The 4th US Circuit Court of Appeals has affirmed a ruling against Catholic Relief Services in a sex discrimination lawsuit brought by a former employee whose husband’s dependent health benefits were terminated. The 2-1 decision in John Doe v. Catholic Relief Services, issued October 16, 2026, answers a question that federal courts have skirted for years: when a religious employer’s decision is motivated by both religious belief and a protected characteristic such as sex, does Title VII’s religious employer exemption provide cover? The 4th Circuit says no.
John Doe, a data analyst, joined Catholic Relief Services (CRS) in Baltimore in 2016, enrolled his husband in the organization’s dependent health benefits program, and was told five months later that the enrollment was a mistake because covering a same-sex spouse violated CRS’s religious values. Doe stayed at CRS until 2024. Following a 2024 bench trial, the district court awarded Doe $60,000 in compensatory damages, an amount the parties had previously stipulated to. CRS appealed, raising four defenses: Title VII’s Section 702 religious employer exemption, the Maryland Fair Employment Practices Act, the Religious Freedom Restoration Act (RFRA), and the First Amendment’s church autonomy doctrine. The 4th Circuit rejected all four.
Section 702 of Title VII exempts religious organizations from the statute’s prohibition on employment discrimination, but the 4th Circuit held that the exemption is limited to claims of religious discrimination. It does not extend to decisions that are also based on sex, race, or national origin, even when a sincere religious belief attended the decision. The majority opinion drew the line: “The opposite interpretation - that section 702 permits religious organizations to discriminate on any basis so long as a religious reason attended - would allow the exemption to swallow the rule.”
Religious nonprofits that exclude same-sex spouses from dependent health coverage have long assumed that a documented religious rationale places the decision outside Title VII’s reach. The 4th Circuit has now held that assumption to be wrong, at least for employees in nonministerial roles, and most employees at a hospital, university, or social service organization are in nonministerial roles.
The ministerial exception, a separate and still-viable defense, did not help CRS here because Doe’s duties (managing a data pipeline system, compiling donor reports, supervising IT staff) were, in the court’s words, “materially indistinguishable from those performed by individuals at secular organizations.” He performed no spiritual function. That distinction is the governing test: not whether the employer has a religious mission, but whether the specific employee directly carries it out. A same-sex spousal exclusion that has never been legally tested fits in the category of plan design decisions that brokers advising on unintended consequences of benefits changes are already being asked to flag.
The RFRA defense failed on a different ground. The court held that the RFRA does not apply in suits between private parties, a position consistent with the majority of circuits that have considered the question.
The ruling applies within the 4th Circuit’s jurisdiction: Maryland, Virginia, West Virginia, North Carolina, and South Carolina. That region has a high concentration of religiously affiliated hospitals, universities, and social service organizations, many of which carry benefits designs that have never been challenged under Bostock v. Clayton County, the 2020 Supreme Court decision that established discrimination on the basis of sexual orientation as sex discrimination under Title VII. Compliance advisory has become one of the concrete areas where employers expect brokers to add value. Doe gives advisors in those five states a clear and current reason to revisit dependent eligibility provisions with religious nonprofit clients.
The ruling, however, is not the final word. Judge Quattlebaum’s dissent called the majority’s approach deeply restrictive of religious freedom and argued that it inverts First Amendment protections. CRS is likely to seek certiorari, and the Supreme Court has not ruled on whether Title VII categorically bars religiously motivated sex discrimination by religious organizations.
The 9th Circuit’s 2025 ruling in McMahon v. World Vision reached a different outcome, but via the ministerial exception, not by expanding the religious employer exemption. The World Vision ruling turned on the fact that the employee in that case performed what the court found to be “vital religious duties” at the heart of the organization’s mission. Doe did not.
Until the Supreme Court settles the question, the safest path for religious nonprofits in the 4th Circuit with same-sex spousal exclusions is a legal review of which employees those exclusions affect and whether any of them could mount a nonministerial claim under the Doe framework.
