OFCCP Week in Review: October 9, 2017

All reports from observers in the courtroom were that the four liberal Justices immediately and vigorously attacked the employer position, as though they had met in advance and coordinated an offense. Liberal Justice Stephen Breyer even reportedly wondered whether a win for employers would begin to undo major parts of President Franklin Roosevelt’s “New Deal.” Justice Ginsberg, who needs no introduction as the Court’s leading liberal, also reportedly asserted that “protected concerted activity” was the “driving force” behind the NLRA. Justice Kennedy, often the “swing vote”, seemed firmly in the employer’s court according to all reports from the courtroom. Curiously, new Justice Neil Gorsuch, expected to be an active questioner while on the Bench, joined Justice Clarence Thomas in Thomas’ tradition of silence while in the Courtroom.

A decision is expected no later than mid-summer, 2018.

Jarrett, who practiced labor and employment law in Morgan Lewis’ Orange County, Calif., office, will remain at the WHD as Deputy Administrator following the confirmation of a permanent new division head, the email states.

The move allows for a GOP-appointed official to immediately preside over the critical agency, while President Donald Trump’s nominee for the post, Cheryl Stanton, awaits confirmation (See OFCCP Week in Review: September 5, 2017)

Stanton’s committee hearing took place Oct. 4, but it could take months before she is advanced out of the panel and receives a vote from the full Senate.

Under Trump, the agency has been run by career leadership, even as significant policy shifts took place, such as a review of the Obama administration’s overtime and tip-sharing rules, and the withdrawal of guidance memos issued under prior WHD Chief David Weil. Jarrett arrived at the Department Oct. 2.

A DOL spokeswoman confirmed to Bloomberg BNA that Jarrett has been named Acting Administrator and will eventually slide over to Deputy Administrator.

The bill, approved 23-17, would reverse the NLRB’s 2015 Browning-Ferris decision by narrowing the circumstances under which businesses can be classified a joint employer. Under Browning-Ferris, companies that exert only “indirect” control over franchisees may still be joint employers. The bill would revert to a standard of “direct” control. (See OFCCP Week in Review: July 31, 2017)

Republicans approved an amendment to quell complaints from Democrats that the bill made it too easy for franchisers to escape responsibility. The bill lists nine criteria to help judges determine whether a business is a joint employer, including whether it sets employee schedules or administers discipline. Were a business to outsource just one of those responsibilities, it would not be considered an employer, Democrats said.

Republicans insisted that was not the case, but amended the bill’s language somewhat to clarify their goal. “Any lawyer reading that would know that you don’t have to have all of those things,” said Rep. Bradley Byrne (R-Ala.)

Ranking member Bobby Scott (D-Va.) said the amendment did little to fix his concerns. “I think we’re right back where we started — we don’t know what it means,” Scott said. “We’re trying to figure out who a joint employer is and I think this just adds more confusion.”

Republicans rejected six Democratic amendments.

1. May 4, 2017: President Trump started Friday’s actions by earlier signing Executive Order No. 13798 (2 pages), 82 Fed. Reg. 21675 (May 4, 2017) titled “Promoting Free Speech and Religious Liberty.” Sections 2 and 3 are the “guts” of the May 4, 2017 Executive Order:

“Sec. 2.  Respecting Religious and Political Speech. All executive departments and agencies (agencies) shall, to the greatest extent practicable and to the extent permitted by law, respect and protect the freedom of persons and organizations to engage in religious and political speech. (emphasis added) In particular, the Secretary of the Treasury shall ensure, to the extent permitted by law, that the Department of the Treasury does not take any adverse action against any individual, house of worship, or other religious organization on the basis that such individual or organization speaks or has spoken about moral or political issues from a religious perspective, where speech of similar character has, consistent with law, not ordinarily been treated as participation or intervention in a political campaign on behalf of (or in opposition to) a candidate for public office by the Department of the Treasury.  As used in this section, the term “adverse action” means the imposition of any tax or tax penalty; the delay or denial of tax-exempt status; the disallowance of tax deductions for contributions made to entities exempted from taxation under section 501(c)(3) of title 26, United States Code; or any other action that makes unavailable or denies any tax deduction, exemption, credit, or benefit.”

“Sec. 3.  Conscience Protections with Respect to Preventive-Care Mandate.  The Secretary of the Treasury, the Secretary of Labor, and the Secretary of Health and Human Services shall consider issuing amended regulations, consistent with applicable law, to address conscience-based objections to the preventive-care mandate promulgated under section 300gg-13(a)(4) of title 42, United States Code.”

