"[But] you can still be paid but not selected."
Howard is an experienced sports administrator who left his position as the high-performance manager of Cricket Australia in November following another high-profile sporting controversy in the country - the ball-tampering scandal in South Africa in March 2018.
"I never like writing anybody off ever, for anything," said Howard, capped 20 times by Australia at rugby union. "There's got to be repercussions and then where he ends up, so be it."
Folau signed a four-year deal with Sydney-based Super Rugby side the Waratahs in March and had a contract with Rugby Australia until 2022, having escaped punishment for similar comments last year.
Rugby Australia said he "had committed a high-level breach of the Professional Players' Code of Conduct warranting termination of his employment contract".
Howard said the situation "needs to come to a conclusion", but that the case for sacking Folau was "murky".
"I'm sure they're planning for him not to be involved. But I look at this differently," he said.
"It's the employment aspect. Unfortunately, that will be protracted. You can still be paid but not selected. Selection and employment are two different things. It's very murky.
"You shouldn't be able to sack people for religious reasons, we all get that, but you also can't just say things that vilify everybody. These two things absolutely contradict each other.
"That's the real challenge. But a lot of the players have said the situation is not rectifiable, so I think that's laid the platform."
