Nonprofit News
Grace Chan
Partner | San Francisco
Christopher Fallon
Partner | Los Angeles
Cynthia O’Neill
Partner Emeritus | San Francisco
Casey Williams
Partner | San Francisco
Alison R. Kalinski
Senior Counsel | Los Angeles
Sadie Baird
Summer Associate | San Francisco
Ronni Cuccia
Associate | Los Angeles
Hannah Dodge
Associate | San Francisco
Nathaniel J. Price
Associate | Los Angeles
Madison Tanner
Associate | San Diego
corporate governance
How To Legally Change A Nonprofit’s Name In California.
Changing a nonprofit’s name is an exciting step— whether it is part of a rebranding effort, a shift in mission, or simply a modernization of the organization’s identity. However, the process involves more than just updating a logo or website. Legally changing a nonprofit’s name in California requires careful planning and compliance with state and federal laws.
This is a high-level overview of the steps involved in that process, to help nonprofits navigate this transition smoothly.
Step 1: Preliminary Considerations
Before officially changing a nonprofit’s name, nonprofits should check the new name’s availability. This can be done by searching for the new name on the California Secretary of State’s website to assess if it is available with the Secretary of State. Keep in mind that just because the name is available through the Secretary of State, does not mean that using the name will not infringe on existing trademarks. For this reason, LCW also recommends conducting a broader trademark search or potentially consulting with intellectual property counsel, to assist in searching various trade name databases to analyze if your nonprofit’s use of the name under consideration will give raise to trademark or similar liabilities.
Nonprofits should also confirm that the desired domain name is available and register it. Additionally, if a nonprofit has any loans, LCW recommends reviewing those agreements to determine whether advanced lender notification, or any other steps, need to be completed before a name change.
Step 2: Obtain Board Approval & Amend Articles of Incorporation
A nonprofit’s legal name is established in its Articles of Incorporation, so changing the name requires the Board of Directors to approve an official amendment to the organization’s Articles of Incorporation. This can be done two different ways. First, the Board can approve just changing the one article in the Articles of Incorporation identifying the name of the corporation, and then authorize an officer or other agent of the nonprofit to file a “Certificate of Amendment” with the Secretary of State. The second option is to restate the entire set of Articles of Incorporation, including the article identifying the corporation’s name, as well as the rest of the articles in the Articles of Incorporation. Then, the organization’s authorized agent files “Restated Articles” with the Secretary of State. A full restatement is usually done when the Board wants to update and modernize the Articles, in addition to changing the organization’s name.
Either way, Board approval should be documented in meeting minutes, a formal resolution, or a unanimous written consent form. While not legally required, this is also a good time to update the organization’s Bylaws for consistency.
Step 3: File the Name Change with the California Secretary of State
Once Board approval is obtained, the name change must be formally filed with the Secretary of State. If a nonprofit is filing a Certificate of Amendment, it can be filed online using the Secretary of State’s standard online form.
If a nonprofit is restating their Articles of Incorporation, the new Articles must be signed by two officers and,
currently, must be submitted via mail to the Secretary of State. Processing time typically ranges from 2-4 weeks.
Step 4: Notify Government Agencies & Update External Records
After the Secretary of State processes the name change, there are a number of government agencies and external records that will need to be updated. Many of these are outlined below:
• Internal Revenue Service (IRS) - The name change can be reported to the IRS in the next Form 990 filing. If a nonprofit needs an updated tax-exempt determination letter, an affirmation letter can also be requested from the IRS.
• California Franchise Tax Board (FTB) – The FTB administers and collects state personal income tax. No separate filing is required to the FTB as the FTB receives the update automatically from the Secretary of State.
• Payroll Provider – A nonprofit should update payroll records to ensure compliance with the Labor Code’s requirement that paystubs issued to employees include, among other things, the employer’s legal name.
• Vendors & Service Providers – A nonprofit should notify banks, insurance carriers, utility companies, cloud service providers, janitorial and food service vendors, and other key partners of the name change.
• Licensing Agencies – A nonprofit should update business licenses with local city and county agencies, to the extent it is required to have a business license where it operates, as well any state or federal licenses related to its operations.
• Real Property Records – If a nonprofit owns real estate, it may need to update records with the County Assessor’s Office, Board of Equalization, and the County Recorder/Registrar as needed to maintain its welfare property taxexemption.
Step 5: Update Internal Documents
Although existing contracts and agreements remain valid under the old name, all future agreements that the nonprofit enters into or other official documents issued by the nonprofit should reflect the change, including: employment agreements, handbooks and other personnel policies, donor solicitations, vendor agreements, grant agreements, and other official contracts or documents of the organization.
