A Church’s Insurer Was Not Obligated to Provide a Legal Defense for Congregant Facing a Lawsuit

Defamatory remarks made by a lay member on social media were not authorized by the church and therefore not covered by its insurance policy.

Key point 6-06.02. Officers and directors must be legally authorized to act on behalf of their church. Legal authority can be express, implied, inherent, or apparent. In addition, a church can ratify the unauthorized actions of its officers or directors, but this is not required.

A federal court in California ruled that a church’s insurance policy was not obligated to provide a legal defense to a lay member of the church’s council. The member was sued for defamatory remarks he posted on the website Yelp regarding the quality of services provided by a contractor to the church.


In 2018, a company installed solar panels at a church. Dissatisfied with the purported lack of savings in the church’s energy bills promised by the company, a church member (the “defendant”) began investigating the church’s energy usage.

When the company was not sufficiently responsive to the defendant’s inquiries, the defendant began posting critical reviews of it on social media. In particular, the defendant posted a one-star review on the website Yelp.com, stating the company’s products caused the church’s energy bills to increase.

After the defendant refused to remove the posts, the company sued the defendant in state court for defamation and trade libel. The defendant notified the church’s insurance company of the lawsuit. The insurance company initially agreed to provide the defendant with a legal defense, but later determined that no coverage existed. The insurer asked a court to issue a “declaratory judgment” that it had no duty to defend or indemnify.

Explaining the duty to defend

The court noted:

“[A]n insurer must defend its insured against claims that create a potential for indemnity under the policy.” . . . “[W]here there is no potential for recovery on a covered claim, there is no duty to defend.” . . . For instance, “an insurer does not owe a duty to defend if it conclusively demonstrates that a policy exclusion applies to preclude coverage.”

In this case, the insurer argued that there was no duty to defend because the defendant was not even “covered by the church’s insurance policy.” In particular, the insurer pointed to the policy language, which defined “covered person” to include the church and its leaders, employees, appointed persons, and volunteers (or the spouses of such persons) “in relation to any leadership activity undertaken on [the church’s] behalf.”

Defining “leadership activity”

“Leadership activity” was defined by the policy to mean “the decision-making acts of [the church’s] leaders regarding the operation of your organization, and includes related and authorized activity undertaken by volunteer committee members and by other covered persons for the purpose of implementing such decisions.”

The insurer noted that “[t]here are no allegations in [the underlying] complaint that defendant was acting on behalf of the Church or within the course and scope of defendant’s agency with the Church.”

The insurer further noted:

Defendant was not a “covered person” because his allegedly defamatory “social media posts were not authorized by the Church, made for the benefit or on behalf of the Church, made within the course and scope of his duties as a member of the Church Council, or made in relation to the Church’s religious or not-for-profit operations.”

The church provided an affidavit from a former member and former president of the church council, stating that “[c]ouncil members are not expected or authorized to act independently on any matter.”

The defendant acted without direction from leadership

The former church council president testified:

[A]fter the solar panels were installed, Defendant began incessantly sending [the former church council president] and other church leadership . . . “paperwork regarding his alleged investigation into the operation of the installed solar panels.” This culminated in a “report” regarding the operation of the solar panels, which Defendant had created on his own and without direction of church leadership.

According to the former church council president, no one in leadership “authorized defendant to take any action related to his report.”

In December 2018, the defendant began contacting the company and making social media posts “without the knowledge or authorization” of anyone in church leadership.

According to the former church council president, the defendant’s role as member of the church council did not authorize him to make social media posts on behalf of the church and his duties in that role did not relate to “the Church’s contracts and relationships with third party contractors.”

Once the former church council president and other leaders became aware of the defendant’s actions, church leaders wrote him twice to advise him that his activities “were done without the permission of the Church.”

The insurer also noted that the defendant himself stated in his social media posts that he “felt a big pressure from the Church leaders to remove” his allegedly defamatory Yelp review.

Court: The defendant is not a “covered person”

The court concluded:

In sum, [the insurer] carries its burden . . . to show that Defendant’s conduct of making allegedly defamatory social media posts was undertaken on his own and without authorization of any church leader. Consequently, at least in regard to the actions giving rise to the underlying litigation, Defendant is not a “covered person” for purposes of the church’s insurance policy . . . and thus Defendant falls outside the scope of coverage.

What this means for churches

This case demonstrates the potential risk churches face when posting critical comments about businesses and organizations in the community. However, individuals who post critical messages on Yelp or other social media sites, even if in the name of the church, will not create liability for the church if they acted alone and outside the scope of any “agency” relationship with the church.

Consider these three important points from this case.

First, the case illustrates a basic principle of corporate law that board members have no authority to act individually on behalf of their corporation. They may only act collectively as a board. This is an important point, for it demonstrates the potential personal liability of board members who seek to bind their corporation by their unilateral and unauthorized acts.

Second, the court concluded that there was no evidence that the defendant was acting on behalf of the church “or within the course and scope of [his] agency with the Church” when he made his unauthorized Yelp reviews purportedly on behalf of the church.

This is an important point. It indicates that conduct by church employees and volunteers outside of the scope of their ordinary duties cannot be ascribed to the church on the basis of agency.

Third, the defendant was sued by the company for trade libel because of the critical reviews he posted on Yelp. Trade libel is an intentional disparagement of the quality of services or product of a business that results in pecuniary (financially related) damage to the business.

The church’s insurance policy did not provide the defendant with a defense or indemnification because he acted alone when posting his negative Yelp comments without authorization or approval from the church.

According to this court, individuals who post comments on social media without authorization from the church are not acting within the scope of their agency, and so it is the poster rather than the church that is exposed to liability for trade libel.

Insurance Company v. Vinkov 2021 WL 3553733 (C.D. Cal. 2021)

Court Rejects Ministry’s Claim That It Is Exempt from All Taxes and Regulation

Attempts to become a “508(c)(1)(A)” church to avoid taxation and IRS scrutiny could have serious consequences.

A federal court in California rejected as “frivolous” a religious ministry’s claim that it was exempt from all taxes and regulation because it was a”508(c)(1)(A)” church.


The Internal Revenue Service (IRS) issued a subpoena to a Christian ministry in California as part of its investigation into the activities of the ministry. The ministry attempted to quash the subpoena on the ground that the IRS has no authority to investigate an “unregistered Private Ministry/Church,” which it claimed was exempt not only from filing requirements and taxation, but also from IRS scrutiny or inquiry.

In support of its position, the ministry referenced section 508(c)(1)(A) of the federal tax code among other provisions, which it claimed prevents the IRS from inquiring into its finances.

Court: The religious organization is not “exempt from investigation”

A federal district court summarily rejected the ministry’s position. It noted:

[Section 508(c)(1)(A) of the federal tax code] merely exempts churches and certain other religious bodies from the necessity of applying for recognition of their exempt status under § 501(c)(3) and from requirements that they file tax returns. Nothing in [the] statute suggests that a bank’s financial records concerning the financial activity of a religious organization are exempt from investigation.

The court concluded:

The I.R.S. has broad investigative authority, including the authority to examine records or witnesses in order to determine whether tax liability exists or to make a return where none has been made.

In short, [the ministry’s] arguments have no basis in law, and are frivolous (italics added for emphasis).

What this means for churches

Some religious leaders claim that churches can avoid any taxes, regulation, or liability by reclassifying themselves as a “section 508(c)(1)(A)” church.

This is a flawed interpretation of federal tax law. The fact is, churches are automatically 501(c)(3) organizations. There is nothing they need to do to acquire this status. So, it is not clear how they would renounce their 501(c)(3) status.

A church theoretically could become a for-profit entity, but this would have destructive consequences, including:

  • The church’s net income would be subject to federal income taxation.
  • The church’s net income would be subject to income taxation in many states.
  • Donors no longer could deduct charitable contributions they make to the church.
  • The church would be ineligible to establish or maintain 403(b) tax-sheltered annuities.
  • The church could lose its property tax exemption under state law.
  • The church could lose its sales tax exemption under state law.
  • The church could lose its exemption from unemployment tax under state and federal law.
  • The church’s status under local zoning law may be affected.
  • The church could lose its preferential mailing rates.
  • The church could lose its exemption from registration of securities under state law.
  • Nondiscrimination rules pertaining to various fringe benefits would apply.
  • In some cases, a minister’s housing allowance may be affected.
  • In some cases, the exempt status of ministers who opted out of Social Security may be affected.
  • The significant protections available to a church under the Church Audit Procedures Act would not apply.
  • The exemption of the church under the state charitable solicitation laws may be affected.
  • The exemption of the church from the ban on religious discrimination under various federal and state employment discrimination laws may be affected.
  • The exemption of the church from the public accommodation provisions of the Americans with Disabilities Act (ADA) may be affected.

Clearly, any activity that jeopardizes a church’s exemption from federal income taxation is something that must be taken seriously. And churches should not pursue the dubious “section 508(c)(1)(A)” church status, which the federal court in this case considered “frivolous,” without the counsel of an experienced tax attorney or CPA. Steeves v. IRS, 2020 WL 5943543 (S.D.C. 2020).

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Pastor Guilty of Securities Fraud

Court sentenced pastor to nearly 25 years in prison for swindling his congregation, and others.

Key point 9-04. Federal and state laws regulate the offer and sale of securities for the protection of the investing public. In general, an organization that issues securities must register the securities, and the persons who will be selling the securities, with state and federal agencies. In addition, federal and state laws contain a broad prohibition on fraudulent activities in the sale of securities. Churches are exempt from some of these requirements in some states. However, they remain subject to the prohibition of securities fraud in all 50 states, and under federal law.

A California appellate state court found a pastor guilty of securities fraud for swindling his congregation, among others, out of nearly $1 million dollars in an investment scam.

Family and church members invested nearly $1 million

A pastor taught finance classes to church members and came to know and advise many of them. He formed an investment company and began selling securities. Many of the investors were members of his church or family members.

Generally, he told potential investors their funds would be insured and not at risk. They would receive returns pursuant to a specific rate and schedule, some as high as 18 percent every 90 days. He informed them their principal would always be secure. Collectively, they invested nearly $1 million dollars in the pastor’s investment company. Much of the proceeds were used for personal expenses, transferred to other financial institutions, or withdrawn.

Eventually, the pastor informed many of his investors that their money was gone. For the most part, their investments were never returned.

The pastor was arrested and charged with 33 felonies, most of which were based on securities fraud. He was convicted by a jury of 27 felonies and sentenced to nearly 25 years in prison. He also was ordered to pay restitution to his victims.

A state appeals court affirmed the pastor’s sentence.

What this means for churches

“Securities” and “fraud” are defined broadly by state and federal securities laws. In many cases, church leaders are not even aware that they are engaging in fraudulent practices.

The fact is, however, that securities violations represent one of the most significant sources of church liability in terms of the size of verdicts. This is a risk that church leaders must take seriously.

Laws regulating the sale of securities have been enacted by the federal government and by all 50 states. Church securities always will be subject to some degree of regulation. The question in each case is how much.

The federal government and most states exempt securities offered by any organization “organized and operated not for private profit but exclusively for a religious . . . purpose” from registration.

It is important to note, however, that some states do not exempt the securities of religious organizations from registration. Other states impose conditions on the exemption and many require that an application for exemption (or “notice” of exemption) be submitted and approved before a claim of exemption will be recognized. A few states require churches and religious denominations that “issue” their own securities to be registered as issuers or issuer-dealers.

All securities laws subject churches and other religious organizations to the antifraud requirements. Churches, therefore, must not assume that any securities that they may offer are automatically exempt from registration or regulation.

Churches that violate state securities laws face a variety of potential consequences under state and federal securities laws. These include investigations, hearings, subpoenas, injunctions, criminal actions, cancellation of sales, suits for monetary damages by aggrieved investors, monetary fines, and revocation of an exemption, or registration, of securities. The bottom line is that churches should not consider offering securities to investors as a way to increase revenue without first consulting with an experienced securities law attorney. 2020 Cal. App. Unpub. LEXIS 4273; 2020 WL 3790477.

Woman Could Sue Her Former High School for Negligent Supervision in Abuse Claim

But the appeals court ruled that she could not sue for negligent hiring.

Key point 10-09.1. Some courts have found churches liable on the basis of negligent supervision for a worker’s acts of child molestation on the ground that the church failed to exercise reasonable care in the supervision of the victim or of its own programs and activities.

A California appeals court ruled that a woman who was sexually molested by a teacher at the public school she attended as a minor could not sue the school on the basis of negligent hiring for her injuries, but could sue it for negligent supervision.


An adult male (the “defendant”) applied for employment with the Los Angeles Unified School District (LAUSD) in June 2003. The defendant’s job application listed his employment history but did not disclose his previous employment with the Long Beach Unified School District in 1993, or that he had been discharged from this position after being arrested for sexual battery.

At the time the defendant applied to LAUSD, its application asked applicants to report all prior criminal convictions or pending court cases. But state law prohibited employers from asking applicants to disclose prior arrests that did not result in a conviction.

The defendant’s application identified a 2001 conviction for driving under the influence, which was not disqualifying under LAUSD policy. He did not disclose his arrest on suspicion of sexual battery in December 1993 or the underlying circumstances.

In his application, the defendant answered “No” in response to the question, “Have you ever been dismissed from, or not reemployed by, a public or private school while holding any teaching/non-teaching position(s), or while in any other type of employment?”

LAUSD staff reviewed the defendant’s application, interviewed him in person, conducted reference checks, and confirmed the defendant qualified for California teaching credentials. LAUSD staff contacted the defendant’s listed character references by telephone. One of the references was a school official who had supervised the defendant’s student teaching and who rated the defendant as a “5” (the highest level) in overall teaching effectiveness and stated that the defendant “demonstrated many outstanding qualities of a young teacher.”

LAUSD subsequently placed the defendant on the teacher hire eligibility list, pending obtaining his background clearance. For the defendant’s student-teaching job, LAUSD had previously fingerprinted him and submitted his fingerprints to the Federal Bureau of Investigation and the State Department of Justice (DOJ) to have these entities conduct nationwide searches for any prior criminal convictions or pending cases. LAUSD’s Human Resources re-fingerprinted the defendant upon his application for permanent employment and again submitted his fingerprints to the DOJ. The defendant obtained a California Teaching Credential on August 22, 2003, and was cleared for employment.

The defendant was hired as a middle school teacher in 2005, and soon met a 14-year-old student (the “victim”). Over the course of the next four years, the defendant engaged in repeated acts of grooming and sexual contact with the victim.

In May of 2008, an anonymous caller reported to the school principal that she had observed the defendant picking up a female student in the morning and dropping her off at school. The principal was concerned that he was violating LAUSD policy prohibiting teachers from giving students rides without parental consent.

The principal contacted the child abuse unit at the local police department to make a Suspected Child Abuse Report over the phone. The defendant was suspended from teaching the same day.

The school police launched a criminal investigation into the facts and circumstances to determine if a crime had occurred. They interviewed the defendant, who stated he had been tutoring the victim in math and had picked her up from her home on some occasions with the permission of her mother. In addition, the defendant said the school’s flag team coach had asked him for his assistance in coaching the team, and he had sometimes transported some of the flag team girls to and from events.

The school police also interviewed the victim who said she considered the defendant a “friend only” and he, in fact, frequently gave her rides. She said the defendant picked her up from an intersection near her home, and her mother knew this and had no problem with it. She said her father did not know and he would get “mad with me and my mother” if he found out. She said the defendant was tutoring her in math and helping with her flag team.

The principal felt that “something fishy was going on.” He met with the victim and her mother. During this meeting, the victim said that the defendant had taken her to a restaurant, but only when she needed help with her history class. She told the principal that the defendant would take her to school in the morning when she had lots of “books and stuff” to carry, and he would give her rides home from flag practice when it was dark. He would pick her up at the corner instead of her house because she did not want her father to know.

The principal recommended dismissing the defendant for his “failure to follow school policies and procedures and poor judgment in dealing with students.” However, LAUSD determined that “the acts committed by the teacher did not support a recommendation for dismissal.” Instead, LAUSD suspended him for 15 days (later reduced to 10 days) without pay and issued him a Notice of Unsatisfactory Acts for failing to follow LAUSD policies by transporting female students to and from events involving the flag team without having approval from the school administration.

LAUSD instructed the defendant to avoid transporting students in his personal vehicle without proper written permission from school administration and from parents. LAUSD also admonished him not to accompany students off campus, except as part of authorized school activities. LAUSD reassigned the defendant to another school.

In 2012, when she was 18 years of age, the victim informed the police of the defendant’s conduct upon learning that he was seeing another female student. The police conducted a sting operation with the victim’s assistance and ultimately arrested the defendant who later was convicted of two counts of lewd and lascivious acts with a child.

