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July - September 2026

Nonprofit News

Table Of Contents 03 Firm Victories

13 Discrimination

04 Program Administration

14 Benefits Corner

06 DEI

16 Benefits Compliance Question

07 Accommodations

17 Did You Know?

08 Artificial Intelligence

18 Featured Consortium Call

11 Retirement

Riley Jacobs Associate | San Diego Alison R. Kalinski Senior Counsel | Los Angeles Stephanie J. Lowe Senior Counsel | San Diego Casey Williams Partner | San Francisco

Connect With Us! Copyright © 2026 Requests for permission to reproduce all or part of this publication should be addressed to Jacqueline Reid, Marketing Manager at 310.981.2000. Cover Photo: Attributed to pexels.com

Nonprofit News is published quarterly for the benefit of the clients of Liebert Cassidy Whitmore. The information in Nonprofit News should not be acted on without professional advice. To contact us, please call 310.981.2000, 415.512.3000, 559.256.7800, 916.584.7000 or 619.481.5900 or e-mail info@lcwlegal.com.

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FIRM VICTORIES Partner Brian Walter And Associate Olga Bryan Deliver Complete Defense Victory In Nurse’s Employment Case. A traveling nurse alleged race discrimination, defamation, and due process violations against one of LCW’s hospital clients. The claims arose after the hospital reported concerns to the nurse’s staffing agency. Parents had repeatedly complained about the nurse’s handling of NICU infants, and the nurse had an unprofessional confrontation with the hospital’s supervisory staff. The staffing agency reassigned the nurse to another hospital, where he continued working at a higher rate of pay. LCW prevailed at every stage of the nurse’s litigation in both federal and state courts. The federal court denied the nurse’s attempt to withdraw deemed admissions, granted summary judgment on the federal claim, and remanded the remaining state law claims. LCW then renewed the hospital’s motion for summary judgment in state court, successfully opposed the nurse’s untimely efforts to reopen discovery, and won summary judgment on the remaining claims.

Partner Paul Knothe And Associate Gabriella Kamran Persuade California Court Of Appeal To Affirm Dismissal In Union Retaliation Case. A fire engineer filed suit in the California Superior Court. He alleged his city employer retaliated against him for his union advocacy in violation of Labor Code section 1102.5, California’s whistleblower statute. During the court-required meet-and-confer process, LCW Attorney Kamran warned the fire engineer’s counsel that these claims fell within the Public Emploment Relations Board’s (PERB’s) exclusive initial jurisdiction. When the fire engineer persisted with the lawsuit, the city obtained a dismissal without leave to amend because the superior court lacked jurisdiction. The fire engineer appealed. He argued that he should have been permitted to pursue his claims in court because PERB could not adequately address his related whistleblower claims under Labor Code section 1102.5. LCW continued to argue that PERB has exclusive initial jurisdiction over his action for retaliation based on union activity, even if the same alleged facts could also support a Labor Code violation. The California Court of Appeal agreed with LCW and held that employees who alleged retaliation based on union activity may first have to pursue administrative remedies before agencies like the National Labor Relations Board (NLRB) and PERB. The NLRB and PERB have primary jurisdiction over conduct protected or prohibited by the NLRA, and thus court claims based solely on that conduct are generally preempted. This framework provides important guidance for private-sector nonprofit employers facing claims rooted in union-related activity.

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PROGRAM ADMINISTRATION Interpretation And Translation In California Nonprofits: Legal And Practical Considerations. Providing meaningful access to programs and services is central to the work of many nonprofits. When a client, participant, patient, or other member of the public needs interpretation or translation, providing that access can involve more than finding someone who speaks the same language or translating a document. California nonprofits may need to consider when interpretation or translation is required, who is qualified to provide it, and what procedures should be in place to provide effective access while meeting applicable legal requirements. The Legal Landscape There is no single language access or translation law that applies to every California nonprofit. An organization's obligations, if any, depend on factors including its funding sources, programs and services, contractual obligations, the people it serves, and the nature and importance of the communication involved. For example, California Government Code section 11135 prohibits discrimination based on certain protected classifications, such as national origin or ethnicity, in programs and activities conducted or administered by the State, funded directly by the State, or receiving financial assistance from the State. Accordingly, nonprofits with programs or activities that receive state financial assistance may need to take reasonable steps to ensure meaningful access for people with limited English proficiency, including by providing translated materials, qualified interpreters, or other alternative communication services. The steps required depend on the particular circumstances, including the number of people with limited English proficiency likely to be served, the frequency of their contact with the program, and the nature and importance of the services and communications involved. Even nonprofits that receive no government funding may have obligations when it comes to language access. For example, they may be subject to California's Unruh Civil Rights Act if they constitute business establishments open to the public. The Act prohibits discrimination based on primary language, although it does not itself require services or documents in a language other than English beyond what other federal, state, or local law requires. (Civ. Code, section 51(b), (h)). As another example, nonprofits may have contractual obligations in their grant agreements with foundations or other funders that set expectations or requirements around language access. Separate communication requirements can arise under the Americans with Disabilities Act when interpretation or translation assistance is needed because of a disability. For nonprofits open to the public that are covered by Title III, the ADA may require appropriate auxiliary aids and services, such as qualified sign language interpreters or accessible written materials, when necessary to ensure effective communication. (42 U.S.C. section 12103(1); 28 C.F.R. section 36.303). Given this varied legal landscape, each nonprofit should evaluate the laws, funding conditions, and contractual requirements applicable to its particular programs to determine what language-access measures it must or should implement. Do Not Assume Multilingual Staff Are Qualified to Provide Interpretation Services Speaking the same language as a client does not necessarily make an employee qualified to interpret every conversation. For example, California regulations applicable to certain state-funded or state-supported nonprofits establish standards

