Key point 4-03. A gift to a church or minister may be challenged on the ground that the recipient unduly influenced the donor into making the gift. There are several factors the courts will consider in deciding whether or not undue influence occurred, including the age and mental health of the donor, and the presence of independent legal advice. Undue influence generally must be proven by “clear and convincing” evidence.
Key point 7-21. Embezzlement refers to the wrongful conversion of funds that are lawfully in one’s possession. Embezzlement is a common occurrence in churches because of weak internal controls.
A North Carolina court ruled that sufficient evidence supported a pastor’s conviction of embezzlement because the evidence showed that he was acting as the victim’s fiduciary when he gained access to her bank accounts and wrongfully converted $123,367 to his personal use.
Widowed victim “turned everything over” to the defendant
A pastor (the “defendant”) first met a woman (“victim 1”) and her husband (“victim 2”) in 1985. They became very close, eventually considering themselves family. Defendant called the victims “Mom” and “Dad,” and the victims referred to the defendant as their “son.”
On March 28, 2015, victim 2, also a pastor, unexpectedly died. The defendant delivered the eulogy at victim 2’s funeral.
Victim 1 struggled to return to her daily life. She testified that her husband’s death “almost took her out,” and she felt like she “couldn’t make it without him.” Her family was concerned about her because she was so “grief-stricken” and “distraught.”
After the funeral, victim 1 visited the defendant and his wife for a week in their home in North Carolina, against her family’s advice. Over the next few months, she periodically stayed with the defendant and his wife.
The defendant told victim 1 that “he was there to help” her.
Victim 1 thought the defendant was “a man of God” who “loved her” and was “going to take care of her.” She had little experience managing the household finances, as that had been her husband’s responsibility throughout their marriage.
Because she trusted the defendant and thought of him as family, victim 1 “just turned everything over” to the defendant after victim 2’s death, including the keys to her home and post office box.
On April 16, 2015, less than a month after her husband’s death, victim 1 added the defendant as joint holder on her credit union savings and money-market accounts.
She also redeemed over $146,000 in savings bonds and deposited that money into the joint money market account.
That same day, she also added the defendant as a joint holder on her bank accounts. In addition, at some point, the defendant linked his personal credit union accounts to victim 1’s accounts, with the effect that any overdrafts on the defendant’s personal account would be paid from the joint accounts funded with victim 1’s money.
On June 12, 2015, the defendant drove victim 1 to an attorney’s office and encouraged her to execute a power of attorney naming him as her attorney-in-fact. She also executed a will, naming the defendant to serve as her executor and leaving the majority of her estate to him.
On Sept. 4, 2015, funds were withdrawn from the joint bank accounts and used to fund two bank accounts at Wells Fargo Bank. Victim 1 and the defendant were named as joint holders of the new Wells Fargo accounts.
Victim 1 later testified that the signatures on the applications for the two Wells Fargo accounts did not look like her handwriting, that she did not give the defendant permission to open the Wells Fargo accounts, and that she “didn’t know what was going on” with the Wells Fargo accounts because the defendant “took over.”
Concerned that the defendant was committing financial crimes against victim 1, her brother contacted the local sheriff’s office, which transferred the case to the state’s bureau of investigation (SBI). On April 22, 2019, a grand jury returned indictments charging the defendant with four counts of exploitation of an older adult and one count of embezzlement of $100,000 or more.
On January 28, 2020, this case was called for trial.
At trial, the SBI agent testified that the defendant obtained $123,367 from the accounts that he held with victim 1.
The agent explained that, because the defendant linked his personal credit union checking account to victim 1’s jointly held accounts, the credit union transferred $21,350 from the joint money market account to the defendant’s personal checking account to cover his overdrafts between August 11, 2015, and May 11, 2016.
He also testified that the defendant used $102,017 of victim 1’s money from the jointly held credit union, Wells Fargo, and bank accounts for his benefit, including:
$15,000 for a down payment on a Ford truck titled to the defendant
$6,000 in contributions to his individual retirement account (IRA)
$4,850 for repairs to his Mercedes
$8,000 in payments on his credit card account
$25,250 in cash withdrawals
The defendant testified that the money in the joint accounts belonged to victim 1, stating, “it was her money—her accounts, her money. I was there to help her. It wasn’t about me.”
He maintained that he had “no idea” that the credit union was transferring money from the accounts that he held with victim 1 to cover overdrafts from his personal checking account, because he had not reviewed the credit union statements and instead “just stuck them in a drawer.”
Victim 1 testified that, although she “just turned everything over” to the defendant after her husband’s death, she never authorized the defendant to link his personal credit union checking account to any joint account to cover his overdrafts, and never gave the defendant permission to withdraw money from the joint accounts for his personal use.
She also stated that she never gave the defendant permission to use her money to purchase a new truck or to fix his Mercedes.
On January 31, 2020, the jury found the defendant guilty of all charges.
The trial court sentenced the defendant to 6 to 17 months in prison for 3 of the 4 counts of exploitation of an older adult and an additional 13 to 25 months for the 4th count, with the sentences to run consecutively.
The court also sentenced the defendant to 73 to 100 months for the embezzlement conviction, to run concurrently with the defendant’s other sentences.
In addition, the court ordered the defendant to pay $123,367 in restitution to victim 1.
The defendant appealed.
Appeals court affirms conviction and sentence
The appeals court affirmed the defendant’s conviction and sentence.
It noted that “to constitute embezzlement, the property in question initially must be acquired lawfully, pursuant to a trust relationship, and then wrongfully converted.” The court noted that a trust relationship indisputably existed between victim 1 and the defendant:
[A] fiduciary relationship may arise under a variety of circumstances; it exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence. … Here, [the defendant] concedes that he acted as victim 1’sfiduciary after she executed the power of attorney naming the defendant as her attorney-in-fact.
Nevertheless, the evidence sufficiently established that a fiduciary relationship existed between the defendant and victim 1 prior to that point, when he came into possession of the funds in victim 1’s bank accounts.
The parties’ relationship was certainly one of special confidence and trust.
The defendant argued that he could not be guilty of embezzlement since there was insufficient evidence that he wrongfully converted victim1’s money to his own use.
In support of his position, the defendant noted that, as a joint holder of the accounts, he was a co-owner of the funds and could not be prosecuted for unlawful withdrawal and use of the funds.
The court disagreed:
The depositor is … deemed to be the owner of the funds. … In the instant case, it is undisputed that [victim 1], alone, funded the joint accounts. Indeed, the defendant testified that all of the money in the accounts was her money. Thus, [victim 1], as the depositor, was still deemed to be the owner of the funds. … Moreover, there was ample evidence that [victim 1] did not intend to make a gift to the defendant of $123,367, the total amount of funds that the defendant was eventually convicted of embezzling from her.
She testified that she did not give the defendant permission to use the funds for his personal expenses, nor did she gift him the money. We conclude that there was sufficient evidence that the funds taken were the property of [victim 1], and that she did not have the requisite donative intent to grant the defendant the money to withdraw and use for his personal benefit.
Thus, the defendant was not entitled to convert the money to his use without her permission.
What this means for churches
This case illustrates an important point.
Pastors are often asked to serve as a fiduciary for financially unsophisticated members because of their perceived trustworthiness. Pastors who take advantage of this relationship for their private benefit are exposing themselves to potential liability for breach of trust and embezzlement.
Another issue not addressed by the court in this case is the legal doctrine of undue influence. If the recipient of a gift unduly influences the donor into making the gift, the donor may have the gift canceled.
This rule applies both to direct gifts made during one’s lifetime and to gifts contained in documents (such as wills) which take effect at the donor’s death. Undue influence is more than persuasion or suggestion. It connotes total dominion and control over the mind of another.
Undue influence generally must be inferred from the circumstances surrounding a gift, since it seldom can be proven directly. Circumstances commonly considered in determining whether a donor was unduly influenced in the making of a gift include:
Whether the person or organization benefited by the gift was active in securing it.
The donor’s age, physical condition, and mental health.
Whether a confidential relationship existed between the donor and the recipient of the gift.
Whether the donor had independent advice.
In summary, pastors who take advantage of a fiduciary relationship to convert funds to their private benefit face both criminal liability for embezzlement and civil liability for undue influence.
Key point 8-12.01. Title VII of the Civil Rights Act of 1964 prohibits employers engaged in commerce and having at least 15 employees from discriminating in any employment decision on the basis of race, color, national origin, gender, or religion. Religious organizations are exempt from the ban on religious discrimination but not from the other prohibited forms of discrimination.
A federal court in North Carolina ruled that a male teacher employed by a church school could sue the school for employment discrimination following his termination from employment based on his plans to marry another male.
The plaintiff is a former teacher and substitute teacher at a Catholic high school (the “school”) in Charlotte, North Carolina.
The plaintiff came out as homosexual to his close friends and family in 1995. He was married to a woman for about 24 years; they divorced around 2002.
The plaintiff began working at the school as a substitute teacher in the fall of 2000. He was given a full-time position teaching English in the fall of 2001. After a year, he switched to teaching drama classes, which he taught full time until the fall of 2012.
When the plaintiff retired from full-time teaching, he stayed on as a substitute teacher with the school from the fall of 2012 until December 2014. He was not required to sign a contract for employment as a substitute teacher. He primarily substituted for English courses because he had expertise in that subject. He only taught nonreligious subjects during his time at the school.
While employed as a full-time teacher, the plaintiff received positive work evaluations. He also won the Inspirational Educator Award from North Carolina State University in 2011 and the Charlotte Catholic Teacher of the Year award in 2012. The school’s principal said that the plaintiff was the “only teacher who had been nominated for the award every year since its inception.”
In 2000, while he and his wife were separated, the plaintiff began a romantic relationship with another man. The two began living together in 2002, and in 2013 they decided to get married.
In October 2014, the plaintiff announced his engagement to his companion on Facebook with a post that read:
We will be married on May 2, 2015 . . . details to follow. . . . If you don’t agree with this . . . keep it to yourself. You never asked my opinion about your personal life and I am not asking yours.
The plaintiff informed the school’s assistant principal of his announcement several days after the Facebook post. The assistant principal congratulated the plaintiff but stated that the diocese would likely be unhappy with the message, although the assistant principal said he would not personally inform the diocese.
When he heard about the engagement announcement, the school’s chaplain met with the principal to discuss it. The principal believed that the plaintiff could not serve as a substitute because of his engagement to his male companion, and a decision was made not to have the plaintiff return as a substitute teacher.
The assistant principal informed the plaintiff by phone that he could no longer work as a substitute teacher because he “announced his intention to marry a person of the same sex.”
The plaintiff claimed that he was emotionally devastated and suffered a loss of identity and self-worth after being eliminated from the substitute teacher list of the school.
The plaintiff sues over sex discrimination
The plaintiff sued the school and diocese (the “church defendants”) claiming that they violated Title VII of the Civil Rights Act of 1964, which prohibits employers from discriminating on the basis of sex (including sexual orientation) in employment decisions.
The court ruled that the church defendants’ termination of the plaintiff as a substitute teacher violated Title VII’s ban on employment discrimination based on sexual orientation.
The court acknowledged:
The Catholic Church believes marriage should be between a man and a woman. Human sexual expression belongs to “husband and wife alone.” Therefore, unmarried people should not engage in sexual intercourse, and same-sex couples should not engage in sexual expression because they cannot be husband and wife. [The Church] believes that while people who experience homosexual tendencies or thoughts are to be treated with respect and compassion, individuals who act on those thoughts engage in “disordered” conduct since their acts violate God’s plan for human sexuality and reproduction.
The school used several documents to inform their employees of its expectations for their behavior. These included a code of ethics, a personnel policies handbook, employment contracts, training sessions, and a faculty handbook.
These documents instructed employees to uphold the teachings and principles of the Catholic Church by serving as role models to students. As role models, they may not publicly engage in conduct or advocacy that contradicts the moral tenets of the Catholic Church.
The school discouraged teachers of secular subjects from instructing students on any sort of religious subject. The school asked that teachers who teach secular subjects refrained from instructing students on Catholic doctrine.
Secular teachers did not have to undergo religious training, did not have to be Catholic, and did not have to be Christian. Teachers, including the plaintiff, were required to accompany students to Masses held at the school, but they performed no religious function and served essentially as chaperones.
The court acknowledged that Title VII exempts religious organizations from the ban on discrimination in employment based on religion. But the court said Title VII does not exempt religious organizations from the ban on the law’s other categories of prohibited employment discrimination, including sexual orientation. The court explained:
“While the language of [Title VII] makes clear that religious institutions may base relevant hiring decisions upon religious preferences, Title VII does not confer upon religious organizations a license to make those same decisions on the basis of race, sex, or national origin.” [The church defendants’] argument would allow a religious employer to “convert any claim of discrimination on the basis of one of the protected classes under Title VII to a case of religious discrimination, so long as there was a religious reason behind the employment decision.” . . . “This would effectively strip employees of religious institutions of all Title VII protections, if the employer’s religion clashed with the employee’s protected class status.” . . . “If Congress had intended to allow religious employers to avoid liability for discriminating on the basis of race, sex, or national origin, it could have done so.” . . . “By its very terms, [Title VII] only applies to discrimination on the basis of religion. The ban on discrimination in employment on account of race, national origin, or sex is still applicable to religious organizations.”
The defendants: “Church autonomy doctrine” prevents interference
The church defendants argued that the “church autonomy doctrine” prevented a civil court from interfering with its termination of the plaintiff’s employment. The court noted that the church autonomy doctrine “protects a religious organization’s right to decide important matters of faith, governance, and religious doctrine.” But the court clarified that the church autonomy doctrine is “not without limits and does not apply to secular decisions, even when made by churches.”
The court also rejected the church defendants’ argument that the “ministerial exception,” which generally shields churches from employment discrimination claims involving ministers, prevented the court from resolving the plaintiff’s lawsuit since he was not a “minister.”
The North Carolina court concluded that “because of the abundant evidence that [the teachers in Hosanna-Tabor and Our Lady of Guadalupe] performed vital religious duties . . . the [Supreme Court] held that they qualified as ministers under the ministerial exception.” The court continued:
Unlike the teachers in these two most recent Supreme Court cases, very few facts weigh in favor of finding that Plaintiff is a minister. The only factor that weighs in favor of finding that he is a minister is that he works at a Catholic School with a Catholic mission and was tasked in his employment handbook with helping Defendants carry out their religious mission. However, many other facts in the record indicate that he was not a minister. . . . First, [the church defendants] did not bestow the title of “minister, with a role distinct from that of most of its members,” on Plaintiff. Plaintiff was primarily a substitute teacher of English and drama—purely secular subjects. Unlike the plaintiff in Hosanna-Tabor, who was issued a “diploma of vocation” and accorded the official title of “Minister of Religion, Commissioned,” Plaintiff here was a non-contractual secular employee. Furthermore, unlike the plaintiff in Hosanna-Tabor, Plaintiff was not required to be a Catholic or even a Christian to hold his post.