The victim sues LAUSD

The victim sued the LAUSD, arguing that its employees knew or should have known of prior complaints at the other school about the defendant engaging in unlawful sexual touching and indecent exposure, and they negligently ignored facts indicating that the defendant “had the propensity to sexually abuse minors and was in fact likely sexually abusing [the victim].”

The lawsuit claimed that the school district was therefore liable for the defendant’s actions on the basis of negligent hiring, negligent supervision, and negligent retention. The lawsuit also alleged that school district employees owed the victim a duty to protect her from sexual abuse and to enforce policies designed to protect children from sexual abuse.

Declaration from expert witness details “standard of care”

The LAUSD asked the trial court to dismiss the case. In opposition, the victim submitted to the court a written declaration from an expert witness who was a professor of educational administration with experience in evaluating and developing school policies for preventing educator sexual misconduct and harassment.

The professor’s declaration included her opinion as to “the standard of care” for screening the backgrounds of prospective school employees in order to prevent child sexual abuse. She concluded:

  • Those interviewing candidates for such positions should inquire as to their previous work experience, including gaps in their employment timelines.
  • Candidates for employment and their references should be explicitly asked if the candidates had been previously accused of sexual misconduct.
  • In addition, reference checks should extend beyond the individuals on the candidate’s list of references on his employment application.
  • LAUSD should have asked the defendant about the 13-year period in which he stated he was self-employed as a cabinet maker.
  • LAUSD also should have asked the defendant if he had ever worked for another school and if he had ever been investigated for or accused of sexual misconduct.
  • Schools and school districts need clear policies and regulations that “describe educator sexual abuse, detail acceptable and unacceptable behavior, provide mechanisms for reporting, guide students, teachers, administrators, and parents in prevention, describe a system of investigation, and describe the consequences. These policies should provide guidance in identifying and reporting behaviors that might indicate sexual exploitation and make it clear that the entire school family is responsible for identification and reporting.”
  • School policies should address communications between teachers and students outside of school, prohibit employees being alone with students in closed rooms, and require any after-hours tutoring to be in a public and supervised location.
  • Schools and school districts should conduct annual trainings for all employees focused on adult-to-student sexual misconduct, the signs of such misconduct, and investigation practices. She concluded that “if LAUSD employees had received adequate training on educator misconduct, they would have been better able to recognize and address the defendant’s behavior and better protect the victim and other students.
  • LAUSD’s level of supervision on school grounds was inadequate. She noted that “sexual abuse of students is diminished through active supervision of the school,” including “hall sweeps, checking classrooms at lunch and before and after school to make sure that an adult is not alone with a child.”
  • Increased supervision was necessary for employees who consistently crossed boundaries, hung out with students regularly, or drove them in their cars.
  • Teachers must know where their students are during class time. If policy violations are discovered by employees, they should understand their responsibility to report to administration.

The professor concluded that “based on the above standard of care, LAUSD did not adequately supervise” the defendant or other employees, the school premises, or the victim. In particular, she noted that “regular checks of rooms when class was not in session would have likely uncovered the private meetings between the victim and defendant.

The trial court dismissed the case against the defendant citing a lack of evidence to prove negligent hiring, supervision, or retention. The victim appealed.

The appeals court’s decision—negligent hiring

With regard to negligent hiring as a basis for liability, the court observed: “A defendant may be liable for negligent hiring if it knows an employee is unfit, or has reason to believe the employee is unfit or fails to use reasonable care to discover the employee’s unfitness before hiring him.”

The court referenced a decision of a California appellate court in Evan F. v. Hughson United Methodist Church, 10 Cal.Rptr.2d 748 (Cal. 1992). In Evan F., a church hired a pastor who had previously sexually abused a child. The pastor molested a young boy in the church.

Although the church did not have actual knowledge when it hired the pastor of his prior sexual abuse, it had become “aware of some difficulty” with the pastor’s reappointment to the active ministry and understood he had been on a sabbatical. Nevertheless, the church did not make any inquiry regarding the pastor’s past or his fitness to serve. A trial court dismissed the plaintiff’s negligent hiring claim against the church, and a state appeals court agreed.

The California appellate court in the case involving LAUSD noted:

We conclude that the trial court correctly found no reasonable jury could find LAUSD liable on the victim’s negligent hiring theory. Unlike in Evan F., where the church knew there had been some problems with the pastor in the past and thus should have investigated further, none of the available information about the defendant reasonably should have given LAUSD any cause for concern. He had just finished student-teaching, and his supervisor gave him a superlative review. A professor and an administrator at his college program had also vouched for him. Because he omitted his employment with the Long Beach Unified School District and did not list any other work experience in a school setting on his application, it was reasonable for LAUSD to assume he did not have any other experience working at a school and pointless to ask this question. In the absence of any clue at the time that the defendant had not been truthful or had misconduct in his past, there was no reason to probe further. . . .

Finally, we disagree that LAUSD could reasonably be faulted for not asking the defendant about whether anyone had previously accused him of sexual impropriety. LAUSD had run two background checks using his fingerprints, which yielded only a conviction for driving under the influence. LAUSD was prohibited under Labor Code section 432.7 from asking about prior arrests that did not result in a conviction. The defendant answered “No” to the question asking if he had been dismissed from or not reemployed by any school or any other type of employment. Although he testified at his deposition that he would have “told the truth” if LAUSD had asked him about his arrest while working for the Long Beach school, this does not mean that LAUSD was negligent for not ferreting out information about his prior arrest and misconduct in another district and questioning him about it. We conclude no reasonable jury could find LAUSD was negligent in failing to make further inquiries when it had no reason to suspect anything problematic about the defendant or his background.

The appeals court’s decision—negligent supervision

The court concluded that the trial court erred in dismissing the negligent supervision claim against LAUSD. It noted that “ineffective supervision of a student, as well as the failure to use reasonable measures to protect a student from foreseeable injury from a third party, may constitute a lack of ordinary care on the part of those responsible for student supervision.” It further noted: “Reasonable minds could differ as to whether the school’s lack of supervision that allowed the defendant access to the victim for grooming constituted negligence for which LAUSD is vicariously liable,” and therefore the trial court erred in dismissing the negligent supervision claim against LAUSD.

What this means for churches

This case is instructive for church leaders for at least five reasons:

  1. California is one of 33 states that have adopted a “ban the box” law prohibiting employment applications from asking applicants to disclose prior arrests that did not result in a conviction. The defendant’s application did not disclose his arrest on suspicion of sexual battery in December 1993 or the underlying circumstances. Since the state’s ban the box law prohibited LAUSD from asking for this information, the LAUSD could not be found liable on the basis of negligent hiring as a result of its inability to obtain it. The same logic would apply to churches if forbidden by state law to ask job applicants about prior arrests. Note, however, that some exceptions exist under the ban the box laws in some states.
  2. The defendant’s job application identified a 2001 conviction for driving under the influence, which the court noted “was not disqualifying under LAUSD policy.” Every state requires criminal records checks for school employees, and identifies crimes that disqualify an applicant for employment. This can provide churches with a useful tool in identifying those crimes that disqualify applicants for employment. To the extent a church aligns its practices with those of the public schools (an agency of the state) it has gone a long way in establishing a defense in the event it hires an applicant.
  3. In May of 2008, an anonymous caller reported to the school principal that she had observed the defendant picking up the victim in the morning and dropping her off at school. The principal contacted the child abuse unit at the local police department to make a Suspected Child Abuse Report over the phone. The defendant was suspended from teaching the same day. The duty to report child abuse is triggered in most states by a reasonable belief that a minor is being sexually abused. In this case, the principal concluded that the anonymous phone call provided a reasonable belief that the victim was being abused.
  4. LAUSD had a policy prohibiting teachers from giving students automobile rides without parental consent. Such a policy is strongly recommended because so many incidents of child abuse occur off campus and are facilitated by the use of automobiles. The problem in this case was that this policy was not consistently enforced. To achieve the lowest risk, such a policy should not have a “parental consent” exception.
  5. The victim’s expert witness testified that LAUSD “did not adequately supervise” the defendant or other employees, the school premises, or the victim. The expert witness cited 11 grounds for her conclusion that are summarized above. They provide churches with excellent guidelines to examine their own policies and procedures for protecting minors from abuse.
  6. C.A. v. L.A. Unified School District, 2019 WL 1649637 (Cal. App. 2019).

Teachers at a Religious Preschool Not Considered Ministers

California Appeals Court says the four-factor test for ministerial status in Hosanna-Tabor was not satisfied.

Key Point 8-10.01

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.

A California appeals court ruled that the civil courts could resolve a dispute regarding the claim of teachers in a synagogue’s preschool to benefits under a state wage-and-hour law.

Background and teaching requirements

The California Labor Commissioner sued a Jewish synagogue (the “Temple”) claiming that it had violated various provisions of the California Labor Code by failing to provide its preschool teachers with rest breaks, uninterrupted meal breaks, and overtime pay.

The Temple is a Reformed Jewish synagogue whose mission is to promote the Jewish faith and serve and strengthen the Jewish community.

The Temple’s early childhood center (ECC), which employs approximately 40 teachers, is an onsite preschool for children five years of age and under. The ECC’s curriculum has a significant secular component.

ECC teachers spend much of the school day engaged with children in indoor and outdoor play at various learning centers. These learning centers include blocks, puzzles, games, books, and science, and promote reading readiness, writing readiness, and math readiness. Teachers also work with children on social skills, including sharing and kindness, and assist with toileting, meals, and snacks.

The ECC’s curriculum has a religious component of introducing children to Jewish life, religious ritual, and Judaic observance. The religious curriculum includes the celebration of Jewish holidays, weekly Shabbat observance, recitation of the ha-motzi (grace blessing) before meals and snacks, and an introduction to Jewish values such as kehillah (community), hoda’ah (gratitude), and shalom (peace and wholeness). All ECC teachers participate in weekly Shabbat services and teach religious concepts, music, singing, and dance.

The ECC is part of the Temple’s religious and educational mission, and it fulfills a religious obligation of the Temple. The ECC exists to instill and foster a positive sense of Jewish identity and to develop in children favorable attitudes toward the values and practices of Judaism.

ECC teachers are not required to be adherents to the Temple’s religious philosophy or, indeed, to be Jewish. As a result, while some of the ECC’s teachers are Jewish, others are non-Jewish or do not identify with any faith tradition. For example, one former teacher was raised as a Catholic and, prior to taking a job at the ECC, was employed as a teacher and librarian at a private Catholic elementary school. Another teacher is a practicing Catholic; and yet another taught catechism at a church. ECC teachers are not ordained as religious leaders and do not hold themselves out as ministers of the faith.

ECC teachers are not required to have any theological training, to be educated about Judaism, or to be proficient in Hebrew. As a result, some ECC teachers are hired without any knowledge of Jewish religion or practice.

Once employed, teachers are not required to undertake a course of theological study. Instead, the ECC provides teachers with Judaic reading materials, including the Temple’s “holiday packets,” which include explanations of each of the Jewish holidays and the symbols, Hebrew vocabulary, foods, and songs associated with those holidays. In addition, teachers receive guidance on religious observance from the ECC’s rabbis and administrators trained in Jewish education.

Lawsuit focused on the “non-exempt” classification

The California Labor Commissioner sued the school, alleging that the Temple classifies its noncredentialed teachers as “non-exempt,” but does not provide them with 10-minute rest breaks, uninterrupted 30-minute meal breaks, or overtime pay, as required by California’s wage-and-hour laws. The Commissioner alleged wage-and-hour violations, and sought meal and rest period premiums, overtime pay, statutory and civil penalties, and an injunction.

The Temple asked the court to dismiss the case on the ground that the ECC was a religious school and its preschool teachers were “ministerial employees,” and therefore the case was barred by the so-called “ministerial exception,” recognized by the United States Supreme Court in a landmark 2012 case, Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, 565 U.S. 171 (2012) (Hosanna-Tabor). In the Hosanna-Tabor case, the Supreme Court barred the civil courts from resolving employment disputes between churches and ministers.

Were these preschool teachers ministers?

The court dismissed the case, concluding that the Temple’s preschool teachers were “ministers” within the meaning of the ministerial exception, explaining that the exception is not limited to the heads of religious congregations, and prior decisions had recognized that preschool teachers in religious schools could serve ministerial functions.

In the present case, it was undisputed

that the ECC fulfills a religious obligation of the Temple; ECC teachers further the Temple’s mission and implement Judaic curriculum; ECC teachers teach children about Jewish religious holidays; ECC teachers participate in weekly Shabbat services; ECC teachers teach student[s] to say the Jewish grace blessing before each meal and snack; ECC teachers instruct children in saying the Shema prayer and Oseh Shalom, a prayer for peace; teaching children about religious practices, holidays, and rituals fulfills religious commandments; ECC teachers help transmit Judaism to future generations; Judaism does not preclude a non-Jew from teaching the Jewish religion; early Jewish childhood education impacts not only the child, but the Jewish identity of the child’s parents and family; upon a child’s completion of the ECC program, the majority of families continue their children’s Jewish education at the Temple’s schools; and teaching music, singing, and dance to students fulfills a religious obligation and Biblical directive.

Under these facts, the court said, “a reasonable trier of fact could not conclude that ECC teachers do not serve a ministerial function.”

The Commissioner appealed, claiming that the Temple’s preschool program was primarily secular; ECC teachers were not required to study or to adhere to the Temple’s theology to be hired or maintain employment; ECC teachers were not ordained or otherwise recognized as spiritual or religious leaders; ECC teachers did not hold themselves out as ministers; the ECC is open to children of parents who are not adherents of the Temple’s theology; and the Temple’s rabbis, not its teachers, were primarily responsible for the children’s religious instruction and spiritual leadership.

A state appeals court reversed the trial court’s decision and ruled in favor of the Commissioner. It concluded:

Considering all the relevant circumstances of the teachers’ employment, we conclude the ministerial exception does not foreclose the Commissioner’s claims. Although the ECC’s teachers are responsible for some religious instruction, we do not read Hosanna-Tabor to suggest that the ministerial exception applies based on this factor alone. To the contrary, it was central to Hosanna-Tabor’s analysis that a minister is not merely a teacher of religious doctrine—significantly, he or she “personifies” a church’s (or synagogue’s) beliefs and “ministers to the faithful.” The record in the present case is clear that the Temple’s teachers did not play such a role in synagogue life. Indeed, as we have said, many of the Temple’s teachers are not members of the Temple’s religious community or adherents to its faith. Thus, while the teachers may play an important role in the life of the Temple, they are not its ministers.

The court noted that the ECC teachers did not satisfy the Supreme Court’s four-factor test for ministerial status in the Hosanna-Tabor case.

First, the church in Hosanna Tabor “held [the employee] out as a minister,” with a role distinct from that of most of its members.

Second, the employee had the title of minister, which reflected significant religious training followed by a formal process of commissioning.

Third, the employee held herself out as a minister by accepting “the formal call to religious service” and claiming a special housing allowance on her taxes available only to employees earning their compensation in the exercise of the ministry.”

Fourth, the employee’s job duties “reflected a role in conveying the church’s message and carrying out its mission.” She taught her students religion three times per week and led her students in prayer three times a day. Once a week, she took her students to a school-wide chapel service, and about twice a year she led the chapel service by choosing the liturgy, selecting the hymns, and delivering a short message based on Bible verses. Thus, she “performed an important role in transmitting the Lutheran faith to the next generation.”

The California court concluded that the ECC teachers were not “ministers” under this four-part test.

What this means for churches

The court narrowly construed the Hosanna-Tabor case. Perhaps most importantly for churches to note, the Supreme Court in Hosanna-Tabor concluded that a finding of ministerial status cannot be based solely on the amount of time a person spends on religious functions.

The Court observed:

The issue before us, however, is not one that can be resolved by a stopwatch. The amount of time an employee spends on particular activities is relevant in assessing that employee’s status, but that factor cannot be considered in isolation, without regard to the nature of the religious functions performed.

The Supreme Court acknowledged that the teacher’s religious duties “consumed only 45 minutes of each workday, and that the rest of her day was devoted to teaching secular subjects.”

However, the Court noted that it was unsure whether any church employees devoted all their time to religious tasks: “The heads of congregations themselves often have a mix of duties, including secular ones such as helping to manage the congregation’s finances, supervising purely secular personnel, and overseeing the upkeep of facilities.” Su v. Temple, 244 Cal. Rptr.3d 546 (Cal. App. 2019).

For additional insights, church leaders should see “Cases Recognizing the Ministerial Exception” and “Cases Not Recognizing the Ministerial Exception” in Pastor Church & Law.