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for multilingual employees and qualified interpreters. The regulations define a multilingual employee as a qualified employee with oral proficiency in English and the target language necessary to accurately and readily interpret in the second language. (Cal. Code Regs., tit. 2, section 14100(c)). The regulations separately define a qualified interpreter as a person capable of effectively, accurately, and impartially interpreting spoken or signed communications between people using different languages, both receptively and expressively, using necessary specialized vocabulary and appropriate cultural relevance. (Cal. Code Regs., tit. 2, section 14020(ll)). Helping someone find the correct office is very different from interpreting during a grievance proceeding, an eligibility determination, or a medical discussion. Nonprofits should also consider the employment law implications of using staff as interpreters. If a nonprofit regularly asks an employee hired for another role to provide interpretation, it should consider whether that responsibility is part of the employee's duties, whether training is appropriate, and how the additional responsibility affects the employee's regular workload. Relying on Family Members or Minors Instead of Qualified Interpreters In some cases, a client may offer to have a spouse, friend, or child interpret. Whether a nonprofit may rely on that person depends in part on why interpretation is needed and which laws apply. For example, under Title III of the ADA, when interpretation is required to provide effective communication because of a disability, a covered nonprofit cannot require an individual to bring their own interpreter and generally cannot rely on a minor child to interpret except in an emergency involving an imminent threat to safety or welfare when no interpreter is available. Reliance on an accompanying adult is also limited. (28 C.F.R. section 36.303(c)(2)–(4).) Other laws, including requirements applicable to certain health programs, may impose similar or additional restrictions. Even where a particular law does not prohibit reliance on a family member, nonprofits should consider accuracy, confidentiality, conflicts, and the sensitivity of the information being discussed. Use AI Translation and Interpretation Tools Carefully Nonprofits using AI for interpretation or translation should consider the importance and complexity of the communication, the risk of inaccurate interpretation or translation, confidentiality, and whether human review is appropriate. An AI-generated translation of a routine scheduling reminder differs from an AI translation of an eligibility determination, grievance notice, legal consent form, or other communication affecting a person's rights or access to services. Organizations should also determine whether the laws, regulations, grants, or contracts applicable to their programs impose specific requirements concerning qualified interpreters or translators, including requirements for human interpretation, translation, or review. Organizations should also consider whether information entered into an AI translation or interpretation tool may contain confidential, privileged, health, personnel, or other protected information and should understand how the tool collects, uses, retains, and protects that information. Develop a Language Access Plan Before You Need It A language access plan helps ensure that staff know what to do before the need arises. Some grants also require nonprofits to maintain a language access plan. Depending on the organization, a plan may identify commonly encountered languages, important communications and documents, qualified internal or outside resources, procedures for translated materials, appropriate uses of AI, and the process staff should follow when assistance is needed. Interpretation and translation practices can affect both an organization's legal compliance and its ability to serve the people who rely on its programs effectively. Nonprofits should periodically review their funding, programs, contracts, workforce practices, and the communities they serve to determine whether their approach remains appropriate and legally compliant. Addressing these issues before a need arises can help staff respond consistently, reduce risk, and increase access to programmatic services. • www.lcwlegal.com •

DEI Court Strikes Down Grant Terminations Driven By DOGE Review Process And AI-Generated Screening. In American Council of Learned Societies v. National Endowment for the Humanities, a federal trial court invalidated what it described as the largest mass termination of grants in the history of the National Endowment for the Humanities (NEH). The case arose after the Trump Administration terminated more than 1,400 previously awarded grants, representing over $100 million in congressionally appropriated funds, issued to scholars, writers, universities, museums, and humanities organizations. The challenged terminations followed a series of executive orders directing federal agencies to identify and eliminate programs associated with diversity, equity, and inclusion (DEI), environmental justice, and what the Administration characterized as “gender ideology.” NEH staff initially reviewed grants awarded during the Biden Administration and categorized them based on their perceived relationship to those topics. The review process then shifted to personnel from the U.S. Department of Government Efficiency (DOGE), who independently reviewed grants and developed lists of projects they believed should be terminated. The Court devoted significant attention to the methods used during the review process. According to the opinion, DOGE personnel created spreadsheets identifying grants as “DEI” or “non-DEI” and used keyword searches for terms such as “BIPOC,” “native,” “indigenous,” “tribal,” “gay,” “melting pot,” “social justice,” and “immigrant.” The Court found that DOGE personnel also used ChatGPT to generate short explanations, referred to in the opinion as “DEI Rationales,” for why particular grants allegedly related to DEI. These AI-generated rationales were incorporated into the spreadsheets used to identify grants for termination. The opinion describes numerous examples of grants identified for cancellation, including projects involving Holocaust history, Indigenous history, African American history, Asian American experiences, women’s history, and preservation of cultural archives. The Court noted that many grants were classified as “DEI” simply because they involved minority communities, women, or historically underrepresented groups. The Court also found evidence that grants awarded during the Biden Administration were treated as presumptively subject to review and potential termination. The Court granted summary judgment in favor of the plaintiffs and held that the mass termination violated the First Amendment, the equal protection clause of the Fifth Amendment, and the governing federal statute establishing the NEH. First, the Court concluded that the grant cancellations constituted impermissible viewpoint discrimination because grants were terminated based on perceived support for disfavored ideas and subject matter. The Court reasoned that NEH grants fund private expression rather than government speech, and that the government may not withdraw previously awarded grants because it disagrees with the viewpoints reflected in the funded work. Second, the Court found that the process violated equal protection principles because the review system expressly relied on classifications involving race, ethnicity, religion, sex, sexual orientation, and national origin. The Court concluded that the government could not justify terminating grants based on those characteristics, even under the Administration’s stated goals of promoting merit or reducing wasteful spending. Third, the Court held that DOGE acted ultra vires (i.e., beyond its legal authority). The Court explained that Congress vested grantmaking authority in the NEH Chairperson and established a detailed statutory process for awarding and administering grants. The Court found that DOGE personnel effectively controlled the grant termination decisions, overrode recommendations from NEH leadership, and exercised authority that Congress had never delegated to them. According to the Court, neither the governing statute nor the relevant executive orders authorized DOGE to decide which NEH grants would be terminated.

