Nonprofits must of course be aware of and compliant with applicable anti-discrimination laws. The first law we’ll review in this area is Title VII of the Civil Rights Act of 1964.

Employment Discrimination

Title VII protects employees and job applicants from employment discrimination based on race, color, religion, sex, pregnancy (and pregnancy-related conditions), sexual preference or transgender status*, and national origin. Title VII generally applies only to employers, including nonprofit employers, with 15 or more employees.

* See U.S. Supreme Court decision in Bostock v. Clayton County, Georgia (2020) (held: “An employer who fires an individual merely for being gay or transgender violates Title VII.”)

It shall be an unlawful employment practice for an employer –

(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or

(2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.

Under Title VII, it is unlawful to discriminate in any aspect of employment, including:

• Hiring and firing;
• Compensation, assignment, or classification of employees;
• Transfer, promotion, layoff, or recall;
• Job advertisements and recruitment;
• Testing;
• Use of company facilities;
• Training and apprenticeship programs;
• Retirement plans, leave and benefits; or
• Other terms and conditions of employment.

Discriminatory practices under Title VII also include:

• Harassment on the basis of race, color, national origin, sex (including pregnancy, sexual orientation, and gender identity) or religion;
• Refusal or failure to reasonably accommodate an individual’s sincerely held religious observances or practices, unless doing so would impose an undue hardship on the operation of the employer’s business;
• Employment decisions based on stereotypes or assumptions about the abilities, traits, or performance of individuals of a certain race, color, national origin, sex (including pregnancy, sexual orientation, and gender identity), or religion;
• Denial of employment opportunities to an individual because of marriage to, or association with, an individual of a particular race, color, national origin, sex (including sexual orientation and gender identity) or religion; and
• Other employment decisions based on race, color, national origin, sex (including pregnancy, sexual orientation, and gender identity) or religion.

Religious discrimination includes failing to reasonably accommodate an employee’s religious practices where the accommodation does not impose undue hardship. Common accommodations include those with respect to dress, grooming, days off, schedule changes, and daily prayers. However, Title VII provides an exception for religious organizations and certain educational organizations affiliated with a religion or religious entity in making hiring and employment decisions on the basis of an individual’s particular religion. See What You Should Know: Workplace Religious Accommodation (EEOC).

Federal laws prohibit covered entities from retaliating against a person who files a charge of discrimination, participates in a discrimination proceeding, or otherwise opposes an unlawful employment practice.

Disparate Treatment

Disparate treatment of an employee due to their membership in a protected class under Title VII is perhaps the most common form of employment discrimination. The basis of such claim is a difference in treatment between similarly situated individuals. 

To prove disparate treatment, the charging party must establish that respondent’s actions were based on a discriminatory motive. …The courts and the Commission have recognized that it is difficult and often impossible to obtain direct evidence of discriminatory motive. They have held that discriminatory motive can be inferred from the fact of differences in treatment. 

https://www.eeoc.gov/laws/guidance/cm-604-theories-discrimination

Generally, in order to establish a prima facie case of disparate treatment to support a claim against an employer, an employee must show:

1. The employee a member of a protected class under Title VII.
2. The employer new of employee’s membership in a protected class.
3. The employee suffered some harm.
4. Similarly situated employees were either treated more favorably or not subjected to the same or similar adverse treatment.

To rebut a disparate treatment claim, an employer must provide  a legitimate, non-discriminatory reason for its actions. 

Disparate Impact

Unlawful discrimination can also result from neutral employment policies and practices which are applied evenhandedly to all employees but adversely impact one or more protected groups relative to others and cannot be justified as serving a legitimate business goal for the employer.

Generally, in order to establish a prima facie case of disparate impact to support a claim against an employer, an employee must show  an explicit, causal connection between an employment policy or practice and the disparate impact.

To rebut a disparate impact claim, an employer must produce (but not necessarily prove) a legitimate, non-discriminatory reason (business necessity) for its employment practice. Even if the employer provides such reason, the employee may still prevail if they can show that the employer refused to adopt an available alternative employment practice that has less disparate impact and serves the employer’s legitimate needs.

Preferential Treatment on Account of an Imbalance

Title VII does not require an employer to provide preferential treatment to an individual or group of individuals because of low representation.

Nothing contained in this subchapter shall be interpreted to require any employer, employment agency, labor organization, or joint labor-­management committee subject to this subchapter to grant preferential treatment to any individual or to any group because of the race, color, religion, sex, or national origin of such individual or group on account of an imbalance which may exist with respect to the total number or percentage of persons of any race, color, religion, sex, or national origin employed by any employer, referred or classified for employment by any employment agency or labor organization, admitted to membership or classified by any labor organization, or admitted to, or employed in, any apprenticeship or other training program, in comparison with the total number or percentage of persons of such race, color, religion, sex, or national origin in any community, State, section, or other area, or in the available work force in any community, State, section, or other area.