Update. The Temple has petitioned the United States Supreme Court to reverse this decision. The Court has agreed to review a similar case involving the scope of the ministerial exception in the context of religious schools: Our Lady of Guadalupe School v. Morrissey-Berru.

Clergy-Penitent Privilege Not Applicable to a Conversation with a Church Elder

Key point 3-07.2. In order for the clergy-penitent privilege to apply there must be a

Key point 3-07.2. In order for the clergy-penitent privilege to apply there must be a communication that is made in confidence. This generally means that there are no other persons present besides the minister and counselee who can overhear the communication, and that there is an expectation that the conversation will be kept secret.

Key point 3-07.4. In order for the clergy-penitent privilege to apply there must be a communication that is made to a minister acting in a professional capacity as a spiritual adviser.

A federal court in California ruled that the clergy-penitent privilege did not apply to a criminal defendant’s conversation with a church elder since the presence of a second elder in the room negated the essential requirement of confidentiality and the purpose of the conversation was more in the nature of marital than spiritual counseling.

A woman contacted her local police department because she suspected that her husband’s private computer contained child pornography. Six months earlier she walked into their bedroom and her husband was on the computer. She observed several thumbnail photos of “young girls . . . engaged in sexually suggestive poses while wearing bra and panties.” The girls appeared “between the ages of 13–15 years old,” and some “were . . . as young as 10 years of age.” When the wife confronted her husband about the photos, he told her they “had been attached to an email he had received and he was trying to identify the sender.”

The husband was “always using his computer and even attached a mirror next to it so he would know if someone was entering the bedroom.” He kept its password protected and did not allow anyone else to use it. A few days before contacting the police, the wife found two pairs of young girls panties concealed in a drawer next to his computer.

The husband explained that he had seen “a girl throwing items into a trashcan” and, after she walked away, “he retrieved the items from the dumpster . . . and kept them.” The wife suspected that this behavior had been going on for years. She believed that he “had confessed his activities to two of the elders at their church in an attempt to keep her from moving out of their residence.” The elders “would not elaborate on the conversation other than to say the information he disclosed ‘was horrible.’” The wife turned over her husband’s computer to the police, and they booked it into evidence.

The police obtained statements from the two elders who had met with the husband. Based on the information from the wife and elders, a judge issued a warrant to search the computer. As a result of the search, police recovered thousands of pornographic images of “young children and teenage girls,” in addition to over 200 videos. The police also recovered video of the husband molesting a 10-year-old girl. Based on this evidence, the police requested, and the trial court granted, a search warrant for the husband’s vehicle, home, and camera. The husband was convicted of one count of a lewd act on a child and one count of possession of child pornography.

The trial court sentenced him to a prison term of six years. The husband sought habeas corpus relief in a federal district court in California. The husband claimed that the police had violated his right to “due process” by securing a search warrant based on information procured in violation of the clergy-penitent privilege. The court rejected the husband’s request for habeas corpus relief based on the state court’s alleged violation of the clergy-penitent privilege, noting that “to the extent that the husband’s argument is simply that the police and trial court violated the state-created clergy-penitent privilege, his claim fails [since] the United States Supreme Court has long recognized that a mere error of state law is not a denial of due process.” Even assuming California’s clergy-penitent privilege could provide a basis for a due process claim, the husband “has not shown the evidence contained in the search warrant affidavit was privileged.”

The court observed:

For purposes of the clergy-penitent privilege, California’s Evidence Code defines “penitential communication” as “a communication made in confidence, in the presence of no third person so far as the penitent is aware.” California courts have found the privilege does not apply in circumstances where third persons are present during an allegedly privileged conversation or where it is to be expected the statements will be shared with a third party, even where the third party is another clergyman. In addition, California’s clergy-penitent privilege does not apply “to communications made to a religious or spiritual advisor acting as a marriage counselor.”

Here, the detective stated in the statement of probable cause that the husband made admissions during a meeting with two religious elders. In addition, his wife informed police that he sought the assistance of the elders to prevent her from moving out of their home, not for the purposes of religious repentance. Where the husband’s statements were made in the presence of a third party, albeit another religious elder, and were made in the context of marital counseling, it is unlikely that his statements to his elders were privileged under California’s clergy-penitent privilege.

What This Means For Churches:

The court defined the clergy privilege’s requirement of confidentiality to mean the absence of any third persons. State clergy-penitent privilege laws define confidentiality in one of two ways.

  1. Most state laws have adopted the Uniform Rules of Evidence which defines confidentiality in the context of the “religious privilege” as “a communication . . . made privately and not intended for further disclosure except to other persons present in furtherance of the purpose of the communication.” There are two points to note about this definition: (1) the communication must be “private,” and (2) it must not be intended for further disclosure except to “other persons present in furtherance of the purpose of the communication.” According to this definition, other persons can be present, and listening, when a person seeks out a minister for spiritual counsel so long as their presence is “in furtherance of the purpose of the privilege.”
  2. A minority of state clergy-penitent privilege laws define confidentiality more narrowly to mean that a communication was made in private in the presence of no other persons besides the minister. This is a very different view of confidentiality than the more expansive view taken by the Uniform Rules of Evidence and a majority of the states. The California clergy privilege is not based on the Uniform Rules of Evidence, and specifically precludes the presence of third parties.
  3. The takeaway point here is that ministers need to understand that the presence of a third person in the course of providing spiritual counsel to a counselee can negate the privilege. This is so under the Uniform Rules of Evidence if the third person’s presence is not “in furtherance of the privilege.” But it is also the case in states in which the clergy privilege’s requirement of a “confidential” communication is construed to mean the absence of third persons.

    Also, the court concluded that in deciding if the defendant’s confession to the elder was made in the course of seeking spiritual counsel, the key consideration is why the conversation started rather than how it ended. The court was convinced that the defendant’s initial purpose in speaking with the elder had nothing to do with seeking spiritual advice, and therefore the conversation was not privileged even though at some point later in the conversation the defendant may have sought such advice. Lindhorst v. Sullivan, 2018 U.S. Dist. LEXIS 151257 (C.D. Cal. 2018).

Church Not Obligated to Return Undesignated Contributions

There generally is no legal basis for honoring such requests since charitable contributions constitute “gifts,” and gifts represent an irrevocable transfer of all of a donor’s right, title, and interest in donated funds or property.

Key point. The word contribution is synonymous with the word gift, and since no gift occurs unless a donor absolutely and irrevocably transfers all title, dominion, and control over the gift, it follows that donors who make an undesignated contribution to a church have no legal right to a refund.

A California court ruled that a church is not obligated to return undesignated contributions to donors absent fraud or mistake.

A church member (the “plaintiff”) sued his church seeking a refund of contribution he had made to the church on the ground that his contributions were “converted” from legitimate church use to the inappropriate and unauthorized expenses including the purchase of a home, furnishings, landscaping, cars, clothes, a swimming pool, a Jacuzzi, and other items. The trial court disagreed, and the member appealed.

A state appeals court noted that the elements of conversion are “the plaintiff owns or has a right to possession of personal property; defendant disposed of the personal property in a manner that is inconsistent with the plaintiff’s rights; and damages.” However, “where plaintiff neither has title to the property alleged to have been converted, nor possession thereof, he cannot maintain an action for conversion.”

The question is whether the plaintiff “had title to or possession of the money, or whether he relinquished both title and possession by making valid gifts. If he made valid gifts, then the trial court did not commit error because he could not establish the requisite title to or possession of the money. If he did not make valid gifts, then the trial court’s ruling is not supported by its logic.”

The court noted that there are three requirements for a valid gift: “There must be an intent on the part of the donor to make an unconditional gift; there must be an actual or symbolical delivery that relinquishes all control; and the donee must signify acceptance.”

The court concluded that the plaintiff

failed to establish that any of the necessary elements of a gift are missing. He suggests he did not intend to make unconditional gifts of money because he was deceived. But he misses the point. Even if he was deceived, he was induced into making unconditional gifts. He indicates in his brief that he gave the money for “specific non-profit needs within the church,” and his “giving was akin to a conditional gift, with the specific intent that he was not giving up ownership of his monies as if he was tossing those funds in the trash.” Thus, he suggests that the money was converted because it was not used as he intended. . . . To dispel the plaintiff’s notion he has a conversion claim, we highlight that his gifts were unconditional because they were present transfers. He may have wished his money to be used in a specific way, but he relinquished all control. To the degree he communicated his wishes, the church may have had a moral obligation to honor those wishes, but it did not have a legal obligation.

The court added that the plaintiff “cannot be heard to complain that he was left with no remedy if he was, in fact, deceived by [the church].” It pointed out that “if a donor’s intent is induced by mistake or fraud, the gift may be rescinded or set aside in an action in equity. Consequently, the plaintiff could have sued to rescind or set aside his gifts,” but “a conversion claim was not a viable substitute.”

What this means for churches

Most churches have been confronted with a donor asking for a return of his or her contributions. Such requests usually are generated by a decision to change churches or a financial emergency. For whatever reason, such requests can be perplexing. Church leaders often do not know how to respond. This case reflects the conclusion that most courts have reached when considering the legal basis of donors’ requests for a return of some or all of their undesignated contributions. As this court noted, there generally is no legal basis for honoring such requests since charitable contributions constitute “gifts,” and gifts represent an irrevocable transfer of all of a donor’s right, title, and interest in donated funds or property. Therefore, there is no legal justification for donors to reclaim donations they previously made for which they have no more legal interest to support a request or demand for a refund.

However, this court mentioned two possible exceptions to this general rule. First, donors who make a designated contribution for a stated purpose (e.g., building fund) may have a legal right to enforce their designation. And second, the court suggested that donors may be able to reclaim a contribution based on fraud or mistake. Lewis v. Double Rock Baptist Church, 2017 WL 491693 (Cal. App. Unpub.).

Church Not Responsible for Pedestrian Accident Near Premises

Church was not responsible for injuries sustained by a member who was struck by a car when crossing a five-lane road that separated the church from an overflow parking lot across the street.

Key point. Churches are not necessarily liable for injuries incurred by members and visitors while crossing a public street from an overflow parking lot to the main church building.

The California Supreme Court ruled that a church was not responsible for injuries sustained by a member who was struck by a car when crossing a five-lane road that separated the church from an overflow parking lot across the street.

A church was located on a five-lane public road across the street from a swim school. The church had an agreement to use the swim school lot for overflow parking when the church’s main lot was full. There were no traffic signals or crosswalks at the intersection used by church members to access the parking lot.

An adult male (the “plaintiff”) sought to attend a seminar at the church on a rainy evening in November. When he arrived, a church member volunteering as a parking attendant informed him that the main lot was full and told him to park at the swim school lot across the street. The plaintiff, along with two others, attempted to cross in the middle of the block directly opposite the church. Midway across, he was hit and injured by an oncoming car.

The plaintiff and his wife sued the church for negligence and loss of consortium (a legal term meaning loss of intimacy with a partner). He alleged that the church created a foreseeable risk of harm by maintaining an overflow parking lot in a location that required persons to cross a busy five-lane street, and that the church was negligent in failing to protect against that risk. He also alleged that the church was negligent in failing to adequately train or supervise its parking attendants. The church moved for summary judgment on the ground that it did not have a duty to assist the plaintiff with crossing a public street it did not own, possess, or control. The trial court dismissed the case, but a state appeals court ruled that the case could proceed against the church. The church appealed to the state supreme court.

The supreme court observed:

The plaintiff contends that landowners could assist invitees in crossing the street. But crossing volunteers are not authorized traffic officers and generally have no authority to direct traffic or otherwise control public streets. Further, crossing volunteers may inadvertently convey to invitees that they do possess authority to direct traffic and thereby cause invitees to rely on such assistance to their detriment.

The plaintiff also contends that landowners can warn of the danger of crossing the street, perhaps by posting a sign. But the danger posed by crossing a public street midblock is obvious, and there is ordinarily no duty to warn of obvious dangers. Although some fraction of people may fail to appreciate an obvious danger, to require warnings for the sake of such persons would produce such a profusion of warnings as to devalue those warnings serving a more important function.

It is possible that a landowner can reduce the risk of harm by maintaining a parking lot in a location that does not require invitees to cross a public street. We note that landowners already have incentives to provide parking that is safe and convenient for their invitees. Doing so increases the likelihood that invitees will visit the landowners’ premises and can help create a positive experience for invitees, increasing the likelihood of repeat visits. Conversely, a landowner’s reputation will be damaged if parking is unsafe or inconvenient. But there may be instances where another parking option that did not require crossing a public street was available and would not have been cost prohibitive. Finding a duty here may encourage landowners to choose safer parking options. This approach would be socially desirable if it reduces collisions on the public street, and it is fair to place the costs on landowners to the extent they seek to attract invitees. But it is likely difficult in many cases to reliably assess which of several parking options was the safest at the time the invitee was directed where to park. The relevant considerations are multitudinous and vary by the hour, day of the week, and month, and many will be hard to establish with accuracy. These considerations include the volume and speed of traffic along the streets in the area, the volume of traffic to and from the landowners’ premises and neighboring properties, crime rates and perceptions of safety on the sidewalks, and the location of crosswalks and traffic control devices.

What this means for churches

Many churches use overflow parking lots located across a public street from the church building. This case illustrates that a church is not necessarily liable for injuries to members and visitors who park in such lots and are injured when crossing the street to attend the church. Vasilenko v. Grace Family Church, 3 Cal.5th 1077 (Cal. App. 2017).

Related Topics:

Court Ruled a University Has a Duty to Protect Others from Foreseeable Violence

Colleges have a duty to act with reasonable care when aware of a foreseeable threat of violence in a curricular setting.

Key point 7-20.4.
A church may be legally responsible for assaults occurring on its premises if similar assaults occurred on or near the premises in the recent past and the church failed to take reasonable precautions.

The California Supreme Court ruled that a university has a legal duty to protect students from foreseeable violence during curricular activities.

A male university student (the “assailant”) began experiencing problems with other students in both classroom and residence hall settings. For example:

• He informed a professor that he was “angered” by “offensive” remarks from other students during a final examination and “outraged” because their comments had affected his performance.

• He claimed to have heard another professor calling him “troubled” and “crazy,” among other things.

• He complained about mistreatment by fellow dormitory residents. In a three-page letter to the Dean of Students, he alleged a female resident had repeatedly made “unwelcomed verbal sexual advances” toward him, and others had spread rumors and “accusations of a sexual nature about him throughout the entire student body.”

• He claimed the residents frequently disrupted his sleep, called him “stupid,” and eavesdropped on his phone calls. Not only had he been “made the target” of the residents’ “teasing,” but he also “received an immense amount of unwanted attention” around campus. He warned that if the university failed to discipline the responsible parties, the matter would likely “escalate into a more serious situation,” and he would “end up acting in a manner that will incur undesirable consequences.”

• He was expelled from the university dormitories after assaulting a student on a baseless charge.

The assailant began to receive counseling at the campus counseling center. Though he denied wanting to hurt himself or others, he continued to report auditory hallucinations and paranoid thoughts. He threw away prescribed antipsychotic medication. A counselor diagnosed schizophrenia and urged him to see a psychiatrist.

One day, while doing classwork in a chemistry laboratory, the assailant, without warning or provocation, stabbed a fellow student in the chest and neck with a kitchen knife. The victim was taken to the hospital with life-threatening injuries but ultimately survived. When campus police arrived, the assailant admitted he had stabbed someone and explained that the other students had been teasing him. He pleaded not guilty by reason of insanity to a charge of attempted murder, and was admitted to a psychiatric hospital and diagnosed with paranoid schizophrenia.

The victim sued the university. She claimed that the university had a special relationship with her as an enrolled student, which entailed a duty “to take reasonable protective measures to ensure her safety against violent attacks and otherwise protect her from reasonable foreseeable criminal conduct, to warn her as to such reasonable foreseeable criminal conduct on its campus and in its buildings, and to control the reasonably foreseeable wrongful acts of third parties and other students.” She alleged that the university breached this duty because, although aware of the assailant’s “dangerous propensities,” it failed to warn or protect her or to control the assailant’s foreseeably violent conduct.

A trial court rejected the university’s motion to dismiss the case, and the university appealed. A state appeals court reversed the trial court’s ruling, and dismissed all claims. The victim appealed to the state supreme court, which reversed the appellate court’s ruling and ordered the case to proceed to trial.

The supreme court’s ruling

The supreme court began its opinion by noting that “in general … one owes no duty to control the conduct of another, nor to warn those endangered by such conduct,” and that “a person who has not created a peril is not liable in tort merely for failure to take affirmative action to assist or protect another unless there is some relationship between them which gives rise to a duty to act.”

