[Federal Register Volume 84, Number 158 (Thursday, August 15, 2019)]
[Proposed Rules]
[Pages 41677-41691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17472]


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DEPARTMENT OF LABOR

Office of Federal Contract Compliance Programs

41 CFR Part 60-1

RIN 1250-AA09


Implementing Legal Requirements Regarding the Equal Opportunity 
Clause's Religious Exemption

AGENCY: Office of Federal Contract Compliance Programs, Labor.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Department of Labor's (DOL's) Office of Federal 
Contract Compliance Programs (OFCCP) is proposing regulations to 
clarify the scope and application of the religious exemption contained 
in section 204(c) of Executive Order 11246, as amended. The proposed 
clarifications to the religious exemption will help

[[Page 41678]]

organizations with Federal Government contracts and subcontracts and 
federally assisted construction contracts and subcontracts better 
understand their Executive Order 11246 obligations.

DATES: To be assured of consideration, comments must be received on or 
before September 16, 2019.

ADDRESSES: You may submit comments, identified by RIN 1250-AA09, by any 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Fax: (202) 693-1304 (for comments of six pages or less).
     Mail: Harvey D. Fort, Acting Director, Division of Policy 
and Program Development, Office of Federal Contract Compliance 
Programs, Room C-3325, 200 Constitution Avenue NW, Washington, DC 
20210.
    Receipt of submissions will not be acknowledged; however, the 
sender may request confirmation that a submission has been received by 
telephoning OFCCP at (202) 693-0104 (voice) or (202) 693-1337 (TTY) 
(these are not toll-free numbers).
    All comments received, including any personal information provided, 
will be available for public inspection during normal business hours at 
Room C-3325, 200 Constitution Avenue NW, Washington, DC 20210, or via 
the internet at http://www.regulations.gov. Upon request, individuals 
who require assistance to review comments will be provided with 
appropriate aids such as readers or print magnifiers. Copies of this 
notice of proposed rulemaking (NPRM) will be made available in the 
following formats: Large print, electronic file on computer disk, and 
audiotape. To schedule an appointment to review the comments and/or to 
obtain this NPRM in an alternate format, please contact OFCCP at the 
telephone numbers or address listed above.

FOR FURTHER INFORMATION CONTACT: Harvey D. Fort, Acting Director, 
Division of Policy and Program Development, Office of Federal Contract 
Compliance Programs, 200 Constitution Avenue NW, Room C-3325, 
Washington, DC 20210. Telephone: (202) 693-0104 (voice) or (202) 693-
1337 (TTY).

SUPPLEMENTARY INFORMATION: 

Executive Summary

    On July 2, 1964, President Lyndon B. Johnson signed the landmark 
Civil Rights Act of 1964. See Public Law 88-352, 78 Stat. 241. This 
legislation prohibited discrimination on various grounds in many of the 
most important aspects of civic life. Its Title VII extended these 
protections to employment opportunity, prohibiting discrimination on 
the basis of race, color, religion, sex, or national origin. In Title 
VII, Congress also provided a critical accommodation for religious 
employers. Congress permitted religious employers to take religion into 
account for employees performing religious activities: ``This title 
shall not apply . . . to a religious corporation, association, or 
society with respect to the employment of individuals of a particular 
religion to perform work connected with the carrying on by such 
corporation, association, or society of its religious activities. . . 
.'' See sec. 702(a), Public Law 88-352, 78 Stat. 255 (codified as 
amended at 42 U.S.C. 2000e-1(a)). Congress provided a similar exemption 
for religious educational institutions. See sec. 703(e)(2), Public Law 
88-352, 78 Stat. 256 (codified at 42 U.S.C. 2000e-2(e)(2)).
    Title VII's protections for religious organizations were expanded 
by Congress in 1972. Congress added a broad definition of ``religion'': 
``The term `religion' includes all aspects of religious observance and 
practice, as well as belief, unless an employer demonstrates that he is 
unable to reasonably accommodate to an employee's or prospective 
employee's religious observance or practice without undue hardship on 
the conduct of the employer's business.'' Equal Employment Opportunity 
Act of 1972, sec. 2(7), Public Law 92-261, 86 Stat. 103 (codified at 42 
U.S.C. 2000e(j)). Congress also expanded the religious exemption in 
section 702 of Title VII and added educational institutions to the list 
of those eligible for exemption. In addition, Congress broadened the 
scope of the section 702 exemption to cover not just religious 
activities, but all activities of a religious organization: ``This 
title [VII] shall not apply . . . to a religious corporation, 
association, educational institution, or society with respect to the 
employment of individuals of a particular religion to perform work 
connected with the carrying on by such corporation, association, 
educational institution, or society of its activities.'' Sec. 3, Public 
Law 92-261, 86 Stat. 104 (codified at 42 U.S.C. 2000e-1(a)). This 
expansion of the religious exemption to all activities of religious 
organizations was upheld against an Establishment Clause challenge 
unanimously \1\ by the Supreme Court. See Corp. of the Presiding Bishop 
of the Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 
327, 330 (1987).
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    \1\ Justice White wrote the majority opinion for five justices. 
Justices O'Connor, Blackmun, and Brennan (with Justice Marshall 
joining) wrote opinions concurring in the judgment.
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    One year after President Johnson signed the Civil Rights Act, he 
signed Executive Order 11246, requiring equal employment opportunity in 
federal government contracting. The order mandated that all government 
contracts include a provision stating that ``[t]he contractor will not 
discriminate against any employee or applicant for employment because 
of race, creed, color, or national origin.'' Sec. 202(1), E.O. 11246, 
30 FR 12319, 12320 (Sept. 28, 1965). Two years later, President Johnson 
expressly acknowledged Title VII of the Civil Rights Act when expanding 
Executive Order 11246 to prohibit, as does Title VII, discrimination on 
the bases of sex and religion. See sec. 3, E.O. 11375, 32 FR 14303 
(Oct. 17, 1967). In 1978, the responsibilities for enforcing Executive 
Order 11246 were consolidated in DOL. See E.O. 12086, 43 FR 46501 (Oct. 
5, 1978). In its implementing regulations, DOL imported Title VII's 
exemption for religious educational institutions. See 43 FR 49240, 
49243 (Oct. 20, 1978) (now codified at 41 CFR 60-1.5(a)(6)); cf. 42 
U.S.C. 2000e-2(e)(2). Finally, in 2002, President George W. Bush 
amended the executive order by expressly importing Title VII's 
exemption for religious organizations, which likewise has since been 
implemented by DOL's regulations. See sec. 4, E.O. 13279, 67 FR 77143 
(Dec. 12, 2002); 68 FR 56392 (Sept. 30, 2003) (codified at 41 CFR 60-
1.5(a)(5)); cf. 42 U.S.C. 2000e-1(a).
    Because the exemption administered by OFCCP springs directly from 
the Title VII exemption, it should be given a parallel interpretation, 
consistent with the Supreme Court's repeated counsel that the decision 
to borrow statutory text in a new statute is a ``strong indication that 
the two statutes should be interpreted pari passu.'' Northcross v. Bd. 
of Educ. of Memphis City Sch., 412 U.S. 427, 428 (1973) (per curiam). 
OFCCP generally interprets the nondiscrimination provisions of 
Executive Order 11246 consistent with the principles of Title VII. 
There has been some variation among federal circuit courts in 
interpreting the scope and application of the Title VII religious 
exemption. And many of the relevant court opinions predate the recent 
Supreme Court decisions and executive orders discussed below. In this 
proposed rule, OFCCP has sought to follow the principles articulated by 
these recent decisions and orders, and has interpreted the circuit-
level case law in light of them. OFCCP draws on Title

[[Page 41679]]

VII case law regarding religious employers because of its 
persuasiveness on issues in common with federal contractor issues 
arising under Executive Order 11246.
    These recent Supreme Court decisions have addressed the freedoms 
and anti-discrimination protections that must be afforded religion-
exercising organizations and individuals under the U.S. Constitution 
and federal law. See, e.g., Masterpiece Cakeshop, Ltd. v. Colo. Civil 
Rights Comm'n, 138 S. Ct. 1719, 1731 (2018) (government violates the 
Free Exercise Clause of the First Amendment when its decisions are 
based on hostility to religion or a religious viewpoint); Trinity 
Lutheran Church of Columbia, Inc. v. Comer, 137 S. Ct. 2012, 2022 
(2017) (government violates the Free Exercise Clause of the First 
Amendment when it conditions a generally available public benefit on an 
entity's giving up its religious character, unless that condition 
withstands the strictest scrutiny); Burwell v. Hobby Lobby Stores, 
Inc., 134 S. Ct. 2751, 2775 (2014) (the Religious Freedom Restoration 
Act applies to federal regulation of the activities of for-profit 
closely held corporations); Hosanna-Tabor Evangelical Lutheran Church & 
Sch. v. EEOC, 565 U.S. 171, 196 (2012) (the ministerial exception, 
grounded in the Establishment and Free Exercise clauses of the First 
Amendment, bars an employment-discrimination suit brought on behalf of 
a teacher against the religious school for which she worked). Although 
these decisions are not specific to the federal government's regulation 
of contractors, they have reminded the federal government of its duty 
to protect religious exercise--and not to impede it. Recent executive 
orders have done the same. See E.O. 13831; E.O. 13798, 82 FR 21675 (May 
9, 2017).
    Some religious organizations have previously provided feedback to 
OFCCP that they were reluctant to participate as federal contractors 
because of uncertainty regarding the scope of the religious exemption 
contained in section 204(c) of Executive Order 11246 and codified in 
OFCCP's regulations. This proposal is intended to provide clarity 
regarding the scope and application of the religious exemption 
consistent with the legal developments discussed above by proposing 
definitions of key terms in 41 CFR 60-1.3 and a rule of construction in 
41 CFR 60-1.5. Among other changes, this proposal is intended to make 
clear that the Executive Order 11246 religious exemption covers not 
just churches but employers that are organized for a religious purpose, 
hold themselves out to the public as carrying out a religious purpose, 
and engage in exercise of religion consistent with, and in furtherance 
of, a religious purpose. It is also intended to make clear that 
religious employers can condition employment on acceptance of or 
adherence to religious tenets without sanction by the federal 
government, provided that they do not discriminate based on other 
protected bases. In addition, consistent with the administration policy 
to enforce federal law's robust protections for religious freedom, the 
proposed rule states that it should be construed to provide the 
broadest protection of religious exercise permitted by the Constitution 
and other laws. While only a subset of contractors and would-be 
contractors may wish to seek this exemption, the Supreme Court, 
Congress, and the President have each affirmed the importance of 
protecting religious liberty for those organizations who wish to 
exercise it.

