Private Education Matters: March 2024

Private Education Matters

Titleix

Another Court Determines That Tax-Exempt Status Is Not Federal Financial Assistance.

Jane Doe and Grace Roe were students at Currey Ingram Academy, a boarding school in Tennessee. The students alleged that another student, Brenda Doe, sexually assaulted them at the School. The students filed suit against the School, asserting federal claims under Title IX and state law claims such as negligence, negligent supervision, and intentional infliction of emotional distress.

The School filed a motion to dismiss, arguing that the Title IX claims should be dismissed. The School argued that if the federal claims were dismissed, then the federal court would not have jurisdiction over the remaining state law claims.

The students argued that the School was subject to Title IX because they received federal financial assistance through their tax-exempt status as a 501(c) (3) organization. The Court considered the Title IX regulations, which define federal financial assistance, and which do not include income tax exemption in any category listed. In reviewing the regulations, the Court concluded that federal financial assistance encompassed only direct transfers of federal money, property or services from the government to a program. The Court concluded that exemption from taxation was not the same type of direct transfer.

The Court also considered the Spending Clause in Title IX. The Spending Clause states that when the government offers to transfer property or money to an entity to support an educational program or activity, the intended recipient has the choice whether or not to accept the assistance. If the entity does accept the assistance, they are subject to the associated obligation to not discriminate on the basis of sex. The Court reasoned that when granting tax-exempt status, the government does not invoke the same nondiscrimination requirements.

The Court specifically noted that it was rejecting the cases that take the opposite view on tax-exempt status because the Court believed that those cases did not focus sufficiently on the words in the applicable regulations for federal financial assistance.

The Court dismissed the Title IX claims and declined to exercise jurisdiction over the state law claims.

Note:

Over the last few years, two courts (one California court and one Maryland court) have held that tax-exempt status constitutes federal financial assistance, obligating the schools involved in those cases to follow Title IX and the Rehabilitation Act, among other statutes. In January 2024, an Arizona court held that tax-exempt status did not constitute federal financial assistance. This area of the law remains in flux and LCW will monitor these cases for further developments.

Doe v. Currey Ingram Acad. (M.D.Tenn. Mar. 5, 2024) 2024 U.S.Dist.LEXIS 38241.

religious schools

Court Declines To Stop Enforcement Of AntiDiscrimination Law Against Religious School Receiving State Funding.

Crosspoint is a Christian church incorporated as a nonprofit corporation under Maine law and located in Bangor, Maine. Bangor Christian Schools (BCS) is a private, Christian K-12 school affiliated with Crosspoint.

Under Maine law, every person is entitled to a free public education. In areas that are sparsely populated, the government will pay the tuition for students to attend private school if there are no closely located public schools. Under this law, a private school may be approved for receipt of public funds only if it is nonsectarian.

In 2018, three families, including two families whose children attended BCS, filed suit to challenge the sectarian exclusion, claiming that it violated the First Amendment’s Free Exercise Clause. That case was Carson v. Makin (2022) ___U.S.___ [142 S.Ct. 1987, 213 L.Ed.2d 286].

In 2022, the U.S. Supreme Court held that Maine’s sectarian exclusion violated the Free Exercise Clause because it operated to identify and exclude otherwise eligible schools on the basis of their religious excise. Specifically, the Supreme Court held that BCS was disqualified for the generally available benefit solely because of its religious character. By conditioning the availability of benefits in that manner, the Supreme Court concluded that Maine’s tuition assistance program effectively penalized the free exercise of religion. As a result, the sectarian exclusion is now unenforceable.

While the Carson case was pending, the Maine Legislature enacted amendments to the Maine Human Rights Act (MHRA), adding gender identity, religion, ancestry, and color as protected classes. The amendments also narrowed the religious exception to state that religious corporations, associations, or societies that do not receive public funding were not required to comply with the section as it relates to sexual orientation or gender identity.

When Crosspoint filed its complaint, the MHRA exempted single-sex schools, even those participating in the tuition program, from its prohibition on discriminating on the basis of race, color, ancestry, national origin, sex, religion, sexual orientation, and gender identity. In June, 2023, the MHRA was amended to remove the single-sex school exclusion from the definition of “educational institution.” Crosspoint alleged that this change was designed to operate as a workaround to Carson to exclude BCS from the tuition program.

BCS is a religious school that believes that marriage is only a union between one man and one woman and that all sexual activity that lies outside of the definition of marriage is wrong. BCS’s code of conduct prohibits students from engaging in immoral conduct, including sexual activity outside of marriage, or identifying as a gender other than their biological sex.

Crosspoint Church employees, including BCS staff, must be co-religionists—that is, they must be in agreement with Crosspoint’s Statement of Faith and engage in religious practice consistent with the Church’s spiritual standards.

Crosspoint filed for a preliminary injunction, arguing that the changes to the MHRA violated the Free Exercise Clause, the Establishment Clauses, and the Free Speech Clause of the First Amendment.

Crosspoint argued that the changes to the MHRA violated the Free Exercise Clause because the timing and structure of the changes showed that its purpose was to preemptively exclude them from the tuition program in order to moot Carson. Alternatively, Crosspoint argued that because the changes exempted single-sex schools from the antidiscrimination provisions, it was not narrowly tailored to achieve a compelling government interest.

Crosspoint argued that the changes to the MHRA violated the Establishment and Free Exercise Clauses by prohibiting them from hiring only co-religionists. Crosspoint argued that MHRA’s plain language protected them from hiring only co-religionists for its ministries, including BCS, due to the ministerial exception.

Crosspoint argued that the changes to the MHRA violated the Free Speech Clause because it was designed to stop them from educating students with Crosspoint’s religious perspective as a condition of participating in the tuition program. Crosspoint argued that imposing financial burdens because of Crosspoint’s teaching that reflects its religious perspective was unconstitutional.

The Defendants (the Commissioner of the Maine Department of Education and the two Commissioners of the Maine Human Rights Commission) argued that Crosspoint’s claim was not ripe because it was predicated on a list of hypothetical events, including Crosspoint applying for funding, being accepted, denying admission to a person in a protected class, and then facing an MHRA discrimination harm. There was no imminent threat of enforcement or lawsuit.

If ripe, Defendants argued that Crosspoint was not entitled to a preliminary injunction because it was not likely to prevail on the merits—admitting students belonging to protected classes would not burden their religious practices, as BCS would still be free to teach and say whatever it wishes. It simply would not be allowed to prevent students from receiving the education BCS chooses to deliver.