In short, “whether [the university] was negligent in failing to prevent the assailant’s attack depends first on whether a university has a special relationship with its students that supports a duty to warn or protect them from foreseeable harm.”

The supreme court noted that the following special relationships are recognized by the Restatement 3rd Torts (a respected restatement of the law) that “may support a duty to protect against foreseeable risks”:

  • common carrier and customer
  • innkeeper and customer
  • business or landowner and invited guests
  • landlord and tenants
  • a guard with those in his or her custody
  • an employer with its employees, and
  • a school with its students.

The Restatement does not exclude colleges from the school-student special relationship. However, it cautions that reasonable care varies in different school environments, with substantially different supervision being appropriate in elementary schools as opposed to colleges. State courts have reached different conclusions about whether colleges owe a special relationship-based duty to their students. The California Supreme Court noted that it had not previously addressed the question. It noted:

Relationships that have been recognized as “special” share a few common features: Generally, the relationship has an aspect of dependency in which one party relies to some degree on the other for protection… . The corollary of dependence in a special relationship is control. Whereas one party is dependent, the other has superior control over the means of protection. “[A] typical setting for the recognition of a special relationship is where ‘the plaintiff is particularly vulnerable and dependent upon the defendant who, correspondingly, has some control over the plaintiff’s welfare.'”

The Restatement authors observed over 50 years ago that the law has been “working slowly toward a recognition of the duty to aid or protect in any relation of dependence or of mutual dependence.”

The court noted that in a previous case it had ruled that a high school has a special relationship with students “arising from the mandatory character of school attendance and the comprehensive control over students exercised by school personnel, analogous in many ways to the relationship between parents and their children,” and this special relationship gives secondary school personnel “the duty to use reasonable measures to protect students from foreseeable injury at the hands of third parties acting negligently or intentionally” (emphasis added).

The court concluded that “postsecondary schools have a special relationship with students while they are engaged in activities that are part of the school’s curriculum or closely related to its delivery of educational services.” The court explained:

The college-student relationship thus fits within the paradigm of a special relationship. Students are comparatively vulnerable and dependent on their colleges for a safe environment. Colleges have a superior ability to provide that safety with respect to activities they sponsor or facilities they control.

The court cautioned that

many aspects of a modern college student’s life are, quite properly, beyond the institution’s control. Colleges generally have little say in how students behave off campus, or in their social activities unrelated to school. It would be unrealistic for students to rely on their college for protection in these settings, and the college would often be unable to provide it.

Having concluded that colleges and universities have a duty “to use reasonable measures to protect students from foreseeable injury at the hands of third parties acting negligently or intentionally,” the court explained foreseeability as follows:

Whether a university was, or should have been, on notice that a particular student posed a foreseeable risk of violence is a case-specific question, to be examined in light of all the surrounding circumstances. Any prior threats or acts of violence by the student would be relevant, particularly if targeted at an identifiable victim. Other relevant facts could include the opinions of examining mental health professionals, or observations of students, faculty, family members, and others in the university community. Such case-specific foreseeability questions are relevant in determining the applicable standard of care or breach in a particular case.

The court concluded:

We emphasize that a duty of care is not the equivalent of liability. Nor should our holding be read to create an impossible requirement that colleges prevent violence on their campuses. Colleges are not the ultimate insurers of all student safety. We simply hold that they have a duty to act with reasonable care when aware of a foreseeable threat of violence in a curricular setting. Reasonable care will vary under the circumstances of each case. Moreover, some assaults may be unavoidable despite a college’s best efforts to prevent them. Courts and juries should be cautioned to avoid judging liability based on hindsight.

The court sent the case back to the trial court for trial.

What This Means For Churches:

Most church leaders are concerned about the threat of armed assailants on church property. This concern is rooted both in a desire to protect parishioners and to mitigate a church’s legal risk for deaths or injuries that may occur. For this reason we monitor legal developments in this fast-evolving area of the law and apprise readers of notable cases having both a direct and indirect relevance to churches.

The California Supreme Court’s recent ruling is notable because rulings by this court often are trend-setters for the rest of the nation, and because the case directly addresses the important question of the liability of landowners for assaults on their premises. Note the following takeaway points.

First, the court noted that “special relationships” give rise to a duty “to use reasonable measures to protect against foreseeable injury at the hands of third parties acting negligently or intentionally.” Special relationships include any relationship that has “an aspect of dependency in which one party relies to some degree on the other for protection.” The “corollary of dependence in a special relationship is control. Whereas one party is dependent, the other has superior control over the means of protection. A typical setting for the recognition of a special relationship is where the plaintiff is particularly vulnerable and dependent upon the defendant who, correspondingly, has some control over the plaintiff’s welfare.”

This is a broad understanding of special relationship, and clearly applies to the relationship between a primary and secondary school and its students and, according to the California Supreme Court, to the relationship between a university and its students when engaged in activities that are “part of the school’s curriculum or closely related to its delivery of educational services.” And while the court did not address religious schools, its ruling likely will apply to religious primary, secondary, and postsecondary schools in California and in any state that follows the court’s reasoning, meaning that such schools may be deemed to have a duty “to use reasonable measures to protect against foreseeable injury at the hands of third parties acting negligently or intentionally.”

Second, what about churches? Does the California Supreme Court’s ruling mean that churches in that state, or in any other jurisdiction that follows the court’s ruling, have a legal duty “to use reasonable measures to protect against foreseeable injury at the hands of third parties acting negligently or intentionally”? The court did not address this issue. But note:

(1) No court has said that a special relationship exists between churches and their members (unless a counseling relationship exists), and so churches generally have no legal duty to protect members against armed assailants on that basis. (2) It is unlikely that a special relationship exists between a church and its members using the court’s analysis, since the requisite elements of dependency and vulnerability ordinarily do not exist. (3) Some courts have found landowners liable for assaults and other criminal acts on their premises if such acts were reasonably foreseeable, meaning that similar acts have occurred on or near the owner’s premises in the recent past. (4) Many church leaders believe that even if they do not have a legal duty to protect members against armed assailants, a moral or theological duty exists to safeguard human life.

Regents of the University of California v. Superior Court, 4 Cal. 5th 607 (Cal. 2018).

Provisions in Decedent’s Will Could Be Reformed by Recourse Based on Religious Charities’ Extrinsic Evidence

The court noted that “the charities have articulated a valid theory that will support reformation if established by clear and convincing evidence.”

Key point. Some courts interpret charitable bequests in a testator's will based on extrinsic evidence outside the four corners of the will itself.

The California Supreme Court ruled that a decedent's will leaving his estate to two religious charities if he and his wife died simultaneously could be reformed by recourse to extrinsic evidence to show that he wanted his estate distributed to the charities even if he survived his wife, so long as the charities could show by "clear and convincing evidence" that this was the decedent's true intent.

In 1984, a 72-year-old male (the "decedent") prepared a "holographic" (i.e., handwritten) will in which he left all of his property to "my beloved wife" who was then 58 years of age. He left to his brother "the sum of one dollar." The will provided that

should my wife and I die at the same moment, my estate is to be equally divided between [two named religious charities]. The will further provided that "I have intentionally omitted all other persons, whether heirs or otherwise, who are not specifically mentioned herein, and I hereby specifically disinherit all persons whomsoever claiming to be, or who may lawfully be determined to be my heirs at law, except as otherwise mentioned in this will. If any heir, devisee or legatee, or any other person or persons, shall either directly or indirectly, seek to invalidate this will, or any part thereof, then I hereby give and bequeath to such person or persons the sum of one dollar ($1.00) and no more, in lieu of any other share or interest in my estate.

The decedent's wife died in July 2002, and the decedent died in 2007, leaving no spouse or children.

The holographic will was admitted to probate. The religious charities named in the will claimed that the estate should be divided between them as the will prescribed. But the decedent's sole surviving heirs claimed that the bequest to the charities was negated by the fact that the couple did not die simultaneously, and therefore the estate had to be distributed to the decedent's heirs pursuant to the state laws of intestacy. The probate court concluded that the will was not ambiguous, and awarded the entire estate to the heirs. A state appeals court affirmed the trial court's ruling. The charities appealed to the state supreme court. Their main argument was that there was ample "extrinsic" evidence (i.e., evidence outside the will itself) that would demonstrate the decedent's intent to leave his estate to the two charities and not to his surviving heirs.

The court acknowledged that California law "allows the admission of extrinsic evidence to establish that a will is ambiguous and to clarify ambiguities in a will." However, California law "does not currently authorize the admission of extrinsic evidence to correct a mistake in a will when the will is unambiguous." The court concluded that "a change in the law is warranted to allow the reformation of an unambiguous will when clear and convincing evidence establishes that the will contains a mistake in the expression of the testator's intent at the time the will was executed and also establishes the testator's actual and specific intent at the time the will was executed." Therefore, the court remanded the case back to the trial court to determine "whether clear and convincing evidence establishes that the decedent intended, at the time he drafted his will, to provide in his will that his estate was to pass to [the religious charities] in the event his wife was not alive at the time the testator died."

The court noted that "the charities have articulated a valid theory that will support reformation if established by clear and convincing evidence. [The charities] contend that the decedent actually intended at the time he wrote his will to provide that his estate would pass to the two charities in the event his wife was not alive to inherit his estate when he died, but that his intent was 'inartfully' expressed in his will and thus there is a mistake in the will that should be reformed to reflect his intent when the will was drafted. Their contention, if proved by clear and convincing evidence, would support reformation of the will to reflect his actual intent."

What this means for churches

This case demonstrates the problems that can arise when an individual seeks to save money by drafting his or her own estate plan without the assistance of an attorney. Sadly, the decedent's estate in this case was substantially depleted by the legal fees expended in the probate court case, and the appeals to a state appeals court and the state supreme court. As a result of the supreme court's ruling, the case goes back to the probate court for the process to start all over again.

Church leaders who encourage members to remember the church in their estate plan should caution them to utilize the services of an estate planning attorney to ensure that their wishes will be honored. In re Estate of Duke, 352 P.3d 863 (Cal. 2016).

Pastor’s Confession of Embezzlement Admissible Due to Lack of Coercion

Church Law and Tax Report Pastor’s Confession of Embezzlement Admissible Due to Lack of Coercion

Church Law and Tax Report

Pastor’s Confession of Embezzlement Admissible Due to Lack of Coercion

Key point. Confessions of embezzlement of church funds to a government investigator are admissible in a future criminal prosecution so long as they are voluntary, and not made during a custodial interrogation unless a Miranda warning is provided in advance.

A federal court in California concluded that a pastor’s confession to two IRS agents that he stole over $1 million from his church, and did not report the stolen funds as taxable income on his tax return, was voluntary and not coerced, and was not made during a custodial interrogation. Therefore, the confession was admissible in a criminal prosecution of the defendant, even though he had not been given a Miranda warning. At approximately 1:45 p.m. on the afternoon of October 17, 2012, two special agents of the IRS Criminal Investigations Unit approached a priest (the “defendant”) in the parking lot of a Catholic church. As the agents approached the priest, they identified themselves, displayed their badges, and asked whether they could ask him questions regarding his tax returns.

The defendant agreed to speak with the agents, but suggested that they do so instead at a nearby church where he was the priest. The agents agreed, and the three made their way to the other church. Inside the church, the defendant directed the agents to a room off to the right side of the church vestibule, and suggested they have their conversation there.

The agents first asked the defendant about his background, including questions about his education, employment with the church, sources of income, financial assets, and bank account and related assets. The defendant explained that he earned approximately $32,000 a year from the church, not including a housing allowance of $1,000 a month, and gifts from parishioners totaling about $10,000 a year. When asked about his other financial holdings, the defendant explained that he held assets worth about $2 million in bank accounts, certificates of deposit, a vehicle, and a home whose mortgage was fully paid.

The agents then questioned the defendant about the presence of large cash deposits in his bank account, totaling approximately $1.2 million. On this subject, the agents claimed that the defendant could not give consistent answers to their questions. For example, at first he explained that the cash deposits were gifts from parishioners. Later he explained that the $1.2 million cash deposits were money that his siblings would give him to hold for his parents.

When the agents remarked that the defendant’s answers were inconsistent, he asked the agents what was “the worst case scenario if he accepted responsibility.” One agent told him that he could appear before a judge, and may be sentenced to a jail term. The defendant then asked “what the legal exposure would be, or what type of crimes the agents would be investigating if he accepted responsibility.” One of the agents answered that if the IRS could prove that he stole money, the charges against him would include mail fraud, wire fraud, money laundering, tax evasion, and structuring cash deposits.

Two hours into the interview one of the agents informed the defendant: “I advise you that anything which you say and any documents which you submit may be used against you in a criminal proceeding which may be undertaken. I advise you further that you may, if you wish, seek the assistance of an attorney before responding.”

When one of the agents mentioned that there may be a public trial, the defendant confessed that he stole money from the church, and that he failed to report the stolen money from the church on his tax returns.

In all, from the agents’ first meeting with the defendant in the parking lot of the first church until the end of the interview, their encounter lasted about four and a half hours. At no point in the interview did the defendant indicate that he wished to end the interview, or seek an attorney. The agents later claimed that the defendant was free to terminate the encounter and leave at any time during the interview. They did not handcuff the defendant nor did they arrest him during or at the end of the interview.

On December 1, 2015, a grand jury in the Northern District of California returned an indictment charging the defendant with 14 counts of bank fraud and 4 counts of tax evasion. The defendant asked the trial court to suppress statements he made to the two agents during his interview. He claimed that his confession was involuntary because the agents had deceived him into making it, and had used coercive tactics to elicit the statements. The prosecution insisted that the defendant’s statements were freely and voluntarily given, and that the agents did not need to “Mirandize” the defendant during the first approximately two-hour portion of the interview because he was not in custody.

The court concluded that the defendant’s statements were voluntary:

When the agents first approached the defendant, they introduced themselves and inquired whether they could ask him questions about his tax returns. The defendant agreed, and brought the agents to his church to speak. In securing his cooperation, the agents did not induce him to accede to their request by threat or any promise. Moreover, during the interview, the agents remained cordial and conversational throughout. They did not brandish handcuffs, display their service weapons, or otherwise compel defendant’s presence to answer questions. When the defendant suggested that they take breaks during the interview, the agents agreed … . At no time in the course of the interview did the defendant … convey a desire to terminate the interview. Neither is there evidence that defendant suffered from a particularly vulnerable mental state.

The defendant also argued that he was coerced into making his statements because they were extracted over the course of a four-and-a-half-hour interview and occurred in an oppressive setting—a small windowless room used by clergy at the church to hold confessions. The court conceded that lengthy interrogations “may weigh in favor of finding a confession involuntary,” but it concluded that the evidence demonstrated that the interview was not coercive. It noted that “breaks were taken as requested … that the interrogation did not take place during regular meal times … and that the defendant was free to leave at any time. Defendant has cited to no other facts to buttress his argument that the length of time presented in this case rendered his confession involuntary. The absence of any such references may be because there are no other facts to suggest circumstances rising to the level of duress.”

In rejecting the defendant’s claim that the interview had been coercive, the court observed:

The room in which the interview took place was one that he himself chose. The court is hard-pressed to find improper psychological coercion where, given the freedom to select where to speak with the agents, the defendant was at liberty to choose the setting. In addition, there are no facts to suggest that the agents took advantage of his vulnerability and concern for the church to extract his confession. It may have been the case that the defendant’s piety motivated him in some degree to confess. However even then, as the Supreme Court has explained, divine inspiration does not itself render a confession involuntary … . The evidence set forth here show that the agents made no threats or promises to secure the defendant’s cooperation. Their tone was at all times conversational and respectful. When the defendant asked what his “legal exposure” could be, the agents answered truthfully.

Finally, the court addressed the defendant’s argument that his confession occurred before he was “Mirandized” by the agents. The court noted that the Fifth Amendment privilege against self-incrimination requires that a person be advised of certain rights if they are “in custody” and “subjected to interrogation.” Miranda v. Arizona, 384 U.S. 436 (1966). The government’s failure to provide such advisements “renders statements made by a person during a custodial interrogation inadmissible.”

