DATELINE: May 17, 2009, Chicago
The New York Times is reporting that Joyce S. Johnson has filed suit against her former employer, the Black Equity Alliance, over her recent dismal by the organization. Michael Barbaro, Nonprofit Leader Says She Was Fired for Backing Bloomberg (May 13, 2009). She had been the Alliance’s executive director. Unfortunately the documents relating to the suit have not yet been posted by the New York Court System, but the Times article does provide a fair amount of detail.
Johnson alleges that she was fired because she endorsed...
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Mayor Michael R. Bloomberg for New York City Mayor. Her lawyer asserts that Johnson made the endorsement on her personal time and in her personal capacity. Johnson alleges that several board members scolded her for endorsing the mayor without first obtaining their consent. She further alleges that several board members advised her that an endorsement could jeopardize Black Equity Alliance’s Section 501(c)(3) status.
We are pleased to see a board ostensibly exercising some oversight. Unfortunately the board members got the law wrong, if the facts are as alleged and reported in the Times article. The scolding board members should have taken a look at Revenue Ruling 2007-41. It contains 21 useful examples of permissible and impermissible conduct when it comes to the question of political activity by Section 501(c)(3) organizations. Situation 3 is particularly relevant, providing:
President A is the Chief Executive Officer of Hospital J, a section 501(c)(3) organization, and is well known in the community. With the permission of five prominent healthcare industry leaders, including President A, who have personally endorsed Candidate T, Candidate T publishes a full page ad in the local newspaper listing the names of the five leaders. President A is identified in the ad as the CEO of Hospital J. The ad states, “Titles and affiliations of each individual are provided for identification purposes only.” The ad is paid for by Candidate T’s campaign committee. Because the ad was not paid for by Hospital J, the ad is not otherwise in an official publication of Hospital J, and the endorsement is made by President A in a personal capacity, the ad does not constitute campaign intervention by Hospital J.
The operative phrase in this example is “personal capacity.” In our view, Johnson’s endorsement posed no risk to Black Equity Alliance’s tax-exempt status if the facts support her position that the endorsement was made in her personal capacity. In fact, and we have not fully researched the law on this point, we are far more troubled from the standpoint of tax-exemption by the notion that the executive director must first obtain the consent of the board before making a political endorsement. In that case, the executive director appears to be acting in her capacity as the head of the organization and the board appears to be intervening on behalf of a candidate in its official capacity. Situation 6 in the Revenue Ruling 2007-41 supports our concern, providing:
Chairman D is the chairman of the Board of Directors of M, a section 501(c)(3) organization that educates the public on conservation issues. During a regular meeting of M shortly before the election, Chairman D spoke on a number of issues, including the importance of voting in the upcoming election, and concluded by stating, “It is important that you all do your duty in the election and vote for Candidate W.” Because Chairman D’s remarks indicating support for Candidate W were made during an official organization meeting, they constitute political campaign intervention by M.
If the Black Equity Alliance board members who spoke with Johnson were acting in an official capacity, Situation 6 suggests that their actions may be the more troubling from the standpoint of tax-exemption, assuming the Times article accurately described the facts. At worst, we suspect their actions would be viewed as a foot fault by the IRS, but you never know.
Now, let’s step back from the Section 501(c)(3) issues. The lawsuit poses a number of interesting employment law issues. Can an organization fire someone for her political views when expressed outside the workplace. The natural inclination for many people will be to look to the First Amendment, but unless the employer is a governmental entity, that is the wrong inclination. As a general rule, the First Amendment provides no protection for employees who work in the private sector.
We have little employment law experience, but we are unaware of any federal statutory law that prohibits discrimination solely on the basis of political views or activity. We recognize that individual states do have laws that protect certain types of political activity. Johnson’s lawyer claims that it is illegal to terminate an employee for outside political activity. We assume he must be referring to New York law.
The question we find particularly intriguing is whether an employer could limit political endorsements and political activity as a condition of employment. We would find such a prohibition to be unusual, but could see instances where business circumstances could justify such a requirement. Imagine a nonprofit that depends heavily on state and local discretionary grants. We could understand why the organization would want to keep a low and non-controversial profile by asking senior employees to refrain from endorsing any local candidates. Whether such a request is permissible would seem to turn on individual state law.
We suspect that this case may turn on whether Johnson had an employment contract or was employed at will. The pleadings apparently raise a question as to whether Johnson's dismal was based in part on considerations of race. We look forward to reading the pleadings once they are posted online. This is a case that we will be following.
If anyone has any thoughts on any of the legal issues, please send us an e-mail.
Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, any advice (but none is intended) relating to federal taxes that is contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.
| THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NONPROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL.
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