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The Court certified a class of affected grantees, permanently enjoined the government from enforcing the mass terminations, ordered the government to rescind the termination notices, and declared the terminations unlawful, unconstitutional, and without legal effect. Am. Council of Learned Societies v. NEH (S.D.N.Y. May 7, 2026) 2026 WL 1256545. Note: This case is a significant judicial decision addressing the Trump Administration’s efforts to eliminate programs perceived as connected to DEI. The opinion underscores that governmental decisions affecting funding, programs, or opportunities may still be subject to constitutional scrutiny when they are based on viewpoint, protected characteristics, or criteria that exceed the authority granted by statute.

Accommodations ADA Did Not Require Employer To Provide Paid Leave For Guide Dog Training, Sixth Circuit Finds. Andrea Tumbleson, an art teacher with the Lakota Local School District in Ohio, spent decades teaching despite living with Usher syndrome, a rare genetic condition that has progressively caused her to lose both her hearing and vision. By the time of the events at issue, Tumbleson was completely deaf and relied on cochlear implants to hear, while her vision continued to deteriorate. Despite these challenges, she remained a highly regarded teacher who consistently received positive evaluations and had never been disciplined. Over the years, the employer provided various accommodations, including additional classroom lighting, specialized computer equipment, and accessibility software. As her vision worsened, however, Tumbleson decided that she needed a guide dog to help her navigate daily life safely. Obtaining the guide dog required Tumbleson to attend a mandatory three-week training program in Michigan during the school year. She requested permission to use approximately thirteen (13) days of accrued paid sick leave to attend the training, explaining that the program was medically related and necessary because of her disability. The employer denied the request for paid sick leave, concluding that the training did not qualify as a “personal illness, injury, or exposure to contagious disease” under Ohio law, the collective bargaining agreement, or the employer’s sick-leave policy. At the same time, the employer approved unpaid leave as a reasonable accommodation under the Americans with Disabilities Act (ADA), allowing Tumbleson to attend the training and obtain her guide dog. After successfully completing the program and receiving her guide dog, Henry, Tumbleson sued. She alleged that the employer violated the ADA by discriminating against her based on her disability and by failing to provide a reasonable accommodation. She also asserted that the Family and Medical Leave Act (FMLA) entitled her to use accrued paid sick leave during the training period. The Sixth Circuit rejected all of her claims. With respect to her ADA discrimination claim, the Court explained that disparate treatment claims require evidence that similarly situated non-disabled employees were treated more favorably. Although Tumbleson argued that other employees routinely received sick leave without scrutiny, she could not identify any non-disabled employee who was permitted to use paid sick leave for an absence that did not otherwise qualify under the employer’s policy. Without evidence of a comparator, the claim failed. • www.lcwlegal.com •

The Court also rejected her failure-to-accommodate claim. The ADA requires employers to provide reasonable accommodations to an otherwise qualified individual with a disability, unless doing so would unduly burden the employer. The Court noted, however, that the ADA does not require employers to provide an employee’s preferred accommodation if another reasonable option is available and permits the employee to perform their job. Here, the employer allowed Tumbleson to take unpaid leave so that she could attend the training and obtain her guide dog. Because that accommodation enabled her to achieve the same objective, the Court held that the employer satisfied its obligations under the ADA. The Court emphasized that the ADA does not require an employer to address every financial consequence associated with an accommodation. While Tumbleson argued that unpaid leave created financial hardship for her family, the Court concluded that those concerns arose outside the workplace and therefore did not determine whether the accommodation was reasonable under the ADA. The Court likewise rejected Tumbleson’s FMLA claim. Although it declined to definitively decide whether the guide dog training qualified for FMLA leave, it held that the FMLA is presumptively treated as unpaid leave. FMLA only entitles employees to substitute paid leave when the employer would normally provide paid leave under its existing policies. The employer had concluded that attending guide dog training did not constitute a “personal illness” under its sick-leave policy, and Tumbleson failed to meaningfully challenge that interpretation on appeal. Accordingly, the Court affirmed summary judgment in favor of the employer. Tumbleson v. Lakota Loc. Sch. Dist. (6th Cir. May 13, 2026) 175 F.4th 773. Note: This case provides useful guidance on providing reasonable accommodations to employees, especially when the accommodation is not an employee’s preferred accommodation. Under the ADA, where multiple accommodations would effectively address an employee’s functional limitations, employers generally retain discretion to choose among reasonable options. This case also highlights the importance of consistency in the application of leave policies, especially sick leave where permissible purposes for sick leave are dictated by both legal requirements and policy language. Had the employer not consistently permitted the use of sick leave only for permissible purposes, the result of this case could have been different.

