If Church A dismisses an employee for misconduct and that individual is later hired by Church B, does Church A have a legal duty to warn Church B?
This article reviews an important court case exploring this topic, examines several related cases, and concludes with key considerations and a practical checklist.
Recent Case: McRaney v. Mission Board
In McRaney v. Mission Board, 304 F. Supp.3d 514 (N.D. Miss. 2018), a federal district court ruled it could address a minister’s claims against a denominational missions board for its alleged interference with his employment. The court found that neither the ministerial exception nor the ecclesiastical abstention doctrine barred the case.
Facts of the Case
A missions agency terminated its executive director (the “plaintiff”), an ordained minister.
The plaintiff alleged that an unrelated denominational missions board interfered with his business and contractual relationships by:
Trying to cancel his scheduled speech at a pastors conference (unsuccessful).
Taking steps that led to his termination from the missions agency (successful).
Getting him removed from speaking at a missions symposium.
The Lawsuit
The plaintiff sued the denominational missions board for intentional interference with business relationships.
The court noted that, under Mississippi law, a claim for interference requires:
Intentional and willful acts;
Acts aimed at causing damage to the plaintiff’s lawful business;
Acts done with an unlawful purpose or malice;
Actual damage or loss resulting; and
Proof that the defendant’s acts caused the damage.
Key Court Findings:
The claim related to the canceled pastors conference was dismissed—no actual damage occurred.
The claims involving his termination and cancellation from the missions symposium were allowed to proceed.
Ministerial Exception Not Applicable: The court found the ministerial exception did not apply because:
The plaintiff was not employed by the missions board.
The claim did not involve an employment decision made by the defendant.
Four Case Studies: Interference with Contract
Across many states, individuals who interfere with an existing contract can be sued for “interference with contract.”
Important:
Timing matters.
Interference after hiring may lead to liability.
Comments before hiring may not lead to liability.
Case Study 1: Marshall v. Munro (Alaska)
A denominational official made disparaging comments about a newly hired minister, leading to job loss.
The Alaska Supreme Court allowed the interference claim, noting no core ecclesiastical issues were involved.
Case Study 2: Williams v. Palmer (Illinois)
A Methodist minister sued over an unwanted transfer.
The court dismissed the claim under the ecclesiastical abstention doctrine, stating the matter was internal church governance.
Case Study 3: Hayden v. Schulte (Louisiana)
A priest claimed a church official’s letter harmed his Navy chaplain prospects.
The court leaned toward protecting internal church communications.
Case Study 4: McGarry v. Saint Anthony of Padua Roman Catholic Church (New Jersey)
A music director sued after a prior employer disclosed his criminal conduct.
The court dismissed the case, citing:
No malicious intent;
Information was requested, not volunteered;
A qualified privilege protected the disclosure.
Five Key Considerations
Churches must tread carefully when discussing a former employee’s misconduct. Here are five critical points:
1. Proving Interference with Contract
To succeed, plaintiffs usually must prove:
A valid employment contract existed;
Intentional interference by a former employer;
Actual damage or loss occurred.
Note: Some courts also recognize “interference with prospective contractual relations,” requiring proof that:
A relationship or contract was likely;
A wrongful act prevented it;
The act was intentional;
Harm resulted.
2. Misunderstanding the Duty to “Warn”
Many church leaders mistakenly believe they must warn other churches about a former employee’s misconduct.
However, courts generally do not impose an affirmative duty to warn.
Example: In Hornback v. Archdiocese of Milwaukee, 752 N.W.2d 862 (Wis. 2008):
The Wisconsin Supreme Court ruled that the Diocese had no duty to warn future employers or the public about a priest’s past misconduct.
The court emphasized the lack of a foreseeable relationship between the Diocese and the victims.
Important Distinction:
Churches are not required to track former employees or warn every potential future employer.
Liability may arise if a church provides a positive, unqualified reference that omits known misconduct.
3. High Plaintiff Win Rates
According to the American Bar Association:
Interference with contract claims have a very high plaintiff success rate, among the highest for all liability claims.
4. The Ministerial Exception
In Hosanna–Tabor Evangelical Lutheran Church and School v. E.E.O.C., 132 S. Ct. 694 (2012), the U.S. Supreme Court confirmed that:
The ministerial exception bars many employment-related lawsuits involving clergy.
However, as seen here in McRaney, not all interference claims are automatically barred.
5. Volunteers
Most interference claims require an employment relationship. Thus, warnings about volunteers typically do not trigger interference with contract liability.
Conclusion
Churches must balance two risks when dealing with former employees:
Remaining silent and potentially allowing misconduct to continue elsewhere.
Speaking up and risking an interference with contract lawsuit.
Key takeaways:
Avoid gratuitous disclosures unless asked for a reference.
If providing information, stick to factual, verifiable details.
Understand that an affirmative legal duty to warn is rare.
Be cautious when issuing positive references for individuals with known misconduct.
We’ve used a combination of AI and human review to make this content easier to read and understand.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: MangoStar_Studio | Getty
How to Investigate a Sexual Harassment Allegation
Seven steps to take when an allegation arises—and when outside help may prove wisest.
William R. Thetford Jr. and H. Robert Showers
Every church should have a carefully crafted and legally sound policy to address sexual harassment. Such a policy can help guide and protect the church in case an accusation of harassment by an employee surfaces. It can also help prevent abuse from taking place at all.
New study on sexual harassment in the Christian workplace: Learn about the extent of this troubling problem in churches and parachurch ministries.
Once you have a policy in place, your church is in a much better position, both in terms of fostering a healthy workplace culture and in maintaining a sound legal position. However, should an allegation arise, your church must stand ready to follow the policy and shrewdly respond. Use the following seven steps to conduct a proper investigation for your church.
1. How to receive complaints
First, church leaders must be receptive to receiving a complaint. Do not treat a complaint as a nuisance created by the reporter. Along the same lines, do not promise punishment for the accused until you have investigated the allegation. In other words, it is important that the church treats the complainant and all parties involved with respect. While it is too early in the process to promise a result (dismissal or exoneration of the alleged offender, and so on), it is important that you take this matter seriously and assure everyone that a full and fair investigation will be undertaken.
Before further discussing the investigative process, it is important to note here that not all complaints are made through a formal channel. Sometimes they are given informally. Churches still must be vigilant to understand when this is happening and direct this situation into the proper channels. For instance, if an employer is made aware of sexual harassment, either through informal conversation with an employee or through observing this behavior directly, the employer should begin to take action. If no action is taken, courts will likely find that the employer “knew or should have known” about the problem and may impose liability on the employer. In such a situation, the employer should probably respond by seeking to establish a formal complaint and have the known victims or witnesses to record their accounts in writing. Likewise, if you have a sexual harassment policy and the employee/victim does not report an alleged incident, then the church will be able to raise a defense if a lawsuit is later filed.
Once a complaint is received, whether formally or informally, the church may need to do an initial evaluation to determine the scope of the upcoming investigation and see if there are any interim remedial steps that need to occur pending the outcome of the investigation. For instance, it is generally inappropriate to have the alleged offender continue to maintain direct oversight over the complainant. In fact, it may be wise—if probable cause exists—to put the alleged offender on paid administrative leave pending the results of the investigation. (For a definition of “probable cause,” please see the related article “Seven Steps for Creating an Effective Sexual Harassment Policy.”) There may be other instances in which the complainant should be offered paid administrative leave, too. Whatever the case may be, church leaders must make certain any remedial steps they take are not actual—or perceived—retaliatory measures against the complaining employee, nor actual or perceived steps taken to retaliate or punish alleged offenders before the evidence has been fully considered. Fairness and respect to all parties must be emphasized in order to build trust and transparency on all levels.
2. Other early steps
At the beginning stages, if your church has liability insurance, review your policy. Should you want to make a claim, your church needs to know what must be done—and when—with the insurer to ensure it maintains coverage.
Also, your church should take time early on to explain the process of the investigation to the appropriate stakeholders (e.g., the church board, church members, and other leadership), and decide how the findings will be distributed. Help both the victim and the alleged perpetrator know that you will conduct an objective and professional investigation, and what they should expect throughout the process.
3. Choosing an investigator
In accordance with your sexual harassment policy, your church will need to take prompt action. The first major decision you will have to decide is who will handle the complaint. There are essentially three options available to conduct the investigation:
do it internally;
hire an independent outside group that is not a law firm; or
hire an independent law firm.
Some minor complaints can be handled internally. However, sexual harassment is a sensitive subject and has the potential to become a highly charged issue with long-term ramifications for your church. Moreover, conducting the investigation internally may subject your church to real or perceived bias that may taint the process. Any decision to conduct an internal investigation must be made with caution.
For most serious allegations or for allegations involving church leadership, you will want to choose an independent agency to conduct the investigation. This may be more costly initially, but it may save your church’s reputation, resources, and morale, if done right.
We do not recommend independent outside groups that are not law firms. An independent investigation by legal counsel experienced in sexual harassment complaints is prudent for three reasons, especially if there is a chance that the issue may result in a lawsuit or legal liability:
Communications with legal counsel regarding the matter will be protected by attorney-client privilege or the standards of confidentiality that law firms are obligated to follow.
While a thorough investigation made in good faith can prevent the church from being held legally responsible for the acts of the offender, a poorly handled investigation can leave the church on the hook. In some states, an employer with good intentions even can be liable for the malicious acts of its employees if the employer conducts a negligent investigation and takes action on that errant basis. (For more information on an employer’s liability for taking disciplinary action on a negligent investigation, see Vasquez v. Empress Ambulance Serv., 835 F.3d 267, 269 (2d Cir. 2016)). Similarly, a negligent investigation is not likely to protect a church which fails to take appropriate action. Moreover, beware that a grossly negligent investigation done in house can bring potential liability as well.
Some third-party investigation firms have been known to endlessly investigate, needlessly expending resources and taking months, if not years, to conclude. Such a scenario puts the church in the difficult position of deciding whether to continue the investigation until its resources are exhausted or to fire the investigators, a move outsiders may perceive to be an attempted cover-up and breach of trust. Moreover, the alleged victims and perpetrators are indefinitely left in limbo. Speed can be as important as completion in any sexual harassment investigation.
