                                                      Septem ber 27, 1977


77-55      MEMORANDUM OPINION FOR THE
           SOLICITOR OF THE DEPARTMENT OF
           LABOR
           Dues-Paying Practices of Private Clubs—
           Discriminatory Practices


   This responds to your request for our opinion concerning the pay­
ment of fees for .membership in private organizations. You request
clarification of one part o f the December 7, 1976, opinion letter of
former Assistant Attorney General Antonin Scalia regarding this
m atter,1 and you have enclosed for our review a new draft of instruc­
tions to the compliance agencies.
   1.    The portion of Mr. Scalia’s letter that you question reads as
follows:
    O r to take what is perhaps a more realistic example: In a city
    whose luncheon clubs include a “Professional Women’s Club,” a
    “Businessmen’s Club” and a “Men’s and Women’s Downtown
    Club,” it would not necessarily constitute discrimination on the
    part of an employer to pay dues for all three.
You interpret the quoted sentence as saying that—
    . . . all that a contractor is required to do to remedy the prohibit­
    ed discrimination involved in the payment o f dues to discriminating
    clubs is to ensure that each of its employees eligible for such fees is
    given an opportunity to join a club. * * *
Our interpretation of Mr. Scalia’s statement differs from yours.
   The example was intended to illustrate the point, stated earlier in Mr.
Scalia’s letter, that “a policy which affords each employee an opportu­
nity to join one . . . [private] organization [emphasis in original] would
[not] necessarily be discriminatory merely because some of the organi­
zations selected were limited to members of a particular sex, a particu­
lar nationality . . . , a particular race, or a particular religion.” The
letter did not say that such a policy would always comply with Execu-

 1T hat letter is reprinted as an appendix hereto.

                                           2 20
tive Order 11246. The general idea suggested (with which we agree) is
that there may be circumstances in which such a policy would not
violate the Executive order. Similarly, the hypothetical case described
by Mr. Scalia was merely an example, and in stating that such a
situation would “not necessarily constitute discrimination,” he did not
rule out the possibility that, depending on all the circumstances, it
could be discriminatory. In short, we do not read Mr. Scalia’s opinion
as reviving the “separate but equal doctrine.”
   2. The draft memorandum that you enclosed sets forth a general rule
concerning payment of dues and then lists two types of exceptions. The
general rule is that—
    . . . payment by a contractor of dues to an organization which
    limits its membership based on race, color, religion, sex, or national
    origin is a discriminatory practice proscribed by Executive Order
    11246 and the implementing regulations.
One of the exceptions is that a contractor may pay fees to—
    . . . organizations in which membership does not confer a business
    or professional advantage and whose primary purpose is charitable,
    religious, or community service.
The other exception permits payment of fees to “organizations whose
primary purpose is to improve the employment positions of minorities
and women.”
   We have certain reservations concerning the approach taken in the
draft. Apart from these two exceptions, the draft does not provide for
any means whereby an employer may demonstrate that its dues-pay-
ment practices (involving some discriminatory organizations) have not
resulted in a business or professional advantage having a discriminatory
impact upon its hiring, promotion, commissions, bonuses, or other bene­
fits. Because of the absence of some mechanism for an employer to
attempt to prove the nondiscriminatory effect of its policy, we question
whether this approach is sufficiently flexible.
   For example, a particular employer might have a dues-paying policy
applicable to all managers. Some covered by that policy select discrimi­
natory organizations, such as a country club or a downtown club.
Assume that, for many years, the employer has had an effective affirm­
ative action program. Its present (and past) employment statistics show
that significant numbers of women and members of minority groups are
managers and that women and minority-group managers have compen­
sation and authority comparable to that of other managers who are
their contemporaries. Promotions are and have been made on a nondis­
criminatory basis. In these circumstances, it seems doubtful to us that,
because of its dues-paying policy alone, the employer would be in
violation o f Executive Order 11246. Perhaps, such situations are not
likely, but, because they are possible, we suggest that you consider a
different approach.