For the employment issue, the Defendants argued that the ministerial exception may apply, but could not be applied unless there was a facial challenge to the statute. Finally, for the free speech claim, the Defendants argued that Crosspoint was free to say whatever it wished, it just could not exclude willing listeners for discriminatory reasons.

The Court concluded that, as a threshold matter, the claim was ripe. The Court reasoned that Crosspoint desired to apply for Maine’s tuition program, a benefit the Supreme Court recently ruled the state could not deny to sectarian institutions, such as Crosspoint. The amendment to the MHRA, prohibiting educational institutions from discriminating on sexual orientation or gender identity, was in conflict with Crosspoint’s discriminatory hiring practices. The Court concluded that if Crosspoint availed itself to the tuition assistance program, it would risk a credible threat that the MHRA would be enforced against its religious practices.

For Crosspoint’s Free Exercise Claims, the Court concluded that Maine’s amendments to the MHRA were done for legitimate interests, namely, preventing discrimination in education. Maine’s decision to add further protections to the MHRA aligned with similar Maine laws on employment, housing, and education, which likewise prohibit sexual orientation/gender identity discrimination in employment, housing, and education, but also generally exempt religious organizations that do not receive public funding. The Court found that the MHRA provisions were reasonably related to the state’s interest in preventing discrimination and applied to all schools receiving public funding.

For Crosspoint’s employment discrimination claim, the Court concluded that there was no controversy between the parties, as the parties agreed that all religious organizations are allowed to give employment preference to individuals of the same religion and may require all applicants and employees to conform to the organization’s religious tenets.

For Crosspoint’s Free Speech claim, the Court determined that the plain text of the MHRA did not limit Crosspoint’s ability to teach from a religious perspective—the MHRA limited conduct, not speech. The Court concluded that Crosspoint was not entitled to a preliminary injunction.

Note:

At the end of this opinion, the Court acknowledged that Crosspoint raised important legal questions. The Court noted that despite the students’ victory in Carson v. Makin, the Maine Legislature and Maine Attorney General largely deprived Crosspoint and similar religious schools from the “fruit of their victory.” The Court noted that the case presents novel constitutional questions and framed the opinion as a prelude to the Court of Appeals for the First Circuit for a more authoritative ruling. In other words, LCW anticipates that this case will be appealed and will monitor this case for further developments.

Crosspoint Church v. Makin (D.Me. Feb. 27, 2024) 2024 U.S.Dist.LEXIS 32975.

covid-19 students

USF Not Liable For Breach Of Contract For Providing Remote And Hybrid Learning During Pandemic.

Three undergraduate students were enrolled at the University of San Francisco (USF) for the Spring 2020 semester. Prior to March 2020, they attended their USF classes in person. On March 4, 2020, Governor Gavin Newsom declared a state of emergency in response to COVID-19, and on March 16, 2020, the San Francisco Health Officer issued a shelter-in-place order, requiring residents of San Francisco County to remain in their homes, except when engaging in essential activities. A few days later, the Governor issued an executive order requiring all Californians to stay home except for essential activities. As a result, USF was prohibited by law from holding large in-person gatherings, and USF suspended all in-person instruction and closed its on-campus facilities. All classes transitioned to distance learning for the remainder of the semester.

In July 2020, USF announced instruction would be primarily remote for the Fall 2020 semester, and in October 2020, USF announced instruction would be primarily remote for the Spring 2021 semester. Three students filed class action complaints against USF, alleging breach of contract, among other claims. The students alleged that USF failed to deliver the educational services, facilities, access, and opportunities that they contracted and paid for, and that they were entitled to in-person educational services.

USF moved for summary judgment. USF argued that the students failed to show any specific promise by USF to provide them with in-person instruction under all circumstances; USF was excused from providing inperson instruction due to state and local orders related to COVID-19; and students were aware that USF would conduct classes either remotely or in a hybrid format during the Fall 2020 and Spring 2021 semesters, prior to paying tuition.

The students argued that USF promised to provide inperson instruction based on language in their admissions letter, such as, that the students would develop amazing friendships and expand their horizons, and would be surrounded by the “best city ever;” inviting students to admitted students’ day; and that USF looks forward to greeting the students on campus.

The students also argued that an implied-in-fact contract was formed based on conduct, custom, usage, and history. For example, the students argued that USF’s 165-year history of in-person instruction, the course descriptions in the course catalog, and the students’ schedules stating the physical locations and times of in-person classes indicated that USF offered in-person instruction and on-campus facilities. To note, the USF catalog provided a disclaimer that information contained therein was subject to change and that USF reserved the right to revise its regulations and programs in accordance with academic standards and requirements.

The trial court ruled that the admissions letters did not contain any promise of in-person instruction, nor did they promise exclusively in-person instruction. The trial court also concluded that the syllabi, student schedules, and course catalogs did not give rise to a binding contract for in-person instruction. The trial court concluded that the students could not establish a breach based on the failure to provide in-person instruction during the COVID-19 pandemic.

The students appealed, arguing that the contract formed between the students and USF committed USF to provide exclusively in-person instruction.

The Court of Appeals concluded that not all statements in university catalogs and bulletins amount to contractual obligations, rather the analysis focuses on what is reasonable under the circumstances. Here, the Court of Appeals reasoned that the statements in the admissions letter did not provide a specific promise of exclusive in-person instruction for the duration of the Spring 2020 semester. The Court of Appeals found that USF’s

statements were, at best, specific representations that there would be some in-person instruction and on-campus services in exchange for tuition. But the Court of Appeals did not find any evidence to support an inference of exclusively in-person instruction under the circumstances of a global health and safety emergency.

The Court of Appeals was also not persuaded that past conduct or custom supported a contract exclusively for in-person instruction. While USF has generally provided in-person instruction and access to the campus, the students did not identify any historical evidence of times when USF provided in-person instruction during a public health or safety emergency. Nor did the students identify any evidence indicating an expectation that USF would offer in-person instruction during such emergencies.

The Court of Appeals determined that vague statements in university promotional materials and course catalogs created an expectation of in-person classes but were insufficient to demonstrate a specific contractual promise.

For the Fall 2020 and Spring 2021 Semesters, the Court of Appeals agreed with the trial court, reasoning that tuition for those semesters was not due until after the announcements about remote and hybrid learning were made. As such, there was no contract for in-person instruction during those semesters. The Court of Appeals affirmed the trial court’s ruling.

