Pennsylvania

Legal Developments

Priest Claimed Defamatory and False Statements Led to His Dismissal

But a court ruled the ministerial exemption barred it from resolving the priest’s claim.

Richard R. Hammar, Attorney, CPA
Bio

Key point 8-10.01. 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 Pennsylvania court ruled that it was barred by the “ministerial exception” from resolving a priest’s claim that members of his church “interfered with” his employment contract by sharing negative information about him with diocesan officials for the purpose of having him permanently removed.

Background

A Catholic priest was appointed by contract by his diocese to be the priest and administrator for a church in Scranton, Pennsylvania. Prior to this assignment, the priest alleged that a lay employee (“Defendant 1”) and two lay members of the church (“Defendant 2” and “Defendant 3”) exerted influence over the parish’s finances.

After assuming his duties as a priest and administrator for the church, the priest claimed that, while looking through a file cabinet, he found hundreds of dollars in cash that was hidden and unaccounted for. Since the cabinet was under the control of Defendant 1, he confronted her, but she did not have a sufficient explanation.

The priest claimed the defendants had previously demonstrated dismay at decisions he made due to their lack of ability to exert control they once had in the parish.

He further claimed that the defendants made defamatory and false statements to members of the parish with the intention of causing the separation of the priest from his contractual agreement with the Diocese of Scranton.

Specifically, he stated that Defendant 1 made untrue complaints to the local police department alleging harassment, which were discovered to be unfounded by the department. He said Defendant 1 also made similar remarks about harassment to church members as well as individuals in the diocese, all for the purpose of causing separation of the priest from his contract with the diocese.

Defendant 2 allegedly made defamatory and false statements, both orally and in writing, to the local bishop with the intention of removing the priest. It was also asserted that Defendant 2 forwarded emails to the priest’s superiors stating that the priest had made “outright lies to his congregation” and “spends the Diocese’s money like a drunken sailor.”

Defendant 2 reportedly forwarded an additional email to the diocese claiming that the priest “spent an exorbitant amount of money on light fixtures, that were never as expensive as claimed and never even purchased.”

The priest claimed that Defendant 3 made defamatory and false statements, both orally and in writing, to the bishop with the intention of removing the priest from the church.

Applying the “rule of deference”

The priest sued the three defendants, claiming they interfered with his contractual relationship with the diocese, which resulted in the decision of the bishop to terminate his employment with the diocese.

The defendants argued that the Establishment and Free Exercise Clauses of the First Amendment to the United States Constitution prohibit judicial interference with the employment decisions of religious institutions. A trial court agreed with the defendants and dismissed the lawsuit.

The priest appealed, claiming that the trial court erred in concluding that the constitution prohibited judicial interference with his lawsuit. The priest claimed that the defendants’ campaign of defamatory and false statements caused monetary damages through the termination of his contract and in “keeping him from obtaining other similar positions in the . . . Diocese.”

The appeals court concluded that American courts have developed a “rule of deference” to religious tribunals in matters of doctrine and faith:

[W]henever the questions of discipline, or of faith, or ecclesiastical rule, custom, or law have been decided by the highest of these church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final, and as binding on them, in their application to the case before them. Kedroff v. St. Nicholas Cathedral of Russian Orthodox Church in N. Am., 344 U.S. 94 (1952) (quoting Watson v. Jones, 80 U.S. 679 (1871)).

The appeals court noted that this “rule of deference” arose out of disputes over church property, but its application has expanded to other kinds of church disputes including those “involving the choice of church leadership.” The court elaborated this point by quoting a 1985 Supreme Court decision:

All disputes among members of a congregation, however, are not doctrinal disputes. Some are simply disputes as to the meaning of agreements on wills, trusts, contracts, and property ownership. These disputes are questions of civil law and are not predicated on any religious doctrine. While it is true that parties may agree to settle their disputes according to their own agreed fashion, the question of what they agreed to, or whether they agreed at all, are not doctrinal and can be solved without intruding into the sacred precincts.

The appeals court stated:

We must decide whether the same is true of [the priest’s] interference [with contract claim]—can we analyze the propriety of [the defendants’] communications without intruding into the sacred precincts?

Applying the ministerial exception

The appeals court then evaluated how the priest’s claims compared with a prior decision made by the Pennsylvania Supreme Court. In that specific case, the Pennsylvania Supreme Court noted:

[C]ases involving the choice of clerical leadership . . . is a special class of cases that involves the employment relationship between a religious institution and its ministerial employees in which the courts understandably are particularly reluctant to encroach on the institution’s decision-making process in selecting such employees. . . . This application of the deference rule has come to be known as the “ministerial exception” to a civil court’s ability to exercise jurisdiction over a matter related to the employment or retention of a cleric.

The appeals court then continued:

Under the “ministerial exception,” the Free Exercise Clause of the First Amendment of the United States Constitution prohibits courts from exercising . . . jurisdiction in cases where the court’s involvement would encroach on decisions made by religious institutions concerning employment of ministers. Rooted in the First Amendment’s guarantee of religious freedom, the ministerial exception precludes courts from considering claims involving the employment relationship between a religious institution and its ministerial employees, based on the institution’s constitutional right to be free from judicial interference in the selection of those employees.

The appeals court further noted:

The ministerial exception applies to persons whose “primary duties include teaching, spreading the faith, church governance, supervision of a religious order, or supervision of participation in religious ritual and worship.” . . . The question, then, is whether the [defendants’] statements are actionable regardless of [the priest’s] status as a minister.”

According to the priest:

[The defendants] were influential members of the parish community whose communications were made with the intention of prompting the bishop to terminate [the priest’s] employment and had the desired effect. He also notes that [the defendants] were not members of the church hierarchy, that their statements did not occur during a church meeting or in furtherance of an official church proceeding relating to [the priest’s] continued employment, and that the statements did not relate to [the priest’s] pastoral care. . . . “[T]he defamatory statements of lay persons against a priest are not religious controversies and, as such, should be dealt with through civil law.” . . . [The priest] claims [the defendants’] statements were made in retaliation to [the priest’s] discovery of possible malfeasance on [the defendants’] part; that he brought this action in response to [the defendants’] concerted campaign to discredit him; and that the association of [the parties] with the same religious organization is merely incidental to this lawsuit. . . . Thus, [the priest] argues that this case can and should be decided under neutral principles of law and that the trial court erred in dismissing his complaint pursuant to the ministerial exception.

The appeals court disagreed with the priest’s arguments.

It concluded that there was “no doubt” that the priest believed that the defendants’ communications to the bishop and various parishioners led to his “undeserved and unjust termination from his post as priest” of the church. The appellate court pointed to the United States Supreme Court’s unanimous 2012 ruling, in which the Court found the ministerial exception applies to cases involving the termination of a cleric—regardless of whether the termination was for a religious reason. Hosanna-Tabor Evangelical Lutheran Church and School v. E.E.O.C., 132 S.Ct. 694 (2012).

