Pastor’s Age Discrimination Claim Against a Denominational Agency Was Barred by the “Ministerial Exception.”

The “ecclesiastical abstention doctrine” does not necessarily preclude resolution of pastor’s claims of breach of contract, wrongful eviction, and defamation, so long as doing so would not implicate religious doctrine.

Richard R. Hammar, Attorney, CPA

Bio

State: District of Columbia
Categories: Breach of Contract, Defamation, Judicial Resolution of Church Disputes

Key Point 8-10.1. The civil courts have consistently ruled that the First Amendment prevents them from applying employment laws to the relationship between a church and a minister.

Key point 9-07. The First Amendment allows civil courts to resolve internal church disputes so long as they can do so without interpreting doctrine or polity.

A federal district court for the District of Columbia ruled that a pastor’s age discrimination claim against a denominational agency was barred by the “ministerial exception,” but the court could resolve the pastor’s claims of breach of contract, wrongful eviction, and defamation, so long as doing so would not implicate religious doctrine.

A pastor and his wife organized a church (the “local church”) in 1995. The local church affiliated with a Protestant denomination (the “national church”) and one of its subdivisions (the “regional church”), but retained its organizational, administrative, and pastoral independence. Despite that independence, the local church entered into an agreement with the regional church with the following terms: (1) the regional church agreed to arrange financing to purchase property for the local church’s use; (2) the local church agreed to be responsible for repaying the loan; (3) the regional church held title to the property while the loan was being paid “to protect against the church’s default on the loan”; and (4) when the loan was repaid, the regional church would “relinquish the title to the property to the church free and clear of any encumbrances.” By 2005, the local church, using “the funds of the church membership without any contribution from the regional church,” had fully repaid the loan, but the regional church refused to transfer title to the local church.

In 2011, an officer of the regional church formally appointed the pastor as lead pastor of the local church. Although the pastor insisted that the regional church had no authority to determine who was the church’s pastor, he accepted the appointment and accepted a stipend of $1,500 per month. The regional church discontinued the stipend in 2012.

In 2015, an officer of the regional church informed the pastor that it was time for him to retire because the regional church had “younger people” capable of taking his place and that his last day as pastor would be May 31, 2015. The pastor ignored this ultimatum and continued to assert his authority to act as the church’s pastor. The regional church responded by changing the locks to the church without notifying the pastor, and by informing local law enforcement personnel that the pastor “had made illegal and unauthorized entry onto the properties.” The pastor was warned that he would be subject to arrest if he attempted to enter the property again.

The pastor sued the regional church, asserting the following claims:

age discrimination based on the regional church’s attempt to remove the pastor so that a younger pastor could be chosen;

breach of contract to pay a monthly stipend of $1,500 after 2012;

breach of contract based on the regional church’s failure to convey title to the local church pursuant to the agreement to carry out such a transfer upon the church’s repayment of the loan;

wrongful eviction based on the regional church’s changing the locks to the church in order to prevent the pastor from entering the building; and

defamation based on the letter the regional church disseminated to law enforcement authorities stating that the pastor had illegally entered onto the property.

The regional church asked the court to dismiss the lawsuit on the ground that it was an internal church matter over which the civil courts have no jurisdiction.

Ecclesiastical abstention and ministerial exception

The ecclesiastical abstention doctrine is based on a “long line of Supreme Court cases that affirm the fundamental right of churches to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine.” The related ministerial exception “precludes application of [employment discrimination laws] to claims concerning the employment relationship between a religious institution and its ministers.” As the United States Supreme Court noted in a unanimous ruling in 2012: “The exception … ensures that the authority to select and control who will minister to the faithful—a matter strictly ecclesiastical—is the church’s alone.” Hosanna-Tabor Evangelical Lutheran Church and Sch. v. EEOC, 132 S. Ct. 694 (2012).

The court noted that “the Supreme Court has expressed no view on whether the ministerial exception bars claims other than employment discrimination claims,” and it noted that a prior federal appeals court ruling had concluded that the exception “did not bar a breach of contract claim when resolution of such a claim is subject to entirely neutral methods of proof.” Minker v. Baltimore Annual Conference of United Methodist Church, 894 F.2d 1354 (D.C. Cir. 1990).

Age discrimination

The pastor claimed that the regional church discriminated against him on the basis of age because its officer forced him to retire from his position as pastor by telling him that he needed “to retire” because there were “younger people” to take his place. The court noted that the pastor had abandoned this claim on appeal, but even if he had not done so, the ministerial exception would have barred the claim:

His allegation is that the officer “forced him to retire because of his age,” thereby ending his tenure as pastor. The age discrimination claim before the court thus “is an employment discrimination [claim] brought on behalf of a minister, challenging his church’s decision to fire him.” The ministerial exception bars such a claim. That bar is in place because the court’s involvement in assessing the propriety of a pastor’s termination would improperly entangle it in “an internal church decision that affects the faith and mission of the church itself.”

Breach of contract to pay a stipend

The pastor claimed that the regional church’s discontinuation of his monthly $1,500 stipend amounted to a breach of contract. The court noted that in the District of Columbia, the elements of a breach of contract claim are: “(1) a valid contract between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty; and (4) damages caused by breach.”

The regional church argued that the ministerial exception barred this claim, but the court disagreed. The court quoted from the Minker case (see above): “A church is always free to burden its activities voluntarily through contracts, and such contracts are fully enforceable in civil court.” In Minker, the court considered a breach of an oral employment contract claim asserted by a minister. The court recognized that “it could turn out that in attempting to prove his case, the minister will be forced to inquire into matters of ecclesiastical policy even as to his contract claim,” which would require a dismissal of this claim.

The same analysis is warranted here, the DC court concluded:

If it turns out that resolution of the pastor’s claim that the regional church breached a contract to pay him a stipend requires excessive entanglement with religious doctrine, the court can grant summary judgment in favor of the regional church. But because at this early stage it is not entirely clear that resolution of [the pastor’s breach of contract claim] will require anything other than “neutral methods of proof,” dismissal on ministerial exception grounds is not warranted.

Breach of contract to convey title to property

The pastor claimed that the regional church breached its agreement to return title to the church property to the local church when it paid off the underlying loan in full. The regional church claimed that the ecclesiastical abstention doctrine prevented the court from resolving this breach of contract claim because resolution of that claim would require the court “to delve into the doctrinal beliefs of [the national church]. Specifically, the regional church explained that the property deed states that the property is to be held by the regional church in trust for the use and benefit of the national church,” and subject to The “Discipline” (the foundational document of the national church). And, of utmost importance according to the regional church, was the fact that The Discipline states that the regional church can only convey property “as may be deemed necessary or convenient for the purpose of [the regional church].” And, The Discipline describes those purposes as “religious, benevolent, charitable and educational in keeping with the purposes of national church as set forth in its Discipline.”

Therefore, the regional church reasoned, since any conveyance of real property by the regional church must be consistent with the religious “purpose” of the national church, the court was barred from resolving the breach of contract claim since doing so would directly entangle the court in the internal doctrine and practice of a religious denomination.

The court again disagreed:

Assuming the regional church is correct that terms in The Discipline are relevant to resolution of a claim that it breached a contract to convey title to the local church, it is still not apparent that resolution of the claim would require the court to assess religious doctrine or policy. The fulcrum of the regional church’s religious entanglement argument is the provision in The Discipline that states that the regional church can only convey property “as may be deemed necessary or convenient for the purpose of [the regional church].”

The regional church argues that this provision mandates that any contract to convey title must be consistent with the religious “purpose” of the national church and the court, in making that assessment as part of the breach of contract analysis, would be impermissibly assessing religious doctrine. Not so. The provision does not require that any conveyance of real property actually be consistent with the church’s religious “purpose.” Instead, it states that any conveyance must have been “deemed necessary or convenient” for that religious purpose by the appropriate individuals acting on the regional church’s behalf. An assessment of whether the regional church deemed conveyance of its property to the local church necessary or convenient for its religious purpose is a neutral determination that would not involve the court in determining what the church’s religious principles actually are. Thus, assuming the terms of The Discipline are relevant to this breach of contract claim, the regional church has not demonstrated that resolution of that claim will require the court to undertake an assessment of religious doctrine or policy. Again, to the extent that it becomes apparent that the court would be required to make such an assessment as this case progresses, the court at that time can grant summary judgment on the ground that resolution of the claim would create an excessive entanglement with religion. But, at this early stage, with that entanglement not yet apparent, dismissal on ecclesiastical abstention grounds would be premature.