2. October 6, 2017: AG Jeff Sessions issued a 25-page “Memorandum For All Executive Departments and Agencies” titled “Federal Law Protections for Religious Liberty.”  The Memorandum is actually 8-pages with a 17 page “Appendix.” Paras 16, 17, 18, 19 pertain to employers. (See related story immediately below.) The Memorandum is written largely from the point of view to protect conservative evangelical and fundamentalist views as you see in paragraph 20 of the Memorandum (designed to protect against the federal government denying federal grants and contracts to religious organizations which discriminate in employment by hiring only members of their faith):

“20. As a general matter, the federal government may not condition receipt of a federal grant or contract on the effective relinquishment of a religious organization’s hiring exemptions or attributes of its religious character.

Religious organizations are entitled to compete on equal footing for federal financial assistance used to support government programs. Such organizations generally may not be required to alter their religious character to participate in a government program, nor to cease engaging in explicitly religious activities outside the program, nor effectively to relinquish their federal statutory protections for religious hiring decisions.”

October 6, 2017: USDOJ issued a Press Release announcing AG Sessions’ Memorandum. It is significant that the AG’s Press Release does NOT reference HHS’ decisions as to Obamacare and contraceptive and sterilization services or the two IRS/USDOL/HHS Interim Final Rules the Administration released Friday (while thinking both Interim Final Rules would have been published in the Federal Register that same day) alongside the AG’s investigation and prosecution announcement. This separate activity of the AG reveals that the AG views the federal government enforcement efforts he has directed to occur (see below) as different from and stand on their own legs apart from the IRS/USDOL/HHS Rulemakings. The question, as noted below, is whether AG Sessions’ instructions in the 25-page Memorandum and in his 2-page Implementation Memorandum are new and long-lasting federal investigation and prosecution policies aimed at employers who allegedly unlawfully discriminate based on employee religious activities?

3. October 6, 2017: IRS, USDOL and HHS jointly issued two companion interim final religious freedom rules. The IRS, HHS, and USDOL had intended to publish both IFRs (“Interim Final Rules”) in the Federal Register on Friday October 6, 2017, make them effective that date and require any public comments to be received 60 days later by December 5, 2017. However, that did not happen, despite the fact that all the Press Releases and Rules themselves were written that way. The government’s plan now at DE’s Press Time, is for the IRS/USDOL/HHS to publish both IFRs in final form in the Friday October 13, 2017 Federal Register. Nonetheless, the draft of the first of the two Interim Final Rules  (100 pages exactly, although the Rules themselves – as opposed to Preamble and financial sections– start at p.92) is publicly available and is formally titled “Moral Exemptions and Accommodations for Coverage of Certain Preventive Services Under the Affordable Care Act.” The  second companion Interim Final Rule is also publicly available and is titled: “Religious Exemptions and Accommodations for Coverage of Certain Preventive Services Under The Affordable Care Act.”

Here is how HHS’ Press Release explained the new Rules:

“Trump Administration Issues Rules Protecting the Conscience Rights of All Americans.

The Departments of Health and Human Services, Treasury, and Labor are announcing two companion interim final rules that provide conscience protections to Americans who have a religious or moral objection to paying for health insurance that covers contraceptive/abortifacient services. Obamacare-compliant health insurance plans are required to cover “preventive services,” a term defined through regulation. Under the existing regulatory requirements created by the previous administration, employers, unless they qualify for an exemption, must offer health insurance that covers all FDA-approved contraception, which includes medications and devices that may act as abortifacients as well sterilization procedures.

Under the first of two companion rules released today, entities that have sincerely held religious beliefs against providing such services would no longer be required to do so. The second rule applies the same protections to organizations and small businesses that have objections on the basis of moral conviction which is not based in any particular religious belief.”

The first IFR explains its purpose as follows at p. 25:

“These interim final rules incorporate conscience protections into the contraceptive Mandate. They do so in part to bring the Mandate into conformity with Congress’s long history of providing or supporting conscience protections in the regulation of sensitive health-care issues, cognizant that Congress neither required the Departments to impose the Mandate nor prohibited them from providing conscience protections if they did so. Specifically, these interim final rules expand exemptions to the contraceptive Mandate to protect certain entities and individuals that object to coverage of some or all contraceptives based on sincerely held moral convictions but not religious beliefs, and these rules make those exempt entities eligible for accommodations concerning the same Mandate.”

The first IFR goes on to explain (at page 47) the expansion of eligible institutions to conscientiously object to contraceptive and sterilization services:

“In the new 45 CFR 147.133 as created by these interim final rules, we expand the exemption that was previously located in § 147.131(a), and that was expanded in § 147.132 by the companion interim final rules concerning religious beliefs issued contemporaneously with these interim final rules and published elsewhere in this issue of the Federal Register. With respect to employers that sponsor group health plans, §147.133(a)(1) and (a)(1)(i) provide exemptions for certain employers that object to coverage of all or a subset of contraceptives or sterilization and related patient education and counseling based on sincerely held moral convictions.”