Section-by-Section Discussion of Proposal

Section 60-1.3 Definitions

    OFCCP proposes to add definitions of the following five terms, 
appearing in alphabetical order, to the list of definitions in 41 CFR 
60-1.3: Exercise of religion; Particular religion; Religion; Religious 
corporation, association, educational institution, or society; and 
Sincere. These definitions are interrelated and are therefore discussed 
below in the order in which they build on one another.
    OFCCP proposes defining Religion to provide that the term is not 
limited to religious belief but also includes all aspects of religious 
observance and practice. The proposed definition is identical to the 
primary definition of ``religion'' in Title VII: ``The term `religion' 
includes all aspects of religious observance and practice, as well as 
belief. . . .'' 42 U.S.C. 2000e(j). The proposed definition omits the 
second portion of the Title VII definition, which refers to an 
employer's accommodation of an employee's religious observance or 
practice, because that is redundant with OFCCP's existing regulations. 
OFCCP's regulations at 41 CFR part 60-50, Guidelines on Discrimination 
Because of Religion or National Origin, contain robust religious 
protections for employees, including accommodation language 
substantially the same as that in the portion of the Title VII 
definition omitted here. Compare 42 U.S.C. 2000e(j) with 41 CFR 60-
50.3. Those provisions continue to govern contractors' obligations to 
accommodate employees' and potential employees' religious observance 
and practice.
    The definition of Religion proposed here has been used by other 
agencies. It would be identical to the definition used by the 
Department of Justice in grant regulations implementing section 815(c) 
of the Justice System Improvement Act of 1979. See 28 CFR 42.202(m). 
The Small Business Administration has used the same definition as well 
in its grant regulations. See 13 CFR 113.2(c).
    Building on the proposed definition of Religion, OFCCP proposes to 
define Particular religion to clarify that the religious exemption 
allows religious contractors not only to prefer in employment 
individuals who share their religion, but also to condition employment 
on acceptance of or adherence to religious tenets as understood by the 
employing contractor. This proposed definition flows directly from the 
broad definition of Religion, discussed above, to include all aspects 
of religious belief, observance, and practice as understood by the 
employer. It is also consistent with Title VII case law holding that 
``the permission to employ persons `of a particular religion' includes 
permission to employ only persons whose beliefs and conduct are 
consistent with the employer's religious precepts.'' Little v. Wuerl, 
929 F.2d 944, 951 (3d Cir. 1991); see also, e.g., Kennedy v. St. 
Joseph's Ministries, Inc., 657 F.3d 189, 194 (4th Cir. 2011) 
(``Congress intended the explicit exemptions to Title VII to enable 
religious organizations to create and maintain communities composed 
solely of individuals faithful to their doctrinal practices, whether or 
not every individual plays a direct role in the organization's 
`religious activities.' '' (quoting Little, 929 F.2d at 951)); Hall v. 
Baptist Mem'l Health Care Corp., 215 F.3d 618, 624 (6th Cir. 2000) 
(``The decision to employ individuals `of a particular religion' under 
[42 U.S.C.] Sec.  2000e-1(a) and Sec.  2000e-2(e)(2) has been 
interpreted to include the decision to terminate an employee whose 
conduct or religious beliefs are inconsistent with those of its 
employer.'' (citing, inter alia, Little, 929 F.2d at 951)); Killinger 
v. Samford Univ., 113 F.3d 196, 200 (11th Cir. 1997) (``[T]he exemption 
[in 42 U.S.C. 2000e-1(a)] allows religious institutions to employ only 
persons whose beliefs are consistent with the employer's when the work 
is connected with carrying out the institution's activities.'').
    This approach, which recognizes contractors' exercise of religion, 
is also consistent with Supreme Court decisions emphasizing that

[[Page 41680]]

``condition[ing] the availability of benefits upon a recipient's 
willingness to surrender his religiously impelled status effectively 
penalizes the free exercise of his constitutional liberties.'' Trinity 
Lutheran, 137 S. Ct. at 2022 (alterations omitted) (quoting McDaniel v. 
Paty, 435 U.S. 618, 626 (1978) (plurality opinion)). These decisions 
naturally extend to include the right to compete on a level playing 
field for federal government contracts. See id. (government burdens 
religious exercise when it so conditions ``a benefit or privilege,'' 
``eligibility for office,'' ``a gratuitous benefit,'' or the ability 
``to compete with secular organizations for a grant'' (quoted sources 
omitted)). Accord sec. 1, E.O. 13831 (the executive branch's policy is 
to allow ``faith-based and community organizations, to the fullest 
opportunity permitted by law, to compete on a level playing field for . 
. . contracts . . . and other Federal funding opportunities'').
    OFCCP believes this clarification will assist contractors who have 
looked for guidance on the religious exemption in OFCCP's past 
statements. These past statements may have suggested that the exemption 
permits qualifying organizations only to prefer members of their own 
faith in their employment practices. See, e.g., OFCCP, Compliance 
Webinar (Mar. 25, 2015), https://www.dol.gov/ofccp/LGBT/FTS_TranscriptEO13672_PublicWebinar_ES_QA_508c.pdf (``This exemption 
allows religious organizations to hire only members of their own 
faith.''). OFCCP based such statements on guidance from the Equal 
Employment Opportunity Commission (EEOC), the agency primarily 
responsible for enforcing Title VII. See, e.g., EEOC, EEOC Compliance 
Manual sec. 12-I.C.1 (July 22, 2008) (``Under Title VII, religious 
organizations are permitted to give employment preference to members of 
their own religion.''). However, with this rulemaking, OFCCP clarifies 
that it applies the principles discussed above, permitting qualifying 
employers to take religion--defined more broadly than simply preferring 
coreligionists--into account in their employment decisions. The case 
law makes clear that qualifying employers ``need not enforce an across-
the-board policy of hiring only coreligionists.'' LeBoon v. Lancaster 
Jewish Cmty. Ctr. Ass'n, 503 F.3d 217, 230 (3d Cir. 2007); Killinger, 
113 F.3d at 199-200 (``We are also aware of no requirement that a 
religious educational institution engage in a strict policy of 
religious discrimination--such as always preferring Baptists in 
employment decisions--to be entitled to the exemption.'').
    As is made clear by the text of section 204(c) of Executive Order 
11246 and the corresponding regulation at 41 CFR 60-1.5(a)(5), the 
religious exemption itself does not exempt or excuse a contractor from 
complying with other applicable requirements. Although Title VII does 
not contain a corresponding proviso, courts have generally interpreted 
the Title VII religious exemption to be similarly precise, so that 
religious employers are not exempted from Title VII's other provisions 
protecting employees. See, e.g., Kennedy, 657 F.3d at 192; Rayburn v. 
Gen. Conference of Seventh-Day Adventists, 772 F.2d 1164, 1166 (4th 
Cir. 1985); cf. Hobby Lobby, 134 S. Ct. at 2783 (rejecting ``the 
possibility that discrimination in hiring, for example on the basis of 
race, might be cloaked as religious practice to escape legal 
sanction''); Bob Jones Univ. v. United States, 461 U.S. 574, 604 (1983) 
(``the Government has a fundamental, overriding interest in eradicating 
racial discrimination in education''). Thus, an employer may not, under 
Title VII or Executive Order 11246, invoke religion to discriminate on 
other bases protected by law.
    Thus, when evaluating allegations of discrimination on bases other 
than religion against employers that are entitled to the Title VII 
religious exemption, courts carefully evaluate whether the employment 
action was permissibly based on religion. The particulars vary. Some 
courts have invoked the burden-shifting rules of McDonnell Douglas 
Corp. v. Green, 411 U.S. 792 (1973), to determine whether a religious 
employer's invocation of religion (or a religiously motivated policy) 
in making an employment decision was genuine or, instead, was merely a 
pretext for discrimination prohibited under Title VII. See Cline v. 
Catholic Diocese of Toledo, 206 F.3d 651 (6th Cir. 2000); Boyd v. 
Harding Academy of Memphis, Inc., 88 F.3d 410 (6th Cir. 1996); cf. 
Geary v. Visitation of Blessed Virgin Mary Parish Sch., 7 F.3d 324 (3d 
Cir. 1993) (applying McDonnell Douglas in assessing religious-exemption 
defense to claim under the Age Discrimination in Employment Act). At 
least one other case has noted that ``[o]ne way'' to show 
discriminatory intent using circumstantial evidence ``is through the 
burden-shifting framework set out in McDonnell Douglas,'' but another 
way is to ``show enough non-comparison circumstantial evidence to raise 
a reasonable inference of intentional discrimination.'' Hamilton v. 
Southland Christian Sch., Inc., 680 F.3d 1316, 1320 (11th Cir. 2012).
    Other decisions have not used the McDonnell Douglas framework, 
particularly when an inquiry into purported pretext would risk 
entangling the court in the internal affairs of a religious 
organization or require a court or jury to assess religious doctrine or 
the relative weight of religious considerations. See Geary, 7 F.3d at 
330-31 (discussing cases). Depending on the circumstances, such an 
inquiry by a court or an agency could impermissibly infringe on the 
First Amendment rights of the employer.
    This arises most prominently in the context of the ministerial 
exception, a judicially recognized exemption grounded in the First 
Amendment from employment-discrimination laws for decisions regarding 
employees who ``minister to the faithful.'' Hosanna Tabor, 565 U.S. at 
189. The exemption ``is not limited to the head of a religious 
congregation,'' nor subject to ``a rigid formula for deciding when an 
employee qualifies as a minister.'' Id. at 190. ``The interest of 
society in the enforcement of employment discrimination statutes is 
undoubtedly important. But so too is the interest of religious groups 
in choosing who will preach their beliefs, teach their faith, and carry 
out their mission.'' Id. at 189. The ministerial exception thus bars 
``an employment discrimination suit brought on behalf of a minister.'' 
Id. In such a situation, it is dispositive that the employee is a 
minister; there is no further inquiry into the employer's motive. See 
id. at 706 (``[b]y imposing an unwanted minister, the state infringes 
the Free Exercise Clause . . . and the Establishment Clause''); see, 
e.g., Rayburn, 772 F.2d at 1169 (``In `quintessentially religious' 
matters, the free exercise clause of the First Amendment protects the 
act of decision rather than a motivation behind it.'' (quoting Serbian 
E. Orthodox Diocese for U.S. of Am. & Canada v. Milivojevich, 426 U.S. 
696, 720 (1976))).
    Courts also apply a different framework when an employer makes an 
employment decision based on religious criteria, yet the employee 
disputes the religious criteria. In those situations, courts have 
stated that ``if a religious institution . . . presents convincing 
evidence that the challenged employment practice resulted from 
discrimination on the basis of religion, Sec.  702 deprives the EEOC of 
jurisdiction to investigate further to determine whether the religious 
discrimination was a pretext for some other form of discrimination.'' 
Little, 929 F.2d at 948 (quoting EEOC v. Miss. Coll., 626 F.2d 477, 485 
(5th Cir. 1980)). Courts have noted the constitutional dangers of 
``choos[ing] between parties' competing

