May a religious institution give preference to hiring adherents of the same religion? What is a "ministerial exception" under Title VII?

Title VII of the federal Civil Rights Act makes it unlawful for an employer "to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment," because of the individual's religion. However, Title VII includes an exception for defined "religious organizations" and "religious educational institutions."

Under the exception, religious organizations are permitted to give employment preference to adherents of the same religion. This applies only to those institutions whose "purpose and character are primarily religious." To determine whether an entity is religious, consider whether its articles of incorporation state a religious purpose and whether its day-to-day operations are religious. For example, are the services it performs, the product it produces or the educational curriculum it provides directed toward propagation of the religion? Also consider whether it is nonprofit and whether it is affiliated with, or supported by, a church or other religious organization.

Religious organizations may not otherwise discriminate in employment on the basis of race, color, national origin, sex, age or disability. Thus, a religious organization is not permitted to engage in racially discriminatory hiring by claiming that its religious beliefs include not associating with people of other races. And, while Title VII does not expressly exempt religious organizations from provisions barring discrimination on the basis of race, gender or national origin, there is a limited "ministerial exception" that allows religious employers to avoid liability for discrimination claims from employees who qualify as "ministers."

In 2012, the U.S. Supreme Court unanimously ruled that workplace bias lawsuits may not be brought by church employees who act as ministers to their denominations (Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, No. 10–553). The high court explicitly recognized—for the first time—a ministerial exception to federal, state and local laws against discrimination on the job. The ministerial exception comes from the First Amendment principle that government regulation of church administration, including the appointment of clergy, impedes the free exercise of religion and constitutes impermissible government entanglement with church authority.

Religious organizations should keep in mind that, despite the Supreme Court's ruling, they may face significant litigation in trying to determine the reach of the ministerial exception when applied to teachers and other lay employees, since the high court failed to provide a bright-line test to determine who qualifies as a minister.