CAUTION Do not allow alleged victims or outside victim advocacy groups to pressure the church, through social media or otherwise, into conducting a one-sided investigation or into hiring an investigator who is not objective and trying to find the truth regardless of where it leads.
Whether the investigation exonerates or finds wrongdoing on the part of the alleged offender, the stakes are high. Liability can result both in failing to protect a victim or defaming someone who was innocent. A law firm skilled in sexual harassment investigations can minimize and overcome numerous challenges such as the ones described above.
Good questions to ask legal counsel early on include:
What statements do we make to the employees?
What should we say to the complainant?
How should we communicate with the alleged wrongdoer?
How should we handle the media if our church is approached by reporters? How do we handle social media?
4. Conducting the investigation, gathering documentation
When investigating the accusations, the investigator, whether in-house or third-party, should interview both the victim and the accused. The investigator will try to corroborate the claims of the witnesses with other evidence (including other witnesses) to try to verify what really happened. After reviewing this new evidence, the investigator may need to reinterview the reporter and/or the accused.
How to address the individual who has reported the harassment is a sensitive subject. It is important to get to the bottom of what happened so that appropriate action can be taken. However, as stated earlier, the victim should be treated with respect, not harshness.
All findings should be documented, with an awareness that what is written down could end up in court. As you go through the investigative process, your primary concern is to understand what happened and how to respond. However, you should also seek to learn how this happened and what steps can be taken to prevent this situation from arising again in the future.
5. Take reasonable action
As a result of the investigation, the employer must take reasonable action. However, determining reasonable action depends upon the level of proof the church requires—a standard that should be considered and established with its sexual harassment policy long before a problem ever occurs. For specific information and guidance on choosing a level of proof, see the “Standard of evaluation” section in our policy article.
If the investigation determines the offender is guilty of serious wrongdoing, formal discipline or potential job termination is warranted. If termination is contemplated, though, it is important the employee received notice that sexual misconduct could lead to that result. This means it is essential that your church’s sexual harassment policy states termination is a possible consequence. It is also essential all employees acknowledge the policy to demonstrate they received notice of this possible outcome in light of a violation.
Of course, if the investigation reveals sexual harassment did not occur, then this finding should also be reported to all parties involved. However, it is important not to let such an outcome create a perception in the church that future allegations should not be brought forward.
6. Communicate the results prudently with legal guidance
This step is increasingly important since employers are more highly scrutinized by the public in the seemingly ever-expanding world of social media, including the #MeToo and #ChurchToo movements. Honesty, trust, and transparency are virtues, but so is discretion. There is no requirement that all information must be revealed to the public and all parties. In fact, doing so could destroy attorney-client privilege, result in defamation lawsuits, and either start or exacerbate a negative public relations war. Do not give in to public pressure or social media in communicating something that you will later regret. Be wise in the dissemination of information and/or statements made to the public (social media included).
This step is another critical juncture to seek out legal counsel as the best course of action will vary greatly based on the specific situation. Typically, the final report containing the full findings of the investigation is kept by the employer and the parties are only given a written summary of the findings and results. If appropriate, another statement can be issued to the congregation or others who may have reason to know. Public statements are particularly problematic since potential defamation, intentional infliction of emotional distress, and other causes of legal action may flow from thoughtless and unwise releases of information. Telling the truth is important—but do it wisely and with counsel from experienced professionals.
7. Follow up
Just because the investigation is concluded (and, if warranted, an appropriate measure of discipline is applied) does not mean that everything goes back to the way it previously was.
The church must not allow any retaliation against the complainant for making a good-faith complaint. It would be wise for the church also to periodically check in with the victim to ensure that the situation improves and that no retaliation has occurred. If the offender was disciplined short of termination and warned not to repeat his or her behavior, the church also must ensure that the individual complies. Conversely, if the investigation reveals the alleged victim was using the sexual harassment allegation as a tool to distract from poor performance or to settle a score, it is just as important to make certain that issue gets resolved for the sake of fairness and transparency.
Further, it will be important to document the steps that your church took during the investigation and the result of it. Usually, the best practice is to prepare a short, written report. If you have hired legal counsel to assist in this matter, this document can be protected as attorney work product, except for the conclusions and discipline.
Handling historical investigations
Historical investigations of sexual harassment are much more difficult to address compared with ones investigating the recent past. These types of situations have garnered significant media attention recently. A prime example is the allegations made against Justice Brett Kavanaugh during his confirmation hearings for the US Supreme Court. Other examples include years-old and decades-old sexual misconduct allegations arising within the Catholic Church, the Southern Baptist Church, and Penn State University. Memories can fade over the years and it may be difficult to locate the relevant witnesses, documents, or other evidence.
Many of the investigation principles discussed above and the policy recommendations given in this article will apply to historical investigations, but it may take more digging in order to reach the truth of what occurred. When your church does reach a conclusion, you may find that it is a bit hazier than an investigation of a recent event. One of the keys will be corroborating evidence. Often, documentary evidence, which can be critical in corroboration, may be more difficult to find the longer the time period between the sexual harassment event and investigation. It initially may be the word of one person against the other, but if you can independently confirm or contradict the details of the testimony you receive, you may be able to get a better picture of who is telling the truth, what was forgotten, and what really happened. It may be a complicated interconnected puzzle where one piece can help lead to another to get the whole clear picture.
Seven Steps for Creating an Effective Sexual Harassment Policy
A strong sexual harassment policy policy not only can provide protection for all involved, but also can serve as a deterrent.
William R. Thetford Jr. and H. Robert Showers
The #MeToo and #ChurchToo movements have captured headlines and national attention in recent months, placing a renewed emphasis on understanding, exposing, and preventing sexual misconduct. It is imperative that churches and nonprofits understand the legal, practical, and public relations implications of this crucial subject. A poorly handled response to such an allegation will mangle the mission of the church or organization and may lead to an expensive and time-consuming legal labyrinth.
A 2020 study on sexual harassment in the Christian workplace: Learn about the extent of this troubling problem in churches and parachurch ministries.
Legal claims for sexual harassment typically arise in the employment context. Therefore, it is of utmost importance that churches take action to prevent this threat from taking root in their workplaces and carefully address any issues that do arise in a prompt and honest way.
Key point. Under Title VII of the Civil Rights Act of 1964, sexual harassment is a form of sex-based discrimination. See 42 U.S.C. 2000e-2(a). Only churches with 15 or more employees that engage in interstate commerce are subject toTitle VII. While only between 1 percent and 2 percent of all churches are subject to Title VII, several states enforce comparable laws—and many use a lower employee threshold.
Why churches need a policy
It may be tempting to believe that something as serious as workplace sexual harassment could never occur in your church. Understandably, many leaders may feel reluctant to think in detail about how to handle something so unpleasant and something that they hope will never happen. Still, the best time to create a sexual harassment policy is well before one is needed. It is much easier to create a wise plan of action before the pressures, emotions, and relational complexities among the people in your church arise in a moment of crisis.
A strong sexual harassment policy is crucial for three reasons:
First, a good anti-sexual harassment policy may prevent sexual harassment in the first place. This policy will make clear to potential wrongdoers that this conduct has no place in your church. Because sexual harassment deals, in part, with what is or is not “welcome,” there is a great potential for misunderstanding between employees as to what kinds of comments, jokes, or actions are appropriate or inappropriate, and what constitutes illegal sexual harassment. Your policy should clarify what actions constitute sexual harassment and how your church will address those actions.
Second, if the policy does not stop someone from engaging in harassing behavior, this policy will help your church address the serious issue for what it is, protect the rights of the victim and the accused, and move forward.
Finally, implementing and following a strong sexual harassment policy may protect your church from civil liability, should it ever be sued regarding a sexual harassment allegation. For certain hostile work environment sexual harassment complaints, it is an affirmative defense to liability for an employer if it can prove it created a policy, communicated it to employees, and followed its complaint procedure. In certain other claims, the employer will not be held liable for sexual harassment that occurs if it shows that the employer took “immediate and appropriate action.”
Crafting an effective sexual harassment policy
A sexual harassment policy is vital to any church, organization, or business that has employees. There are many differences between the way for-profits and nonprofits should operate; however, both for-profits and nonprofits need a strong sexual harassment policy.
Further, a church or nonprofit may find certain behavior unacceptable, even if it is not illegal. For those situations, it may be helpful to create a high standard for your church and address indiscretions at that level, rather than awaiting misdeeds that are also a violation of law. In fact, the unique nature of churches and ministries allows them to enforce moral standards in accordance with their religious convictions to a greater extent than other organizations can. Of course, churches must enforce such moral standards consistently—for instance, not treating women less favorably than men. For additional insights on this topic of enforcing moral standards, see “Discrimination Based on Religion or Morals” in Pastor, Church & Law.
Thankfully, a sexual harassment policy need not be particularly long to be effective. It may only be a few pages by itself or it may be a part of the church’s broader employee handbook. However, there are seven central aspects that any policy should contemplate.
1. Make it broad in who it applies to and in what it prohibits
The policy should be clear that no harassment will be tolerated. Those who are found to have engaged in sexual harassment should be subject to discipline, up to and including termination.
Because there is a lot of uncertainty about what constitutes sexual harassment, define it for your employees so that there are no misunderstandings and no excuses. Federal government regulations define sexual harassment as:
Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when (1) submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment, (2) submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual, or (3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment. 29 C.F.R. § 1604.11.
Your policy should be at least as broad, if not broader, than the federal government definition. You should also provide examples of what can constitute sexual harassment, such as:
Unwanted physical contact or conduct of any kind, including sexual flirtations, touching, advances, requests for sex, or propositions;
Repeated unwelcome requests for a romantic relationship;
Verbal harassment of a sexual nature, such as lewd comments, sexual jokes or references, and offensive personal references;
Demeaning, insulting, intimidating, or sexually suggestive comments about an individual;
Graphic, verbal commentary about an individual’s body, sexual prowess, or sexual deficiencies;
The display in the workplace of demeaning, insulting, intimidating, pornographic, or sexually suggestive objects, pictures, calendars, or photographs; and
Demeaning, insulting, intimidating, or sexually suggestive written, recorded, or electronically transmitted messages (such as email, text messages, instant messaging, and internet materials, including social media and social networking sites).
Key point. Sexual harassment can occur between individuals of the opposite sex or of the same sex.
