Fourth Circuit Rejects Catholic Charity's Religious Defenses in Gay Worker's Benefits Case

Key Points

• The Fourth Circuit held that Title VII's section 702 exemption for religious employers does not apply when an employment decision is based on sex as well as religion.
• The court held that the Religious Freedom Restoration Act is not an available defense in a lawsuit between private parties, rejecting the position of the United States as intervenor.
• The court held that the church autonomy doctrine does not shield a religious organization's benefits decisions for lay employees who perform no spiritual function, and that Title VII and the Maryland law are neutral and generally applicable despite their small-employer exemptions.
• The court affirmed judgment for Doe under Title VII and the Maryland Fair Employment Practices Act and dismissed the appeal on the Equal Pay Act claim as moot because of the $60,000 damages stipulation.
• Judge Floyd wrote for the majority, Judge Wynn concurred, and Judge Quattlebaum dissented.

A federal appeals court ruled on Oct. 16 that Catholic Relief Services violated federal and Maryland anti-discrimination law when it cut off health insurance for the husband of a gay employee. The court rejected the charity's argument that its religious beliefs about marriage shielded it from liability.

The U.S. Court of Appeals for the Fourth Circuit split 2-1 in affirming a judgment for the employee, an IT analyst who sued under the pseudonym John Doe. Senior Circuit Judge Floyd wrote the majority opinion, joined by Circuit Judge Wynn, who also wrote a concurrence. Circuit Judge Quattlebaum dissented in an opinion that runs nearly 90 pages.

The panel held that a religious motive does not excuse a benefits decision based on sex, and that a federal religious-freedom statute cannot be raised as a defense in a suit between private parties. Judge Floyd wrote that "neither the statutes at issue nor the First Amendment provide such broad immunity."

Catholic Relief Services, a nonprofit affiliated with the Catholic Church and governed by the U.S. Conference of Catholic Bishops, has more than 8,000 employees. Doe met a recruiter at a 2016 job fair, said he was gay and married, and asked whether his husband would be covered. The recruiter said he would.

Five months after Doe enrolled his husband, the charity told him the enrollment was a mistake because covering his husband conflicted with its religious values. Doe declined an alternative compensation arrangement, and the charity ended the coverage. Doe resigned in 2024.

The federal district court in Baltimore ruled for Doe on claims under Title VII of the Civil Rights Act of 1964, the Equal Pay Act and the Maryland Fair Employment Practices Act. The parties stipulated to $60,000 in compensatory damages if the charity was found liable, while preserving its right to appeal.

The central question was section 702 of Title VII, a provision that exempts religious organizations from the statute "with respect to the employment of individuals of a particular religion." The charity argued that the exemption covers any employment decision driven by religious belief. Judge Floyd, calling the question one of first impression for the court, held that even when an employment decision is motivated by religious belief, the exemption does not apply to claims of discrimination based on sex, race or national origin.

Because the Supreme Court held in Bostock v. Clayton County that discrimination against gay workers is discrimination because of sex, the majority concluded that Title VII applied. "In sum, section 702 provides no safe harbor in this case because the employment decision was based on sex as well as religion," Judge Floyd wrote. He tested the charity's reading against hypothetical religious employers that refused benefits to spouses of a different race, opposed racial integration or paid women less on the belief that only men may head a household. "We see no principled distinction between those cases and this one," he wrote.

The panel also rejected the charity's defense under the Religious Freedom Restoration Act, a 1993 law requiring the government to justify substantial burdens on religious exercise. The court held that the statute applies only when the government is a party to the suit. The United States, which intervened, had argued that Congress and the courts count as government actors in private litigation. "This argument borders on the absurd," Judge Floyd wrote. The opinion noted that a 2006 Second Circuit decision reaching the opposite result "has proven controversial even within its own court."

On the Maryland claim, the panel applied a test the Maryland Supreme Court announced on questions certified from the case. That test extends the state's religious exemption only to employees whose duties "directly further the core mission(s)—religious or secular, or both—of the religious entity." The panel agreed with the trial court that Doe's data and information-technology roles did not qualify.

The majority also rejected the charity's First Amendment arguments. It held that Title VII and the Maryland law remain neutral and generally applicable despite exempting employers with fewer than 15 workers, because "the small business exception equally exempts small secular and small religious organizations." Because the stipulated damages would not change, it set aside a harder question about the Equal Pay Act's industry exemptions and dismissed that claim's appeal as moot.

The court further held that the church autonomy doctrine, which keeps courts out of religious bodies' internal affairs such as choosing ministers, does not cover benefits for lay employees who perform no spiritual function. Judge Floyd wrote that "if CRS wishes to reap the benefits of employing highly skilled IT analysts like Doe, it must participate in the surrounding regulatory scheme just like every other employer." The majority added that religious organizations keep "complete autonomy in the employment of those who communicate the organization's religious teachings."

Judge Quattlebaum would have reversed. "In a decision stunningly restrictive of religious freedom, the majority sides with Doe," he wrote. Tracing church-state conflict back to the Roman Empire, he argued that the church autonomy doctrine bars review of employment terms set by religious belief. He said the majority's reading of the doctrine "treats religious freedom like getting an after-work beer—a little bit is okay, but not too much."

The dissent also argued that the statutes' exemptions for small employers, private clubs and sex-based job qualifications trigger strict scrutiny. Judge Quattlebaum read section 702 to remove all of Title VII from a religiously based decision. "No appellate court in our country has issued a decision so dismissive of religious freedom," he wrote.

Judge Wynn's concurrence responded that the dissent "embarks on a stunningly misleading sojourn through history that ends by declaring the supremacy of religious law over secular law." He wrote that, under the dissent's reasoning, segregationists "simply made the wrong legal arguments during the Civil Rights Movement."

Joseph Christian Dugan of Gallagher LLP argued for Catholic Relief Services. Anthony Jovi May of Nusinov Smith LLP argued for Doe.

The ruling affirms the judgment on Doe's Title VII and Maryland claims, leaving the $60,000 stipulated award in place, and dismisses the appeal on the Equal Pay Act claim.