Wrongful eviction

The pastor alleged that the regional church wrongfully evicted him by changing the locks on the church so that he was unable to access the building. Once again, the regional church insisted that resolution of this claim would involve impermissible religious entanglement. The court concluded that there was no evidence that this would be the case, and so it declined to dismiss this claim.

Defamation

The pastor claimed that the regional church defamed him when it disseminated a letter to law enforcement officers stating that he had made illegal and unauthorized entry onto church property. The regional church claimed that the ecclesiastical abstention doctrine prevented the court from resolving this claim since any attempt by the court to address this claim would impermissibly implicate this court in matters of religious doctrine and policy. Again, the court disagreed, noting that it “was not convinced that resolving the property-related claims will necessitate inappropriate judicial meddling in religious matters.”

What this means for churches

This case illustrates an important principle: While the “ecclesiastical abstention doctrine” prevents the civil courts from resolving internal church disputes involving “matters of church government as well as those of faith and doctrine,” it does not necessarily preclude resolution of such disputes on the basis of strictly neutral principles requiring no recourse to faith or doctrine. Gregorio v. Hoover, 238 F.Supp.3d 37 (D.D.C. 2017).

Legal Developments

Court Not Barred by First Amendment’s Religion Clauses in Donor’s Designated Contribution Claim

The court concluded that each of the plaintiff’s claims could be resolved without recourse to “questions of religious doctrine or ecclesiastical polity,”

Richard R. Hammar, Attorney, CPA

Bio

State: Michigan
Categories: Breach of Contract, Charitable Contributions

Key point. Donors may be able to recover designated contributions to a church if their contributions were not applied to the designated purpose, so long as doing so would not implicate religious doctrine.

A Michigan appeals court ruled that the civil courts are not barred by the First Amendment’s religion clauses from resolving a donor’s claim that the church failed to apply his designated contribution to his designated purpose, so long as religious doctrine was not implicated.

The chairman of a church’s board of trustees (the “plaintiff”) donated more than $41,000 into a restricted fund whose purpose “was to raise money to expand the church and build a fellowship hall.” Several years later, the plaintiff sued the church, claiming that the donated funds had not been used to build a fellowship hall, that the funds were used for other purposes without plaintiff’s permission, and that the plaintiff unsuccessfully asked for a return of the money numerous times.

The lawsuit claimed that the plaintiff was entitled to a refund of his donation on the basis of several grounds, including conversion, breach of contract, and fraud and misrepresentation.

A trial court dismissed the lawsuit, and the plaintiff appealed. A state appeals court began its opinion by noting:

It is well settled that courts, both federal and state, are severely circumscribed by the First and Fourteenth Amendments to the United States Constitution and … the Michigan Constitution in resolution of disputes between a church and its members… . Jurisdiction over disputes between churches and their members is limited to property rights which can be resolved by application of civil law. A court loses jurisdiction over disputes when resolution requires the court to entertain “questions of religious doctrine or ecclesiastical polity.”

In this case, the court concluded, “resolution of the plaintiff’s claims does not require a court to analyze questions of religious doctrine or ecclesiastical polity. The claims are based on the alleged facts that the restricted fund had a designated purpose of expanding the church and building a fellowship hall, that plaintiff donated money into the fund for that purpose, and that plaintiff’s donations were not used for the designated purpose.”

The court analyzed each of the plaintiff’s claims:

Looking to the substance of the specific claims, the conversion claims add additional allegations that plaintiffs were entitled to return of their money, asked for return of the money, and did not receive the money. The contract claims add the allegation that there was an agreement that the donated money would be used for the sole purpose of building a fellowship hall. The fraud claim adds the allegation that defendants made a material misrepresentation that induced them to donate the money… . Under the alleged facts, the dispute does not require a court to analyze questions of religious doctrine or ecclesiastical polity. Rather, resolving the issues merely involves property rights and applying civil law.

On appeal, the church insisted that the plaintiff’s donations had not been used for other purposes, and as proof pointed out that the fund contained more than the $41,000 donated by the plaintiff. The court rejected this defense, noting that the plaintiff had alleged that the donated money was used for other purposes, and the church had not directly rebutted this claim with affidavits or other evidence.

The church cited a previous Michigan case in support of the trial judge’s dismissal of the case. In McDonald v. Macedonia Missionary Baptist Church, 2003 WL 1689618 (Mich. App. 2003), a Michigan appeals court ruled that a married couple did not have a legal right to a refund of a $4,000 contribution they made to their church’s building fund. The congregation planned to construct a new church the following year, but these plans were put on hold when the church received an unused school building. The couple sued their church, seeking a return of their building fund donation on the basis of the church’s “breach of contract.” Church leaders noted that the church had $500,000 in its new building fund and insisted that it still planned to build a new sanctuary as soon as the fund grew to $6 million. A trial court agreed with the couple and ordered the church to refund their contributions. The church appealed.

A Michigan appeals court reversed the trial court’s ruling and dismissed the case. It concluded that the civil courts are barred by the First Amendment guaranty of religious freedom from intervening in such internal church disputes:

We hold that this dispute involves a policy of the church for which our civil courts should not interfere. Because the decision of when and where to build a new church building is exclusively within the province of the church members and its officials, the trial court erred in not dismissing the couple’s lawsuit.

In dismissing the relevance of this case, the appeals court noted in the present case that the McDonald case “is distinguishable because it involved decisions over when and where to build a new church building … not whether funds donated for a specific purpose were being used for a different purpose.”

What this means for churches

Few courts have addressed the right of church members to a return of their designated contributions in the event a church does not apply the funds as the donor specified. The court in this case concluded that such cases may be resolved by the civil courts if they can do so without reference to “questions of religious doctrine or ecclesiastical polity.” The court concluded that each of the plaintiff’s claims could be resolved without recourse to “questions of religious doctrine or ecclesiastical polity,” and therefore the civil courts were not barred by the First Amendment guaranty of religious freedom from resolving the plaintiff’s lawsuit seeking a return of the $41,000 he had donated to his church. Rogers v. Methodist Church, 2017 WL 2791002 (Mich. App. 2017).

Legal Developments

State Supreme Court Addresses Pastor’s Rescinded Resignation

The central issue was the pastor’s status, a question the court was barred from resolving by the constitutional protection of religious liberty.

Richard R. Hammar, Attorney, CPA

Bio

State: Alabama
Categories: Breach of Contract, Clergy - Removal, Judicial Resolution of Church Disputes

Key point 2-04.1. Most courts have concluded that they are barred by the First Amendment guarantees of religious freedom and nonestablishment of religion from resolving challenges by dismissed clergy to the legal validity of their dismissals.

The Alabama Supreme Court addressed the question of whether a pastor who had resigned his position could later retract his resignation.

At a church business meeting in 1995, a church appointed a new pastor. The church operated with its new pastor for a number of years without conflict. By 2012, however, a rift had formed between the pastor and board of deacons which led to the pastor’s termination, as described in a letter to him from the board:

The listed deacons called the meeting for the purpose of informing the body of some of their concerns regarding the welfare of the church that need immediate attention. A few of the things that were discussed were the falling off of member attendance, the falling off of tithes and offerings, the incorporation of the church being ignored, your lack of spiritual and financial leadership, the $187,000 [of] steel that is lying in the parking lot, and your holding a grudge against us that has not been revealed to us. Your consistently refusing to meet with the board of deacons has brought us to where we are today.

After discussing these topics and a few others, there was a motion from the floor for your termination, which was seconded. After putting this to a vote, the majority present voted for your termination. Regretfully, this is to inform you that your services to St. Union as pastor are no longer needed as of Monday, August 13, 2012. We hope you will accept the majority vote and move on pleasantly.”

The pastor declined to leave his position, however, and, on October 13, 2012, held another church meeting at which he asked those present to vote whether they wanted “the pastor to stay” or “for the deacons to remain.” The minutes of that meeting indicate that 37 members voted for the pastor and 10 members voted for the deacons.

For two years this situation remained at a stalemate, with the pastor continuing to serve as pastor and the deacons continuing to perform at least some of their traditional duties. The conflict between them continued, however, and eventually the deacons, who continued to administer the church’s finances, at some point stopped paying the pastor’s salary. Thereafter, the pastor told the congregation that he would resign if he was paid the money he was owed consisting of the salary that had been withheld by the deacons. The pastor and board began negotiations, and, on November 30, 2014, the pastor submitted his resignation. The pastor signed an “agreement” with the church in which he agreed to resign as pastor of the church in exchange for $16,600. He thereafter negotiated a check in that amount issued to him by the church.

