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Penn v. New York Methodist Hospital, No. 16-474 (2d Cir., Mar. 7, 2018); EEOC v. R.G. &. G.R. Harris Funeral Homes, No. 16-2424 (6th Cir. Mar. 7, 2018)

This week, two U.S. Courts of Appeals publish decisions about whether religiously-oriented employers were exempt from Title VII owing to alleged religious-liberty rights: a Methodist hospital wins in the Second Circuit, while a funeral home loses in the Sixth Circuit.

Penn v. New York Methodist Hospital, No. 16-474 (2d Cir., Mar 7, 2018): The battle in the Second Circuit concerned a hospital chaplain who alleged race discrimination under Title VII, section 1981, and New York state and city law. The hospital (NYMH) asserted that the job was covered by the "ministerial exception" of Hosanna‐Tabor Evangelical Lutheran Church & Sch. v. EEOC, 565 U.S. 171 (2012), a First Amendment protection for religious institutions against invasion of their rights to make autonomous decisions about ministry personnel.

There was no dispute that the plaintiff was engaged in ministry, so the only question presented was whether the hospital was a religious institution. Dividing 2-1, the panel holds that NYMH was covered by the exception owing "to its history and continuing purpose, through its Department of Pastoral Care."

The panel majority conceded that the hospital was sectarian in name only: "[T]he hospital is no longer affiliated with the United Methodist Church ... Its by‐laws no longer require the hospital to seek permission from the United Methodist Church to make significant business decisions, nor do they give the United Methodist Church the power to veto any amendment to the hospital's articles of incorporation ... Furthermore, NYMH's Methodist identity does not infuse its performance of its secular duties."

Nevertheless, NYMH continued to provide ministry through its Department of Pastoral Care, and that office by itself warranted coverage under the exception. "The Department of Pastoral Care required chaplains, like Mr. Penn, to distribute Bibles, perform religious rituals and organize and conduct religious services, including Easter services and memorial services ... These services, while not limited to those who are Methodist, are indisputably religious."

Beyond the religious mission of the Department of Pastoral Care, the panel majority noted that a Title VII action against the hospital would require constitutionally-suspect inquiry into the hospital's reasons for firing him.

"NYMH claims that Mr. Penn improperly completed a 'referral card,' which resulted in a patient dying without receiving last rites, inappropriately counseled a couple after a fetal demise, misrepresented the availability of an Easter Service to a Catholic nurse, and triggered complaints about sexual harassment from a Resident Chaplain .... Any jury hearing Mr. Penn's employment discrimination and retaliation claims therefore would have to determine how a minister should conduct religious services or provide spiritual support."

The panel majority rejected the suggestion that ecumenical services fall outside the ministerial exception, though it reserved the question about whether a pastoral office in a hospital that was otherwise secular in origin would be covered.

Dissenting, Judge Droney holds that the formal severance of the hospital from The United Methodist Church and the non-sectarian character of the Department of Pastoral Care deprived the hospital of any argument that it is a religious institution. "While many religious hospitals, schools or other entities could certainly qualify as religious institutions and receive the protections of the ministerial exception, NYMH is no longer such a religious institution." Indeed, the judge cautioned, a loose definition of "religious institution" invites a whole new round of challenges: "The presence of a nonsectarian chaplaincy department cannot transform an otherwise secular hospital into a religious institution for purposes of the ministerial exception. If it could, most hospitals would be exempt from anti‐discrimination laws, as most-even clearly secular hospitals-have chaplaincy departments."

EEOC v. R.G. &. G.R. Harris Funeral Homes, No. 16-2424 (6th Cir. Mar. 7, 2018): In the Sixth Circuit, the court joined the recent decisions in two other circuits - Zarda v. Altitude Express, Inc., No. 15-3775 (2d Cir. Feb. 26, 2018) (en banc, 9-3) and Hively v. Ivy Tech Community College of Indiana, 853 F.3d 339 (7th Cir. 2017) (en banc, 9-3) - in holding that sex discrimination under Title VII includes discrimination against LGBTQ individuals.