“Thus, the fact that [the defendants’] allegedly defamatory statements concern secular matters—[the priest’s] misuse of parish funds, dishonesty toward parishioners, and an alleged incident of harassment—does not avoid the applicability of the ministerial exception,” the appellate court said.

The appellate court concluded:

[The priest’s] complaint is very specific—he alleges that [the defendants] through their communications with the local bishop and others, sought and successfully procured [his] removal from ministry. Our holding is correspondingly narrow—[the priest’s] allegations are inextricably intertwined with his removal from ministry, and therefore the trial court properly [dismissed his lawsuit.]

What this means for churches

Consider the following points.

1. Liability for intentional interference

According to the legal principle of “interference with contract,” a former employer may be liable if it intentionally interferes with an existing employment relationship.

To illustrate, assume that Church A dismisses a lay employee (“Jill”) because of embezzlement, and Jill is later hired by Church B as its bookkeeper. The pastor of Church A discovers that Jill is now working for Church B and calls the pastor of Church B to warn him that Church B has hired an embezzler.

Case Study from Alaska Supreme Court
For a pertinent court case on interference with contract with implications for churches, church leaders, and church employees and former employees, see the case study on a ruling by the Alaska Supreme Court in the “Reference Letters” section of the Legal Library.

Based on this unsolicited communication, Jill is dismissed by Church B. She later sues Church A and its pastor for interference with contract. To prove interference with contract, Jill must demonstrate the existence of a contract (an employment relationship), and some intentional act by her former church or pastor that interfered with that contract. Consider the holding from the Alaska Supreme Court regarding interference with contract (see sidebar).

2. Interference requires malicious intent

Interference with contract requires malicious intent. The defendant must have willfully and intentionally engaged in conduct that interfered with another’s employment contract.

3. Interference during the preemployment stage

Some courts have extended the principle of interference with contract to the preemployment stage, referring to this as “interference with prospective contractual relations.”

This requires proof of the following elements: (1) a “reasonable probability” that the plaintiff would have entered into the prospective relationship or contract; (2) a wrongful act by the defendant that prevented the relationship from occurring; (3) the defendant did such act with a conscious desire to prevent the relationship from occurring, or knew that the interference was certain or substantially certain to occur as a result of the defendant’s conduct; and (4) the plaintiff suffered actual harm or damage as a result of the defendant’s interference.

4. The ministerial exception may bar rulings on interference-with-contract claims

Case Study from a Louisiana Court For an example of a case suggesting that the ministerial exemption may prevent a court from resolving an interference-with-contract claim, see the case study on a ruling by a Louisiana court in the “Reference Letters” section of the Legal Library.

Some courts, like the appellate court in this Legal Development, have ruled that the ministerial exception prevents them from resolving interference-with-contract claims involving clergy. Consider the outcome reached by a Louisiana court illustrating this point (see sidebar).

5. Seek legal counsel

Pastors should not interfere with a former employee’s employment relationship with another employer without first seeking legal counsel.

Tracy v. O’Bell, 268 A.3d 405 (Pa. App. 2021)

Legal Developments

Protester Could Be Banned from Church Property—but Distance Restriction Found Improper

Attempt to prohibit a disruptive person from coming within 5,000 feet went too far, appellate court says.

Richard R. Hammar, Attorney, CPA
Bio

Key point 7-17. Churches do not have to tolerate persons who disrupt religious services. Church leaders can ask a court to issue an order barring the disruptive person from the church’s premises. If the person violates the order, he or she may be removed from church premises by the police and may be found to be in contempt of court.

A state appellate court in Pennsylvania ruled that a trial court acted properly in banning a disruptive protester from church property, but it went too far in prohibiting the protester from coming within 5,000 feet of the church’s property.

Background

A man (the “protester”) moved to Philadelphia in 2008 and joined the Tenth Presbyterian Church, where he remained a member until the church excommunicated him in August 2016. The protester thereafter began picketing at the church regarding his excommunication and the conduct of certain current and prior church officials. The protester brought a defamation action against individual members of the church, but ultimately, a jury tendered a verdict against him.

After the verdict in the defamation action, the protester picketed outside of the church every Sunday, both before and after church services.

The church filed a complaint

On July 24, 2019, the church filed a complaint for an injunction and an emergency motion for a preliminary injunction seeking to restrict the protester from coming within 1,000 feet of all properties owned by the church. Following oral argument, the protester temporarily agreed to the church’s requested relief.

The trial court subsequently conducted a hearing on the church’s motion for a preliminary injunction in early 2020. The trial court described the evidence presented at that hearing as follows:

[The protester] testified [that] he began picketing outside [of the Church] after the March 22, 2019, jury verdict more frequently, with a sign that contained the phrase . . . “lying,” and rape[,]” because he was displeased with the results of the case. [The protester] further testified that he had protested while wearing a body camera and film[ed] congregants outside [of the Church property]. [The protester] testified that [a trial court Order and subsequent Opinion in the defamation case] misrepresented the truth. [The Church’s former administrator] testified that [the protester] frequently wore a visibl[y] “concealed” firearm to [C]hurch when he was a member[,] and that he continued the practice while picketing with the sign and body camera. [The former administrator] testified that [the protester] would verbally harass and yell at congregants outside [the Church] and then post body camera videos on a blog. [The senior pastor of the Church] testified that [the protester] called him the “son of Satan” and a liar. [The pastor] testified that [the protester] had verbally disparaged [the protester’s] own family for not committing to his protest and not being faithful, including referring to [the protester’s] wife as Job’s wife. . . . [The pastor] also testified that [the protester] seemed preoccupied with safety and firearms, such that he would stand beside [the pastor] and point out individuals who[m] he thought were carrying firearms. [The protester’s] fixation on security and policing[,] even minor behavior of [the C]hurch congregants[,] went on for years and included concerns about stolen phones, money, and immigrants. [The protester] himself provided testimony that he has been the only individual telling the truth, that he has mailed 100 pages of material to 200 members of the Church, that he will never stop any of his behaviors until [the Church’s] leadership has resigned in full, and that [the Church] was trying to poison him and hire a hitman to assassinate him. . . . [A congregant] testified that outside of [C]hurch services on June 16, 2019, [the protester] told her he was an instrument of God, similar to a prophet, and that only [he] knows the true nature of [the pastor’s] soul. [The protester] went on to tell [the congregant] that [the pastor] was a son of Satan, and that any congregants who support [him] are doing Satan’s work. [The protester] also told [the congregant] that he was unhappy with his wife, described her as Job’s wife because she did not support him, and that his oath to remove [the pastor] from the [C]hurch was more important to him than his family.

. . . [The trial court] granted [the Church’s] motion and enjoined [the protester] from appearing within five thousand (5,000) feet of [the Church’s] properties.