The court concluded that when the defendant made his confession he was not in custody and therefore the fact that he confessed before being Mirandized was irrelevant. The court noted that whether a person is “in custody” requires the court to determine “whether there was a formal arrest or restraint on freedom of movement of the degree associated with a formal arrest … . If in considering the totality of the circumstances a reasonable person would not feel free to leave the interrogation, then the interrogation is considered custodial” and any statements made prior to being Mirandized are not admissible in evidence. The court concluded that

the many facts presented in this case clearly tip the scale in favor of a finding of non-custody. The agents asked, not commanded, defendant to speak with them about his tax returns. The defendant dictated the terms under which the interview would take place by directing the agents to his own church, in a room of his choice. The agents remained at all times cordial and respectful. They presented to the defendant copies of his tax forms, but did not engage in strong-arm tactics that accused him of guilt. When he requested breaks, the agents complied with each one. He never requested food or drink, or indicated he wished to terminate the interview or seek an attorney. At the end of the interview, the agents shook his hand, thanked him for his time, and left. Examined in its totality, the facts here do not indicate that the defendant was in custody.

What This Means For Churches:

This case illustrates that incriminating statements made by clergy, or anyone else, to IRS agents may be admissible in a criminal prosecution so long as they are voluntary, and made outside of the context of a custodial interrogation (or during a custodial interrogation so long as made after a Miranda warning is read). 2016 WL 2593893 (N.D. Cal. 2016).

California Court Rejects Religious School’s Motion to Dismiss Disability Discrimination Claim

Church Law and Tax Report California Court Rejects Religious School’s Motion to Dismiss Disability Discrimination

Church Law and Tax Report

California Court Rejects Religious School’s Motion to Dismiss Disability Discrimination Claim

Key point 8-14.1. The federal Americans with Disabilities Act prohibits employers with at least 15 employees, and that are engaged in interstate commerce, from discriminating in any employment decision against a qualified individual with a disability who is able, with or without reasonable accommodation from the employer, to perform the essential functions of the job. Accommodations that impose an undue hardship upon an employer are not required. Religious organizations may give preference to nondisabled members of their faith over disabled persons who are members of a different faith.

A federal district court in California rejected a church-affiliated school’s motion to dismiss a former employee’s disability discrimination claim. A 67-year-old teacher (the “plaintiff”) at a church-operated school sustained serious injuries as a result of a fall in a stairwell at her school causing her to strike her head. As a result of the fall, the plaintiff suffered from “vision problems, including symptoms of dizziness, instability, loss of balance, and double vision and migraine headaches.” Due to her injuries the plaintiff has fallen on several occasions and is no longer able to drive at night.

After the fall, the plaintiff requested, and received, a one-week leave of absence. During this leave, the plaintiff claimed that she received electronic communications from the school principal “pressuring her to return to work.” Over the next several months, the principal inquired about the plaintiff’s health and was told she continued to suffer from double vision, dizziness, and migraines.

The principal thereafter informed the plaintiff that various categories of work performance and work behavior were “areas for growth” and that her contract was not being renewed.

The plaintiff sued the school, claiming that her termination amounted to unlawful discrimination in violation of the Americans with Disabilities Act; and, the school’s failure to renew her teaching contract amounted to “wrongful termination.”


As evidence of disability discrimination, the plaintiff noted that the school:

The court noted that “the elements of a disability discrimination claim under the Americans with Disabilities Act (ADA) are (1) the claimant has a disability, (2) the claimant is qualified to perform the essential functions of the job, (3) the claimant has suffered adverse employment action because of the disability.

The court concluded the plaintiff’s lawsuit satisfied “all elements” of an ADA claim:

She alleges that her disability resulted from a fall and injury to her head that led to on-going concussions, vision problems, dizziness, instability, and the loss of balance. These conditions allegedly and substantially limited her ability to work, walk, and see … .

She also adequately alleges that she was qualified to perform her job and that she suffered an adverse employment decision because of her disability. She alleges that the school was openly hostile to Plaintiff, subjecting her to unfair and excessive monitoring of her teaching performance. Further, Plaintiff alleges that she suffered disability harassment because, in part, she was subjected to an “annual” performance review that had not been conducted for several years. Such allegations, plaintiff argues, establish that she was disabled or “regarded” as disabled.

As a result the court rejected the school’s motion to dismiss the plaintiff’s ADA claim.

Wrongful termination

The plaintiff also alleged that the school’s failure to renew her annual teaching contract amounted to wrongful termination. The school argued that any cause of action for wrongful termination fails because in Daly v. Exxon Corp., 63 Cal.Rptr.2d 727 (1997), the court held that a claim for wrongful termination in violation of public policy cannot be based upon the nonrenewal of an employment contract. In Daly, the parties entered into an employment contract for a period of one year. The contract was renewed for two additional one-year extensions. During the third year, the employee complained to the employer about unsafe working conditions. Several months later the employer provided the plaintiff with written notice that his contract would not be renewed and in fact was not renewed.

The plaintiff sued the employer for wrongful termination. The trial court dismissed the lawsuit, and a state appeals court agreed that the wrongful termination claim based on nonrenewal of the employment contract had to be dismissed, concluding that “a decision not to renew a contract set to expire is not actionable in tort.”

The plaintiff in the California case asked the court to reject the Daly decision, since according to that case “an employer could discriminate on the basis of a prohibited reason (i.e., race, religion, disability, etc.) and there would be no basis for a wrongful termination cause of action.” But the court disagreed: “This argument is not persuasive. While a common law tort for wrongful nonrenewal of an employment contract does not exist, the injured hypothetical party has viable statutory remedies (i.e. the ADA, Title VII, or various other state or federal statutory schemes). Consequently, Plaintiff cannot state a claim for tortious nonrenewal of the employment contract.”

What This Means For Churches:

This case is important because of its analysis of a disability discrimination claim, and because of the court’s rejection of any cause of action for “wrongful termination” based on an employer’s decision not to renew employment contracts of stated terms. Baker v. Roman Catholic Diocese, 2015 WL 1344958 (S.D. Cal. 2015).

Privacy on Church Devices

Key point 4-04. Many states recognize "invasion of privacy" as a basis for liability. Invasion

Key point 4-04. Many states recognize "invasion of privacy" as a basis for liability. Invasion of privacy may consist of any one or more of the following: (1) public disclosure of private facts; (2) use of another person's name or likeness; (3) placing someone in a "false light" in the public eye; or (4) intruding upon another's seclusion.

Key point 8-29. Employees may have a limited right of privacy in their workspace that may extend to the contents of their desk and cabinet drawers, and employer-provided computers. This right of privacy can be superseded by a policy that clearly authorizes the employer to inspect these items.

A federal district court in California ruled that an employer did not commit an invasion of privacy by reading text messages and email that were accessible on a former employee's employer-provided cell phone following his dismissal.

An employee ("Gary") of a for-profit business (the "defendant") informed his employer that he had taken a job with one of its competitors. Upon learning of Gary's intent to pursue other employment, the defendant immediately dismissed him.

While employed with the defendant, Gary was assigned a company-owned iPhone and iPad for both work and personal purposes. Thereafter, Gary created and paid for a personal Apple account that was linked to both devices. He returned both devices to the defendant after his termination.

Gary's new employer provided him a new iPhone. At some point thereafter, Gary registered or linked his new iPhone to the same personal Apple account he had previously used while working for the defendant. This process "synced" the new iPhone with Gary's personal Apple account.

Several weeks later, when he received a new iPad from his new employer, Gary linked the new iPad to his personal Apple account. In the process of registering the iPad, he discovered the telephone number associated with his former iPhone was still linked to his personal Apple account. Because he had failed to unlink the former iPhone from his account, his private electronic data and electronic messages, including text messages sent to and from his new iPhone, also were transmitted to the previous iPhone which he had returned to the defendant. Gary then deleted the old iPhone number from his account to ensure that his new Apple products were not in any way linked to the old account.

Gary claimed that after his departure, the defendant began actively investigating his post-employment acts, conduct, and communications. In the course of its investigation, the defendant allegedly invaded his privacy by accessing, intercepting, monitoring, reviewing, storing and using his post-employment private electronic data and electronic communications (including but not limited to text messages sent and received from his new iPhone) without consent.

Based on its investigation, the defendant sued Gary for breach of contract, misappropriation of trade secrets, and breach of the fiduciary duty of loyalty. Gary responded by counter-suing the defendant for invasion of privacy. The gist of the counterclaim was that the defendant improperly read the text messages that were inadvertently transmitted to his prior iPhone. The defendant asked the court to dismiss Gary's counterclaim.

Invasion of privacy for accessing Gary's personal text messages

The court began its opinion by noting that an invasion of privacy claim based on intruding upon another's seclusion has two elements: "First, the defendant must intentionally intrude into a place, conversation, or matter as to which the plaintiff has a reasonable expectation of privacy. Second, the intrusion must occur in a manner highly offensive to a reasonable person." The court added that invasion of privacy can occur "only if the plaintiff had an objectively reasonable expectation of seclusion or solitude in the place, conversation or data source."

Gary claimed that, as a matter of law, an employee has a reasonable expectation of privacy with respect to text messages contained on employer-owned mobile telephones, and he cited two cases in support of this conclusion.

(1) In City of Ontario v. Quon, 560 U.S. 746 (2010), a police officer was issued a pager by his police department which was subject to a limit on the number of characters that could be sent and received each month. After becoming concerned that the officer was repeatedly exceeding his character limit, the police department obtained transcripts of the text messages from the wireless carrier to ascertain whether the texts were work-related or personal. After finding that most of the text messages were not work-related, the police department took disciplinary action against the officer. The officer then sued the city and its police department alleging that the department's review of his text messages invaded his privacy. The United States Supreme Court assumed, without deciding, that the plaintiff had a reasonable expectation of privacy in text messages sent to him on an employer-provided pager. However, the Court ultimately upheld the police department's review of those messages as reasonable.

In summary, the Court ruled that employees have a legitimate expectation of privacy in employer-provided computer equipment, but that employer searches of such equipment are legally permissible so long as the employer (1) has a legitimate work-related reason for the search, and (2) the search was not excessively intrusive in light of that justification.

The district court concluded that the Quon case did not support Gary's claim that employees always have a legitimate expectation of privacy in their work-related computer equipment and cell phones that is violated whenever an employer examines the devices without consent.

(2) In United States v. Finley, 477 F.3d 250 (5th Cir. 2007), a criminal defendant challenged the denial of his motion to suppress text messages and call records which law enforcement officials had obtained through a warrantless search of his employer-issued cell phone. A federal appeals court ruled that the mere fact that the employer owned the phone and had access to its contents did not demonstrate that defendant had no expectation of privacy in his call records and text messages. In reaching its decision, the court specifically noted that the defendant had undertaken precautions to maintain the privacy of data stored on his phone and that "he had a right to exclude others from using the phone." However, unlike the defendant in Finley, Gary was no longer an employee of the company which owned the cell phone to which the text messages had been sent. In addition, he had no right to exclude others from accessing [his old] iPhone—which he did not own or possess and no longer had any right to access. Moreover, rather than undertake precautions to maintain the privacy of his text messages, he did just the opposite by failing to unlink his old iPhone from his Apple account, which, in turn, facilitated the transmission of those messages to an iPhone exclusively owned, controlled, and possessed by his former employer.

The district court also noted that Gary's privacy claim failed because he did not show any intrusion into a "place, conversation, or matter as to which the plaintiff has a reasonable expectation of privacy":

He cannot legitimately claim an expectation of privacy in [his old iPhone] which belongs to his former employer and to which he has no right to access. Nor can he claim a reasonable expectation of privacy with respect to his text messages, in general. The pleadings do not identify the contents of any particular text messages, and instead, refer generally to "private electronic data and electronic communications." This and other courts have concluded that there is no "legally protected privacy interest and reasonable expectation of privacy" in electronic messages, in general. Rather, a privacy interest can exist, if at all, only with respect to the content of those communications. In any event, even if Gary were claiming an expectation of privacy with respect to the specific content of his text messages (which he has not specified), the facts alleged demonstrate that he failed to comport himself in a manner consistent with an objectively reasonable expectation of privacy. By his own admission, he personally caused the transmission of his text messages to the [old] iPhone by syncing his new devices to his Apple account without first unlinking his [old] iPhone. As such, even if he subjectively harbored an expectation of privacy in his text messages, such expectation cannot be characterized as objectively reasonable, since it was Gary's conduct that directly caused the transmission of his text messages to the defendant in the first instance … .

Gary also does not specify whether his claim is predicated upon text messages sent by him, received by him, or both. With respect to messages he transmitted, there is authority finding that a plaintiff has no reasonable expectation of privacy in messages sent to third parties … because he relinquished control of them once they were transmitted … .

The facts alleged in Gary's counterclaim are insufficient to show that the defendant intruded into his privacy in a manner highly offensive to a reasonable person. Invasions of privacy must be sufficiently serious in their nature, scope, and actual or potential impact to constitute an egregious breach of the social norms underlying the privacy right. In addition, the plaintiff must show that the use of his information was highly offensive … . Here, Gary alleges only that the defendant acted in a "highly offensive" manner by "accessing, intercepting, monitoring, reviewing, storing and using [his] post-employment private electronic data and electronic communications without [his] knowledge, authorization or consent as part of an unreasonably intrusive and unauthorized investigation into his post-employment conduct." He offers no factual support for these conclusory assertions. In particular, he provides no details regarding the specific conduct by the defendant that amounts to "accessing, intercepting, monitoring, reviewing, storing and using [his] post-employment private electronic data and electronic communications." He also fails to offer any facts to establish that the defendant's use of the intercepted communications was highly offensive. The possibility that the defendant may have reviewed text messages sent to a cell phone which it owned and controlled—without more—is insufficient to establish an offensive use.

What this means for churches

This case illustrates the following points:

1. Employees have a legitimate expectation of privacy in employer-provided computers and cell phones, meaning that an employer may be liable on the basis of invasion of privacy for nonconsensual searches of such equipment.

2. But this expectation may be superseded in a couple of situations: First, the employer has a legitimate work-related reason for the search, and the search was not excessively intrusive in light of that justification. This was the conclusion reached by the United States Supreme Court in the Quon decision. Second, an employee's expectation of privacy in an employer-provided computer or cell phone is diminished, if not lost, when the employee's employment relationship is terminated.

3. An employee's expectation of privacy in employer-provided computers and cell phones ordinarily is lost if the employee consents to a search. Consent may occur in two ways. The Supreme Court noted in the Quon case that the city's computer policy was evidence that its inspection of pager messages was "not excessively intrusive." This is an important reason for churches to adopt a computer policy that informs employees that computers, pagers, and cell phones provided by the church are subject to inspection, and that clarifies that employees have no expectation of privacy with respect to the content of such devices.

The Supreme Court did not say that the mere existence of such a policy will be conclusive evidence that an employer's inspection of such devices will be reasonable. The contents of the policy, and the circumstances of each case, must be considered. But, churches will be in a better legal position with such a policy than without one.

Note that a computer policy authorizing employer searches of its equipment may not be legally enforceable if the policy is applied to employees hired prior to the creation of the policy. This is due to the contractual requirement of consideration. In order for a new policy to be enforceable, each party must receive something of value ("consideration") in exchange for his or her commitment to be bound by the policy. The requirement of consideration is what distinguishes contracts from gifts. In a gift, the recipient receives the benefit of the donated property without any value provided in return to the donor.

In the employment context, the commitment by employees to be bound by an employer's employment policies, including a computer policy, requires that they receive something of value ("consideration") in exchange for their commitment. When employees are hired, the fact of employment can constitute valid consideration for their commitment to be bound by the employer's employment policies, especially if this is properly articulated in documentation signed by the employees. Ideally, employees will sign a statement at the time of hire affirming that, in consideration of being hired, they agree to be bound by the current employee policy manual and any changes thereto. Before using this technique, be sure to consult with legal counsel in your state.

4. Some church employees own a laptop computer that they use, either occasionally or regularly, in their church office. The expectation of privacy is even higher for such computers, since they are owned by the employees. Sunbelt Rentals, Inc. v. Victor, 2014 WL 4274313 (N.D. Cal. 2014).

Court Applies “Ministerial Exception” to Church Discrimination Case

Employee discrimination claim left to church’s decision.

Church Law & Tax Report

Court Applies “Ministerial Exception” to Church Discrimination Case

Employee discrimination claim left to church’s decision.

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

Key point 8-12.1. 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.

Key point 8-12.4. 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. The Act permits religious organizations to discriminate in employment decisions on the basis of religion. This exemption permits such organizations to discriminate on the basis of moral or scriptural standards so long as they do consistently and not in a way that adversely impacts employees who are members of a group that is protected under an applicable state or federal discrimination law.

A California appellate court ruled that it was barred by the “ministerial exception” from resolving the discrimination claims of a church preschool director who was terminated on the basis of her decision to live with her boyfriend without the benefit of marriage. A preschool operated by a Lutheran church required its teachers to sign a document prior to the start of each school year setting forth professional expectations. The preschool director (the “plaintiff”), who had teaching responsibilities, was required to sign the form. The plaintiff knew the school was “Bible-based.” Although teachers were not required to attend the church, or be Lutheran (the plaintiff is Catholic) they were required to be practicing Christians “involved in a church-based setting on a regular basis.”