Note:

In this case, the court found that USF’s vague statements in promotional materials and catalogs did not create a contract for in-person learning. Schools should be mindful, however, that these types of materials could form contractual obligations if they are not carefully worded.

Berlanga v. University of San Francisco (Feb. 29, 2024) ___Cal.App.5th___ [2024 Cal. App. LEXIS 137].

new to the Firm!

Caroline Cohen is an Associate in our San Francisco office, where her extensive experience in employment law and litigation makes her a valuable asset to our clients.

Ashley Riser is an Associate in our Sacramento office, where she specializes in providing expert advice and counsel in labor and employment law matters.

sports

Soccer Team Violates State Law

By Failing To Provide Concussion Materials To Family, But Is Not Liable For Causing Player’s Concussion.

On December 13, 2017, Sydney, then age 14, practiced with her Premier soccer team at the Northeast Regional Recreation Center, a Baltimore County owned facility located in Parkville, Maryland.

One night, Sydney’s team was practicing in the facility on Field 2 when she collided with another player. She fell into the wooden wall bordering the field, hitting her head, and causing a concussion. Her injury was addressed immediately, however, she could no longer play soccer and claimed to have sustained permanent injuries.

In December 2019, Sydney and her family filed suit against several defendants, including Premier, alleging that the accident occurred because the lights were off over Field 2, such that Sydney was unable to see adequately and causing her to collide with another player and fall into the wall. Premier moved for summary judgment, claiming that Sydney assumed the risk by playing a contact sport, regardless of the lighting conditions, and was herself negligent under the law. The Parties held a hearing on the summary judgment motions, at which point another issue came up—whether Sydney was provided with the Maryland State Department of Education’s (MSDE) information on Concussions for Public Schools and Youth Sport Programs. The trial court denied Premier’s motion for summary judgment.

In September 2022, Premier filed a second motion for summary judgment, asserting that failure to provide the concussion materials was not the cause of Sydney’s injury and would not have protected her from falling and hitting her head on the wall. This would only be true if the materials would have caused Sydney’s parents to withdraw her from practice entirely, of which there was no evidence. Premier also argued that the statute did not

include preventive measures, such as requiring helmets, prohibiting unpadded walls, or requiring space between the field of play and perimeter walls.

The trial court ruled in favor of Premier, finding that the family could not pursue a negligence claim based on the concussion rules because there was no evidence that the failure to present the rules caused Sydney’s injury.

The family’s claim against Premier based on their allowing Sydney’s team to practice on an unlit field went to trial. The evidence was disputed as to whether the lights were on or off over Field 2. The jury returned a verdict in favor of Premier. The family appealed.

On appeal, the family alleged that Premier violated Maryland’s general health code section on youth concussions by: (1) not making available information on concussions and other head injuries to the coach, Sydney, or her parents; (2) Sydney’s coach not reviewing the information; and (3) allowing Premier to use the facility without first providing notice of the concussion protocols.

The Court of Appeals found that, in order for Sydney and her family to succeed, they would need to show that had Sydney and/or her parents received the concussion information, Sydney would not have practiced with her team or would have altered her behavior during practice so as to avoid the injury or that Sydney’s coach’s review of the concussion information would have caused him to modify the practice so as to prevent the injury to Sydney.

The Court of Appeals found no such evidence. For one, the concussion information was not made part of the court record, despite the trial court’s repeated requests to see the information during the various hearings. Even still, the Court of Appeals said they would have reached the same result. The Court of Appeals considered a hyperlink to the MSDE website, which was included in one of the family’s briefs. The hyperlink included the required concussion information, which notably did not require coaches to structure practices to avoid concussions. Rather, it mandated training for coaches on understanding, recognizing, and responding to concussions.

Similarly, the information Sydney and her parents were entitled to receive were primarily geared towards understanding and recognizing the signs and symptoms of concussions and ensuring proper reporting to parents, coaches, and medical personnel. The only “preventive” measures pertained to personal protective equipment, following rules set by coaches for safety, and practicing good sportsmanship. The Court of Appeals found that none of these measures were relevant to the prevention of Sydney’s injury. Likewise, the Court of Appeals found no evidence that Sydney or her parents would have chosen not to allow her to participate in soccer, generally, or this practice, specifically, had they received the fact sheet about concussions.

The Court of Appeals affirmed the trial court’s ruling.

Note:

This case involved a private soccer team in Maryland. However, it is relevant for California private schools because under Education Code section 49475, private schools are required to provide concussion and head injury information sheets to athletes and their parents on an annual basis.

Walton v. Premier Soccer Club, Inc. (App. Mar. 1, 2024, No. 1691) 2024 Md. App. LEXIS 151.

LCW In The News

To view these articles and the most recent attorney-authored articles, please visit: www.lcwlegal.com/news.

• Featured in Inside Higher Ed, LCW Partner Michael Blacher and Attorney Gabriella Kamran delve into California’s race-neutral admissions policies, offering insights for diversity objectives. The article explores targeted outreach, alternative diversity measures, diversity statements, and data collection, providing a roadmap for colleges tackling post-Students for Fair Admissions challenges.

• Published in the Daily Journal, LCW Partner Michael Blacher and Senior Counsel David Urban examine the balance between free speech and anti-harassment on college campuses. Among other things, their article emphasizes the need to comply with constitutional obligations and federal and state laws, while consistently enforcing anti-harassment policies. They also describe ways to address modern protests that protect against harassment yet avoid infringing protestor speech rights. Their expertise offers colleges a short strategic guide to upholding community members’ competing rights amidst these challenging times.

• Published in Bloomberg Law, LCW Senior Counsel David Urban and Attorney Gabriella Kamran examine laws on free speech and harassment that universities must consider. In their analysis, Urban and Kamran discuss the complexities surrounding public and private educational institutions' obligations, from adhering to the First Amendment while addressing harassment and discrimination to the challenges of enforcing policies consistently. Their evaluation underscores the importance of nuanced approaches rooted in legal principles to safeguard both free expression and individuals' rights in academic settings.

• LCW Senior Counsel Stephanie Lowe recently authored an article regarding the incoming Affordable Care Act deadlines, published in the Expert Analysis section of Law360. In her analysis, Lowe urges readers to understand the nuances of these deadlines, ensure compliance and file in a timely manner to avoid IRS penalties.