A few weeks later, the pastor rescinded his resignation, stating that he was doing so at the request of the members of the church who had, he stated, told him that they would not accept his resignation. However, the pastor did not repay the $16,600 the church had paid him to resign. The next day, the church sent the pastor a letter reminding him of their agreement and advising him that legal action would be taken if he did not honor the agreement. On December 23, 2014, the threatened legal action was commenced when the church, acting through the five deacons who were now serving as its officers and directors, sued the pastor, alleging breach of contract and trespass and asking the trial court to issue a restraining order banning him from the church premises. On December 24, 2014, the trial court entered the requested restraining order. The court explained its judgment as follows:

The heart of the dispute and litigation in the present case is whether the pastor is or is not the pastor of the church. The choice of a pastor for a church is based wholly on Biblical principles for which a court cannot interfere without violating the United States Constitution and the Constitution of the State of Alabama. All cases adjudicated by the Alabama Supreme Court throughout its history have respected this principle. The congregation … by majority vote must choose or terminate its pastor. This court nor the legislature through its business organization statutes nor any church member or minority group of members can alter this principle.

The dispute over whether the pastor resigned or not and if he did whether he may be rehired as pastor is for the majority of the congregation to decide …. The central, substantive dispute is whether the pastor is or is not the pastor and such is wholly spiritual and ecclesiastical in nature and the court cannot interfere (emphasis added).

The state supreme court agreed with the trial court that the central issue was the pastor’s status, a question it was barred from resolving by the constitutional protection of religious liberty. It concluded: “As the trial court implicitly recognized … even if the pastor had resigned, there is still the question whether he could rescind his resignation or be rehired as pastor if that was the desire of the majority of the church’s members. Ultimately, only the congregation, not this court, can answer that question.”

The supreme court noted that the pastor had countersued the church for conversion, breach of fiduciary duty, unjust enrichment, breach of contract, and conspiracy, and sought an accounting of church funds from 2005 to the present, a temporary restraining order enjoining the church and its directors from expending any church funds, and an order requiring the church to turn over to the pastor all funds held on behalf of the church. The supreme court concluded that the gist of the pastor’s claims “is that the corporation and its directors have wrongfully refused him access to financial records of the church and to church funds, and he also makes vague allegations that the church and its directors have misused church funds. The church denies that the pastor has been refused access to any records, denies any misuse of church funds, and maintains that it is the proper party to control the church’s finances. Unlike the selection of a pastor, these are not ecclesiastical issues that a court lacks jurisdiction to consider.”

What this means for churches

Many courts have concluded that for-profit employers are under no legal obligation to rehire an employee who previously resigned his or her employment. Few courts have addressed this question in the context of church employment. This is one of the few courts to do so. The court’s conclusion was that the status of ministers, unlike most lay employees, implicates constitutional considerations, and that when a pastor resigns “there is still the question whether he could rescind his resignation or be rehired as pastor if that was the desire of the majority of the church’s members. Ultimately, only the congregation, not this court, can answer that question.”

It is possible, though unlikely, that one or more of the following resources may address an employee’s right to revoke a resignation, and so they should be consulted whenever a former employee seeks to revoke a prior resignation:

A church’s constitution, bylaws, or other governing document

The state nonprofit corporation law under which a church is incorporated

Robert’s Rules of Order Newly Revised

A policy manual

An employee handbook

One additional point: in order to avoid a discrimination claim under state or federal law, it is important for churches, like any employer, to treat members of a protected class under state or federal civil rights laws the same as other employees. So, for example, if a church has allowed some employees to revoke a resignation from employment, but has not offered this same accommodation to a member of a protected class, this could be the basis for an unlawful discrimination claim. St. Union Church v. Howard, 2016 WL 2848391 (Ala. 2016).

Legal Developments

Pastor’s Breach of Contract Lawsuit Against Board Members Dismissed by Court

The court concluded that church board members are not personally liable for breach of contract, since “whenever a corporation makes a contract, it is the contract of the legal entity … and not the contract of the individual members.”

Richard R. Hammar, Attorney, CPA

Bio

State: Pennsylvania
Categories: Breach of Contract, Clergy - Discipline and Removal, Officers, Directors, and Trustees

Key point 4-06. Clergy who sign legal documents in their own name with no indication that they are signing in a representative capacity on behalf of their church may be personally liable on the document.

Key point 6-07.02. Church board members may be personally liable for contracts they sign if they do so without authorization, or if they fail to indicate that they are signing as a representative of the church.

Key point 6-08. State and federal laws provide limited immunity to uncompensated officers and directors of churches and other charities. This means that they cannot be personally liable for their ordinary negligence. However, such laws contain some exceptions. For example, officers and directors may be personally liable for their gross negligence or their willful or wanton misconduct.

A federal district court in Pennsylvania dismissed a lawsuit by a pastor against individual members of a board of deacons claiming that his termination constituted a breach of contract.

A church hired a pastor (the "plaintiff") in 2012. The church and plaintiff executed a contract specifying a 20-year term of employment expiring in 2032. The contract stated various terms and conditions governing termination of the pastor's employment, including that either party could terminate the agreement with or without cause but with certain contractual consequences. The contract further provides that "the rights of termination set forth in this contract are in addition to any other rights of termination allowed to either party by law." The plaintiff claimed that termination of his employment as pastor was without cause as defined in the contract, and on this basis sued the church and each member of the board of deacons (the "defendants") for breach of the employment contract in a federal district court. He sought $2.6 million in damages.

The defendants asked the court for a "judgment on the pleadings," meaning that the law was so overwhelmingly in their favor that the court should rule based solely on the pleadings. The court addressed each of the plaintiff's claims in evaluating the defendants' motion.

Deacons' personal liability

The board of deacons were named individually and personally as defendants in the plaintiff's lawsuit. The deacons asked the court to dismiss them from the case on the following grounds: (1) They could not be sued for breach of a contract to which they were not parties; (2) they did not have authority as deacons of the church to hire or fire church employees, and therefore, they could not be held liable for actions for which they had no authority; and (3) as volunteers in a nonprofit organization they were "immune" from liability under state nonprofit corporation law as uncompensated charitable volunteers.

(1) The deacons were not parties to the contract

The court agreed that the existence of a contract between the pastor and the individual deacons was required under Pennsylvania law for the pastor to pursue his breach-of-contract claim against them: It is axiomatic that only a party to a contract can be sued for its breach … . Moreover, as a general matter, when a corporation enters into a contract, the corporation alone is liable … . Whenever a corporation makes a contract, it is the contract of the legal entity—of the artificial being created by the charter—and not the contract of the individual members. Liability of the corporate officer for breach of contract only extends where, as opposed to here, the officer makes the promise in his individual capacity … . Notably, only one of the [deacons] was a signatory to the contract, having signed as stated thereon as Chairman of the Deacon Board. Regardless, the contract itself attached … clearly indicates that it is an agreement between the pastor and church as the contracting parties … . Nowhere in the document does the language reasonably suggest that [individual deacons were] assuming personal liability for the contract.

(2) Board of deacons' lack of authority to hire and fire employees

The individual deacons argued that they did not have authority as deacons to hire or fire church employees, and therefore cannot be held liable for actions for which they had no authority. They also claimed that under the church bylaws, the church, by a two-thirds vote of the congregation, could remove a pastor from his tenure.

The plaintiff insisted that the bylaws make the board of deacons responsible for providing input regarding church administrative matters.

The court concluded that both parties argue these matters for naught. These arguments do not have any relevance to the individual defendants' liability for breach of contract. That the contract, charter and bylaws spell out the structure of the church and certain procedures to be followed regarding termination of the pastor does not establish any liability of the individual defendants for breach of the contract between the pastor and the church.

(3) Charitable immunity for nonprofit volunteers

The individual deacons argued that even if they could be sued for the pastor's termination, they are immune from liability under the state nonprofit corporation statute, which provides:

(a) General rule. Except as provided otherwise in this section, no person who serves without compensation, other than reimbursement for actual expenses, as an officer, director or trustee of any nonprofit organization under section 501(c)(3) of the Internal Revenue Code … shall be liable for any civil damages as a result of any acts or omissions relating solely to the performance of his duties as an officer, director or trustee, unless the conduct of the person falls substantially below the standards generally practiced and accepted in like circumstances by similar persons performing the same or similar duties, and unless it is shown that the person did an act or omitted doing of an act which the person was under a recognized duty to another to do, knowing or having reason to know that the act or omission created a substantial risk of actual harm to the person or property of another. It shall be insufficient to impose liability to establish only that the conduct of the person fell below ordinary standards of care.