In sexual harassment cases, there is often confusion about how “consent” factors into the consideration. The standard is actually whether the actions or comments are “welcomed” by the individual and deemed as such by a reasonable person. Just because the victim does not immediately object does not mean that it is not “unwelcome.” Your policy should note this. Sometimes individuals do not lash out when they are offended by sexual misconduct. Some victims may immediately object or they may be surprised by what they perceive to be brazen misconduct and not know how to appropriately respond.
Tip.It is important to warn employees that violations of this policy can result in discipline, up to and including termination.
For more on defining sexual harassment, including specifics on “quid pro quo” and “hostile environment” harassment, examples demonstrating the need for a policy, and case studies, see this article by attorney and Church Law & Tax senior editor Richard Hammar.
2. Lay out a reporting procedure
The second important feature of a sexual harassment policy is creating a procedure to handle reports of sexual harassment. Employees who believe they may have been sexually harassed need to know who to go to and how to make a complaint.
You may want to encourage your employees who believe they are being harassed to firmly notify the offender that his or her behavior is unwelcome. There are some situations where that will put an end to the behavior. However, this will not always be possible, especially when the offender has a position of power or influence over the victim.
The reporting hierarchy will depend on the structure of your church. However, it is common to have employees notify their direct supervisor, manager, or human resources officer first and then senior executives if necessary. It is important to have multiple avenues of reporting in case the official who is supposed to receive reports is the one accused or ignores the report for any reason.
The policy should strongly encourage that sexual harassment complaints be in writing. This aids the investigation, if needed, and serves to preserve the memory of details that would otherwise become hazy with time. It also serves to confirm or dispel the possible response from the alleged offender that the complainant’s story has changed.
If the employee cannot give a written report, or prefers not to do so, the person receiving the report should document what was reported and when. If possible, have the employee review and verify the documented statement and agree to it with a signature.
3. Develop a framework for conducting an investigation
Your policy should include the framework of how you will conduct investigations. Importantly, once you receive a report, you have a duty to investigate it promptly. Promptness is important for a variety of reasons. It is much more difficult to determine what happened long after the fact. Also, the organization is often only protected from liability for harassment undertaken by one of its employees if it took immediate and appropriate action in response to a report.
The policy also should clearly state that your church will give a fair investigation, both to the one who reported the abuse and to the accused individual. Both the victim and the accused should be given the opportunity to present evidence to the investigator, tell his or her side of the story, and offer witnesses. You may want to indicate in your policy that employees will be required to participate with the investigation. There may be employees who are witnesses to the harassment but will not want to get involved in “office politics” unless you require them to talk to the investigator.
Some policies will reserve the right of employers to place any or all employees involved in the matter on administrative leave (with or without pay) while the investigation is pending. This is more commonly used for the accused employee. You may offer the alleged victim paid leave or reassignment during the investigation to protect his or her privacy. However, you should not force the alleged victim to go on leave or take reassignment, because that will appear to be retaliation against the employee for making a report.
Find guidance for choosing an investigator and the steps for conducting an investigation in this article.
4. Determine the standard of evaluation
The policy should also address what happens once the investigation concludes, and how certain the investigator must be before discipline is undertaken.
There are five standards used in the American legal system for evaluating whether a claim or charge brought in a matter prevails. These are listed below in increasing degree of rigor and certainty:
Reasonable suspicion;
Probable cause;
Preponderance of the evidence (more likely than not)—used in most civil cases;
Clear and convincing evidence;
Beyond a reasonable doubt—used in most criminal cases.
Reasonable suspicion and probable cause are used as introductory matters in criminal cases to determine when certain investigations can be conducted and when searches, arrests, or charges may be made.
Preponderance of the evidence just means that there is more evidence in support of a claim than there is against it. Most civil cases are decided by that standard.
Clear and convincing evidence is a more stringent standard than preponderance of the evidence, but it is used less frequently.
Lastly, a criminal defendant cannot be convicted unless the evidence shows he is guilty beyond a reasonable doubt, the highest standard in American jurisprudence.
When there is a debate over what occurred, the standard of evaluation may make the crucial difference at the end of the investigation. A well-publicized example is the difference between the two O.J. Simpson cases. In those two cases, one civil and one criminal, the same facts, same witnesses, and same defendant led to different results because the evidence did not rise to the standard of beyond a reasonable doubt in the criminal case, but the evidence was enough to move past the preponderance of the evidence standard in the civil case.
A good policy will answer two questions:
What standard is necessary to begin an investigation?
What standard is required to find someone in violation and to exercise discipline?
At a minimum, there should be reasonable suspicion in order to begin an investigation. But you need more than that in order to take appropriate disciplinary action against someone. Most businesses, organizations, and churches will utilize the preponderance of the evidence standard, but some will opt for the more rigorous test of clear and convincing evidence. In any civil case against the church or organization for sexual misconduct, the standard or proof will be preponderance of the evidence. Thus, in most cases, it is appropriate and consistent to make preponderance of the evidence the standard for the investigation as well. However, some organizations choose to use the stricter clear and convincing standard. Clear and convincing evidence is a higher threshold reserved for allegations such as fraud in civil lawsuits (but less than beyond a reasonable doubt standard required for prosecution of criminal acts). Some churches believe that, under biblical standards, serious accusations against a spiritual leader (like an elder or a pastor) require a higher degree of certainty.
5. Provide confidentiality
Make it clear in your policy that complaints and investigations will be handled confidentially to the extent practical and appropriate under the circumstances. You should handle with sensitivity the report of the victim, interviews with the witnesses, and other information the investigation produces. You should also avoid jumping to false conclusions of such a serious nature as well, which can result in defamation lawsuits. However, you will still need to relay information to the accused and key stakeholders (e.g., board members, denominational leaders, or church members). What you communicate, when, and to which group of stakeholders is a good question to discuss with your legal counsel.
6. Prohibit retaliation for good faith reports
Your policy should prohibit any retaliation or retribution for reporting sexual harassment in good faith (meaning a report is made based on a genuine belief about the act in question, and not based on intentional dishonesty). Even if there is not enough evidence to support disciplining the accused, there should be no reprisals against the reporter if the report was made in good faith. You may want to address bad faith complaints. Fabricating allegations or lying during an interview may be its own cause for discipline or termination.
7. Consider off-premises conduct
You should also consider whether your policy will apply to conduct amongst employees that takes place during nonwork hours and outside of work. Our recommendation: Whether it is a work-sponsored activity or not, your policy should take a strong stance against any sexual harassment.
If a thorough investigation shows that one employee engaged in sexual harassment against another (or engages in other conduct which violates your church’s moral standards or code of conduct), the church may wish to impose discipline against that employee even though the actions occurred offsite and during nonwork hours. Just because the sexual harassment occurs between employees off-site or after-hours does not necessarily make it less damaging. It certainly does not make it less wrong. The actions of an employee can still dramatically impact the reputation of the employer.
If you want your church to be able to respond effectively in these types of situations, we advise that your policy and your employee handbook clearly explain that conduct (including sexual misconduct) at work and outside of work reflects on an employee’s ability to carry on the religious mission of the church and lead spiritually, and that such misconduct may warrant discipline from the church, up to and including termination.
Such a provision frequently appears in well-drafted employee handbooks. Such a provision could be included in documents that volunteers review and sign as well, but it is much less common to seek to govern off-site and after-hours conduct by an unpaid volunteer.
Follow-up: training and expectations
Once the policy is written, it is important for employees to understand it. They need training in how to handle sexual harassment allegations because helping them develop a clear understanding of expectations and procedures could prove pivotal in the event of a crisis, or better yet, it may avoid one altogether. One important component to this training will be the reporting process, including who employees should contact in the event an allegation arises. Retaining experts to conduct training on sexual harassment, either online or in person, will help develop this understanding while also building the culture of trust and transparency needed within a church workplace .
See also this article on conducting investigations in response to sexual harassment allegations.
Q: During one of our church services, someone submitted a prayer request card describing a situation that may involve child abuse. How should we respond to this situation and any future ones like it?
Gather the facts
The first thing to do is carefully read the prayer request card to determine whether the situation is described with sufficient specificity to evaluate under the relevant child abuse statutes. Does the card identify the child or sufficient facts to identify the child and describe a current situation or one that occurred years ago? Does it describe circumstances in detail sufficient to evaluate as potential child abuse? If the prayer request fails any one of these questions, then the church should contact the requestor for more information to determine the answers.
Refer to state law
Assuming the church has sufficient information, the next thing to do is evaluate your state’s mandatory child abuse reporting law. This will help you determine what constitutes a legally required report of child abuse or neglect and who the law says is a required reporter. The top priority is to determine whether the person who read the card is a mandatory reporter. Generally, if someone is a mandatory reporter, the report must be made very quickly. Time is of the essence.
Understand definitions
Additionally, the definition of what is considered abuse or neglect is also important to review. Neglect can be very broad in some states. Therefore, what may be a required disclosure in one state may not be required in another. The church should also review its policies and procedures regarding child abuse and neglect reporting. Hopefully, these policies and procedures have been vetted by an attorney knowledgeable about your state’s child abuse reporting status. Each church should be familiar with the statutory definitions of child abuse and neglect.
Identify who are mandated reporters
For an example, let’s consider what reporting might look like in California—the state in which I practice law. California’s Penal Code has an extensive list of those who are considered mandated reporters of suspected child abuse. Clergy members, which are defined in the Code as a “priest, minister, rabbi, religious practitioner, or similar functionary of a church, temple, or recognized denomination or organization,” fall within the category of mandated reporters.
In addition, “any custodian of records of a clergy member” are mandated reporters. This means that church secretaries and other lay people could be considered mandated reporters if their job—or even voluntary function—is to maintain records for clergy. According to the California Penal Code, “[a] mandated reporter shall make a report to an agency whenever the mandated reporter, in his or her professional capacity or within the scope of his or her employment, has knowledge of or observes a child whom the mandated reporter knows or reasonably suspects has been the victim of child abuse or neglect.”
Is is penitential communication?
After determining whether there is a reportable offense and if it was made to a mandatory reporter, the second step is to determine if there is an exception for penitential communication.
Or, to put it in another way, you should determine if the communication is protected by your state’s law addressing the clergy-penitent privilege. Some states do not require clergy to report if the communication is penitential in nature.
