Couple of points:
1. Is the discussion slightly unreal? I’m not aware that religious hospitals are selecting, e.g., surgeons based on denomination rather than training, competence, experience and expertise. And Christine’s experience doesn’t suggest that Catholic schools, at any rate, are hiring only Catholic teachers. I’m aware of schools from other traditions and denominations which, equally, appoint teaching staff who are not of that particular tradition/denomination. Shouldn’t discussion about a law like this address the kinds of discrimination that do in fact arise in society, rather than unrealistic hypotheticals?
2. There’s obviously an area within which religious organisations must be free to discriminate. You can’t require, e.g., a Jewish congregation to disregard religious identification, practice, belief, etc when appointing a rabbi. They want a Jewish rabbi, and furthermore they want a rabbi who takes Judaism seriously, and practices it. Something similar goes for other religious bodies appointing ministers. The same, indeed, goes for non-religious bodies which exist to express a particular philosophy or belief – political parties, feminist organisations, etc, etc.
3. Obviously, appointing (say) a bishop is not the same as hiring someone to mow the grass. It’s more important that a Catholic bishop should be, well, Catholic, than that the gardener in a Catholic school should be. Where do we draw the line after which denomination or religious/philosophical belief is irrelevant to the job?
4. I’m inclined to think that, in the first instance, the drawing of the line should be left to the organisation concerned. They, after all, know what the job is and how it fits into their overall mission and vision. I may think that the job of a maths teacher, say, is to teach the children the nine times’ tables, and nothing more, and that his beliefs and philosophies on other subjects are irrelevant, but the people who create and maintain the position for which he is applying may have an entirely vision of what that position is and what it entails. If their vision is wider than mine, and entails the teaching staff in their schools participating in building an intentional Christian community, then it’s not unreasonable for them to take the view that religious belief is relevant, and to take that into account in hiring decisions.
5. We might, of course, decide that the government has no business funding a school which seeks to create an intentional Christian community, but that’s not the point. The issue here is not whether the school should get public funding – let’s assume, in fact, that it doesn’t - but whether it should be allowed to operate the employment policy which it thinks appropriate to its mission.
6. It seems to me that if we allow a religious organisation to specify that its priests and ministers should have a particular religious position, and if that organisation genuinely sees education (or medical care, or social services, or whatever) as an aspect of ministry, and seeks to employ people who are committed to that vision of ministry, we cross an important line if we refuse to allow them to do so.