[[Page 41681]]

religious visions'' and entangling themselves in deciding whether the 
employer or the employee has the better reading of doctrine, or which 
tenets an employee must follow or believe to remain in employment. 
Geary, 7 F.3d at 330; see Curay-Cramer v. Ursuline Acad. of Wilmington, 
Del., Inc., 450 F.3d 130, 141 (3d Cir. 2006) (``While it is true that 
the plaintiff in Little styled her allegation as one of religious 
discrimination whereas [this plaintiff] alleges gender discrimination, 
we do not believe the difference is significant in terms of whether 
serious constitutional questions are raised by applying Title VII. 
Comparing [plaintiff] to other Ursuline employees who have committed 
`offenses' against Catholic doctrine would require us to engage in just 
the type of analysis specifically foreclosed by Little.''); Little, 929 
F.2d at 949 (``In this case, the inquiry into the employer's religious 
mission is not only likely, but inevitable, because the specific claim 
is that the employee's beliefs or practices make her unfit to advance 
that mission. It is difficult to imagine an area of the employment 
relationship less fit for scrutiny by secular courts.''); Maguire v. 
Marquette Univ., 627 F. Supp. 1499, 1507 (E.D. Wisc. 1986) (``Despite 
[plaintiff's] protests that she is a Catholic, `of a particular 
religion,' the determination of who fits into that category is for 
religious authorities and not for the government to decide.''), aff'd 
in part, vacated in part on other grounds, 814 F.2d 1213 (7th Cir. 
1987).
    Finally, there may be other instances where an inquiry by a court 
or an agency into employment practices otherwise threatens First 
Amendment rights. See DeMarco v. Holy Cross High Sch., 4 F.3d 166, 172 
(2d Cir. 1993) (``There may be cases involving lay employees in which 
the relationship between employee and employer is so pervasively 
religious that it is impossible to engage in an age-discrimination 
inquiry without serious risk of offending the Establishment Clause.''). 
These turn on their individual facts, and OFCCP does not attempt to 
enumerate such situations here.
    With the foundation of those proposed definitions, the next term in 
the present proposed regulation is Religious corporation, association, 
educational institution, or society. This term is used in Executive 
Order 11246 section 204(c) and 41 CFR 60-1.5(a)(5), and it is the same 
term used in the Title VII religious exemption at 42 U.S.C. 2000e-1(a). 
The proposed definition applies to a corporation, association, 
educational institution, society, school, college, university, or 
institution of learning. The words ``school, college, university, or 
institution of learning'' also appear in 41 CFR 60-1.5(a)(6), the 
exemption for religious educational organizations. They are included in 
the proposed definition to make clear that the definition's listing of 
``educational institution'' includes schools, colleges, universities, 
and institutions of learning. Depending on the facts, an educational 
organization may qualify under the Sec.  60-1.5(a)(5) exemption, the 
Sec.  60-1.5(a)(6) exemption, both, or neither.
    The proposed definition of Religious corporation, association, 
educational institution, or society seeks to clarify which 
organizations can qualify for the religious exemption. Federal circuit 
courts have applied a confusing variety of tests for doing so under 
Title VII. In 2007, the Third Circuit noted:

    Over the years, courts have looked at the following factors: (1) 
Whether the entity operates for a profit, (2) whether it produces a 
secular product, (3) whether the entity's articles of incorporation 
or other pertinent documents state a religious purpose, (4) whether 
it is owned, affiliated with or financially supported by a formally 
religious entity such as a church or synagogue, (5) whether a 
formally religious entity participates in the management, for 
instance by having representatives on the board of trustees, (6) 
whether the entity holds itself out to the public as secular or 
sectarian, (7) whether the entity regularly includes prayer or other 
forms of worship in its activities, (8) whether it includes 
religious instruction in its curriculum, to the extent it is an 
educational institution, and (9) whether its membership is made up 
by coreligionists.

LeBoon, 503 F.3d at 226 (citing Killinger, 113 F.3d 196; EEOC v. 
Kamehameha Sch./Bishop Estate, 990 F.2d 458 (9th Cir. 1993); EEOC v. 
Townley Eng'g & Mfg. Co., 859 F.2d 610 (9th Cir. 1988); Miss. Coll., 
626 F.2d 477). In contrast, the Ninth Circuit has more recently held 
that:

an entity is eligible for the [Title VII] section 2000e-1 exemption, 
at least, if it is organized for a religious purpose, is engaged 
primarily in carrying out that religious purpose, holds itself out 
to the public as an entity for carrying out that religious purpose, 
and does not engage primarily or substantially in the exchange of 
goods or services for money beyond nominal amounts.

Spencer v. World Vision, Inc., 633 F.3d 723, 724 (9th Cir. 2011) (per 
curiam).
    The World Vision court reasoned that an approach like that 
exemplified in LeBoon, in which the court assesses the religiosity of 
an organization's various characteristics, can lead the court into a 
``constitutional minefield.'' Id. at 730 (O'Scannlain, J., concurring); 
see also id. at 741 (Kleinfeld, J., concurring) (concurring in this 
part of Judge O'Scannlain's opinion). When the parties dispute whether 
a particular practice, position, or purpose has religious meaning, 
``[t]he very act of making that determination . . . runs counter to the 
`core of the constitutional guarantee against religious establishment.' 
'' Id. at 731 (O'Scannlain, J., concurring) (quoting New York v. 
Cathedral Acad., 434 U.S. 125, 133 (1977)). ``[I]nquiry into . . . 
religious views . . . is not only unnecessary but also offensive. It is 
well established . . . that courts should refrain from trolling through 
a person's or institution's religious beliefs.'' Id. (alterations in 
original) (quoting Mitchell v. Helms, 530 U.S. 793, 828 (2000) 
(plurality opinion) (internal quotation marks omitted)).
    The World Vision court had other reasons for doubting LeBoon's 
inquiries into the depths of religious practice. It noted that courts 
are ``ill-equipped to determine whether an activity or service is 
religious or secular in nature.'' Id. at 732; see also id. at 732 n.8. 
Favoring institutions with denominational affiliations could lead a 
court or an agency to discriminate among religions, which could also 
violate the First Amendment's Establishment Clause. See id. at 732 & 
n.9; see also id. at 738 & n.19 (Judge O'Scannlain pointing out that 
requiring the restriction of membership or benefits to coreligionists 
as a condition of Title VII exemption could similarly cause inter-
religion discrimination that violates the Establishment Clause). And 
finally, a ``multifactor test,'' like LeBoon's, ``does not work well 
because it is inherently too indeterminate and subjective.'' Id. at 741 
(Kleinfeld, J., concurring).
    Although the World Vision majority agreed on those principles, its 
two judges differed slightly on the test to be used. Judge O'Scannlain 
put forward a three-part test: That ``a nonprofit entity qualifies for 
the [Title VII religious] exemption if it establishes that it (1) is 
organized for a self-identified religious purpose (as evidenced by 
Articles of Incorporation or similar foundational documents), (2) is 
engaged in activity consistent with, and in furtherance of, those 
religious purposes, and (3) holds itself out to the public as 
religious.'' Id. at 734 (O'Scannlain, J., concurring) (footnote 
omitted). His test drew upon similar formulations by the D.C. Circuit 
and by then-Judge Breyer on the First Circuit rejecting, due to 
Establishment Clause concerns, National Labor Relations Board 
assertions of jurisdiction over religious educational institutions. See 
id. (citing Univ. of Great Falls v. NLRB, 278 F.3d 1335,

[[Page 41682]]

1343 (D.C. Cir. 2002); Universidad Cent. de Bayamon v. NLRB, 793 F.2d 
383, 399-400, 403 (1st Cir. 1985) (en banc) (Breyer, J.)). Judge 
Kleinfeld would not have restricted the exemption to nonprofit entities 
but would have included, as an additional factor, that the entity 
charge only nominal fees for its goods and services. See id. at 746-48 
(Kleinfeld, J., concurring). World Vision's controlling per curiam 
opinion thus put forward a four-part test: That an entity, to qualify 
for the religious exemption, must be ``organized for a religious 
purpose, . . . [be] engaged primarily in carrying out that religious 
purpose, . . . hold[ ] itself out to the public as an entity for 
carrying out that religious purpose, and . . . not engage primarily or 
substantially in the exchange of goods or services for money beyond 
nominal amounts.'' Id. at 724 (per curiam).
    OFCCP agrees with the World Vision court's reasoning that it would 
be inappropriate and constitutionally suspect for OFCCP to contradict a 
claim, found to be sincere,\2\ that a particular activity or purpose 
has religious meaning. See World Vision, 633 F.3d at 733 (O'Scannlain, 
J., concurring) (``[W]here there is no dispute that a particular 
activity or purpose is religious in nature, we may rely on the parties' 
characterization. In a case such as this, where the matter is hotly 
contested, however, we should stay our hand and rely on considerations 
that do not require us to engage in constitutionally precarious 
inquires.''). Earlier Title VII decisions illustrate the problems of 
doing so, drawing the government into a balancing of secular and 
religious characteristics, with no clear indicia of how heavily which 
characteristics should weigh or how much religiosity or secularity is 
needed to tip the balance toward one side or the other.
---------------------------------------------------------------------------