Using California as an example again, a penitential communication is defined as “a communication, intended to be in confidence, including, but not limited to, a sacramental confession, made to a clergy member who, in the course of the discipline or practice of his or her church, denomination, or organization, is authorized or accustomed to hear those communications, and under the discipline, tenets, customs, or practices of his or her church, denomination, or organization, has a duty to keep those communications secret.”
The provision is narrow. The Penal Code states that the exception does not limit a clergy member’s duty to report known or suspected child abuse or neglect when the clergy member is acting in some other capacity that would otherwise make the clergy member a mandated reporter.”
Therefore, a pastor is a mandated reporter unless the prayer card is considered a penitential communication.
Steps churches can take
Courts have yet to address whether a prayer card would be considered a penitential communication. However, churches can take steps to bring some clarity to this issue.
An initial step is to include a statement on the prayer card that says “CONFIDENTIAL—For the pastoral team only.” The goal is to indicate that the prayer request is intended to be read only by someone in a pastoral role. This could be helpful evidence that the communication was intended to be penitential and the pastor might not be a mandated reporter in that situation.
If the prayer card does not indicate that the prayer request is only to be read by the pastors, then the pastor cannot reasonably invoke the provision and should make an immediate report assuming the circumstances describe potential child abuse or neglect. In California, the code requires reports to be made “as soon as is practicably possible” and a written report is required within 36 hours. The quick time frame demonstrates why it is important for a church to understand its role in reporting suspected child abuse or neglect.
Child abuse and neglect reporting policy
However, if the card was not marked confidential, or it was still seen by someone other than a pastor, the question remains as to who read the prayer card. Was it a prayer team volunteer, an usher, or a church secretary? Are any of these people mandated reporters? If someone is not a pastor by title but employed by the church in a role that is ministerial in nature, they could be viewed as a mandated reporter and must make an immediate report. The church should address this issue in its child abuse and neglect reporting policy. Since this is a fact-specific matter, it may be best to have an attorney review the matter prior to the leadership choosing to make the report.
Develop a plan
After all these questions have been asked and answered, one question remains: How should a church respond to a prayer card where abuse is at least implied? This will look different for each church. Everyone wants to keep children safe and well cared for. Even if the prayer card is confidential and the reader is exempt from making a report, churches should always consider the steps they can take to ensure the safety of children who are at risk of harm or neglect. We recommend that all churches have a comprehensive plan in place to minimize the risk of abuse and to follow up with all reports of possible child abuse and neglect.
Kelli Marsh is an attorney with Church Law Center, offering clients legal counsel in the areas of governance and tax-exemption.
Supreme Court Upholds Constitutionality of Bladensburg Peace Cross
Overview of the Case
A high-profile legal case concerning a nearly 100-year-old war memorial was recently resolved by the United States Supreme Court. In a 7-2 decision, the Court ruled that the presence of a large cross on public land does not violate the U.S. Constitution. This decision carries important implications for churches and religious organizations.
Historical Background
1918: Citizens of Prince George’s County, Maryland, formed a committee to honor locals who died in World War I.
Design: The committee, which included mothers of fallen soldiers, chose a 32-foot-tall Latin cross, designed and built with community donations.
Completion: When funds ran low, the American Legion completed the project in 1925.
Features: The cross stands atop a pedestal with inscriptions like “Valor,” “Endurance,” “Courage,” and “Devotion.” A plaque honors 49 local men who died in the war.
Ownership: The land was transferred to the state’s park and planning commission in 1961.
The cross, known as the Bladensburg Cross or Peace Cross, became a focal point for patriotic events and was eventually surrounded by other memorials in what is now Veterans Memorial Park.
The Legal Challenge
2012: The American Humanist Association (AHA) filed a lawsuit claiming the cross violated the Establishment Clause of the First Amendment.
Request: The AHA sought removal of the cross or alteration to eliminate its religious appearance.
Defense: The American Legion intervened to defend the monument.
Court Journey: A district court upheld the cross; a federal appeals court reversed that decision; the Supreme Court granted review.
Supreme Court’s Analysis and Rationale
The majority opinion, authored by Justice Samuel Alito, outlined several key points.
1. Problems with the Lemon Test
The Court criticized the Lemon v. Kurtzman test, noting:
It failed to account for long-standing traditions and symbols.
It struggled to explain why prayers, “In God We Trust,” or religious holiday observances remain constitutional.
It created legal uncertainty and confusion.
The Court provided four reasons why the Lemon test should not apply:
Uncertain Historical Motives: Determining original intent decades later is speculative.
Evolving Symbolism: Over time, religious symbols often gain new, secular meanings.
Changing Public Perception: Monuments can become ingrained in cultural identity.
Risk of Hostility: Removing old religious symbols may appear hostile to religion, evoking memories of secular regimes that erased religious references.
2. Avoiding Religious Hostility
The Court emphasized:
Altering or removing the cross could be seen as disrespectful.
Government efforts to eliminate long-standing religious symbols may reflect hostility, not neutrality.
3. A Shift Toward Historical Practice
Rather than rely on Lemon, the Court:
Turned to historical context as a more reliable guide.
Cited Marsh v. Chambers (1983) and Town of Greece v. Galloway (2014) as examples where prayer and religious symbols in public settings were upheld based on tradition.
4. Final Holding
The Court concluded:
The cross has dual meaning: It honors WWI soldiers and reflects its historical Christian symbolism.
Over nearly a century, it gained significance beyond religion, symbolizing sacrifice, memory, and civic unity.
Its continued presence is constitutional, especially given its original context and long-standing role in the community.
Implications for Churches and Religious Organizations
This decision weakens the Lemon test, a long-used but controversial standard in Establishment Clause cases. The Court acknowledged:
Lemon has been criticized by justices, judges, and scholars.
Legal scholar Michael McConnell called it a source of “doctrinal chaos.”
Key takeaways for church leaders:
Older monuments with religious imagery are now strongly presumed to be constitutional.
This includes:
Crosses on public land
State and city names with religious roots
Phrases like “In God We Trust” on currency
However, the ruling focuses on existing monuments, not the creation of new ones.
The Supreme Court concluded: “Retaining established, religiously expressive monuments, symbols, and practices is quite different from erecting or adopting new ones. The passage of time gives rise to a strong presumption of constitutionality.”
In summary, the Bladensburg Peace Cross may remain, and by extension, many similar memorials may continue to stand as reminders of faith, sacrifice, and national heritage.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: getty/Thomas Barwick
Does a Gift to Support a Camp Counselor Have Tax Implications?
Giving financial gifts to church camp counselors comes with a variety of tax considerations.
Q: A college student from our church will be a volunteer counselor at a Christian camp this summer. Our church will give the camp $600 from our mission budget and give him $900 from the mission budget as a gift for his service. He is not an employee of the church. Is there a tax reporting requirement for this gift?
The amount paid directly to the student is considered mission support for the student’s activities. Mission support of individuals is required to be reported on Form 1099-NEC if it is $600 or more.
The amount paid to the camp might be reported, depending on the intention of the payment. If the payment is intended to help cover the student’s expenses, then it is reported on the student’s Form 1099-NEC issued by the church along with the $900. If the amount is intended to be a contribution to the camp, unrelated to the student’s service, then it is not reported on the student’s Form 1099-NEC issued by the church.
For additional information on the proper use of Form 1099-NEC, see chapter 4 in Elaine Sommerville’s book, Church Compensation.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
Image: getty/kinga krzeminska
Can We Lose Our Tax Exemption For Letting An Outside Group Use Our Building?
Seven questions to help understand the potential implications of these arrangements.
Richard R. Hammar
Last Reviewed: January 21, 2025
Q: Our church allows a homeschooling organization to meet in our facility one day per week during the school year. In return, the group makes a donation to the church to help us cover the costs of electricity and water. I recently heard that such an arrangement puts our church’s property tax exemption in jeopardy. Is this true?
First, classifying such payments as a “donation” does not necessarily resolve the question, since the Internal Revenue Service (IRS) may conclude that the “donation” is actually rent paid to the church for the use of its facilities. The IRS often says that it is the “economic reality” that controls, not terminology.
Second, whenever a church is considering the rental of some or all of its facilities, there are a number of factors to be considered. Your question is actually one of seven questions that merit attention by your church leaders when weighing arrangements like this one:
1. Would receiving rental income impact our church’s tax-exempt status?
No, so long as the rental activity is insubstantial in nature. Unfortunately, neither Congress nor the IRS has defined “insubstantial.”
2. If receiving rental income does not impact our tax-exempt status, would our church be required to file a tax return and pay taxes on the rental income?
Only if the income represents unrelated business taxable income.
Federal law imposes a tax (equal to the corporate income tax) on the net income generated by a tax-exempt organization from any unrelated trade or business that is “regularly carried on.” This tax is called the unrelated business income tax (or UBIT, for short). Rental income derived from debt-financed property generally constitutes unrelated business taxable income unless the property falls within certain exceptions.
For example, if substantially all (85 percent or more) of the use of any property is substantially related to a church’s exempt purposes, the property isn’t treated as debt-financed property. Related use doesn’t include a use related solely to the organization’s need for income.
Example: unrelated debt-financed property
If less than 85 percent of the use of the property is devoted to exempt purposes, only that part of the property that is not used to further exempt purposes is treated as unrelated debt-financed property.
Even if a church’s rental activities are subject to the tax on unrelated business income due to the property being debt-financed, there are three additional observations to note. First, the tax is a prorated tax.
This means that only a portion of net rental income is taxable. The taxable portion of net income is determined by multiplying both the revenue and the applicable expenses by a ratio—average acquisition indebtedness during the year divided by the average tax basis of the property during the year. Acquisition indebtedness is debt incurred in connection with the purchase or improvement of the property.
For example, if the average acquisition indebtedness on the rented property during the year were half the property’s tax basis, then only half of the net rental income is subject to the unrelated business income tax. (Half of the revenue and half of the expenses would factor into the calculation.)
Second, the tax is assessed against net income from the taxable rental activity. This means the church is entitled to deduct applicable expenses. This would include a number of items, including an allocated portion of insurance, utilities, custodial services, and so on. Third, there is a $1,000 exclusion, meaning that the first $1,000 of net taxable income is excluded from tax.
