Key point. Employees of churches and church-affiliated schools are ineligible for unemployment benefits in most states.

An Illinois court ruled that a former employee at a church-affiliated school was not eligible for unemployment benefits. A former church employee (the "plaintiff") filed a claim for unemployment benefits with the Illinois Department of Employment Security. A hearing was conducted to determine the plaintiff's eligibility for benefits. Testimony at the hearing demonstrated that the church is a nonprofit Illinois corporation organized for religious purposes, and that it operates a school. The church hired and supervised all school personnel and determined their compensation. The plaintiff was hired by the board of directors of the church. The school did not have a separate corporate charter or legal organization. The church did not pay unemployment contributions because it was tax-exempt. The church did not inform its employees that they would not be able to receive unemployment benefits.

The school had been an elementary school that instructed children from preschool through sixth grade. The church building and the school building are physically attached. Four teachers had been employed at the school. The plaintiff worked as a food service coordinator from 2004 through 2013. She also worked at the church's school. Her check stubs indicated that her employer was the church. In 2013, the church closed the school and the plaintiff was laid off.

After the hearing, the judge issued her decision in which she determined that the plaintiff was not eligible for unemployment insurance benefits under the Illinois Unemployment Insurance Act. The judge explained that under the Act, "employment" does not include services performed in the employ of a church. The judge reasoned that because the school was not separately incorporated from the church, it constituted an arm of the church and school employees constituted church employees. The judge stated because the plaintiff had not been in the church's employment for purposes of the Act, the money she was paid by the church did not constitute wages for purposes of the Act and could not be considered when determining the plaintiff's eligibility for benefits. The plaintiff appealed.