The parents of students did not have to be Lutherans, but they, too, had to be practicing Christians.

As director of the preschool, the plaintiff made the classroom arrangements, helped hire teachers, and scheduled their hours and classroom assignments. She also processed the applications for incoming students and made sure the school complied with state mandates. Every week she gave a tour of the preschool to parents of prospective students. During the tour she talked to the parents about the “Christian-based, Bible-based values of the school.” She wanted the parents to understand that if they sent their children to the school, they could expect their children to receive a “Christian education” and Biblebased “Christian values.”

Every week the teachers participated in devotions. They read from a devotional book, took prayer requests from the group, and prayed for each other. As a teacher, the plaintiff taught religion to the preschoolers as a part of the regular curriculum. She spoke to the children about Jesus on a daily basis. Two or three times a week she taught a Bible story in conjunction with the theme being taught that week. The plaintiff claimed that the Christian themes she introduced related to Christianity in general and “not specifically to Lutheran doctrine or teachings.” On occasion when the need to discipline a child arose, she would “bring in some theme from a Bible story or a teaching of Christianity.”

Every Wednesday the preschool classes and their teachers attended chapel for about half an hour. The plaintiff was in charge of the chapel service three to four times a school year. The responsibility of reading a Bible story or performing some other act of religious teaching during chapel rotated among the teachers. The plaintiff led her class in prayer each day: at the beginning of each day, before each meal, and at the end of each day. The plaintiff estimated she spent one hour a week teaching religion, another hour leading the children in prayer, and the remainder of the time she spent teaching—other than those times she was in charge of the chapel service—was spent on “secular subjects, including such things as: numbers and counting; the alphabet and letter concepts; basic science; small motor control; large motor control; social, emotional, physical and language skills; and computer skills.”

The plaintiff was married when she applied to the school for a teaching position. She subsequently divorced and gave birth to a child fathered by her boyfriend. While she was pregnant, she told representatives of the church that she intended to get married, but was not ready to do so just yet. She returned to the school for the following school year. She stated that she believed the school would not punish her for having had a baby out of wedlock. She lived with her boyfriend prior to having the baby, but did not know whether the principal of the school was aware they were living together.

Eventually, the church’s pastor met with the plaintiff. They discussed her living with her boyfriend and he asked whether she intended to marry him. The plaintiff said she and her boyfriend intended to get married, but did not know when. She understood that her living arrangement was “contrary to the religious and moral beliefs of the church.” The plaintiff knew before she became pregnant that living with boyfriend was contrary to the teachings of the Bible.

The school terminated the plaintiff’s employment for living with her boyfriend and raising their son together without being married, a “failure to adhere with the professional expectations of the teaching staff in that her living arrangements were contrary to the religious beliefs of the church and school.”

The plaintiff sued the church, alleging that the church terminated her employment based upon her marital status, in violation of Title VII of the Civil Rights Act of 1964. The court entered judgment in the church’s favor on the ground that the church is a religious institution, and that the plaintiff’s employment was terminated because she violated a church precept. The plaintiff appealed.

Title VII

The plaintiff insisted that “the law does not allow the church to discriminate against non-ministerial employees based on gender or marital status.” But the court pointed out that Title VII does not bar employment discrimination based on marital status, and that the plaintiff failed to cite any law declaring a public policy against marital status discrimination.

The trial court found the church terminated the plaintiff’s employment because she violated a church precept. According to the church, the plaintiff’s employment was terminated not because she had a baby out of wedlock, and not because she remained unmarried, but because she continued to live with her boyfriend in a sexual relationship while unmarried. The court concluded that the evidence supported the church’s position:

After the plaintiff’s marriage ended, she lived with her boyfriend and became pregnant. There is no evidence the school’s principal or the church knew of the plaintiff’s living situation at that time. The church did not terminate her employment for being pregnant. Neither did it fire her when she had the baby out of wedlock. In fact, she gave birth to her son in June 2007 and went back to teaching at the beginning of the next school year, 2007-2008. The plaintiff testified she knew she would not be punished for having had a baby. It was only at the end of 2008, when the principal became aware that parents of children at the school knew of and were talking about the plaintiff living with her boyfriend and raising their child out of wedlock, that the plaintiff was informed by the school that she had to make a choice. The plaintiff knew she was expected to live by the teachings of the Bible and that her living arrangement was “contrary to the religious and moral beliefs of the church.”

Had the plaintiff decided to marry her boyfriend, the church would have been satisfied. But the church would also have been satisfied and the plaintiff would have kept her job even if she decided against marrying him. She could have moved out of their shared residence. In fact, after the plaintiff explained to the school board her hesitancy to remarry, one of the school board members specifically asked her, “Why do you have to live with him?” What the church could not allow was to have the plaintiff, its face and representative to the students and parents of the students who attended its school, to continue living in what it considered a sinful manner. In other words, if the plaintiff stopped living with her boyfriend she could continue in her job. That being the case, the evidence at trial indicates her employment was terminated based upon a matter of religion, not her sex and not her having had a baby out of wedlock.

The court noted that Title VII bans employment discrimination based on race, color, national origin, gender, and religion, but exempts religious organizations “from Title VII liability on the basis of religious discrimination.” Under Title VII’s religious exemption, “the decision to employ individuals of a particular religion … has been interpreted to include decisions to terminate an employee whose conduct or religious beliefs are inconsistent with those of its employer.” The court continued:

Whereas a religious organization’s termination of an employee’s employment for becoming pregnant would violate Title VII, terminating the employment because the employee committed adultery—a violation of the religious organization’s requirement that the employee live a life in conformity with the fundamentalist beliefs of the church would not be a violation. In this case, the evidence at trial supports a finding that the plaintiff’s employment was terminated because she was living with her boyfriend in a sexual relationship and was raising their child in that living arrangement, and not because she was a woman or became pregnant or had a baby out of wedlock. As the plaintiff admitted on cross-examination, she understood that “living with [her] child’s father and not being married was contrary to the school and church’s expectation of [her] as a Christian, setting a Christian role model.” The judgment in favor of defendant does not violate any public policy rooted Title VII.

the ministerial exception

The court next addressed the church’s claim that the “ministerial exception” barred civil court resolution of the plaintiff’s claims. The court explained the ministerial exception as follows:

The ministerial exception doctrine is based on the notion a church’s appointment of its clergy, along with such closely related issues as clerical salaries, assignments, working conditions and termination of employment, is an inherently religious function because clergy are such an integral part of a church’s functioning as a religious institution. Therefore, secular courts will not attempt to right wrongs related to the hiring, firing, discipline or administration of clergy. Implicit in this statement of the rule is the acknowledgment that such wrongs may exist, that they may be severe, and that the administration of the church itself may be inadequate to provide a remedy. The preservation of the free exercise of religion is deemed so important a principle as to overshadow the inequities which may result from its liberal application. In our society, jealous as it is of separation of church and state, one who enters the clergy forfeits the protection of the civil authorities in terms of job rights.

Dismissing an Employee for Violation of a Church’s Moral Teachings

Before dismissing an employee for violating the church’s moral teachings, church leaders should ask the following questions:

  1. Is there sufficient evidence to support our decision?
  2. Did we inform the employee, in an employee handbook or other document, that he or she would be subject to dismissal for engaging in behavior in violation of our moral teachings?
  3. How will we describe the basis for our decision? The best description will refer to the church’s doctrinal tenets, and scriptural citations. Stay away from words such as “pregnancy” that can have a “secular” meaning, and that diminish the “religious exemption” available to churches under most federal and state civil rights and employment laws.
  4. How have we treated other employees in the past who were guilty of the same kind of misconduct? Have we treated all employees equally? Or, have we treated some employees less favorably than others? For example, have we dismissed female employees who were guilty of extramarital sexual relations, but only warned or reprimanded male employees guilty of the same behavior? Before dismissing an employee for misconduct, church leaders should review all other known cases involving similar misconduct by other employees. Be sure that an employee who is protected against discrimination by state or federal law is not treated less favorably than other employees in previous cases.
  5. Have we consulted with an attorney before taking final action?
  6. The court explained that the ministerial exception is not limited to churches, but extends to “church-related institutions which have a substantial religious character,” including church-affiliated schools. Further, the exception is not limited to members of the clergy, but encompasses “all employees of a religious institution, whether ordained or not, whose primary functions serve its spiritual and pastoral mission.” The court concluded that the ministerial exception applied to the plaintiff, and barred consideration of her claims. In particular, it noted that the plaintiff: (1) led the students in prayer at the beginning and end of each day and before each meal; (2) was responsible for leading chapel up to four times a year; (3) regularly taught religion in her classes, including secular classes; (4) participated in weekly devotions with the staff at which they would read a devotional-type book and then take prayer requests and pray for each other; (5) led staff prayers; and (6) conducted tours for parents of student applicants, assuring them of the school’s Christian atmosphere. The court concluded: “The minister is the chief instrument by which the church seeks to fulfill its purpose …. One such purpose is to bring people to the church. The plaintiff fulfilled that function by teaching her preschoolers religion, leading them in prayers every day, and leading chapel services. She taught religion and spread the faith. We find the ministerial exception applies in this matter.”

    What This Means For Churches:

    This case is significant for the following reasons.

    First, it illustrates the importance of accurately describing the basis for terminating an employee. As this case illustrates, there is a critical legal difference between dismissing an employee on account of pregnancy (even if out of wedlock) and dismissing an employee on account of adultery (of which pregnancy is merely evidence). The court acknowledged that dismissing a pregnant employee on account of adultery is permissible under Title VII, though dismissing an employee on account of pregnancy is not. It does not matter that pregnancy out of wedlock violates a church’s religious teachings and values. Title VII does not exempt churches from discrimination based on pregnancy. It does exempt churches from discrimination based on adultery. The takeaway point is the importance of correctly and adequately describing the basis for employee terminations and discipline. To avoid confusion, religious organizations that take an adverse employment action against an employee or applicant for employment as a result of the organization’s moral teachings should word their determination with references to relevant passages from scripture and church doctrine. This will make it more likely that a court will view the decision as a protected form of religious discrimination.

    Second, a number of courts have ruled that Title VII’s exemption of religious organizations from the ban on religious discrimination in employment does not apply if a religious organization uses religion as a “pretext” to discriminate against a member of a protected class. This is a very important qualification. Religious organizations can discriminate in their employment decisions on the basis of religion, but they must be consistent. To illustrate, a church that dismisses only female employees on the basis of extramarital sexual relations could not justify this practice on the basis of the Title VII exemption.

    Third, note that most churches are not subject to Title VII, which only applies to employers that have 15 or more employees and are engaged in interstate commerce. However, many states have their own versions of Title VII, and some churches will be covered under these laws. Fortunately, most of them (like Title VII) exempt religious employers from discrimination based on religion. Some exempt religious employers from all the discrimination prohibitions. Evangelical Lutheran Church, 134 Cal.Rptr.3d 15 (Cal. 2012).

    Key point 8-09.1. Many federal employment and civil rights laws apply only to those employers having a minimum number of employees. In determining whether or not an employer has the minimum number of employees, both fulltime and part-time employees are counted. In addition, employees of unincorporated subsidiary ministries of a church are counted. The employees of incorporated subsidiary ministries may be counted if the church exercises sufficient control over the subsidiary.

Ascending Liability Claims

National churches will not necessarily be held liable for the acts of local affiliates.

Church Law & Tax Report

Ascending Liability Claims

National churches will not necessarily be held liable for the acts of local affiliates.

Key point 10-18.2. Most courts have refused to hold denominational agencies liable for the acts of affiliated ministers and churches, either because of First Amendment considerations or because the relationship between the denominational agency and affiliated church or minister is too remote to support liability.

A California court ruled that the national headquarters of Little League Baseball was not legally responsible for the sexual molestation of a 10-year-old boy by an adult volunteer worker. Little League Baseball is a nonprofit organization founded in 1939 and granted a federal charter in 1964. Little League Baseball’s purpose is “to promote, develop, supervise, and voluntarily assist in all lawful ways the interest of those who will participate in Little League Baseball.” Little League Baseball operates through local leagues, which apply for a charter from Little League Baseball.

Little League Baseball has promulgated a Little League Operating Manual (Operating Manual) under which each local league establishes its own administration, elects its own board of directors, and establishes guidelines that best suit the needs of the community in which it is established. The local league is responsible for the selection and supervision of coaches, managers, umpires, and other volunteers.

Little League Baseball has also promulgated Official Regulations and Playing Rules (Regulations). The Regulations address the manner in which the teams are to be established, the official playing rules, and the basic safety rules for players. The rules also dictate the playing divisions, age ranges for each division, registration and tryouts, the start and end dates of each season, and other rules relating to the game of baseball.

The Operating Manual and the Regulations do not give Little League Baseball any control over day-to-day operations of the local leagues.

Little League Baseball offers administrative support to local leagues at their request but does not require that local leagues consult with Little League Baseball. Little League Baseball offers local leagues the option of enrolling in the Little League blanket accident insurance plan, but does not require them to do so. Similarly, Little League Baseball recommends that local leagues operate as nonprofit corporations but does not require them to do so.

In 1994, Little League Baseball created a child abuse prevention program for distribution to local leagues. In 1996, Little League Baseball recommended a statement that was incorporated into Little League Baseball’s 1997 Operating Manual and distributed to every local league. This statement recommended that each local league create a formal written policy defining abuse and stating that it was unacceptable; that all managers, coaches, and other volunteers have a background check at the time of their applications; that procedures be set up to receive and act on allegations of abuse; that local law enforcement should be involved in implementing preventive measures and responding to allegations; that the application procedure should ask for criminal history, employment history, and references; and that a preseason meeting should be held annually for managers, coaches, and parents to explain prevention and detection mechanisms. However, until 2003, Little League Baseball did not implement a rule requiring background checks for all local volunteers.

In the 1990s, a registered high-risk sex offender (Randy) began serving as an umpire with a Little League affiliate in California. He eventually was promoted to the paid position of “umpire-in-chief.” At this time, the local affiliate did not require its officials or volunteers to fill out a written application or undergo a background check or other investigation, and no background check was ever conducted on Randy.

In 1996, Randy sexually molested a 10-year-old boy (the “victim”) on several occasions following evening baseball games. He was apprehended and sentenced to 84 years in prison.

In 2004 the victim sued Little League Baseball and its local affiliate for negligence in screening, retention, and supervision; negligence in failing to take reasonable protective measures; negligence in violation of a special relationship; breach of fiduciary duty; negligent and intentional infliction of emotional distress; and sexual assault, battery, and harassment. Little League Baseball (the national organization) was dismissed from the lawsuit, and the victims appealed this ruling.

the court’s ruling

The court began its ruling by describing the “convoluted syntax” of the victim’s legal claim: “The victim seeks to impose liability on the national organization that chartered the local organization for which the molester volunteered and later worked as an employee when the molester, through the local organization, met and befriended the child he later molested on occasions outside official Little League activities. Plaintiff’s theory of liability is that the national organization, Little League Baseball, was negligent in failing to require local leagues to investigate and screen local volunteers.”

The court concluded that “the nature and degree of the connection between the defendant’s acts and the events of which the plaintiff complains was, as a matter of public policy, too attenuated to support imposing liability on Little League Baseball.”

Application. This case is of direct relevance to any national denominational agency that has created a program for youth that can be utilized by local churches. The fact that the national church created the program does not necessarily make it liable for injuries that may occur at the local church level. Whether or not the national church is liable will depend on a number of factors. The court’s review of the nature of the relationship between Little League Baseball and its local affiliates provides an excellent example of the kinds of considerations that will be relevant in such a determination. These can guide national churches in the structuring of their youth programs and related manuals and resources to reduce the risk of ascending liability claims. B.R. v. Little League Baseball, Inc., 2009 WL 3049280 (Cal. App. 2009).

This Recent Development first appeared in Church Law & Tax Report, May/June 2011.

Caught on Camera

Video surveillance may reduce embezzlement, but is it an invasion of privacy?

Hernandez v. Hillsides, Inc., 97 Cal.Rptr.3d 274 (Cal. 2009)

Churches are experiencing embezzlement at an alarming rate. Sometimes, church leaders who suspect embezzlement install hidden video cameras in an attempt to identify the embezzler. A camera may be hidden in a room that is used by volunteers to count offerings, or it may be in the office of a church bookkeeper or other employee who is suspected of embezzling funds. Can the use of hidden cameras expose a church to liability for "invasion of privacy"? If so, how can this risk be reduced? These questions were addressed by the California Supreme Court in a recent case.