As you can see, navigating a nonprofit name change involves multiple legal and operational steps. If your organization is considering embarking on this organizational change, an LCW attorney is available to help answer any questions you may have about the legal steps outlined above.
WORKING WITH YOUTH
Top Tips For Nonprofits Working With Youth In California.
The nonprofit sector provides invaluable support and services for youth and also takes on considerable legal responsibility and risk by doing so. To help nonprofits navigate those responsibilities and risks, this article discusses a few best practices and considerations for nonprofits working with youth, related to employee screening, mandatory reporting, staff training, and insurance.
1. Do Not Just Hire Anyone
Implementing a thorough hiring and screening process is vital for ensuring that those working with minors are qualified and safe. Additionally, section 18975 of the California Business and Professions Code, also known as Assembly Bill 506 or AB 506, requires that any administrator, employee, or regular volunteer of a youth service organization undergo a background check pursuant to section 11105.3 of the Penal Code to identify and exclude any persons with a history of child abuse. A “youth services organization” is a youth center, youth recreation program, or youth organization. If the background check discloses a criminal conviction, nonprofit organizations should work with counsel to ensure that their next steps comply with AB 506 as well as California’s Fair Chance Act and other laws limiting how employers may consider criminal convictions in hiring.
Additionally, screening methods may include using a detailed application to gather information about a candidate’s experience and qualifications. An application should include specific questions about a candidate’s previous work with youth to gain further insight into their suitability for the role and their understanding of best practices in youth interactions. Conduct thorough interviews focusing
on the candidate’s experience working with youth, understanding of boundaries, and scenarios that assess their judgment and suitability. Additionally, always verify references, focusing specifically on the candidate's interactions with youth. However, remain mindful of the California Fair Chance Act, which prohibits employers from asking about an applicant’s criminal history until after a conditional offer of employment.
2. Stay Vigilant with Mandatory Reporting
In California, nonprofit organizations that work with youth are required to adhere to the Child Abuse and Neglect Reporting Act, outlined in sections 1116411174.3 of the California Penal Code. Generally, mandated reporters are required to report reasonable suspicions of child abuse or neglect. There are a number of professions listed in the Penal Code that are mandated reporters, such as teachers, social workers, alcohol or drug counselors, and employees of any organization whose duties require direct contact and supervision of children. Mandated reporters must report to a county child welfare department or to local law enforcement (police or sheriff’s department) immediately by phone, followed by a written report within 36 hours. Written reports must be submitted on the California Suspected Child Abuse Report Form 8572. Failing to report an incident of known or reasonably suspected child abuse or neglect is a misdemeanor.
To help mandated reporters comply with their obligations under the law, nonprofits that employ mandated reporters are required to have those employees sign a statement informing the employees about their obligations and rights as a mandated reporters and confirming that they will comply with their obligations. An employer must also provide copies of sections 11165.7, 11166, and 11167 of the Penal Code to the employees. Under AB 506, youth service
organizations are required to train employees on abuse and neglect identification and reporting and, as a general matter, such training is recommended for any nonprofit organizations working with youth.
3. Teach Your Staff Where to Draw the Line
Establishing clear professional boundaries between staff and youth is crucial for creating a safe environment for everyone involved. This practice helps protect minors and protect staff and volunteers from misunderstandings or false allegations. Nonprofits can do this by adopting a professional boundaries policy and setting procedures that set rules and provide guidance on appropriate and inappropriate interactions, including physical contact, communication, and social media use. Examples of issues covered in those types of policies and procedures, include avoiding one-on-one interactions in secluded areas, keeping doors open when meeting with youth, using professional language and tone, and avoiding personal social media connections with youth participants. Training will review those rules, as well as provide guidance to staff on how to handle disclosures of abuse or other sensitive information from youth appropriately and in compliance with their obligations as mandated reporters. This includes listening without judgment or interruption, not making promises about confidentiality if abuse is disclosed, and reporting the disclosure.
4. Insurance is A Nonprofit’s Best Friend
Finally, insurance is a vital aspect of risk management for nonprofits working with youth. It can protect the organization, staff, and volunteers in case of accidents or allegations of misconduct. All nonprofits should speak with a reputable insurance broker experienced in working with nonprofits and able to advise nonprofits on various coverage products, including products unique to organizations working with youth, such as policies providing coverage for abuse or molestation allegations. This type of insurance may provide crucial assistance with these kinds of very tough situations.
In sum, California nonprofits serving youth must prioritize safety and compliance with the law through robust policies, staff training, rigorous hiring, and adequate insurance. These steps not only protect youth but also bolster nonprofit credibility, ensuring lasting impact.
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LEAVES
California Museum Not Required to Provide Indefinite Leave as Accommodation.