ARTIFICIAL INTELLIGENCE California Is Preparing For AI’s Impact On Workers—Should Employers Be Preparing Too. Artificial intelligence has quickly evolved from an emerging technology into a tool that many employers use every day. Whether it is screening job applicants, drafting performance evaluations, summarizing workplace investigations, or assisting with policy development, AI is becoming increasingly integrated into business operations. California policymakers have taken notice. Earlier this year, Governor Gavin Newsom issued an Executive Order directing state agencies to evaluate AI's anticipated effects on California's workforce and to develop strategies to prepare workers, employers, and government for those changes. While the Executive Order directs state agencies, it reflects a

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Although the Executive Order does not impose new legal obligations on employers, it provides a valuable reminder that organizations should begin evaluating how AI is being used within their organizations and whether appropriate policies and safeguards are in place. AI Is Already Being Used by Employers Generative artificial intelligence (AI) is increasingly becoming part of everyday workplace operations, including in the nonprofit sector. Employers are exploring and adopting AI tools to improve efficiency and assist employees with routine tasks such as researching and synthesizing information, drafting and editing documents, summarizing lengthy materials and meetings, preparing internal reports, and organizing and analyzing data. Recent employment data reflect the growing use of these technologies. Gallup reported that the percentage of U.S. employees using AI at work at least a few times a year nearly doubled between 2023 and 2025, increasing from 21% to 40%. Pew Research Center found that workers who use AI chatbots on the job commonly use them to research information, edit and draft written materials, and summarize documents or meetings. These broader workplace trends are also relevant to nonprofit employers, where AI tools may be used for administrative, communications, fundraising, programmatic, and other organizational functions. As AI capabilities become increasingly integrated into commonly used workplace software, nonprofit employers should consider whether they have appropriate policies, employee training, and safeguards in place to address issues such as confidentiality, data security, accuracy, intellectual property, bias, and appropriate human oversight. California's Policy Direction Is Becoming Clear The Governor's Executive Order focuses on understanding AI's potential impact on California workers, identifying occupations that may be affected, and developing strategies to help workers adapt to technological change. It also calls for collaboration among state agencies, educational institutions, labor organizations, and industry stakeholders. While these initiatives do not directly regulate employers, they send a clear signal that California

intends to remain at the forefront of AI governance. Employers should expect continued legislative, regulatory, and judicial developments addressing the use of AI in employment.

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broader policy trend: California is actively preparing for a future in which AI will play a significant role in the workplace.

Indeed, California has already adopted regulations under the Fair Employment and Housing Act addressing the use of automated decision systems in employment decisions. As AI becomes more common in the workplace, employers should anticipate increased scrutiny regarding how these technologies are selected, implemented, and monitored. Human Oversight Remains Essential One of the most important principles for organizations is that AI should assist—not replace—human judgment. AI-generated content can be remarkably persuasive while still containing factual inaccuracies, incomplete analysis, or fabricated citations. For that reason, any AIgenerated work product should be carefully reviewed by an employee with appropriate subject matter expertise before it is relied upon for decision-making. This is particularly important when AI is used to assist with: • Personnel investigations; • Disciplinary recommendations; • Performance evaluations; • Hiring decisions; • Accommodation analyses; or • Legal research. Ultimately, employers—not software—remain responsible for employment decisions. Consider Confidentiality Before Using AI Nonprofits routinely handle confidential information, including personnel records, medical information, attorney-client communications, and sensitive investigative materials. Before employees input information into any AI platform, organizations should understand: • Whether the platform stores submitted information;

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• Whether user data may be used to train future AI models;

Clear expectations can help ensure that AI is used responsibly and consistently across the organization.

• What contractual privacy protections exist;

Engage Labor Relations Early

• Whether the platform complies with applicable security requirements; and

For nonprofit employers with union-represented employees, the implementation of AI may raise collective bargaining considerations.

• Whether employer policies permit the use of the platform for confidential work. Even where an AI platform offers enterprise-level security, employees should exercise caution when handling sensitive information on such platforms and follow applicable employer policies. Review Existing Policies Many employers have not yet adopted formal AI policies. Nevertheless, employees may already be using publicly available AI tools, perhaps without management's knowledge. Now is an appropriate time to review existing policies and determine whether additional guidance is warranted. An effective AI policy may address topics such as: • Approved and prohibited AI tools and uses; • Protection of confidential, proprietary, donor, employee, client, and beneficiary information;

Even where an employer retains discretion to adopt new technology, bargaining obligations may arise regarding the decision to implement AI or the effects of its implementation. Consulting labor relations professionals or legal counsel early in the planning process can help nonprofit employers identify and address potential bargaining obligations before implementation. Preparing for What's Next AI technology is advancing rapidly, and California's legal framework is evolving just as quickly. Rather than waiting for new legislation or litigation to define best practices, employers should begin preparing now. Among other things, organizations should consider:

• Required human review and verification of AIgenerated work;

• Identifying where AI is currently being used across the organization;

• Documentation and record-retention requirements;

• Evaluating potential legal, operational, privacy, and reputational risks;

• Compliance with applicable privacy, grant, contractual, and regulatory requirements; • Intellectual property and ownership considerations; • Vendor selection, contracting, and procurement considerations; • Risks of bias or discrimination in AI-assisted decisionmaking; and • Employee training on appropriate and responsible AI use.

Depending on how AI is introduced and used, nonprofit employers may need to evaluate whether implementation affects terms and conditions of employment that are subject to bargaining, such as workload, job duties, staffing, performance expectations, or workplace monitoring.

• Developing and implementing appropriate AI governance policies; • Training supervisors and employees on appropriate and responsible AI use; • Reviewing AI vendor contracts, data-use practices, and privacy and security protections; • Considering applicable grant, donor, contractual, and regulatory requirements; and • Monitoring legal and regulatory developments affecting the use of AI in the workplace.