The case involved a funeral director (Stephens), a transgender woman, who was fired because she wished to wear women's clothing to work. The owner testified directly that he fired Stephens because "he was no longer going to represent himself [sic] as a man. He [sic] wanted to dress as a woman."

The panel affirmed the district court's holding that the termination was directly motivated by sex stereotyping, a widely-recognized theory of liability of sex discrimination under Title VII. Further, agreeing with Zarda and Hively, the panel holds that "discrimination on the basis of transgender and transitioning status violates Title VII." The panel concluded, as did the other circuits, that "it is analytically impossible to fire an employee based on that employee's status as a transgender person without being motivated, at least in part, by the employee's sex."

This case raised the additional question, not presented in Zarda and Hively, of whether a religiously-motivated business owner was privileged either under the ministerial exception or under the federal Religious Freedom Restoration Act (RFRA) to avoid a Title VII claim, because he maintained a religious objection to employing a transgender woman in a public-facing position.

The business owner testified that he "sincerely believe[s] that the Bible teaches that a person's sex is an immutable God-given gift." The funeral home maintained strict dress codes for men and women, and the owner expressed a belief "that authorizing or paying for a male funeral director to wear the uniform for female funeral directors would render him complicit 'in supporting the idea that sex is a changeable social construct rather than an immutable God-given gift.'"

The district court held that that RFRA "preclude[d] the EEOC from enforcing Title VII against the Funeral Home, as doing so would substantially burden Rost and the Funeral Home's religious exercise and the EEOC had failed to demonstrate that enforcing Title VII was the least restrictive way to achieve its presumably compelling interest."

The Sixth Circuit reverses. First addressing the ministerial exception, the panel notes that the defendant had already stipulated that it was not a religious institution, and thus not eligible for the defense. In any case, even if it had not so stipulated, the defendant "has virtually no 'religious characteristics' ... the Funeral Home does not purport or seek to 'establish and advance' Christian values" and "is not affiliated with any church; its articles of incorporation do not avow any religious purpose; its employees are not required to hold any particular religious views; and it employs and serves individuals of all religions." Neither was Stephens a "ministerial employee" under the exception, because she performed entirely secular functions, was not trained or involved in ministry, and was not engaged in any religious practices in her job.

Regarding the RFRA defense, the panel accepts on face value the sincerity of the owner's profession of faith, and proceeds to the question of "whether the Funeral Home has identified any way in which continuing to employ Stephens would substantially burden Rost's ability to serve mourners." It rejects outright the argument that mourners might be offended by Stephens' appearance. "[W]e hold as a matter of law that a religious claimant cannot rely on customers' presumed biases to establish a substantial burden under RFRA."

It also rejects the contention that the proprietor's faith was burdened by having to accept a transgender employee's decision to wear women's clothing while at work.

"Rost may sincerely believe that, by retaining Stephens as an employee, he is supporting and endorsing Stephens's views regarding the mutability of sex. But as a matter of law, bare compliance with Title VII-without actually assisting or facilitating Stephens's transition efforts-does not amount to an endorsement of Stephens's views."

In addition to knocking out the props on the "substantial burden" test, the panel goes on to grant summary judgment to the EEOC on the additional ground that the government has a compelling interest in "eradicating employment discrimination." Notes the panel, "the EEOC's compelling interest in eradicating discrimination applies with as much force to Stephens as to any other employee discriminated against based on sex." The employer sought to frame the issue more narrowly as whether it had a right "to enforce an appropriate [gendered] workplace uniform," but the panel holds that "the Funeral Home has not identified any cases where the government's compelling interest was framed as its interest in disturbing a company's workplace policies."

Finally, the panel holds that the Title VII statute represents the least restrictive means to advance the compelling interest, as required by RFRA. It notes that the Supreme Court in Hobby Lobby already held that laws prohibiting employment discrimination were "precisely tailored" to achieving the government's "compelling interest in providing an equal opportunity to participate in the workforce." It also notes that Congress, in Title VII, expressly declined to make exceptions for sex discrimination except in the limited realm of "a bona fide occupational qualification reasonably necessary to the normal operation of [a] particular business or enterprise."

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