The court noted that this provision only applies to liability for "torts" (i.e., personal injuries) and not to breach-of-contract claims like the one presented in this case.

The court's conclusion

The court agreed with the position of the deacons, and dismissed the plaintiff's claims against them.

What this means for churches

This case is relevant to church leaders for these reasons:

Liability for breach of contract. The court concluded that church board members are not personally liable for breach of contract, since "whenever a corporation makes a contract, it is the contract of the legal entity … and not the contract of the individual members. Liability of the corporate officer for breach of contract only extends where, as opposed to here, the officer makes the promise in his individual capacity." Even the fact that the chairman of the deacon board signed the contract did not make him personally liable if the contract "clearly indicates that it is an agreement between the pastor and church as the contracting parties." The court stressed that "nowhere in the document does the language reasonably suggest that [individual deacons were] assuming personal liability for the contract."
Church board members may be personally liable on contracts that they sign in two ways. First, they may be liable on a contract they sign without authority to do so. Second, board members may be personally liable on contracts they are authorized to sign but which they sign in their own name without any reference to the church or to their representational capacity. To prevent this inadvertent assumption of liability, board members who are authorized to sign contracts (as well as any other legal document) should be careful to indicate the church's name on the document and clearly indicate that they are signing in a representative capacity (i.e., agent, director, trustee, or officer).

To summarize, clergy and church board members should refrain from signing contracts unless they are certain that (1) the contract has been properly authorized; (2) they are authorized to sign on behalf of the church; (3) the church is clearly identified in the contract as the party to the agreement; and (4) the minister signs in a "representative capacity" (for example, as "authorized agent" or "president").
Charitable immunity. Most states have enacted laws limiting the liability of officers and directors of nonprofit corporations. In many states, these "immunity" laws protect church volunteers. Most of these laws only immunize uncompensated directors and officers (or volunteers) from legal liability for their ordinary negligence committed within the scope of their duties. These statutes generally provide no protection for "willful and wanton" conduct or "gross negligence."

Many courts have agreed with this court, and have limited state charitable immunity laws to personal injuries, and not breach-of-contract claims. Lee v. Sixth Mount Zion Church, 2016 WL 2344529 (W.D. Pa. 2016).

Legal Developments

Removal of Church Board Members

If a church neglects to address an issue in its governing documents, state nonprofit corporation law will provide the answer.

Richard R. Hammar, Attorney, CPA

Bio

State: Florida
Categories: Breach of Contract, Charters, Constitutions, and Bylaws, Officers, Directors, and Trustees

Key point 6-02.2. Churches are subject to the provisions of their governing documents, which generally include a charter and a constitution or bylaws (in some cases both). A charter is the state-approved articles of incorporation of an incorporated church. Most rules of internal church administration are contained in a constitution or bylaws. Specific and temporary matters often are addressed in resolutions. If a conflict develops among these documents, the order of priority generally is as follows—charter, constitution, bylaws, and resolutions.

Key point 6-06.4. Church officers and directors can be removed from office in the manner authorized by the church's governing documents. It is common for church bylaws to give the membership the authority to remove officers and directors who engage in specified misconduct or change their doctrinal position.

A Florida court ruled that state nonprofit corporation law governed the removal of board members in a church that did not address the issue in its governing documents.

A pastor and a member of a church's board of directors (the "defendants") attempted to remove the four other members of the board (the "plaintiffs") and replace them with new members. When the ousted board members discovered what had happened, they entered into protracted negotiations to resolve the dispute without recourse to litigation. When that failed, the former board members sued the defendants, alleging breach of contract, breach of fiduciary duty, and fraud. A trial court dismissed the case on the basis of the "ecclesiastical abstention" doctrine which generally bars the civil courts from resolving internal church disputes. The court noted that any attempt on its part to resolve the dispute "would necessarily and excessively entangle this court in doctrinal and theological issues." The plaintiffs appealed.

A state appeals court ruled that the ecclesiastical abstention doctrine did not prevent it from resolving this case. It observed: "Plaintiffs are not categorically prohibited from ever seeking redress from the courts solely because a religious organization is somehow involved in the dispute. When a church-related dispute can be resolved by applying neutral principles of law without inquiry into religious doctrine and without resolving religious controversy, the civil courts may adjudicate the dispute …. Nothing in the record indicates that the plaintiffs have sought judicial intervention concerning any aspect of church governance. Instead, they allege that the defendants, acting without authority, attempted to remove specific board members from the organization in derogation of the requirements of [the Florida nonprofit corporation law]."

The court noted that the state nonprofit corporation law (under which the church was incorporated) specified the procedure to be followed in removing board members of nonprofit corporations, and stipulated that these procedures applied only to the extent that a corporation's articles of incorporation or bylaws did not address the issue. The court found nothing in the church's articles of incorporation or bylaws addressing the removal of board members, and so, by default the state nonprofit corporation law applied. The court concluded:

The church in the instant case did not decide this aspect of church governance for itself; the bylaws of the church do not address the composition of the board, the removal of board members, or any similar aspect of corporate management. Because the church in the instant case had no bylaws governing the removal of board members, [the nonprofit corporation law] dictates the required procedures.

Because the statute unambiguously establishes procedures of uniform law, the instant dispute can be resolved by applying neutral principles of law without inquiry into religious doctrine and without resolving a religious controversy. Thus, the allegations in the complaint may be evaluated without recourse to any policy, practice, or doctrine of the church. The court is not asked to interpret religious doctrine or to evaluate church policies. The allegations at the heart of the complaint—that the defendants improperly attempted to remove members of the board of trustees—are entirely controlled by neutral application of [the nonprofit corporation law] …. This is not an instance where the court's involvement would transgress upon the exclusive authority granted to churches under the First Amendment "to decide for themselves, free from state interference, matters of church government."

What this means for churches

There are a couple of points to note about this case. First, the court concluded that the civil courts do not necessarily have to refrain from resolving internal church disputes. The resolution of such disputes is barred by the First Amendment only if an inquiry into church doctrine would be required. Second, the court applied state nonprofit corporation law in determining the procedure for removing church board members since the church had not addressed this issue in its governing documents. This illustrates the basic principle that state nonprofit corporation law is a "gap filler." An incorporated church is generally free to address issues of administration and governance in its articles and bylaws in any manner it chooses, free from state interference. But, if it neglects to address an issue in its governing documents, then state nonprofit corporation law will provide the answer. Bendross v. Readon, 89 So.3d 258 (Fla. App. 2012).

Legal Developments

Religious Discrimination

Federal law does not prohibit religious discrimination in private contracts.

Richard R. Hammar, Attorney, CPA

Bio

State: Michigan
Categories: Breach of Contract

Church Law & Tax Report

Religious Discrimination

Federal law does not prohibit religious discrimination in private contracts.

Richard R. Hammar, J.D., LL.M., CPA

Key point. Federal law prohibits racial discrimination in private contracts. But, this law does not prevent discrimination in private contracts based on religion or national origin.

A federal court in Michigan ruled that a priest did not violate federal law by urging parishioners not to use the services of a photographer based on his Muslim faith. A Muslim American of Albanian descent (the “plaintiff”) was married to a woman who, along with their three children, attended a Catholic church. Plaintiff is a professional photographer and videographer who owns his business. He relies heavily for much of his income on weddings, communions, anniversaries, or other celebratory events, which are sometimes held in a hall owned and operated by his wife’s church. The plaintiff sued the priest of his wife’s church, claiming that he instructed his parishioners not to use the plaintiff’s services as a photographer because he was “a Muslim, terrorist, or member of the Taliban.” This conduct, the plaintiff asserted, violated a federal statute (42 U.S.C. § 1981) prohibiting racial discrimination in private contracts.

The statute in question (42 U.S.C. § 1981) provides:

All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

This section prohibits racial discrimination during the scope of a private contractual relationship, including discrimination in the workplace. The priest asked the court to dismiss the lawsuit since the plaintiff was alleging religious discrimination which is not protected under the statute. The court agreed: “To the extent that Count I of Plaintiff’s complaint asserts a § 1981 claim based upon religious discrimination, plaintiff fails to state a claim because § 1981 does not prohibit religious discrimination.”