The protester claimed his activities were constitutionally protected

Thereafter, the protester appealed, claiming that the trial court improperly barred him from constitutionally protected peaceful protest. He insisted that his activities were protected under the First Amendment to the United States Constitution.

According to the protester, his claims implicate his constitutional right to freedom of speech. The First Amendment provides as follows:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

The United States Supreme Court has mandated that court orders affecting First Amendment rights “must be tailored as precisely as possible to the exact needs of the case.” . . . Therefore, “[a]n order issued in the area of First Amendment rights must be couched in the narrowest terms that will accomplish the pin-pointed objective permitted by constitutional mandate and the essential needs of the public order” (emphasis added).

In addition, the Pennsylvania Constitution provides:

The free communication of thoughts and opinions is one of the invaluable rights of man, and every citizen may freely speak, write and print on any subject, being responsible for the abuse of that liberty.

Thus, under Pennsylvania law, “peaceful picketing conducted in a lawful manner and for a lawful purpose is lawful.”

While the appellate court agreed with the trial court that an injunction barring the protester from church property was valid, it concluded that the trial court’s decision banning him from being within 5,000 feet of the church was excessive:

[W]e agree that the trial court had “apparently reasonable grounds” for the imposition of a preliminary injunction against [the protester]. . . . However, we cannot conclude that the five-thousand-foot injunction imposed upon [the protester] was crafted so as to “be no broader than is necessary for the petitioner’s interim protection.” . . . Rather, the trial court couched its preliminary injunction in the broadest terms to protect the interest of the Church and its members, disregarding [the protester’s] constitutional right to protest the Church and its leadership. A five-thousand-foot restriction places [the protester] well beyond the point at which his constitutional right to protest is utterly extinguished. Put succinctly, the five-thousand-foot restriction is not “couched in the narrowest terms that will accomplish the pin-pointed objective permitted by constitutional mandate and the essential needs of public order.”

What this means for churches

While the First Amendment guarantee of free speech is robust, a church need not tolerate disruptive individuals. The courts will issue injunctions to ban a disruptive individual from attending church so long as this is done in the least restrictive means to ensure that the constitutional protection of speech is not compromised or infringed.

The court in this case concluded that banning a disruptive individual within 5,000 feet of the church’s property “places [the protester] well beyond the point at which his constitutional right to protest ­is utterly extinguished. Put succinctly, the five-thousand-foot restriction is not ‘couched in the narrowest terms that will accomplish’’’ the public interest.

Tenth Presbyterian Church v. Snyder, 266 A.3d 640 (Pa. App. 2021)

Legal Developments

Employee’s Sexual Harassment Lawsuit Dismissed Due to Lack of ‘Viable Claim’

Court dismissed a sexual harassment lawsuit brought by a former female employee of a denominationally affiliated hospital on the ground that the alleged offenses were not sufficiently severe or pervasive.

Richard R. Hammar, Attorney, CPA
Bio

Key Point 8-12.5 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 the employer has 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 Pennsylvania dismissed a sexual harassment lawsuit brought by a former religious hospital employee on the ground that the alleged offenses were not sufficiently severe or pervasive.

Title VII of the Civil Rights Act of 1964 prohibits covered employers (i.e., those with 15 or more employees that are engaged in interstate commerce) from discriminating against any employee or applicant “with respect to compensation, terms, conditions or privileges of employment, because of such individual’s sex.” Sexual harassment is a form of sex discrimination prohibited by Title VII.

The courts have identified two types of sexual harassment—”quid pro quo” and “hostile environment.” Quid pro quo harassment refers to conditioning employment opportunities on submission to a sexual or social relationship, while hostile environment harassment refers to the creation of an intimidating, hostile, or offensive working environment through unwelcome verbal or physical conduct of a sexual nature. In general, an employer is liable for a supervisory employee’s hostile environment sexual harassment.

A former female employee (the “plaintiff”) sued a denominationally affiliated hospital, claiming that she had been the victim of unlawful sexual harassment in violation of Title VII’s ban on sex discrimination in employment. She claimed that three brief comments by her supervisor and a nonsupervisory employee amounted to hostile environment sexual harassment. She conceded that she was relying on only these three incidents to establish her claim for sexual harassment, but she insisted that these instances were “representative of the overall environment” and that she was “subjected to this type of behavior on a daily basis.”

A federal district court dismissed the plaintiff’s sexual harassment claim. It began its opinion by observing:

To state a prima facie claim of hostile work environment sexual harassment, a plaintiff must plead that: (i) she suffered intentional discrimination because of her sex; (ii) the discrimination was severe or pervasive; (iii) the discrimination detrimentally affected her; and (iv) the discrimination would negatively affect a reasonable person in plaintiff’s position.

To rise to the level of actionable harassment, the workplace must be permeated with discriminatory intimidation, ridicule, and insult that was sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.

The court concluded that even if all of the plaintiff’s allegations were true, and “as inappropriate for the workplace as the conduct may be,” the plaintiff failed to establish a viable claim: “Simply put, on this record, this behavior does not rise to an actionable level. These three incidents, even when taken together, are neither sufficiently severe nor pervasive to establish a hostile work environment claim.” The court cited the following examples of prior cases in which the courts rejected sexual harassment claims: (1) ten incidents of alleged inappropriate harassment over a ten-year period was not sufficiently severe or pervasive, Davis v. City of Newark, 285 Fed. App. 899 (3d Cir. 2008); (2) the issuance of two letters of reprimand over a four-month period was not sufficiently severe or pervasive, Gonzalez v. Potter, 2010 WL 2196287 (W.D. Pa. 2010); (3) a male supervisor’s alleged comments to a female employee that “the last time I saw you, you were quiet, a virgin, and unmarried,” “when the cat’s away the mice will play,” and “you have good child bearing hips” were not sufficiently severe or pervasive, Porta v. Dukes, 1998 WL 470146 (E.D. Pa. 1998).

What this means for churches

Sexual conduct and speech of fellow employees may be offensive, but it will not necessarily constitute sexual harassment unless there is sexually offensive conduct in the workplace that is “sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.”

An employer may be liable for a supervisor’s acts of “hostile environment” sexual harassment even if it was not aware the acts were happening when they occurred. The basic rule may be stated as follows: If a supervisor creates an intimidating, hostile, or offensive working environment through unwelcome verbal or physical conduct of a sexual nature, this is “hostile environment” sexual harassment for which the employer will be legally responsible if the supervisor takes any “tangible employment action” against the employee. A tangible employment action includes “a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.” The employer is liable under such circumstances whether or not it was aware of the harassment.

An employer may be liable for a supervisor’s acts of hostile environment sexual harassment even if it takes no tangible employment action against the victim. But, in such cases, the employer may assert an “affirmative defense” to liability. This defense consists of two elements:

1. The employer “exercised reasonable care to prevent and correct promptly any sexually harassing behavior.” This generally means that the employer adopted a written sexual harassment policy that was communicated to employees, and contained a complaint procedure.

