigoted organizations'' are needed.

IV. Regulatory Procedures

Executive Order 12866

    The Office of Management and Budget (OMB) has reviewed this rule 
under Executive Order 12866, ``Regulatory Planning and Review.'' OMB 
has determined that this rule is a ``significant regulatory action'' as 
defined in section 3(f) of the Order. However, this rule is not an 
economically significant regulatory action under the Order, and 
therefore, no regulatory impact analysis has been prepared.

Regulatory Flexibility Act

    The final rule will not substantially change the existing 
obligation of recipients or entities operating Federally-assisted 
programs or activities to apply a policy of nondiscrimination and equal 
opportunity in employment or services. The Secretary, in accordance 
with the Regulatory Flexibility Act (5 U.S.C. Sec.  605(b)), has 
reviewed and approved this final rule, and in so doing certifies that 
this rule will not have a significant economic impact on a substantial 
number of small entities. Therefore, a regulatory flexibility analysis 
is not required.

Unfunded Mandates Reform

    For purposes of the Unfunded Mandates Reform Act of 1995, as well 
as Executive Order 12875, this final rule does not include any Federal 
mandate that may result in increased expenditures by any State, local, 
and tribal governments.

Paperwork Reduction Act

    The final rule contains no new information collection requirements. 
Therefore, it is not subject to the Paperwork Reduction Act.

Executive Order 13132

    This final rule has been reviewed in accordance with Executive 
Order 13132 regarding Federalism. The final rule will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government. Therefore, 
the requirements of section 6 of Executive Order 13132 do not apply to 
this rule.

List of Subjects in 29 CFR Part 37

    Administrative practice and procedure, Discrimination, Civil 
rights, Equal education opportunity, Equal employment opportunity, 
Grant programs--Labor, Individuals with disabilities, Investigations, 
Reporting and recordkeeping requirements.

    Signed at Washington, DC, this 7th day of July.
Elaine L. Chao,
Secretary of Labor.

Title 29--Labor

0
For the reasons discussed in the preamble, Part 37, Subpart A, title 29 
of the Code of Federal Regulations, is amended to read as set forth 
below.

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

0
1. The authority citation for Part 37 continues to read as follows:

    Authority: Sections 134(b), 136(d)(2)(F), 136(e), 172(a), 
183(c), 185(c)(2), 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; 
and title IX of the Education Amendments of 1972, as amended, 20 
U.S.C. 1681.


0
2. In Sec.  37.6, paragraphs (f)(2) and (3) are revised to read as 
follows:


Sec.  37.6  What specific discriminatory action, based on prohibited 
grounds other than disability, are prohibited by this part?

* * * * *
    (f)(2) Except under the circumstances described in paragraph (f)(3) 
below, a recipient must not employ participants to carry out the 
construction, operation, or maintenance of any part of any facility 
that is used, or to be used, for religious instruction or as a place 
for religious worship.
    (3) A recipient may employ participants to carry out the 
maintenance of a facility that is not primarily or inherently devoted 
to religious instruction or religious worship if the organization 
operating the facility is part of a program or activity providing 
services to participants.
* * * * *
[FR Doc. 04-15708 Filed 7-8-04; 8:45 am]
BILLING CODE 4510-23-P