As it turns out, openvpn on RHEL6 cannot run just any shell script as an event command despite the script-security 3 option being present in the config file. The event script needs to have the openvpn_etc_t type context set as well if SELinux policies are enforced.
]==> ls -lZ /etc/openvpn/up.sh -rwxr-xr-x. root root unconfined_u:object_r:openvpn_etc_t:s0 /etc/openvpn/up.sh
This can be done by running the following command.
]==> chcon -v --type=openvpn_etc_t /etc/openvpn/up.sh changing security context of `/etc/openvpn/up.sh'