    \2\ The issue of sincerity is discussed later in this preamble.
---------------------------------------------------------------------------

    For example, the Third Circuit in LeBoon applied a balancing test 
to decide whether a Jewish community center qualified as a religious 
corporation, organization, or institution. See 503 F.3d at 221. The 
court noted the center's various religious and secular characteristics, 
including some that weighed on both sides: For example, the center `` 
`espoused Jewish values' although `the Jewish values it espoused are 
universal,' '' id. at 227 (quoting testimony from the center's 
corporate designee) (alterations omitted); rabbis from three local 
synagogues advised the center but were honorary, non-voting members; 
the center received financial support from a local Jewish federation, 
but most of its income came from programming services and rentals; 
several of its ``activities involved observance of the Jewish religious 
calendar, although these activities did not necessarily involve holy 
services,'' id. at 228; and the center ``kept a kosher kitchen, 
although non-kosher foods could be brought into the building,'' id.
    A test that relies on the government--as opposed to the 
organization itself--identifying whether certain features of an 
organization, or its character as a whole, are religious or secular may 
require the comparison of things that may not be comparable, as 
demonstrated by the decisions above. It may, for example, invite 
inquiries that are aptly described as ``judging whether a particular 
line is longer than a particular rock is heavy.'' Bendix Autolite Corp. 
v. Midwesco Enters., Inc., 486 U.S. 888, 897 (1988) (Scalia, J., 
concurring in the judgment). Further, the Supreme Court has cautioned 
especially against judging the centrality of religious beliefs and, by 
extension, the centrality of religion in an organization:

    It is no more appropriate for judges to determine the 
``centrality'' of religious beliefs before applying a ``compelling 
interest'' test in the free exercise field, than it would be for 
them to determine the ``importance'' of ideas before applying the 
``compelling interest'' test in the free speech field. What 
principle of law or logic can be brought to bear to contradict a 
believer's assertion that a particular act is ``central'' to his 
personal faith?

Emp't Div., Dep't of Human Res. of Ore. v. Smith, 494 U.S. 872, 887 
(1990), superseded in other respects by Religious Freedom Restoration 
Act (RFRA), 42 U.S.C. 2000bb et seq. The Supreme Court continued: 
``Repeatedly and in many different contexts, we have warned that courts 
must not presume to determine the place of a particular belief in a 
religion or the plausibility of a religious claim.'' Id. As the D.C. 
Circuit stated in University of Great Falls, a test that requires 
ascertaining an entity's ``substantial religious character'' or lack 
thereof ``boils down to `is it sufficiently religious?' '' 278 F.3d at 
1343. Such inquiries by government entities are highly suspect under 
the Establishment Clause. See, e.g., Cathedral Acad., 434 U.S. at 133 
(``The prospect of church and state litigating in court about what does 
or does not have religious meaning touches the very core of the 
constitutional guarantee against religious establishment. . . .'').
    The competing opinions in World Vision also underscore the problem 
of asking the government to identify the primary purpose of certain 
organizations as religious or secular. See 633 F.3d at 737 
(O'Scannlain, J., concurring) (World Vision ``attempts to express its 
`Christian witness . . . in holistic ways through . . . ministries of 
relief, development, advocacy and public awareness.' '') (alterations 
in original); id. at 747 (Kleinfeld, J., concurring) (``the idea 
[behind World Vision] is not merely foreign aid in poor countries, but 
what amounts to missionary work by making its service providers 
exemplars of Christian charity''). But cf. id. at 764 (Berzon, J., 
dissenting) (``World Vision's purpose and daily operations are defined 
by a wide range of humanitarian aid that is, on its face, secular.''). 
Cf. also, e.g., St. Elizabeth Cmty. Hosp. v. NLRB, 708 F.2d 1436, 1441 
(9th Cir. 1983) (``St. Elizabeth does not have a substantial religious 
character. Its primary purpose, like that of any secular hospital, is 
rather humanitarian, devoted to medical care for the sick.'').
    Consequently, in its definition of Religious corporation, 
association, educational institution, or society, OFCCP proposes to 
adopt the test set out in World Vision, with some modifications 
discussed below. Most important, as explained in World Vision, all the 
factors below are determined with reference to the contractor's own 
sincerely held view of its religious purposes and the religious meaning 
(or not) of its practices. See World Vision, 633 F.3d at 733 
(O'Scannlain, J., concurring).
    First, the contractor must be organized for a religious purpose, 
meaning that it was conceived with a self-identified religious purpose. 
This need not be the contractor's only purpose. Cf. Universidad Cent. 
de Bayamon, 793 F.2d at 401 (no NLRB jurisdiction when, among other 
things, an educational institution's mission had ``admittedly religious 
functions but whose predominant higher education mission is to provide 
. . . students with a secular education''). A religious purpose can be 
shown by articles of incorporation or other founding documents, but 
that is not the only type of evidence that can be used. See World 
Vision, 633 F.3d at 736 (O'Scannlain, J., concurring); id. at 745 
(Kleinfeld, J., concurring) (noting that some religious entities have 
``no corporate apparatus''). And finally, ``the decision whether an 
organization is `religious' for purposes of the exemption cannot be 
based on its conformity to some preconceived notion of what a religious 
organization should do, but must be measured with reference to the 
particular religion identified by the organization.'' Id. at

[[Page 41683]]

735-36 (O'Scannlain, J., concurring) (quoting LeBoon, 503 F.3d at 226-
27) (internal quotation mark omitted).
    Second, the contractor must hold itself out to the public as 
carrying out a religious purpose. Again here, ``religious purpose'' 
``must be measured with reference to the particular religion identified 
by the contractor.'' Id. at 736. A contractor can satisfy this 
requirement in a variety of ways, including by evidence of a religious 
purpose on its website, publications, advertisements, letterhead, or 
other public-facing materials, or by affirming a religious purpose in 
response to inquiries from a member of the public or a government 
entity.
    Third, the contractor must exercise religion consistent with, and 
in furtherance of, a religious purpose. Here too, ``religious purpose'' 
means religious as ``measured with reference to the particular religion 
identified by the contractor.'' Id. The test here is similar to that in 
Judge O'Scannlain's concurring opinion in World Vision rather than that 
in the per curiam opinion. Cf. id. at 734.
    OFCCP proposes this approach because it offers simpler 
administration for OFCCP and clearer notice to contractors. While OFCCP 
generally follows Title VII case law, the agency is an enforcement 
body, not a court, and it has authority over federal contractors 
specifically, rather than employers generally. Those differences 
counsel in favor of OFCCP's proposed revision to this aspect of the 
World Vision test.
    OFCCP's staff can easily and consistently apply the test as 
proposed. As discussed earlier, an inquiry into whether an entity is 
engaged ``primarily'' in religious activity invites the balancing of 
things that cannot be balanced in any consistent way. How much 
expressly religious instruction must a school require of its students 
to be primarily engaged in a religious purpose? See Kamehameha, 990 
F.2d at 463-64. How much funding must an organization receive from an 
ecclesiastical organization to be primarily engaged in a religious 
purpose? See Killinger, 113 F.3d at 199. What percentage of an 
organization's controlling body or employees must be made up of a 
certain religion to be primarily engaged in a religious purpose? See, 
e.g., Siegel v. Truett-McConnell Coll., Inc., 13 F. Supp. 2d 1335, 1341 
(N.D. Ga. 1994).\3\ These and similarly intractable questions have 
arisen repeatedly in cases involving the religious exemption. And those 
questions remain intractable despite courts' having the benefit of full 
adversarial presentation and development of the record, two conditions 
not present at the beginning of OFCCP reviews. Avoiding such difficult-
to-draw lines would better promote consistency in OFCCP's 
administration and give field staff better guidance.
---------------------------------------------------------------------------

    \3\ See Siegel, 13 F. Supp. 2d at 1341 (``The religious 
affiliation of full-time faculty on the main campus were listed as 
follows: Baptist 23, Episcopalian 4, Methodist 4, Catholic 2, 
Congregational 1, and Evangelical Free Church 1. Adjunct faculty on 
the main campus were listed as follows: Baptist 11, Christians 5, 
Lutheran 1, Methodist 4. Thus, 66% of full-time faculty and 52% of 
part-time faculty on the main campus, for the period 1988-1993, were 
Baptist; 100% were Christians. The faculty at the satellite campuses 
was identified as part-time and the religious breakdown was listed 
as follows: Baptist 179, Methodist 73, Episcopal 26, Presbyterian 
52, Unitarian 6, Pentecostal 2, Catholic 27, Independent 1, 
Christian 7, United Church of Christ 2, Jehovah''s Witness 1, Church 
of the Nazarene 1, Church Member 1, Assembly of God 6, Seventh Day 
Adventist 3, Non-Denominational 3, Unity Christian 1, Evangelical 
Free Church 1, Protestant 4, Congregational 1, Church of God 1, 
Church of Christ 3, Anglican 1, Lutheran 4, and Mormon 1.'').
---------------------------------------------------------------------------