Second, . . . Plaintiff’s position did not “[reflect] a significant degree of religious training followed by a formal process of commissioning.” The plaintiff in Hosanna-Tabor had to complete eight college-level courses in subjects including biblical interpretation, church doctrine, and the ministry of the Lutheran teacher. Here, however, Plaintiff did not have to undergo any religious training. He attended some individual religious training sessions when serving as a full-time employee of [the school], but this does not amount to a significant amount of religious training.
Third, Plaintiff did not “[hold] [himself] out as a minister of the Church by accepting the formal call to religious service” or by claiming religious tax benefits. Plaintiff, as with other teachers at [the school], would sometimes begin class with a prayer. But sometimes he would have students lead prayer and sometimes there would be no prayer at all. The content of the prayer was not specified, the prayers could be ecumenical, and the prayers were not required.
Finally, Plaintiff’s position as substitute English and drama teacher did not directly “[reflect] a role in conveying the Church’s message and carrying out its mission.” [The school’s] teachers do not have to reference Catholic principles. The High School administration prefers that secular teachers, like Plaintiff, avoid discussing Catholic doctrine. Unlike all three teachers in Hosanna-Tabor and Our Lady of Guadalupe, Plaintiff did not teach religion in his classes and was not tasked with preparing students for participation in Catholic worship services.
What this means for churches
This case illustrates the following important points.
1. Religious organizations may discriminate based upon religion under Title VII—but not beyond
Title VII of the Civil Rights Act of 1964 bans discrimination in employment decisions on the basis of race, color, national origin, sex (including sexual orientation) and religion. Religious organizations are exempt from the ban on religious discrimination, but not from the other prohibited forms of discrimination.
2. Most churches are subject to Title VII or a similar state statute
While Title VII only applies to employers involved in interstate commerce and having at least 15 employees, most states have enacted similar laws that apply to smaller employers. As a result, most churches are subject to either Title VII or a comparable employment discrimination statute under state law.
3. Religious ban applies to both religious and “secular” positions
Many church leaders are unaware that Title VII’s ban on religious discrimination in employment decisions applies to both religious and “secular” positions in a church. This court explicitly acknowledged that the church and school were allowed to discriminate on the basis of religion in terminating the plaintiff, even if his position as a teacher was deemed to be “secular.” But they could not discriminate in employment decisions on the basis of the other forms of prohibited discrimination under Title VII (race, color, national origin, or sex). The court explained:
“While the language of [Title VII] makes clear that religious institutions may base relevant hiring decisions upon religious preferences, Title VII does not confer upon religious organizations a license to make those same decisions on the basis of race, sex, or national origin.” . . . [The church defendants] would allow a religious employer to “convert any claim of discrimination on the basis of one of the protected classes under Title VII to a case of religious discrimination, so long as there was a religious reason behind the employment decision.” . . . “This would effectively strip employees of religious institutions of all Title VII protections, if the employer’s religion clashed with the employee’s protected class status. . . . “If Congress had intended to allow religious employers to avoid liability for discriminating on the basis of race, sex, or national origin, it could have done so.” . . . “By its very terms, [Title VII] only applies to discrimination on the basis of religion. The ban on discrimination in employment on account of race, national origin, or sex is still applicable to religious organizations.”
4. The court said this case’s facts specifically favored the plaintiff
The court concluded:
The school claims that [Plaintiff] was fired for his support of gay marriage—something the Catholic Church opposes. Plaintiff claims he was fired, or at least suffered a more severe employment action, because of who he is as a gay man. The court respects the sincerity of the Catholic Church’s opposition to Plaintiff’s actions. With a slightly different set of facts, the court may have been compelled to protect the church’s employment decision. However, [whereas] here, Plaintiff lost his job because of sex discrimination and where he was working as a substitute teacher of secular subjects without any responsibility for providing religious education to students, the court must protect Plaintiff’s civil and employment rights.
5. Guidance for applying the ministerial exception
Lastly, the court’s opinion provides helpful guidance in determining if a teacher is subject to the ministerial exception. In particular, the court found the absence of a ministerial title, the lack of ministry training, and the absence of performing “vital religious duties,” along with the teacher’s decision not to use any tax benefits available to ministers, all pointed to determining the teacher was not a minister and the school could not use the ministerial exception as a defense.
Billard v. Charlotte Catholic High Sch., 2021 WL 4037431 (W.D.N.C. 2021)
Key point 2-04.02. Some courts are willing to resolve disputes over the termination of clergy if they can do so without any inquiry into religious doctrine.
A North Carolina appeals court ruled that a trial court did not err in determining it had jurisdiction over a church pastor’s counterclaim because it related to church bylaws and did not involve ecclesiastical matters protected under the First Amendment of the United States Constitution.
A church was incorporated as a North Carolina nonprofit corporation in 1988. At the church’s time of incorporation, the elders acted as the board of directors for the church.
On March 31, 2016, the elders hired a senior pastor for the church. The pastor was employed on an “at-will” basis. The employment agreement letter signed by the pastor in March of 2016 set out his terms of employment, in pertinent part, as follows:
An “at-will” employment relationship has no specific duration. This means that an employee can resign their employment at any time, with or without reason or advance notice. The [C]hurch has the right to terminate employment at any time, with or without reason or advance notice as long as there is no violation of applicable state or federal law.
Disagreement over which set of bylaws apply
The church had two different sets of bylaws, and the parties disagreed regarding which set governed the church’s operations during the time relevant to this case. The church adopted a set of bylaws (the “first bylaws”) in January of 1997. In April of 2008, the church applied for a bank loan and incorporated another set of bylaws (the “second bylaws”) as part of its loan application.
Effective June 17, 2019, the elders unanimously decided to terminate the pastor’s employment at the church. Despite his termination, the pastor ignored the instructions of the church and continued to conduct religious activities at the church.
The church filed a lawsuit on September 17, 2019, seeking an injunction to prohibit the pastor from accessing the church. In response, the pastor filed an answer and counterclaim.
The pastor’s counterclaim requested the following:
(I) Declaratory judgment against the Church and the Elders, declaring that: (i) [the Pastor] is the “Bishop” and “Senior Pastor” of the Church; (ii) [the Pastor] was not an “at-will” employee of the Church; (iii) the Elders’ attempt to terminate [the Pastor’s] employment with the Church was unauthorized by the then-controlling Second Bylaws; and (iv) [the Pastor] is entitled to recover back-pay and benefits earned since his purported termination;
(II) Preliminary and permanent injunction allowing [the Pastor] to resume employment with the Church, earning full compensation and benefits;
(III) Money damages from the Elders for breach of fiduciary obligations owed to [the Pastor] and to the Church;
(IV) Money damages from the Elders for wrongful interference with [the Pastor’s] employment relationship with the Church;
(V) Rights (i) to inspect the Church’s financial records, (ii) to receive an accounting from the Elders and the Church of Church funds or assets the Elders misappropriated, and (iii) to impose a constructive trust upon the Elders’ assets in an amount equal to any Church funds or assets found to have been misappropriated; and
(VI) Money damages from the Elders for civil conspiracy to remove [the pastor] from employment with the Church and to seize complete control of the Church’s operations.
The court concluded that it had jurisdiction over the matters and claims asserted in the pastor’s counterclaim. The church and the elders appealed, arguing that the trial court erred in concluding that it had jurisdiction, since such a conclusion would force the court to interpret and resolve ecclesiastical questions to resolve the claims.
The appeals court concluded that the trial court properly determined that it had jurisdiction over the pastor’s claims. It acknowledged that “the First Amendment of the United States Constitution prohibits a civil court from becoming entangled in ecclesiastical matters,” and it defined an ecclesiastical matter as one which “concerns doctrine, creed, or form of worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of membership.”
However, civil courts do not violate the First Amendment “merely by opening their doors to internal church disputes,” the court said (quoting Presbyterian Church in U.S. v. Mary Elizabeth Blue Hull Mem’lPresbyterian Church).
“‘The dispositive question,’” the appeals court continued (quoting Smith v. Privette, 128 N.C. App. 490 (1998)), “‘is whether resolution of the legal claim requires the court to interpret or weigh church doctrine. . . . If not, the First Amendment is not implicated and neutral principles of law are properly applied to adjudicate the claim.’”
The court concluded:
As [the pastor] asserts, “[t]his is an employment dispute.” The core tenet upon which all of [the Pastor’s] claims depend is the determination of which bylaws governed the Church at the relevant time. [The Pastor] was an employee of the Church and now raises disputes regarding the Church’s bylaws. His claims do not fall under the protections of ecclesiastical matters within the First Amendment.
Resolving [his] claims requires a two-part determination: First, which bylaws were the governing authority at the relevant time, and whether [the Pastor’s] termination was in accordance with the proper bylaws? Second, whether the Elders properly determined that [the Pastor] was unfit to serve as Senior Pastor of the Church?
The first determination may be made by applying neutral principles of law without engaging in ecclesiastical matters. . . . The trial court must first determine which set of bylaws controlled at the relevant time, based solely on contract and business law. The court will then be able to assess whether the Church’s procedure for firing [the Pastor] complied with the requirements of the controlling bylaws. The court may determine that the Church’s method of terminating [the Pastor] did not comply with the requirements of the controlling bylaws, making [his] termination void. In this instance, this dispute would be resolved without the necessity of answering the second question—whether [the pastor] was unfit to serve—and engaging with ecclesiastical matters.
If the court determines that the Church’s method of terminating [the Pastor] did comply with the requirements of the controlling bylaws, then our Courts would be required to assess whether the Church, through its Elders, properly determined that [the Pastor] was unfit to serve as Senior Pastor. That determination cannot be made applying only neutral principles of law. Answering this second question may require an impermissible engagement with ecclesiastical matters. . . .
The present case requires determining which bylaws were in effect, whether new bylaws had been adopted by the Church, whether the Elders had the authority to terminate [the Pastor] and whether the termination was done in accordance with the proper bylaws. “This inquiry can be made without resolving any ecclesiastical or doctrinal matters” [quoting Tubiolo v. Abundant Life Church, Inc., 605 S.E.2d 161, 163 (2004)] . . . [and therefore [o]ur courts have jurisdiction over each of these determinations.
What this means for churches
This decision deviates from the vast majority of court rulings refusing to resolve internal church disputes involving the fitness or tenure of a pastor. Most courts (including the trial court in this case) have concluded that the relationship between a church and its pastor inevitably implicates religious issues that are off limits to the courts.
Additionally, note that the pastor’s counterclaim requested declaratory judgment against the church and the elders because he claimed, in part, that he—as the church’s pastor—was not an “at-will” employee of church. To better understand various issues related to “at-will” employment—including exceptions to note—see the section titled “Termination“ in the Legal Library.
Nation Ford Baptist Church Inc. v. Davis, 866 S.E.2d 11 (N.C. App. 2021)
Key point 10.19. There are several legal risks associated with the use of cellphones by church employees and volunteers, including liability for distracted driving while using a cellular device, punitive damages, personal liability of board members, invasion of privacy, and admissions against interest.
Key point 4-11.1. Clergy who engage in sexual contact with an adult or minor are subject to civil liability on the basis of several legal theories. They also are subject to criminal liability.
A North Carolina court affirmed the conviction of a former church youth group leader for his repeated attempts to engage in “sexting” with three adolescent members of the church’s youth group. The case provides a direct reminder of the civil and criminal liability that adults, including clergy, can face when they engage in sexual contact with another adult or minor.
Background: The defendant requested pictures on Snapchat
A church’s youth group allowed older members of the church to act as leaders and mentors to the children. One of the adult leaders (the “defendant”) became very close with a few of the younger children in the group. They would do things outside of church such as:
play games in the neighborhood
drive around in the defendant’s car
The defendant’s relationship with at least two of the boys got to the point where he moved in and lived with their families for some time.
Eventually, the nature of the defendant’s relationship with the boys changed, and three boys (Victims 1, 2, and 3) accused the defendant of using Snapchat to request pictures of their genitals.
When Victim 1 was 15, the defendant began asking him for pictures of his genitals every night for at least three months. The defendant was 21 years old at the time.
When Victim 1 refused to send pictures of his genitals, the defendant got mad, cursed at him, and told him that he didn’t want anything to do with him. Victim 1 never sent the requested pictures and blocked the defendant on Snapchat.
When Victim 2 was 14 years old, the defendant began asking him for pictures of his genitals via Snapchat. The requests continued almost every night for a few months, and the defendant even offered to buy Victim 2 fishing gear and to give him money if he sent the nude pictures.
Despite Victim 2 telling the defendant “no,” the defendant continued to ask. The defendant would get frustrated and tell Victim 2 that he did not want anything to do with him. Victim 2 blocked the defendant on Snapchat and told Victim 3 about it.
Victim 3 was familiar with the defendant’s actions because the defendant sent him the same requests. However, Victim 3 divulged sensitive information to the defendant in a private conversation prior to the requests, and the defendant used that information as leverage. One night, he told Victim 3 that it would “be a shame if everybody found out about your history.” Victim 3 was afraid and sent the defendant a picture of his genitals.
Charged with attempted second-degree sexual exploitation
Victim 2 finally told his father about the defendant’s behavior. The defendant contacted Victim 2’s father via text message and repeatedly apologized for what he had done and prayed for forgiveness.
Victim 2’s parents contacted the local sheriff who then contacted the state bureau of investigation (SBI). The SBI was unable to access the defendant’s messages during the investigation because the messages had been deleted and were never stored on Snapchat or on the victims’ phones.
The defendant was charged with two counts of attempted second-degree sexual exploitation of a minor. A jury found him guilty on both counts, and the trial court sentenced him to an active prison sentence term of 32 months to 58 months. The defendant appealed.
Appeals court affirmed conviction and sentence
A state appeals court affirmed the defendant’s conviction and sentence:
In order to establish the elements of an attempted sex crime against a minor, the State must show: (1) the intent to commit the substantive offense, and (2) an overt act done for that purpose which goes beyond mere preparation, but (3) falls short of the completed offense. . . .
Defendant sent dozens of Snapchat messages to [the victims] over many months containing the same request to see their genitals. Defendant took additional steps in furtherance of the attempted exploitation by offering money and gifts in exchange for nude photos. Defendant also used his “older brother” relationship in attempt to coerce [the boys] into sending him the pictures. When they refused, he expressed his frustration and threatened to not have anything else to do with them. Defendant even admitted that his messages were indecent and repeatedly asked for forgiveness for his conduct. The State also offered additional evidence of the defendant’s intent by showing that he had already successfully solicited and received nude pictures of another teenager’s genitals at least once before by using similar behavior and conduct. The evidence was uncontroverted at trial. This was substantial evidence of each essential element of second-degree exploitation of a minor, and of defendant being the perpetrator of such offense. Accordingly, the trial court did not err in denying defendant’s motion to dismiss.
What this means for churches
This case is important for three reasons.
