Should You Disclose Staff Compensation?

A court case in California helps answer this question.

International Federal of Professional and Technical Engineers v. Superior Court, 27 Cal.Rptr.3d 262 (Cal. App. 2005)

Article summary. Should churches disclose staff compensation information to members? This is a controversial question. Some churches do so, but many do not. Can churches that choose not to disclose this information do so legally, or does such a practice violate the legal rights of members? These issues are addressed in this article in the context of a court case in California.

Should a church share with members the amount of compensation it pays to staff members? Some church leaders view salary information as private, and refuse to disclose it. Others believe that members who “pay” the salaries through their weekly contributions have a right to know how much staff members are paid. Those who favor disclosure often point to the public disclosure of compensation paid to state and local government employees. The logic goes like this, “If taxpayers who pay government employees’ compensation have a right to know how much these employees are being paid, shouldn’t church members have a right to know how much church employees are being paid?”

A recent case

Reporters from two newspapers asked the City of Oakland, California, for records indicating the name, job title, and gross salaries of all city employees who earned at least $100,000 per year, including those whose base salaries were below $100,000 but who crossed that threshold when overtime and other compensation were included.

The city refused to identify any individual employees with such earnings on the ground that doing so would constitute an unwarranted invasion of personal privacy. A municipal employees union supported the city’s position, noting that past newspaper coverage of city employee salaries had included unfair insinuations that the employees were “greedy, undeserving, and overpaid,” and that the disclosures sought by the newspapers were “offensive and objectionable” to employees.

The newspapers sought a court order compelling the city to disclose the requested salary data, and a trial court issued the desired order. The court concluded that city employees earning over $100,000 had no legally protected privacy interest in their salary information, and that disclosing such information would not result in unjustified embarrassment or risk of identity theft. Further, even if employees had a legitimate privacy interest in salary information, this interest was outweighed by the public interest in exposing “inefficiency, favoritism, nepotism, and fraud with respect to the government’s use of public funds for employee salaries.” The court concluded, “The disclosure sought in this case is not an unwarranted invasion of personal privacy, and the public interest served by this disclosure outweighs the interests served by nondisclosure.”

A state appeals court affirmed the trial court’s ruling. It concluded, “There are no established norms that would support a privacy right protecting public employees from the disclosure of their names and salaries …. Public salaries are matters of substantial public interest warranting open discussion.” In rejecting the union’s claim that disclosing salary information would lead to identity theft, the court observed, “The union fails to explain how publication of names and salaries alone would facilitate such theft. It raises the specter of cold calls from stock brokers and the like. Even if such calls could be considered a serious invasion of privacy, we take notice of the establishment of do-not-call registries by the Federal Communications Commission and the California Attorney General for the purpose of combating the annoyance of telemarketers.”

The court also rejected the union’s argument that names and salaries should not be linked, noting that “the public has a right to know not only how much it is spending on salaries, but also who the recipients are. Salary information stripped of personal identification would leave the public in the dark as to possible instances of nepotism, favoritism, inefficiency, and fraud.” The court concluded, “While public employment does not entail the loss of privacy rights-and we emphasize that public employees have the same financial privacy rights as anyone else after they have received their salaries-it does require a surrender of anonymity due to the fact that public employees are engaged in the people’s business. The public is entitled to know the names as well the salaries of its highly paid employees.”

The court acknowledged that a California court had reached the opposite conclusion in a previous case, but it rejected that court’s decision. City of Los Angeles v. Superior Court (3 Cal.Rptr.3d 915 (Cal. App. 2003). The court in the previous case had declared: “Payroll information is personal. Ask any ordinary reasonable person if he or she would want their payroll information routinely disclosed to parties involved in litigation and one would hear a resounding, ‘No.’ Even though the pay scale of public employees is generally a matter of public record, it is quite a different thing to know with precision another person’s salary, selection of benefits, and potential retirement income. Few records are deemed more personal. Of all records kept by employers, it is the disclosure of payroll records that would constitute one of the greatest ‘unwarranted invasions of personal privacy.'”

Relevance to church leaders

Here are some considerations that may help church leaders decide whether or not to disclose salary information.

1. Review the church’s governing documents. A church’s governing documents (charter, bylaws, etc.) may mandate the disclosure of salary information. If so, this must be followed. Church leaders should be familiar with any such provision.

2. Review state nonprofit corporation law. State nonprofit corporation law gives members a limited right to inspect corporate documents at a reasonable time and for a “proper purpose.” Churches that are incorporated under state law may be subject to such a provision. However, note that such provisions are usually limited in three ways:

• Only members are given a right of inspection.

• The right of inspection only pertains to specified corporate records.

• The right of inspection only applies to requests prompted by a “proper purpose.”

Does such a right of inspection give church members the legal right to obtain salary data on all church employees? This question has never been addressed by any court. The answer will depend on the following factors:

• Is the church incorporated?

• What records may members inspect according to the state nonprofit corporation law under which the church is incorporated?

• Does the member have a “proper purpose”? This third factor is perhaps the most difficult to evaluate. Certainly, idle curiosity is probably not a proper purpose. But there doubtless are cases in which members may have a “proper purpose” in requesting inspection of salary information, at least for some staff members. An example would be members’ concern that the church’s tax-exempt status (and their charitable contribution deductions) may be jeopardized by excessive compensation paid to the senior pastor.

3. Public employees. The case summarized in this article involved municipal employees. While the application to church employees is not exact, there are some parallels. In both cases the employees’ compensation is being paid by persons (taxpayers or donors) who have a legitimate interest in knowing how much employees are being paid. The court concluded that the news media and taxpaying public have “a right to know not only how much [the government] is spending on salaries, but also who the recipients are” in order to identify “possible instances of nepotism, favoritism, inefficiency, and fraud.” This right of disclosure outweighs any “right of privacy” municipal employees may have to keep such information confidential.

This result is relevant to church leaders who are evaluating whether or not to disclose the salaries paid to each employee. It suggests, by analogy, that church members have a legitimate interest in knowing how much is being paid to staff members out of the contributions they make to the church, and that this interest transcends any privacy interests the staff members may have.

To be sure, the parallels are not perfect, and certainly are not controlling. Churches are free to keep salary information confidential, assuming that this does not violate the church’s organizational documents or nonprofit corporation law. Church leaders should also understand that other options are available. For example, some churches balance members’ “right to know” against staff members’ right of privacy by publishing “total compensation” paid to all staff members collectively in the church budget and financial statements, without breaking this amount down into individual salaries.

Copyright © 1994 – 2006 Christianity Today International. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, A publication of Christianity Today International, 465 Gundersen Drive, Carol Stream, IL 60188.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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