May a 501(c)(3) organization devoted to strengthening African-American communities fire its executive director after she has endorsed a white Jew for mayor without violating antidiscrimination laws?

That’s the question facing a trial court in New York City in a suit brought by Joyce Johnson, the CEO of Black Equity Alliance, who was fired after she endorsed Mayor Michael Bloomberg for a third term as mayor. She sued both the organization and its individual directors for damages.

In response to a motion to dismiss filed by all defendants before they answered the complaint, the Court has dismissed the claims against the individual volunteer directors, including one who was separately paid as a consultant to the organization, but refused to dismiss the case against the organization without further proceedings. (Johnson v. Black Equity Alliance, Supreme Court of NY, New York County, No. 106797/09, 1/21/10.)

The issue arose when Johnson appeared at a press conference with other individuals endorsing Bloomberg for mayor in March 2009.  She had been hired by the Equity Alliance as an at-will employee in 2008 with a long history of political involvement.  Although she said that she had not spoken at the press conference in order to avoid confusion about the fact that she was making a personal endorsement and not acting on behalf of the Equity Alliance, the press reports of the event identified her affiliation.

After the event, she said she was told by several directors that it would not “look good” for the Black Equity Alliance to endorse a white Jew.  She said that another director expressed concern that her endorsement could jeopardize the organization’s charitable status.  After an emergency board meeting to which she was not invited although she was a member of the board, she said she was offered a month’s severance pay to resign.  When she refused, she was terminated.  She said her termination letter did not state a reason for the action.  She sued for violation of the state labor law and antidiscrimination law.

The directors invoked the state’s volunteer protection law, which provides that a volunteer director of a charitable organization is immune from suit absent allegations of gross negligence or intent to cause harm. 

Johnson claimed that the directors were not unpaid because they receive certain perquisites, such as having the Alliance pay for their attendance at various events.  She also said that one of the directors was paid as a consultant to help develop a business plan.

The Court ruled that the consultant was not paid for her service as a director and was not thereby disqualified from protection for actions in her role as a director.  It also held that since the CEO had not cited any case or statutory reference that the perquisites constitute compensation of the type envisioned by the statute, the directors were entitled to the protection.

The Court also ruled that the CEO had not alleged any facts that would show the directors acted with gross negligence or intent to harm, and dismissed the case against them.  Since the Court ruled on the basis of the state law, it did not consider a defense under the federal Volunteer Protection Law.  (See Ready Reference Page:  “Federal Law Protects Nonprofit Volunteers”)

With respect to the organization, the Court said that conflicting claims as to the reason for the termination precluded a determination at this preliminary stage of the proceedings. The CEO argued that it was unlawful discrimination because she endorsed a white Jew. The organization appeared to argue that it was based on its fear of losing its tax-exempt status.

YOU NEED TO KNOW

The most recent IRS guidance on political activity makes it pretty clear that a personal endorsement by a charity’s executive in a press conference off of the premises is not cause for revocation of exemption, although such an endorsement on the premises, or putting a picture of the press conference in the organization’s bulletin showing the executive giving the endorsement would cross the line.  (See Ready Reference Page:  “IRS Issues New Guidance on Electioneering”)  A charity need not fire its top executive for making an endorsement, but may nevertheless think it is a good idea under the circumstances.  Whether it would be considered illegal discrimination in a case like this remains to be seen.