First, it demonstrates the problems that can occur when using mobile devices and social media. The best practice for church leaders is to prohibit cellphone, email, and social media interactions between youth leaders (both employees and volunteers) and minors, and to respond immediately with appropriate discipline if this policy is violated.
A good response to those who consider such a policy too restrictive is to contact your local public school district and find out its policy with regard to mobile device and social media communications between teachers and minors. Many school districts absolutely prohibit such communications.
Second, the defendant’s actions in this case graphically demonstrate the risks associated with grooming. The US Department of Justice, Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking (SMART) uses the following definition of grooming:
Grooming is a method used by offenders that involves building trust with a child and the adults around a child in an effort to gain access to and time alone with her/him. In extreme cases, offenders may use threats and physical force to sexually assault or abuse a child. More common, though, are subtle approaches designed to build relationships with families.
The offender may assume a caring role, befriend the child or even exploit their position of trust and authority to groom the child and/or the child’s family. These individuals intentionally build relationships with the adults around a child or seek out a child who is less supervised by adults in her/his life. This increases the likelihood that the offender’s time with the child is welcomed and encouraged.
One court defined grooming as:
[A] systematic process where the sole goal is to gain access to the child for inappropriate sexual behavior. Sometimes the child can be groomed quickly, but other times it can take years. Examples of grooming include buying the child a gift, befriending him, and condoning his behaviors that others disapprove of. Secrecy plays a large part in grooming by enhancing the offender’s control over the victim. This control is used to drive a wedge between the victim and his friends and family. The offender may also buy gifts or offer alcohol or drugs to the victim to entice him to stay with her instead of spending time with his friends and family.
Common examples of classic grooming behavior include:
an adult youth leader demonstrates excessive interest in a minor
trips and outings
spending time alone with a minor, either in person or via email and social media
minors spend time, including overnight, in a youth leader’s home
providing a minor with alcoholic beverages or narcotic drugs
providing sexually explicit materials to a minor
Third, as this case illustrates, child molesters often “seduce” a child’s parents, making it more likely that their attempts to have sexual contact with a minor will succeed.
Key point 7-20.2. A variety of defenses are available to a church that is sued as a result of an injury occurring on its premises.
The North Carolina Supreme Court ruled that a church was not legally responsible for injuries sustained by a visitor who was injured when he tripped on an irregular stairway.
The plaintiff sued church for injuries
An adult male (the “plaintiff”) visited a church for a funeral. Employees of the funeral home asked him to help carry the casket. After the plaintiff agreed, he was led through a section of the church building and then outside and down a small set of stairs.
He and three others carried the casket from a hearse to the church building, taking the same set of stairs he had just descended. The plaintiff walked sideways as he carried the casket. He watched the doorway instead of where he was stepping. He tripped near the top of the steps, fell into the church building, and was injured.
The set of stairs was fully visible as the plaintiff approached it with the casket. The set of stairs includes five steps. Each of the bottom four steps is made of gray concrete and rises about six and one-half inches. The fifth and final step is made of both red brick and gray concrete, initially rising about nine inches, with a white, wooden platform on top, set a few inches back from the edge, that adds just over an inch to that height. The total rise of the top step is, therefore, about four inches greater than that of the other steps, constituting about a 61 percent increase in rise.
The plaintiff sued the church to recover for his injuries alleging, among other things, that the church failed to keep its premises in a reasonably safe condition and failed to warn plaintiff of a dangerous and defective condition on the property.
State supreme court: the plaintiff “did not take reasonable care”
The church asked the trial court to dismiss the lawsuit on the ground that any dangerous condition on the property was open and obvious and that the plaintiff was contributorily negligent. The trial court dismissed the lawsuit, but a state appeals court reversed this judgment. The case was then appealed to the state supreme court.
The supreme court began its opinion by observing:
[Every person has] a duty to take reasonable care to not harm others and a corresponding duty . . . to take reasonable care to not harm oneself. . . . A landowner does not have a duty to warn a visitor about a condition on the landowner’s property that is open and obvious . . . and a defendant is not liable for injuries to a plaintiff when the plaintiff does not take reasonable care to protect himself. Our precedent requires courts to apply an objective reasonable person standard. In this case plaintiff used a set of stairs with a top step that was visibly higher than the other steps and made of noticeably different materials. When plaintiff used the set of stairs a second time, he failed to take the precautions a reasonable person would have taken to avoid tripping on the higher step. Because the alleged defect was open and obvious and thus should have been evident to plaintiff, and because plaintiff did not take reasonable care, the trial court correctly granted summary judgment in favor of defendant.
Was the top step on the church’s property an open and obvious condition such that a reasonably prudent person would have recognized it and taken appropriate care to avoid injury while using it? The court concluded that it was:
The distinct height and appearance of the step, the clear visibility of the set of stairs, and plaintiff’s previous experience walking down the set of stairs show that a reasonable person in plaintiff’s position would have been aware of the step’s condition and taken greater care.
The top step is obviously different in height than the other steps. First, the visible part of that step is made mostly of red brick, making its appearance starkly different than that of the other gray concrete steps. The wood on top of that step, which was painted white, only accentuates its distinctiveness. Second, that step rises about nine and one-half inches to the top of the brick, and about ten and one-half inches including the wooden portion on top, compared to the about six and one-half inch rise of the other steps. All in all, the top step is thus about four inches, or about sixty-one percent, higher than the others. This great difference would be readily apparent to a reasonable person.
At the time of the fall, plaintiff had just walked down the set of stairs, experiencing the difference in the height of the steps firsthand. A reasonable person in plaintiff’s position would have become aware of the approximately four-inch difference. Moreover, the top step sits a few feet above the ground; thus, it is at a height plainly visible to someone walking towards the steps and then using them. Common experience dictates that a reasonable person would recognize the starkly different condition of the top step and thus understand that he would have to step up higher when he arrived at it. Viewed objectively, the condition was open and obvious, visible to a reasonable person in plaintiff’s situation. Thus, defendant had no duty to warn plaintiff of the condition of the top step. . . .
Because the condition of the top step would be open and obvious to a reasonable person, defendant had no duty to warn plaintiff. Similarly, because plaintiff, after his previous descent of the steps, did not heed the risk obviously presented by the distinct appearance of the top step, and because he carried the casket while walking sideways without looking at the steps, his own negligence contributed to his fall.
What this means for churches
A church is not automatically responsible for injuries that occur on its premises. As this case illustrates, churches ordinally will not be legally responsible for injuries sustained by adults who expose themselves to an open hazard or defect. This principle is known as assumption of risk, or contributory negligence. Draughon v. Evening Star Holiness Church, 843 S.E.2d 72 (N.C. 2020).
Key point 7-21. Embezzlement refers to the wrongful conversion of funds that are lawfully in one’s possession. Embezzlement is a common occurrence in churches because of weak internal controls.
A North Carolina court ruled that a pastor who also served as an officer for a Parent Teachers Association (PTA) was guilty of embezzlement for using corporate funds for personal purposes.
An investigation of improper use of funds
A pastor of a local church (the “defendant”) served as president of an elementary school’s PTA from 2011 to 2013. As the defendant’s term concluded, allegations arose of improper use of PTA funds by the defendant. As a result, a CPA and the local county sheriff instituted an investigation into the receipts and expenditures of the PTA.
The investigation unearthed spending and disbursements by the defendant and other PTA officers that apparently exceeded standards authorized by the organization’s bylaws. The bylaws authorize the PTA to make expenditures “in furtherance of the general mission of the PTA.” According to the bylaws, financial records were to be audited monthly and annually.
The CPA reviewed the PTA’s account and found several problematic transactions, such as
transactions with no receipts,
unaccounted for gift cards and fundraising certificates,
checks for meals,
checks reimbursing defendant personally for gas and travel expenses, and
checks issued without the purpose indicated.
The pastor’s arrest and indictment
The defendant was arrested and charged with embezzlement. Following his arrest, he was administered his Miranda rights and consented to an interview with a detective. The defendant was informed that he would be held accountable, as the PTA president, for any improper expenditures made by any PTA board member, even if he did not personally request the expenditure. The detective also informed the defendant that if he was unable to account for the gift cards at issue, “that [would be] considered embezzlement.”
The defendant was subsequently indicted for two counts of embezzlement, one count for each year he was the PTA president. The state offered the following transactions as evidence tending to show defendant’s guilt:
golf shirts embroidered with the name of the church of which the defendant was the pastor, but billed to and paid for by the PTA;
PTA reimbursements to the defendant for gas used to attend a family funeral;
a digital camera purchased by the defendant with PTA funds;
numerous unaccounted for gift cards bought with PTA funds;
payments to PTA board members and their families;
reimbursements for food at PTA board meetings; and
renewal of the church’s Sam’s Club Warehouse membership with PTA funds.
The defendant did not offer any evidence in his defense and moved to dismiss the charges for insufficient evidence. The trial court convicted the defendant on both counts and sentenced him to two consecutive terms of 16–29 months, both of which were suspended for 36 months of supervised probation. The defendant appealed, claiming that the state failed to produce substantial evidence of fraudulent intent, or produce substantial evidence that defendant was the perpetrator of any crime.
State appeals court affirms conviction
A state appeals court affirmed the defendant’s conviction. It noted that
a person commits embezzlement when he: (1) with intent to defraud; (2) converts to his own use; (3) money or property belonging to another; in a situation where (4) the money or property initially came within his possession or control lawfully. . . . Embezzlement does not occur through a mere act of converting or appropriating property to one’s own use. Instead, the State must not only demonstrate appropriation, but it also must demonstrate that such act was done with a fraudulent purpose or corrupt intent.
The courts have found substantial evidence of fraudulent intent when a defendant “exceeded his authority by taking more coupons than was allowed from his employer without any authorization,” or through discrepancies in financial books, or when a corporate treasurer took funds to her own home every night.
The appeals court explained:
Defendant plausibly exceeded his authority as president of the PTA by using funds for purposes the jury could have found to be outside the scope of the PTA Bylaws [such as] church shirts, personal travel reimbursements, and procuring the $35 renewal of the church’s Sam’s Club Warehouse membership. In doing so, the “defendant not only exceeded his authority, but often did so without PTA approval through a vote. The evidence also tended to show defendant failed to hold PTA funds in reserve as required by the PTA Bylaws. Substantial evidence showed defendant had the power to control PTA spending, a power he employed to misapply or appropriate PTA funds for personal use.
What this means for churches
I have addressed several cases in which a pastor’s personal use of church funds led to severe consequences, including loss of a church’s tax-exempt status as a result of prohibited “inurement,” and exposure of a pastor and church board to crippling penalties for excess benefit transactions under section 4958 of the tax code. And while this case doesn’t deal specifically with embezzlement of church funds, it still demonstrates another significant consequence: pastors can face criminal liability for embezzlement. State Gillbert, 2019 WL 1040957 (N.C. App. 2019).
A North Carolina court ruled that a church member could not be convicted of violating an anti-stalking statute for posting content to his social media account that offended another member.
An adult male (the “defendant”) met a woman (“Mary”) at a church prior to the start of a Good Friday worship service. Mary was employed in the church’s communications department. The two of them were seated at the same table and briefly made small talk in a group setting before separating at the beginning of the service. Upon leaving church that day, Mary did not give any further thought to her encounter with the defendant.
A few weeks later the defendant mailed a five-page handwritten letter to Mary’s work address. Mary later testified:
The gist of it was that when [Defendant] first saw me at the Good Friday service he thought he had found his soul mate, and that the feelings he felt were so intense he couldn’t talk to me. And then he goes on to say that he used the communications plan to talk to me, to ask me out, rather than for professional reasons.
The defendant ended the letter by writing that he was “highly attracted” to Mary and asking her to go on a date with him. The following day, Mary gave the letter to her work supervisors and asked them to intervene on her behalf, and they agreed to do so. She did not respond to the defendant’s letter.
A few days later the defendant sent Mary a second handwritten letter, which was seven pages long and mailed to her home address. Mary provided the following summary of the second letter:
He starts by apologizing for sending this to me without me giving him my address. He says he found it on a website. And he also says that he would not harass or stalk me, and that if I felt uncomfortable to notify him and he would cease communication. Then he goes on to talk about some of his personal history, and the last line says that I need to go on a date with him or tell him to leave me alone.
Mary showed the defendant’s letter to her supervisors, who once again told her that they would handle the situation.
The church’s minister of pastoral care spoke to the defendant over the phone about his communications with Mary. During this phone call, the minister told the defendant “to stop making any contact [with Mary] and [that] there could be legal actions if he did, and that the contacts were unwanted.” Following this conversation, the defendant did not send Mary any further emails or letters.
A few months later, Mary logged into an account she had created on the social media service Google Plus. Upon doing so, she discovered that the defendant had “followed” her account and had made four separate posts on his own Google Plus account that referred to her by name.
The posts on the defendant’s Google Plus account were not specifically directed to Mary but were shared publicly on his account where any user of the service could read them.
The first post stated that “God chose Mary” to be the defendant’s “soul mate.” In the other three posts, the defendant wrote, among other things, that he “freely chose Mary as his wife” and wanted God to “please make her his wife.”
After viewing these posts, Mary immediately blocked the defendant’s account. Shortly thereafter, she deleted her own Google Plus account. Mary continued, however, to monitor the defendant’s publicly shared posts by checking his Google Plus page “at least once a week.”
Several months later a box of cupcakes was delivered to Mary’s office at work with a note from the defendant. Upon receiving the cupcakes, Mary filed a police report that led to the defendant being arrested and charged with four counts of felony stalking based mainly on his posts on his Google Plus account. He was later convicted on all counts by a jury, and sentenced up to seven years in prison.
The defendant appealed, claiming that the trial court erred by denying his motion to dismiss the four stalking charges for which he was ultimately convicted. He contended that because all of these charges were based—either in whole or in part—upon the content of his Google Plus posts, he could not constitutionally be convicted of stalking due to the resulting infringement of his right to free speech under the First Amendment.
The appeals court reversed the defendant’s conviction. It concluded:
As this case aptly demonstrates, difficult issues arise in attempting to balance, on the one hand, society’s laudable desire to protect individuals from emotional injury resulting from unwanted and intrusive comments with, on the other hand, the free speech rights of persons seeking to express themselves on social media. Our courts will no doubt continue to grapple with these issues going forward. In the present case, however, it is clear that defendant’s convictions violated his constitutional right to free speech. His Google Plus posts about Mary—while understandably offensive to her—constituted protected speech that cannot constitutionally be prohibited by the State. As such, we are compelled to vacate his convictions.
What this means for churches
This case demonstrates how some courts resolve the tension between offensive social media posts and free speech. Church leaders should note, however, that employees (e.g., youth pastors) who send sexually explicit social media posts (text and images) to minors (e.g., youth group members) cannot use freedom of speech as a defense.
State v. Shackelford, 2019 WL 1246180 (N.C. App. 2018).