A Form 990-T must be filed with the IRS if your church generates $1,000 or more of gross income from an unrelated trade or business.
3. Would allowing a for-profit entity to use church property threaten the church’s property tax exemption?
Possibly, depending on the state in which you live. See Table 12-4 in my annual Church & Clergy Tax Guide for the relevant sections of the property tax exemption statutes of all 50 states.
Note that in some cases the full or partial loss of your church’s property tax exemption may be avoided if the “rent” is characterized as a “facilities use fee” that is designed to recover the costs to the church of providing the property. You will have to check with the tax assessor or a real estate attorney about this.
4. What about liability concerns?
You must assess the increased risk of legal liability associated with the rental of your property. Some risks may be too great to even consider, especially when you consider the relatively modest rental income that will be received. Any rental activity involving minors represents the highest risk. The lessee must provide evidence of insurance in an amount that is acceptable to you. The church should be listed on the lessee’s liability policy as a named insured. You also should check with your church insurer about additional coverage under your policy.
5. Is the rental activity a permitted use under our church’s zoning classification?
Your church needs to verify that the use of its property by an outside group is permissible under zoning law. For example, if you rent your property to a childcare provider, is this a permitted use in your zoning classification? Possibly not. You will need to check with your local zoning authorities, or an attorney, about this.
6. Should we require the outside group to sign a facilities use agreement?
It is possible for a church to be liable for injuries that occur during the use of its premises by an outside group since it is the owner of the premises. This risk can be reduced by adopting various precautions, including the following:
Have the outside group sign a “facilities use agreement” that (1) provides the group with a mere license to use the property, (2) contains a hold harmless and indemnification clause, and (3) states that the church provides no supervision or control over the property when being used by the group. This document should be prepared by an attorney.
Have the church named as an additional insured under the group’s liability policy.
Review the group’s liability policy to ensure that it provides adequate coverage and does not exclude sexual misconduct.
If the group’s activities will involve minors, have a written acknowledgment from the group that all workers have been adequately screened. Fifth, check with the church insurer to determine coverage issues in the event the church is sued as a result of an accident or injury occurring during the group’s use of the property.
7. Will allowing outside groups to use our church building subject us to public accommodations laws?
It is possible. An activity like this one by your church may make it subject to local, state, and federal public accommodations laws, but it requires a more detailed analysis. You can find more insights in my ChurchLawAndTax.com article addressing a key decision by a federal court in Idaho. Your church also will want to consult with a qualified local attorney who can review the language of the relevant statutes and analyze them in relation to your church’s activities.
The bottom line is that the rental of your church property raises a number of important questions, and may expose the church to significant liability. You must decide if all of these risks are worth the minimal amount of rent that your church will receive.
One final thought: Sometimes a church allows groups to use its facilities free of charge. Doing so can still expose a church to a number of the concerns outlined above—such as local zoning requirements and various liability issues.
Fraudulent Email Scheme Costs Ohio Parish $1.75 Million
Two lessons for church leaders to draw from this unfortunate story.
Michael Batts, Jr., Mike Lee, and Mike Batts
A Catholic parish in Ohio was a victim of a major fraud perpetrated through the use of fake emails. According to news reports, the church was in the midst of a large construction project. Fraudsters used emails that appeared to originate from church workers’ email accounts to convince other church workers to change the bank account routing information for the church’s construction company.
Misdirected wire transfers
As a result of changing the bank account information, the parish said wire transfers worth $1.75 million were never received by the construction company.
Rather, the funds were misdirected to a separate bank account, out of which the fraudsters swept the funds. The church discovered the theft when the construction company contacted the church and inquired about overdue payments. The church said it immediately contacted local police, the construction company, and the bank.
The Federal Bureau of Investigation (FBI) was later brought in.
Methods use not known
Because news accounts at the time and information issued by the church refer to both “hacking” and “spoofing,” it is not clear whether the perpetrators actually “hacked” the email accounts of church workers or “spoofed” them.
If the fraudsters actually hacked the church workers’ email accounts, then the emails instructing other church workers to change the bank account information were indeed from within the church’s internal email system (although not actually sent by the workers from whom they appeared to come).
If the email accounts were spoofed, then the emails may have appeared to come from within the church’s system, but a closer look at the sender information should have revealed that they did not.
Important lessons for churches
Either way, there are important lessons in this scenario.
One, any email communications that request or affect significant financial transactions or transfers for a church should be independently verified using means other than email (personal conversations, phone calls to known phone numbers of the persons thought to be sending the messages, and so on).
And two, with any electronic disbursements made by a church, it is also important to independently verify the accuracy of the recipient’s bank account information prior to sending funds—especially when the transfers are large in amount.
Here is a link to a news account covering this incident.
Adapted from a post originally published by Batts Morrison Wales & Lee (BMWL). Used with permission. Michael Batts, Jr. is the Director of Systems Innovation and Security for BMWL. Mike Lee is a partner and the National Director of Audit & Assurance services for BMWL. Mike Batts is the Managing Partner of BMWL and an editorial advisor for Church Law & Tax.
Image: Getty
Payroll and Benefits for Dual-Role Church Employees
When nonexempt employees split their time between the two parts, overtime can occur.
Q: An employee splits his time between teaching preschool (24 hours per week) and serving as a custodian (16 hours per week). Our contract for preschool teachers doesn’t include benefits whereas our contract for other church employees, working more than 32 hours per week, are eligible for benefits. In total, he works 40 hours a week. Does that make him eligible for benefits as a full-time employee? Also, how do we handle overtime pay?
When a church also operates a preschool or school, the two parts of the church frequently have differing employee handbooks, benefits, and compensation structures.
This dual nature arises from the state regulations imposed on daycare centers or preschools and schools.
Let’s first address the issue of overtime.
The US Department of Labor views the church and its preschool or school as one employer. When nonexempt employees split their time between the two parts, overtime can occur. The church will owe overtime every time a nonexempt employee works more than 40 hours in a week (more than 8 hours in 24 hours in California).
Assuming the employee is paid a different rate when working for one part of the church than when working for the other part, the church will calculate overtime using a blended hourly rate.
For example, the employee is paid $20 per hour while working for the church as a custodian but $10 per hour when working for the preschool. If the employee worked 30 hours for the church and 20 hours for the preschool, the church owes the employee for 10 hours of overtime pay.
Let’s first figure his base pay for each job: 30 times $20 per hour equals $600 for his custodial work; 20 times $10 per hour equals $200 for his preschool work. His base pay for this week, then, is $800. Now let’s figure his per-hour blended rate by dividing the base weekly pay by the hours worked: $800 divided by 50 equals $16 per hour for the blended rate. Next the church needs to calculate the overtime pay. Overtime pay is computed at 150 percent of the hourly rate. Since the church included the hourly rate for the 10 hours of overtime in the base weekly pay, we only need to add the remaining 50 percent of the blended hourly rate to the weekly pay. The church must add $16 times 10 hours times 50 percent. This, then, equals overtime pay of $80. (You can find the DOL’s guidance on overtime pay here.)
As for benefits, the IRS and state benefit laws will also view the church as a single employer for fringe benefits.
The church needs to check the terms and conditions of each fringe benefit to determine the employee’s eligibility to participate.
Many fringe benefits must be available to qualifying employees without discrimination—based on federal and state fringe benefit laws.
The church must combine the hours to determine whether the shared employee has inadvertently become eligible for a fringe benefit under either part of his employment.
For example, if the church offers a qualified retirement benefit under Section 403(b), the church must offer employees access to the retirement benefit if an employee works 1,000 hours or more during a calendar year. T
he hours worked are combined between the preschool and church to determine whether the church must offer access to this retirement benefit.
You should also verify that he has other group health insurance since he declined your group health insurance. If he is not enrolled in another qualified group health insurance plan, he cannot opt out of your plan per current rules under the Affordable Care Act.
Frank Sommerville is a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
Image: Westend61 | Getty
Who Can Be an Authorized Signatory for Church Documents?
Understand key guidelines on authorized signatories for church documents and the implications of unauthorized signatures.
Understanding who can legally sign church documents is vital for avoiding contract disputes and personal liability. Learn key considerations and case studies to guide your church’s practices.
Key Legal Issues with Signing Church Documents
Personal Liability: Clergy who sign without proper authorization may be personally liable.
Legal Authority: Only those explicitly authorized can sign on behalf of the church.
Board Responsibilities: Boards must comply with bylaws and governing documents.
Background and Case Study
In Jenkins v. Refuge Temple Church of God (2018), a South Carolina court ruled a stipend agreement unenforceable because board members lacked authority. This highlights the importance of adherence to church bylaws and proper election of board members.
Case Findings
The agreement was invalid due to improperly appointed board members.
The court applied “neutral principles of law” to determine contract validity.
Practical Guidelines for Church Leaders
Ensure all contracts are authorized by the church board or governing body.
Verify compliance with bylaws and denominational guidelines.
Always sign in a representative capacity, explicitly stating your role (e.g., “Pastor John Doe, Authorized Agent”).
Frequently Asked Questions
1. What is an authorized signatory?
An authorized signatory is a person legally empowered to sign documents on behalf of an organization, such as a church.
2. What happens if someone signs without authorization?
Unauthorized signatories may be personally liable for any breaches or disputes arising from the agreement.
3. How can churches ensure proper authorization?
Review governing documents, bylaws, and legal resolutions before signing any contracts.
4. Are digital signatures acceptable for church documents?
Yes, but they must be securely controlled to prevent misuse or fraud.
Case Study: Electronic Signatures and Risks
One church faced significant financial losses due to misuse of digital signatures. Proper safeguards and audits are essential to prevent embezzlement and fraud.
Key Takeaways
Always verify the authority of signatories for legal and financial documents.
Adhere strictly to bylaws and denominational policies.
Consider a CPA audit to improve internal controls and reduce risks.
For more resources on managing church finances and legal matters, visit Church Law & Tax.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Getty
Determining Financial Policies for Your Church
How to identify the policies needed for sound financial management.
Churches often wrestle with which policies to adopt. A well-crafted policy can enhance compliance, protect the church, and build trust among members. However, a poorly designed policy may create more problems than it solves.