What This Means for Churches:

This case illustrates that a federal law prohibiting racial discrimination in private contracts does not necessarily apply to an interference with contract that is based on religion. Ziba v. Kcira, 2011 WL 2214666 (E.D. Mich. 2011).

This Recent Development first appeared in Church Law and Tax Report, May/June 2012.

Legal Developments

Determing Disability Discrimination

Most courts have concluded that they are barred by the First Amendment from resolving challenges by dismissed clergy to the legal validity of their dismissals.

Richard R. Hammar, Attorney, CPA

Bio

State: Iowa
Categories: Breach of Contract, Clergy - Removal

Church Law & Tax Report

Determing Disability Discrimination

Most courts have concluded that they are barred by the First Amendment from resolving challenges by dismissed clergy to the legal validity of their dismissals.

Richard R. Hammar, J.D., LL.M., CPA

Key point 2-04.1. Most courts have concluded that they are barred by the First Amendment guarantees of religious freedom and nonestablishment of religion from resolving challenges by dismissed clergy to the legal validity of their dismissals.

* A federal court in Iowa ruled that the First Amendment guarantee of religious freedom prevented it from resolving a rabbi’s claim that her dismissal violated the Americans with Disabilities Act and amounted to a breach of contract. A rabbi (“Beth”) entered into an employment contract with a Jewish congregation for a period of three years. The contract specified that it could be terminated by the congregation for gross misconduct or an ongoing inability to perform the duties described in the agreement. According to the agreement, Beth’s duties included leading religious services, serving as principal and teacher in the Hebrew school, visiting ill or confined congregants, satisfying pastoral needs of members, maintaining regular office hours, and writing newsletter articles.

Beth claimed that she suffered a physical disability related to a broken foot, which limited her ability to stand, walk, and move, and that she provided the congregation with a set of accommodations that would permit her to work. Despite her disability, she continued to perform her job duties in a manner that she believed met the congregation’s expectations.

In fact, some congregational leaders were dissatisfied with her communication with congregants, office hours, pastoral care, and religious services. The congregation gave Beth a written memorandum of concerns regarding her job performance and provided specific instructions for the timeliness of returning phone calls and number of visits to ill or confined congregants. She responded with a written memorandum, stating she had posted her office hours and made every reasonable effort to return congregants’ phone calls and messages. She also stated that the visitation requirements outlined in the memo were not reasonable, given her foot injury. A few months later, the congregation’s board of directors determined that Beth’s performance had not improved, and it voted to terminate her employment.

Beth insisted that she performed her job adequately at all times, despite her foot injury disability. She sued the congregation, claiming that its decision to terminate her violated the Americans with Disabilities Act and amounted to a breach of contract.

Americans with Disabilities Act

The Americans With Disabilities Act (ADA) prohibits employers engaged in commerce and having at least 15 employees from discriminating in any employment decision on the basis of disability. The ADA defines a “disability” as a physical or mental impairment that substantially limits one or more major life activities. Beth claimed that her foot injury met this definition. The congregation conceded that after her injury Beth used crutches and a cane to assist her mobility.

The court noted that an analysis of Beth’s discrimination claim “quickly implicates whether the performance she was providing could meet her religious obligations. The issue is further complicated by the record of complaints regarding communication with congregants, pastoral care, religious services, and complaints … within and without the confines of the congregation. From this type of record, there understandably arises a reluctance of courts not only to avoid the ultimate entanglement but to avoid the essential inquiry.” The court cited the following cases as examples of a judicial reluctance to decide if a church’s decision to terminate a minister was discriminatory or based on legitimate performance-related concerns:

A federal appeals court held that a minister’s age discrimination claim was properly dismissed because “the First Amendment prohibits the government from regulating internal church decisions about the promotion of pastors, because churches have broad discretion in determining who may speak for the church.” The minister had asserted that since there was no church policy or doctrine in favor of age discrimination, there was no First Amendment implication in having a secular court decide his claim. The court concluded that it need not wade into the nuances of church policy, since as a determination of the church leader “is per se a religious matter. We cannot imagine an area of inquiry less suited to a temporal court.” Minker v. Baltimore Annual Conference of United Methodist Church, 894 F.2d 1354 (D.C.Cir. 1990).
A federal appeals court dismissed a pastor’s claims of racial and sexual discrimination in a church’s hiring process. The court found the constitutional questions mandated refrain from inquiry into clergy selection: “The right to choose ministers without government restriction underlies the well-being of religious community, for perpetuation of a church’s existence may depend upon those whom it selects to preach its values, teach its message, and interpret its doctrines.” The court held that any governmental attempt “to restrict a church’s free choice of its leaders thus constitutes a burden on the church’s free exercise rights.” Rayburn v. General Conference of Seventh-Day Adventists, 772 F.2d 1164 (4th Cir. 1985).
A federal appeals court ruled that the First Amendment precluded civil court review of a minister’s sex discrimination claim. Calling the relationship between church and clergy the “lifeblood” of the church, the court determined that matters affecting that relationship are “of prime ecclesiastical concern” and thus outside the purview of the secular courts. McClure v. Salvation Army, 460 F.2d 553 (5th Cir. 1972).
A federal appeals court ruled that “the overwhelming weight of precedent going back over a century” precluded it from intervening in a minister’s race discrimination, sex discrimination and retaliation claims. The court concluded that a church’s selection of its clergy is “primarily an ecclesiastical matter” that is the exclusive province of the church. The court determined that the First Amendment prohibits civil court review of church procedures regarding clergy employment decisions. Young v. Northern Illinois Conference of United Methodist Church, 21 F.3d 184 (7th Cir. 1994).
A minister alleged several physical and mental conditions but claimed he was able to perform his ministerial duties with slight accommodations. He sued the church pursuant to the ADA, asserting the church failed to accommodate his disability and that the failure to make reasonable accommodations forced him to resign. The court held that it could not consider such a claim, as it “clearly fits into this long recognized category of ministerial personnel decisions exempt from consideration by the civil courts,” noting that the very act of decision was protected—even the reasoning behind such a decision was outside the legitimate purview of the court. Werft v. Desert Southwest Annual Conference of the United Methodist Church, 377 F.3d 1099 (9th Cir. 2004).

Beth insisted that judicial resolution of a minister’s disability discrimination claim is a neutral act involving no analysis of religious doctrine. The court disagreed, noting that “it is the very inquiry into those decisions that constitutes excessive entanglement with a church’s internal affairs.” The court noted that a resolution of Beth’s claim would pit her theory of disability discrimination against the congregation’s view that her termination was solely related to unsatisfactory performance of her religious duties. Resolving these competing claims would invite “improper scrutiny by the court of the congregation’s expectations as a religious institution. Any such investigation presses the civil court to become excessively entangled in internal church affairs and is prohibited by the First Amendment.” As a result, the court dismissed Beth’s disability discrimination claim.

breach of contract

The court concluded that Beth’s claim for breach of contract “similarly raises the compelling question of whether religious determinations are at issue or whether this is merely a civil contract dispute defined by the terms the congregation sought. Though the congregation’s insistence on a contract document increases the stark nature of the legal collision, the result ultimately is the same.”

Beth argued that the court should entertain her breach of contract claims because the congregation made numerous secular legal references in drafting the employment agreement, including (1) health and disability insurance, (2) the Internal Revenue Code, (3) insurance coverage by the congregation, (4) termination based upon gross misconduct, and (5) termination based on an inability to perform duties. In addition, the contract had an addendum which referred to certain statistics published by the U.S. Department of Labor regarding the calculation of Beth’s annual compensation adjustment.

The court concluded: “Had Beth brought a claim for breach of contract based on the congregation’s refusal to provide the agreed-upon insurance coverage or failure to make the annual compensation adjustment, it may well be that the court could adjudicate those claims by factual determinations that do not involve the court in internal, ecclesiastical matters. However, the congregation claims to have discharged her pursuant to misconduct and an inability to perform her duties. As the above analysis has repeatedly noted, the ability of church members to obtain clergy of their choosing is a matter of prime constitutional consideration and outside the proper inquiry of a civil court.”