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Looking Ahead Artificial intelligence presents significant opportunities for California’s employers. Used thoughtfully, AI can improve efficiency, streamline administrative tasks, and allow employees to focus on higher-value work. At the same time, the technology raises important questions regarding privacy, bias, transparency, labor relations, and legal compliance. Governor Newsom's recent Executive Order underscores that California is actively planning for AI's impact on the workforce. Employers will be well served by viewing it as an opportunity to assess their own AI practices. Organizations that establish thoughtful governance, maintain meaningful human oversight, and proactively address legal risks today will be better positioned to adapt as California's regulatory landscape continues to evolve.

RETIREMENT Why Beneficiary Forms Matter: Protecting Retirement Benefits And Reducing Nonprofit Risk. Nonprofit organizations commonly offer a variety of retirement benefits to employees, including 403(b) plans and other employer-sponsored retirement arrangements. Certain tax-exempt organizations may also maintain 457(b) or 457(f) deferred compensation arrangements, particularly for executives and other members of management. While these plans provide valuable retirement security and can assist nonprofits in attracting and retaining employees, they also create an often overlooked administrative responsibility: ensuring that employees complete and maintain current beneficiary designation forms. A beneficiary designation determines who will receive plan benefits if a participant dies before receiving all benefits payable under the plan. Unlike a will, which generally governs the disposition of a person's probate estate, or a trust, which generally governs assets held by or transferred to the trust, retirement plan assets are generally distributed according to the terms of the retirement plan and the applicable beneficiary designation. As a result, an outdated, incomplete, or missing beneficiary designation can create significant problems for surviving family members and the nonprofit organization responsible for administering the benefits. Beneficiary designations are particularly important for 403(b) and other qualified defined contribution plans, where employees may accumulate substantial account balances over the course of their careers. If a participant dies with an account balance remaining, the plan administrator must determine the person or persons entitled to receive the participant's benefits. Beneficiary designations can also be important under 457(b), 457(f), and other deferred compensation arrangements maintained by tax-exempt organizations. A 457(b) arrangement maintained by a tax-exempt nonprofit differs materially from a 403(b) plan because it generally must remain unfunded. Deferred amounts remain the employer’s property and are available to its general creditors, and participants’ or beneficiaries’ rights are contractual under the arrangement rather than based on ownership of separate participant accounts. The rules governing these arrangements can differ significantly, making it important for nonprofits to review the specific terms of each plan rather than assuming that the same beneficiary rules apply to every benefit program. Unfortunately, beneficiary forms are often completed when an employee first becomes eligible for a plan and then forgotten. Over a career spanning twenty or thirty years, an employee may marry, divorce, remarry, have children, or experience the death of a previously designated beneficiary. If the employee fails to update the designation, the retirement benefits may ultimately be distributed in a manner that no longer reflects the employee's wishes. In addition, applicable federal law and the terms of the plan may impose requirements concerning spousal rights that must be considered before benefits are distributed. • www.lcwlegal.com •

Nonprofits can help prevent these issues by regularly reminding employees to review their beneficiary designations. New-hire onboarding, annual benefits enrollment, retirement planning meetings, and communications following major life events provide useful opportunities to remind employees to confirm that their beneficiary information remains current. Employers should be careful, however, not to advise employees regarding whom they should designate. The organization's role should generally be to encourage employees to review and properly complete their elections. Maintaining accurate beneficiary records is only part of the equation. Nonprofits and their plan administrators must also ensure that completed beneficiary designations are properly retained and can be retrieved when needed. When a participant dies, the inability to locate a valid designation can create significant uncertainty. The plan document may contain default beneficiary provisions that determine who receives the benefit when no valid designation exists. Those provisions may produce a result that differs substantially from what the participant or surviving family members expected. Missing beneficiary forms can also lead to disputes among surviving family members. Former spouses, current spouses, children from prior relationships, and estate representatives may assert competing claims to the benefits. Human resources and benefits staff may spend considerable time gathering historical records, communicating with recordkeepers and third-party administrators, responding to competing claims, and consulting legal counsel. In some circumstances, a dispute can escalate into litigation. The consequences can be even more serious when a valid beneficiary designation exists but is not followed. If benefits are distributed to the wrong person despite a valid designation being maintained by the plan, the intended beneficiary may seek recovery of the benefits. Depending on the type of plan and applicable law, the organization and those responsible for plan administration may also face claims concerning their administration of the plan or compliance with the plan's governing documents. To reduce these risks, nonprofits should adopt clear procedures for collecting, storing, updating, and retrieving beneficiary designations. Organizations should also coordinate with their retirement plan recordkeepers and thirdparty administrators to clearly identify which party is responsible for maintaining the official beneficiary record and performing related administrative functions. For an ERISA-covered plan, identifying a recordkeeper or third-party administrator as responsible for maintaining beneficiary records does not, by itself, alter the duties of the named plan administrator under the plan documents and ERISA. Periodic administrative reviews can help identify missing beneficiary elections, inconsistencies between employer and recordkeeper records, and outdated procedures. Vendor transitions deserve particular attention. When changing recordkeepers or third-party administrators, nonprofits should ensure that all existing beneficiary designations are obtained from the outgoing provider and successfully transferred to, or otherwise preserved for, the incoming provider. Depending on the circumstances, it may also be advisable to require or strongly encourage all participants to complete new beneficiary designation forms with the new provider, which can both confirm participants' current elections and reduce uncertainty regarding whether historical beneficiary information transferred correctly. Nonprofits should also periodically review accounts maintained for former employees who have terminated employment but continue to have balances in the plan. Where permitted by the plan and applicable law, organizations should consider whether available distribution or mandatory cash-out provisions can be used to reduce the number of small or inactive accounts that must continue to be administered. Reducing the population of terminated participants with outstanding balances can lessen the administrative burden associated with maintaining beneficiary information, locating former participants and beneficiaries, and resolving death benefit claims years or even decades after employment has ended. Finally, nonprofits should review the beneficiary provisions contained in each retirement and deferred compensation plan they maintain. A 403(b) plan and a non-governmental 457(b) plan should not automatically be treated as though they operate under identical rules. Procedures should reflect the governing plan document and applicable law, including any applicable spousal consent requirements.