This article will help churches determine:
Which financial policies are essential; Which policies may be beneficial under specific circumstances; Key considerations before adopting a new policy.
Key Considerations Before Adopting a Policy
Before drafting or implementing a policy, churches should ask:
Will it help ensure compliance with the law? Does it protect the church and its members? Will it enhance the church’s ability to fulfill its mission? Does it foster confidence and trust among congregants?
Some aspects of financial operations—such as expense reimbursements and internal controls—may be effectively managed through staff procedures instead of board-approved policies.
💡 A Note on Risk:
More policies = More monitoring and enforcement.
Failing to follow an adopted policy can increase liability more than not having a policy at all.
Each church must strike the right balance between oversight and flexibility.
That said, some financial policies are critical for every church, while others should be considered based on specific needs.
Essential Financial Policies for Every Church
1. Budget Administration Policy
Why it matters: The budget is one of the church’s most important financial tools.
What it should include:
Process for approving and administering the church’s budget;
Oversight for operating, capital, and debt-related expenditures;
Procedures for handling budget overages.
This policy can be outlined in bylaws or a separate board-approved document.
2. Conflicts-of-Interest Policy
Why it matters: Churches must avoid financial transactions that create ethical concerns or violate tax laws.
What it should address:
When leaders (such as pastors, board members, and senior staff) have a financial interest in church transactions;
Restrictions under federal tax law and state nonprofit laws;
Public perception of financial dealings (even if legally sound).
📌 Example: A board member selling property to the church at a discount may seem beneficial—but could still raise scrutiny. A well-drafted policy ensures transparency and integrity.
3. Executive Compensation Policy
Why it matters: Church leaders must not set their own salaries, and compensation must comply with federal tax laws.
What it should include:
The process for setting and approving compensation;
Documentation requirements for legal compliance;
Ensuring fair comparisons to similar roles in other organizations.
Potential consequences: Noncompliance with federal guidelines can lead to tax penalties and reputational harm.
4. Fraud, Dishonesty, and Whistleblower Protection Policy
Why it matters: Churches need clear protections against unethical behavior and safe reporting mechanisms.
Key components:
Explicitly prohibits fraud and financial misconduct;
Establishes confidential reporting channels;
Protects whistleblowers from retaliation (as required by Sarbanes-Oxley Act);
Defines oversight responsibility (e.g., a Compliance Officer or Audit Committee).
✅ Tip: A well-drafted policy encourages transparency and discourages financial misconduct.
5. Document Retention Policy
Why it matters: Federal and state laws require record-keeping compliance for tax, employment, and financial reporting.
Deadlines for submitting reimbursement requests with the required documentation (e.g., not more than 60 days after the expense gets incurred);
Deadlines for returning excess reimbursement amounts (e.g., not more than 120 days after an excess reimbursement gets paid).
🔹 Best for: Churches with multiple leaders incurring expenses on behalf of the church.
3. Additional Policies Based on Legal Requirements
Churches may need additional policies depending on state laws and unique circumstances.
📌 Examples:
Investment Policy (if managing large assets or endowments);
Fundraising and Solicitation Policy (for handling public donations);
Use of Church-Owned Vehicles Policy (for liability protection).
Consult legal counsel to determine specific requirements for your church.
Final Thoughts
Every church must evaluate which policies are necessary based on its size, structure, and financial complexity.
Start with the essentials (budget, conflict of interest, fraud protection). Add policies as needed for financial oversight and risk management. Review policies regularly to ensure compliance and effectiveness.
Before adopting any policy, church leadership should consult with legal counsel to tailor it to the church’s unique needs.
We’ve used a combination of AI and human review to make this content easier to read and understand.
Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.
Image: Getty
Best Practices for Avoiding Cyberliability Problems
These best practices can help prevent cyberliability problems, including data breaches.
Bobby Ross Jr.
Last Reviewed: August 28, 2024
No amount of cyberliability insurance coverage can protect a church against a damaged reputation and loss of trust. That’s why it’s important to take steps to keep data breaches and other technological mishaps from happening in the first place. “Prevention is extremely important, and it doesn’t have to be that expensive,” stressed Nick Nicholaou, co-author of Church IT, Third Edition.
Something as innocent as offering free public wireless networking can get a church in trouble, according to Nicholaou.
Nicholaou gave an example from several years ago. A Missouri church neither password-protected nor adequately managed its open Wi-Fi by turning it off when it wasn’t needed. “There was a guy that was pulling into their parking lot in the evenings, and he was distributing child porn through their public Wi-Fi connections,” Nicholaou said. “When the FBI determined what the IP address the child porn was coming from, they knew it was such-and-such church, so they swooped in and confiscated all the computers” and the church’s servers.
Even though no one with the church was involved in the crime, the church ended up on the news and staff members lost access to their computers for months. “That was a very heavy cost for that church, and it could have been prevented very easily and for almost no cost,” he said.
Along with addressing potential hacking and cybercrimes, churches also must work hard to maintain their integrity in copying and sharing information online, said Frank Sommerville, an attorney and senior editorial advisor for Church Law & Tax. “No church would knowingly steal someone else’s property and use it in their newsletter,” he said. “But [they think], ‘Oh, it’s on the internet, so it must be free.’”
In reality, most copyright laws do apply to churches, said Susan Fontaine Godwin founder of Christian Copyright Solutions. “Many churches and church leaders have a lack of knowledge,” she said, “and they sometimes just don’t even think about the way they might be using copyrighted material, and that they could be at risk of infringement.”
“There are some exemptions which cover churches and religious organizations,” she added. “But for the most part, a church would be viewed under the copyright law pretty much in the way that any business or organization would.”
Another crucial issue for churches to take into consideration is member privacy, according to Sommerville. He cited the case of a church that posted Vacation Bible School pictures and then discovered that some of the children were part of a family in a witness protection program.
“What we recommend is, if you’re going to take pictures, whether it’s broadcasting your Sunday services or Sunday school activity, you post signs in your parking lots and at your entrances,” advised Sommerville, noting that “the signs give people an opportunity to turn around and go home if they don’t want to be photographed or recorded.”
Jeremy Thompson, an information security expert, offers these tips:
Engage third parties to host payment information and Social Security numbers so that this sensitive information does not reside with the church. Utilize established firms who have an established presence. Do not look to be anyone’s biggest customer. Find someone for whom these transactions are a core competency. It may be your local financial institution, it may be a niche-specific provider, or it may be a nationwide presence, like PayPal.
Use strong security defense tools to protect your device and data. Enabling software firewalls on your device will help fend off hacking attempts and use of encryption for sensitive data is the best method to protect it, especially if the data must be stored on a computer by a church staff member (for example, a youth pastor who needs to bring medical information about youths on his laptop for a missions trip overseas). Keeping antivirus, anti-malware up to date and having a personal firewall enabled are the bare minimum tactics you should always consider when connecting to a public network or internet. Ensure all software has current security patches or fixes applied. Use strong passwords on all laptops and desktop computers, and ensure all accounts have strong passwords. When possible, utilize multifactor authentication, such as a fingerprint swipe or “soft token,” and use disk encryption to protect sensitive information.
Educate staff to exercise caution when opening and clicking through email. Be suspicious of email you aren’t expecting, either based on the sender or content. Do not click on unfamiliar links. If you have doubts, follow up with the sender via a separate, new email (not a reply) or via phone to verify the legitimacy of a request. Follow the safety practices outlined by the National Cyber Security Alliance.
Develop prayer request distribution best practices. Keep any personal or sensitive details out of the distributed prayer request. Do not pass along anything other than publicly available information without written consent. (You can learn more about privacy rights at PrivacyRights.org.)
Establish or enforce a social media use policy. A social media policy should include a list of do’s and don’ts to guide acceptable behavior. It should specify who can publish content on the church’s behalf. It should give guidelines as to the use of parishioners’ names or sensitive information. Social media are more akin to a press release rather than a church newsletter, so keep in mind that your messages and posts may be read by the general public, as well as your members.
Beware of This “Donor” Scam
Why a refund request for a donation should ring alarm bells.
Michael E. Batts and Danny Johnson
Last Reviewed: May 8, 2025
Imagine this:
A very kind but anxious fellow named Tom calls your finance office and says he accidentally donated $5,000 to your church when it should’ve only been $50.
Tom says he’s on a fixed income. He pleads for the church to refund him the $4,950 difference. The church checks its online gifts and sure enough, there it is: an online ACH gift from Tom, a new donor, in the amount of $5,000.
Having verified the donation, the church refunds the $4,950 via ACH.
Two days later, the bank alerts your church that the initial ACH for $5,000 from Tom was rejected for insufficient funds, and issues a chargeback against the church’s bank account for the $5,000.
And since Tom’s phone number is suddenly disconnected, your church realizes it has been scammed.
This happens all the time to American nonprofits. There are variations to this scam–maybe someone puts a check in the offering plate, waits until it’s been deposited, then calls the church to claim they wrote it for the wrong amount, and asks for an immediate electronic refund.
But the scam is rooted in the lag time between when a payment is made and when it clears the banking system.
Be Alert to Unusual Refund Requests
Refund requests for charitable contributions should raise immediate red flags. These requests are highly unusual because:
A donation typically involves giving up ownership and control of the funds.
Nonprofits are not free to return contributions simply because a donor asks.
Example: Imagine a donor gives a large sum that’s used for a major initiative. If they later request a refund, the organization could be left in a serious financial bind. If this became common practice, nonprofits would struggle to function effectively.
When a Refund May Be Appropriate
There are rare cases when a refund might be justified—such as when a donor accidentally gives more than intended. In such situations, the organization may have a moral (and possibly legal) responsibility to correct the mistake.
But proceed with caution:
Confirm the error was truly accidental.
Ensure the organization itself isn’t being targeted by a scam.
How to Protect Your Organization
To reduce risk, take these simple but effective steps:
Create a dedicated team to manage donation refund requests.
Train the team on common refund scams and red flags to watch for.
Never issue a refund until the original funds have:
Fully cleared the banking system, and
Been confirmed as settled and secure.
Final Thought
A clear policy and basic awareness go a long way. By staying vigilant and enforcing proper procedures, your organization can avoid falling victim to donation refund scams.
Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A. (BMWL), an accounting firm dedicated exclusively to serving nonprofit organizations across the United States. Danny A. Johnson is CPA partner on the audit and assurance team at BMWL.