2. The victim “unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.” This generally means that the victim failed to follow the complaint procedure described in the employer’s sexual harassment policy.

As a result, it is a “best practice” for a church with employees to adopt a sexual harassment policy, since this will serve as a defense to liability for a supervisor’s acts of “hostile environment” sexual harassment to the extent that a victim of such harassment does not follow the policy. Peacock v. UPMC Presbyterian, 2016 WL 890574 (W.D. Pa. 2016).

Legal Developments

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

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

Richard R. Hammar, Attorney, CPA
Bio


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

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

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

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

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

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

Deacons' personal liability

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

(1) The deacons were not parties to the contract

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

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

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

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

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

(3) Charitable immunity for nonprofit volunteers

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

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

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

The court's conclusion

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

What this means for churches

This case is relevant to church leaders for these reasons:

  1. Liability for breach of contract. The court concluded that church board members are not personally liable for breach of contract, since "whenever a corporation makes a contract, it is the contract of the legal entity … and not the contract of the individual members. Liability of the corporate officer for breach of contract only extends where, as opposed to here, the officer makes the promise in his individual capacity." Even the fact that the chairman of the deacon board signed the contract did not make him personally liable if the contract "clearly indicates that it is an agreement between the pastor and church as the contracting parties." The court stressed that "nowhere in the document does the language reasonably suggest that [individual deacons were] assuming personal liability for the contract."

    Church board members may be personally liable on contracts that they sign in two ways. First, they may be liable on a contract they sign without authority to do so. Second, board members may be personally liable on contracts they are authorized to sign but which they sign in their own name without any reference to the church or to their representational capacity. To prevent this inadvertent assumption of liability, board members who are authorized to sign contracts (as well as any other legal document) should be careful to indicate the church's name on the document and clearly indicate that they are signing in a representative capacity (i.e., agent, director, trustee, or officer).

    To summarize, clergy and church board members should refrain from signing contracts unless they are certain that (1) the contract has been properly authorized; (2) they are authorized to sign on behalf of the church; (3) the church is clearly identified in the contract as the party to the agreement; and (4) the minister signs in a "representative capacity" (for example, as "authorized agent" or "president").

  2. Charitable immunity. Most states have enacted laws limiting the liability of officers and directors of nonprofit corporations. In many states, these "immunity" laws protect church volunteers. Most of these laws only immunize uncompensated directors and officers (or volunteers) from legal liability for their ordinary negligence committed within the scope of their duties. These statutes generally provide no protection for "willful and wanton" conduct or "gross negligence."

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

Legal Developments

The Liability of Knowing but Not Acting

Church Law and Tax Report The Liability of Knowing but Not Acting Key point 4-08.

Church Law and Tax Report

The Liability of Knowing but Not Acting

Key point 4-08. Every state has a child abuse reporting law that requires persons designated as mandatory reporters to report known or reasonably suspected incidents of child abuse. Ministers are mandatory reporters in many states. Some states exempt ministers from reporting child abuse if they learned of the abuse in the course of a conversation protected by the clergy-penitent privilege. Ministers may face criminal and civil liability for failing to report child abuse.

The Pennsylvania Supreme Court affirmed the felony conviction of a priest who worked in an administrative position with an archdiocese for “endangering the welfare of a child” for failing to take steps to protect children from a priest who had molested children. In 1992, a Catholic priest (the “defendant”) was appointed Secretary for Clergy for the Archdiocese of Philadelphia, where he served for 12 years, until 2004. As Secretary for Clergy, he was responsible for ensuring that parishes were filled with enough priests, resolving disputes among priests, and handling clergy sexual abuse issues. It was his responsibility to collect and assess information concerning allegations of sexual abuse against priests in the Archdiocese, discuss the allegations with the accused priests, participate in deciding how to address the allegations, and make recommendations to the Cardinal about the priests against whom allegations were made.

By his own account, the defendant was the sole “funnel” of information concerning instances of clergy sex abuse, and it was his office alone that was responsible for not only receiving the allegations and exploring them, but also for passing vital information about abusive priests and their young victims up the chain of command in the Archdiocese.

Although he could only independently remove a priest from a parish if that priest admitted that he had abused someone, it was the defendant’s responsibility to make recommendations about assignments to the Cardinal, who had the ultimate decision-making authority. For example, the defendant could make recommendations to place a priest on administrative leave or restrict a priest’s ministry by, for instance, prohibiting contact with the public or with children. In this respect, the defendant characterized protecting children as the most important part of his job, and explained that he worked “for” the children of the Archdiocese.

When the defendant first assumed the office of Secretary for Clergy in 1992, he collected information. In addition, his position authorized him to be one of the few officials within the Archdiocese of Philadelphia with access to the “Secret Archives.” The Secret Archives were located on the 12th floor of the Office of Clergy and maintained under lock and key; they contained information about “any kind of major infractions a priest would have,” and which only a “very, very limited number of people within the Archdiocese had access to or a key to.” The Secret Archives were largely in the defendant’s control as Secretary for Clergy, and he routinely consulted them to determine if there was already information relevant to a priest about whom he had received complaints.

In early 1994, after receiving accusations of inappropriate conduct by a priest in active ministry, the defendant consulted the Secret Archives and discovered documentation that this particular priest had engaged in serious sexual misconduct in the past. This discovery caused the defendant to become concerned that there were other priests in active service against whom allegations of abuse had been asserted, and this prompted him to conduct a comprehensive review of the Secret Archives to check for incidents of child sexual abuse among all priests in active ministry within the Archdiocese of Philadelphia.

This review encompassed 323 priests and resulted in a report created by the defendant that identified 35 priests in active service with previous complaints of sexual abuse of minors. The defendant placed each of these 35 priests on one of three lists: three priests were identified as “pedophiles;” 12 priests as “Guilty of Sexual Misconduct with Minors;” and 20 were included on a list titled “Allegations of Sexual Misconduct with Minors with No Conclusive Evidence.” Regarding the 12 priests that the defendant determined were guilty of sexual misconduct with minors, he considered it his job “to do something about them.”

The first name on the defendant’s list of priests whom he considered to be guilty of sexual misconduct with minors was Father Jones. The defendant was personally familiar with Jones due to previous investigations into allegations of alcoholism and the molestation of an 11-year-old boy. Jones had built a trusting relationship with this minor in his church, groomed him with attention outside of the church, and, on several occasions supplied him with alcohol and engaged in inappropriate sexual conduct. Jones often invited several boys to spend the night in his home, where he provided them with alcohol and wrestled with them. According to the victim, Jones continued this pattern of inviting him to participate in seemingly innocuous activities, and then groping him when vulnerable.