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Ultimately, beneficiary designations are among the most important records associated with an employee's retirement benefits. For nonprofits sponsoring 403(b), 457(b), 457(f), and similar arrangements, a current and properly maintained beneficiary designation can help ensure benefits are distributed appropriately after an employee's death. By encouraging regular reviews, maintaining reliable records, coordinating responsibilities with service providers, and carefully following the governing plan documents, nonprofit organizations can better protect employees and their families while reducing administrative burdens, disputes, and potential legal exposure.

DISCRIMINATION Sixth Circuit Upholds $205,000 Pregnancy Discrimination Verdict Against University. Dr. Peng Guo, a Chinese-born accounting professor at Michigan Technological University, sued the University and the Dean of its College of Business, alleging discrimination based on pregnancy, sex, race, and national origin, along with retaliation and Equal Pay Act violations. Dr. Guo and her husband, who was also hired by the University as a tenure-track accounting professor, began employment at the same salary in 2015. Although they initially progressed through the tenure process together, Dr. Guo alleged that after she became pregnant and took maternity leave, she received lower merit raises, was expected to perform service work during leave, lost professional opportunities, and was treated less favorably than her husband and other faculty members. Michigan Tech's parental leave policy allowed tenure-track faculty to take either one semester of paid leave while remaining responsible for only 50% of their research obligations, or six weeks of paid leave while being relieved of all duties. The policy was silent as to service requirements. Dr. Guo selected the first option. Nevertheless, during her maternity leave, Dr. Guo continued receiving committee emails requesting that she organize academic seminars, attended her annual review shortly after giving birth by emergency C-section, and testified that the Dean remarked she had "lots of free time" because she had been relieved of teaching responsibilities. The Dean also criticized her service during the leave period, despite the Dean having been advised by the Provost that faculty taking this type of leave should not be expected to perform service obligations. Following her return, Dr. Guo received a merit raise of 1.13%, while her husband received 2.24%. When she asked the Dean why her increase was significantly lower, Dr. Guo testified that he responded it was because she "took maternity leave" and "didn't do enough service." Afterward, she sent the Dean an email memorializing that conversation and asking him to correct her if she had misunderstood his comments. He never responded. Dr. Guo also alleged that the University discriminated against her in other ways, including providing lower compensation than her husband, assigning additional responsibilities, canceling research database subscriptions, replacing her as the recipient of a faculty fellowship, criticizing her performance, and retaliating after she complained internally about discrimination. The trial court dismissed those claims on summary judgment, leaving only her pregnancy discrimination claims for trial. A jury ultimately found in her favor on her pregnancy discrimination claim under Michigan law, awarding $5,000 in economic damages and $200,000 in emotional distress damages, while rejecting her Title VII pregnancy discrimination claim. Both sides appealed. The Sixth Circuit first affirmed dismissal of Dr. Guo's Equal Pay Act claim. Although she established that she and her husband performed substantially equal work while he ultimately received higher merit raises, the Court concluded that the University demonstrated that the pay differential resulted from factors other than sex. The evidence showed that Dr. Guo's husband had significantly more publications, published in higher-ranked journals, and consistently received stronger teaching evaluations. Dr. Guo failed to produce sufficient evidence that those explanations were pretextual. • www.lcwlegal.com •

The Court likewise affirmed dismissal of Dr. Guo's race, national origin, sex discrimination, and retaliation claims. It concluded that many of the alleged adverse actions either lacked appropriate comparators or failed to establish a causal connection to her protected activity. The Court further held that the individual Dean was entitled to qualified immunity because Dr. Guo failed to identify clearly established constitutional law prohibiting the conduct she alleged. The Court reached a different conclusion regarding the jury's pregnancy discrimination verdict. Under Michigan law, pregnancy discrimination constitutes sex discrimination. Viewing the evidence in the light most favorable to the jury's verdict, the Court held that sufficient evidence supported the finding that the University's decision regarding Dr. Guo's 2017 merit raise was motivated by her pregnancy and maternity leave. Most significantly, the jury was entitled to credit Dr. Guo's testimony that the Dean explicitly told her that her lower merit raise resulted from taking maternity leave and failing to perform service work during that leave—even

though the University's own policy did not require faculty on parental leave to perform service obligations and the provost informed the Dean that Guo was to be relieved of her service duties on leave. The Court concluded that this testimony alone provided sufficient evidence for a reasonable jury to find pregnancy discrimination. Accordingly, the Sixth Circuit affirmed both the dismissal of Dr. Guo's other claims and the jury's pregnancy discrimination verdict. Guo v. Mich. Tech. Univ., Nos. 24-1891/25-1077 (6th Cir. June 23, 2026). Note: This case illustrates that managers should exercise caution when discussing the impact of protected leave on performance evaluations, compensation, or advancement. Comments directly linking an employment decision to pregnancy leave may provide compelling evidence of pregnancy discrimination.

