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socrateaser
socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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Unemployment from 501(c)3??

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A person I know was working for a media/radio company that was religious focused. Basically a religious media ministry. They worked there, but were paid and/or employed by either an agency hired by the company or a subsidiary. This is in the state of CA. 


The person was laid off from their job due to cutbacks and was told they would receive unemployment by the company. They went and filed for unemployment and the office told them they were rejected because it was religious. 
Now they are a media company that focuses on religion and they are a 501(c)3. They sell items and take donations.


They are probably exempt from UI, so can the person not get unemployment because of this? Is the only way they could get unemployment is if they company voluntarily paid UI?


Also, does it matter if they were not actually employed by the 501(c)3? They were getting their payroll and were actually employed by another company; maybe a subsidiary, parent company or stand along company. But it also could have just been an agency that the 501(c)3 uses. Does this come into play at all? Is there any way they can get unemployment other than if they voluntarily paid? Especially if they are employed and getting checks from another company?
This question appears to be a duplicate. Are you looking for a second opinion?
Customer: replied 5 years ago.
Sure. Does it matter if the person was being paid or employed by another company?

Is there any way they can collect unemployment if the main 501 company was not voluntarily paying UI?

Just basically trying to find out if there is anyway at all for the person to get UI.

On the day of the lay-off the company told the person they would get unemployment. They also said they had to sign waivers etc. that they would not file a lawsuit if they wanted a severance. They either lied or didn't know, plus it was like forcing them to sign under duress.
Does it matter if the person was being paid or employed by another company?

A: It could make a huge difference. The issue would be whether or not the other company is involved in what the IRS calls an "unrelated business activity." Tax-exempt organizations are only exempt to the extent that they actually undertake activities within the scope of their exempt purpose. Example: If a church runs a car dealership, the employees of that dealership are not exempt from payroll tax. You could potentially make a reasonable first-level appeal to the UI administrative law judge by showing that the employee's actual employer is not engaged in a religious function from which the employer would be exempt from paying unemployment contributions.

Is there any way they can collect unemployment if the main 501 company was not voluntarily paying UI?

A: If EDD finds that the relationship with the church is a sham to avoid payroll taxes, the employee will get UI benefits, and the employer will get hit with huge fines.

On the day of the lay-off the company told the person they would get unemployment. They also said they had to sign waivers etc. that they would not file a lawsuit if they wanted a severance. They either lied or didn't know, plus it was like forcing them to sign under duress.

A: This is not particularly relevant. What matters is what the employee's job description was, and what the employing organization's business was, and whether that business has anything related to the church function.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!


Customer: replied 5 years ago.
I'm not sure if they were being paid by another company that was a subsidiary or if they were just using an agency to handle the payroll.

If they were just using an agency, then that probably doesn't make a difference? But if it was a subsidiary or another company that was actually doing the employing, would they also have to be a 501c3?
Unemployment Code 634.5 provides exclusion from UI contributions for employees:

  • (a) In the employ of either of the following:
    • (1) A church or convention or association of churches.
    • (2) An organization which is operated primarily for religious purposes and which is operated, supervised, controlled, or principally supported by a church or convention or association of churches.
  • (b) By a duly ordained, commissioned, or licensed minister of a church in the exercise of his or her ministry or by a member of a religious order in the exercise of duties required by the order.

A payroll company that simply calculates pay and cuts checks would not be a separate employer. An HR staffing company or temp service would be a separate employer, that is not a church or organization controlled by a church, and it would be liable for unemployment contributions.

A separate business business/subsidiary would have to be both controlled by the church and operated for religious purposes, or it would be liable for unemployment contributions.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!


socrateaser and other California Employment Law Specialists are ready to help you
Customer: replied 5 years ago.
Okay, thanks. If you find any additional info or have other thoughts that would be great!

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