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   O ur recommendation is that you consider stating in the instructions
to compliance agencies that there is a rebuttable presumption that a
contractor’s payment of dues to a discriminatory organization violates
the Executive order.2 Under this approach, the contractor would have
the opportunity to show th at its policy and the effects of its policy (on
hiring, promotions, sales, commissions, bonuses, or other compensation,
etc.) are nondiscriminatory. This is the essential point made in Mr.
Scalia’s letter. A dues-payment policy that results in employer pay­
ments to clubs that discriminate will not always and invariably consti­
tute employment discrimination, and the employer should be allowed to
demonstrate that its dues policy has had no such discriminatory conse­
quence. While this may be a formidable evidentiary task for the em­
ployer, we believe that the employer may not be foreclosed from
endeavoring to make that showing. In our view, it would be difficult,
as a m atter of law, to justify an interpretation of the Executive order
denying employers the opportunity to rebut the presumption. The
order, by its terms, is aimed at assuring that Government contractors
will not discriminate. Unless the employer can be found to be maintain­
ing a dues-payment policy that does have the effect of discrimination
with respect to employment matters, we do not think that policy may
be challenged simply because it allows payments to private clubs that
are discriminatory.
   T he Civil Rights Division concurs in the views expressed in this
letter.
                                                     J o h n M. H a r m o n
                                                  Assistant Attorney General
                                                          Office o f Legal Counsel




   ’ The instructions could still set forth certain general exceptions. The present draft's
exception for organizations, which is intended to improve the employment situation of
minorities and women, seems proper. Regarding the other exception included in the
present draft, we question whether it should be limited to groups whose primary purpose
is charitable, religious, or community service. There may be some organizations that are
purely social but do not “confer a business or professional advantage.” If so, it would
seem that such organizations could appropriately be included within the exception.
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                            APPENDIX