George Manos's, an HVAC technician who had been working at the J. Paul Getty Trust (the "Getty") in 2011, job required significant physical labor, including standing, climbing, and lifting heavy equipment. In 2018, he complained to Human Resources (HR) that he was being threatened, harassed, and belittled by his supervisors and colleagues. He also related that two days earlier, he felt “so stressed out” after a conversation with one of these colleagues that he began to have chest pains and went to the hospital. Getty’s HR department conducted an internal review, and Manos ultimately stated that he was not feeling harassed, only that he wanted to work in a more civil environment.
The following year, in June 2019, Manos suffered a workplace injury when he fell off a ladder and fractured his left leg. He went on medical leave and requested multiple extensions, each supported by documentation from his physician stating that he was unable to perform any work. Initially, his doctor estimated that he might be able to return to work in November 2019, but as the months passed, Manos continued to seek additional leave extensions, each time noting that he remained unable to work.
Once Manos’ 12 weeks of protected leave expired, the Getty continued to accommodate Manos’s requests for over a year, placing him on inactive status and informing him that his return was not guaranteed if he did not return within 90 days. In April 2020, Manos submitted another request for leave without a definite end date. The Getty then asked him to complete an interactive process questionnaire, where he was given the opportunity to propose accommodations that might allow him to return to work. In his responses, Manos confirmed that he was unable to stand, walk without assistance, squat, kneel, or lift heavy objects. He also stated that he was not requesting any accommodations at that time but rather continuous leave. His doctor estimated that his impairment would last another 12 to 18 months.
After reviewing the completed questionnaire, the Getty’s HR team concluded that this amounted to a request for indefinite leave, which they determined was unreasonable. In June 2020, the Getty terminated Manos’s employment, stating that he could not return to work in the foreseeable future.
In February 2021, Manos filed a lawsuit against the Getty, arguing that his termination violated the Fair Employment and Housing Act (FEHA). He alleged that the Getty had failed to accommodate his disability and had not properly engaged in the interactive process to identify potential accommodations. He also claimed that his firing was retaliatory, either for his 2018 harassment complaints or for his requests for accommodations.
The Getty moved for summary judgment, contending that Manos had been granted more than a year of leave, had failed to propose any accommodations that would allow him to return to work, and remained unable to work even after his termination. The Getty further argued that there was no causal link between his 2018 harassment complaint and his termination in 2020. Additionally, the Getty pointed out that there were no vacant positions at the time that Manos could have filled, as all available jobs still required physical capabilities that he did not have.
The trial court granted summary judgment in favor of the Getty. On the claims of failure to accommodate and failure to engage in the interactive process, the trial court found that Manos had only requested additional leave as an accommodation, which the Getty provided for over a year, and that he did not identify any accommodations that would allow him to return to work. The trial court emphasized that employers are not required under California law to provide indefinite leave as an accommodation, particularly when there is no reasonable certainty that an employee will be able to return to work in the near future. The trial court also pointed out that Manos had not responded to the Getty’s specific request to suggest reasonable accommodations that could allow him to return to work.
On the retaliation claim, the trial court found no evidence that Manos’s termination was linked to his
harassment complaints from 2018. The trial court noted that two years had passed between his complaints and his termination and that he had been on medical leave for over a year before his termination. Since there was no temporal proximity or other evidence linking his prior complaints to his termination, the trial court ruled that Manos had failed to establish a causal connection. Additionally, the trial court rejected Manos’s alternative argument that the Getty retaliated against him for requesting accommodations, concluding that there was no evidence of retaliatory intent. The trial court further held that Manos’s argument regarding an available security officer position was raised too late, as it had not been included in his complaint.
Because Manos’s claims under FEHA were dismissed, his claim for wrongful termination in violation of public policy also failed. The trial court ruled that without an underlying violation of law, there was no basis for a wrongful termination claim.
On appeal, the California Court of Appeal affirmed the trial court’s ruling. The appellate court agreed that indefinite leave is not a reasonable accommodation under California law and that the Getty had engaged in a good-faith interactive process by allowing Manos multiple opportunities to request accommodations, which he failed to do. The Court of Appeal also found that the trial court properly dismissed the retaliation claim, emphasizing the lack of a causal link between Manos’s prior complaints and his termination. In affirming the decision, the appellate court held that the Getty had fulfilled its legal obligations and was justified in terminating Manos’s employment when it became clear that he could not return to work and that no reasonable accommodations were available. As a result, Manos’s claims were rejected and summary judgment on behalf of the Getty was affirmed.
Manos v. J Paul Getty Trust (Feb. 21, 2025) ___Cal.App.5th___ [2025 Cal. App. Unpub. LEXIS 1042].
Note:
This case reinforces that while employers, including nonprofit organization, must engage in the interactive process and provide reasonable accommodations, they are not required to grant indefinite leave when an employee cannot perform essential job functions or identify a reasonable return date.