After the victim revealed the details of his sexual abuse to the defendant, Jones was sent to a mental health facility for six months for evaluation and treatment. His first post-discharge assignment was as a hospital chaplain. Despite his treating therapist’s concerns about the existence of other victims, and his recommendation that Jones be kept away from minors, Jones was allowed to reside in a nearby rectory owned by a church that operated a grade school. The defendant never shared with anyone his concern that Jones was guilty of sexual misconduct with minors, while housing him where he had access to grade school children.

Soon after moving into the rectory, Jones met a 10-year-old altar boy who assisted with religious services at the church. Following one service, and after everyone had left, Jones made the boy strip naked to music while telling him that “this is what God wants.” He then engaged in multiple sex acts with the boy. The effect of this abuse was devastating. The boy became withdrawn and began using drugs, which developed into a heroin addiction by age 17.

Ultimately, due to these and other wrongful acts, the Archdiocese of Philadelphia removed Jones from active ministry and rectory living, “or any other living situation in which he would have unrestrained access to children now or in the future.”

A district attorney in Philadelphia began to investigate the Archdiocese for clergy sex abuse. In 2002, a grand jury was empanelled at the request of the district attorney to investigate the Archdiocese’s treatment of allegations of such abuse. The grand jury subpoenaed documents from the defendant pertaining to priests accused of sexual abuse, and the defendant was summoned to testify repeatedly. In 2011, the district attorney charged the defendant with two counts of “endangering the welfare of a child” (EWOC), under a state law that provided, in part: “A parent, guardian, or other person supervising the welfare of a child under 18 years of age commits an offense if he knowingly endangers the welfare of the child by violating a duty of care, protection or support.”

The defendant sought to quash the charges of EWOC on the ground that he had “no connection whatsoever” to the children whose welfare he was accused of having endangered. The court rejected the defendant’s position, and the criminal prosecution against him proceeded to trial. The state introduced extensive evidence that the defendant’s handling of Father Jones’ case was not an anomaly, but was in accord with his established practice for dealing with sexually abusive priests. The evidence demonstrated that “he violated his duty to prevent priests from sexually molesting children in order to protect their reputations in furtherance of his objective to conceal the misconduct and to protect instead the reputation of the Archdiocese,” and that “evidence in the files of other priests revealed that the defendant routinely failed to act in his supervisory capacity to protect the welfare of children when faced with reports of priests who were raping, molesting, and acting immorally with these children, repeatedly [making] transfers to facilities where clergy could continue abusing children when trouble arose, and permitting abusing priests to continue in the ministry while keeping parents and law enforcement ignorant of the peril.”

After several months of testimony, the jury found the defendant guilty of EWOC on the ground that his frequent failure to remove pedophile priests constituted “knowing endangerment of the welfare of children” in violation of the statute. The conviction and sentence were reversed by a state appeals court, but were reinstated by the Pennsylvania Supreme Court in a ruling in 2015. The court concluded that one can commit the crime of EWOC without any direct supervisory responsibility over a child if his conduct knowingly endangers the welfare of children. The court concluded:

The Commonwealth’s evidence established that despite being responsible for responding to sexual abuse allegations against priests for the purpose of protecting the welfare of children, the defendant mollified victims of sexual abuse by falsely telling them their allegations were being seriously investigated and that the particular priest would never again be assigned around children, despite knowing that the priests under his supervision would merely be reassigned to another parish with no ministry restrictions on contact with children; he informed parishioners that the priests he transferred were moved for health reasons, leaving the welfare of children in jeopardy; he routinely disregarded treatment recommendations for priests; he failed to inform the relocated priest’s new supervisor about abuse allegations; he took no action to ensure that the abusive priest was kept away from children at his new assignment; he suppressed complaints and concerns by the colleagues of the priests; all with the knowledge that sexually abusive priests rarely had only one victim and that all of these actions would endanger the welfare of the diocese’s children. Finally, and even more egregiously, when the defendant was contacted by law enforcement, he misrepresented facts to thwart their investigation of these priests, and their crimes.

The plain reading and common sense of the phrase “supervising the welfare of a child” leaves little doubt that the defendant’s actions constituted endangerment of children. Further, the broad protective purpose of the statute, the common sense of the community, and the sense of decency, propriety, and morality which most people entertain, coalesce and are actualized in our conclusion that the defendant’s particular conduct is rendered criminal in accord with the EWOC statute … . The Commonwealth proved beyond a reasonable doubt that as Secretary for Clergy the defendant’s day-to-day responsibilities involved receiving allegations of clergy sexual abuse and reacting to them for the protection of the children of the Archdiocese from harm by sexually abusive priests over whose assignments he exercised significant influence. He endangered the welfare of [children] whose well-being he supervised, when he placed Father Jones in a position to have access to them.

What This Means For Churches:

This case is significant for one reason: it demonstrates the potential criminal liability that may befall a minister or denominational leader who fails to (1) take steps to protect minors from ministers who are known or reasonably suspected of having molested children, and (2) report such individuals to civil authorities pursuant to the state child abuse reporting law. Commonwealth v. Lynn, 2015 WL 1888582 (Pa. 2015).

Legal Developments

Church-related School Required to Pay Benefits to Unemployed Principal

Pennsylvania court ruled that because school was separately incorporated from church, it was not exempt from paying unemployment benefits.

Church Law and Tax

Church-related School Required to Pay Benefits to Unemployed Principal

Pennsylvania court ruled that because school was separately incorporated from church, it was not exempt from paying unemployment benefits.

Key point. State laws exempt churches and some other religious organizations from coverage under unemployment laws, but such an exemption may not apply to church-created schools and other institutions that are separately incorporated.

A Pennsylvania court ruled that a church-related school was not an exempt employer under the state’s unemployment law and therefore was required to pay benefits to an unemployed principal. A church school terminated an assistant principal (the “plaintiff”), and the plaintiff thereafter applied for unemployment benefits. A state agency acknowledged that the church had founded the school, but ruled that an exemption in the unemployment law for “a church or convention or association of churches or an organization that is operated primarily for religious purposes and that is operated, supervised, controlled or primarily supported by a church, or convention or association of churches” did not apply to the school since it was separately incorporated and therefore was “a separate entity operating independently from [the church]” that was operated primarily for educational purposes. The agency also noted that the school received no funding from the church, and had purchased it own facility.

A state appeals court agreed with the agency’s conclusion that the school was not a religious employer exempt from the state’s unemployment law. It based this conclusion on the school’s alleged failure to introduce evidence that it was a religious institution rather than a purely educational institution. The court concluded that the agency “did not err in determining that the plaintiff’s employment is not exempt from coverage … because the school does not operate primarily for religious purposes based on the agency’s findings.”