    Likewise, the test as proposed would be clearer for contractors. 
OFCCP's power to regulate any private entity springs entirely from that 
entity's contracting with the federal government. See Sec. 201-202, 
E.O. 11246; 29 U.S.C. 793 (a)-(b); 38 U.S.C. 4212(a)(1)-(2); see also 
48 CFR 52.222-26, -35, -36. Both contractors and the government have an 
interest in ensuring that the terms of their agreements are as clear as 
possible. As the discussion earlier makes apparent, a ``primarily 
engaged'' inquiry lacks the clarity that ought to prevail in 
contractual relations--organizations should understand the obligations 
they will take on before entering into a binding agreement with the 
government. See generally Fed. Crop Ins. Co. v. Merill, 332 U.S. 380 
(1947) (contractors are bound to obligations imposed by law even when 
government agents, acting beyond their authority, say otherwise); cf. 
Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17 (1981) 
(``There can, of course, be no knowing acceptance if a State is unaware 
of the conditions [on federal funds] or is unable to ascertain what is 
expected of it.''). This need for clear regulation is especially acute 
given that the contractual conditions enforced by OFCCP are animated in 
part by the government's economic interest in the efficient fulfillment 
of its contracts, for which clarity is critical. See Contractors Ass'n 
of E. Pa. v. Sec'y of Labor, 442 F.2d 159, 171 (3d Cir. 1971) 
(antidiscrimination requirements in federal procurement and federally 
assisted construction contracts go beyond ``merely . . . impos[ing] 
[the President's] notions of desirable social legislation''; they 
further the government's ``financial and completion interests''); cf. 
UAW-Labor Emp't & Training Corp. v. Chao, 325 F.3d 360, 366-67 (D.C. 
Cir. 2003); AFL-CIO v. Kahn, 618 F.2d 784, 792 (D.C. Cir. 1979).
    For these same reasons of contractual clarity and efficiency of 
administration, OFCCP's proposed definition extends no further than the 
three components listed therein, which, if satisfied, entitle an 
organization to the religious exemption. They are intended to be stand-
alone components and not factors guiding an ultimate inquiry into 
whether an organization is ``primarily religious'' or secular as a 
whole.
    The regulatory text proposed here uses the phrase ``engages in 
exercise of religion'' rather than Judge O'Scannlain's phrase, 
``engages in activity.'' See World Vision, 633 F.3d at 734 
(O'Scannlain, J., concurring) (``engaged in activity consistent with, 
and in furtherance of, those religious purposes''). This change, along 
with accompanying definitions described next, has been made for 
clarity, since OFCCP is proposing regulatory text in the form of a 
definition rather than a judicial opinion-style narrative in which 
terms like ``activity'' can be explicated at length. No change in 
substantive meaning is intended. The phrasing proposed here, along with 
the other definitions, makes clear that the activities furthering a 
religious purpose must be themselves of the kind that the contractor 
itself views as religious. OFCCP believes this formulation gives due 
regard to religious contractors' sincere religious exercise by 
recognizing that such organizations ascribe deep religious significance 
to their humanitarian, healing, charitable, and educational work. With 
that said, OFCCP does not see a scenario in which an entity's single 
religiously motivated employment action, standing alone, would be 
sufficient to satisfy this element of the definition, if that were the 
only religiously motivated action the entity could identify.
    OFCCP does not propose to adopt the fourth factor set out in World 
Vision, that the entity seeking exemption ``not engage primarily or 
substantially in the exchange of goods or services for money beyond 
nominal amounts.'' Id. at 724 (per curiam). OFCCP believes that the 
adoption of this factor could yield unexpected results and that it is 
difficult to square with other case law. First, there are many 
religious entities that engage ``primarily or substantially in the 
exchange of goods or services for

[[Page 41684]]

money beyond nominal amounts.'' For instance, religious entities may 
operate discount retail stores or otherwise engage in the 
marketplace.\4\ Religiously oriented hospitals, senior-living 
facilities, and hospices may also engage in substantial and frequent 
financial exchanges.\5\ A test that makes financial exchange a 
dispositive factor may sweep more broadly than Executive Order 11246 
intended, especially when considering that Executive Order 11246--and 
its religious exemption--pertain to government contracting, an economic 
activity in which most participants are for-profit entities.\6\
---------------------------------------------------------------------------

    \4\ See Brian J. Grim and Melissa E. Grim, ``The Socio-economic 
Contribution of Religion to American Society: An Empirical 
Analysis,'' Interdisciplinary Journal of Research on Religion, vol. 
12 (2016), article 3, pp. 10, 24, http://www.religjournal.com/pdf/ijrr12003.pdf.
    \5\ See id. at 7.
    \6\ See General Services Administration, System for Award 
Management, Advanced Search--Entity (listing 356,265 active for-
profit entities and 85,484 nonprofit and/or other-not-for-profit 
entities), sam.gov/SAM/pages/public/searchRecords/advancedEMRSearch.jsf (last accessed Apr. 17, 2019).
---------------------------------------------------------------------------

    Second, and perhaps for this reason, this factor has not been 
determinative for other courts. An entity's for-profit or nonprofit 
status, or the volume or amount of its financial transactions, may be a 
factor, but not necessarily a dispositive one, under the LeBoon test. 
See 503 F.3d at 227 (``[N]ot all factors will be relevant in all cases, 
and the weight given each factor may vary from case to case.''). 
Likewise, in an earlier Ninth Circuit decision involving a claim for 
religious exemption brought by a for-profit organization, the court did 
not hold that the organization's for-profit status alone disqualified 
it from exemption. See Townley, 859 F.2d at 619.\7\
---------------------------------------------------------------------------

    \7\ Judge O'Scannlain's proposed test in World Vision included 
the entity's nonprofit status as an ``initial consideration'' 
because ``the fact that that an entity is structured as a nonprofit 
provides strong evidence that its purpose is purely nonpecuniary.'' 
633 F.3d at 734-35 (O'Scannlain, J., concurring). However, Judge 
Kleinfeld believed that there was ``not much congruence between 
nonprofit status and the free exercise of religion, or any 
eleemosynary purpose.'' Id. at 745 (Kleinfeld, J. concurring). World 
Vision was issued before the Supreme Court's decision in Hobby 
Lobby, which is discussed next.
---------------------------------------------------------------------------

    Although the Supreme Court considered and upheld the Title VII 
religious exemption against Establishment Clause challenge as applied 
``to the secular nonprofit activities of religious organizations,'' 
Amos, 483 U.S. at 330, the Supreme Court's more recent decision in 
Hobby Lobby counsels against a stark distinction between for-profit and 
nonprofit corporations in this context. The Supreme Court wrote, ``No 
conceivable definition of the term [`person'] includes natural persons 
and nonprofit corporations, but not for-profit corporations.'' Hobby 
Lobby, 134 S. Ct. at 2769. Hobby Lobby forcefully rejected the argument 
that only nonprofit corporations can exercise religion. See id. at 
2769-75. In Hobby Lobby, the Supreme Court observed that furthering the 
religious freedom of corporations, whether for-profit or nonprofit, 
furthers individual religious freedom. See id. at 2769. The Supreme 
Court found no reason to distinguish between for-profit sole 
proprietorships--which had brought Free Exercise claims before the 
Supreme Court in earlier cases--and for-profit closely held 
corporations. See id. at 2769-70. And the Supreme Court noted that 
every U.S. jurisdiction permits corporations to be formed ``for any 
lawful purpose or business,'' id. at 2771 (quoted source omitted), 
including a religious one: ``For-profit corporations, with ownership 
approval, support a wide variety of charitable causes, and it is not at 
all uncommon for such corporations to further humanitarian and other 
altruistic objectives. . . . If for-profit corporations may pursue such 
worthy objectives, there is no apparent reason why they may not further 
religious objectives as well.'' Id. An argument to the contrary ``flies 
in the face of modern corporate law.'' Id. at 2770. Hobby Lobby 
answered the question whether a for-profit closely held corporation can 
exercise religion, and its affirmative answer supports OFCCP's proposal 
not to disqualify organizations from the religious exemption on the 
basis of their for-profit or nonprofit status.\8\ However, for the same 
reasons discussed by the Supreme Court in Hobby Lobby with respect to 
the application of RFRA to for-profit entities, OFCCP does not 
anticipate that large, publicly held corporations would seek exemption 
or fall within the proposed definition. See id. at 2774 (``the idea 
that unrelated shareholders--including institutional investors with 
their own set of stakeholders--would agree to run a corporation under 
the same religious beliefs seems improbable'').
---------------------------------------------------------------------------

    \8\ The Hobby Lobby Court elsewhere noted the assertion of the 
Department of Health and Human Services (HHS) that ``statutes like 
Title VII . . . expressly exempt churches and other nonprofit 
religious institutions but not for-profit corporations.'' 134 S. Ct. 
at 2773. The Court did not address whether HHS's characterization 
(which itself relied in part on World Vision) was correct. The Court 
simply stated that ``[i]f Title VII and similar laws show anything, 
it is that Congress speaks with specificity when it intends a 
religious accommodation not to extend to for-profit corporations.'' 
Id. at 2773-74.
---------------------------------------------------------------------------

    With the definition of Religious corporation, association, 
educational institution, or society set forth in this proposal, OFCCP 
intends to clarify the scope of the exemption and to ``rely on 
considerations that do not require [it] to engage in constitutionally 
precarious inquiries.'' World Vision, 633 F.3d at 733 (O'Scannlain, J., 
concurring). Accordingly, the proposed definition also identifies a 
number of features that are not required for OFCCP to determine that a 
contractor is religious. With this proposed definition, OFCCP intends 
to identify contractors that qualify for the exemption without engaging 
in an analysis that is inherently subjective and indeterminate, outside 
its competence, susceptible to discrimination among religions, or prone 
to entanglement with religious activity. See, e.g., Mitchell, 530 U.S. 
at 828 (plurality opinion); Colorado Christian Univ., 534 F.3d at 1261-
62; Univ. of Great Falls, 278 F.3d at 1342-43.
    OFCCP proposes to define Exercise of religion--which appears in the 
proposed definition of Religious corporation, association, educational 
institution, or society just discussed--as the term is defined for 
purposes of RFRA. RFRA, in 42 U.S.C. 2000bb-2(4), defines ``exercise of 
religion'' to mean ``religious exercise'' as defined in the Religious 
Land Use and Institutionalized Persons Act (RLUIPA), 42 U.S.C. 2000cc-
5(7). RLUIPA, in turn, defines ``religious exercise'' as including 
``any exercise of religion, whether or not compelled by, or central to, 
a system of religious belief.'' This definition is well-established and 
prevents the kinds of problematic inquiries into the ``centrality'' of 
a religious practice highlighted above.
    The proposed definition of Exercise of religion also clarifies that 
the touchstone for religious exercise is sincerity, and therefore an 
exercise of religion must only be sincere. As the Supreme Court has 
repeatedly counseled, ``religious beliefs need not be acceptable, 
logical, consistent, or comprehensible to others in order to merit 
First Amendment protection.'' Church of the Lukumi Babalu Aye, Inc. v. 
City of Hialeah, 508 U.S. 520, 531 (1993) (quoting Thomas v. Review Bd. 
of Ind. Emp't Sec. Div., 450 U.S. 707, 714 (1981)) (internal quotation 
marks omitted); see also, e.g., United States v. Ballard, 322 U.S. 78, 
86 (1944) (``[People] may believe what they cannot prove. They may not 
be put to the proof of their religious doctrines or beliefs.''). To 
merit protection, religious beliefs must simply be ``sincerely held.'' 
E.g., Frazee v. Ill. Dept. of Emp't Sec., 489 U.S. 829, 834 (1989); 
United States v.