Join LCW’s Nonprofit Consortium!
LCW’s Nonprofit Consortium provides California nonprofits with year-round access to practical resources and educational opportunities. By paying an annual subscription fee, you’ll receive an array of preventive services designed to help your organization enhance compliance, reduce exposure to costly claims, and stay current on best practices. Consortium membership includes:
Unlimited telephone consultations throughout the year
Workshops throughout the year (open to any team member) covering a variety of compliance topics, such as employment, governance, and business matters
Access to model policies through the Liebert Library
Discounts on additional LCW webinars and events
A quarterly newsletter featuring timely updates and insights
To learn more or to join, email fsavellano@lcwlegal.com. We look forward to supporting your nonprofit’s success!
NLRB
New Administration, New Labor Policies: How Changes to Federal Guidance May Benefit California Nonprofits
The National Labor Relations Board (NLRB) is an independent federal agency responsible for enforcing U.S. labor laws. It oversees private-sector employees’ rights to form unions, engage in collective bargaining, and even draft policies or severance agreements. California nonprofit organizations fall under the jurisdiction of the NLRB even if they are not unionized.
Changes in Presidential administrations often influence the NLRB’s positions, as board members are appointed by the sitting president and typically reflect the administration’s labor policies. This year seems no different. On February 14, 2025, the NLRB’s Acting General Counsel, William B. Cowen, rescinded several memoranda issued during the Biden administration. This action followed the Executive Order issued by President Trump titled “Initial Rescissions of Harmful Executive Orders and Actions,” which mandated the review and rescission of certain policies from the previous administration.
General Counsel memoranda do not have the authority of law or regulation. Rather, the memoranda are issued to NLRB field offices and Washington offices by the General Counsel to provide policy guidance. The rescinding of the Biden era memoranda, suggest a significant shift in the NLRB’s priorities.
Here are some of the key changes affecting California nonprofits:
1. Severance Agreements: The rescission of Memorandum GC 23-05 withdraws prior NLRB guidance restricting non-disparagement clauses and confidentiality agreements in severance agreements. In a severance agreement, the employer typically offers the employee a sum of money in exchange for the employee relinquishing certain rights, such as the right to sue the employer. The memo had
advised that the use of non-disparagement and confidentiality provisions in severance agreements violated employees’ rights under section 7 of the National Labor Relations Act (NLRA) as they could prevent employees from discussing workplace misconduct, discrimination, or union-related activities. The rescission action suggests, instead, a more lenient approach by the NLRB on including these types of provisions in severance agreements.
2. Electronic Monitoring and Workplace
Surveillance: The withdrawal of Memorandum GC 23-02 signals a more lenient approach to protections for employees regarding workplace surveillance and electronic monitoring. Specifically, the memo stated that monitoring employees through AI-productivity tracking, keystroke logging, and facial recognition software could have a chilling effect on employees’ ability to engage in protected activities.
3. Non-compete Agreements: Memoranda GC 23-08 and GC 25-01 had stated the NLRB’s interpretation that non-compete agreements in employment contacts and severance agreements were violations of the NLRA. The NLRB had instructed that the provisions restricted employees’ ability to seek better job opportunities and discouraged collective action. California, however, has separate laws prohibiting non-compete agreements except in limited situations.
4. Unfair Labor Practices: Memoranda GC 21-06 and GC 21-07 had suggested expanded consequences for employers found guilty of unfair labor practices. Specifically, they supported employees seeking remedies for emotional distress, reinstatement rights, and funding for organizing efforts. The rescission of these memoranda hint that the NLRB will likely take a more lenient approach in penalizing employers for unfair practice charges in the future.
Overall, the rescission of the memoranda allow greater employer control over the workplace, at least from the standpoint of federal NLRB enforcement. Nonprofit organizations should bear in mind this shift when
assessing the risk of taking certain employment actions, such as including certain details in severance agreements. At the same time, the substantial protections afforded employees under California law remain, which nonprofits must continue to consider when making employment decisions. LCW attorneys are closely monitoring President Trump’s Executive Orders and any associated developments. Please also see LCW’s Executive Order Summaries here.
BUSINESS & FACILITES
Permitting Third Party Discovery In Employee Arbitration Agreements.
In Vo v. Technology Credit Union, Thomas Vo was hired by Technology Credit Union (TCU) in 2020 and was required to sign an arbitration agreement at that time. TCU terminated Mr. Vo after he contracted COVID-19 and was facing long-term health issues. Mr. Vo sued TCU for wrongful termination, discrimination, and harassment under the Fair Employment and Housing Act (FEHA).
TCU sought to enforce arbitration on Mr. Vo’s claims based on the signed arbitration agreement. Mr. Vo argued the arbitration process was unfair because it restricted his ability to perform discovery and collect evidence from third parties before the hearing.