• Quoted in The Wall Street Journal, LCW Partner Amy Brandt comments on a California case highlighting the rising legal disputes between school districts and parents seeking assistance for their children. Brandt notes that “The squeaky wheel gets the oil. The families who can squeak the loudest generally have more resources.”

NLRA employees

Home Depot Violated NLRA By Requiring Employee To Remove BLM Messaging On Apron.

Antonio Morales, who identifies as Hispanic, Mexican, and a person of color, using they/them pronouns, was employed at a Minnesota Home Depot as a sales specialist in the flooring department. From the outset of Morales’ employment, coworker Allison Gumm subjected customers and employees of color, including Morales, to racially discriminatory behavior. For example, Gumm erroneously attributed Morales’ difficulty in registering a customer’s credit card in the computer system to Morales’ entry of the relevant data in Spanish. A day later, Gumm advised Morales to watch a Black customer closely because, according to Gumm, people of Somali descent were more inclined than others to steal.

On numerous occasions, Morales discussed Gumm’s offensive conduct with coworkers in the flooring department. All agreed that Gumm exhibited racial bias toward customers and fellow employees and that management should deal with her misconduct. In fact, the other flooring department employees even made a conscious effort to “intercept” customers of color so they would not be subject to Gumm’s bias.

Morales and coworkers complained to supervisors and managers about Gumm’s misconduct on at least a monthly basis. Unbeknownst to Morales and his coworkers, Home Depot held a documented verbal performance discussion with Gumm, and Gumm received disciplinary coaching and counseling in response to these complaints. The employees were not aware of those interventions, seeing only that Gumm persisted in her misconduct with no evident consequences.

A few months later, employees prepared materials for the observance of Black History Month at Home Depot’s request. Shortly thereafter, unidentified persons ripped

up the displays on two separate occasions. Management emailed certain store employees and supervisors, advising them of the incident. Morales replied to the email and suggested a wider discussion of the serious underlying issues at Home Depot.

Later that day, Morales was called to meet with an assistant store manager and store manager about their email. The store manager admonished Morales that Home Depot was taking care of the vandalism incidents and they should leave the problem to management. Then, the store manager began discussing the BLM initials on Morales’ apron. This was the first time a manager or supervisor had said anything about the BLM marking, even though Morales had worn it continuously for the prior five (5) months, including during face-to-face meetings with supervisors.

The store manager said the BLM initials were contrary to the dress code and apron policy’s ban on displaying causes or political messages unrelated to workplace matters. The store manager said Morales could not return to work until he removed the BLM initials. The store manager explained that if he allowed Morales to wear the BLM initials, he would have to let other employees wear swastikas. Morales objected to that comparison. The store manager said that “All Lives Matter” was preferable as a slogan to “Black Lives Matter.”

Morales resigned from Home Depot due to the racial harassment and discrimination their coworkers had suffered, and noted that injustices, micro-aggressions, and blatant racism they experienced would not go unnoticed. Seven days after Morales resigned, Home Depot fired Gumm. Home Depot also, for the first time, posted copies of the dress code and apron policy throughout the store and advised all employees that displaying BLM insignia was contrary to the policy.

Section 7 of the National Labor Relations Act (NLRA) protects employees when they engage in concerted activities for the purpose of collective bargaining or other mutual aid and protection. To be protected under Section

7, the conduct must relate to collective bargaining, working conditions and hours, or other matters of mutual aid or protection of employees. For an action to be concerted, it must be engaged in with or on the authority of other employees, and not solely by an employee acting on behalf of himself.

The National Labor Relations Board (NLRB) determined that Morales’ refusal to remove the BLM marking from their work apron was protected concerted activity under the National Labor Relations Act. Morales, along with two coworkers, wore the BLM markings on their aprons around the same time that the flooring department employees were having conversations about Gumm’s behavior. The NLRB found that although there was no evidence that Morales discussed the BLM insignia with other employees before adding it to their apron, or that other employees expressed approval or support for it, it was clear that there was a group complaint about the working conditions. Morales was voicing group concerns about Home Depot’s response to discriminatory working conditions when they sent the email and met with the managers, and wearing the BLM marking was a logical outgrowth of their prior concerted activities.

The NLRB also found that Morales’ insistence on continuing to wear the BLM marking was for mutual aid or protection. Morales stated that displaying the BLM marking was a way to show support for people of color or Black associates, and Morales said in the meeting that their refusal to remove the BLM was in order to lead by example. In other words, these actions were done to improve the terms and conditions of their employment.

The NLRB determined that Morales’ refusal to remove the BLM marking was protected concerted activity and that Home Depot interfered with Morales’ rights under the NLRA. The NLRA determined that Home Depot did not demonstrate any special circumstances to justify the prohibition of the BLM markings, such as concerns about employee safety, damage to machinery or products, interference with an established employer public image, or part of the employer’s business plan.

The NLRB determined that Home Depot constructively discharged Morales by conditioning their return to work on removing the BLM from their work apron. The NLRB ordered Home Depot to offer full reinstatement to Morales; provide Morales with any loss of earnings, including back pay; and compensate Morales for any direct and foreseeable monetary harm, such as searchfor-work and interim employment expenses. The NLRB also ordered Home Depot to cease and desist from applying its dress code and apron policy to Section 7 activity.

Note: This topic has been coming up more frequently. In December, an administrative judge for the NLRB found that Whole Foods dress code forbidding BLM messaging was permissible because there was a lack of nexus between BLM messaging and employees’ rights to unionize. Here, the NLRB came to the opposite conclusion because the BLM messaging was in protest to the employees’ working conditions.

Home Depot USA, Inc., 373 NLRB No. 25 (N.L.R.B. February 21, 2024).

Court Finds That School

Terminated Gay Teacher Due To Performance Concerns

Rather Than Discrimination.

Thomas Taylor worked as a math and science teacher at School of the Woods. As a first-year teacher, the Head of School and the high school principal provided regular feedback to Taylor on lesson plans and assisted him with grading and assignment issues as they arose. The School contended that Taylor refused to take constructive criticism, communicate consistently, or participate in any proposed collaborative efforts to help Taylor improve as a teacher.

Taylor is openly gay and believed his sexual orientation was the cause of what he considered harassment throughout his time at the School. In fact, Taylor said he told the Head of School via email of workplace harassment and said that the harassment was having a negative effect on his health. In the same email, Taylor requested reasonable accommodations to address his health concerns and to stop the harassment.