A California case. A nonprofit church-affiliated organization (the "employer") operated a residential facility for abused children, including the victims of sexual abuse. Many of the children had been exposed to or participated in child pornography.

The employer adopted a computer policy to prevent employees from using employer- provided computers in a manner that defamed, harassed, or harmed others, or that subjected the company to "significant legal exposure." Illegal and inappropriate activity was prohibited, such as accessing sexually offensive websites or displaying, downloading, or distributing sexually explicit material. The policy warned employees that they had "no reasonable expectation of privacy in any use of Company computers, network and system." Along the same lines, the policy advised that all data created, transmitted, downloaded, or stored on the system was the employer's property, and that it could "monitor and record employee activity on its computers, network and email systems," including "email messages, files stored or transmitted, and websites accessed."

Two employees (the "plaintiffs") shared an enclosed office and performed clerical work during daytime business hours. The employer's director learned that late at night, after plaintiffs had left the premises, an unknown person had repeatedly used a computer in plaintiffs' office to access the Internet and view pornographic websites. Such use conflicted with company policy and with the employer's aim of providing a safe haven for the children.

Concerned that the culprit might be a staff member who worked with children, and without notifying plaintiffs, the director set up a hidden camera in their office. The camera could be made operable from a remote location, at any time of day or night, to permit either live viewing or videotaping of activities around the targeted workstation. The camera was never operated during business hours, and, as a consequence, the plaintiffs' activities in the office were not viewed or recorded by means of the surveillance system. The director testified that his objective was to protect the children from any staff person who might expose them to pornography, emphasizing the harm they had endured before entering the facility.

The plaintiffs eventually discovered the hidden camera in their office, and sued their employer for invasion of privacy. The trial court dismissed the case, but a state appeals court ruled that the plaintiffs had a viable claim for invasion of privacy. The employer appealed to the California Supreme Court.

The court's decision. The court defined "invasion of privacy" as consisting of two elements:

  1. the defendant must intentionally intrude into a place, conversation, or matter as to which the plaintiff has a reasonable expectation of privacy, and
  2. the intrusion must occur in a manner highly offensive to a reasonable person.
  3. The court concluded that the plaintiffs established the first element, but not the second. As a result, it affirmed the trial court's dismissal of the case. The court's reasoning is helpful in evaluating the use of surveillance cameras.

    (1) intrusion upon another's reasonable expectation of privacy

    The court listed three factors to consider in deciding if an employer's intrusion upon an employee's privacy violates a reasonable expectation of privacy:

    The first factor examines whether the employer deceived its employees regarding the identity of the person who secretly recorded conversations or activities. To illustrate, if an employer misleads employees into thinking that a person who secretly records their conversations or activities is a fellow employee, this will tend to support a finding of an invasion of privacy.

    The second factor examines the extent to which other persons had access to the area that was surveilled, and could see or hear the person whose privacy was allegedly invaded. The plaintiffs insisted that they were provided with an enclosed office with a door that could be shut and locked, and window blinds that could be drawn, to allow the occupants "to obtain some measure of refuge, to focus on their work, and to escape interruptions from other sources, including their employer." The court agreed that "employees who retreat into a shared or solo office, and who perform work and personal activities in relative seclusion there, would not reasonably expect to be the subject of televised spying and secret filming by their employer."

    The third factor examines the means by which the intrusion occurred. The court noted that hidden cameras and video recorders are highly intrusive, especially in settings that otherwise seem private. It noted that the "unblinking lens can be more penetrating than the naked eye with respect to duration, proximity, focus, and vantage point. Such monitoring and recording denies the actor a key feature of privacy—the right to control the dissemination of his image and actions. … The mere fact that a person can be seen by someone does not automatically mean that he or she can legally be forced to be subject to being seen by everyone."

    The court concluded that the first element of invasion of privacy was met: "Plaintiffs had no reasonable expectation that their employer would intrude so tangibly into their semi-private office."

    (2) the intrusion must occur in a manner highly offensive to a reasonable person

    The court stressed that invasion of privacy requires proof of more than an intrusion upon reasonable privacy expectations. The intrusion also must be "highly offensive." In evaluating whether this requirement is met, the court pointed to two additional factors.

    First, the "place, time, and scope" of the employer's video surveillance efforts must be considered. The court concluded that this factor "weighed heavily against a finding that the intrusion upon plaintiffs' privacy interests was highly offensive or sufficiently serious to warrant liability." It noted that the employer "took a measured approach in choosing the location to videotape the person who was misusing the computer system [and] its surveillance efforts were largely confined to the area in which the unauthorized computer activity had occurred." Finally, the employer's surveillance activities "were quite limited in scope [and occurred] only once a week for three weeks. Such measures were hardly excessive or egregious."

    Second, to find that an intrusion upon another's privacy is highly offensive, a court must examine the employer's motives and justifications. This case "does not involve surveillance measures conducted for socially repugnant or unprotected reasons [such as] harassment, blackmail, or prurient curiosity." Further, the employer installed the video surveillance equipment in plaintiffs' office, and activated it three times after they left work, "in order to confirm a strong suspicion … that an unknown staff person was engaged in unauthorized and inappropriate computer use at night. Given the apparent risks under existing law of doing nothing to avert the problem, and the limited range of available solutions, the employer's conduct was not highly offensive for purposes of establishing an intrusion into private matters."

    The court concluded:

    We appreciate plaintiffs' dismay over the discovery of video equipment…Nothing we say here is meant to encourage such surveillance measures, particularly in the absence of adequate notice to persons within camera range that their actions may be viewed and taped. Nevertheless, considering all the relevant circumstances, plaintiffs have not established, and cannot reasonably expect to establish, that the conduct that is challenged in this case was highly offensive and constituted an egregious violation of prevailing social norms .…

    What this means for churches

    This case serves as a warning to church leaders that the use of hidden video cameras may expose a church to liability for invasion of privacy. But, it also demonstrates that in some cases the use of hidden cameras may be justifiable. Due to the potential risk involved in such cases, church leaders are advised to consult with legal counsel before making a decision to use such equipment. An attorney can assist church leaders in evaluating the many factors to be considered in evaluating the propriety of using such equipment. These factors include the following:

    • Assume that your employees have a reasonable expectation of privacy in their workspace, and that the use of hidden video cameras without notice may constitute an invasion of privacy for which the church may be liable in a court of law.
    • An invasion of privacy occurs only if the employer's intrusion upon an employee's privacy would be highly offensive to a reasonable person. In deciding whether a particular intrusion meets this test the courts generally evaluate the reasonableness of the intrusion in terms of its place, duration, and scope, as well as the reasonableness of the employer's purpose or motivation in conducting the surveillance. An attorney can be invaluable in assisting your church in evaluating these factors.
    • The risk of invasion of privacy is reduced if an employer provides employees with notice (in a policy, on posters, etc.) that its premises are being monitored with video cameras.
    • Some states prohibit the use of hidden video cameras in the workplace. One state law makes it a crime to use "a concealed camcorder, motion picture camera, or photographic camera of any type, to secretly videotape, film, photograph, or record by electronic means, another, identifiable person who may be in a state of full or partial undress, for the purpose of viewing the body of, or the undergarments worn by, that other person, without the consent or knowledge of that other person, in the interior of a bedroom, bathroom, changing room, fitting room, dressing room, or tanning booth, or the interior of any other area in which that other person has a reasonable expectation of privacy, with the intent to invade the privacy of that other person." Cal. Penal Code § 647.
    • Be aware of laws in your state that authorize civil liability and monetary damages for certain invasions of privacy that involve either a physical trespass or other offensive conduct for the purpose of capturing a picture of someone engaged in personal or familial activities.
    • All states bar audio recordings of conversations without the consent of at least one party to the conversation. In several states, the consent of both parties is required. It is for this reason that surveillance cameras typically do not have the ability to record audio.
    • Adopt a policy governing the disposal of video recordings to ensure that they are destroyed as soon as it is determined that no inappropriate activity was recorded.
    • If a church's video camera reveals an employee misappropriating church funds, this evidence may be inadmissible in a criminal prosecution if its use would violate the Fourth Amendment's ban on unreasonable searches or seizures. While the Fourth Amendment does not directly apply to churches or other private employers, the United States Supreme Court has ruled that it may apply to the extent that the government aided or facilitated a particular search.
    • The law often lags behind technological innovation. As a result, it is important for church leaders to be aware of legal developments in their state and at the federal level that directly or potentially affect the use of surveillance technology.

Protection of Charitable Donations

Court rules that charitable contributions made by bankrupt church member cannot be recovered.

Church Law & Tax Report

Protection of Charitable Donations

Court rules that charitable contributions made by bankrupt church member cannot be recovered.

Key point 9-09. Bankruptcy trustees are prohibited by the federal Religious Liberty and Charitable Donation Protection Act from recovering contributions made by bankrupt debtors to a church or other charity prior to declaring bankruptcy, unless the contributions were made with an intent to defraud creditors. This protection extends to any contribution amounting to less than 15 percent of a debtor’s gross annual income, or more if the debtor can establish a regular pattern of giving more. In addition, the Act bars bankruptcy courts from rejecting a bankruptcy plan because it allows the debtor to continue making contributions to a church or charity. Again, this protection applies to debtors whose bankruptcy plan calls for making charitable contributions of less than 15 percent of their gross annual income, or more if they can prove a pattern of giving more.

A federal court in California ruled that a bankruptcy trustee could not recover charitable contributions made by a church member to his church in the year preceding his filing of a bankruptcy petition, since the amount of his contributions were less than 15 percent of his gross annual income. A physician filed a Chapter 7 bankruptcy petition that listed $90,000 in assets and nearly $600,000 in debts. Shortly after the bankruptcy petition was filed, the bankruptcy trustee brought an adversary proceeding against the physician’s church, seeking to recover $18,000 in charitable contributions he made to the church during the previous year.

The court noted that the Religious Liberty and Charitable Donation Protection Act of 1998 (“RLCDPA”) amended the Bankruptcy Code to protect certain contributions to qualified religious or charitable organizations by debtors. The RLCDPA prevents bankruptcy trustees from recovering a charitable contribution to a qualified religious or charitable organization if (1) the amount of the contribution was not more than 15 percent of the debtor’s gross annual income; or (2) the amount of the contribution exceeded 15 percent of the debtor’s annual income but was consistent with the debtor’s practices of making charitable contributions.

The trustee claimed that the physician’s contributions for the prior year exceeding the 15 percent limitation. He further argued that donations for the two years before that consisted of 12 percent of his income for each year, so the donations in the most recent year were not consistent with his practice of contributing 12 percent. The church argued that the amount of the physician’s contributions fell below 15 percent of his gross annual income, and, even if they exceeded 15 percent of his income they were consistent with practice of making charitable contributions.

The court rejected the trustee’s claim that “gross annual income” meant annual income less expenses, or “disposable income.” It concluded:

This court’s refusal to apply the definition of disposable income is buttressed by the fact that this term was in existence before the enactment of the RLCDPA in 1998. When Congress [enacted] the RLCDPA, it was aware of the term “disposable income” and chose not to use this term. Instead “gross annual income” was used. In addition, Congress also amended [the Bankruptcy Code] to deduct from disposable income “charitable contributions that do not exceed 15 percent of the debtor’s gross income.” Congress could have easily used the term “disposable income”; however, it chose to use “gross income” in both [contexts]. As a result, because “disposable income” was defined as income less reasonably necessary expenses to live and continue to operate a business, “gross annual income” must mean something different. If Congress wanted to have business gross income reflect deductions for operation of a business, it would have used the term “disposable income” … when the RLCDPA was passed. It decided not to do so ….

The court added that the policy behind the RLCDPA supported its definition of gross annual income: “The legislative history of the RLCDPA states that the act ‘protects religious and charitable organizations from having to turn over to bankruptcy trustees donations these organizations received from individuals who subsequently file for bankruptcy relief. In addition, the bill protects the rights of debtors to continue to make religious and charitable contributions after they file for bankruptcy relief.'” The court noted that its interpretation of “gross annual income” furthered this policy “by allowing a higher earner to give more money to charitable organizations without fear of that organization surrendering the money in an avoidance action in the event that the higher earner files for bankruptcy.”

Since the physician’s charitable contributions during the year preceding the filing of his bankruptcy petition were less than 15 percent of his gross annual income, they could not be recovered by the bankruptcy trustee.

“Tithing is not per se unnecessary and unreasonable.” [A federal bankruptcy court, in a case addressing the discharge-ability in bankruptcy of a church member’s debts who insisted on continuing to tithe to his church. In re Halverson, 401 B.R. 378 (D. Minn. 2009).]

Application. This court’s interpretation of the key term “gross annual income” is both broad and reasonable. Any court that follows this interpretation will reduce the authority of bankruptcy trustees to recover charitable contributions made by donors to their church or other charity in the year preceding the filing of a bankruptcy petition. In re Lewis 401 B.R. 431 (C.D. Cal. 2009).

This Recent Development first appeared in Church Law & Tax Report, November/December 2009.

Dismissing a Minister for Wrongdoing

Take care when terminating staff over moral conduct.

Church Law & Tax Report

Dismissing a Minister for Wrongdoing

Take care when terminating staff over moral conduct.

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 California court ruled that a church’s music minister who was dismissed after it was learned that he was homosexual could not sue the church and church leaders for defamation and invasion of privacy as a result of statements made to the staff and congregation. An adult male (the “plaintiff”) was licensed as a minister by a conservative, evangelical church. He was employed by the church as its worship minister for six years, and then became its worship director. As worship director, he directed all aspects of congregational worship.

The plaintiff was homosexual, but never revealed his sexual orientation to any of the church elders because of his perception that the church considered homosexuality inappropriate and in violation of scripture and church doctrine. No one at the church ever asked the plaintiff about his sexual orientation for the many years that he was an employee.

If a church leader was guilty of misconduct, it was the church’s policy to confront that person and tell anyone in the church who was immediately affected by the leader’s ministry of the reason for his or her disqualification from church leadership. Sometime before his own termination, the plaintiff had participated as a church leader in terminating another staff member after discovering he was homosexual, after which he made an announcement to the entire church choir (about 100 people) that the staff member had been removed from his position because he “had admitted to some moral failure.”

The plaintiff eventually informed another church employee that he was a homosexual, and the employee shared this information with the church’s executive pastor. When confronted with this information, the plaintiff acknowledged that he was gay. A few days later, the plaintiff was informed by church leaders that he was going to be terminated from his leadership position and that an announcement would be made to church staff, the choir, and the congregation. Similar announcements had been made to the entire congregation when other church leaders were removed from leadership positions. The plaintiff prepared a written message which he agreed could be read by church elders to the choir. In that statement, he revealed he was gay and said there was now “a fundamental difference in theological perspective between myself and the church” making it “necessary to part ways.”

The following Sunday, the church’s senior pastor informed the congregation that the plaintiff had been terminated as worship director because he had “admitted to moral and sexual actions which according to the Bible, are sin and disqualify him from leadership and ministry in our church.” He told the congregants they did not need to know more details than that. The pastor told the congregation it was important for the matter to be brought out in the open because the church should “hold to the biblical standards of leadership, and when someone in leadership has disqualified themselves and there has been a breakdown in character, we need to be honest with each other and talk about that, and then pray for each other about it.” The pastor then referred to a specific passage in the Bible stating, “if someone is caught in a sin you who are spiritual should restore him … gently, but watch yourself so that you are not also tempted.” The pastor later testified that his statements to the congregation were necessary because the plaintiff’s ministry was “in front of the whole church,” and church members should not learn about problems with church leaders “through the rumor mill.”

The day after the plaintiff’s dismissal, certain church leaders allegedly made the following statements to the church staff, and repeated these statements the following weekend to the whole congregation during four separate services:

According to the plaintiff, these statements were false and the pastor and elders who made them knew they were false. The plaintiff complained that these statements destroyed his career in church ministry, and caused him humiliation and severe emotional distress.

The plaintiff sued the church, and certain church leaders, for defamation and invasion of privacy. With regard to his invasion of privacy claim, the plaintiff alleged that he had “lived an ordinary private life” and had “never made any public statement about his sexual orientation,” and “did not consent to have his sexual orientation made public in a derogatory and negative way, or at all.”

The trial court granted the church’s motion to dismiss the case, based on the “ministerial exception.” The courts generally have ruled that they are barred by the First Amendment from resolving employment disputes between ministers and churches. This so-called ministerial exception is based on the principle that “a church’s selection of its own clergy is a core matter of ecclesiastical self-governance with which the state may not constitutionally interfere. A church must retain unfettered freedom in its choice of ministers because ministers represent the church to the people …. They act as the church’s lifeblood. Indeed, the ministerial relationship lies so close to the heart of the church that it would offend the First Amendment simply to require the church to articulate a religious justification for its personnel decisions.”