Here is the new definition of companies which are now eligible to choose to eliminate contraceptive and sterilization services without running afoul of federal law:

§147.133 Moral exemptions in connection with coverage of certain preventive health services.

(a) Objecting entities.

(1) Guidelines issued under §147.130(a)(1)(iv) by the Health Resources and Services Administration must not provide for or support the requirement of coverage or payments for contraceptive services with respect to a group health plan established or maintained by an objecting organization, or health insurance coverage offered or arranged by an objecting organization, and thus the Health Resources and Service Administration will exempt from any guidelines’ requirements that relate to the provision of contraceptive services:

(i) A group health plan and health insurance coverage provided in connection with a group health plan to the extent one of the following non-governmental plan sponsors object as specified in paragraph (a)(2) of this section:

(A) A nonprofit organization; or

(B) A for-profit entity that has no publicly traded ownership interests (for this purpose, a publicly traded ownership interest is any class of common equity securities required to be registered under section 12 of the Securities Exchange Act of 1934);

(ii) An institution of higher education as defined in 20 U.S.C. 1002 in its arrangement of student health insurance coverage, to the extent that institution objects as specified in paragraph (a)(2) of this section. * * *

(iii) A health insurance issuer offering group or individual insurance coverage to the extent the issuer objects as specified in paragraph (a)(2) of this section. * * *

(2) The exemption of this paragraph (a) will apply to the extent that an entity described in paragraph (a)(1) of this section objects to its establishing, maintaining, providing, offering, or arranging (as applicable) coverage or payments for some or all contraceptive services, or for a plan, issuer, or third party administrator that provides or arranges such coverage or payments, based on its sincerely held moral convictions.

The second Interim Final Rule publication packet (with Preamble and Financial Analyses Sections) is 163-pages long, but the Interim Final Rule itself is only 27-pages in length and starts at page 136.

See § 147.132 Religious exemptions in connection with coverage of certain preventive health services (at pages 160-161) which lists the kinds of employer institutions which may enjoy the right to object to and deny employees contraceptive and sterilization services through their health plans for employees despite Obamacare’s otherwise requirement that employers and health insurers must provide that coverage and must provide it for free, even without otherwise required co-pays:

§ 147.132 Religious exemptions in connection with coverage of certain preventive health services

(a) Objecting entities. (1) Guidelines issued under § 147.130(a)(1)(iv) by the Health Resources and Services Administration must not provide for or support the requirement of coverage or payments for contraceptive services with respect to a group health plan established or maintained by an objecting organization, or health insurance coverage offered or arranged by an objecting organization, and thus the Health Resources and Service Administration will exempt from any guidelines’ requirements that relate to the provision of contraceptive services:

(i) A group health plan and health insurance coverage provided in connection with a group health plan to the extent the non-governmental plan sponsor objects as specified in paragraph (a)(2) of this section. Such non-governmental plan sponsors include, but are not limited to, the following entities:

(A) A church, an integrated auxiliary of a church, a convention or association of churches, or a religious order.

(B) A nonprofit organization.

(C) A closely held for-profit entity.

(D) A for-profit entity that is not closely held.

(E) Any other non-governmental employer.

(ii) An institution of higher education as defined in 20 U.S.C. 1002 in its arrangement of student health insurance coverage, to the extent that institution objects as specified in paragraph (a)(2) of this section. * * *

(iii) A health insurance issuer offering group or individual insurance coverage to the extent the issuer objects as specified in paragraph (a)(2) of this section. * * *

Institutions which believe they are a “covered” religious institution which could deny contraceptive and sterilizations services in its medical plan are permitted to “self-certify”. See § 54.9815–2713A Accommodations in connection with coverage of preventive health services at pp. 137-138, and especially §(a)(4).

Amid the explosion of publicity surrounding Attorney General Sessions’ Friday announcement of the Trump Administration’s termination of paid contraceptive and sterility services pursuant to Obamacare and also allowing religiously-based employers and health care insurers to self-identify themselves as religious objectors to contraception and sterility services in medical plans for employees and to end those services in the discretion of the insurer or employer, (see story above),  AG Sessions ALSO issued on Friday October 6, 2017 a 2-page “MEMORANDUM FOR ALL COMPONENT HEADS AND UNITED STATES ATTORNEYS” titled: Implementation of Memorandum on Federal Law Protections for Religious Liberty. The “guts” of the “Implementation order is to direct federal investigators and prosecutors, including the EEOC and OFCCP, to “vigorously” enforce Federal law protecting religious freedoms:

All Department components and United States Attorney’s Offices shall, effective immediately, incorporate the guidance in litigation strategy and arguments, operations, grant administration, and all other aspects of the Department’s work, keeping in mind the President’s declaration that “[i]t shall be the policy of the executive branch to vigorously enforce Federal law’s robust protections from religious freedom.” Exec. Order 13798, § 1 (May4, 2017).