In response, the Head of School scheduled a meeting for May 5, 2021, which Taylor alleged did not occur. On June 12, 2021, the Head of School informed Taylor that the School was not renewing his employment contract.

Taylor filed suit against the School claiming (1) discrimination based on sexual orientation under Title VII; and (2) disability discrimination under the Americans with Disabilities Act (ADA).

Taylor argued that he was discriminated against on the basis of his sexual orientation based on subjective beliefs that he developed after receiving constructive criticism and instruction.

To establish a prima facie case of discrimination under Title VII, a plaintiff must show he: (1) is a member of a protected class; (2) was qualified for his position; (3) was subject to an adverse employment action; and (4) was replaced by someone outside the protected class, or, in the case of disparate treatment, shows that others similarly situated were treated more favorably.

The School argued that Taylor failed to establish a case of discrimination based on sexual orientation because he failed to identify a similarly situated employee that was treated more favorably. In fact, Taylor admitted in his deposition that all teachers were required to provide their study guides and receive feedback from the Head of School. The School argued that it could demonstrate legitimate, non-discriminatory reasons for its decisions. Specifically, Taylor’s performance as a teacher and his unwillingness to collaborate or communicate with the administrators who were trying to help him improve.

Taylor argued that the reasons were pretext, and he was harassed based on his sexual orientation. Taylor also argued that the School’s subsequent positive reference when later seeking a substitute teacher job was proof of pretext.

The Court concluded that there was insufficient evidence to establish discrimination. The Court reasoned that, during the two years Taylor worked at the School, multiple complaints from students and parents were reported about Taylor’s lesson plans and overall ability as a teacher. For example, nine of eleven students in Taylor’s pre-calculus course raised various concerns, including that he was dismissive and unapproachable, and the students relied on other teachers (and students) to teach them precalculus. When the School attempted to mentor and aid Taylor in improving as a teacher, Taylor responded by making accusations against the principal and not cooperating with the School’s attempt to improve his teaching ability.

The Court concluded that the School had legitimate concerns about Taylor’s teaching ability, supported by numerous complaints from students, parents, and student advisors. The School sought to assist Taylor in improving and succeeding as a teacher. Other junior teachers in similar positions were open to constructive feedback and worked with the School to improve. Taylor, on the other hand, was combative and adverse to any plan for improvement. Taylor considered any critique or administrative meeting “harassment,” creating an impasse between the administration and Taylor. The

Court concluded that the School had legitimate, nondiscriminatory reasons for terminating Taylor’s employment.

The Court did not find persuasive that providing a recommendation for a new job as a substitute teacher was proof of pretext. The School reasoned that a substitute teacher does not plan the curriculum or have the responsibility for the students’ ultimate success. The Court concluded that this showed the School had no ill will toward Taylor or his future success. The Court granted summary judgment on Taylor’s sexual orientation discrimination claim.

For Taylor’s disability discrimination claim, Taylor argued that he was experiencing high blood pressure, agitation, and sleepless nights as a direct consequence of the treatment he experienced at the School. The School argued that Taylor did not provide any evidence that he was treated differently or subjected to adverse employment actions due to a disability or a perceived disability, and Taylor never requested a reasonable accommodation.

The Court said that merely stating that Taylor was experiencing these conditions did not establish a disability under the ADA. Taylor did not provide a doctor’s note, diagnosis, medical information, or evidence of disability, either at the time or throughout discovery. The Court concluded that Taylor failed to prove that he had a disability under the ADA. The Court granted the School’s motion for summary judgment.

Note:

This school was able to dispute that their decision to terminate the teacher was based on a discriminatory motive because they had documented concerns about the teacher’s performance, including from parents and students, and they had addressed these concerns by working with the teacher and providing regular feedback.

Taylor v. Sch. of the Woods (S.D.Tex. Feb. 22, 2024) 2024 U.S.Dist.LEXIS 30181.

How to Customize LCW’s Model Workplace Violence Prevention Plan (“WVPP”) and Implement the Required WVPP Training for Employees

In 2023, in order to address growing concerns about violence in the workplace, the legislature passed and the Governor signed into law Senate Bill 553. The new law amends Labor Code section 6401.7 and adds Labor Code section 6401.9, requiring California employers to establish and implement by July 1, 2024 a Workplace Violence Prevention Plan (“WVPP”) and provide effective training to employees on the requirements of the new law and the employer’s WVPP.

Option 1:

Comprehensive package including LCW’s model WVPP and template training materials along with instructions with valuable insight and explanation as to how to customize the WVPP for your unique workplace specific issues as well as how to implement and maintain an effective WVPP moving forward. This training will also provide detailed guidance regarding the customization of LCW’s training materials to effectively train your employees on issues specific to your workplace(s).

Option 2:

Model Workplace Violence Prevention Plan annotated on how to update for your agency.

Retaliation

Whistleblower Need Not Prove Employer’s Retaliatory Intent.

The whistleblower-protection provision of the Sarbanes-Oxley Act of 2002 prohibits covered employers from discharging, demoting, suspending, threatening, harassing, or in any other manner discriminating against an employee because of protected whistleblowing activity.

In 2011, Trevor Murray was a research strategist at securities firm UBS. Murray worked for UBS’s commercial mortgage-backed securities (CMBS) business. Murray reported on CMBS markets to current and future UBS customers. Federal Securities and Exchange Commission (SEC) regulations required him to certify that he independently produced his reports and his reports accurately reflected his own views.

Two leaders of the CMBS trading desk pressured Murray to skew his reports to be more supportive of their business strategies. They instructed Murray to clear his research articles with the trading desk before publishing them. Murray advised his direct supervisor, but the pressure from the trading desk only increased. Murray’s supervisor recommended to his own supervisor that Murray be removed from UBS’s head count, or alternatively, transferred to a trading desk position where he would not have SEC certification responsibilities. When the trading desk declined to accept his transfer, and despite a strong performance evaluation, Murray was fired.

Murray filed a complaint with the US Department of Labor (DOL) alleging that his termination violated §1514A of Sarbanes-Oxley Act because he was fired in response to his internal reporting about fraud on shareholders. When the DOL did not issue a final decision on his complaint within 180 days, Murray sued in US District Court. The jury found that Murray had established his §1514A claim and that UBS had failed to prove, by clear and convincing evidence, that it would have fired Murray even if he had not engaged in protected activity.