Key point 6-10.1. According to the majority view, the civil courts will not resolve disputes challenging a church’s discipline of a member since the First Amendment guaranty of religious freedom prevents them from deciding who are members in good standing of a church.
A North Carolina appeals court ruled that it was barred by the First Amendment guaranty of religious freedom from resolving a lawsuit brought by two dismissed church members challenging the legality of their removal.
A married couple (the plaintiffs) asked a court to rule that they remained active members of a church they had attended for 35 years. The church claimed that a membership meeting was convened and the members voted unanimously to revoke the plaintiffs’ membership. The plaintiffs challenged the validity of this meeting on the ground that it was not conducted in conformity with the church’s constitution and bylaws in at least two respects: (1) they were never informed in writing of their removal as members, and (2) they were not given an opportunity to address the church membership concerning their removal. A trial court dismissed the lawsuit on the ground that the plaintiffs’ status of membership in the church was a “core ecclesiastical matter.” The plaintiffs appealed.
A state appeals court affirmed the trial court’s dismissal of the case. It concluded:
Courts should not and may not become entangled in purely ecclesiastical matters involving a church, but can resolve civil law matters which may arise from a church controversy. Ecclesiastical matters include those which concern doctrine, creed, or form of worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of membership, and the power of excluding from such associations those deemed unworthy of membership by the legally constituted authorities of the church.
To determine whether an issue is an ecclesiastical matter, the dispositive question is whether resolution of the legal claim requires the court to interpret or weigh church doctrine. If the inquiry does not involve such interpretation, then neutral principles of civil law may be applied to resolve the issue.
The court noted that membership in a church is a core ecclesiastical matter and not a “property interest” as the plaintiffs alleged.
On appeal, the plaintiffs claimed that their ouster was unlawful because the church failed to follow the procedure spelled out in its constitution and bylaws. The church bylaws addressed the discipline of members as follows:
Should some serious condition exist which would cause a member to be a liability to the general welfare of the church, the pastor and the deacons will take every reasonable measure to resolve the problem in accord with Matthew 18. If it becomes necessary for the church to take action to exclude a member, a three-fourths . . . secret vote of the members present is required; and the church may proceed to declare the person to be no longer in the membership of the church. A spirit of Christian kindness and forbearance shall pervade all such proceedings.
The plaintiffs argued no vote was taken, they were never provided written notice of their removal, nor were they provided an opportunity to address the other members of the church to discuss their removal. The court noted that “the bylaws specifically call for a three-fourths . . . secret vote” and do not provide for or require prior notice, an opportunity for the affected member to be heard, or a written notification of removal.
The plaintiffs also asserted “that at no time did they take any action to have themselves removed from church membership.” The court responded: “A determination of this issue would fall squarely within ecclesiastical matters beyond the jurisdiction of the courts. . . . We cannot decide who ought to be members of the church, nor whether the excommunicated have been regularly or irregularly cut off.” The court concluded:
Plaintiffs’ allegations center around ecclesiastical matters, specifically the adoption and enforcement within a religious association of needful laws and regulations for the government of membership, and the power of excluding from such associations those deemed unworthy of membership by the legally constituted authorities of the church. We cannot apply neutral principles of law without delving into ecclesiastical matters to determine whether or not plaintiffs were properly removed from the church membership. . . . Civil courts cannot become entangled with deciding what action may or may not have justified plaintiffs’ removal from church membership, and further inquiry by this court into the matter is barred.
What this means for churches
This case illustrates what many courts call the “ecclesiastical abstention” doctrine. Under this doctrine the civil courts are barred by the First Amendment religion clauses from resolving most internal church disputes. While not using the terminology “ecclesiastical abstention,” the United States Supreme Court described the basic principle in a 1976 ruling in which it noted that the civil courts lack jurisdiction over internal church disputes that are “strictly and purely ecclesiastical in [their] character . . . a matter which concerns theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them.” Serbian E. Orthodox Diocese v. Milivojevich,426 U.S. 696 (1976). The concept of ecclesiastical abstention prevented the court in this case from resolving the plaintiffs’ wrongful expulsion claim. Lippard v. Diamond Hill Church, 821 S.E.2d 246 (N.C. App. 2018).
Key point 6-06.4. Church officers and directors can be removed from office in the manner authorized by the church’s governing documents. It is common for church bylaws to give the membership the authority to remove officers and directors who engage in specified misconduct or change their doctrinal position.
Key point 6-12.1. Church membership meetings must be conducted in accordance with the procedural requirements ordinarily specified in the church’s governing documents. The most common requirements pertain to notice, quorum, and voting.
Key point 6-12.4. Most courts refuse to intervene in church disputes concerning the validity of a membership meeting that was not conducted in accordance with the procedural requirements specified in the church’s governing documents. However, some courts are willing to intervene in such disputes if they can do so without inquiring into religious doctrine or polity.
A North Carolina appeals court ruled that it could resolve a lawsuit claiming that (1) a church’s attempt to amend its bylaws was void because it was not done in accordance with the bylaws; (2) the trial court acted improperly in ordering a new church election to fill the vacant positions of deacon and trustee; and (3) the civil courts cannot resolve disputes over the selection of deacons and trustees when a church’s governing documents do not address the issue.
In 2013, members of a church (the “plaintiffs”) sued their church and its pastor. All the plaintiffs’ claims stemmed from the pastor’s management of church finances and a decision by the church in 2013 to amend the church bylaws changing various tenets of church doctrine as well as other aspects of the church’s day-to-day operations. The trial court denied the church’s motion to dismiss the case, rejecting the argument that the First Amendment barred the courts from adjudicating these claims. The court concluded that the church had “violated its bylaws in its 2013 attempts to vote on proposed amendments” and therefore those amendments were void. The trial court also found that, because the existing bylaws were “silent as to the process for removing deacons and trustees,” the trial court could not play any role in reviewing the removal of those officers from their posts. But the trial court nevertheless ordered the church to hold an election “to fill vacancies in the office of deacon and trustee . . . at the next regular business meeting of the church, but in any event, no later than ninety (90) days from the filing of this order.” The case was appealed.
The appeals court’s ruling
The appeals court began its opinion by noting that “the First Amendment of the United States Constitution prohibits a civil court from becoming entangled in ecclesiastical matters. However, not every dispute involving church property implicates ecclesiastical matters. . . . Courts may resolve disputes involving a religious institution through ‘neutral principles of law.’ The dispositive question is whether resolution of the legal claim requires the court to interpret or weigh church doctrine.”
1. Amending the bylaws
Did the trial court act correctly in striking down an amendment to the church bylaws on the ground that the amendment was not done consistently with the method prescribed in the bylaws? The court noted that while the civil courts have “no jurisdiction or right of supervision” in matters of polity, they can determine “‘whether the church tribunal acted within the scope of its authority and observed its own organic forms and rules’ with respect to ‘civil, contract or property rights.’” The appeals court added,
Put another way, when the church creates written bylaws that govern the use of church property, and other matters unrelated to church doctrine and religious practice, courts can review whether the church and its members followed the procedural rules created in those bylaws. . . . The trial court did so . . . when it declared that the means by which the church and its members voted to amend the bylaws violated the procedure established in the bylaws. We therefore affirm that portion of the trial court’s judgment.
2. The court-ordered election
The church challenged the trial court’s mandate that the church hold “an election to fill vacancies in the office of deacon and trustee . . . at the next regular business meeting of the church, but in any event, no later than ninety (90) days from the filing of this order.” The church insisted that this portion of the trial court’s order impermissibly assumes a supervisory role over church governance. The court agreed, noting that the trial court had “‘exceed[ed] its authority by . . . ordering a new vote.’”
3. Removal of deacons
The appeals court agreed with the church that the trial court properly determined it could play no part in determining whether deacons and trustees properly were removed from their posts. As the trial court held, the church bylaws “are silent as to the process for removing deacons and trustees,” and “neither party directs this court to any neutral principles of law [i.e., not involving an application of religious doctrine] that would permit this court to fill in the gaps. With no neutral principles to apply, the courts have no authority to wade into when and how these church leaders are removed from office.”
What this means for churches
This case illustrates the view of some courts that they can resolve internal church disputes if they can do so without interpreting church doctrine. Not all courts agree with this conclusion. Many have concluded that the First Amendment guaranty of religious freedom prevents the civil courts from resolving any internal church conflict. Davis v. New Zion Church, 811 S.E.2d 725 (N.C. App. 2018).
Court Willing to Resolve Pastor’s Lawsuit Against Church for Compensation Dispute
Court ruled that it was not barred by the “ministerial exception” and “ecclesiastical abstention doctrine” from resolving a claim by a pastor that his church had failed to pay him the salary and benefits to which they had contractually agreed.
Key point 2-04.2. Some courts are willing to resolve disputes over the termination of clergy if they can do so without any inquiry into religious doctrine.
A North Carolina court ruled that it was not barred by the "ministerial exception" and "ecclesiastical abstention doctrine" from resolving a claim by a pastor that his church had failed to pay him the salary and benefits to which they had contractually agreed.
A pastor (the "plaintiff") was employed by a church in 1975 on a part-time basis. He also worked for a secular employer. In order to be eligible for retirement at his secular employer, the plaintiff was required to continue working until 2013. However, in 2001, the plaintiff resigned his secular job and entered into a contract with the church titled "Agreement of Full Time Pastorship." This contract consisted of several provisions, including the following:
The Pastor shall serve the church for an indefinite period since there is no scriptural support of tenure.
If the Pastor should become disabled to carry on his work, he shall be paid his full salary until the disability insurance begins to be paid (which is provided by the church) and relieves the church of its responsibility to Pastor.
Whereas, at any time the church shall become dissatisfied with the services of Pastor and ask for his resignation, the congregation at that time shall take a vote and be governed by the majority of voting members eligible (members in good standing with church). At that time the church shall pay the Pastor the total package in advance or his services shall continue until such time the church shall meet this requirement.
The plaintiff claimed that he was guaranteed under the contract "salary continuation upon his disability" and "salary, housing, utilities, social security, and medical insurance through 2013" in consideration of resigning from his secular job and losing his retirement and other benefits to which he would have been entitled had he continued his employment.
After 10 years of serving as head pastor of the church, the plaintiff contracted kidney disease, was hospitalized, and underwent surgery. As a result, he was no longer able to serve as the pastor of the church. In addition, because the long-term disability insurance policy mentioned in the employment agreement lapsed prior to the plaintiff's disability, he was without any disability coverage. The plaintiff claimed that the church ceased all payment of his salary and benefits.
The plaintiff sued the church and its board of deacons (the "church defendants") in 2013. The church defendants filed a motion asking the court to dismiss the case on the ground that it lacked jurisdiction to resolve an internal church dispute. The trial court agreed with the defendants and dismissed the case. The plaintiff appealed.
The at-will employment doctrine
On appeal, the church defendants argued that, in the absence of an employment contract providing for a specified term of employment, the plaintiff was an "at will employee" and could not sue for breach of contract.
The state wage and hour law
The court agreed that employees hired for indefinite periods are deemed to be "at will employees" whose employment can be terminated by the employee or employer at any time, with or without cause. But it noted that the at-will employment doctrine "does not preclude an at-will employee from suing for breach of contract with respect to benefits or compensation to which the parties contractually agreed." Because the plaintiff "is not challenging the basis for his dismissal, but only seeks to recover money and benefits owed under the employment contract he alleges he entered into with defendants, the at-will doctrine is inapplicable."
The plaintiff also alleged a claim under the state Wage and Hour Act, which provides: "Every employer shall pay every employee all wages and tips accruing to the employee on the regular payday. Pay periods may be daily, weekly, bi-weekly, semi-monthly, or monthly." Further, "any employer who violates the Act … shall be liable to the employee … in the amount of their unpaid compensation."
The court noted that the plaintiff's allegations that the contractually promised "salary" constituted wages as defined in the Wage and Hour Act, along with his allegation that the church defendants wrongfully failed to pay that salary, "sufficiently alleged a claim under the North Carolina Wage and Hour Act." The court noted that "once the employee has earned the wages and benefits under [the Act] the employer may not rescind them."
The ministerial exception doctrine
The defendants' main argument in support of their motion to dismiss the plaintiff's lawsuit was that the civil courts are barred by the "ministerial exception" and "ecclesiastical abstention" doctrine from resolving internal church disputes. The court noted that the defendants, in citing the ministerial exception and ecclesiastical abstention doctrine, "address almost exclusively the doctrine's applicability to wrongful discharge claims." However, the court noted, the plaintiff's lawsuit was not challenging the termination of his employment, but "the non-payment of contractually agreed upon compensation and benefits." Therefore, the court concluded, neither doctrine applied to the plaintiff's claims.
In affirmatively recognizing the ministerial exception, a unanimous United States Supreme Court observed in a 2012 case:
[The courts] have uniformly recognized the existence of a "ministerial exception," grounded in the First Amendment, that precludes application of [employment discrimination] legislation to claims concerning the employment relationship between a religious institution and its ministers … . By imposing an unwanted minister, the state infringes the Free Exercise Clause, which protects a religious group's right to shape its own faith and mission through its appointments. According the state the power to determine which individuals will minister to the faithful also violates the Establishment Clause, which prohibits government involvement in such ecclesiastical decisions. Hosanna-Tabor Evangelical Lutheran Church & School v. E.E.O.C., 132 S.Ct. 694 (2012).
At the conclusion of the Hosanna-Tabor ruling, the Supreme Court limited its holding to the narrow circumstance of "employment discrimination suits brought on behalf of a minister, challenging her church's decision to fire her" and specifically "expressed no view on whether the exception bars … actions by employees alleging breach of contract."
Contractual transactions, and the resulting obligations, are assumed voluntarily. Underneath everything, churches are organizations. And, like any other organization, a church is always free to burden its activities voluntarily through contracts, and such contracts are fully enforceable in civil court. Surely, a church can contract with its own pastors just as it can with outside parties. Enforcement of a promise, willingly made and supported by consideration, in no way constitutes a state-imposed limit upon a church's free exercise rights.The church defendants vigorously argued that "it is the decision of a church to hire or fire its pastor that is protected from judicial scrutiny" by the ministerial exception. But the court retorted that "defendants cite no authority and provide no argument why the ministerial exception, as articulated in Hosanna-Tabor, should apply to claims based on nonpayment of compensation and benefits." The court quoted with approval from a 2014 ruling by the Kentucky Supreme Court:
We are not presented with a situation where the government is inappropriately meddling in the selection of who will minister to the congregation. Limits on a religious institution's ability to choose—or the criteria for choosing—who will minister to its faithful are not being foisted on the religious institution … . This is a situation in which a religious institution has voluntarily circumscribed its own conduct, arguably in the form of a contractual agreement, and now that agreement, if found to exist, may be enforced according to its own terms. That cannot breach church autonomy. Arguably, instead, this exemplifies religious autonomy because religious institutions are free to set forth policies that align with their respective mission. Kirby v. Lexington Theological Seminary, 426 S.W.3d 597 (Ky. 2014).
