"Assuming that Catholics only hire and associate with other Catholics is utterly ridiculous."
It is not about an assumption but, as noted before, a reasonable interpretation.  The law doesn't care about what is or is not likely to happen but what is and is not within the scope of the proposed initiative.  As noted previously with fighting words.  It doesn't matter that the people and the legislature that enacted the laws criminalizing their use assumes it will only apply to unprotected fighting words speech, the reasonable interpretation of the rule includes punishing other protected speech.