UBS appealed the decision, and Murray crossappealed for back pay, reinstatement, and attorney’s fees. A panel of the US Court of

Appeals for the Second Circuit vacated the jury’s verdict and remanded for a new trial. The appellate court concluded that the Sarbanes-Oxley Act’s anti-retaliation provision requires a whistlebloweremployee to prove “retaliatory intent”, and that the trial court failed to so instruct the jury. The US Supreme Court granted certiorari because the Fifth and Ninth Circuit Courts had rejected the retaliatory intent requirement. The USSC reversed to align with the Fifth and Ninth Circuits.

The Court held that when whistleblowers invoke the protections of the Sarbanes-Oxley Act, they bear the initial burden of showing that their protected activity was a contributing factor in the unfavorable personnel actions at issue. But the whistleblower need not prove that the employer acted with retaliatory intent. The burden then shifts to the employer to show that it “would have taken the same unfavorable personnel action absent the protected activity.”

The Court found that the term “discriminate” did not impose a requirement that a whistleblower prove the employer’s “retaliatory intent” or animus. The Court reasoned that burden-shifting frameworks have long provided a mechanism for getting at intent in employment discrimination cases, and the contributing-factor burden-shifting framework is meant to be more lenient than most. Finally, the Court rejected UBS’s argument that without a retaliatory intent requirement, innocent employers will face liability for legitimate, nonretaliatory personnel decisions. The Court stated that the employer may avoid liability by demonstrating by clear and convincing evidence that it would have taken the same personnel action in the absence of the protected behavior.

Murray v. UBS Securities, LLC., 217 L.Ed 2nd 343 (2024).

Note:

One of California’s whistleblower statutes also requires an employer to submit “clear and convincing” evidence that it would have taken the same unfavorable personnel action in the absence of the protected behavior. (Labor Code sections 1102.5- 1102.6.) The USSC gave this advice to employers to determine if this standard has been met: The right way to think about that kind of same-action causation analysis is to change one thing at a time and see if the outcome changes. The question is whether the employer would have retained an otherwise identical employee who had not engaged in the protected activity.

business & Facilities

Don’t Just Click! Browsewrap Or Clickwrap Agreements For Arbitration Provisions Can Be Enforceable.

In Patrick v. Running Warehouse, the 9th Circuit Court of Appeals found that an arbitration provision contained in a browsewrap or clickwrap agreement was enforceable. Defendants, Running Warehouse and its affiliated companies, own and operate e-commerce websites selling sporting goods. Consumers purchasing goods from Defendants’ websites are given the option to ‘Create an Account’ or to proceed straight to checkout. If a consumer selects ‘Create an Account,’ they must check a box that states “by creating an account, you agree to our privacy policy and terms of use.” The phrase ‘terms of use’ is a hyperlink that leads to the Defendants’ terms. When a consumer checks the box, they create a clickwrap agreement because they consent to the Defendants’ terms merely by clicking their assent rather than formally signing the agreement. If a consumer opts to not create an account and chooses to proceed straight to checkout, they are asked to confirm that they agree to the following statement: “By submitting your order you…agree to our privacy policy and terms of use," before they can purchase the goods. The phrase ‘terms of use’ is again hyperlinked. Consumers that do not create an account merely assent to the terms by making a purchase. This creates an implied consent that they agree to the terms and conditions, known as a browsewrap agreement.

The hyperlinked ‘terms of use’ for Defendants included choice of law, arbitration, and venue provisions, and specifically required consumers to agree to arbitrate any claims through JAMS, in their Orange County, California offices, and waive any rights to litigate any claims in court or through class action.

John Patrick and other consumers purchased goods online from Running Warehouse and had their information stolen by hackers who breached Defendants’ websites. Mr. Patrick and the other consumers became Plaintiffs who brought class actions against Defendants for negligence and breaches of contract. Defendants moved to compel arbitration pursuant to the ‘terms of use’ in their agreements. The district court granted the motion and the 9th Circuit affirmed the decision.

Plaintiffs’ arguments included that clicking on boxes agreeing to the ‘terms of use’ did not provide sufficient notice of the arbitration provision, that the arbitration provision was unconscionable, and that the arbitration provision does not clearly or unmistakable delegate the issue of arbitrability. First, in considering whether the Plaintiffs had sufficient notice, the Court considered whether the website provided reasonably conspicuous notice and whether the consumer had to take some action that unambiguously manifests his or her assent to those terms. The Court concluded that even though most consumers will not actually click on the hyperlink, the consumer is nevertheless making the choice to not be informed. The consumer had ‘inquiry notice,’ meaning they could have been informed if they had inquired. Further, the Court found that the arbitration provision was conspicuous. In order to be conspicuous, a browsewrap agreement must be displayed in a font size and format that a reasonably prudent Internet user would have seen it. The users were also required to either click to agree to the terms or pass a screen that confirmed that by placing the order the user consented to the terms. Accordingly, by either clicking or continuing with the order, the user took some action that unambiguously manifested his or her assent. The Court found that the users therefore had sufficient notice of the terms.

Second, the Plaintiffs claim that the arbitration clause was unconscionable due to its inclusion of a unilateral modification clause. The Court disagreed and found that the presence of a unilateral modification provision on its own does not render an arbitration provision unconscionable.

Finally, the Court found that parties clearly delegated arbitrability when they incorporate arbitrator’s arbitration rules in the agreement. Here, they agreed to JAMS rules so there was no issue of delegating the arbitrability.

The Ninth Circuit’s decision affirming the order to compel arbitration showed that the arbitration agreement was enforceable regardless of how the Plaintiffs assented to the terms. Specifically, as long as users have sufficient notice to the terms, the terms can be binding.

This case serves as a valuable reminder that consenting to terms and conditions via a clickwrap or browsewrap agreement can have consequences. Clickwrap and browsewrap agreements are binding contracts and can have significant implications.

Patrick v. Running Warehouse, LLC, No. 22-56078 (9th Cir. Feb. 12, 2024).

Get Ready For Fundraising Season

By Updating Your Gift Acceptance Policy.