                                                     D ecem ber 7, 1976


         MEMORANDUM FOR THE SOLICITOR
         DEPARTMENT OF LABOR

         Dues-Paying Practices of Private Clubs


   This responds to your request for our opinion regarding the proposed
memorandum o f your Office of Federal Contract Compliance Programs
(OFCCP) concerning payment of fees for membership in private orga­
nizations. The basic position expressed in the memorandum is that any
payment by a Government contractor of membership fees for employ­
ees in organizations whose membership practices involve “discrimina­
tion” on the basis o f race, color, religion, sex or national origin would
violate Executive O rder 11246 and O FCCP’s implementing regulations.
   Our conclusions on the issues raised may be summarized as follows:
Title V II’s exemption for the employment practices of certain private
membership clubs does not govern the present matter. N or does the
public accommodations law’s exemption for private clubs. Neither those
statutes nor the Constitution would bar the Government from prohibit­
ing payment o f dues by a contractor in a case where such a prohibition
is needed to remedy discrimination in regard to promotions, compensa­
tion, or other aspects o f employment. However, in our view, the
OFCCP memorandum’s basic position is too broad. In some circum­
stances, the payment of dues to private groups which limit membership
on the basis of race, color, religion, sex, or national origin may violate
the Executive order or the regulations; in other circumstances, howev­
er, such payment may be entirely proper and not result in any pro-,
scribed discrimination.
   1.   One question raised in your request is whether O FCCP must be
guided by the exemption of certain bona fide private membership clubs
from the coverage of Title VII of the Civil Rights Act o f 1964, 42
U.S.C. §2000e(b)(2) (1975 Supp.). That exemption, contained in the
definition of “employer,” means that the employment practices of such
clubs are not subject to Title VII. We do not believe that that exemp-
                                  223
tion affects the authority o f O FCCP to apply the proposed ruling to
the employment practices of contractors covered by the Executive
order. That involves no attem pt to regulate the employment practices
o f clubs—which is all that the exemption prohibits.1
   2. W e reach the same conclusion regarding the relevance of the
exemption o f private clubs from the coverage of the public accommo­
dations law, Title II of the Civil Rights A ct of 1964, 42 U.S.C.
§ 2000a(e). The present m atter does not involve any challenge to the
membership practices of the clubs; they may continue unchanged.2
Here, the relationship of Federal contractors to clubs with discriminato­
ry memberships is involved; no exemption of the clubs themselves from
direct regulation affects that issue. 42 U.S.C. § 2000a(e) clearly ac­
knowledges the distinction between regulating the clubs and regulating
the relations o f other entities to the clubs—since it excludes from the
exemption club facilities made available to a covered establishment.
   3. We do not believe that the Constitution bars O FCCP or agencies
from affecting the payment of dues by Federal contractors to private
organizations w here such payment would result in discriminatory em­
ployment. It is well established that the right o f association, however
broad its sweep, does not prohibit the Federal Government from insist­
ing upon the application o f equal protection standards in many fields,
including that o f Federal contracting. C f, Oklahoma v. Civil Service
Commission, 330 U.S. 127, 143 (1947); Contractors' Association v. Schultz,
442 F. 2d 159, 170 (3d Cir.), cert, denied, 404 U.S. 854 (1971); Bob Jones
University v. Johnson, 396 F. Supp. 597, 606 (D. S.C. 1974), a ffd per
curiam, 529 F. 2d 514 (1975).
   W hether the current Executive order is based on the President’s
power under the Constitution or statutory provisions or both, it is
unquestionable that the order is valid. See, e.g„ Farmer v. Philadelphia
Electric Co., 329 F. 2d 3, 8 (3d Cir. 1964); Contractors’ Association v.
Schultz, supra, at 170. If a dues-paying arrangement results in denial of
equal employment opportunity, then the Order would afford a basis for
remedial action. This conclusion, in our opinion, is not altered by the
decision in Washington v. Davis, 426 U.S. 229 (1976), which speaks to
the conduct which the Constitution proscribes rather than to the con­
duct which the Government may take into account in its contracting
regulations.
   4. Your letter states that one of the main premises for the proposed
ruling o f O FC C P is

   1 O f course, in the rare event th at a club is also a Government contractor, the club’s
employment practices would be subject to Executive Order 11246. This is clearly not the
situation to w hich the present inquiry is addressed; and, in any case, there is, in our
opinion, no reason to read into the Executive order the Title V II exemption o f the
employment practices o f private membership clubs.
   2 W e do not here reach the question of the validity o f any Congressional attempt to
change the Cf., Cornelius v. B.P.O.K, 382 F. Supp. 1182, 1201 (D. Conn., 1974); Runyon
v. McCrary, 427 U.S. 160 (1976).