The court continued:

FN6. While we affirm the Board based on its findings of fact, we caution that this decision is not dispositive in a separate action against Employer pertaining to its exemption from contribution to the unemployment tax fund. We highlight Section 509 of the Law, as amended, 43 P.S. § 829, which provides the following:

[w]henever an appeal involves a question as to whether services were performed by a claimant in employment or for an employer or whether remuneration paid constituted wages, a decision thereon shall not be conclusive as to an employing entity’s liability for contributions unless the employing entity was given special notice of such issue and of the pendency of the appeal and was afforded a reasonable opportunity by the referee or the board to adduce evidence bearing on such question.

Here, while Employer had a reasonable opportunity to be heard at the hearing, there is no evidence that Employer was given any special notice concerning a determination of Employer’s status for purposes of unemployment tax. For this reason, and based upon representations made during argument by the Board’s counsel, our decision in this matter on Claimant’s eligibility does not, in any way, affect Employer’s exemption status for taxation purposes. Because our decision does not affect Employer’s exemption status for purposes of the unemployment tax law, we need not address Employer’s constitutional claim as our decision does not infringe on Employer’s constitutional rights.

A dissenting judge asserted that the exemption for religious employers “may apply when a religious school: offers actual religious instruction and prayer; emphasizes the religious principles in the presentation of secular subjects; and is controlled by school committees elected by monthly meetings of the affiliated congregation, by a principal appointed by a board of deacons of the affiliated church, or by a principal appointed by the board of elders of the affiliated church” (quoting Christian School Association of Greater Harrisburg v. Department of Labor and Industry, 423 A.2d 1340 (Pa. 1980).

The dissenting judge noted that the church “founded the school, has several members on the school’s board of directors, and many of the school’s employees are both members of the church and elders of the church.” The dissenting judge also noted that the agency and trial court both “utterly failed to address [the school’s] testimony regarding the control of the church over school operations due to the presence of church elders and members on the school’s board of directors and as school employees.”

What This Means For Churches:

This case illustrates an important point. While a decision to separately incorporate a church-created entity is almost always done to protect the church from liability for the obligations of the affiliate, the separate incorporation of a church-created entity may have unintended consequences. Complex legal and tax issues flow from such a decision, and these must be carefully evaluated before separate incorporation is pursued. The assistance of legal counsel is essential in this process. Academy v. Unemployment Compensation Board of Review, 42 A.3d 1171 (Pa. Common. 2012).

Church Law & Tax Report is published six times a year by Christianity Today International, 465 Gundersen Dr. Carol Stream, IL 60188. (800) 222-1840. © 2013 Christianity Today International. editor@churchlawandtax.com All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. “From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.” Annual subscription: $69. Subscription correspondence: Church Law & Tax Report, PO Box 37012, Boone, IA 50037-0012.

Legal Developments

Pennsylvania Teacher Granted Unemployment

Court rules that teacher terminated from church-affiliated school is eligible for unemployment benefits.

Richard R. Hammar, Attorney, CPA
Bio

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

A Pennsylvania court ruled that a terminated employee of a church-affiliated school was eligible for unemployment benefits since her employment was not exempt from coverage.

A common question for any church that operates a school or preschool is the application of state unemployment laws to its employees. Are employees entitled to unemployment benefits if they resign or are terminated? This question was addressed by a Pennsylvania court. An assistant (the "plaintiff") to the principal of a religious school was terminated, and she applied for unemployment compensation benefits under state law. A state agency determined that she was ineligible for benefits because she did not have sufficient wages entitling her to benefits. In reaching this conclusion, the agency excluded wages from her employment with the school since it considered such employment to be excluded from the definition of "employment" under the unemployment compensation law on the basis of the following exemption:

Service performed in the employ of (i) a church or convention or association of churches or (ii) an organization which is operated primarily for religious purposes and which is operated, supervised, controlled or principally supported by a church or convention or association of churches.

The plaintiff appealed this ruling to a state unemployment compensation board of review, which reversed the agency's determination that the plaintiff's services were exempt from the definition of covered employment under the unemployment compensation law. The board cited the following facts that had been established in this dispute:

  • The school was a Christian school that "operates for educational purposes with strong religious influence" from its founding church.
  • The school is a nonprofit organization separate and apart from the church.
  • Many of the church's elders serve on the school's board of directors and many of the school's employees are both members of the church and elders of the church.
  • While the school and church at one time shared a building in which there was a rental agreement, the school currently operates in a separate space.
  • The school pays its own bills and receives zero funding from the church.

The board determined that the school is a nonprofit organization legally separate from its founder (the church), and operated primarily for educational purposes. The board also found that the school received no funding from the church, and, even though it rented a facility from the church when the plaintiff began employment, the school later purchased its own facility. The board concluded that, based on these circumstances, the school did not constitute a church or convention or association of churches or an organization that is operated primarily for religious purposes and that is operated, supervised, controlled or primarily supported by a church, or convention or association of churches. As a result, services performed by the plaintiff constituted covered employment, and wages earned for the school were to be considered in determining financial eligibility for unemployment benefits. The school appealed to the civil courts. The Commonwealth Court of Pennsylvania affirmed the board's determination that the plaintiff's employment with the school was covered employment under the unemployment compensation law.

The court quoted the above-cited exemption of services performed for religious organizations from the definition of "employment" in determining eligibility for unemployment benefits, and concluded that it did apply to the school in this case:

Here, the record … includes little evidence of the extent to which the religious underpinnings pervade the curriculum. Instead, it appears that the board's factual finding that the school is "operated primarily for educational purposes with a strong religious influence" is almost a verbatim quote from school's witness. Unfortunately, the employer's witness provided nothing further of substance. Accordingly, this case comes down to the board's fact finding …. We give primacy to the board's finding that the school "operated primarily for educational purposes." Therefore, we conclude that the board did not err in determining that the plaintiff's employment is not exempt from coverage under the Law because the school does not operate primarily for religious purposes based on the Board's findings. Imani Christian Academy v. Unemployment Compensation Board of Review, 42 A.3d 1171 (Pa. Common. 2012).

Legal Developments

Termination of Free Counseling for an Abuse Victim

Consequences of stopping counseling payments.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Termination of Free Counseling for an Abuse Victim

Consequences of stopping counseling payments.

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

Key point. Churches that voluntarily agree to pay counseling fees to victims of sexual misconduct may be able to discontinue these payments without liability if the counseling has not placed the counselee in a worse position.