[[Page 41685]]

Seeger, 380 U.S. 163, 185 (1965). Courts have appropriately relied on 
the ``sincerely held'' standard when evaluating religious 
discrimination claims in the Title VII context. See, e.g., Davis v. 
Fort Bend Cnty., 765 F.3d 480, 485 (5th Cir. 2014), on remand, No. 
4:12-CV-131, 2016 WL 4479527 (S.D. Tex. Aug. 24, 2016), rev'd, 893 F.3d 
300 (5th Cir. 2018), cert. granted, No. 18-525 (U.S. Jan. 11, 2019); 
Philbrook v. Ansonia Bd. of Educ., 757 F.2d 476, 481-82 (2d Cir. 1985), 
aff'd on other grounds, 479 U.S. 60 (1986); Redmond v. GAF Corp., 574 
F.2d 897, 901 n.12 (7th Cir. 1978). In such cases, a court must 
``vigilantly separate the issue of sincerity from the factfinder's 
perception of the religious nature of the [employee's] beliefs.'' EEOC 
v. Union Independiente de la Autoridad de Acueductos y Alcantarillados, 
279 F.3d 49, 57 (1st Cir. 2002) (alteration in original) (quoting 
Patrick v. LeFevre, 745 F.2d 153, 157 (2d Cir. 1984)) (internal 
quotation mark omitted).
    These principles are incorporated in the proposed definition of 
Sincere. In line with court precedent and OFCCP's principles, the 
critical inquiry for OFCCP is whether a particular employment decision 
was in fact a sincere exercise of religion. OFCCP, like courts, 
``merely asks whether a sincerely held religious belief actually 
motivated the institution's actions.'' Geary, 7 F.3d at 330. The 
religious organization's burden ``to explain is considerably lighter 
than in a non-religious employer case,'' since the organization, ``at 
most, is called upon to explain the application of its own doctrines.'' 
Id. ``Such an explanation is no more onerous than is the initial burden 
of any institution in any First Amendment litigation to advance and 
explain a sincerely held religious belief as the basis of a defense or 
claim.'' Id.; see Seeger, 380 U.S. at 185 (whether a belief is ``truly 
held'' is ``a question of fact''). The sincerity of religious exercise 
is often undisputed or stipulated. See, e.g., Hobby Lobby, 134 S. Ct. 
at 2774 (``The companies in the case before us are closely held 
corporations, each owned and controlled by a single family, and no one 
has disputed the sincerity of their religious beliefs.''); Holt v. 
Hobbs, 135 S. Ct. 853, 862 (2015) (``Here, the religious exercise at 
issue is the growing of a beard, which petitioner believes is a dictate 
of his religious faith, and the Department does not dispute the 
sincerity of petitioner's belief.'').
    In assessing sincerity, OFCCP takes into account all relevant 
facts, including whether the contractor had a preexisting basis for its 
employment policy and whether the policy has been applied consistently 
to comparable persons, although absolute uniformity is not required. 
See Kennedy, 657 F.3d at 194 (noting that the Title VII religious 
exemption permits religious organizations to ``consider some attempt at 
compromise''); LeBoon, 503 F.3d at 229 (``religious organizations need 
not adhere absolutely to the strictest tenets of their faiths to 
qualify for Section 702 protection''); see also Killinger, 113 F.3d at 
199-200. OFCCP will also evaluate any factors that indicate an 
insincere sham, such as acting ``in a manner inconsistent with that 
belief'' or ``evidence that the adherent materially gains by 
fraudulently hiding secular interests behind a veil of religious 
doctrine.'' Philbrook, 757 F.2d at 482 (quoting Int'l Soc'y for Krishna 
Consciousness, Inc. v. Barber, 650 F.2d 430, 441 (2d Cir. 1981)) 
(internal quotation mark omitted); cf., e.g., Hobby Lobby, 134 S. Ct. 
at 2774 n.28 (``To qualify for RFRA's protection, an asserted belief 
must be `sincere'; a corporation's pretextual assertion of a religious 
belief in order to obtain an exemption for financial reasons would 
fail.''); United States v. Quaintance, 608 F.3d 717, 724 (10th Cir. 
2010) (Gorsuch, J.) (``the record contains additional, overwhelming 
contrary evidence that the [defendants] were running a commercial 
marijuana business with a religious front'').
    OFCCP likewise acknowledges the constitutional and prudential 
limitations on its inquiry that may come into play when religious 
matters are involved. OFCCP respects and will apply the ministerial 
exception. OFCCP will not compare religious doctrines or practices in 
evaluating sincerity. See, e.g., Curay-Cramer, 450 F.3d at 139 
(comparing ``the relative severity of [religious] offenses . . . would 
violate the First Amendment''); Hall, 215 F.3d at 626 (``the First 
Amendment does not permit federal courts to dictate to religious 
institutions how to carry out their religious missions or how to 
enforce their religious practices''). Nor will OFCCP require 
contractors to adhere to strict, uniform procedures to demonstrate 
sincerity. See Kennedy, 657 F.3d at 194; LeBoon, 503 F.3d at 229. And 
where ``it is impossible to avoid inquiry into a religious employer's 
religious mission or the plausibility of its religious justification 
for an employment decision,'' then OFCCP will apply the Executive Order 
11246 religious exemption. Curay-Cramer, 450 F.3d at 141.
    Finally, OFCCP proposes to apply a but-for standard of causation 
when evaluating claims of discrimination by religious organizations 
based on protected characteristics other than religion.\9\ 
Specifically, where a contractor that is entitled to the religious 
exemption claims that its challenged employment action was based on 
religion, OFCCP will find a violation of Executive Order 11246 only if 
it can prove by a preponderance of the evidence that a protected 
characteristic other than religion was a but-for cause of the adverse 
action. See Univ. of Texas Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 362-
63 (2013); Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 180 (2009). 
OFCCP believes this approach is necessary in the context in which a 
religious organization, acting on a sincerely held belief, takes 
adverse action against an employee on the basis of the employee's 
religion.\10\
---------------------------------------------------------------------------

    \9\ OFCCP requests comment on whether this causation standard 
should be included in any final regulatory text.
    \10\ OFCCP recognizes that in prior notice-and-comment 
rulemaking implementing E.O. 13665 (which amended E.O. 11246 to 
include pay transparency nondiscrimination), OFCCP rejected comments 
stating that a but-for causation standard was required; OFCCP 
adopted the motivating factor framework as expressed in the Title 
VII post-1991 Civil Rights Act for analyzing causation. See 80 FR 
54934, 54944-46 (Sept. 11, 2015). Where a religious organization 
takes adverse action on the basis of an employee's religion, 
however, OFCCP believes that application of the motivating factor 
framework could require OFCCP to enter the Constitutionally-suspect 
minefield of having to evaluate the nature of a sincerely held 
belief, which could result in the inappropriate encroachment upon 
the organization's religious integrity. See, e.g., World Vision, 633 
F.3d at 733 (O'Scannlain, J., concurring).
---------------------------------------------------------------------------

Section 60-1.5 Exemptions

    This rule proposes to add paragraph (e) to 41 CFR 60-1.5 to 
establish a rule of construction for subpart A of 41 CFR part 60-1 that 
provides for the broadest protection of religious exercise permitted by 
the Constitution and laws including RFRA. This rule of construction is 
adapted from RLUIPA, 42 U.S.C. 2000cc-3(g). Significantly, RFRA applies 
to all government conduct, not just to legislation or regulation. 42 
U.S.C. 2000bb-1. The proposed paragraph (e) is clarifying, since the 
Constitution and federal law, including RFRA, already bind OFCCP.

Regulatory Procedures

Executive Order 12866 (Regulatory Planning and Review) and Executive 
Order 13563 (Improving Regulation and Regulatory Review)

    Under Executive Order 12866, OMB's Office of Information and 
Regulatory Affairs (OIRA) determines whether a regulatory action is 
significant and, therefore, subject to the requirements of Executive 
Order 12866 and OMB review. Section 3(f) of Executive Order

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12866 defines a ``significant regulatory action'' as an action that is 
likely to result in a rule that: (1) Has an annual effect on the 
economy of $100 million or more, or adversely affects in a material way 
a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local or tribal 
governments or communities (also referred to as economically 
significant); (2) creates serious inconsistency or otherwise interferes 
with an action taken or planned by another agency; (3) materially 
alters the budgetary impacts of entitlement grants, user fees, or loan 
programs, or the rights and obligations of recipients thereof; or (4) 
raises novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in Executive Order 
12866.
    Executive Order 13563 directs agencies to propose or adopt a 
regulation only upon a reasoned determination that its benefits justify 
its costs; tailor the regulation to impose the least burden on society, 
consistent with obtaining the regulatory objectives; and in choosing 
among alternative regulatory approaches, select those approaches that 
maximize net benefits. Executive Order 13563 recognizes that some 
benefits are difficult to quantify and provides that, where appropriate 
and permitted by law, agencies may consider and discuss qualitatively 
values that are difficult or impossible to quantify, including equity, 
human dignity, fairness, and distributive impacts.
    This proposed rule has been designated a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. The Office of Management and Budget has reviewed 
the proposed rule. The designation, under Executive Order 13771, of any 
finalization of this proposed rule will be informed by feedback 
received during the public comment period.