The trial court denied TCU’s motion to compel arbitration, ruling that the arbitration agreement was unconscionable as it was unfairly one-sided. The court referenced Aixtron, Inc. v. Veeco Instruments Inc. (2020), which determined that the JAMS arbitration rules in place at the time did not permit arbitrators to compel third-party discovery before a hearing. The judge concluded that this restriction could prevent Mr. Vo from securing critical evidence to support his claims, making the arbitration agreement fundamentally unfair.
The California Court of Appeal reversed the trial court’s ruling. The appellate court relied on the California
Supreme Court’s recent decision in Ramirez v. Charter Communications, Inc. (2024), which clarified that arbitration agreements should be interpreted to give arbitrators broad discretion in allowing necessary discovery, including from third parties. The court took a pro-arbitration approach, emphasizing that arbitration rules should be read expansively to ensure fair access to evidence and due process.
As a result, the appellate court directed the trial court to grant TCU’s motion to compel arbitration and pause the lawsuit. This ruling reinforces the enforceability of arbitration agreements, particularly those structured to allow arbitrators to permit necessary discovery.
Employers should ensure their arbitration agreements are crafted carefully to explicitly allow for reasonable discovery to avoid enforceability challenges. Regularly reviewing arbitration agreements is key to ensure enforceability and keep up with evolving legal requirements.
Vo v. Technology Credit Union, 2025 WL 1234567 (Cal. Ct. App. 2025).
Considerations For Nonprofit Organizations Planning To Allow Third Parties To Use Their
Facilities.
Renting facility space can be a great way for a nonprofit organization to generate additional revenue. However,
nonprofits must carefully consider the following factors before making these arrangements:
1. Utilizing a Lease or a Facilities Use Agreement (FUA)
A lease is an agreement granting a third party the exclusive right to occupy the nonprofit’s real property for a specific period. The lease typically gives the tenant exclusive possession and use of the property, meaning the tenant may generally exclude the owner from the premises. A leasehold interest is typically transferable and irrevocable, unless otherwise stated in the lease agreement.
In contrast, a Facilities Use Agreement (FUA) typically conveys a license to use the facility for an event or a certain period of time, rather than providing a leasehold interest. Unlike a lease, an FUA does not grant extensive property rights. Instead, it permits a third party to use the nonprofit’s property for a specified purpose. A FUA is usually non-transferable, revocable, and can be either exclusive or non-exclusive.
Ultimately, the language of the FUA determines the rights a nonprofit will grant to the third party. If the nonprofit intends to provide a license for temporary use rather than an exclusive possessory interest, it should use an FUA rather than a lease.
2. Unrelated Business Income Tax (UBIT)
Unrelated Business Income Tax (UBIT) is a tax imposed on income generated by tax-exempt organizations from business activities that are not substantially related to their exempt purpose. This is important because excessive UBIT may jeopardize a private nonprofit’s taxexempt status.
Determining whether income from facility use is subject to UBIT is highly fact-specific and depends on multiple factors.
Ways to Avoid UBIT:
• Rent to users aligned with the nonprofit’s educational purpose or mission (e.g., nonprofit organizations or educational groups).
• Charge reasonable fees for facility use rather than excessive market-rate rents.
• Ensure that facility rentals do not constitute a
substantial or disproportionate portion of the nonprofit’s gross income.
• Avoid providing substantial services to facility users.
Ǟ Acceptable incidental services: Heating, lighting, trash collection.
Ǟ Services that may trigger UBIT: Event staffing, catering, event coordination.
Please be aware that renting facilities to for-profit or non-charitable entities may jeopardize a nonprofit’s welfare property tax exemption. Nonprofits should consult with their legal counsel prior to making these types of arrangements.
3. Insurance and Indemnification
If a nonprofit allows a third party to use its facilities, the contract should include indemnification and insurance provisions to protect the nonprofit and to reduce potential liability and risk.
An indemnification provision can protect the nonprofit from lawsuits or claims related to incidents that occur during the third party’s use of the facility. The FUA should also include a duty to defend clause, requiring the third party to provide a defense for the nonprofit for any litigation or claims asserted against the nonprofit.
Users should also be required to maintain adequate insurance coverage based on the type of use of the nonprofit’s facilities and provide proof of that insurance before they use the facilities. Nonprofits should check with their broker to ensure that the user provides sufficient coverage. The nonprofit should ensure endorsements on the policies name the nonprofit as an additional insured and waive rights of subrogation against the nonprofit.
4. Termination
Nonprofits should ensure the FUA includes their right to terminate the FUA and stop the event at any time and for its own convenience, including during the event itself. This will give the nonprofit the right to immediately stop an event or use of its facilities if a user or that user’s guests or invitees are not following the nonprofit’s rules or are otherwise not complying with the FUA.