Accordingly, "because plaintiff's complaint does not challenge the church's decision to terminate his employment, but instead seeks to enforce a contractual obligation regarding his compensation and benefits, we hold that the ministerial exception does not apply and is not a basis for dismissal of plaintiff's claims."
The ecclesiastical abstention doctrine
The "ecclesiastical abstention doctrine," which has been recognized by state and federal courts, "is a jurisdictional bar to courts adjudicating ecclesiastical matters of a church." The courts "have no jurisdiction over and no concern with purely ecclesiastical questions and controversies." The Supreme Court "has interpreted [the First Amendment's prohibition of any establishment of religion] to mean that the civil courts cannot decide disputes involving religious organizations where the religious organizations would be deprived of interpreting and determining their own laws and doctrine."
However, the court again noted that "while the courts can under no circumstance referee ecclesiastical disputes," they "do have jurisdiction, as to civil, contract and property rights which are involved in, or arise from, a church controversy." It continued:
The question of liability for the salary of a minister or pastor is governed by the principles which prevail in the law of contracts, and it is generally held that a valid contract for the payment of such a salary will be enforced … . However, the controversy must be resolved pursuant to neutral principles of law … .
Defendants seem to argue, without citing any pertinent authority, that the First Amendment of the United States Constitution immunizes, without exception, a religious institution from liability arising out of a contract between the religious institution and its ministerial employees. This unsupported assertion cannot be reconciled with [prior cases] … . A holding that a religious body must be held free from any responsibility for wholly predictable and foreseeable injurious consequences of personnel decisions, although such decisions incorporate no theological or dogmatic tenets, would go beyond First Amendment protection and cloak such bodies with an exclusive immunity greater than that required for the preservation of the principles constitutionally safeguarded … .
Although defendants cite numerous decisions holding that civil courts cannot interject themselves into ecclesiastical disputes, they again focus their argument on the bar against courts determining the propriety of a church's decision to dismiss a plaintiff from his position as pastor—an issue not present in this case … .
Accordingly, because a court can decide plaintiff's contract-based claims applying "neutral principles of law," without entangling the court in an ecclesiastical dispute or interpretation, we hold that the ecclesiastical abstention doctrine does not require dismissal of plaintiff's complaint. We, therefore, hold plaintiff has sufficiently stated claims for relief and, therefore, reverse the trial court's order dismissing plaintiff's complaint.
What this means for churches
The court concluded that while the ministerial exception bars discrimination claims by current or dismissed ministers, it does not bar breach-of-contract claims that can be resolved without recourse to church doctrine. While some other courts have disagreed with the conclusion, there is sufficient support for it that it is imperative for church leaders to obtain legal review of employment agreements and handbooks and other contractual documents to ensure that they will not give rise to breach-of-contract claims that the civil courts may be able to adjudicate. Through careful drafting, this risk can be significantly reduced, if not eliminated. Bigelow v. Baptist Church, 786 S.E.2d 358 (N.C. App. 2016).
North Carolina Appeals Court Ruling Shows Limits of Negligent Selection and Negligent Supervision
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 North Carolina appeals court ruled that a diocese could be sued on the basis of negligent supervision for a priest’s molestation of a 16-year-old boy, but dismissed a negligent hiring claim and a demand that the priest undergo a test for sexually transmitted diseases. An adult male (the “plaintiff”) claimed that when he was 16 years old a priest sexually assaulted him on multiple occasions. He further claimed that the priest had begun to “cultivate a special relationship with him, and began to groom him for sexual assault by exhibiting frequent physical contact with him through hugs and embraces.” The plaintiff alleged that the first sexual assault occurred when the priest invited him to spend the night at his home and that the second incident took place when the priest, “using his stature as a priest,” secured an invitation to spend the night at the plaintiff’s home.
The plaintiff reported the sexual abuse to church officials, resulting in the priest’s immediate suspension. The plaintiff sued the diocese, claiming that it was responsible for the priest’s actions on the basis of its negligence in hiring and supervising the priest. He also asked the court to compel the priest to undergo a test for sexually transmitted diseases.
The court began its opinion by rejecting the argument of the diocese that the First Amendment guarantee of religious freedom prevented it from resolving the plaintiff’s claims. It noted, “The dispositive question is whether resolution of the legal claims requires the court to interpret or weigh church doctrine. If not, the First Amendment is not implicated and neutral principles of law are properly applied to adjudicate the claim.” The court defined an “ecclesiastical matter” as one “which concerns doctrine, creed, or form of worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of membership … .”
The plaintiff’s lawsuit claimed that the priest had been inadequately screened. The court ruled that it was barred by the First Amendment guaranty of religious freedom from resolving this claim, noting that “the decision to hire a minister is inextricable from religious doctrine and protected by the First Amendment from judicial inquiry … . We hold that plaintiff is not permitted to proceed on any claim that the diocese was negligent in hiring the priest as such a claim would clearly be forbidden by the First Amendment.
The plaintiff claimed that the diocese was liable for his injuries on the basis of its negligent supervision of the priest. The court noted that negligent supervision required proof that the diocese was aware of, or in the exercise of reasonable care could have been aware of, prior behavior by the priest, suggesting he posed a risk of molesting minors, and that the plaintiff’s injuries were due in part to the failure by the diocese to reasonably supervise the priest. The court agreed, and rejected the position of the diocese that it had no prior knowledge that the priest posed a risk of harm to minors. It noted that the diocese was aware of the priest’s unnatural preoccupation with minors, which included spending the night with them in his home.
The plaintiff claimed that when he requested that the diocese require the priest to submit to a test for sexually transmitted diseases and inform him of the results so he could be assured of his health, the diocese refused the request. The court refused to order the diocese to compel the priest to undergo testing for a sexually transmitted disease: “Adjudication of this claim would, by definition, require the examination of church doctrine and thus constitute precisely the type of ecclesiastical inquiry courts are forbidden to make” since it would involve the question of the control by the diocese over a priest. The court noted that “this claim seeks to impose liability based on the diocese’s alleged failure to exercise authority over a priest stemming from an oath of obedience taken by him pursuant to the church’s canon law. As such, this claim directly challenges church actions involving religious doctrine and practice and cannot be adjudicated without entangling a secular court in ecclesiastical matters.”
What This Means For Churches:
This case illustrates the legal duty churches have to supervise any employee or volunteer that they know is a threat of harm to minors, or in the exercise of reasonable care should know is such a threat. In this case, the diocese claimed that it had no actual knowledge that the priest had engaged in the sexual abuse of minors in the past. But, the court concluded, this did not get it off the hook since it had knowledge of other behavior (including preoccupation with minors, and having minors spend the night in his home) that should have alerted it to a potential propensity to molest minors. Doe v. Diocese, 776 S.E.2d 29 (N.C. App. 2015).
Key point 3-04. All states permit clergy to perform marriage ceremonies. However, some states permit only "ordained" or some other classification of clergy to perform marriage ceremonies. It is important for clergy to determine if they are legally authorized to perform marriages under applicable state law, and in addition to be aware of the legal qualifications for marriage and any license and reporting requirements prescribed by state law.
A North Carolina court ruled that the failure of a couple to obtain a valid marriage license prior to their wedding will not invalidate the wedding, but may expose the officiating minister to criminal prosecution pursuant to state law.
A couple was married in 1993, and divorced in 2007. The couple later reconciled, and the wife moved back into the husband's home in 2012. They attended church every Sunday and established a relationship with their pastor. The pastor at first assumed that the couple was married, but they informed her they had divorced and reconciled, and that they intended to remarry, but "never made a solid date." According to the pastor, the couple "just said they wanted to do it, and I said, you know, give me a call and we'll get together and discuss it. And, you know, he got ill and we never had that meeting that they wanted to have."
The husband had chronic medical issues, and his wife cared for him. The husband became ill in November 2013, and required hospitalization. He was twice transferred from the hospital to a rehabilitation facility before returning to the hospital in December 2013. The couple discussed marriage while the husband was hospitalized, and decided to marry while he was still in the hospital. The wife asked a friend to be her maid of honor and witness, and she asked her son to be best man and a second witness.
The couple's pastor visited the husband in the hospital every other day, and she agreed to officiate the wedding ceremony at the couple's request. The pastor testified she had been ordained for 22 years, had performed many wedding ceremonies in her capacity as a pastor, and was fully authorized by her church to do so. She testified she performed the regular ceremony that she performs for weddings, though certain parts were shortened. She stated that both the husband and wife affirmed: "In the name of God, I take you to be my wife (or husband), to have and to hold from this day forward, for better, for worse, richer or poorer, in sickness, in health, to love and to cherish until death." The pastor then pronounced them husband and wife, and performed "the blessing of the marriage" which, she claimed was very important in her church.
However, because the couple had not procured a marriage license, the pastor testified:
It was my intent to provide what I thought was for the husband in the last days of his life some closure to something that he felt and regretted had not been done. So, it was a pastoral act on my part. I knew there wasn't a wedding license. I wasn't in there as a representative of the state, which clergy are, you know, when they're doing marriages and have the license present. So, I mean, we all knew that there was not a marriage license. So, this was a pastoral and a sacramental—I would say for me it was mainly a sacramental act, a sacrament that they wanted to know that they had … . I told them that it would not be a legal marriage if we didn't have a license, and they did not have a license. But I believe the sacrament took place, and that was what was important to them.
The wife claimed that she did not attempt to obtain a marriage license because her husband was too ill to travel to the register of deeds, and that "we didn't really think about a marriage license, we just were happy to finally get married."
The husband died on the day following the ceremony. A dispute arose over the disposition of his estate. His wife claimed that, as his spouse, she was entitled to half his estate under state probate law. But the husband's children argued that she was not his wife since the marriage ceremony was invalid due to the couple's failure to obtain a marriage license. A trial court concluded that the ceremony did "not make the wife an heir or entitle her to the share of the surviving spouse or any other interest in or from the decedent's estate." The wife appealed.
A state appeals court noted that North Carolina law specifies that "a valid and sufficient marriage is created by the consent of [the parties] who may lawfully marry, presently to take each other as husband and wife, freely, seriously and plainly expressed by each in the presence of the other … in the presence of an ordained minister of any religious denomination, a minister authorized by a church, or a magistrate; and with the consequent declaration by the minister or magistrate that the persons are husband and wife."
The court noted that it was undisputed that the couple "were able to lawfully marry at the time of the ceremony; that they seriously and freely expressed their desire to become husband and wife in the presence of each other; that the pastor was an ordained minister with authority to conduct marriage ceremonies; and that the pastor declared during the ceremony that the couple were husband and wife."
However, the court pointed out that the marriage was conducted without a license, and it quoted from the state marriage law: "No minister, officer, or any other person authorized to solemnize a marriage under the laws of this State shall perform a ceremony of marriage between a man and woman, or shall declare them to be husband and wife, until there is delivered to that person a license for the marriage of the said persons, signed by the register of deeds of the county in which the marriage license was issued or by a lawful deputy or assistant." A violation of this provision is punishable by a fine:
Every minister, officer, or any other person authorized to solemnize a marriage under the laws of this State, who marries any couple without a license being first delivered to that person, as required by law, or after the expiration of such license, or who fails to return such license to the register of deeds within 10 days after any marriage celebrated by virtue thereof, with the certificate appended thereto duly filled up and signed, shall forfeit and pay two hundred dollars ($200.00) to any person who sues therefore, and shall also be guilty of a Class 1 misdemeanor.
The court concluded that "the fact that the ceremony in the present case was conducted without a license could not serve to invalidate an otherwise properly performed ceremony and resulting marriage. There is no dispute that the ceremony was conducted in the presence of a minister authorized to perform marriages, and that that minister … declared that couple were husband and wife. There is no dispute that the couple could lawfully marry at the time the ceremony was conducted, and that they stated at the ceremony that they would take each other as "husband and wife freely, seriously and plainly expressed by each in the presence of the other … ."
The legal effect of a marriage without a valid license is not the invalidation of the marriage, but rather, criminal sanctions against a minister who knowingly performs a marriage without a license.
What This Means For Churches:
Pastors occasionally are called upon by parishioners to perform a "religious" marriage ceremony without complying with the legal requirements for a valid marriage prescribed by state law. There are many reasons for doing so. Consider the following examples:
One or both spouses is an undocumented alien.
Compliance with one or more of the civil law requirements is not possible. For example, a couple failed to obtain a license within the time prescribed by law, or one of the spouses is underage.
A pastor is asked to perform a marriage in another state in which nonresident pastors are not authorized to perform marriages.
A divorced spouse will lose alimony from her former husband if she remarries. A few states have enacted legislation that in some circumstances permits the provision of support (sometimes called "palimony") from one former partner to the other. Conditions apply.
A divorced spouse will lose insurance or other benefits in the event of remarriage.
A couple believes that their Social Security retirement benefits will be higher if they are not legally married.
A couple regards the civil law requirements for marriage as an unnecessary nuisance, or even an unwarranted government intrusion into an essentially religious ceremony.
Whatever the reason, pastors should understand that officiating at a religious marriage that fails to comply with the civil law requirements for a marriage may not be treated as a valid marriage under state or federal law, and this can have several unintended consequences, including the following:
Pastors may be subject to criminal penalties (typically a misdemeanor involving a fine or short prison sentence) under state law for performing a marriage that does not comply with state law. It is imperative for pastors to understand the possible application of such penalties before performing a religious marriage.
A religious marriage that does not comply with civil law requirements may preclude one spouse from suing for money damages based on "loss of consortium" for injuries sustained by the other.
In general, your tax filing status depends on whether you are considered unmarried or married. You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried. State law governs whether you are married or legally separated under a divorce or separate maintenance decree. An unmarried couple may not file a joint tax return as a married couple. Each files an individual tax return.
An unmarried couple cannot claim each other as an exemption on their individual tax returns.
An unmarried couple cannot claim each other as a dependent on their individual tax returns, unless certain conditions are met.
Unmarried persons cannot combine tax deductions, and cannot claim expenses paid by their partner.
The phaseout for an IRA deduction begins at a lower amount of income for unmarried persons than for married persons.
Married spouses generally avoid estate taxes upon the death of the first spouse. This is not necessarily the case with unmarried partners.
Married spouses generally can transfer property back and forth without gift taxes due to the unlimited marital deduction. This is not the case with unmarried partners.
If an employer provides health benefits to employees and their "domestic partners," the amount paid by the employer is generally a tax-free fringe benefit to employees but is taxable to unmarried partners.
An unmarried partner generally cannot receive death benefits payable as a result of the death of the other partner. There is an exception for couples who have a "common law marriage" recognized under state law. However, these marriages are recognized in only nine states, and conditions apply.