Application. This case is important for two reasons. First, it extends the so-called “ministerial exception” to ministers’ claims of employer discrimination under the Americans with Disabilities Act. Second, the court concluded that the ministerial exception prohibits the civil courts from inquiring into the reason why a church dismissed a minister. The very act of deciding if a church’s decision to terminate a minister was legitimately related to job performance, or illegitimately based on discriminatory intent, would impermissibly entangle a court in a matter of “prime ecclesiastical concern.” Leavy v. Congregation Beth Shalom, 490 F.Supp.2d 1011 (N.D. Iowa 2007).

Legal Developments

Enforced Moral Codes

Churches can impose scriptural or moral standards on their employees, and such efforts will be fully protected by the civil courts?o long as they do so fairly and uniformly.

Richard R. Hammar, Attorney, CPA

Bio

State: New York
Categories: Breach of Contract, Contracts, Employment Practices

Church Law & Tax Report

Enforced Moral Codes

Churches can impose scriptural or moral standards on their employees, and such efforts will be fully protected by the civil courts—so long as they do so fairly and uniformly.

Richard R. Hammar, J.D., LL.M., CPA

Key point 8-06. The civil courts have consistently ruled that the First Amendment prevents the civil courts from applying civil rights laws to the relationship between a church and a minister.

Key point 8-08.1. Title VII of the Civil Rights Act of 1964 prohibits employers engaged in commerce and having at least 15 employees from discriminating in any employment decision on the basis of race, color, national origin, gender, or religion. Religious organizations are exempt from the ban on religious discrimination, but not from the other prohibited forms of discrimination.

* A federal court in New York ruled that church-operated schools can enforce “moral codes” on their employees, but only if they do so fairly and uniformly and not in ways that disproportionately and adversely affect persons (such as pregnant, since women) who are protected by employment discrimination law. A woman (the “plaintiff”) taught a fifth grade class at a church-operated school. She was required to teach one hour of Bible study per day and spent the remainder of her day teaching secular subjects. Shortly after the start of her third academic year, the plaintiff informed the school principal that she was pregnant; that she intended to follow through with the pregnancy; and that she did not intend to marry the father of the unborn child. Based on her decision not to marry the child’s father, the principal informed plaintiff that she would have to bring the matter to the attention of the governing board of the school and initiate termination proceedings. In a subsequent meeting, the board voted to terminate plaintiff “in that her pregnancy outside of marriage was evidence of fornication.” The principal thereafter sent the plaintiff a letter informing her that the board had voted to terminate her employment for exhibiting “immoral or unsatisfactory personal conduct inconsistent with the principles of the church.” The plaintiff sued the church that operated the school, claiming that it had unlawfully discriminated against her on the basis of pregnancy in violation of state and federal law.

The school required all teachers to sign an employment agreement prior to the start of each academic year. The employment agreement states that the employee and employer shall “be bound by” various specified policies. One of these policies stated: “Termination is discontinuance of salary and employment at any time by the employing organization, at their sole discretion. An employee may be terminated for, but not limited to, the following reasons: … Immoral or unsatisfactory personal conduct inconsistent with the principles of the church.” Another policy listed “fornication” under “grievous sins for which members shall be subject to discipline.” Plaintiff did not recall being given a copy of these policies and also denied being aware that “immoral or unsatisfactory personal conduct” could be grounds for termination. She claimed to be unaware that having sexual relations outside of marriage was contrary to the teachings of the church.

In arguing that she was singled out for termination because of her pregnancy, plaintiff maintained that other teachers at the school were having sexual relations outside of marriage, which she knew based on “talking with them about their relationships.” However, she admitted to having no knowledge whether any member of the school administration had ever been informed of such conduct. She testified that she was aware of one teacher who taught at the school while pregnant and separated from her husband during at least part of the pregnancy.

Ministerial exception

The church insisted that the “ministerial exception” required the plaintiff’s lawsuit to be dismissed. The ministerial exception generally prohibits the civil courts from resolving employment disputes between churches and their ministers. The court agreed that this rule has been applied in some cases to non-ordained church employees whose primary duties consist of “teaching, spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship.” However, the court concluded that the ministerial exception did not apply in this case since plaintiff’s teaching duties were primarily secular, and her religious duties were limited to one hour of Bible instruction per day and attending religious ceremonies with students once per year. The court stressed that there was no evidence that the plaintiff included church teachings when she taught secular subjects.

Pregnancy discrimination

Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment on the basis of gender or pregnancy. Title VII applies to any employer engaged in interstate commerce and having 15 or more employees. The court summarized the “burden shifting” analysis that is used in resolving Title VII discrimination claims.

First, the plaintiff must establish a prima facie case by showing that he or she (1) is a member of a protected class, (2) was qualified for the position in question, and (3) suffered an adverse employment action (4) under circumstances giving rise to an inference of discrimination. The prima facie case “raises an inference of discrimination” that the employer must rebut.

Second, the burden then shifts to the employer “to articulate some legitimate, nondiscriminatory reason for the employee’s rejection.” If the employer meets this burden, the presumption of discrimination set by the prima facie case is dropped.

Third, the burden or proof shifts back to the employee to show that the reasons given by the employer are a pretext for discrimination. Pretext may be shown “either directly by persuading the court that a discriminatory reason more likely motivated the employer or indirectly by showing that the employer’s purported explanation is unworthy of credence.”

Here, there was no dispute that the plaintiff established a prima facie case of pregnancy discrimination. As a pregnant woman she was a member of a protected class; she was qualified for the teaching position at the school; and she suffered an adverse employment action by being terminated. The church countered that plaintiff was not terminated because of her pregnancy but because of her failure to abide by the church’s doctrine that fornication is a “grievous sin.”

Where an employer has articulated a religious reason for the allegedly discriminatory adverse employment action, the plaintiff may not challenge the plausibility of that religious reason. The court must presume that “an asserted religious motive is plausible in the sense that it is reasonably or validly held.”

The focus of the court’s inquiry then becomes pretext, including “factual questions such as whether the asserted reason for the challenged action comports with the defendant’s policies and rules, whether the rule applied to the plaintiff has been applied uniformly, and whether the alleged nondiscriminatory purpose was stated only after the allegation of discrimination.” The court concluded:

In cases where religious school employers have asserted fornication as a reason for terminating a pregnant unmarried woman, courts have held that an employer enforcing such a policy unevenly—e.g., only against women or only by observing or having knowledge of a woman’s pregnancy—is evidence of pretext. This is because a school violates Title VII if, due purely to the fact that women can become pregnant and men cannot, it punishes only women for sexual relations because those relations are revealed through pregnancy. Thus, while a religious school employer may validly seek to impose moral doctrine upon its teaching staff, punishment singularly directed at [women] without regard to [men] is not permissible.

The court noted that the church provided no evidence “that any other teacher has been terminated from the school for engaging in sexual relations outside of marriage. Knowledge of other teachers engaging in extramarital sexual relations, as reported by plaintiff, cannot be imputed to the defendant. But the church fails to explain how it has enforced a policy against such behavior, if it exists, to both males and females. Moreover, the church admits to considering plaintiff’s pregnancy as evidence of fornication.” The court concluded that “the issues raised by plaintiff … at least raise a question regarding whether the church’s policy is applied in a discriminatory fashion and whether plaintiff was terminated because of her sex and pregnancy, as prohibited by Title VII.”

The church insisted that the plaintiff knew about its policy against extramarital sexual relations and that the annual employment contracts she signed “legitimized” her termination. The court disagreed, noting that “there can be no prospective waiver of an employee’s rights under Title VII” and that “Title VII’s strictures are absolute and represent a congressional command that each employee be free from discriminatory practices.” Therefore, “employment contracts, no matter what the circumstances that justify their execution or what the terms, may not be used to waive protections granted to an individual under Title VII or any other Act of Congress.”

The sole issue was “whether the church terminated plaintiff because of her sex and pregnancy or because of an evenly applied religious and moral code.”

Application. This case is important for three reasons. First, it demonstrates that churches can impose scriptural or moral standards on their employees, and such efforts will be fully protected by the civil courts—so long as they do so fairly and uniformly and not in ways that disproportionately and adversely impact persons (such as pregnant women) who are protected by federal or state employment discrimination laws. As the court noted, “In cases where religious school employers have asserted fornication as a reason for terminating a pregnant unmarried woman, courts have held that an employer enforcing such a policy unevenly—e.g., only against women or only by observing or having knowledge of a woman’s pregnancy—is evidence of pretext. This is because a school violates Title VII if, due purely to the fact that women can become pregnant and men cannot, it punishes only women for sexual relations because those relations are revealed through pregnancy. Thus, while a religious school employer may validly seek to impose moral doctrine upon its teaching staff, punishment singularly directed at [women] without regard to [men] is not permissible.”