As to employers covered by Title VII, see especially paras 16, 17, 18 and 19 of the Implementation Memorandum:

“16. Title VII of the Civil Rights Act of 1964, as amended, prohibits covered employers from discriminating against individuals on the basis of their religion.

Employers covered by Title VII may not fail or refuse to hire, discharge, or discriminate against any individual with respect to compensation, terms, conditions, or privileges of employment because of that individual’s religion. Such employers also may not classify their employees or applicants in a way that would deprive or tend to deprive any individual of employment opportunities because on the individual’s religion. This protection applies regardless of whether the individual is a member of a religious majority or minority. But the protection does not apply in the same way to religious employers, who have a certain constitutional and statutory protections for religious hiring decisions.”

“17. Title VII’s protection extends to discrimination on the basis of religious observance or practice as well as belief, unless the employer cannot reasonably accommodate such observances without undue hardship on the business.

Title VII defines “religion” broadly to include all aspects of religious observance or practice except when an employer can establish that a particular aspect of such observance or practice cannot reasonably be accommodated without undue hardship to the business. For example, covered employers are required to adjust employee work schedules for Sabbath observance, religious holidays, and other religious observations, unless doing so would create an undue hardship, such as materially compromising operations or violating a collective bargaining agreement. Title VII might also require an employer to modify a no-head-coverings policy to allow a Jewish employee to wear a yarmulke or a Muslim employee to wear a headscarf. An employer who contends that it cannot reasonably accommodate a religious observance or practice must establish undue hardship on its business with specificity; it cannot rely on assumptions about hardships that might result from accommodation.”

“18. The Clinton Guidelines on Religious Exercise and Religious Expression in the Federal Workplace provide useful examples for private employers of reasonable accommodations for religious observance and practice in the workplace.

President Clinton issued Guidelines on Religious Exercise and Religious Expression in the Federal Workplace (“Clinton Guidelines”) explaining that federal employees may keep religious materials on their private desks and read them during breaks; discuss their religious views with other employees, subject to the same limitations as other forms of employee expression; display religious messages on clothing or wear religious medallions; and invite others to attend worship services at their churches, except to the extent that such speech becomes excessive or harassing. The Clinton Guidelines have the force of an Executive Order, and they also provide useful guidance to private employers about ways in which religious observance and practice can reasonably be accommodated in the workplace.”

“19. Religious employers are entitled to employ only persons whose beliefs and conduct are consistent with the employers’ religious precepts.

Constitutional and statutory protections apply to certain religious hiring decisions. Religious corporations, associations, educational institutions, and societies – that is – entities that are organized for religious purposes and engage in activity consistent with, and furtherance of, such purposes – have an express statutory exemption from Title VII’s prohibition on religious discrimination in employment. Under that exemption, religious organizations may choose to employ only persons whose beliefs and conduct are consistent with the organizations’ religious precepts. For example, a Lutheran secondary school may choose to employ only practicing Lutherans, only practicing Christians, or only those willing to adhere to a code of conduct consistent with the precepts of the Lutheran community sponsoring the school. Indeed, even in the absence of the Title VII exemption, religious employers might be able to claim a similar right under RFRA or the Religious Clauses of the Constitution.”

Employers and federal contractors will have to wait to see whether the OFCCP and EEOC now change their investigative and enforcement priorities and begin an ongoing crusade to now investigate and prosecute religious discrimination issues with the zeal the Obama EEOC and OFCCP did with regard to compensation issues. The question is whether the AG’s implementation memo is merely “political posturing fluff” or whether it is an announcement of a sustained change of direction in the strategic enforcement of our nation’s discrimination laws.

Practice Tip: Members subject to Title VII and Government contractors subject to Executive Order 11246 should handle all religious discrimination accommodation requests and discrimination claims with special care until such time as we can determine whether the Trump Administration’s efforts to root out religious discrimination is “all bark and no bite,” or whether a new government discrimination agency crusade has been launched.

Irony: One of the great ironies of this new direction is that the vast majority of Title VII religious discrimination claims in recent years have been brought by Muslims claiming hiring and termination discrimination because of employer dress codes (especially in retail, hospitality and children’s amusement parks) and grooming standards (no beard rules).