Unmarried partners can execute wills (or other legally enforceable instruments) that leave some or all of their estate to a surviving partner. However, without a will, a deceased partner's estate that is not otherwise disposed of will be distributed according to the law of intestacy. Unmarried partners have no rights under intestacy laws. A few states have passed laws that permit domestic partners to receive a share of a deceased partner's estate. In re Estate of Peacock, 788 S.E.2d 191 (N.C. App. 2016).
Key point 7-21. Embezzlement refers to the wrongful conversion of funds that are lawfully in one's possession. Embezzlement is a common occurrence in churches because of weak internal controls.
A North Carolina court upheld the conviction of a woman who embezzled funds from the church and a school district office where she worked as a bookkeeper.
In 2008, a woman (the "defendant") began work as a secretary for a public school district. Her responsibilities included purchasing food and non-food items for school meetings, training sessions, and programs. Purchases were typically conducted with a school district credit card. The school district also reimbursed employees, such as the defendant, for purchases made using personal funds and for any mileage expenses incurred.
Also beginning in 2008, defendant worked as the bookkeeper for a church. As church bookkeeper, she was responsible for paying the church's bills, keeping all financial records, and providing the church with quarterly financial reports.
In 2010, after noticing irregularities in the church's finances, the pastor contacted the local sheriff's office. A police investigation and audit revealed that defendant had used the church's checking account to pay personal debts. Defendant subsequently apologized to the church and repaid the misappropriated funds.
The school district was notified of the police investigation into defendant's misappropriation of funds from the church. Shortly thereafter, defendant's supervisor discovered her name had been forged on reimbursement forms submitted by defendant to the school district. After a police investigation of purchases defendant made using the school district credit card, she was arrested for embezzlement of school funds.
In 2011, a grand jury indicted defendant on one count of embezzlement. A jury convicted her of embezzlement. The defendant appealed, claiming that the state failed to prove embezzlement. Specifically, defendant argued that the state failed to offer substantial evidence that defendant used the school system's property for a wrongful purpose.
A state statute defines the offense of embezzlement and requires the state to present proof of the following essential elements: (1) the defendant acted as an agent or fiduciary for his principal, (2) he received money or valuable property of his principal in the course of his employment and by virtue of his fiduciary relationship, and (3) he fraudulently or knowingly misapplied or converted to his own use such money or valuable property of his principal.
The court noted that the defendant had forged signatures in obtaining payment for several items, and this "presents sufficient evidence by which a jury could infer defendant's intent to commit embezzlement."
The defendant also claimed that the trial court improperly allowed the state to present evidence of her embezzlement of funds at the church. The court cited a state law that provides, in part: "Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show that he acted in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake, entrapment or accident."
The appeals court concluded that it was proper for the trial court to admit evidence of the defendant's embezzlement of church funds under this exception, to show motive, intent, and common plan or scheme. The court noted, "the misappropriation of church funds occurred about the same time as the embezzlement of school funds; defendant held a similar position of trust in each setting which allowed her access to funds—checking account for the church, credit cards for the school; and she abused that position of trust through the unauthorized use of funds and property. The only distinction is that defendant admitted to the misappropriation of the church funds and was allowed to repay the money."
What this means for churches
This case is relevant to church leaders for the following reasons:
1. Many church leaders consider embezzlement to be a problem that "couldn't happen here." Yet, it is this very attitude that contributes to poor or nonexistent internal controls over cash handling and payment of expenses that makes embezzlement a real threat.
2. How was the defendant able to embezzle church and school funds? In most cases, by forging signatures on checks. Had the church implemented the most basic internal controls, she could not have engaged in her acts of embezzlement. Here are two internal controls that would have worked:
Require at least two signatures for all checks above a nominal amount.
Have monthly bank statements reviewed by a church official or employee having no responsibility for handling cash or writing checks.
3. Church leaders may not be discharging their fiduciary duties when they fail to implement basic internal controls over cash handling and the payment of expenses. Such a failure can result in a host of negative consequences, including criminal liability to the embezzler.
4. The legal consequences of embezzlement can be severe. In this case, the defendant was convicted of a felony. State v. Parker, 756 S.E.2d 122 (N.C. App. 2014).
Church Not Responsible for Rape of Teenage Girl by Camp Worker
Court says church and camp exercised sufficient care in selection and supervision of worker.
Richard R. Hammar
A North Carolina appeals court ruled that a church was not responsible on the basis of negligence for the rape of an adolescent camper by an adult worker at a church camp. The court concluded that the church and camp had exercised sufficient care in the selection and supervision of the worker to rebut the allegation of negligence. A 16-year-old female (the “victim”) attended a summer camp owned and operated by a national religious denomination and a regional affiliate (the “church defendants”). On the last night of camp, an activity called “the Game” was conducted. The purpose of the Game was for campers to sneak around camp staff members through a wooded area, in the dark, and ring a bell located at the top of a hill. The Game was restricted to senior high campers. All participants were required to play with partners for safety purposes. The victim and a friend were partners, and at some point during the evening they met two male camp staff members. The victim’s friend and one of the staff members left together, leaving the victim and the other staff member. The victim claimed that the staff member raped her.
After this incident, the victim returned to a camp dining hall. She did not report what happened to anyone at the camp or make any complaint regarding the assault until several months later. When confronted with the allegation, the assailant initially denied the sexual encounter but later claimed the encounter was consensual.
The victim and her father sued the church defendants, claiming they were responsible for the rape on the basis of negligence in their hiring, retention, and supervision of the staff member. In addition, the complaint alleged the defendants negligently failed to provide the victim with a safe environment when it conducted the Game. Plaintiffs also alleged that, as a result of defendants’ negligence, the victim suffered severe emotional distress. A trial court dismissed the claims against the church defendants, and the plaintiffs appealed.
The appeals court began its opinion by noting that negligence requires proof that a defendant owed the plaintiff a duty of reasonable care, and a breach of that duty. The court agreed with the plaintiffs that the church defendants owed the victim a duty of care:
We hold that camps and their employees have a duty to their campers to exercise the same standard of care that a person of ordinary prudence, charged with the duty of supervising campers, would exercise under the same circumstances. Moreover … this duty of care is relative to the camper’s maturity. Thus, the foreseeability of harm to the individual camper is the relevant test which defines the extent of the duty to safeguard campers from the dangerous acts of others.
The plaintiffs insisted that the church defendants breached this duty of care in the following ways: (1) the Game occurred in a wide, heavily wooded area; (2) the Game occurred late at night; (3) adult camp staff participated in the Game with minor campers; and (4) the executive director, assistant director, and camp director did not supervise the Game.
But, the court pointed out, there were several facts supporting the church defendants’ claim that they did not breach a duty of care:
At the time the Game was played, the victim was 16 years old. Defendants specifically restricted the Game to senior high campers and required them to be with a partner while playing the Game for safety purposes. In addition, adult camp counselors and staff members were present as participants in and supervisors of the Game. These procedural safeguards adequately establish that defendants acted reasonably in their supervision of the Game, particularly in light of the maturity level of the senior high campers who participated in it. Thus, defendants did not breach their duty to the victim by conducting the Game.
The plaintiffs also claimed that the church defendants were negligent because they failed to adequately train the staff member who raped the victim. Specifically, they alleged that defendants (1) failed to have written rules prohibiting relationships between staff and campers; (2) failed to teach the assailant and staff that they should never be alone with a camper; and (3) failed to communicate that certain types of interactions with campers were prohibited. To support their allegations, the plaintiffs submitted an affidavit from a summer camp consultant and author of a book explaining the best practices for camp staff. The affidavit states:
The policies and procedures [of defendants’ camp] are below the standard of care applicable to a summer camp and do not conform to industry best practices. They do not include a clear statement prohibiting a staff member from being alone with a camper, and they demonstrate a disregard for the principle that at least two staff members must be present when working with campers. There was a clear lack of training and ongoing culture of improving and learning with an emphasis on the safety of children or the inappropriateness of staff to camper relationships.
The court noted that the consultant’s opinion was based “solely on his review of the camp’s written policies and procedures,” and that “several of defendants’ staff members testified that they were orally instructed that two staffers must be present at all times when dealing with campers and that they were also warned to be very careful about any physical or romantic relationships with campers.” Most importantly, the assailant himself submitted an affidavit in which he stated that he knew his conduct with the vicitm was “against camp policies,” and “inappropriate and prohibited.” In summary, while the consultant’s affidavit “may create an issue of fact regarding whether defendants had an adequate written policy regarding sexual relationships between camp staff and campers, it does not establish that no such policy existed. On the contrary, the undisputed evidence is that camp staff members were made aware that sexual relationships with campers were prohibited.”
The court noted that prior to his employment, the assailant provided a personal disclosure indicating he had no criminal convictions, that he had never been dismissed, suspended, or asked to resign from a job, and that he had never had a complaint lodged against him for sexual molestation, abuse, or harassment. Additionally, the church defendants checked the National Sex Offender Registry to ensure he was not disqualified from employment. Defendants also received a favorable recommendation in a telephone interview with a trusted reference. Finally, the assailant was hired in 2007 and his employment was very positive that summer. Based on the prior investigation, and his positive performance in 2007, he was re-hired for the summer of 2008 (the summer that the rape occurred).
The court concluded:
Taken together, this undisputed evidence demonstrates as a matter of law that defendants acted reasonably in its training and hiring of the assailant and that his conduct which harmed the victim was unforeseeable by defendants … . Defendants did not breach their duty of care to the victim by failing to maintain a safe environment at the camp. There was no evidence which would have allowed defendants to anticipate the assailant’s actions towards the victim or take additional reasonable steps to prevent them. Since there are no genuine issues as to any material facts, the trial court properly granted defendants’ motion for summary judgment.
What This Means For Churches:
This case is instructive, for it illustrates the kinds of precautions that churches, camps, and youth-serving charities can take to satisfy their duty of care in the selection of youth workers and the supervision of youth activities. In summary, the court concluded that the church defendants had not breached their duty of care to the victim, and therefore were not responsible on the basis of negligence for the staff member’s conduct, because of the following factors:
The church defendants restricted the Game to senior high campers.
Participants in the Game were required to be with a partner.
Adult camp counselors and staff members were present as participants in, and supervisors of, the Game.
While the camp’s written policies and procedures may have been inadequate, several staff members testified they were orally instructed that two staffers must be present at all times when dealing with minor campers.
Adult camp staffers were orally warned to avoid any physical or romantic relationships with minor campers.
The church defendants used a written application when selecting adult camp staff, which asked applicants to disclose (1) any criminal convictions; (2) if they had ever been dismissed, suspended, or asked to resign from a job; and (3) if they had ever had a complaint lodged against them for sexual molestation, abuse, or harassment.
The church defendants checked the National Sex Offender Registry to ensure adult camp staffers were not registered sex offenders.
The church defendants received a favorable recommendation in a telephone interview with a trusted reference.
The assailant had a track record. He had been hired for the previous camp season, giving the church defendants an opportunity to assess his fitness and suitability for working with minors. His performance was exemplary, with no hint of misconduct. Nowlin v. Moravian Church in America, 745 S.E.2d 51 (N.C. App. 2013).
Pastor deemed responsible for total amount of delinquent payroll taxes.
Richard R. Hammar, J.D., LL.M., CPA
Key point. Federal law requires churches to comply with several payroll tax reporting obligations. Almost every church will be subject to at least some of these rules. Many states have similar provisions. Church leaders must take these rules seriously, since penalties are assessed for noncompliance. For example, church officers may be personally liable for a penalty equal to the amount of payroll taxes that are not withheld or deposited. It is essential for church leaders to understand these rules.
A federal district court in North Carolina ruled that a pastor was responsible for 100 percent of payroll taxes that her employing church failed to withhold or pay over to the government. A pastor filed for bankruptcy protection from her creditors. The IRS filed a claim for $88,000 with the bankruptcy court based on its assertion that the pastor was liable for $88,000 in unpaid payroll tax obligations of her church since she was a “responsible person” liable for unpaid payroll tax obligations. The pastor asked the court to reject the IRS claim on the grounds that she was not a “responsible person,” and that any recognition of the IRS claim was barred by the First Amendment’s guaranty of religious freedom. The bankruptcy court rejected the pastor’s defenses, and the case was appealed to a federal district court.
The court began its opinion by noting that “federal law requires employers to withhold federal income taxes and Social Security taxes from employee wages and remit those taxes to the United States. The employer holds these taxes in trust for the United States.” And, although the employer “remains liable for the unpaid payroll taxes, its officers and agents may incur personal liability for the unpaid payroll taxes.” Section 6672 of the tax code states:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall … be liable to a penalty equal to the total amount of tax evaded, or not collected, or not accounted for and paid over.
In order for an individual to be held personally liable under this section: “(1) the party assessed must be a person required to collect, truthfully account for, and pay over the tax, referred to as a ‘responsible person’; and (2) the responsible person must have willfully failed to insure that the withholding taxes were paid.”
The court noted that the question of who within an organization is a “responsible person” required to collect and pay the payroll taxes to the United States, is a “pragmatic, substance-over-form inquiry into whether an officer or employee so participated in decisions concerning payment of creditors and disbursement of funds that he effectively had the authority—and hence a duty—to ensure payment of the corporation’s payroll taxes.” In other words, the “crucial inquiry is whether the person had the effective power to pay the taxes—that is, whether he had the actual authority or ability, in view of his status within the corporation, to pay the taxes owed.”
When making the determination of who is a “responsible person,” courts have considered several factors which are indicative of this authority, including whether the employee:
(1) served as an officer of the company or as a member of its board of directors; (2) controlled the company’s payroll; (3) determined which creditors to pay and when to pay them; (4) participated in the day-to-day management of the corporation; (5) possessed the power to write checks; and (6) had the ability to hire and fire employees. No single factor is controlling or dispositive in the responsible person inquiry.
The bankruptcy court concluded, and the district court agreed, that the pastor was a responsible person. In support of this conclusion, both courts referenced the bylaws of the pastor’s church, which specify that the pastor shall act “as CEO over all spiritual and business matters.” Additionally, the bylaws provide that the pastor shall be the “Chief Executive Officer of the said organization and shall be a continuing member of all boards and committees.” The pastor “shall be an ex-officio member of all standing committees, and shall have the general powers and duties of supervision and management usually vested in the office of president of a corporation.”
freedom of religion
The pastor argued that the courts were barred by the First Amendment guaranty of religious freedom from making a determination regarding “responsible person” status on the basis of a church’s bylaws. The court acknowledged that “the civil courts are obliged to play a limited role at times in resolving church disputes, the limited role being premised on First Amendment principles that preclude a court from deciding issues of religious doctrine and practice, or from interfering with internal church government. First Amendment values are jeopardized when church litigation turns on the resolution by civil courts of controversies over religious doctrine and practice.” However, the court concluded that the pastor “has not shown how mere citation of the bylaws in the bankruptcy court’s order is a challenge to the ecclesiastical decisions or religious customs of the church in violation of the [First Amendment]. In its most favorable light, the pastor asks the court to make the logical leap to hold that the mere citation of the church bylaws as part of the responsible person analysis under section 6672 is prohibited by the First Amendment. The case law, while limited in this specific context, does not appear to support this argument.”
