While much has been said in the mainstream media over the past 24 hours regarding President Obama's latest Executive Order protecting gay and transgender individuals from discrimination by federal contractors, a few less-publicized dimensions of this Order may have escaped your attention.
(1) The new Order applies to federal contractors with even a $10,000 contract with the federal government. (Usually, the federal contract value threshold is $50,000.)
(2) Several states and the District of Columbia have laws including sexual orientation as a protected class. However, this Executive Order goes a step beyond such laws, following the EEOC's lead in the 2012 Macy v. Holder decision where it recognized gender identity as a protected class under Title VII.
(3) This Order applies regardless of the size of the employer – you could have 2 employees and still be covered by it, even if you are not covered by Title VII or any other federal or state laws.
(4) Both the Department of Labor (DOL) and the Office of Federal Contract Compliance Programs (OFCCP) will be issuing regulations providing more detail as to how this Executive Order will be enforced. These regulations could include a requirement to apply affirmative action/give preferential treatment to gay and transgender individuals.
(5) It also remains to be seen how religious organizations who have or would like to have federal contracts will react to this new Executive Order, as unlike most pieces of gay and transgender legislation which have been proposed in Congress, there is no religious organization exemption in this Executive Order. (There is a narrow exception regarding hiring ministers and for those organizations whose mission statements or charters include a preference for employing those of a particular religion.)
This means this Executive Order could face a Hobby Lobby-esque challenge as the Affordable Care Act did under the Religious Freedom Restoration Act (RFRA), which provides that no law or other rule which has general application (i.e., it is not specifically designed or targeted to affect religious freedom), can substantially burden a person's religious freedom unless the Government can show the application of the burden (1) is in furtherance of a compelling government interest and (2) is the least restrictive means of furthering that compelling interest.
In light of the fact that the U.S. Supreme Court just recognized in the Hobby Lobby case that corporations who have indicated a clear commitment to a religious mission/belief system are protected as "persons" under RFRA, the absence of an exemption for such organizations in this new Order makes such a challenge inevitable.
We will of course keep you updated as federal rules further clarify the requirements of this new Executive Order. For now, at the very least, failing to hire, terminating, or denying any applicant or employee equal treatment regarding the terms and conditions of employment based on their sexual orientation or gender identity is prohibited if your company has a contract with the federal government which is worth at least $10,000. In order to sign a federal contract, your business will have to affirm that it has a policy protecting gay and transgender applicants and employees from discrimination.