The Need for the Regulation

    The proposed regulatory changes are needed to provide clarity 
regarding the scope and application of the Executive Order 11246 
religious exemption consistent with recent legal developments. The 
proposed rule is designed to clarify the requirements of the religious 
exemption, thus giving contractors and potential contractors better 
information and more predictability for ordering their affairs.

Discussion of Impacts

    In this section, the Department presents a summary of the costs 
associated with the new definitions proposed in Sec.  60-1.3 and the 
new rule of construction proposed in Sec.  60-1.5. The Department 
determined that there are approximately 420,000 entities registered in 
the General Services Administration's System for Award Management (SAM) 
database.\11\ Entities registered in the SAM database consist of 
contractor firms, and other entities such as state and local 
governments and other organizations that are interested in federal 
contracting opportunities, and other forms of federal financial 
assistance. The total number of entities in the SAM database fluctuates 
and is posted on a monthly basis. The current database includes 
approximately 420,000 entities. Thus, the Department determines that 
420,000 entities are a reasonable representation of the number of 
entities that may or may not be affected by the proposed rule.\12\ This 
SAM number, however, likely results in an overestimation for two 
reasons: The system captures firms that do not meet the jurisdictional 
dollar thresholds for the three laws that OFCCP enforces, and it 
captures contractor firms for work performed outside the United States 
by individuals hired outside the United States, over which OFCCP does 
not have authority. On the other hand, there is at least one reason to 
believe that the data may result in an underestimation because SAM data 
does not include all subcontractors.\13\
---------------------------------------------------------------------------

    \11\ U.S. General Services Administration, System for Award 
Management, data released in monthly files, available at https://www.sam.gov. The SAM database is an estimate with the most recent 
download of data occurring March 2019.
    \12\ While the proposed rule may result in more religious 
corporations, associations, educational institutions or societies 
entering into federal contracting or subcontracting, there is no way 
to estimate the volume of increase.
    \13\ However, this underestimation may be partially offset 
because of the overlap among contractors and subcontractors; a firm 
may have a subcontract on some activities but have a contract on 
others and thus in fact be included in the SAM data.
---------------------------------------------------------------------------

    The Department estimated the hourly compensation of the employees 
who would likely review the rule. The Department assumes that a Human 
Resource Manager (SOC 11-3121) would review the rule. The mean hourly 
wage of Human Resource Managers is $59.38.\14\ The Department adjusted 
this wage rate to reflect fringe benefits such as health insurance and 
retirement benefits, as well as overhead costs such as rent, utilities, 
and office equipment. The Department used a fringe benefits rate of 46 
percent \15\ and an overhead rate of 17 percent,\16\ resulting in a 
fully loaded hourly compensation rate for Human Resources Managers of 
$96.79 ($59.38 + ($59.38 x 46%) + ($59.38 x 17%)).
---------------------------------------------------------------------------

    \14\ BLS, Occupational Employment Statistics, Occupational 
Employment and Wages, May 2017, https://www.bls.gov/oes/current/oes_nat.htm.
    \15\ BLS, Employer Costs for Employee Compensation, https://www.bls.gov/ncs/data.htm. Wages and salaries averaged $24.26 per 
hour worked in 2017, while benefit costs averaged $11.26, which is a 
benefits rate of 46%.
    \16\ Cody Rice, U.S. Environmental Protection Agency, ``Wage 
Rates for Economic Analyses of the Toxics Release Inventory 
Program'' (June 10, 2002), https://www.regulations.gov/document?D=EPA-HQ-OPPT-2014-0650-0005.
---------------------------------------------------------------------------

Cost of Regulatory Familiarization

    The Department acknowledges that 5 CFR 1320.3(b)(1)(i) requires 
agencies to include in the burden analysis for a new information-
collection requirement the estimated time it will take for contractors 
to review and understand the instructions for compliance. In order to 
minimize the burden, OFCCP will publish compliance assistance 
materials, such as fact sheets and answers to frequently asked 
questions. OFCCP will also host webinars for interested persons that 
describe the new regulations and conduct listening sessions to identify 
any specific challenges contractors believe they face, or may face, 
when complying with the new regulations. The Department notes that such 
informal compliance guidance is not binding.
    The Department believes that human resource managers at each 
contractor firm would be the employees responsible for understanding 
the new regulations. Therefore, the Department estimates that it will 
take a minimum of one-half hour for a human resource professional at 
each contractor firm to read the rule, read the compliance assistance 
materials provided by OFCCP, or participate in an OFCCP webinar to 
learn the new requirements.\17\ Consequently, the estimated burden for 
rule familiarization would be 210,000 hours (420,000 contractor firms x 
\1/2\ hour). The Department calculates the total estimated cost of rule 
familiarization as $20,325,900 (210,000 hours x $96.79/hour) in the 
first year, which amounts to a 10-year annualized cost of $2,313,413 at 
a discount rate of 3 percent (which is $5.51 per contractor firm) or 
$2,704,627 at a discount rate of 7 percent (which is $6.44 per 
contractor firm). The Department seeks public comments regarding the 
estimated number of firms that would review this rule, the estimated 
time to review the

[[Page 41687]]

rule, and whether human resource managers would be the most likely 
staff member to review the rule.
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    \17\ The Department believes that contractor firms that may be 
potentially affected by the rule may take more time to review the 
proposed rule, while contractor firms that may not be affected may 
take less time, so the one half hour reflects an estimated average 
for all contractor firms.

                Table 1--Regulatory Familiarization Costs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total number of contractors..........  420,000.
Time to review rule..................  30 minutes.
Human resources manager fully loaded   $96.79.
 hourly compensation.
Regulatory familiarization cost......  $20,325,900.
Annualized cost with 3% discounting..  $2,313,413.
    Annualized cost per contractor     $5.51.
     with 3% discounting.
Annualized cost with 7% discounting..  $2,704,627.
    Annualized cost per contractor     $6.44.
     with 7% discounting.
------------------------------------------------------------------------

    The proposed rule does not include any additional costs because it 
adds no new requirements. The proposed definitions in Sec.  60-1.3 
(Exercise of religion; Particular religion; Religion; Religious 
corporation, association, educational institution, or society; and 
Sincere) simply clarify the scope and application of Executive Order 
11246's religious exemption. The proposed rule of construction in Sec.  
60-1.5(e) likewise clarifies the application of Executive Order 11246 
and affirms legal requirements that already bind OFCCP.
    The total first year cost of the regulation is estimated at 
$20,325,900. Below, in Table 2, is a summary of the total quantifiable 
costs.

                       Table 2--Quantifiable Costs
                   [Regulatory familiarization costs]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
First-Year Costs................                $24,197,500
                                 ---------------------------------------
                                     Disc Rate = 3%      Disc Rate = 7%
                                 ---------------------------------------
10-Year Annualized Costs........         $2,313,413          $2,704,627
------------------------------------------------------------------------

Cost Savings

    The Department expects that contractors impacted by the rule will 
experience cost savings. Specifically, the clarity provided in the new 
definitions and the interpretation provided will reduce the risk of 
non-compliance to contractors and the potential costs of litigation 
such findings of non-compliance with OFCCP's requirements might impose.

Benefits

    Executive Order 13563 recognizes that some rules have benefits that 
are difficult to quantify or monetize but are nevertheless important, 
and states that agencies may consider such benefits. Those benefits 
include equity, fairness, and religious freedom. This proposed rule 
improves equity, fairness, and religious freedom by giving contractors 
clear guidance on the scope and application of the religious exemption 
to Executive Order 11246.
    If the proposed rule increases clarity for federal contractors, 
this impact most likely yields a benefit to taxpayers (if contractor 
fees decrease because they do not need to engage third-party 
representatives to interpret OFCCP's requirements). In addition, by 
increasing clarity for both contractors and for OFCCP enforcement, the 
proposed rule may reduce the number and costs of enforcement 
proceedings by making it clearer to both sides at the outset what is 
required by the regulation. This would also most likely represent a 
benefit to taxpayers (since fewer resources would be spent in OFCCP 
administrative litigation and appeals).
    The Department expects that the number of new contractors may 
increase by religious entities' being more willing to contract with the 
government in reliance on this clarified religious exemption and seeks 
comment on the costs, benefits, and distributional impacts on 
contractors and their employees.