Second, the court rejected the church’s claim that the plaintiff consented to being terminated for immoral conduct when she signed her annual employment contract. The court disagreed, noting that “there can be no prospective waiver of an employee’s rights under Title VII” and that “Title VII’s strictures are absolute and represent a congressional command that each employee be free from discriminatory practices.” Therefore, “employment contracts, no matter what the circumstances that justify their execution or what the terms, may not be used to waive protections granted to an individual under Title VII or any other Act of Congress.”

Third, the court’s rejection of the application of the ministerial exception to the plaintiff represents a very narrow reading of the exception that has not been shared by several other courts. Redhead v. Conference of Seventh-Day Adventists, 440 F.Supp.2d 211 (E.D.N.Y. 2006).

Legal Developments

Former Teacher Sues School for Breach of Contract

Court rules that teacher may sue former employer.

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Breach of Contract, Schools

Church Law and Tax 1997-03-01

Employment Practices

Richard R. Hammar, J.D., LL.M., CPA

• Key Point. In some states, a religious organization’s decision to dismiss an employee may be subject to civil court review if the employee performed no “ministerial functions.”

• Key Point. Employee handbooks can limit an employer’s legal right to dismiss “at will” an employee hired for an indefinite term.

• Key Point. Federal age discrimination law prohibits discrimination in employment decisions on the basis of the age of an applicant or employee who is 40 years of age or older. This law applies to some religious organizations.

A federal appeals court ruled that a church school could be sued on the basis of breach of contract by a teacher who was dismissed. The facts of the case are simple. A second grade teacher was informed, after 23 years of teaching at a parochial school, that her school was being closed and that she was not going to be offered a teaching position in another parochial school. The teacher sued the school and diocese, claiming that her dismissal amounted to age discrimination in violation of federal law. She also asserted that the school and diocese had breached her contract of employment. A jury rejected the teacher’s age discrimination claim, but agreed with the teacher that the school and diocese had breached her employment contract and awarded her $83,000 in damages. Specifically, the jury found that the school’s “teachers’ handbook” was part of the teacher’s employment contract and that the school breached this contract by failing to follow a provision requiring it to objectively evaluate each teacher according to specified criteria. The school and diocese appealed. Their main argument was that the court’s resolution of the breach of contract claim was prohibited by the first amendment’s nonestablishment of religion clause, which prohibits entanglement between church and state. The court disagreed, noting that “[r]eligious groups … are generally not immune from all governmental regulation of their employment relationships, or from court enforcement of those laws.” The court concluded:

[T]he judicial enforcement of state employment contract law generally requires little intrusion into the functioning of religious institutions. Furthermore, the only reference to religion made by the diocese is its conclusory allegation that [the teacher] was not hired at [another school] because she “did not adequately prepare children for the sacraments.” We believe that this allegation … did not put into issue the validity or truthfulness of Catholic religious teaching. The diocese’s entanglement argument must be rejected.

The court conceded that there may be cases of age discrimination where “the relationship between employee and employee is so pervasively religious that it is impossible to engage in an age—discrimination inquiry without serious risk of offending the [nonestablishment of religion] clause.”

This case illustrates two important points. First, churches and church schools will be less vulnerable to discrimination and breach of contract claims if they create job descriptions emphasizing the spiritual aspects of each position. Many courts have ruled that teachers parochial schools are performing a vital religious function. Unfortunately, this was not adequately documented or argued in this case. Second, the case illustrates the importance of following those procedures (such as periodic employee evaluations) mandated by an employee manual or handbook. If these policies are clearly set forth, but then ignored, a church or school risks being sued for breach of contract. Gargano v. Diocese of Rockville Centre, 80 F.3d 87 (2nd Cir. 1996). [Discharge and Discipline of Teachers, Application of Federal Labor and Discrimination Laws to Private Schools]

© Copyright 1997, 1998 by Church Law & Tax Report. 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, PO Box 1098, Matthews, NC 28106. Reference Code: m43 m65 c0297

Legal Developments

Termination of Retirement Benefits

Court rules that retired pastor can sue his former church for breaching its promise to pay him in retirement.

Richard R. Hammar, Attorney, CPA

Bio

State: Ohio
Categories: Breach of Contract, Retirement Plans

Church Law and Tax 1994-05-01 Recent Developments

Retirement Plans

Richard R. Hammar, J.D., LL.M., CPA

• Key point: A church’s promise to pay a retiring pastor a portion of his former salary for the rest of his life may be legally enforceable.

• An Ohio appeals court ruled that a retired pastor could sue his former church for breaching its promise to pay him one-third of his former salary for the remainder of his life. The retired pastor had become the pastor of a local Baptist church in 1958. In 1971 he suffered a heart attack and was hospitalized. While he was recuperating, a church deacon told him that the church had voted to pay his full salary for the remainder of his lifetime. That promise was never fulfilled because the pastor later recovered and resumed his pastoral duties. In 1980, the pastor again experienced heart problems. Under the advice of his doctor, he approached the deacons of the church about his retirement. He proposed that his salary be reduced after retirement through a series of gradual “step-downs,” to an amount approximately one-third of the salary he was then receiving. This proposal was accepted by the deacons, and an agreement was approved that contained that placed the pastor on “disability retirement” status, conferred upon him the title “pastor emeritus,” allowed him to set up an office in the church, and agreed to pay him retirement benefits according to the step-down schedule agreed to by the deacons. The pastor also was obligated to aid, assist and advise whomever the church called as its next pastor, to the extent that his health would permit. The pastor and deacons recommended to the church congregation that it approve the agreement, which it did by unanimous vote at a business meeting in 1980. In 1985 the congregation was advised by a church officer that the retirement benefits being paid to the former pastor under the 1980 agreement should continue for his lifetime, The church congregation again unanimously reaffirmed the agreement. From 1980 through 1990, the retired pastor occasionally preached at the church, taught Sunday School classes there, served on the budget committee, and helped with various administrative matters. Retirement benefits were paid throughout this period according to the agreement. In 1990, however, church officials notified the former pastor that he had been dismissed from membership in the church and that no more payments would be made to him. All other benefits, such as the free office space, were also discontinued. The former pastor sued the church, claiming that it had breached its contract to pay him retirement benefits for life. The church insisted that there was no legally binding contract obligating the church to pay the former pastor retirement benefits for life, and that the payments made by the church from 1980 until 1990 were gifts. A jury ruled in favor of the retired pastor, awarding him $151,000 (representing the present value of all amounts due under the agreement for the balance of the pastor’s life expectancy). The church appealed. The church argued on appeal that the agreement to pay the pastor retirement benefits was not a legally enforceable contract for two reasons. First, there had been no “meeting of the minds,” and second, the pastor had given no “consideration” in exchange for the church’s promise to pay him retirement benefits. The appeals court rejected both of these arguments. It acknowledged that “one of the elements essential to a valid contract is a meeting of the minds of the parties as to the terms of the contract.” However, it rejected the church’s claim that no such “meeting of the minds” had occurred. With regard to the church’s claim that there was no “consideration” for the church’s promise to pay retirement benefits, the court observed: “Consideration is, of course, an element necessary for a binding contract, and a complete lack of any consideration is a valid defense to a breach of contract action.” The court noted that consideration refers to something of value given by a promisee (the pastor) in exchange for the promisor’s (the church) promise. The court concluded that the pastor in fact had given something of value to the church in exchange for its promise to pay him retirement benefits: “[He] was obligated to aid, assist and advise whomever the church called as a new pastor, to the extent that [his] health would allow.” This commitment on the part of the pastor was sufficient consideration to make the agreement with the church a legally enforceable contract. The court further observed that “consideration is not deemed legally insufficient merely because it is inadequate.” However, the court rejected the jury’s verdict in the amount of $151,000, and instead ordered the church to pay the pastor the agreed upon retirement benefits for the remainder of his life.

The court rejected the church’s argument that the church constitution gave it the right to terminate the promise to pay retirement benefits to the former pastor. The church constitution specified that

[a] statement of consideration shall be drawn up in writing by the committee and the pastor at the time of his call and shall be presented to the church for approval. Said statement shall include such consideration as salary, vacation, retirement, convention expenses, and any others deemed advisable by the church or the pulpit committee. Said statement may be changed or altered by mutual agreement between the church and the pastor at any time. When mutual agreement cannot be reached, said statement may be changed by a two-thirds majority of the members present and voting.

