Christian Business Wins Exemption from Title VII, EEOC Transgender Rule

A Christian business in Texas is entitled to a religious exemption from federal nondiscrimination employment requirements encompassing sexual orientation and gender identity, the Fifth Circuit Court of Appeals ruled Tuesday.

The unanimous ruling largely affirmed a district court opinion in favor of Braidwood Management, Inc., which sought declaratory relief against the Equal Employment Opportunity Commission (EEOC). Braidwood asserted that “Title VII, as interpreted in the EEOC’s guidance and Bostock, prevents them from operating their places of employment in a way compatible with their Christian beliefs.”

Braidwood Management is controlled and owned by Steven Hotze and employes nearly 70 workers at Hotze Health & Wellness Center, Hotze Vitamins, and Physicians Preference Pharmacy International LLC. Braidwood asserted “sincere and deeply held religious beliefs that heterosexual marriage is the only form of marriage sanctioned by God, premarital sex is wrong, and ‘men and women are to dress and behave in accordance with distinct and God-ordained, biological sexual identity,’” said the court.

“Hotze runs his corporations as ‘Christian’ businesses,” described the court, meaning that he will not “employ individuals who engage in behavior he considers sexually immoral or gender non-conforming, nor … recognize homosexual marriage,” as doing so would “lend approval to homosexual behavior and make him complicit in sin.” This policy manifests itself in a sex-specific dress code and a requirement that employees use the restroom that accords with their sex.

Braidwood brought the suit in 2018 because “even before Bostock, the EEOC interpreted statutory prohibitions on sex discrimination to include sexual orientation and gender identity,” wrote the court. However, the case was paused while the Supreme Court decided Bostock v. Clayton County (2020), which ultimately reinterpreted discrimination “because of sex” in Title VII employment nondiscrimination law to include sexual orientation and gender identity.

The openly biblical nature of Braidwood’s policies left no doubt that it was out of compliance with both the EEOC and Bostock interpretations of Title VII. “All parties admitted in district court that numerous policies promulgated by plaintiffs (such as those about dress codes and segregating bathroom usage by solely biological sex) already clearly violate EEOC guidance,” reported the court.

Yet the Fifth Circuit ruled for Braidwood on the merits, concluding that the Religious Freedom Restoration Act (RFRA) “requires that Braidwood, on an individual level, be exempted from Title VII because compliance with Title VII post-Bostock would substantially burden its ability to operate per its religious beliefs about homosexual and transgender conduct.” It added, “Moreover, the EEOC wholly fails to carry its burden to show that it has a compelling interest in refusing Braidwood an exemption, even post-Bostock.”

The circuit court affirmed the district court’s conclusion that Braidwood had standing, and that it was “statutorily entitled to a Title VII exemption.” It also affirmed the district court’s judgment against Bear Creek Bible Church, another party to the case, which the court ruled was exempt as a church. It partly reversed the district court’s decision to certify a class action, ruling that the class definitions were “too broad and ill-defined,” and that RFRA exemptions must be considered on an individual basis. It vacated lower court judgments about a constitutional Title VII exemption and the scope of Title VII claims, and remanded the matter back to the district court.

Perhaps recognizing the weakness of their case on the merits, the EEOC’s “spen[t] a tremendous amount of briefing” arguing that Braidwood lacked standing, and that “the district court issued an impermissible advisory opinion.” However, the court ruled that “EEOC’s guidance documents and its previous lawsuit against a religious employer in Harris [a case which became part of Bostock] both conjointly present a credible threat that … Braidwood will face enforcement actions.” They added that “Harris was a clear shot across the bow” for religious employers who might face discrimination complaints from LGBT employees, and that the Bostock decision’s obscure scope clearly called for clarification. “Without resolution, potential penalties hang over plaintiffs’ heads like Damocles’s sword.”

“The EEOC guidance almost assuredly burdens the exercise of Braidwood’s religious practice,” the court explained. It quoted the district court, “employers are required to choose between two untenable alternatives: either (1) violate Title VII and obey their convictions or (2) obey Title VII and violate their convictions.” It added, “We see no reason why that formulation is incorrect. Being forced to employ someone to represent the company who behaves in a manner directly violative of the company’s convictions is a substantial burden and inhibits the practice of Braidwood’s beliefs.”

The court did not approve of the EEOC’s counterargument. “The EEOC’s euphemistic phrasing that ‘the only action that Braidwood is required to take under Title VII is to refrain from taking adverse employment actions’ is tantamount to saying the only action Braidwood needs to take is to comply wholeheartedly with the guidance it sees as sinful,” it argued. “That is precisely what RFRA is designed to prevent.”

According to the framework stipulated in RFRA, the court employed strict scrutiny, requiring the EEOC to prove that its guidance aimed at a compelling governmental interest by the least restrictive means. The EEOC identified the interest of “eradicating workplace discrimination.” But the court determined this interest was not “a trump card against every RFRA claim” and concluded that the commission lacked “a compelling interest in denying Braidwood, individually, an exemption.” Even if it were a compelling interest, the court continued, “refusing to exempt Braidwood, and forcing it to hire and endorse the views of employees with opposing religious and moral views is not the least restrictive means of promoting that interest.”

Throughout the opinion, the Fifth Circuit criticized the confusion and obscurity of the Bostock decision, as well as taking veiled swipes at the legitimacy of the decision itself — while still recognizing and applying it on its own terms. For instance, the opinion began, “In expanding discrimination ‘on the basis of sex’ to include sexual orientation and concepts of gender identity such as transgenderism, the Bostock Court gave little guidance on how courts should apply those defenses and exemptions to religious employers.” Such dissatisfaction with the decision among circuit courts could lead the Supreme Court to revisit the case, or at least clarify its boundaries.

“The Biden Administration wrongly tried to keep our clients out of court, arguing that they had to wait for the EEOC to subject them to costly administrative litigation and an intrusive process before their claims against the EEOC’s radical transgender guidance could be heard,” responded Gene Hamilton, vice president and general counsel of America First Legal, which represented Braidwood. “While we are thrilled that the Fifth Circuit agreed with our position and further affirmed their rights under the Religious Freedom Restoration Act, we will continue to fight for the rights of Americans everywhere to be free from radical administrative transgender edicts.”