The court also stressed that the bankruptcy court’s analysis of the church bylaws
was limited to a few paragraphs …. The bankruptcy court noted that the bylaws provide that the pastor shall be the CEO and a member of all boards and committees and … shall execute in the name of the church all deeds, bonds, mortgages, contracts and other documents, and have the powers and duties of supervision and management usually vested in the office of president of a corporation ….
The bankruptcy court interpreted the bylaws as authorizing the pastor to have decision making authority and supervision over business matters. The pastor argues that this interpretation now forces her to concern herself with secular affairs. Putting aside the fact that the plain language of the bylaws suggests that the pastor does concern herself with such affairs, the bankruptcy court did not base its decision on the bylaws alone. Contrarily, close examination of the bankruptcy court’s order reveals that it placed great emphasis on what the pastor actually did as the church’s pastor, including co-signing a $178,000.00 construction loan, disbursing and withholding payments to vendors and staff, signing a corporate resolution authorizing a bank account which authorized her to sign checks on behalf of the church, and hiring and firing employees.
Appellants do not contest the bankruptcy court’s consideration of (the pastor’s) actions, nor do they contest the documentary evidence showing that she was a responsible person with authority, a person required to collect, truthfully account for, and pay over GTI’s taxes. While appellants argue that the bankruptcy court impermissibly interpreted the GTI bylaws in such a way as to infringe upon appellants’ First Amendment rights, the court finds no support in the case law that the bankruptcy court’s findings or analysis did anything of the kind. As set forth above, appellants’ First Amendment argument is not supported by the case law appellants cite, especially in light of the bankruptcy court’s consideration of several other significant factors in its analysis finding (the pastor) to be a responsible person.
What This Means For Churches:
Section 6672 contains no exemption for church officers or employees. As a result, any church officer or employee having the authority to pay withheld taxes to the government, is potentially liable for 100 percent of the taxes owed if the church for any reason fails to withhold or pay them. The court enumerated several functions of the pastor that made her a “responsible person” liable for the unpaid payroll taxes. In addition, the court ruled that the First Amendment guaranty of religious freedom is not violated if a court examines a church’s bylaws to determine if a pastor, or other church employee, is a “responsible person.” Vaughn v. Internal Revenue Service, 2012-2 U.S.T.C. ¶50,487, (E.D.N.C. 2012).
Key point 8-08.7. Ministers who are employed to perform ministerial services, and who are paid a salary that meets or exceeds the "salary test," are professional employees exempt from the provisions of the Fair Labor Standards Act. Ministers not compensated on a salary basis, or who earn a salary below the salary test, may not be covered by the Act. Department of Labor regulations suggest that the Act does not apply to any ministers, and a few federal courts have ruled that the so-called ministerial exception prevents the application of the Act to ministers.
A North Carolina court ruled that it was barred by the First Amendment guaranty of religious freedom from resolving a priest's compensation dispute with his diocese.
A Catholic priest claimed that his diocese had failed to assign him to a suitable position and failed to properly compensate him for his services. He submitted his grievance to the Vatican's "Congregation for Clergy." The Congregation later instructed the diocese to "provide some priestly ministry for this priest and ensure that he is henceforth to be provided with an adequate means of livelihood."
The priest alleged that the diocese never followed this mandate, and has continued to refuse to give him either an assignment or a salary. As a result, he sued the diocese, claiming that it had violated the North Carolina Wage and Hour Act. The Act provides that employers must "pay every employee all wages and tips accruing to the employee on the regular payday," and that "employees whose employment is discontinued for any reason shall be paid all wages due on or before the next regular payday either through the regular pay channels." The priest alleged that the diocese had violated these provisions by refusing to comply with the decision and instruction of the Congregation." A trial court dismissed the lawsuit, and the priest appealed.
In affirming the trial court's dismissal of the lawsuit, the appeals court observed:
The First Amendment to the United States Constitution prohibits any law "respecting an establishment of religion, or prohibiting the free exercise thereof." The United States Supreme Court has interpreted this clause to mean that the civil courts cannot decide disputes involving religious organizations where the religious organizations would be deprived of interpreting and determining their own laws and doctrine. Thus, the dispositive question is whether resolution of the legal claim brought against a religious organization requires the court to interpret or weigh church doctrine.
The court concluded that any resolution of the priest's claims would require the court "to determine, under ecclesiastical law, the compensation to which the priest is entitled as an adequate means of livelihood and the appropriate necessities as envisioned in the Code of Canon Law." Such a determination "is beyond the jurisdiction of the North Carolina courts and we must affirm the order of the trial court to dismiss his claim."
What this means for churches
This case illustrates a principle that has been recognized by many courts: The First Amendment guaranty of religious freedom bars the civil courts from resolving compensation disputes between clergy and churches, especially when such disputes implicate religious doctrine. Tarasi v. Jugis, 692 S.E.2d 194 (N.C. App. 2010).
Church without “never-alone” policy is held responsible for children who were sexually abused by pastor.
Richard R. Hammar
Key point 10-04.2. Some courts have found churches not liable on the basis of negligent selection for the molestation of a minor by a church worker since the church exercised reasonable care in the selection of the worker.
Key point 10-09.2. Some courts have found churches not liable on the basis of negligent supervision for a worker’s acts of child molestation on the ground that the church exercised reasonable care in the supervision of the victim and of its own programs and activities.
Key point 10-14. Churches may be liable on the basis of “ratification” for the unauthorized act of a minister or other church worker if it is aware of the act and voluntarily affirms it.
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.
* An Ohio court rejected the assertion of two individuals, who had been sexually molested by an associate pastor when they were minors, that their church and senior pastor were liable for the associate pastor’s acts as a result of their failure to implement a child abuse policy forbidding staff members to be alone with children. A church used its senior pastor’s son (the “defendant”) in various volunteer positions, including music director. The defendant also was appointed associate pastor so that he could perform pastoral duties if his father, for health reasons, was unable to do so. However, the defendant was never ordained as a pastor, and was not an employee of the church and consequently received no salary or wages.
The defendant raped a minor on church premises, and molested another minor over the course of several months with some of these acts occurring on church premises. He was charged with various felony counts, and pled guilty. The parents of the two victims (the “plaintiffs”) sued the church, claiming that it was responsible for the defendant’s acts on the basis of negligence since it failed to have a church policy in place to protect children against sexual misconduct. The plaintiffs also claimed that the senior pastor and church were responsible for the defendant’s acts on the basis of negligent supervision and retention, and that a state denominational agency was liable on the basis of negligence. The trial court dismissed all claims against the defendants, and the plaintiffs appealed.
The defendant raped a minor on church premises, and molested another minor over the course of several months with some of these acts occurring on church premises …. The parents of the two victims sued the church.
failure to have a sexual misconduct policy
On appeal, the plaintiffs argued that the senior pastor and church were negligent in failing to have a church policy in place to protect children against misconduct of adult church officials such as the defendant. They claimed that the pastor and church owed the victims a duty to protect them from the criminal acts and that they breached that duty by failing to have in place a policy regarding the protection of children from sexual misconduct of church officials. Such policy, the plaintiffs alleged, should have prohibited adults from being alone with children.
In support of their claim that the pastor and church had a duty to have a policy or protective measures in place to protect the church’s youth members, the plaintiffs cited five items of evidence:
First, a church deacon testified that a few years prior to the defendant’s sexual assaults, the church received notice from its insurance company that it wanted the church to implement “something to safeguard the children from inappropriate behavior.”
Second, a pastor of another church testified that his church had a policy regarding contact between adults and children in his church, that one of the purposes of the policy was to protect the children, and that he believed that it was “common practice” to have such a policy in place. The policy stated, in part, that “two adults should be present during any activity involving youth or children.”
Third, the minutes of a church membership meeting contained a comment by an officer of a state denominational agency to the effect that no person should ever drive an underage child or young person home and that no one person should ever be in the home of another person alone.
Fourth, an officer of a state denominational agency testified that churches should have in place a policy addressing the danger of contact between minor children and members of the church.
Fifth, the church and its senior pastor were “put on notice” of the need for a policy designed to protect young church members several years before, when the defendant informed his father that he was being investigated by the state Department of Youth Services, his employer, based on an allegation that pornography was found on his work computer.
“While it may well be advisable to have such a policy in place, the plaintiffs have not provided this court with any authority mandating that churches adopt such a policy.”
Despite this evidence, the court concluded that the plaintiffs had failed to cite any authority for the proposition that the church and its senior pastor had a duty to have a policy in place to protect the children of the church. The court concluded:
While it may well be advisable to have such a policy in place, the plaintiffs have not provided this court with any authority mandating that churches adopt such a policy or that it was a common standard of care and practice among churches to have such a policy. Nor is this court aware of any such authority. While the plaintiffs note that some churches have implemented such a policy, there is no evidence that such churches are not the exceptions rather than the rule. There is no evidence in the record as to the percentage of churches that have this type of policy. Moreover, there was no testimony from anyone in this case that such a policy was required by law.
With regard to the previous investigation by the defendant’s employer resulting from the discovery of pornography on his work computer, the court noted that he was never disciplined and continued working until right before his arrest related to this case. Further, the court concluded that “even if the defendant did possess pornography on his work computer, it is not reasonably foreseeable that he would sexually abuse a child.”
The court concluded:
We find that plaintiffs have not presented any evidence that the church and its senior pastor either knew or should have anticipated the defendant’s sexual misconduct. We concur with the trial court that a reasonably prudent person would not anticipate that a child would be sexually assaulted whenever left alone with an adult. There is no evidence that any similar acts were committed by the defendant in the past. Moreover … [the plaintiffs] testified that they believed the defendant was a good person and had no reason to believe that he was a threat to their daughters. During the time while they were members of the church they never complained to anyone at the church about the defendant or alleged to anyone at the church that he had engaged in inappropriate conduct with their daughters. During their depositions, both plaintiffs testified that prior to leaving the church, they thought the defendant was a trustworthy person. In short, we find that the plaintiffs failed to present evidence that the church and its senior pastor should have foreseen that the defendant would sexually assault anyone.
negligent supervision and retention
The court rejected the plaintiffs’ claim that the church and senior pastor were liable on the basis of negligent supervision and retention, since they had no prior knowledge of any sexual misconduct by the defendant. It pointed out that the plaintiffs themselves testified that they never voiced any complaints about the defendant and that they believed that he was a good person who would not hurt children. The plaintiffs further testified that (1) they were not aware of anyone who questioned the defendant’s reputation or character; (2) that they never told the defendant not to spend time with their children or be alone with them; and (3) up until the disclosure of the abuse they had no reason not to trust the defendant.
The plaintiffs claimed that the church “ratified” the defendant’s conduct by conducting a candlelight vigil at the jail where the defendant was incarcerated, by using a church bus to transport members to the vigil, and by permitting the defendant to preach a sermon from his cell on the power of forgiveness and love.
The court disagreed that these acts amounted to a ratification of the defendant’s wrongful acts by the church. It pointed out that at the time of the vigil the defendant had not been convicted and his father and some other members of the congregation believed that he was innocent. Moreover, “there is no evidence that sexual assault and battery was condoned at this event.”
negligence by the state denominational agency
The plaintiffs asserted that the state denominational agency with which the church was affiliated was negligent in “failing to mandate and provide policies and procedures regarding contact between adults and children.” The court disagreed, noting that the plaintiffs had failed to cite any authority for the proposition that the denominational agency had a duty to require churches to implement such a policy.
In addition, the plaintiffs had failed to present any evidence that the denominational agency either knew of, or should have known of, or anticipated that the defendant would engage in the intentional sexual acts that he did, since “there is no evidence in the record that the defendant committed any similar acts in the past.”
Plaintiffs insisted that based on occurrences of sexual misconduct between a church official and young congregation members that have been reported in the media since the 1980s, the denominational agency could have foreseen that such misconduct could occur in this case. The court disagreed since such anecdotal reports “are not evidence.” Further, “there is no evidence that the denominational agency had any reason to foresee the sexual misconduct that occurred in this case. There is no evidence that the defendant committed similar acts in the past.”
Application. This case is instructive for the following reasons:
1. It demonstrates the risks that are sometimes associated with the selection of a senior pastor’s child as a pastoral staff member. The problem that sometimes arises in such cases is that church staff may feel awkward in conducting background checks on the pastor’s child, which can lead to a relaxation of the screening procedures that would apply to anyone else. Of course, this can lead to the selection of a person whose undisclosed background makes him or her a risk of harm to others. And, to the extent that the church relaxed its screening procedures in the selection of such a person, this will help establish that the church was negligent in selecting the person. The takeaway point is that churches should apply the same screening standards to everyone, regardless of position or relationship.
2. The court acknowledged that it would have been desirable for the church in this case to have adopted a child protection policy prohibiting adult workers from being alone with a minor, but it concluded that the church’s failure to do so was not negligent since the plaintiff had failed to prove that such a policy was a common and prevailing church practice. Research conducted by Church Law & Tax Report demonstrates that such a policy is increasingly common among churches, but the plaintiffs were unaware of this evidence. Future plaintiffs may be more thorough in their research, and come across the results of surveys conducted by Church Law & Tax Report and others indicating that such policies are common. If so, this will help establish the “community standard of care.” This is significant, since negligence generally is defined as a failure to comply with the community standard of care. As more and more churches adopt child protection policies, this will make it easier for plaintiffs to demonstrate that churches failing to adopt such a policy are negligent.
The bottom line is that it is important for church leaders to be familiar with trends in the risk management practices of churches, since a failure to comply with, or exceed, those practices may constitute evidence of negligence. These trends are regularly reported in this newsletter.
Research conducted by Church Law & Tax Report demonstrates that such a policy is increasingly common among churches, but the plaintiffs were unaware of this evidence. Future plaintiffs may be more thorough in their research.
3. The court concluded that the discovery of pornography on the defendant’s work computer at his place of secular employment did not make the church negligent in hiring him since “even if the defendant did possess pornography on his work computer, it is not reasonably foreseeable that he would sexually abuse a child.”
4. The court concluded that the church was not negligent in hiring, supervising, or retaining the defendant since it was aware of no information suggesting that he was a risk to minors. This demonstrates the importance of taking seriously all allegations of sexual misconduct involving church volunteers and employees who work with minors. Failure to take these allegations seriously, and to respond appropriately to them, greatly increases a church’s risk of liability based on negligent hiring, supervision or retention should the person who is the subject of the allegations injure others by engaging in similar acts of misconduct.
5. The court concluded that the state denominational agency with which the church was affiliated had no legal duty to require churches in its jurisdiction to “mandate and provide policies and procedures regarding contact between adults and children.” The court based this conclusion on three considerations: (1) The plaintiffs had failed to cite any authority for the proposition that the agency had a duty to require churches to implement such a policy; and (2) the plaintiffs had failed to present any evidence that the denominational agency either knew of, or should have known of, or anticipated that the defendant would engage in the intentional sexual acts that he did.