The plaintiff appealed, and a state appeals court reversed the trial court’s ruling in favor of the church. It conceded that the ministerial exception can apply to claims of defamation and invasion of privacy when based on statements “related to the hiring, firing, discipline or administration of clergy.” But, it noted that “no court has articulated a bright-line test for determining when defamatory and privacy invading statements are related to the termination of a minister.” The court concluded, on procedural or “technical” grounds, that in reviewing a lower court’s dismissal of a lawsuit its review is limited to the allegations contained in the original complaint. And, since it could not determine “from the face of the complaint whether making the statements falls within, or is outside of, the ministerial exception, the [trial court’s] judgment must be reversed.” The court concluded:

[The plaintiff’s] complaint sets forth the essential allegations of his defamation and invasion of privacy causes of action. He alleged that after being terminated from his ministerial position because of his homosexuality, church officials not only publicly announced the fact of his homosexuality to the entire congregation, but wrongly stated that he had lied to them on 40 to 50 occasions denying his homosexuality. The plaintiff alleged the defendants knew the latter statement to be false, he in fact had never been questioned about his sexual orientation, and the defendants made the statements with the specific intent to injure him. But the complaint contains no facts from which we can say there was an ecclesiastical purpose for any statements being made to the entire congregation after the plaintiff’s employment was terminated. We cannot say from the record before us the defendants’ statements were “part and parcel” of the defendants’ ecclesiastical functions, or “inseparable parts of a process of divestiture of priestly authority”. Indeed, the complaint suggests the statements were motivated by the individual defendants’ purely personal enmity towards homosexuals, not in furtherance of any “religious doctrine or theology of the church,” and arguably not in furtherance of an ecclesiastical purpose or part of an ecclesiastical function.

The appeals court sent the case back to the trial court, which again dismissed the plaintiff’s claims. The plaintiff once again appealed to a state appeals court.

The court’s ruling

This time, the appeals court ruled in favor of the church. It concluded:

The trial court properly granted summary judgment because there now is no material issue of fact concerning whether the statements made following the plaintiff’s termination were part of the process of his termination. He did not dispute the evidence put forth by the church that it was part of established church practice to explain to congregants, or members of the church directly affected by the particular pastoral leader’s ministry, the reasons for termination of any pastoral leader after the leader’s termination. The plaintiff himself had participated in such public disclosures about other church staff following termination of their employment. The church submitted evidence demonstrating it routinely gave such explanations to the congregation and that it had a religious purpose in doing so. And in his opening brief, the plaintiff concedes the church’s assertion that once it terminated his employment, “it was required, as an integral and inseparable part of its religious process and mission, to inform the congregation of its religious reasons for doing so, is also clearly a matter of church governance covered by the ministerial exception.”

Statements made after termination

On appeal, the plaintiff asserted that the statements made by church leaders about him were all made after his termination, and that the ministerial exception should not apply to statements made after a minister’s termination. The court disagreed:

As we have already concluded, the exception applies to “otherwise actionable claims of defamation and invasion of privacy, when based on statements ‘related to the hiring, firing, discipline or administration of clergy.'” And that would encompass post-termination acts if they were part of the process of termination. This is not a case, as the plaintiff characterizes it, in which the church’s acts occurred at some remote time unrelated to the termination of his pastoral employment. He was removed from his position on Tuesday, he prepared a statement that he agreed could be read to the church choir disclosing the details of his sexual orientation and explaining why he was leaving his church post, and at church services the following Sunday, [the senior pastor] made his comments to the congregation in accordance with the church’s established practice and doctrine. The undisputed evidence is that [the senior pastor’s] act of explaining to the congregation the reasons for [the plaintiff’s] departure were … “part and parcel” of his termination. Thus, the ministerial exception applies to preclude further judicial review regardless of the otherwise tortious nature of the statements.

“Secular” Inquiries

The plaintiff argued on appeal that the ministerial exception was not applicable in this case. He asserted that rather than tell the congregation the actual reason for his termination, i.e., that his sexual orientation conflicted with the church’s theology, the senior pastor told the congregation that the plaintiff was disqualified from leadership because he had been “caught in a sin,” had admitted to “moral and sexual actions that are sin,” had suffered “a breakdown in character,” and was a “broken man.” The plaintiff claimed that the ministerial exception did not apply to any of these statements because their “truth” could be determined based on purely secular principles and a jury would not be required to consider the religious beliefs of the church in deciding if the pastor’s statements were true or false or constituted an invasion of privacy. Once again, the court disagreed: “The truth or falsity of those statements necessarily requires inquiry into the doctrinal beliefs of the church—something we cannot undertake to do. Furthermore, once it has been established the statements were made in relation to the process of the plaintiff’s termination the ministerial exception applies regardless of the nature of the statements.”

Application. Consider the following points:

1. Perhaps most importantly, the court rejected the plaintiff’s argument that the ministerial exception does not apply to statements and acts occurring after a minister’s termination. The court concluded that the ministerial exception applies to post-termination acts if they are “part of the process of termination.”

2. The plaintiff prepared a written message which he agreed could be read by church elders to the choir. In that statement, he revealed he was gay and said there was now “a fundamental difference in theological perspective between myself and the church” making it “necessary to part ways.”

Obtaining such statements from employees at the time of termination is often a desirable practice, since it minimizes the church’s exposure to liability for unauthorized disclosures to the staff or congregation. The timing of such statements is critical. Employees are far more likely to sign them at the time they are confronted with evidence serving as the basis for their termination. However, the more removed the statement is from the day the employee is first informed of the church’s decision to terminate his or her employment, the less likely the statement will be signed.

Ideally, church leaders should have a dismissed employee sign a written confession that (1) admits to wrongdoing (in general or specific terms, depending on the circumstances), and (2) consents to a pastor or board member reading the confession to the staff and congregation. As noted above, having such a statement prepared in advance and available at the time the employee is informed of his or her termination is often desirable since it is more likely that it will be signed. Also, note that it generally is best for such a statement to authorize that it be read to the “congregation” rather than the “membership,” since the former is a broader category and would authorize the reading of the statement at a church service in which non-members are present. Alternatively, some churches draft statements authorizing it being read “in a church service.” This is a narrower authorization than referring to the “congregation,” since the latter term is not limited to disclosures made at church services.

3. It is interesting to note that the court failed to mention the legal principle of “qualified privilege.” Generally, comments made among church members and regarding matters of common interest enjoy a qualified privilege, meaning that they cannot be defamatory unless they are made with “malice.” In this context, malice means a knowledge that the statements were false, or a reckless disregard as to their truth or falsity. It is important to note that this privilege only applies to statements made to members, and assumes that the members have a legitimate need to receive the information. It does not apply to statements made in a worship service in which non-members are present. This means that it will be much easier for a church to be sued for defamation for information shared during church services in which non-members are present than in a special meeting that is restricted to members only. The court noted that the statements made by the church leaders in this case were made in a worship service. Presumably, non-members were present. If so, this would expose the church to a greater risk of liability for defamation. However, the court failed to address this issue, or its possible significance in this case.

4. Obviously, the dismissal of an employee may involve legal pitfalls and risks, and therefore it is important for a church to retain an attorney who can assist church leaders in making decisions in light of legal considerations. Gunn v. Mariners Church, Inc., 84 Cal.Rptr.3d 1 (Cal. App. 2008).

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.

Whistleblower Protections for Church Employees

Dismissing or disciplining a whistleblower can have legal consequences.

Church Law & Tax Report

Whistleblower Protections for Church Employees

Dismissing or disciplining a whistleblower can have legal consequences.

Key point. Churches that dismiss or discipline employees for reporting suspected illegal activity by another church worker may have violated whistleblower protections under federal or state law.

A federal court in California ruled that a woman whose employment at a church was allegedly terminated because of her disclosure of potentially illegal activity by the church treasurer could sue her church for violation of a state policy barring employers from retaliating against “whistleblowers.” A church hired a woman (the “plaintiff”) as a clerical worker, and a few years later promoted her to the position of administrative assistant to the senior pastor. The plaintiff alleged that on several occasions another church employee subjected her and others to abusive and threatening behavior, including sexual harassment. She submitted formal complaints to the church leadership, but claimed that no action was taken. The plaintiff allegedly came across information suggesting that the church treasurer and another employee were misusing church funds. The church began an official investigation into financial improprieties as they related to church funds. But, while the investigation was proceeding and before the plaintiff was questioned about her suspicions, her employment was terminated.

Following her termination, the plaintiff alleged that:

The plaintiff sued the church and various church employees, claiming that they had violated a “public policy” protecting “whistleblowers” from retaliation by their employers for reporting illegal conduct. Specifically, she alleged that the church’s decision to terminate her was based on her uncovering and disclosure of illegal behavior by the church treasurer, and that her termination violated a strong state policy against adverse employment actions against whistleblowers. The court rejected the church’s request to dismiss the case, and ordered the case to proceed to trial.

Application. Several states, like California, have statutes or policies that protect whistleblowers from retaliation by their employer. A similar provision is contained in the federal Sarbanes-Oxley Act, and represents one of the few provisions in that law that applies to churches. The Act amends federal criminal law to include the following crime: “Whoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense, shall be fined under this title or imprisoned not more than 10 years, or both.” The following examples illustrate the application of the Sarbanes-Oxley Act to churches:

Example. A church employee learns that a child was molested at an overnight church activity. The employee informs the pastor, who decides to handle the incident internally as a matter of church discipline. The pastor is a mandatory child abuse reporter under state law. The employee decides to call the police and report the incident on her own initiative. The pastor learns of her action, and terminates her employment. The Sarbanes-Oxley Act’s whistleblower provision does not apply since the underlying offense is a violation of state, and not federal, law. However, state law may provide legal protections to the employee under these circumstances.

Example. A church employee learns that the church is not paying over-withheld income taxes and FICA taxes to the government. The employee notifies the local IRS office. When the pastor learns that the employee notified the IRS, he fires him. Has the pastor violated the Sarbanes-Oxley Act’s whistleblower provision? Possibly not. The Act amends federal criminal law to include the following crime: “Whoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense, shall be fined under this title or imprisoned not more than 10 years, or both.” The pastor’s decision not to pay over withheld taxes to the government may be a federal offense, since section 7202 of the tax code imposes criminal penalties upon “any person required to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax.” As a result, the pastor’s dismissal of the employee for reporting the possible violation of this section may trigger liability under Sarbanes-Oxley.

Note that this section requires that the employee provide to a “law enforcement officer” information relating to the commission of a federal offense. Is an IRS agent a law enforcement officer? Federal law defines this term as “an officer or employee of the federal government, or a person authorized to act for or on behalf of the federal government or serving the federal government as an adviser or consultant—(A) authorized under law to engage in or supervise the prevention, detection, investigation, or prosecution of an offense.” Construed broadly, this could include an IRS agent.

In summary, it is possible that the pastor’s dismissal of the church employee violated the whistleblower provision under Sarbanes-Oxley. If so, this would be a felony exposing the pastor to a fine of not more than $10,000, or imprisonment of not more than five years, or both, together with the costs of prosecution. Finally, note that apart from the pastor’s potential liability for violating Sarbanes-Oxley under these circumstances, the dismissed employee may be able to sue the pastor and church under state law for wrongful termination or some other theory of liability.

As noted above, several states have their own whistleblower protections that in many cases are broader than the Sarbanes-Oxley Act. 2008 WL 2357238 (S.D. Cal. 2008).

This Recent Development first appeared in Church Law & Tax Report, March/April 2009.

Church Disaffiliation Property Dispute

Court rules that national church holds title to local church’s property.

Key Point 7-03.2 Some courts apply the "compulsory deference" rule in resolving disputes over the ownership and control of property in "hierarchical" churches. Under this rule, the civil courts defer to the determinations of denominational agencies in resolving such disputes.

A California appeals court ruled that a national church held title to the property of a local church that had voted to disaffiliate.

A local Episcopal church voted to disaffiliate from the national church in 2004 and take the local church property with it. The church amended its articles of incorporation to delete all references to the national church. A majority of the congregation voted to support the decision, but a minority of 12 members voted against it. The national church, along with other plaintiffs, filed a lawsuit in which they asked a court to rule that the local church property was held in trust for the local diocese.

A state appeals court, in one of the most lengthy discussions of church property disputes, ruled that the local church property was held in trust for the diocese. It based this conclusion on the following considerations:

1. Six rulings by the California Supreme Court, spanning the years from 1889 to 1952, "consistently used a 'highest church judicatory' approach to resolve disputes over church property, an approach it applied to hierarchically organized churches and nonhierarchically organized churches alike." Under this approach, the civil courts must follow the rulings of the highest church tribunal as to the use and ownership of the property. The court quoted from a landmark 1871 decision by the United States Supreme Court: "Whenever the questions of discipline, or of faith, or ecclesiastical rule, custom or law have been decided by the highest of these church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final, and as binding on them, in their application to the case before them." Watson v. Jones, 80 U.S. 679 (1871). This approach, which is sometimes referred to as the "compulsory deference" or "hierarchical" rule, has been adopted in a few other states.

2. In 1969, the United States Supreme Court ruled that church property disputes also may be resolved on the basis of "neutral principles of law." Presbyterian Church in the United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440 (1969). The Court observed:

It is obvious, however, that not every civil court decision as to property claimed by a religious organization jeopardizes values protected by the First Amendment. Civil courts do not inhibit free exercise of religion merely by opening their doors to disputes involving church property. And there are neutral principles of law, developed for use in all property disputes, which can be applied without "establishing" churches to which property is awarded. But First Amendment values are plainly jeopardized when church property litigation is made to turn on the resolution by civil courts of controversies over religious doctrine and practice.

In 1970, the Supreme Court defined "neutral principles of law" to include nondoctrinal provisions in (1) state statutes governing the holding of property by religious corporations; (2) language in the deed conveying property to the local church; (3) language in the charter of the local church; and (4) provisions in the constitution of a parent denomination relating to the ownership and control of church property.

The California court noted that several California appeals court rulings, since 1970, had resolved church property disputes on the basis of neutral principles of law, without an adequate explanation of how such rulings were possible in light of the previous decisions by the state supreme court. The court stressed that the United States Supreme Court's rulings in 1969 and 1970 did not mandate use of the neutral principles of law approach, and therefore the previous state supreme court rulings required that the compulsory deference rule be applied and that the rulings of national church bodies be recognized and enforced by the civil courts.

3. In 1982, the California legislature enacted section 9142 to the Corporations Code. This section specifies that "no assets of a religious corporation are or shall be deemed to be impressed with any trust, express or implied, statutory or at common law unless one of the following applies … (2) the articles or bylaws of the corporation, or the governing instruments of a superior religious body or general church of which the corporation is a member, so expressly provide …. "The court concluded that this language permitted national churches to adopt a provision in their governing instrument imposing a trust on all local church property in favor of the national church. And this is exactly what the national Episcopal Church did in 1979 when it enacted Canon I.7(4). This Canon provides:

All real and personal property held by or for the benefit of any parish, mission or congregation is held in trust for [the national church] and the Diocese thereof in which such parish, mission or congregation is located. The existence of this trust, however, shall in no way limit the power and authority of the parish, mission or congregation otherwise existing over such property so long as the particular parish, mission or congregation remains a part of, and subject to this [national church] and its constitution and canons.

The court concluded: "What is abundantly clear … is that in a hierarchically organized church, the 'general church' can impress a trust on a local religious corporation of which the local corporation is a 'member' if the governing instruments of that superior religious body so provide. In the case before us, the enactment by the national Episcopal Church in 1979 of Canon I.7(4) readily qualifies as a governing instrument expressly providing for a trust on property held by local church corporations."

4. The court concluded its opinion with the following observation: "To be plain: Under [prior] California Supreme Court cases … the right of the general church in this case to enforce a trust on the local parish property is clear, and that right has not been affected by intervening United States Supreme Court decisions or any statute enacted by the legislature. To the degree that [the state statute] alters the common law rule enunciated by these cases, that alteration duplicates the result required under the common law given the facts of this case."

What this means for churches

On September 12, 2007, the California Supreme Court agreed to review the appeals court's decision, and ruled that its acceptance of the appeal "superseded" the appeals court's ruling. The decision of the California Supreme Court will be reviewed in a future edition of this newsletter. In re Episcopal Church Cases, 61 Cal.Rptr.3d 845 (Cal. App. 2007).

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