We’ve used a combination of AI and human review to make this content easier to read and understand.
Image: AdobeStock/ Iryna
Taking a Church Vote in 5 Easy Steps
What you need to know to keep a meeting moving along.
Chairing a meeting is harder than it looks. And at times parliamentary procedure doesn’t make that job any easier. Keeping track of what motion is on the floor and who to recognize next is tough. Taking a vote the proper way might seem like a luxury.
Well, as a professional, I’m here to tell you it’s not. Following a pattern and using consistent language to take a vote can do wonders to move your meeting along. Here’s a tried-and-true method.
Voting Step 1: Tell members that it’s time to vote.
Say this: “There is no further discussion. We will now take a vote.”
Voting Step 2: Tell members what motion they’re voting on.
This is a necessary but often-skipped step. I know you think that members are so entranced by the floor debate and your flawless leadership skills that they know precisely what motion is on the floor for a vote. Let me tell you—they may be looking at you, but they’re thinking about their fantasy football team, not the meeting. So, help everyone out and remind members what they’re voting on before you ask them to vote.
Say this: “The motion on the floor is that we hold a bake sale on January 31 to raise funds for the local homeless shelter.” OR “We are voting on the following motion: that we hold a bake sale on January 31 to raise funds for the local homeless shelter.”
Voting Step 3: Ask members who is in favor of the motion and who is opposed.
You’ve told everyone it’s time to vote and what they’re voting on. Now, ask them to vote.
Say this: “All those in favor, say ‘aye.’ All those opposed, say, ‘no.’” OR “All those in favor, please rise. Be seated. All those opposed, please rise. Be seated.”
(P.S. Read my earlier post to make sure you don’t screw up this step.)
Voting Step 4: Announce the results of the vote.
Tell members who won.
Say this: “The ‘ayes’ have it, and the motion is adopted.” OR “The ‘nos’ have it, and the motion is not adopted.”
Voting Step 5: Announce the effect of the vote.
This step just clarifies what will happen as a result of the vote. All you have to do is tell people whether you will or won’t be doing what the motion said.
Say this: “We will hold a bake sale on January 31 to raise funds for the local homeless shelter.”
Maybe you read these steps and think, overkill—as in, this will take forever and complicate life.
Well, before you write it off, can you just give it a try? Obviously, it’s more words than just saying, “Ok, let’s vote. Who’s in favor? Awesome. Let’s have a bake sale.” But I promise, the extra words are worth it because they keep everyone on the same page, saving you the trouble of getting everyone caught up, especially the guy who was thinking about his fantasy football team. And the consistency of the wording sets your members at ease because they know what to expect. Process helps everyone.
Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
Could You Raffle Away Your Tax-Exempt Status?
Insights on a common misconception that gaming is a “charitable” activity
Congregations that raise funds through raffles, bingo nights, or other games of chance would be wise to familiarize themselves with IRS Publication 3079, “Tax-Exempt Organizations and Gaming.” Here is an excerpt that specifically addresses 501(c)(3) organizations—including churches:
An organization may qualify for exemption under IRC Section 501(c)(3) if it is organized and operated exclusively for religious, charitable, scientific, literary or educational purposes or for the purposes of testing for public safety, fostering national or international amateur sports competition or preventing cruelty to children or animals. To be exempt under Section 501(c)(3), an organization must engage in activities that accomplish one or more of these purposes. Examples of Section 501(c)(3) organizations include schools, churches and non-profit hospitals.
A common misconception is that gaming is a “charitable” activity. There is nothing inherently charitable about gaming. It is a recreational activity and a business. Although a charity may use the proceeds from gaming to pay expenses associated with its charitable programs, gaming itself does not further any charitable purpose. Thus, gaming cannot be a more than an insubstantial purpose of a 501(c)(3) organization. . . .
An organization puts its exempt status in jeopardy when gaming results in inurement or prohibited private benefit to individuals, or where funds from the activity are diverted for private purposes.
A charity conducting gaming as an insubstantial part of its activities will not ordinarily jeopardize its tax-exempt status but may be subject to the tax on unrelated business income. . . .
The IRS determines whether an organization is conducting a “substantial” unrelated activity by examining all the facts and circumstances. There is no “bright-line” or numerical test prescribed by the [Internal Revenue Code]. The IRS will consider the dollars raised by and spent on an unrelated activity as well as the time and other resources devoted to it in making the determination of substantiality.
The editorial team of Church Law & Tax is made up of Matthew Branaugh, attorney-at-law, and Rick Spruill, digital content manager.
Image: LumineImages | Getty
Q&A: What Do We Need to Know About Outsourcing Financial Tasks?
Keep these factors mind: cost, security, and savings.
Q: My church is considering outsourcing our financial roles. If we choose to do this, what should we keep in mind as we search for the right outsourcing service?
When a church considers outsourcing its financial roles, there are a few key factors to keep in mind: cost, security, and savings.
As for the security or risk factor, you need to be aware that, in essence, you are handing your church’s bank accounts over to an outside service. But this doesn’t have to be viewed as a negative—especially if you land a reputable firm.
“Internal controls are a key area where churches are at risk,” writes Sam Yeo, a partner at ChurchWest Insurance Services, in an online article about outsourcing bookkeeping. “Having someone outside of the financial system reconciling your bank accounts, tracking and verifying your deposits and checks means there is a second set of eyes going over all of your system, increasing the safeguarding of your congregation’s resources.”
Justin Spicer, president of Empower Consulting, offered the following pointers on what a church should consider when evaluating each financial outsourcing service:
Church experience
What kind of direct experience does the firm and its staff have in local church financial leadership, including a deep understanding of the “language of church”?
Client profile
Does the firm have a focus on serving churches, or is it a side segment of its client base? Does the service have church clients that are similar in size, budget, and financial operations to your church?
Technology
Does the service use the latest technology (cloud-based software, paperless accounting, mobile apps) and do these technologies integrate with your church’s software?
Level of expertise
Along with considering the time you might save, how much additional high-level expertise can you gain from outsourcing? I would argue that you not only want to find a bookkeeper but also a strategic partner in your ministry.
References
What do church clients say about the firm? Contact several current client references to hear about their experiences working with the firm. Again, get references from churches that are similar to your own in size, budget, and financial operations.
Cost
Does the upfront and monthly expense make sense from a cost-savings perspective (saving staff wages or reallocating current staff) and your current budget? Since the price will increase as you grow, are you willing to absorb that into your operating budget?
Regarding Justin’s thoughts on costs, I would add this advice: Look at the salary and benefits for hiring in-house staff to oversee financial operations. This easily runs from $50,000 to $150,000. That’s just the initial cost of a hire. You would also need to add in expenses such as equipment and overhead.
If you decide to pursue a service, get three bids from outsource firms. Vet the firm to ensure that each one has the highest caliber of leaders and proven integrity. Compare the costs. Then compare the “ease of use.” Will you be able to get a check cut quickly? Can you easily get reports?
Finally, you will still need a team to count and deposit the offering, unless you pay a bank to do this.
David Fletcher has more than 35 years of experience as a pastoral leader in churches. In 2003, he founded XPastor, a resource website for executive pastors, and XP-Seminar, an annual church leadership conference.
Image: mediaphotos | Getty
What Are the Penalties for Pastors Who Do Not Pay Taxes?
Discover the penalties pastors face for not paying taxes and how to avoid legal and financial consequences.
Q: A minister on staff at our church has never filed a federal tax return. What are the consequences?
Why Some Pastors Don’t File Taxes
It’s not uncommon for ministers to misunderstand their tax responsibilities. Some believe they are exempt from taxation, while others are unaware of specific tax rules, such as the exemption of clergy wages from income tax withholding. Ministers must either elect voluntary withholding by filing IRS Form W-4 or prepay their taxes using the estimated tax procedure (Form 1040-ES).
Failing to file can result in substantial tax debt and penalties. Below is a summary of the consequences pastors may face for not filing or paying taxes.
Penalties for Not Filing Tax Returns
Failure-to-File Penalty
The penalty is 5% of the unpaid taxes for each month or part of a month that a return is late, up to a maximum of 25% of the unpaid tax.
If the failure to file is due to fraud, the penalty increases to 15% per month, up to a maximum of 75% of the unpaid tax.
If a return is filed more than 60 days late, the minimum penalty is the smaller of $210 or 100% of the unpaid tax.
Reasonable cause, not willful neglect, can exempt pastors from this penalty.
Failure-to-Pay Penalty
The penalty is 0.5% of unpaid taxes for each month or part of a month after the due date, up to a maximum of 25% of the unpaid tax.
If a notice of intent to levy is issued, the penalty increases to 1% per month starting 10 days after the notice.
The penalty doesn’t apply during the automatic six-month extension if at least 90% of the tax liability was paid by the due date.
Reasonable cause can also exempt pastors from this penalty.
Combination of Penalties
If both failure-to-file and failure-to-pay penalties apply, the failure-to-file penalty is reduced by the failure-to-pay penalty for the same months. However, for returns filed more than 60 days late, the minimum penalty applies.
Criminal Penalties for Tax Evasion
In addition to civil penalties, failing to file tax returns may lead to criminal charges if there is a willful attempt to evade taxes. Tax evasion is a felony and carries severe penalties:
A fine of up to $100,000.
A prison sentence of up to five years.
Both a fine and imprisonment in some cases.
Criminal penalties require an affirmative act, such as filing a false return. Omissions alone are generally insufficient for prosecution. Most pastors face civil penalties rather than criminal charges.
Importance of Filing Taxes Correctly
Filing taxes correctly and on time is critical for pastors to avoid penalties and interest. The services of a qualified CPA can help ensure compliance. Churches should also educate clergy on the quarterly estimated tax procedure to prevent future issues.
FAQs About Penalties for Pastors Who Do Not Pay Taxes
Are pastors exempt from paying taxes? No, pastors must pay taxes on their ministerial income unless they qualify for specific exemptions, such as a housing allowance. Can pastors avoid penalties by claiming reasonable cause? Yes, if they can demonstrate a valid reason for not filing or paying taxes on time, they may avoid penalties. What happens if a pastor files taxes late but pays the full amount owed? They may still face a failure-to-file penalty, though the failure-to-pay penalty would not apply if the full amount was paid. Should churches educate clergy on tax requirements? Yes, educating clergy about tax filing and payment procedures helps avoid misunderstandings and potential penalties.