The church argued that this provision controlled the contract between the former pastor and the church and that it gave the church the legal right to terminate the payments made to the former pastor. The court rejected this position, noting that the evidence presented by both the pastor and the church “was consistent in establishing that the church constitution, while applying to active pastors, did not apply to retired pastors or retirement benefits paid to former pastors.”

Finally, the church suggested that its decision to terminate retirement benefits to the former pastor was justified because it was based on the church’s dismissal of the former pastor from church membership (an act protected by the first amendment). The court again disagreed:

The church argues that its decision to dismiss a pastor or member from its membership is protected by the first amendment to the United States Constitution and that such decisions are not reviewable by courts of law. A review of the record in this case clearly reveals that not only did all parties and the court agree with this general proposition but, more important, that the right of the church to dismiss [the former pastor] from membership in the church was never an issue in this case and that the trial court explicitly instructed the jury not to inquire into or consider that issue, in accordance with the church’s [request]. Brads v. First Baptist Church, 624 N.E.2d 737 (Ohio App. 2 Dist. 1993).

Are Pledges Legally Enforceable?

In some cases, a financial pledge may be legally enforceable.

Richard R. Hammar, Attorney, CPA

Bio

State: Georgia
Categories: Breach of Contract

Key point: A promise to make a charitable contribution to a church may be legally enforceable if the promisor receives something of value ("consideration") for his or her promise.

Can a person who promises to make a $25,000 contribution to a church be compelled to honor his commitment? That was the issue before a Georgia appeals court.

A church purchased property from an individual for $375,000. In the contract of sale the seller promised to donate $5,000 to the church each year for the next five years (for a total contribution of $25,000). When the promised donations were not made, the church sued the seller for breach of contract. The seller claimed that his promise to make the donations was unenforceable because of lack of "consideration" for his promise.

A trial court ruled in favor of the seller, concluding that a commitment or promise is not enforceable unless the promisor receives something of value ("consideration") in return. The court concluded that the seller received no value for his promise to make the donations, and therefore the promise was not enforceable.

The church appealed, and a state appeals court agreed with the church. It observed: "[A]lthough [the seller] asserts the promise to pay the church $25,000 was without consideration … nothing in the [record] shows that to be the case. [The sales contract] recites that the promise to pay $25,000 was made as additional consideration for the church to buy [the seller's] property." The case was sent back to the trial court for further proceedings. First Baptist Church v. King, 430 S.E.2d 635 (Ga. App. 1993).

Legal Developments

Child Care Worker, Dismissed for Striking Child, Sues Former Employer

An Ohio court recently faced a difficult issue.

Richard R. Hammar, Attorney, CPA

Bio

State: Ohio
Categories: Breach of Contract, Child Abuse

Church Law and Tax1991-07-01Recent Developments

Child Abuse

Richard R. Hammar, J.D., LL.M., CPA

• Can a child care worker who is dismissed for striking a child sue the child care facility for breach of contract and defamation? That was the difficult question presented to an Ohio state appeals court. A child care center hired a woman as the head teacher in a class of 2-year-old children. The center enrolled a 2-year-old boy who cried a great deal during his first few days at the facility. An employee informed the director that the teacher in the 2-year-old class had struck the boy. When the director entered the classroom, she saw the boy crying hysterically. As she was removing the boy from the room, she noticed a hand-mark on his face. Upon being questioned, the boy stated (and demonstrated) that the teacher had put her hand over his mouth and shook him. The teacher was confronted with this information, but denied it. However, she offered no other explanation as to the boy’s condition. The director was not satisfied that the teacher was being truthful, and accordingly she dismissed her. A teaching assistant later confirmed that the teacher had abused the boy by putting her hand over his mouth, shaking him, and telling him to “shut up.” The director later reported the incident to the boy’s mother, and to the state department of human services. The fired teacher sued the center, alleging defamation and breach of contract. She claimed that the center’s personnel manual constituted a contract, and that the center “breached the contract” by terminating her without utilizing “progressive discipline,” and by terminating her without “good cause.” She claimed that these actions were required by the personnel manual. Further, the fired employee claimed that she had been defamed by the director’s communications to the boy’s mother, to other workers at the center, to the president of the center’s board of directors, and to the state. A trial court rejected all of the teacher’s claims, and dismissed the lawsuit. The teacher appealed to a state appeals court, which also rejected her claims. The court noted that the teacher was an “employee at will” since she had been hired for an indefinite term. As an employee at will, she could be dismissed at any time for any reason. The court rejected the teacher’s claim that the personnel manual limited the center’s right to terminate her. It noted that the manual “specifically states that hitting or abusing a child is grounds for termination of service.” In rejecting the defamation claim, the court noted that the director was required by state law to report suspected cases of abuse to the department of human services, and so this communication did not constitute defamation. Further, there was no evidence that the director ever informed other workers at the center as to the reason that the teacher had been terminated. With respect to the communications made to the boy’s mother, and to the president of the center’s board of directors, the court concluded that such communications “enjoyed at least a qualified privilege” since they were matters of “common interest.” As such, the communications would not be defamatory unless they were made with “malice.” The court observed that “the record is devoid of evidence of actual malice on the part of [the director in communicating] the statements. On the contrary, the record reveals that [she] acted properly and reasonably under the circumstances.” Lail v. Madisonville Child Care Project, 561 N.E.2d 1063 (Ohio App. 1990).

Child Abuse Reporting | Failure to Report Child Abuse | Child Abuse Reporting | Child Abuse Reporting by Child Care Workers

© Copyright 1991, 1998 by Church Law & Tax Report. 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, PO Box 1098, Matthews, NC 28106. Reference Code: m10 m11 c0491

Legal Developments

Clergy – Part 2

Removal

Richard R. Hammar, Attorney, CPA

Bio

Church Law and Tax 1990-05-01 Recent Developments

Clergy – Removal

Richard R. Hammar, J.D., LL.M., CPA

• Can two dismissed co-pastors sue their church and denomination for breach of contract, defamation, and emotional distress? No, concluded an Ohio state appeals court. The co-pastors (who were husband and wife) were hired by a Christian Church (Disciples of Christ) pursuant to a contract specifying that their “ministry shall be terminated upon ninety days notice by either party.” The co-pastors filed a lawsuit following their termination. They alleged that (1) the church had assured them both orally and in writing that they would be retained as co-pastors for “seven to ten years,” and that their termination violated this assurance; (2) the denomination published defamatory remarks concerning their ministerial conduct and financial misdealings; and (3) the church caused them severe emotional distress by having them removed from before the congregation be police officers. The church and denomination filed a “motion to dismiss,” claiming that the court had no legal authority to resolve a purely internal church dispute. A trial court granted the motion to dismiss the case, and the fired co-pastors appealed. The appeals court acknowledged that a dismissal of a lawsuit is an extraordinary action that is appropriate only if it appears beyond a reasonable doubt that a plaintiff has alleged no facts which would entitle him or her to relief. The court concluded that this standard was satisfied in the present case. It began its opinion by noting that the United States Supreme Court “has established the general rule that religious controversies are not a proper subject of civil court inquiry, and that a civil court must accept ecclesiastical decisions of church tribunals as it finds them.” Applying this test, the court concluded that all of the former co-pastors’ claims involved “internal church discipline governed by ecclesiastical rule, custom, and law” since “review of subjective judgments by religious officers and bodies, such as involuntary termination of co-pastors, necessarily requires inquiry into ecclesiastical matters.” Civil courts “cannot constitutionally intervene in such a dispute.” The same logic applied to the claim of defamation, since such a claim would require the courts to “inquire into the truth or falsity of the statements made” by church and denominational officers and would “require review of subjective judgments made by religious officers and bodies concerning [the former co-pastors’] conduct of the pastorate and financial misdealings. Inquiry would be ecclesiastical in nature and constitutionally prohibited.” Finally, the court rejected the former co-pastors’ claim of emotional distress resulting from their removal from the congregation by police officers. It noted that the civil courts could not inquire into the propriety of the co-pastors’ dismissal, and therefore their church “could use any legal means to prevent them from gaining access to church property” (including use of police officers). Salzgaber v. First Christian Church (Ohio App. unpublished opinion 1989).

© Copyright 1990, 1998 by Church Law & Tax Report. 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, PO Box 1098, Matthews, NC 28106. Reference Code: m31 m40 m86 c0390