We are quickly approaching fundraising season, making it the perfect time to update or adopt a Gift Acceptance Policy! A Gift Acceptance Policy sets forth, among other things, the types of gifts a school will accept freely, what types of gifts require additional consideration before accepting, and the types of gifts a school will not accept, all subject to various procedures outlined in the Policy. Having a detailed and up-to-date Gift Acceptance Policy is considered a best-practice that can aid a school in accepting gifts that are mission aligned, avoid accepting gifts with costly administrative burdens, and spot common pitfalls associated with certain types of gifts. When updating or adopting a Gift Acceptance Policy, here are some items to consider:

1. Who is permitted to solicit gifts? A Gift Acceptance Policy should identify who may solicit funds on behalf of the school and under what circumstances. For example, the policy may provide that certain employees or administrators should oversee and work with all parent fundraising efforts or any contracts with commercial fundraisers. Indeed, any fundraising efforts or campaigns involving parent associations, should be overseen by or coordinated with the school and a Gift Acceptance Policy is a great place to outline the school and the association’s respective rights and obligations with respect to fundraising.

2. Conflict of Interest. A Gift Acceptance Policy should identify a school’s policies with respect to conflicts of interest, such as any conflict of interest policies in the Employee Handbook or adopted by the Board, and explain how those policies apply to fundraising.

3. Types of Gifts. Gifts do not always come in the form of unrestricted monetary donations. Gifts can come in many unique or creative forms, such as real property, supplies, services, or securities. Each different type of gift comes with its own unique set of challenges, and a well-written Gift Acceptance Policy will serve as a guide for identifying whether and under what conditions a school will accept various types of gifts. For example, it is common to have a provision in a Gift Acceptance Policy that states only publically traded securities will be accepted, to avoid the burden, complexities, and risks of accepting a gift of an ownership share in a company that cannot be easily converted to cash. As another example, real property can be very valuable, but very burdensome and come with substantial liabilities. Accordingly, a Gift Acceptance Policy should state that gifts of real property will not be automatically accepted and that a school must first conduct diligence (with the aid of counsel and other appropriate consultants) into things like the environmental hazards, title, usefulness, marketability, and carrying costs. Similarly, a Gift Acceptance Policy should state that restricted gifts will not automatically be accepted, without careful consideration by the School into issues, such as whether the restriction is consistent with a school’s values, overly burdensome (e.g., require specific programs be created without adequate funding), or could create undue legal risks.

4. List of Circumstances When a School Will Not Accept a Gift. As noted above, there may be times when a school wishes to say no to a gift, and often a Gift Acceptance Policy will list specific circumstances when a school will not accept a gift (e.g., the gifts could negatively impact the school’s tax-exempt status). Having that kind of list in a well-written Gift Acceptance Policy can help a school preserve its relationship with a donor when the school must say no to a proposed gift and can help facilitate conversations with a donor about alternative ways to give.

5. Naming and Recognition. One of the most important parts of a Gift Acceptance Policy, are the provisions setting forth the types of recognition a school may implement for different types of donors, including when a school will provide naming rights in

exchange for a gift. These sort of provisions can help a school explain in advance, why the school will require in a gift agreement or pledge agreement certain rights to modify, remove, or provide alternative naming options, which helps preserve a school’s ability to remove a name in the event that continued association between the name and the school is no longer in the school’s best interests.

The above list is not exhaustive, but should provide you with a jumping off point in reviewing or preparing your school’s Gift Acceptance Policy. LCW is also available to help with advice on Gift Acceptance Policies, including helping tailor your policy to the unique needs and experiences of your school, as you prepare for the fundraising season.

did you know...?

• Assembly Bill No. 659, the Cancer Prevention Act, requires schools to notify families of sixth graders about human papillomavirus (HPV) vaccination recommendations. The California Department of Education has released a template letter for schools to use, which can be found here. More information about school immunization requirements can be found here.

• All California employers are required to distribute six pamphlets to employees. Two of them, Unemployment Insurance and Workers’ Compensation Rights and Benefits, have mandatory updates for 2024. Schools should make sure they are giving the most current pamphlet version to their employees. The Unemployment Insurance information is in the For Your Benefit Pamphlet, which can be found here. The Workers’ Compensation Rights and Benefits information is in the Time of Hire Pamphlet, which can be found here.

• The Center for Disease Control (CDC) has issued updated COVID-19 guidance. People who have tested positive can return to normal work activities when they are fever-free for at least 24 hours without taking medication, rather than undergoing a 5-day isolation period. The CDC has issued isolation “recommendations,” such as staying home and away from others for at least 5 days and wearing a high-quality mask when indoors and around others. More information about the updated guidance can be found here.

• A group of California legislators have proposed paid pregnancy leave for public school teachers. If enacted, this law would provide for up to 14 weeks of leave with full pay for an employee who is required to be absent because of pregnancy, miscarriage, childbirth, termination of pregnancy, or recovery from those conditions. As currently written, this proposed law would not apply to private schools, but it will be important legislation to monitor as private schools consider their own leave policies. The proposed bill can be found here.

• The Federal Trade Commission (FTC) is finalizing a proposed rule, that if implemented, would prohibit the impersonation of any individual and prohibit companies from supplying technology they know or reasonably should have known would facilitate impersonation. This rule is to combat the rise of AI tools being used to impersonate individuals via voice cloning and other AI-driven scams. More information can be found here. The California Department of Education has also published tools for learning with AI and about AI, which can be found here

benefits corner

By: Stephanie J. Lowe

IRS Lowers ACA Employer Mandate Penalties For 2025.

The IRS has announced the adjusted 2025 penalty amounts for violations of the Affordable Care Act’s employer shared responsibility provisions (otherwise known as the ACA Employer Mandate). The ACA Employer Mandate authorizes the Internal Revenue Service (IRS) to assess a penalty on applicable large employers under one of the following two circumstances:

A. The applicable large employer fails to offer “substantially all” of its full-time employees and their dependents the opportunity to enroll in minimum essential coverage and any full-time employee receives a subsidy for coverage through Covered California (Penalty A) (26 U.S.C. section 4980H(a)(1)); or

B. The applicable large employer offers coverage to full-time employees and their dependents that is “unaffordable” or does not offer “minimum value” and a full-time employee receives a subsidy for coverage through Covered California (Penalty B). (26 U.S.C. 4980H(b)(1).)

The amount of the penalties changes year-to-year. For plan years beginning after December 31, 2024, Penalty A will be $2,900 per year ($241.67 per month) multiplied by the number of full-time employees employed by the employer less 30. Penalty B will be $4,350 per year ($362.50 per month) multiplied by the number of full-time employees who obtain subsidized coverage through Covered California. These penalty amounts for 2025 are lower than the penalty amounts currently in place for 2024 ($2,970 per year for Penalty A and $4,460 per year for Penalty B).

