President Obama recently signed an executive order that will prohibit federal contractors from discriminating against employees based on sexual orientation and gender identity. The executive order adds sexual orientation and gender identity to the list of protections that apply to federal contractors and adds gender identity as a protected category that applies to federal employees, who are already protected from discrimination based on sexual orientation. President Obama signed the order in the wake of the stalled Employment Non-Discrimination Act (ENDA), which was passed by the Senate last fall but has yet to be considered in the House of Representatives.

The executive order is effective immediately for federal employees and will apply to federal contracts entered into on or after the effective date of rules to be implemented by the Department of Labor within 90 days.

The executive order does not contain any exemptions for religiously affiliated federal contractors. Like other contractors, religious organizations may not make hiring or other employment decisions based on an individual’s sexual orientation or gender identity. However, such organizations may give employment preference to individuals of a particular religion when hiring under the religious exemption President George W. Bush added to the executive order for federal contractors in 2002. For example, a Catholic organization could prefer the hiring of Catholics, but it could not refuse to hire a Catholic applicant based on the applicant’s sexual orientation. The religious exemption issue has received heightened attention in the wake of the recent U.S. Supreme Court decision in Burwell v. Hobby Lobby.

According to a fact sheet released by the White House, 91 percent of Fortune 500 companies already prohibit discrimination based on sexual orientation, and 61 percent already prohibit discrimination based on gender identity. Currently, 18 states and the District of Columbia (as well as hundreds of local governments) prohibit employment discrimination on the basis of sexual orientation or gender identity. Although many large contractors already protect LGBTQ employees, the nondiscrimination rules in the executive order will affect any contractor or subcontractor with contracts worth $10,000 or more in a year, bringing smaller companies and closely held corporations—and the millions of workers they employ—within its reach.

Ballard Spahr’s Labor and Employment Group routinely helps employers comply with their obligations as federal contractors.

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