Benefits Corner IRS Increases ACA Employer Mandate Penalties For 2027. The IRS has announced the adjusted 2027 penalty amounts for violations of the Affordable Care Act’s employer shared responsibility provisions (otherwise known as the ACA Employer Mandate). The ACA Employer Mandate authorizes the Internal Revenue Service (IRS) to assess a penalty on applicable large employers under one of the following two circumstances: Penalty A: The applicable large employer fails to offer “substantially all” of its full-time employees and their dependents the opportunity to enroll in minimum essential coverage and any full-time employee receives a subsidy for coverage through Covered California. (26 U.S.C. section 4980H(a)(1).) Penalty B: The applicable large employer offers coverage to full-time employees and their dependents that is “unaffordable” or does not offer “minimum value” and a full-time employee receives a subsidy for coverage through Covered California. (26 U.S.C. section 4980H(b)(1).)

The amount of the penalties changes year-to-year. For plan years beginning after December 31, 2026, Penalty A will be $3,780 per year ($315 per month) multiplied by the number of full-time employees employed by the employer less 30. Penalty B will be $5,670 per year ($472.50 per month) multiplied by the number of full-time employees who obtain subsidized coverage through Covered California. These penalty amounts for 2027 are higher than the amounts currently in place for 2026 ($3,340 per year for Penalty A and $5,010 per year for Penalty B). Here are some examples of how Penalty A and Penalty B are calculated based on the penalty amounts for 2027: Penalty A Example: If an applicable large employer has 300 full-time employees and fails to offer “substantially all” of its full-time employees and their dependents the opportunity to enroll in minimum essential coverage, and at least one of those employees receives a subsidy for coverage through Covered California for 12 months, then the IRS could assess a Penalty A at $3,780 multiplied by 270 (300 minus 30 full-time employees), which is $1,020,600. Penalty B Example: If an applicable large employer has 300 full-time employees and fails to offer coverage that

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While employers who intend to offer full-time employees and their dependents affordable minimum essential coverage hope to never face these penalties, it helps to be aware of the adjusted amounts year-to-year as part of staying up to date on the ACA. For more information, see IRS Revenue Procedure 2026-22. IRS Updates Sample Educational Assistance Plan And FAQs To Reflect Recent Legal Updates. The past 12 months have brought a number of legal updates to educational assistance plans (EAPs) under section 127 of the Internal Revenue Code. In April 2026, the IRS updated its Frequently Asked Questions webpage about EAPs. Employers that provide educational assistance benefits to help employees pay for tuition, fees, books, supplies, equipment, and qualified student loans may exclude the payments, up to the annual limit, from employees’ gross income if the benefit complies with section 127. The IRS’s FAQs describe and clarify the benefit. Here are the highlights from the IRS’s FAQs: • Updated Sample EAP Plan: To qualify as a valid EAP, the plan must be written and must meet certain other requirements. The IRS released an updated sample plan to assist employers with establishing EAPs that comply with section 127. (See IRS Publication 5993 for the sample EAP plan.)

• Educational Assistance Plan (section 127 Plan) Cap Increase: Starting in 2026, the $5,250 annual cap for section 127 educational assistance benefits will be adjusted for increases in the cost of living. The IRS will announce what the new amount will be. Unused amounts cannot be carried forward to subsequent years.

July - September 2026

is affordable and provides “minimum value,” and 10 of those employees receive a subsidy for coverage through Covered California for 12 months, then the IRS could assess a Penalty B in the amount of $56,700 ($5,670 multiplied by 10 employees who obtain the subsidy).

• Repayments to Qualified Education Loans: Employer-provided student loan repayments are now a permanent benefit available through a section 127 educational assistance plan. The benefit includes principal or interest payments on certain qualified education loans incurred by the employees paid directly to a third party (such as an educational provider or a loan servicer) or directly reimbursed to the employee. Generally, EAP benefits for qualified education loans are only available if the employer amends the terms of its EAP plan to include the benefit. • No Educational Assistance Benefits for Spouses or Dependents: EAP benefits only apply to employees. An employer cannot provide EAP benefits for the spouse or dependent of an employee. For more information, please see the IRS’s EAP FAQs webpage: https://www.irs.gov/newsroom/updatesto-frequently-asked-questions-about-educationalassistance-programs.

LCW In The News To view these articles and the most recent LCW attorney-authored articles, please visit: www.lcwlegal.com/news. • In an article published in CPA Practice Advisor's Financial Reporting, LCW Senior Counsel Andrew Dorado discusses the expansion of Internal Revenue Code Section 4960 under the One Big Beautiful Bill Act and the resulting implications for nonprofit organizations. The expanded rules broaden the reach of the 21% excise tax on compensation paid by tax-exempt organizations, creating new considerations for nonprofit employers and their advisors. Read more here. • LCW Associate Jenny Denny was recently featured in The 74, where she discusses the U.S. Supreme Court's decision upholding state laws that restrict transgender athletes from participating on girls' and women's sports teams. Jenny explains that while the ruling allows states to impose these restrictions, it leaves unresolved broader questions about whether Title IX requires schools to permit transgender students to compete consistent with their gender identity, meaning legal and policy developments are likely to continue. Read more here. • www.lcwlegal.com •

Benefits Compliance Question Question: We offer employees tuition reimbursement under our section 127 educational assistance plan. As part of our policy, we have employees sign agreements stating that if they voluntarily resign or separate from employment within one year of completing their educational course, they will be required to return the tuition reimbursement to us by having the amount withheld from their final paycheck. Is this allowable?