Regulatory Flexibility Act and Executive Order 13272 (Consideration of 
Small Entities)

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objectives of the rule and applicable 
statutes, to fit regulatory and informational requirements to the scale 
of the businesses, organizations, and governmental jurisdictions 
subject to regulation.'' Public Law 96-354. The RFA requires agencies 
to consider the impact of a proposed regulation on a wide range of 
small entities, including small businesses, nonprofit organizations, 
and small governmental jurisdictions.
    Agencies must review whether a proposed or final rule would have a 
significant economic impact on a substantial number of small entities. 
See 5 U.S.C. 603. If the rule would, then the agency must prepare a 
regulatory flexibility analysis as described in the RFA. See id.
    However, if the agency determines that the rule would not be 
expected to have a significant economic impact on a substantial number 
of small entities, then the head of the agency may so certify and the 
RFA does not require a regulatory flexibility analysis. See 5 U.S.C. 
605. The certification must provide the factual basis for this 
determination. The Department does not expect this rule to have a 
significant economic impact on a substantial number of small entities. 
The Department does not believe the proposed rule has any recurring 
costs. The regulatory familiarization cost discounted at a 7 percent 
rate of $45.23 per contractor or $6.44 annualized is a de minimis cost.
    The Department must determine the compliance costs of this proposed 
rule on small contractor firms, and whether these costs will be 
significant for a substantial number of small contractor firms (i.e., 
small firms that enter into contracts with the federal government). If 
the estimated compliance costs for affected small contractor firms are 
less

[[Page 41688]]

than 3 percent of small contractor firms' revenues, the Department 
considers it appropriate to conclude that this proposed rule will not 
have a significant economic impact on small contractor firms.
    A threshold of 3 percent of revenues has been used in prior 
rulemakings for the definition of significant economic impact. See, 
e.g., 79 FR 60634 (October 7, 2014, Establishing a Minimum Wage for 
Contractors) and 81 FR 39108 (June 15, 2016, Discrimination on the 
Basis of Sex). This threshold is also consistent with that sometimes 
used by other agencies. See, e.g., 79 FR 27106 (May 12, 2014, 
Department of Health and Human Services rule stating that under its 
agency guidelines for conducting regulatory flexibility analyses, 
actions that do not negatively affect costs or revenues by more than 3 
percent annually are not economically significant). The Department 
believes that its use of a 3 percent of revenues significance criterion 
is appropriate.
    A standard definition of ``substantial'' impact has not been 
established; however, the EPA provided a determination chart to decide 
whether a substantial impact exists. If the percentage of all small 
entities subject to the rule that are experiencing a given economic 
impact (in this case 3 percent of revenue or greater) is greater than 
or equal to 15 percent of all entities within that industry, then the 
economic impact should be considered substantial. The Department has 
used a threshold of 15 percent of small entities in prior rulemakings 
for the definition of substantial number of small entities. See, e.g., 
79 FR 60633 (October 7, 2014, Establishing a Minimum Wage for 
Contractors). According to the Small Business Administration's (SBA's) 
Guide for Government Agencies: How to Comply with the Regulatory 
Flexibility Act, the determination of what constitutes a substantial 
number of small entities is open to interpretation, and is primarily 
dependent on the size of the industry.\18\ Analysts should determine 
both the total number and percentage of regulated small entities 
experiencing significant economic impacts when determining whether a 
substantial number of small entities may be significantly affected.\19\
---------------------------------------------------------------------------

    \18\ Small Business Administration, A Guide for Government 
Agencies: How to Comply with the Regulatory Flexibility Act (August 
2017), https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf.
    \19\ Final Guidance for EPA Rulewriters: Regulatory Flexibility 
Act (November 2006), section 2.7.2, https://www.epa.gov/sites/production/files/2015-06/documents/guidance-regflexact.pdf.
---------------------------------------------------------------------------

    To analyze the proposed rule's impact on small contractor firms, 
the Department used as data sources the SBA's Table of Small Business 
Size Standards \20\ and the U.S. Census Bureau's Statistics of U.S. 
Businesses (SUSB).\21\ Since federal contractors are not limited to 
specific industries, the Department assessed the impact of this 
proposed rule across 19 industrial classifications. Because data 
limitations do not allow the Department to determine which of the small 
firms within these industries are federal contractors, the Department 
assumes that these small firms are not significantly different from the 
small federal contractors that will be directly affected by the 
proposed rule.
---------------------------------------------------------------------------

    \20\ https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
    \21\ https://www.census.gov/data/tables/2012/econ/susb/2012-susb-annual.html.
---------------------------------------------------------------------------

    The Department used the following steps to estimate the cost of the 
proposed rule per small contractor firm as measured by a percentage of 
total annual receipts. First, the Department used Census SUSB data that 
disaggregates industry information by firm size in order to perform a 
robust analysis of the impact on small contractor firms. The Department 
applied the SBA small-business size standards to the SUSB data to 
determine the number of small firms in the affected industries. Then 
the Department used receipts data from the SUSB to calculate the cost 
per firm as a percentage of total receipts by dividing the estimated 
first year cost and the annualized cost per firm discounted at a 7 
percent rate by the average annual receipts per firm. The methodology 
and results of two industries (construction and management of companies 
and enterprises) are presented in Tables 3 and 4.
    In sum, the increased first year cost and annualized cost of 
compliance resulting from the proposed rule are de minimis relative to 
the revenue at small contractor firms no matter their size. All of the 
industries had a first year cost and annualized cost per firm as a 
percentage of receipts of less than 3 percent. For instance, the first 
year cost for the construction industry is estimated to range from 0.00 
percent of revenue for firms that have average annual receipts of 
approximately $36 million to 0.09 percent of revenue for firms that 
have average annual revenue receipts under $100,000. Likewise, the 
annualized cost for the construction industry is estimated to range 
from 0.00 percent of revenue for firms that have average annual 
receipts of approximately $36 million to 0.01 percent of revenue for 
firms that have average annual revenue receipts of under $100,000. 
Management of companies and enterprises is the industry with the 
highest relative first year costs, with a range of 0.00 percent for 
firms that have average annual receipts of approximately $2 million to 
0.15 percent for firms that have average annual receipts of under 
$31,000. With respect to the annualized costs for the management of 
companies and enterprises industry, the impact as a percentage of 
revenue ranges from 0.00 percent for firms that have average annual 
receipts of approximately $2 million to 0.02 percent for firms that 
have average annual receipts of under $31,000. Therefore, the first 
year and annualized burdens as a percentage of the smallest employer's 
revenue would be far less than 1 percent. Accordingly, OFCCP certifies 
that the proposed rule would not have a significant economic impact on 
a substantial number of small entities.
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Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 requires that OFCCP consider 
the impact of paperwork and other information collection burdens 
imposed on the public. See 44 U.S.C. 3507(d). An agency may not collect 
or sponsor the collection of information or impose an information 
collection requirement unless the information collection instrument 
displays a currently valid OMB control number. See 5 CFR 1320.5(b)(1).
    OFCCP has determined that there is no new requirement for 
information collection associated with this proposed rule. The proposed 
rule provides definitions and a rule of construction to clarify the 
scope and application of current law. The information collection 
contained in the existing Executive Order 11246 regulations are 
currently approved under OMB Control Number 1250-0001 (Construction 
Recordkeeping and Reporting Requirements) and OMB Control Number 1250-
0003 (Recordkeeping and Reporting Requirements--Supply and Service). 
Consequently, this proposed rule does not require review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act.

Unfunded Mandates Reform Act of 1995

    For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532, this proposed rule does not include any federal mandate that may 
result in excess of $100 million in expenditures by state, local, and 
tribal governments in the aggregate or by the private sector.

Executive Order 13132 (Federalism)

    OFCCP has reviewed this proposed rule in accordance with Executive 
Order 13132 regarding federalism, and has determined that it does not 
have ``federalism implications.'' This 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.''

Executive Order 13175 (Consultation and Coordination With Indian Tribal 
Governments)

    This proposed rule does not have tribal implications under 
Executive Order 13175 that would require a tribal summary impact 
statement. The proposed rule will not ``have substantial direct effects 
on one or more Indian tribes, on the relationship between the Federal 
Government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal Government and Indian tribes.''

List of Subjects in 41 CFR Part 60-1

    Civil rights, Employment, Equal employment opportunity, Government 
contracts, Government procurement, Investigations, Labor, Reporting and 
recordkeeping requirements.

Craig E. Leen,
Director, OFCCP.

    For the reasons set forth in the preamble, OFCCP proposes to revise 
41 CFR part 60-1 as follows:

PART 60-1--OBLIGATIONS OF CONTRACTORS AND SUBCONTRACTORS

0
1. The authority citation for part 60-1 continues to read as follows:

    Authority: Sec. 201, E.O. 11246, 30 FR 12319, 3 CFR, 1964-1965 
Comp., p. 339, as amended by E.O. 11375, 32 FR 14303, 3 CFR, 1966-
1970 Comp., p. 684, E.O. 12086, 43 FR 46501, 3 CFR, 1978 Comp., p. 
230, E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258 and E.O. 
13672, 79 FR 42971.

0
2. Amend Sec.  60-1.3 by adding in alphabetical order the definition of 
``Exercise of religion,'' ``Particular religion,'' ``Religion,'' 
``Religious corporation, association, educational institution, or 
society,'' and ``Sincere'' to read as follows:


Sec.  60-1.3   Definitions.

* * * * *
    Exercise of religion means any exercise of religion, whether or not 
compelled by, or central to, a system of religious belief. An exercise 
of religion need only be sincere.
* * * * *
    Particular religion means the religion of a particular individual, 
corporation,

[[Page 41691]]

association, educational institution, society, school, college, 
university, or institution of learning, including acceptance of or 
adherence to religious tenets as understood by the employer as a 
condition of employment, whether or not the particular religion of an 
individual employee or applicant is the same as the particular religion 
of his or her employer or prospective employer.
* * * * *
    Religion includes all aspects of religious observance and practice, 
as well as belief.
* * * * *
    Religious corporation, association, educational institution, or 
society means a corporation, association, educational institution, 
society, school, college, university, or institution of learning that 
is organized for a religious purpose; holds itself out to the public as 
carrying out a religious purpose; and engages in exercise of religion 
consistent with, and in furtherance of, a religious purpose. To qualify 
as religious a corporation, association, educational institution, 
society, school, college, university, or institution of learning may, 
or may not: Have a mosque, church, synagogue, temple, or other house of 
worship; be nonprofit; or be supported by, be affiliated with, identify 
with, or be composed of individuals sharing, any single religion, sect, 
denomination, or other religious tradition.
* * * * *
    Sincere means sincere under the law applied by the courts of the 
United States when ascertaining the sincerity of a party's religious 
exercise or belief.
0
3. Amend Sec.  60-1.5 by adding paragraph (e) to read as follows:


Sec.  60-1.5   Exemptions.

* * * * *
    (e) Broad interpretation. This subpart shall be construed in favor 
of a broad protection of religious exercise, to the maximum extent 
permitted by the United States Constitution and law, including the 
Religious Freedom Restoration Act of 1993, as amended, 42 U.S.C. 2000bb 
et seq.

[FR Doc. 2019-17472 Filed 8-14-19; 8:45 am]
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