Court Ruling Reveals Loophole in Bias Law

A California Supreme Court decision this week has revealed a loophole in state law that could allow parochial schools, hospitals and other nonprofit entities with religious ties to evade some race and sex discrimination lawsuits.

In a 7-0 decision, the justices found that virtually any nonprofit “religious entity” can claim exemption from the state Fair Employment and Housing Act, a 39-year-old statute underpinning about 10,000 discrimination claims filed annually in California.

The trouble is, the state has no firm policy to define a “religious entity,” and some observers worry the loophole will permit hospitals, charities and other organizations to repel lawsuits by linking themselves to a church or other religious body.

“If it’s Booth’s Religious Tire Center, and I believe these tires were made with the help of God, can I then say I’m going to be exempt? I think you can at least argue you would be,” said attorney Bradley G. Booth, who represented hospital nurse June McKeon in the case decided Monday.

McKeon, who is black, said Mercy Healthcare Sacramento improperly stalled her promotion while it hired two white male supervisors.

Lawyers for Mercy Healthcare said the hospital was exempt from the law because it was financed mostly by Roman Catholics, and noted the property was sprinkled with holy water.

But hospital attorney Steven W. Parrish conceded the question of what qualifies as religious is left “unresolved.”

Officials at the state Department of Fair Employment and Housing, which investigates discrimination claims, have wrestled with the question for years.

By 1993, the department compiled a list of entities it believed were exempt--including St. Mary Medical Center in Long Beach and St. Joseph Medical Center in Burbank, educational institutions such as Loma Linda University, as well as the Salvation Army and the relief organization World Vision.

But Suzanne Ambrose, the department’s chief counsel, said the list has been scrapped and officials must analyze each organization on a case by case basis.

“We were actually hoping the [court] case would provide some clarification,” Ambrose said. “I don’t want to say we’re open to people doing a snow job on us.”

Monday’s court ruling also spotlighted an apparent contradiction within Catholic Healthcare West, the San Francisco-based chain that owns Mercy Healthcare. While the hospital claimed its mission exempted it from the state antidiscrimination law, a spokeswoman said that with a few exceptions, the chain does not claim exemption from state payroll tax laws, which can exclude people in the employ of an entity “operated primarily for religious purposes.”

Parrish, the hospital’s lawyer, said the hospital interpreted the tax exemption to apply only to church officials, not all hospital workers.

The court decision outraged workers who are trying to unionize Catholic Healthcare West, one of the state’s largest hospital chains.

“We’re just like workers at any other hospital. I can’t believe they’re saying we’re not covered by the same laws that protect other hospital employees,” said Mary Hillman, a respiratory therapist at CHW’s Mercy American River Hospital who is backing the union.

At least 100,000 people in California are employed by nonprofit entities with a religious mission, the vast majority of them churches and private schools, according to Department of Finance estimates.

Mercy Healthcare spokeswoman Cindy Holst downplayed the impact of the decision, and noted the hospital is still subject to the federal antidiscrimination law. But that law, the Civil Rights Act of 1964, has a shorter statute of limitations for complaints.

The federal law also applies only to companies with at least 15 employees. Under the loophole in state law, workers at smaller nonprofit entities in California have no legal recourse, experts said.

In the major federal case on the subject, the U.S. Supreme Court ruled in 1987 that a Mormon-owned public gymnasium in Utah could fire employees who didn’t qualify as church members.

In the state case that resulted in Monday’s ruling, Mercy Healthcare insisted it didn’t discriminate against nurse McKeon.

Holst, the Mercy Healthcare spokeswoman, said that despite winning the case, the hospital “is committed to maintaining a fair and just workplace, free from discrimination of any kind.”