A Pennsylvania court ruled that a Catholic diocese that agreed to pay counseling fees for a victim of childhood sexual abuse was not responsible for the victim’s suicide that occurred shortly after the diocese decided to stop paying for the counseling. For three years a student (the decedent) at a church-operated parochial school was a victim of sexual abuse by a priest. Thereafter, the decedent graduated from a state university with honors, and became employed in a professional capacity. In 2008, allegedly as a result of the effects of the sexual abuse, the decedent attempted to take his own life. Following this incident, the local diocese began paying for the decedent’s counseling expenses. A year later, the decedent again unsuccessfully attempted suicide. The diocese continued to provide payment for counseling services. In 2010, the diocese indicated that it would not financially support any further services or treatment, and agreed to issue a final payment for $75,000 regardless of decedent’s need for further treatment. A psychotherapist advised the diocese that the decedent needed continued treatment because of suicidal behavior. The decedent’s family claimed that the diocese knew or should have known that their decision to discontinue further payment for psychiatric treatment would likely cause severe emotional distress to decedent. The family further claimed that decision to terminate further support resulted in the decedent taking his life.

The decedent’s family filed a wrongful death complaint against the diocese. A trial court dismissed all claims against the diocese. The family appealed. A state appeals court affirmed the trial court’s dismissal of the family’s claims. The court quoted, in support of its decision, the following excerpt from the Restatement (Second) of Torts (a respected legal treatise that has been adopted by many states):

Termination of Services. The fact that the actor gratuitously starts in to aid another does not necessarily require him to continue his services. He is not required to continue them indefinitely, or even until he has done everything in his power to aid and protect the other. The actor may normally abandon his efforts at any time unless, by giving the aid, he has put the other in a worse position than he was in before the actor attempted to aid him. His motives in discontinuing the services are immaterial. It is not necessary for him to justify his failure to continue the services by proving a privilege to do so, based upon his private concerns which would suffer from the continuance of the service. He may without liability discontinue the services through mere caprice, or because of personal dislike or enmity toward the other.

Where, however, the actor’s assistance has put the other in a worse position than he was in before, either because the actual danger of harm to the other has been increased by the partial performance, or because the other, in reliance upon the undertaking, has been induced to forego other opportunities of obtaining assistance, the actor is not free to discontinue his services where a reasonable man would not do so. He will then be required to exercise reasonable care to terminate his services in such a manner that there is no unreasonable risk of harm to the other, or to continue them until they can be so terminated. Section 323, comment “c”.

The court concluded that the diocese had not placed the decedent in a worse position by offering counseling services, and so the above-quoted exception did not apply. It noted that the decedent twice attempted to take his life prior to the third, successful, attempt. The court concluded: “Thus [the family] is not in a position to allege that the diocese, by notifying the decedent that it would be discontinuing payments for further treatment, can be viewed as putting him in a worse position than he was in before the diocese began paying for treatment …. The decedent was suicidal before the diocese aided him; he was suicidal while the diocese aided him; and unfortunately, he was suicidal after being informed that aid was being terminated. As the diocese had not put the decedent in a worse position than before services began, the diocese was free to discontinue services without liability.”

What This Means For Churches:

Some churches and denominational agencies have voluntarily agreed to pay counseling fees for persons who were sexually abused by a minister, lay employee, or volunteer. Over time, the question inevitably arises as to the duration of this obligation—a question that often is not contemplated or addressed when the commitment is made. This case suggests that a commitment to pay counseling fees, gratuitously made, may be terminated so long as the counseling has not placed the counselee in a “worse position.” But as this case illustrates, this may be difficult to prove. Because of the seriousness and complexity of this issue, and the fact that the Restatement is not recognized in all states, any commitment to pay counseling fees should not be terminated without the advice of legal counsel. Unglo v. Zubik, 29 A.3d 810 (Pa. Super. 2011).

This Recent Development first appeared in Church Law and Tax Report, March/April 2012.

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Legal Developments

When a Church Dissolves

Distribution of assets raises an array of legal and tax issues requiring legal counsel.

Richard R. Hammar, Attorney, CPA
Bio


Key point 6-07.04. Church board members have a fiduciary duty of loyalty to their church, and they may be personally liable for breaching this duty by participating in board decisions that place the interests of one or more board members above the interests of the church itself.

Key point 6-15. The procedure for dissolving an incorporated church is specified by state nonprofit corporation law.

A Pennsylvania court addressed the issue of whether a church acted properly when it dissolved due to declining attendance, sold its assets, and transferred most of the sales proceeds to the pastor as compensation for wages that it was previously unable to pay.

A church was established in 1902. In 1999, the church hired a new pastor with a starting weekly salary of $150, out of which $90 was treated as a non-taxable housing allowance. The pastor subsequently received periodic salary increases and, eventually, his entire salary was treated as a housing allowance. He was also paid separately for his maintenance work. As of 2008, his annual salary was $17,930.

In 2007, thirteen members of the church’s congregation unanimously approved the revision to the church’s constitution to provide that “in the event of the dissolution of this corporation, all of its debts shall be fully satisfied, including any compensation and benefits due to its Pastor.”

At an annual congregational meeting in 2008, eight voting members of the church, including the pastor and his wife and two children, voted to dissolve the church and sell the church’s property. They also adopted a motion by the pastor’s son to compensate the pastor for his past service after the sale of the church’s property.

A committee formed to determine the amount of compensation for the pastor proposed to pay him up to $635,000. Between 1999 and 2008, the church’s annual income ranged from $26,474 to less than $35,000.

Later that year the pastor and his wife and son signed an agreement to sell the church’s property to another church for $750,000. A week later, six remaining voting members (including the pastor and his wife and two children) unanimously voted to dissolve the church and approved the compensation package for the pastor.

After receiving a net amount of $690,000 from the sale of the property in 2009, and pursuant to the procedure for dissolving a nonprofit corporation described in the state nonprofit corporation law, the church asked a court to approve its proposed distribution of the proceeds from the sale of its assets. The church informed the court that it “owed its pastor and other employees compensation for periods of time when they were uncompensated due to the church’s financial struggles.”

The state opposed the proposed distribution of the church’s assets on the grounds that the church failed to seek the court’s approval prior to the sale of its assets, and by voting to approve the compensation package the pastor and other members of the church board violated a fiduciary duty imposed by the nonprofit corporation law and engaged in “self-dealing to inure benefits to private individuals.”

The court concluded that the pastor’s claim for compensation for his past service would be unenforceable under contract law. It noted that contracts, to be enforceable, must by supported by “consideration,” meaning that both parties must receive something of value in exchange for their commitments.

The court noted that the church’s commitment to pay the pastor $635,000 in back wages was unenforceable since “past services” are never valid consideration for current obligations and commitments. As a result, the court concluded that payment of additional sums to the pastor in excess of his specified salary would constitute a gift, which would be inconsistent with the charitable purposes of the church.

The church appealed, claiming that the proposed payment to the pastor is consistent with its charitable purposes. It asserted that its members desired to compensate the pastor appropriately and that the church’s constitution also expresses a desire to compensate him adequately. The church also cited the provision of its revised constitution requiring payment of all debts, including any compensation and benefits owed to the pastor, upon dissolution.