6. The court concluded that media reports on the sexual molestation of minors by clergy did not impose a duty on all denominational agencies to mandate that affiliated churches adopt child protection policies based on the foreseeability of harm, since such anecdotal accounts did not amount to admissible evidence. Further, there was no evidence that the denominational agency in this case “had any reason to foresee the sexual misconduct that occurred in this case. There is no evidence that the defendant committed similar acts in the past.”
7. A dissenting judge observed:
While there may be no record evidence as to the percentage of churches that have such a policy in place, [a pastor of another church testified that] not only did his church have such a policy, but also that having a policy was common practice. The fact that the church received notice from its own insurance company requesting it implement a policy to safeguard children from inappropriate behavior is itself recognition of the foreseeability of harm. The advisability of having such a policy in effect was specifically communicated to the church during its church business meeting by [a denominational officer].
It is difficult to ignore the numerous reported admitted instances of sexual child abuse committed by members of the clergy toward members of their congregation. I suspect, indeed do not doubt, many other instances go unreported. Those members of the clergy and others the church place in positions of authority or supervision over the children in their church can easily and naturally develop a unique relationship of trust and dependency. In that sense, they are not unlike the intimate relationship that can develop between a teacher and student, or a coach and athlete. The record does reflect several members of the clergy and the church’s insurance company have recognized the inherent risk. I believe this court should also. 2010 WL 1254632 (Ohio App. 2010).
Sexual injuries to three minors at a church preschool aren’t covered by church’s insurance policy.
Richard R. Hammar
Key point 10-16.7. A liability insurance policy provides a church with a legal defense to lawsuits claiming that the church is responsible for an injury, and it will pay any adverse settlement or judgment up to the limit specified in the policy. Liability insurance policies exclude a number of claims. For example, some policies exclude injuries based on criminal or intentional acts and claims for punitive damages. A church has an obligation to promptly notify its insurer of any potential claim, and to cooperate with the insurer in its investigation of claims.
* A federal district court in North Carolina ruled that an insurance company properly denied coverage to a church for sexual injuries to three minors at a church-owned preschool due to a sexual misconduct exclusion in the church’s insurance policy. A guardian of three minor children sued a church, its preschool, and a regional denominational agency (the “church defendants”) after learning that the victims had been sexually assaulted by a 4-year-old preschool enrollee who was “acting out” sexual activity. The lawsuit alleged that the preschool director approved the perpetrator’s enrollment in the preschool, despite being informed that he “had been sexually abused and had a history of acting-out sexually with other children.” The lawsuit further alleged that the church defendants were negligent in their supervision of the perpetrator, thereby allowing him to continue this inappropriate “acting-out sexually” on other members of his preschool class.
A question arose as to the coverage of the victims’ injuries under the church’s liability insurance policy. The parties asked a federal court to issue a “declaratory judgment” addressing the availability of insurance under the church’s policy. The policy contained the following “abuse and molestation” exclusion:
This insurance does not apply to “bodily injury,” “property damage,” or “personal and advertising injury” arising out of:
The actual or threatened abuse or molestation by anyone of any person while in the care, custody, or control of any insured; or
Reporting to the proper authorities, or failure to so report;
Retention of a person whom any insured is or ever was legally responsible and whose conduct would be excluded [by this exclusion].
The church defendants claimed that this exclusion was ambiguous because the terms “abuse” and “molestation” were not defined by the policy, and that these terms did not apply to the behavior engaged in by the 4-year-old perpetrator since “to abuse” or “to molest” requires an element of intent that young children do not possess.
The court concluded that the abuse and molestation exclusion was not ambiguous. It noted that “there is nothing in the language of the exclusion to indicate that the alleged abuse must be sexually motivated or calculated to arouse the person or persons involved in the offending conduct; the [perpetrator’s behavior] falls within the plain meaning of the words ‘abuse’ and ‘molestation’ irrespective of the [his] subjective state of mind.”
The church defendants also argued that the exclusion did not apply to them since they had not engaged in abuse or molestation. Rather, they were being sued for negligence in the enrollment and supervision of the perpetrator. The court disagreed: “The exclusion applies to the injury at issue, not the pleaded cause of action. In other words, the issue is whether the alleged bodily injury arose from sexual molestation—not whether another individual’s alleged negligence arose out of the sexual molestation …. The exclusion specifically applies to bodily injury arising out of abuse or molestation by anyone of any person. Here, the injuries to minor plaintiffs are a result of molestation, and therefore fall within the exclusion.”
Application. According to our research, sexual molestation of minors remains one of the leading causes of church litigation. Yet, some church insurance policies exclude these cases from coverage, meaning that the church must retain and compensate its own attorneys, and pay any settlement or judgment. Church leaders should carefully review their general liability policy and determine if it contains such an exclusion. If it does, contact your insurance agent to request that sexual misconduct be added to the policy. This usually requires a separate endorsement and payment of an additional premium. Failure to confirm coverage for sexual misconduct exposes a church to potentially significant defense costs and damages.
It is also important to note that the court rejected the church defendants’ argument that the exclusion did not apply to them since they were being sued for negligence, not abuse or molestation. Erie Insurance Exchange, 690 F.Supp.2d 410 (W.D.N.C. 2010).
The Ministerial Exception and Racial Discrimination
Civil courts are prevented from applying employment laws to ministers.
Richard R. Hammar, J.D., LL.M., CPA
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.
A North Carolina federal court ruled that it was barred by the First Amendment guaranty of religious freedom from resolving a minister’s claim that his denomination engaged in unlawful racial discrimination in violation of Title VII of the Civil Rights Act of 1964. An African-American minister (the “plaintiff”) was employed by a state synod (“regional church”) as a missions director. He claimed that he was subjected to racial discrimination and a hostile work environment and that the conditions became so intolerable that he was ultimately forced to resign. He filed a claim of discrimination with the United States Equal Employment Opportunity Commission (EEOC), but the EEOC dismissed this claim on the basis of the so-called “ministerial exception” which prohibits civil courts and agencies from resolving employment disputes between churches and clergy. The plaintiff thereafter sued his denomination in federal court, alleging racial discrimination and hostile work environment under Title VII of the Civil Rights Act of 1964, as well as state law claims for constructive discharge, intentional infliction of emotional distress, and negligent infliction of emotional distress.
The court dismissed the plaintiff’s claims on the basis of the ministerial exception. It noted that his responsibilities as missions director were “directly involved in fulfilling the church’s purpose of receiving, establishing, and supporting congregations to bear witness to the Gospel and to carry out God’s mission. The specific responsibilities … include working to advance and spread the Gospel and assisting other individuals to carry on outreach work, which includes developing new congregations and supporting existing congregations and ministries.”
The court explained the ministerial exception “precludes application of Title VII to employment decisions relating to members of the clergy and others whose primary duties are religious in nature.” It quoted from an earlier federal appeals court ruling which it described as the “seminal case on the ministerial exception”:
The relationship between an organized church and its ministers is its lifeblood. The minister is the chief instrument by which the church seeks to fulfill its purpose. Matters touching this relationship must necessarily be recognized as of prime ecclesiastical concern. Just as the initial function of selecting a minister is a matter of church administration and government, so are the functions which accompany such a selection. It is unavoidably true that these include the determination of a minister’s salary, his place of assignment, and the duty he is to perform in the furtherance of the religious mission of the church. McClure v. Salvation Army, 460 F.2d 553 (5th Cir.1972).
The court noted that the ministerial exception has been applied not only to ordained ministers, but also by non-ordained individuals whose primary duties “consist of teaching, spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship.” It concluded that the plaintiff was a minister for purposes of the ministerial exception, and as a result his lawsuit had to be dismissed:
As mission director, plaintiff’s duties clearly consisted of “teaching, spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship.” Moreover, many of his allegations relate to office space, meeting attendance, presentation of work plans, telephone messages, leadership selection, lack of communication, and the approval of religious groups. These allegations relate directly to internal church governance, which the First Amendment protects from outside interference. d in McClure,
The court again cited the McClure case:
An investigation and review of such matters of church administration and government as a minister’s salary, his place of assignment and his duty, which involve a person at the heart of any religious organization, could only produce by its coercive effect the very opposite of that separation of church and State contemplated by the First Amendment.
The court also ruled that the ministerial exception required a dismissal of not only the plaintiff’s Title VII claim, but also all of his state law claims.
In rejecting the plaintiff’s argument that the ministerial exception did not apply in this case because the court would not have to intrude upon the spiritual functions of the church in addressing his claims, the court observed: “It is not the court’s role to determine whether the church had a secular or religious reason for the alleged mistreatment of [plaintiff]. The only question is that of the appropriate characterization of [his] position.” Gomez, 2008 WL 3202925 (M.D.N.C. 2008).
This Recent Development first appeared in Church Law & Tax Report, July/August 2009.
Court rules that church employee’s behavior does not qualify as harassment.
Richard R. Hammar, J.D., LL.M., CPA
Key point. Sexual harassment is a form of sex discrimination prohibited by Title VII of the Civil Rights Act of 1964. It consists of both “quid pro quo” harassment and “hostile environment” harassment. Religious organizations that are subject to Title VII are covered by this prohibition. An employer is automatically liable for supervisory employees’ acts of harassment, but a defense is available to claims of hostile environment harassment if they have adopted a written harassment policy and an alleged victim fails to pursue remedies available under the policy. In some cases, an employer may be liable for acts of sexual harassment committed by nonsupervisory employees, and even nonemployees.
A federal court in North Carolina dismissed a church employee’s allegations of sexual harassment on the ground that the offending behavior, even if true, was not sufficiently severe to amount to harassment. A church hired a woman (the “plaintiff”) as its director of music. As part of her job duties, the plaintiff worked with various musicians and was the staff member in charge of monitoring electronic equipment usage. A few years later the church hired a seminary student (Tim) as its youth director. The plaintiff worked with Tim occasionally, and saw him at weekly staff meetings. She later met with the church’s senior pastor, pursuant to the church’s personnel policy, and made the following allegations of sexual harassment:
• Prior to a worship service, Tim placed a photograph of a male bodybuilder wearing a Speedo bathing suit in the plaintiff’s music score. He later asked her if she had received his “surprise.”
• Soon after the picture incident, Tim showed the plaintiff a website project he had been working on for the church youth. When the plaintiff informed him that the technology committee would have to approve the project, he became angry and called her a “stupid [expletive].”
• While preparing for the trip to New York City, the plaintiff discovered a ticket to the “museum of sex,” which is located in New York City, in her office mailbox. Upon her return from New York, Tim asked her if she had received the coupon and if she had used it.
• The plaintiff went to Tim’s apartment to pick up her daughter from a church youth event. Tim suggested that her daughter and another member of the church youth group use his bedroom.
• At some point during his employment, Tim returned a computer to the plaintiff which had a copy of a movie (rated PG-13) in the DVD drive. The plaintiff’s husband viewed the film and found it offensive due to its sexual content.
The plaintiff alleged a host of other problems with Tim, and felt verbally and physically threatened by him. She sought psychiatric care and was treated for stress, anxiety and depression. The church never formally disciplined Tim for his behavior. However, his behavior led to a decision by church leaders not to renew his employment as youth director.
The plaintiff resigned her position at the church, and then sued the church for sexual harassment in violation of Title VII of the Civil Rights Act of 1964. Title VII makes it unlawful for an employer to discharge an employee or discriminate in “compensation, terms, conditions, or privileges of employment” because of the employee’s sex. The workplace environment is one of the terms and conditions of employment, and so Title VII prohibits verbal or physical conduct of a sexual nature that is “sufficiently severe or pervasive to alter the conditions of employment and create an abusive atmosphere.” The court concluded that the plaintiff had not presented “sufficient evidence on which a jury could find that the harassment was sufficiently severe or pervasive to alter the conditions of her employment.” It observed:
Title VII does not protect against all unwanted workplace distractions. Behavior such as “simple teasing, off-hand comments, and isolated incidents (unless extremely serious) will not amount to discriminatory changes in the terms and conditions of employment …. A plaintiff must show that the harassment was “severe or pervasive enough to create an environment that a reasonable person would find hostile or abusive, and the victim must subjectively regard that environment as abusive.” As there is no doubt that [the plaintiff] subjectively regarded the environment as abusive, it must be determined whether a reasonable person would also see the environment as hostile or abusive. In making the objective determination as to whether the work environment was abusive, courts consider: (1) the frequency of the discriminatory conduct; (2) its severity; (3) whether it is physically threatening or humiliating, or merely an offensive utterance; and (4) whether it unreasonably interferes with an employee’s work performance. Courts must also consider all of the surrounding circumstances, including the social context in which the particular behavior occurs.
The court reviewed the five instances of a hostile environment alleged by the plaintiff (and summarized above) and concluded:
These five instances, without more, are not enough for a reasonable person to find that the work environment was hostile or abusive. While [Tim’s] actions were inappropriate, they were certainly not frequent, occurring only five times over sixteen months. Moreover, these five instances were neither particularly severe in nature nor physically threatening or humiliating. Tim never used sexually explicit language nor propositioned or inappropriately touched [the plaintiff], and did not engage in behavior that demeaned the status of women in general. Some of these incidents could interfere with a person’s work, but the extent of the interference cannot reasonably be considered great. While his behavior may have been unsuitable for the workplace, Title VII does not attempt to purge the workplace of vulgarity. These isolated incidents engendering mildly offensive feelings are not enough to sustain an action under Title VII.
Even considering these five instances in light of the plaintiff’s other interactions with Tim, the work environment cannot be seen by a reasonable person as hostile or abusive. Title VII does not ensure a happy workplace, only one that is free from unlawful discrimination.
The court also rejected the plaintiff’s contention that a church is a working environment that must be sheltered from the “cruder aspects of secular life,” thereby creating a lower standard for sexual harassment: “Her personal reasons for choosing to work for a church are not relevant to whether an objectively reasonable person would find the work environment to be abusive.”
Application. This case is important for two reasons. First, it illustrates that “hostile environment” sexual harassment is not implicated by every offensive comment or act. Rather, the harassment must be “severe or pervasive enough to create an environment that a reasonable person would find hostile or abusive, and the victim must subjectively regard that environment as abusive.” The court cited the following factors to consider in evaluating whether harassment has occurred: (1) the frequency of the discriminatory conduct; (2) its severity; (3) whether it is physically threatening or humiliating, or merely an offensive utterance; and (4) whether it unreasonably interferes with an employee’s work performance.
Second, the court rejected the plaintiff’s contention that the definition of hostile environment sexual harassment should be relaxed in cases involving church employees because of the expectation that such behavior will not occur in churches. The court concluded that the definition of harassment is the same for churches as for any other employer. 2008 WL 5216192 (M.D.N.C. 2008).
This Recent Development first appeared in Church Law & Tax Report, March/April 2009.