Conclusion
Failing to file or pay taxes can have serious consequences for pastors, including substantial penalties and possible criminal charges. Churches should ensure that their clergy understand their tax obligations and provide resources or access to tax professionals to help them stay compliant. Proactive measures can prevent financial and legal difficulties in the future.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Piotr Powietrzynski | Getty
When the Church Office Closes for Bad Weather, Does Everyone Get Paid?
The legal—and logical—considerations regarding how to handle an office closure.
Winter weather advisories always urge caution when dealing with snow, gusty winds, ice, and bitter cold.
But how should churches address inclement weather issues for their employees? And are employees entitled to pay for time missed due to bad weather?
Combine caution and common sense
As an overarching human resources matter, caution and common sense must be practiced when it comes to inclement weather situations.
No employer should expect employees to risk life and limb to get to the office.
It may be prudent to cancel or postpone program activities, too.
Watching the weather forecast and staying attentive to public service announcements (e.g., school closings, public transit schedule adjustments) should help church leaders make responsible decisions.
Remote-working options can help as well, with employees handling tasks from home through available technology.
Understand employee classifications
With respect to employers’ pay obligations, three key factors apply:(a) whether the employees are “exempt” or “nonexempt” under the federal Fair Labor Standards Act (FLSA) and comparable state laws, (b) whether the employer is open for business, and (c) whether money matters more than morale.
The FLSA distinguishes between exempt and nonexempt employees.
To be classified as “exempt,” an employee must (a) be paid a salary, (b) of at least $455 per week, and (c) have certain skills or duties (e.g. executives, professionals, or administrative employees who regularly exercise discretion over significant matters—this is known as the “white-collar exemption”; but also note how the “ministerial exception” plays a role for certain positions).
All other employees are considered “nonexempt,” and are entitled to overtime pay and other legal protections.
On inclement weather days, exempt employees are slightly better off than nonexempt employees. The key difference is that nonexempt employees are entitled to pay only if they work, unless the business is closed.
Exempt employees, on the other hand, are entitled to pay regardless of the circumstances.
One common mistake churches make is to improperly deduct pay for exempt employees, essentially giving them unpaid leave for missed work. At least theoretically, a risk may then arise that employees may be reclassified as nonexempt based on such a pay modification. That’s why it’s better for churches to make certain that exempt employees receive their regularly scheduled compensation.
Requiring PTO in exchange for office closures
Some churches might consider making all employees to take paid leave as a result of an office closure.
Legal considerations aside, this may be a very unpopular decision.
Accordingly, churches should adopt an inclement weather policy. The policy should:
1) provide clear guidelines addressing potential use of paid leave;
2) address pay deductions for nonexempt employees’ missed work, and perhaps even offer extra paid “snow,” “cold,” or other inclement weather days when appropriate.
Sally Wagenmaker is a partner at Wagenmaker & Oberly, a law firm serving nonprofit organizations across the nation with offices in Chicago and Charleston, South Carolina. She provides legal counsel in corporate, tax, employment, and real estate matters for clients, including churches and other religious organizations, social service providers, and schools. Sally is the current president and board chair of Christian Legal Society.
Sally Wagenmaker is a founder and partner in the Chicago office of Wagenmaker & Oberly, a law firm serving churches and nonprofits nationwide. Wagenmaker currently serves as president of Christian Legal Society.
Image: getty/javier ghersi
Does Your Church Have a Capital Reserve Account?
Setting and building a capital reserve account fund can help your church prepare for inevitable future expenses.
A capital reserve account is one that is established to save money in a designated account to pay for a major capital expenditure (replacement, repurposing, and so on) when an expensive item’s effective life is over.
For example, the average life of your church’s HVAC systems may be 15 years. If you spend $100,000 on a new HVAC system today, how much should you set aside in a reserve account to have the adequate funds to replace it in 15 years? Is it $100,000? More? Less?
Here are five considerations that will help determine future costs and develop a capital reserve account for any inevitable expenditures:
Deferred maintenance. If you have any deferred maintenance, you must develop a plan to bring things current based on their age and expected life. If that is not done prior to developing the ongoing capital reserves, you will always be playing catch up.
Current replacement value. What would it cost today to replace the item?
Expected life. How many years of life are still expected from this item?
Annual inflation. As you look at the economic environment, what percentage of annual inflation would be prudent to plan on?
Annual budget. Based on the above four considerations, how much money should be set aside every year?
Adapted from 5 Intentional Steps to Establish a Capital Reserve Account, an eBook from the Cool Solutions Group.
The editorial team of Church Law & Tax is made up of Matthew Branaugh, attorney-at-law, and Rick Spruill, digital content manager.
Image: AdobeStock/Farknot Architect
Church Board Member Removal: Handle With Care
Avoid potential litigation and internal strife with proper bylaws, policies, and procedures.
Myron Steeves
When Conflict Arises
One of the toughest challenges a church board may face is removing one of its own members—especially when the pastor, congregation, or other board members initiate the process. Unfortunately, many churches lack clear procedures, and that can lead to costly legal battles.
Real-World Example
In one case, several church members accused two board members of moral failings and demanded their removal. The board expected a quick resolution. Instead:
The church’s bylaws were unclear.
The accused members saw the move as personal and refused to step down.
Tensions escalated into a lawsuit.
After two years in court, the church was left deeply in debt and barely survived. The primary cause? An inadequate removal process in the bylaws.
Preventing Litigation and Disruption
To avoid this kind of turmoil, churches should:
Review their state laws, articles of incorporation, and bylaws related to board member removal.
Add a clearly written provision to the bylaws if one doesn’t exist.
Address this issue while the board is stable—not during a crisis.
Why Remove a Board Member?
Reasons for removal can include:
Health or job issues affecting a member’s ability to serve
Departures from church doctrine or lifestyle standards
Personality conflicts that disrupt board function
Most churches rarely face this issue. Often, members serve short terms (1–3 years), or willingly resign when asked. But when they don’t, problems can escalate quickly.
What State Law Says
When bylaws are silent, state nonprofit laws apply. These laws vary by state and fall into three categories:
1. Removal for Any Reason
Some states allow:
The group that elected a board member (either the board or the congregation) to also remove them, for any reason.
A simple vote—no cause required.
This is the simplest approach and minimizes legal risk. It aligns with the Model Nonprofit Corporation Act, followed by many states.
2. Removal for Cause Only
Other states allow removal only for specific, serious reasons, such as:
Mental incompetence (as declared by a court)
Felony conviction
Chronic absence from meetings
Failure to meet membership standards
But what qualifies as “cause” under these laws may not include doctrinal or lifestyle concerns—issues that are often critical for churches.
3. No Guidance at All
Some states offer no rules at all. In those cases, churches face legal uncertainty unless their bylaws clearly address removal procedures.
Why Bylaws Matter
State laws typically act as default rules. Churches can override them by writing their own standards into their bylaws or articles of incorporation.
A well-crafted bylaw provision:
Provides clarity for both the church and the courts
Helps prevent drawn-out conflicts
Aligns with the church’s governance needs
Drafting Bylaws for Two Audiences
Church bylaws must speak to:
Church leaders, who will apply them
Courts, who may need to interpret them
Vague spiritual language—like removing a member for “ungodly behavior”—can be difficult for courts to enforce.
Instead, bylaws should:
Specify who makes the decision (e.g., the pastor, after counseling)
Describe the process clearly
Avoid requiring courts to define religious standards
This approach allows courts to defer to church leadership without violating First Amendment protections.
Three Approaches to Board Member Removal
Churches typically use one of three approaches in their bylaws:
1. Removal by the Membership
This is most common when members elect the board.
Pros:
Aligns with congregational polity
Reflects the authority of the church body
Challenges:
Members may lack access to sensitive information
Difficult to make factual determinations in disputes
Annual meetings may delay action
Best Practices:
Allow removal for any reason, not just “cause”
Include provisions for special meetings with adequate notice
Avoid requiring the congregation to determine whether standards were violated
Model Language:
“The membership of the church may remove, with or without cause, one or more board members at a meeting of the church membership.”
Or:
“The membership of the church may remove one or more board members at a meeting of the membership for the following reasons: [list cause].”
Notice Requirements:
Notice must be provided at least two weeks in advance.
Include the date, time, location, and purpose of the meeting.
Clearly name the board member(s) whose removal will be considered.
Avoid ambiguous terms like “posted notice.” Use precise language (e.g., “publication in the church newsletter”).
Member Rights:
State whether the board member may attend and speak before the vote.
This adds fairness and transparency—even if tensions are high.
2. Removal by the Board
This is common in churches without a membership model. The board is “self-perpetuating” and governs itself.
Pros:
Efficient decision-making
Board members are often well-informed and meet frequently
Risks:
Can be politicized in divided boards
Safeguards:
Add removal standards, such as:
Excessive missed meetings
Doctrinal or lifestyle conflicts
Criminal conduct
Disruptive behavior
Optional Strategy:
Use shorter board terms (e.g., one year) to reduce the need for mid-term removals.
3. Removal by a Designator
Though less common, this approach can be useful.
A designator could be:
A denominational leader
A nominating committee
A specific individual or group
Advantages:
Brings outside expertise and objectivity
Can focus on spiritual concerns, not politics
Reduces conflict of interest
Cautions:
Avoid giving too much power to one person
Use a group to ensure accountability
Final Thoughts: Prepare Before Problems Arise
Disputes over board member removal can be painful and divisive. Often, the issue is resolved when a board member steps down voluntarily. But that’s not always the case.
Every church should:
Develop a clear bylaw provision for removal
Ensure the provision aligns with state law and church polity
Review and update governing documents before conflict arises
Doing so protects the church, its mission, and its people from unnecessary risk and damage.
Attorney Myron Steeves has practiced law for more than 25 years in California. He founded the Church Law Center of California (ChurchLawCenter.com) in 1995, where he continues to help meet the legal needs of churches and nonprofit organizations. Steeves also was dean of Trinity Law School from 2010 to 2016. He is an active member of the American Bar Association’s Model Nonprofit Corporation Act Subcommittee.