It would therefore seem that providing preferential treatment could mean discriminating against others under a disparate treatment theory. However, federal regulations provide:

The principle of nondiscrimination in employment because of race, color, religion, sex, or national origin, and the principle that each person subject to title VII should take voluntary action to correct the effects of past discrimination and to prevent present and future discrimination without awaiting litigation, are mutually consistent and interdependent methods of addressing social and economic conditions which precipitated the enactment of title VII. Voluntary affirmative action to improve opportunities for minorities and women must be encouraged and protected in order to carry out the Congressional intent embodied in title VII. 4 Affirmative action under these principles means those actions appropriate to overcome the effects of past or present practices, policies, or other barriers to equal employment opportunity. Such voluntary affirmative action cannot be measured by the standard of whether it would have been required had there been litigation, for this standard would undermine the legislative purpose of first encouraging voluntary action without litigation. Rather, persons subject to title VII must be allowed flexibility in modifying employment systems and practices to comport with the purposes of title VII. Correspondingly, title VII must be construed to permit such voluntary action, and those taking such action should be afforded the protection against title VII liability which the Commission is authorized to provide under section 713(b)(1).

29 C.F.R. § 1608.1(c)

3 Circumstances Under Which Voluntary Affirmative Action is Appropriate

Adverse effect. Employers may take affirmative action based on an analysis which reveals facts constituting actual or potential adverse impact, if such adverse impact is likely to result from existing or contemplated practices.

Effects of prior discriminatory practices. Employers may also take affirmative action to correct the effects of prior discriminatory practices. The effects of prior discriminatory practices can be initially identified by a comparison between the employer’s work force, or a part thereof, and an appropriate segment of the labor force.

Limited labor pool. Because of historic restrictions by employers, there are circumstances in which the available pool, particularly of qualified minorities and women, for employment or promotional opportunities is artificially limited. Employers may, and are encouraged to take affirmative action in such circumstances, including, but not limited to, the following:

1. training plans and programs, including on-the-job training, which emphasize providing minorities and women with the opportunity, skill, and experience necessary to perform the functions of skilled trades, crafts, or professions;
2. extensive and focused recruiting activity;
3. elimination of the adverse impact caused by unvalidated selection criteria; and
4. modification through collective bargaining where a labor organization represents employees, or unilaterally where one does not, of promotion and layoff procedures.

If one of the circumstances for taking affirmative action applies, the employer must establish a plan (preferably written) that contains the following three elements:

1. a reasonable self-analysis to determine whether employment practices do, or tend to, exclude, disadvantage, restrict, or result in adverse impact or disparate treatment of previously excluded or restricted groups or leave uncorrected the effects of prior discrimination, and if so, to attempt to determine why;
2. a reasonable basis for concluding action is appropriate (without any admission or formal finding that the person has violated Title VII); and
3. reasonable action tailored to address the problems disclosed by the self-analysis and to ensure that employment systems operate fairly in the future, while avoiding unnecessary restrictions on opportunities for the workforce as a whole.

Independent Contractors

While Title VII does not apply to independent contractors, whether a worker is properly classified as an independent contractor instead of as an employee may be an issue, even if hired pursuant to a written independent contractor agreement. See, e.g., Independent Contractor (Self-Employed) or Employee? (IRS). Also state anti-discrimination laws, some of which may mirror Title VII, may provide certain protections to independent contractors, depending on the state.

Grant Agreements to Individuals or Contracts

Title VII would not apply to an individual who is a true grantee of a grantmaker, but the identification of the individual as a grantee rather than an employee may be an issue, even if the relationship between the “grantee” and grantmaker is memorialized in a written grant agreement.

Perhaps the first issue that would require review is whether the agreement in substance is (1) a grant agreement documenting terms of a gift to the grantee, possibly for the grantee to use to advance a charitable purpose; or (2) a true contract, possibly requiring the grantee to provide a service for the grantmaker’s benefit or use. The distinction is often not a simple or easy one to make. Some use the existence of a penalty for not accomplishing the contemplated task (beyond return of the grant) as the distinguishing characteristic of a contract, but it can be more complicated than that. And the distinction is important.

If the agreement is a contract, then the grantmaker may need to address the issue of whether the individual hired under the contract is legally an independent contractor or an employee. And if they are an employee, then Title VII protections apply. By extension, then the applicants for the grant may legally be job applicants also protected by Title VII. And if the grantmaker restricted qualified applicants to members of only one race, would this be a Title VII violation? What if the grantmaker designed this restriction pursuant to an affirmative action plan? These are some of the big questions many nonprofits are struggling with now. And I’ll be moderating a session at the 25th Annual Western Conference on Tax Exempt Organizations (WCTEO) dealing with this topic this December. More to follow.

Follow-up Posts

Anti-Discrimination Laws – Section 1981

Affirmative Action Plans—A Potentially Important Safeguard for Race-Based Grantmaking

Recent Developments (last updated 8/19/23)

Client Alert: The Supreme Court Grants Certiorari in Muldrow v. City of St. Louis: How the Case Could Bolster Attacks Against Corporate DEI Initiatives (7/21/23) (Jenner & Block, JD Supra)