Religious nonprofits won a partial victory – but the restrictions may surprise you
A federal appeals court just gave religious nonprofits a roadmap for hiring selectively while taking government money – as long as they keep programs properly separated.
On November 26, 2025, the Ninth Circuit Court of Appeals amended a decision that fundamentally reshapes how faith-based organizations can manage hiring when they accept public funding. The ruling in Youth 71Five Ministries v. Williams, originally filed on August 18, 2025, offers what amounts to a permission slip for religious nonprofits: you can maintain strict religious hiring standards, just not for the programs the government is paying for.
Here's what happened. Youth 71Five Ministries, a Christian youth organization in Oregon, had received state grants for years with minimal friction. But in 2023, Oregon's Department of Education added a new requirement to its grant program. Any organization accepting state money had to certify it did not discriminate in hiring based on religion, among other protected characteristics. The catch for 71Five was that the organization requires all its employees and volunteers to affirm a Christian statement of faith and maintain involvement in a local church.
When the state discovered this practice and withdrew a conditional award of $410,000, 71Five sued. A district court initially sided with the state, but 71Five appealed to the Ninth Circuit, which issued this amended ruling on November 26, 2025. The organization claimed the state was trampling on its religious freedom and its right to control its own message by limiting whom it could hire.
The court's answer was surprisingly balanced. Yes, the state can enforce non-discrimination rules on programs it funds. But no, the state cannot extend those rules to programs the organization runs entirely on its own dime.
This distinction matters enormously for HR professionals managing faith-based nonprofits. It means you can have one hiring standard for a youth mentorship program the state funds and a different standard for a religious retreat the organization finances independently. The government's reach stops at the edge of its money.
The court rejected the idea that non-discrimination rules inherently attack religion. These rules apply equally to religious and secular organizations alike. What matters is whether they are enforced even-handedly, which the court found they were. An atheist organization that refused to hire believers would face the same restrictions as 71Five faces for requiring believers.
The ruling also rejected arguments that 71Five's religious mission gives it blanket immunity from hiring rules, at least where public funding flows. The court acknowledged that staffing decisions are central to an organization's ability to communicate its message. But when that message is being amplified with taxpayer dollars, the public's interest in equal access starts to weigh more heavily.
For directors managing faith-based organizations, the practical implication is clear: your hiring policies need to track your funding sources with precision. Document which programs receive government support and structure employment requirements accordingly. A counselor working on a state-funded initiative faces different rules than one supporting only privately funded work, even if both work under your organizational roof.
The decision also signals that courts will scrutinize blanket organizational policies skeptically. If you apply religious hiring requirements across the board to everyone in the organization, you will struggle to defend it when some funding is public. But if your policies track actual funding streams, you are on firmer constitutional ground.
The decision clears the path forward for the case to return to district court, where both sides will implement the appellate court's instructions. But for now, religious nonprofits have a clearer framework for navigating the tension between their mission and the requirements that come with government support. The key is strategic separation – not evasion, but honest delineation of which programs operate with public money, and which do not.
Ninth Circuit upholds religious nonprofits' selective hiring for unfunded programs – HRD America
