On November 21, 2025, the California Court of Appeal issued a pivotal ruling clarifying that religious employers are not automatically exempt from wage and hour obligations under state law. In the case of Lorenzo v. San Francisco Zen Center, the court examined whether the First Amendment’s ministerial exception prevents ministers from filing wage claims against religious organizations.
The court’s decision emphasized that California’s wage and hour statutes remain applicable to religious employees engaged in commercial activities, unless there is clear evidence that enforcing these laws would violate core religious governance or doctrine. The plaintiff, Annette Lorenzo, had previously worked as an apprentice and staff member at the San Francisco Zen Center, a nonprofit religious organization that operates multiple temples and offers overnight accommodations and event spaces to the public.
After her employment was terminated, Lorenzo filed claims with the Labor Commissioner for unpaid minimum wage, overtime, and other compensation as mandated by California law. The Labor Commissioner ruled in her favor, finding both the Zen Center and two individual directors liable under Labor Code section 558.1 and awarding her a total of $149,177.15.
Upon appeal, only the Zen Center met the necessary requirements to proceed, leading to the dismissal of the directors’ appeals due to their failure to comply with the bond requirement. The court’s analysis clearly differentiated between claims related to spiritual governance and those grounded in statutory wage rights.
In its ruling, the court referenced the Tony & Susan Alamo Foundation v. Secretary of Labor case, reiterating the notion that religious organizations engaging in commercial functions are still subject to neutral wage and hour regulations. The decision underscored that statutory requirements, such as minimum wage and overtime, do not interfere with religious doctrine or lead to excessive entanglement.
A key aspect of the ruling was the court’s reliance on the Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC decision, which clarified that the ministerial exception should not be regarded as a blanket immunity. Instead, it is limited to situations involving inquiries into strictly ecclesiastical matters, such as the appointment or removal of ministers. The court cautioned against an overly broad interpretation of the ministerial exception, which could protect misconduct and undermine the purpose of wage laws.
This ruling is a significant affirmation that labor protections under California law extend to religious workers engaged in commercial activities, unless a demonstrable conflict with essential religious governance or practices can be established. By adopting this balanced approach, the court aligned First Amendment considerations with California’s statutory requirements, ensuring that religious identity does not exempt commercial activities from regulatory oversight.
The ruling also clarified procedural requirements under Labor Code section 98.2, subdivision (b), which mandates that any employer appealing a Labor Commissioner’s award must post an undertaking equal to the full amount of the award. Since Lorenzo secured judgments against both the Zen Center and the individual directors—each considered an “employer” under section 558.1—the court ruled that all parties held personally liable were required to post a separate undertaking for their appeals. The Zen Center complied with this requirement, while the directors did not, leading to the dismissal of their appeals on jurisdictional grounds.
Moving forward, religious organizations and their management should closely monitor compliance with wage and hour laws related to all commercial activities. This includes ensuring all procedural requirements are met when contesting wage awards. Individual directors and officers also face significant personal liability risks and must adhere to procedural obligations to exercise their appeal rights.
Religious organizations are advised to adapt their compliance strategies accordingly, balancing their spiritual missions with the realities of employment law. Employers seeking to navigate California’s wage and hour laws, particularly in the context of religious or nonprofit organizations, should consult with experienced employment counsel to ensure adherence to legal standards.