Answer: There are a few different angles used to analyze whether an employer can automatically deduct the tuition reimbursement from an employee’s final paycheck. First, whether an employer can require employees to repay previously paid educational reimbursements depends on whether the educational expenses were for an employer-mandated course or training. If the educational reimbursement is for an employer-mandated training or course, the employer cannot seek repayment if the employee voluntarily separates or otherwise leaves employment. If the education benefit is for discretionary training or a course not required by the employer, the employer can seek repayment. (In re Acknowledgment Cases, 239 Cal.App.4th 1498 (2015).) Second, there are also minimum wage considerations. The employer cannot withhold the repayment amount from the employee’s final paycheck to satisfy the employee’s debt if the withholding would reduce the employee’s wage below statutory minimum wage. (City of Oakland v. Hassey, 163 Cal.App.4th 1477 (2008).) The prohibition applies even if the employee agrees to the withholding in writing. If the employee’s wage falls below minimum wage, there is a risk of a wage and hour claim. Third, the area of the law regarding the repayments changed in 2026. For contracts entered into on or after January 1, 2026, Assembly Bill 692 (AB 692) prohibits contracts or work-related agreements from doing the following: 1. requiring a worker to repay an employer, training provider, or debt collector if the worker’s employment or work relationship ends; or 2. imposing any penalty, fee, or cost because of termination. AB 692 also provides several specific, narrow exemptions that could apply in some situations. If the tuition reimbursement agreement was entered into before January 1, 2026, then AB 692 does not apply to that agreement.

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Did You Know? Whether you are looking to impress your colleagues or just want to learn more about the law, LCW has your back! Use and share these fun legal facts about various topics in labor and employment law. • The IRS increased the standard mileage reimbursement rates effective July 1, 2026, in response to rising fuel costs. The business mileage rate increased from 72.5 cents to 76 cents per mile, and the medical and moving expense rate increased from 20.5 cents to 23.5 cents per mile; the charitable mileage rate remains 14 cents per mile because it is set by statute. Organizations should ensure they are using the correct reimbursement rate for the applicable period and review their expense reimbursement policies to confirm continued compliance with California reimbursement requirements and IRS accountable plan rules. • The California Civil Rights Department (CRD) recently published a new "Disability Accommodations at Work" fact sheet summarizing employees' rights to request reasonable accommodations and employers' obligations under California law. While the fact sheet is informational only and does not need to be distributed or posted, it offers practical guidance on engaging in the interactive process, requesting appropriate medical documentation when necessary, and evaluating common workplace accommodations, such as modified schedules, remote work, job restructuring, and reassignment. It also reminds employers that accommodation requests may be denied only in limited circumstances, such as when the requested accommodation would create an undue hardship. • The EEOC recently adopted its new National Enforcement Plan (NEP) for Fiscal Years 2025–2029, replacing the agency's prior Strategic Enforcement Plan. The NEP serves as the EEOC's roadmap for directing its enforcement, litigation, outreach, and education efforts, identifying the types of cases the agency believes will have the greatest nationwide impact. Among its priorities, the EEOC will focus on intentional discrimination (rather than disparate impact claims), facially discriminatory employment policies, certain DEI-related employment practices, protections for vulnerable workers, religious accommodation, the Pregnant Workers Fairness Act, and cases involving the application of recent Supreme Court decisions. • The U.S. Department of the Treasury recently announced that the IRS plans to revise Form 990 to require clearer reporting concerning government grants, government contracts, and fiscal sponsorship arrangements. The details and timing remain uncertain, and proposed changes will be subject to public comment before they are finalized. LCW is monitoring these developments and will provide updates as additional guidance becomes available. Read Treasury’s press release here: https://home.treasury.gov/news/press-releases/sb0470/

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Featured Consortium Call Members of Liebert Cassidy Whitmore’s consortiums are able to speak directly to an LCW attorney free of charge to answer direct questions not requiring in-depth research, document review, written opinions or ongoing legal matters. Consortium calls run the full gamut of topics, from leaves of absence to employment applications, student concerns to disability accommodations, construction and facilities issues and more. Each month, we will feature a Consortium Call of the Month in our newsletter, describing an interesting call and how the issue was resolved. All identifiable details will be changed or omitted.

Question: A nonprofit HR administrator contacted LCW with a question about a private lactation room. The administrator said the nonprofit has a private office that is not shared and can be locked, and asked LCW if that office could be used as a lactation space or if the nonprofit needed a separate lactation space that is only used for that purpose. The administrator said that the nonprofit has very limited space and it is difficult for the nonprofit to hold a space that may only be needed for one or two individuals per year. The administrator noted that the nonprofit has 50 or more employees.

Answer: The LCW attorney advised that because the nonprofit has 50 or more employees, it is subject to California’s requirements for lactation spaces under the Labor Code. Those requirements are: 1. The room must be private. 2. The room cannot be a bathroom. 3. The room must be close to the employee’s workspace, shielded from view, and free from intrusion while the employee is using it to express milk. 4. The room needs to be clean, safe, and free of hazardous materials.

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5. The room needs to have a surface upon which personal items and a breast pump can be placed. 6. The room should have access to electricity for the employee’s breast pump. 7. There must be a functional sink and a refrigerator where milk can be stored close to the employee’s workspace. If it is not possible to provide a refrigerator, another cooling device like a cooler can be provided by the nonprofit to store milk. 8. If the room is used for other purposes, lactation must take priority over other uses of the room while the room is in use for lactation. 9. A room could be temporarily designated for lactation purposes due to operational, financial, or space limitations. 10. The space can be the same space where the employee works if it meets the requirements above. Therefore, if a private office meets these requirements, the attorney advised that it could be used as a lactation space. The attorney recommended that the nonprofit keep in mind that privacy should include the ability to cover the office windows. The attorney advised that even if there is only one lactating employee, California law requires that the nonprofit adhere to these requirements to provide that employee with the necessary lactation space.

Don't Miss Our Upcoming Webinars! It’s Time to Audit Your Personnel Policies! October 7, 2026 10:00 - 11:00 a.m.

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2027 Nonprofit Legislative Roundup December 10, 2026 10:00 - 11:00 a.m.

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