Nonprofits should carefully evaluate these factors before agreeing to allow third parties to use their facilities. A welldrafted agreement is the best way to minimize risks and liability. Nonprofits should consult trusted legal counsel before entering into any agreements to ensure all potential risks are fully assessed.
WORKPLACE SAFETY
Cal/OSHA’s COVID-19 Regulations Have Expired, Except The Recordkeeping Requirement.
On February 3, 2025, all but one subsection of Cal/OSHA’s COVID-19 response regulations, that were codified at Title 8 of the California Code of Regulations, expired.
The one subsection that remains in effect until February 3, 2026 is Subsection 3205(j) regarding Recordkeeping, which requires an employer to:
• “[K]eep a record of and track all COVID-19 cases” (emphasis added) with the employee's name, contact information, occupation, location where the employee worked, the date of the last day at the workplace, and the date of the positive COVID-19 test and/or COVID-19 diagnosis.
Ǟ One reasonable interpretation of the requirement to “track” all COVID-19 cases as stated within this remaining recordkeeping regulation is that employers are only required to maintain a record of COVID cases they are made aware of as a result of volunteered or widely-known information, as opposed to the active tracking that was required under the now-expired provisions.
• These records must be preserved for two years “beyond the period in which the record is necessary to meet the requirements” of now-expired sections 3205 through 3205.3.
Ǟ Thus, the retention period for a record starts from the last relevant date related to the record, such as the end of the employee’s infectious period or their return to work.
Ǟ For example, an employee who tested positive for COVID on January 1, 2025, but who never developed symptoms, may return to work in 10 days on January 11, 2025, under now-expired regulation section 3205 (b) (9)(B). The employer must maintain that record until January 11, 2027.
• Provide information on COVID-19 cases to the local health department with jurisdiction over the workplace, CDPH, Cal/OSHA, and NIOSH immediately upon request, and when required by law.
MINISTERIAL EXCEPTION
Ninth Circuit Rules Ministerial Exception Extends Beyond Religious Disputes.
Yaakov Markel, an Orthodox Jewish man, served as a mashgiach (kosher supervisor) for the Union of Orthodox Jewish Congregations of America (OU) from 2011 to 2018. OU operates the largest kosher certification program in the United States and supports the Orthodox Jewish community through various religious, youth, and educational programs. OU, a 501(c)(3) nonprofit, generates significant revenue from its certification program, which it uses to further its religious mission.
A team administers OU’s kosher program. Markel’s role as a mashgiach involved ensuring the kosher integrity of grape products at two wineries. Grape products are subject to strict Jewish dietary laws, requiring supervision by observant Orthodox Jews to ensure that the grapes are sufficiently cooked under Jewish dietary law. To qualify for his position, Markel provided a certification letter from an Orthodox rabbi affirming his knowledge of kosher laws, Sabbath observance, and compliance with Jewish dietary practices.
Over time, Markel said his relationship with his supervisor, Rabbi Nachum Rabinowitz, deteriorated. Markel alleged that Rabbi Rabinowitz promised him a promotion and raise that never materialized and that OU failed to compensate him for overtime. OU denied these claims, ultimately leading to Markel's resignation and subsequent legal action. Markel filed suit and raised claims of wage and hour violations, fraud, and misrepresentation.
The case centered on the First Amendment’s ministerial exception, which protects religious institutions from employment-related lawsuits involving certain key employees integral to their religious mission. In particular, the ministerial exception prevents governmental interference in a religious institution's decisions regarding faith and governance.
The ministerial exception is categorical, encompassing all adverse personnel or employment actions between religious institutions and their employees, and disallows lawsuits for damages based on lost or reduced pay. Therefore, so long as OU qualified as a religious organization and Markel was considered a minister, the exception would apply to each of Markel’s employment related claims.
The trial court, in a matter of first impression in the Ninth Circuit, held that Markel’s position as a mashgiach qualified under the ministerial exception and that OU was a religious organization. As such, the trial court concluded that Markel’s claims were categorically barred by the ministerial exception. Markel appealed.
On appeal, Markel contended that OU could not invoke the exception because its kosher certification program was revenue-generating and operated in a competitive market. The defendants (OU and Rabbi Rabinowitz) asserted that the ministerial exception barred Markel's claims because OU is a religious organization and emphasized that maintaining kosher standards is an essential aspect of Orthodox Judaism.