Here are some examples of how Penalty A and Penalty B are calculated based on the penalty amounts for 2025:

Penalty A Example: If an applicable large employer has 100 full-time employees and fails to provide “substantially all” of its full-time employees and their dependents the opportunity to enroll in minimum essential coverage and at least one of those employees receives a subsidy for coverage through Covered California for 12 months, then the IRS could assess a Penalty A at $2,900 multiplied by 70 (100 minus 30 full-time employees), which is $203,000.

Penalty B Example: If an applicable large employer has 100 full-time employees and fails to offer coverage that that is affordable and provides “minimum value”, and 10 of those employees receive a subsidy for coverage through Covered California for 12 months, then the IRS could assess a Penalty B in the amount of $43,500 ($4,350 multiplied by 10 employees who obtain the subsidy).

While employers who intend to offer full-time employees and their dependents with affordable minimum essential coverage hope to never face these penalties, it helps to be aware of the adjusted amounts year-to-year as part of staying up to date on the ACA. For more information, see IRS Revenue Procedure 2024-14.

Cafeteria Plan Compliance Question:

Question: Can an employer offer a 457(b) deferred compensation plan as a cafeteria plan benefit?

Answer: No. Section 125 cafeteria plans may not offer any benefit that defers the receipt of compensation, with limited exceptions for 401(k) plans and certain health savings accounts. (26 U.S.C. section 125(d)(2).) Since 457(b) plans are deferred compensation plans, they cannot be offered as a cafeteria plan benefit. For example, an employer cannot allow employees to make elections to contribute to a 457(b) plan through a cafeteria plan’s salary reduction agreement process or allow an employee to place unused employer contributions from the cafeteria plan directly into a 457(b) plan. While employers may certainly offer a 457(b) plan, it must be offered and administered outside of and unrelated to a cafeteria plan.

Consortium Call Of The Month

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: Answer:

The LCW attorney advised that the School should consider the following:

A School administrator reached out asking about hiring a part-time accountant who lives out of state. The candidate shared that they have family near the School, so can come in when needed. The School administrator asked what legal considerations or potential liabilities they should be aware of before moving forward with the candidate.

• Whether the candidate would need to come to work on short notice, since that could be difficult with the employee living out of state. This could potentially set a precedent for other staff if they perform job duties that could be performed remotely.

• If the School does hire this candidate, there should be an agreement in place which sets forth the expectations around the remote work, for example what hours this employee needs to be available - especially given the time difference, and completing time records, and taking meal and rest breaks.

• The School should reach out to their payroll company to see if they can assist the School with registering for an employer tax ID in another state. The School should also reach out to its workers’ compensation insurance carrier to ask about coverage for this employee out of state – a separate workers’ compensation policy may be needed for this employee.

• The School will need to register for unemployment insurance in this state, and the School can ask their payroll company if that is something they assist with.

• The School should reach out to an employment attorney in that state in order to ensure that the School is complying with that state’s labor and employment laws. LCW is only able to advise on California law.

lcw best timeline

MARCH - END OF APRIL

The budget for next school year should be approved by the Board.

Issue contracts to existing staff for the next school year.

Issue letters to current staff who the School is not inviting to come back the following year.

Assess vacancies in relation to enrollment.

Post job announcements and conduct recruiting.

• Resumes should be carefully screened to ensure that applicant has necessary core skills and criminal background and credit checks should be done, along with multiple reference checks.

Summer Program

• Advise staff of summer program and opportunity to apply to work in the summer, and that hiring decisions will be made after final enrollment numbers are determined at the end of May.

• Distribute information on summer program to parents and set deadline for registration by end of April.

• Enter into Facilities Use Agreement for Summer Program, if not operating summer program.

Transportation Agreements:

• Assess transportation needs for summer/next year.

• Update/renew relevant contracts.

MAY

Complete hiring of new employees for next school year.

Complete hiring for any summer programs.

If service agreements expire at the end of the school year, review service agreements to determine whether to change service providers (e.g., janitorial services, if applicable).

• Employees of a contracted entity are required to be fingerprinted pursuant to Education Code Section 33192, if they provide the following services:

ƒ School and classroom janitorial.

ƒ School site administrative.

ƒ School site grounds and landscape maintenance.

ƒ Pupil transportation.

ƒ School site food-related.

• A private school contracting with an entity for construction, reconstruction, rehabilitation, or repair of a school facilities where the employees of the entity will have contact, other than limited contact, with pupils, must ensure one of the following:

ƒ That there is a physical barrier at the worksite to limit contact with pupils.

ƒ That there is continual supervision and monitoring of all employees of that entity, which may include either:

practices

Each month, LCW presents a monthly timeline of best practices for private and independent schools. The timeline runs from the fall semester through the end of summer break. LCW encourages schools to use the timeline as a guideline throughout the school year.

ƒ Surveillance of employees of the entity by School personnel; or

ƒ Supervision by an employee of the entity who the Department of Justice has ascertained has not been convicted of a violent or serious felony, which may be done by fingerprinting pursuant to Education Code Section 33192. (See Education Code Section 33193).

If conducting end of school year fundraising:

Raffles:

• Qualified tax-exempt organizations, including nonprofit educational organizations, may conduct raffles under Penal Code Section 320.5.

• In order to comply with Penal Code Section 320.5, raffles must meet all of the following requirements:

ƒ Each ticket must be sold with a detachable coupon or stub, and both the ticket and its associated coupon must be marked with a unique and matching identifier.

ƒ Winners of the prizes must be determined by draw from among the coupons or stubs. The draw must be conducted in California under the supervision of a natural person who is 18 years of age or older.

ƒ At least 90 percent of the gross receipts generated from the sale of raffle tickets for any given draw must be used to benefit the school or provide support for beneficial or charitable purposes.

• 50/50 raffles may only be conducted by major league sports nonprofits.

Auctions:

• The School must charge sales or use tax on merchandise or goods donated by a donor who paid sales or use tax at time of purchase.

ƒ Donations of gift cards, gift certificates, services, or cash donations are not subject to sales tax since there is not an exchange of merchandise or goods.

ƒ Items withdrawn from a seller’s inventory and donated directly to nonprofit schools located in California are not subject to use tax.

ƒ For example, if a business donates items that it sells directly to the School for the auction, the School does not have to charge sales or use taxes. However, if a parent goes out and purchases items to donate to an auction (unless those items are gift certificates, gift cards, or services), the School will need to charge sales or use taxes on those items.

Liebert Cassidy Whitmore