                                           224
    “that an employer’s policy of paying membership dues to its em­
    ployees has a disparate impact on protected groups in that it
    segregates employees on the basis of their race, color, sex, religion
    or national origin as to the places where they may transact business
    and thereby affects their promotion and advancement potential.”
   Without questioning the proper application of this thesis to certain
factual situations, it does not seem to be of such uniform validity to
warrant the categorical prohibition which provides the basis for the
memorandum. Although some clubs are used substantially for the trans­
action of business or for making business contacts, we see no grounds
for assuming that this is universally so. It is our understanding, for
example, that many community-service clubs (some of which are frater­
nal organizations) are not organizations in which any significant amount
of business is transacted or acquired; and the practice of a company to
pay for membership in such an organization may be prompted—if by
any commercial motive at all—only by the desire to have the company
appear as a “good citizen” of the community through participation of
many of its employees in good works, without any care or attention to
which particular employees are responsible for this reputation.
   Moreover, even if it were established that all private club member­
ship appreciably affects promotion potential, or even if such effect were
not considered necessary in order to constitute a violation, on the
theory that the payment of membership fees is a special emolument
available only to certain employees, it is not apparent why a policy
which affords each employee an opportunity to join one such organiza­
tion would necessarily be discriminatory merely because some of the
organizations selected were limited to members o f a particular sex,
nationality, race, or religion. If, for example, a firm were to offer to
pay, for each of its employees at a certain level, membership dues in
one “worthwhile community organization,” which it interprets to in­
clude, among others, the YMCA, the YWCA, the Jewish Community
Center, the Knights of Columbus, the German-American Club, the
Hibernian Society, and the National Council of Negro Women, it is far
from self-evident that any discrimination prohibited by Executive Order
11246 or the implementing regulations could be found. Or to take what
is perhaps a more realistic example: In a city whose luncheon clubs
include a “Professional Women’s Club,” a “Businessmen’s Club,” and a
“Men’s and Women’s Downtown Club,” it would not necessarily con­
stitute discrimination on the part of an employer to pay dues for all
three.
   We now turn to the specific provisions of existing regulations upon
which the memorandum relies for its categorical exclusion: T w o provi­
sions of Revised Order No. 4, which prescribes the contents o f affirma­
tive action programs refer to the administration of all “company spon­
sored . . . programs” without discrimination, and to the need to assure
the participation of minorities and women in “company sponsored ac­
                                  225
tivities or programs.” 41 C F R § 60-2.20(a)(4) and § 60-2.23(b)(9). The
O FC C P memorandum regards these descriptions as disapproving con­
tractors’ payment of all club membership fees o f the type here at issue.
We do not believe this generalization is justified. It is possible to view
an employer’s over-all scheme of paying membership dues as a “compa­
ny sponsored program”; and any improper discrimination as to whose
dues will be paid (eg., the payment o f men’s dues only) would be a
violation. Assuming, however, that the dues-paying program is nondis-
criminatory, the fact that some employees choose to join men’s or
women’s clubs would place the employer in violation o f the provisions
only if the clubs themselves could be considered “company sponsored
activities or programs.” W e do not interpret the O FCCP memorandum
as adopting this position— and it would seem to us an unreasonable
reading of the regulations, except perhaps in the case of a club support­
ed so substantially by one particular firm as to constitute a sort of
“company club.” Thus, no general conclusion of violation of these
provisions seems possible, and analysis of the specific circumstances is
necessary.
   A nother provision cited in the memorandum is 41 C FR § 60-20.3(c),
which states that an employer “must not make any distinction based
upon sex in employment opportunities. . . .” The conclusion that all
payment of memberships in clubs limited to men or women violates this
provision assumes (1) that the club in question does provide significant
business opportunities, and (2) that the employer does not pay for
membership in another club, which includes the other sex and which
provides equivalent business opportunities. As discussed above, neither
of these assumptions is self-evidently correct. Once again, analysis of
the specific circumstances is necessary.
   Finally, the memorandum refers to the guidelines regarding discrimi­
nation based on religion o r national origin, 41 CFR §§60-50.1, and
50.2. O ur views here are similar to those just expressed with respect to
sex discrimination. It does not necessarily constitute a violation of these
provisions to pay dues in organizations composed o f persons of a
particular religion or national origin, so long as other employees are
given the opportunity o f joining, at company expense, other clubs
which provide equivalent benefits. The injunction against discrimination
does not mean particular religious and ethnic groups cannot be accord­
ed special treatment, so long as over-all benefits are accorded on a
nondiscriminatory basis. T his is evident from several provisions within
§ 60-50 itself: § 60-50.2(6) encourages “establishment of meaningful
contracts with religious and ethnic organizations and leaders . . . ”;
§ 60-50.2(8) encourages “ use of the religious and ethnic media for
institutional and employment advertising”; and § 60.50.3 states that “an
employer must accommodate to the religious observances and practices
of an employee.” It is positively consistent with these provisions for an

                                   226
employer to subsidize membership in various religious and ethnic orga­
nizations.
   5. In conclusion, our main difficulty is the generality of the approach
and its apparent failure to take into consideration the various types of
circumstances which may arise. Please let me know if we can be o f any
further assistance regarding this matter.
                                           A n t o n in S c a l ia
                                       Assistant Attorney General
                                               Office o f Legal Counsel




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