The Court of Appeals agreed with the defendants and held that despite generating revenue through its kosher certification program, OU qualified as a
religious organization. Its activities, including youth and educational programs, aligned with its religious mission to support the Orthodox Jewish community. The fact that OU profited or competed with for-profit companies did not make the organization non-religious for the purposes of the ministerial exception. Markel also argued that his role did not qualify under the ministerial exception because his duties were primarily secular, involving supervision of food production rather than religious functions. The defendants argued that Markel, as a mashgiach, served a key religious role central to its mission and that Markel’s responsibilities of maintaining the kosher standards of grapes involved religious duties integral to their faith.
The Court of Appeals concluded that Markel's duties as a mashgiach—ensuring compliance with kosher laws—were essential to OU's religious mission. Following Supreme Court precedent, the Ninth Circuit emphasized that the term “minister” extended to various religious functionaries beyond ordained clergy, including those performing duties vital to a religious institution’s mission. Here, the Court concluded that Markel was responsible for ensuring the kosher integrity of the grape products, and “keeping kosher” is essential to Orthodox Judaism.
The Court also took the opportunity to clarify the scope and purpose of the ministerial exception. Markel argued that the exception should not apply because his dispute with OU was secular. In other words, Markel asked the Court to create a rule that if a religious purpose does not animate the relevant employment decisions, the ministerial exception should not apply.
The Court rejected this argument. The Court underscored that religious decisions, even if facially secular, often intertwine with religious doctrine, and courts must avoid entanglement in such matters. The Court noted that distinguishing between secular and non-secular issues could lead to unconstitutional judicial action because it would force the Court to scrutinize religious decisions and attempt to understand certain religious beliefs.
Relatedly, the Court reiterated that the ministerial exception forbids courts from requiring religious institutions to provide a religious justification before invoking the exception, as doing so would offend the Free Exercise Clause.
Lastly, the Court extended the ministerial exception to claims against individual supervisors, such as Rabbi Rabinowitz, noting that litigation involving minister-on-minister disputes risks excessive entanglement with religious institutions.
The Ninth Circuit affirmed the trial court's grant of summary judgment in favor of OU.
Markel v. Union of Orthodox Jewish Congregations of Am. (9th Cir. Dec. 30, 2024) 2024 U.S. App. LEXIS 32832.
Note:
This case supports the ministerial exception’s broad applicability to disputes involving ostensibly secular matters, such as wage and hour and compensation claims.
cases we are watching
• AIDS Vaccine Advocacy Coalition v. Department of State and Global Health Council v. Donald J. Trump. The AIDS Vaccine Advocacy Coalition is an international non-profit organization working to develop and deliver HIV prevention tools. Journalism Development Network, Inc. (JDN) is a non-profit corporation supporting a global consortium of journalists. On February 10, 2025, the Coalition and JDN filed a lawsuit challenging the Trump administration’s funding freeze to U.S. Agency for International Development (USAID). USAID is the main U.S. agency responsible for administering civilian foreign aid and development assistance. The next day Global Health Council brought a similar lawsuit, and the lawsuits were brought together by the same judge.
On February 13, 2025, Judge Amir Ali, a federal judge in Washington D.C., issued a temporary restraining order ordering the Trump administration to pay contractors for foreign aid work that has already been performed while he continues to review the case. The government appealed to the U.S. Supreme Court. On March 5, 2025, the Supreme Court voted 5-to-4 to uphold the lower court ruling. The Supreme Court instructed the Judge Ali to “clarify what obligations the government must fulfill to ensure compliance with the temporary restraining order with due regard for the feasibility of any compliance timelines.”
On March 10, 2025, Judge Ali issued a 48-page ruling granting a preliminary injunction ordering the Trump administration to release USAID payments owed under certain existing contracts through February 13. The Court found “Plaintiffs have adduced ample evidence that the funding freeze has had dire humanitarian consequences and has devastated businesses and programs across the country.” The Court explained the freeze was an “unbridled view of Executive power” that “usurps Congress’s exclusive authority to dictate whether the funds should be spent in the first place.” We will continue to monitor this case.
• National Council of Nonprofits v. Office of Management and Budget. Several coalitions of nonprofit organizations that rely on federal grants are suing over the administration’s spending freeze. On February 25, 2025, Judge Loren L. AliKhan, a federal judge in Washington D.C ordered the Trump administration to reverse the freeze because it interfered with Congress’s appropriation of federal money. Judge AliKhan wrote the “freeze was ill-conceived from the beginning” and “irrational, imprudent, and precipitated a nationwide crisis.” We will continue to monitor this case.
• Joyce Bell Limbrick, a Black woman and former Executive Senior Associate Athletic Director at the University of Southern California (USC), has sued USC in Los Angeles County Superior Court, alleging that she was subjected to discrimination and harassment based on the intersection of her race and gender. Following the appointment of a new Athletic Director, Limbrick claims she endured racially and sexually discriminatory remarks, was stripped of key responsibilities, and was systematically excluded from leadership opportunities. Despite reporting this conduct and cooperating in internal investigations, she has asserted that she was wrongfully terminated under the pretext of poor performance shortly after receiving a merit-based salary increase. This case is among the first to invoke California’s new intersectionality bias provisions under the Fair Employment and Housing Act (FEHA) (Joyce Bell Limbrick v. University of Southern California, Los Angeles County Superior Court Case No. 25STCV00551).
Did You Know?
Whether you are looking to impress your colleagues or just want to learn more about the law, LCW has your back! Use and share these fun legal facts about various topics in labor and employment law.
• The Consumer Financial Protection Bureau has issued guidance asserting that employers must comply with the Fair Credit Reporting Act (FCRA) when using background dossiers, algorithmic scores, or other third-party consumer reports for employment decisions such as hiring, promotion, or retention. This includes obtaining the worker's consent before procuring a consumer report, providing necessary notices before and upon taking adverse actions based on the report, and ensuring that consumer reports are used solely for permissible purposes as outlined in the FCRA. This guidance also impacts employers utilizing third-party vendors for employee screening, monitoring, or assessment. The guidance can be found here.
• The California Civil Rights Department (CRD) has released its 2025 Pay Data Reporting Guidance, introducing a new race/ethnicity category, “Middle Eastern or North African” (MENA), aligning with recent federal changes. Employers (including nonprofit organizations) with 100 or more employees, including those hired through labor contractors, must submit pay data reports by May 14, 2025, detailing wages, demographics, and workforce data by race, ethnicity, and gender. Failure to comply may result in fines of up to $100 per employee for a first offense and $200 per employee for subsequent violations. CRD has published a Pay Data Reporting Handbook with helpful guidance.
LCW In The News
To view these article and the most recent LCW attorney-authored articles, please visit: www.lcwlegal.com/ news
• Recently published in Nonprofit Pro, LCW Partner Casey Williams and Attorney Nandini Ruparel outline five essential considerations for nonprofit directors when reviewing and approving executive compensation. They emphasize the board’s critical governance role in ensuring compensation aligns with the organization’s mission and complies with legal standards. Williams and Ruparel detail the IRS three-step process for determining reasonable compensation, the importance of understanding state-specific laws, and the need for clear communication between the board and the CEO. They also highlight the necessity of tying compensation decisions to comprehensive performance evaluations. By following these guidelines, nonprofit boards can attract and retain top leadership while safeguarding the organization’s integrity and effectiveness.
To access the full article, please click the following link: https://www.nonprofitpro.com/post/5-things-everynonprofit-director-should-know-about-executive-compensation/
Featured Consortium Call
Members of Liebert Cassidy Whitmore’s consortiums are able to speak directly to an LCW attorney free of charge to answer direct questions not requiring in-depth research, document review, written opinions or ongoing legal matters. Consortium calls run the full gamut of topics, from leaves of absence to employment applications, student concerns to disability accommodations, construction and facilities issues and more. Each month, we will feature a Consortium Call of the Month in our newsletter, describing an interesting call and how the issue was resolved. All identifiable details will be changed or omitted.
Question:
A nonprofit administrator reached out explaining an employee asked about taking leave pursuant to Labor 230.8. The administrator wanted to learn more about this provision, including whether the leave was paid, if sick or vacation time could be used, and if the employee could take FMLA leave instead.
Answer:
The LCW explained this is one of the lesser known leave provisions. The Family School Partnership Act and Labor Code 230.8 provides employees the option of taking leave to participate in their children’s education. Under the Act, an employee who is a parent (parent” includes a parent, guardian, stepparent, foster parent, or grandparent of, or a person who stands in loco parentis to, a child) having custody of a child in kindergarten or grades one through 12, including a licensed child care facility, can take off up to 40 hours a year for the purpose of certain child care or school-related activities. Covered activities include finding, enrolling, or reenrolling a child in a school or with a licensed child care provider; time off for this purpose is limited to eight hours in a calendar month. Covered activities also include addressing a child care provider or school emergency, including a request that the child be picked up from school/child care, behavioral/discipline problems, closure or unexpected unavailability of the school (excluding planned holidays), or a natural disaster, field trips, open houses, and extracurricular activities.
The LCW attorney explained that this leave is unpaid, and the employee may use other paid leave available to them for this time, such as vacation time. The LCW attorney explained that the employee could not use FMLA leave for this purpose; FMLA leave is reserved for care of themselves or a covered family member for a serious health condition and baby bonding. In addition, this school activities leave is up to 40 hours in a calendar year and is separate and distinct from FMLA leave. The LCW attorney also explained the employer is entitled to request the employee provide documentation to verify the parental participation in the school activities.
Liebert Cassidy Whitmore