A state appeals court dismissed the church’s appeal on a technical ground. It noted that the trial court’s ruling was in the context of the church’s petition to dissolve its corporate status, and as such it was not appealable until the broader issue of dissolution was adjudicated. Once the trial court reaches a decision on the church’s petition to dissolve its corporate status, then the entire case, including the court’s prior ruling addressing the distribution of the sales proceeds, would be appealable as a final order of the court.

What this means for churches

This case addresses a question that often arises when a small, struggling church dissolves, sells its assets, and transfers the proceeds to its pastor or, in some cases, other employees or directors. In many such cases, the justification for distributing the proceeds from the sale of church assets to the pastor is that he or she was not “adequately compensated” in the past and this is a way to make amends. But as the trial court in this case noted, such dispositions of the proceeds from the sale of church assets has a number of potential legal and tax consequences, including the following:

Churches and religious organizations, like all exempt organizations under IRC section 501(c) (3), are prohibited from engaging in activities that result in inurement of the church’s or organization’s income or assets to insiders (i.e., persons having a personal and private interest in the activities of the organization).

Insiders could include the minister, church board members, officers, and in certain circumstances, employees. Examples of prohibited inurement include the payment of dividends, the payment of unreasonable compensation to insiders, and transferring property to insiders for less than fair market value. The prohibition against inurement to insiders is absolute; therefore, any amount of inurement is, potentially, grounds for loss of tax-exempt status. In addition, the insider involved may be subject to excise tax.

See the following section on excess benefit transactions. Note that prohibited inurement does not include reasonable payments for services rendered, payments that further tax-exempt purposes, or payments made for the fair market value of real or personal property. IRS Publication 1828.

    1. Disposition of the proceeds of the sale of church assets in the course of a dissolution of a church often is governed by state nonprofit corporation law. The Pennsylvania Nonprofit Corporation Act applied in this case, and it gave the civil courts authority to review the disposition of church assets in the course of a dissolution. The lesson is clear—church leaders should never distribute the proceeds of a sale of church assets to individuals without the assistance of legal counsel to ensure compliance with state nonprofit corporation law.
    2. A church board that authorizes the distribution of proceeds from the sale of church assets to a pastor or any other individual may be in violation of their fiduciary duties to the church, which could expose them to personal liability.
    3. A church’s distribution of proceeds from the sale of church assets to a pastor or any other individual jeopardizes the church’s tax-exempt status since it may amount to prohibited “inurement” of a church’s resources to the personal benefit of a private individual. The IRS defines “inurement” as follows:
    4. The trial court concluded that the $635,000 paid to the minister was not a legitimate debt of the church that could lawfully be discharged in the dissolution proceeding, since the minister provided no “consideration” (value) to the church in return for its commitment to pay this amount. To the contrary, the only “consideration” was the ministers’ past services did not amount to consideration. As a result, the court characterized the church’s proposed payment of $635,000 to the minister as a gift.
    5. The payment of an “excess benefit” to an officer or director (or relative) of a church or any other tax-exempt entity may result in substantial penalties called “intermediate sanctions.” These penalties can be as much as 225 percent times the amount of the excess benefit. This tax is paid by the recipient of the excess benefit, which would be the minister in this case.
    6. An excise tax equal to 10 percent of an excess benefit may be imposed on an exempt organization’s managers who authorized the payment of an excess benefit to an officer or director (or relative). This tax may not exceed $20,000 with respect to any single transaction, and is only imposed if the manager knowingly participated in the transaction and the manager’s participation was willful and not due to reasonable cause.
    7. To be exempt from federal income tax, a church must be organized exclusively for exempt purposes. This requirement is referred to by the IRS as the “organizational test” of tax-exempt status. The income tax regulations specify that an organization is not organized exclusively for exempt purposes unless its assets are dedicated to an exempt purpose, and that an organization’s assets will be presumed to be dedicated to an exempt purpose if, upon dissolution, the assets would, by reason of a provision in the organization’s articles of incorporation, be distributed to another exempt organization.
    8. In summary, the distribution of church assets to a minister or other private individual raises an array of legal and tax issues of considerable importance. Such transactions should never be contemplated without the assistance of legal counsel. In re First Church, 2011 WL 2302540 (Pa. Common. 2011).

Legal Developments

Pastor Permitted to Sue Church for Breach of Contract

Have employment contracts reviewed by legal counsel to protect against liability.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Pastor Permitted to Sue Church for Breach of Contract

Have employment contracts reviewed by legal counsel to protect against liability.

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

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 Pennsylvania appeals court ruled that a dismissed pastor was not barred by the First Amendment guaranty of religious freedom from suing his former church for breach of contract so long as a resolution of the dispute would not require the court to inquire into religious doctrine or polity. A church hired a pastor in 1999, but did not enter into a written employment agreement with him until 2005. The employment agreement contained a number of provisions, including an employment term of two years. The agreement specified that it could be amended with “only the unanimous consent of both the pastor and the church.” In 2006, several church members became dissatisfied with the pastor’s performance, which resulted in a congregational vote to terminate his employment contract.

The former pastor sued the church for breach of contract, and sought $77,000 in damages. The church asserted that the First Amendment guaranty of religious freedom barred the civil courts from intervening in internal church disputes, and therefore the lawsuit had to be dismissed. The trial court conducted a hearing to determine whether the case could proceed. The former pastor and chairman of the church board testified that the dismissal was financially motivated. But other church leaders testified that the termination was rooted in the former pastor’s “damaging the spiritual welfare of the church … members were divided and membership had left, membership was dwindling.”

The court concluded that the dispute was religious in nature, pertaining to the fitness of the former pastor. As a result, it dismissed the lawsuit. The former pastor appealed, claiming that the underlying dispute (breach of contract) did not turn on religious doctrine or polity, but rather, sought the enforcement of a secular right through civil contract law. As a result, the First Amendment did not bar his lawsuit.

A state appeals court reversed the trial court’s ruling and ordered the case to proceed to trial. It acknowledged that the First Amendment bars the civil courts from intervening in church disputes that involve questions of “discipline, or of faith, or ecclesiastical rule, custom, or law.” The court insisted, however, that not all church employment disputes involve such issues. It made the following additional points in support of its decision:

  • “A church is always free to burden its activities voluntarily through contracts, and such contracts are fully enforceable in civil court.”
  • “The First Amendment does not exempt religious institutions from all statutes that regulate employment. For example, the First Amendment does not exempt religious institutions from laws that regulate the minimum wage or the use of child labor, even though both involve employment relationships.”
  • “All disputes among members of a congregation, however, are not doctrinal disputes. Some are simply disputes as to the meaning of agreements on wills, trusts, contracts, and property ownership. These disputes are questions of civil law and are not predicated on any religious doctrine. While it is true that parties may agree to settle their disputes according to their own agreed fashion, the question of what they agreed to, or whether they agreed at all, are not doctrinal and can be solved without intruding into the sacred precincts.”

The court conceded that “the First Amendment protects a church’s right to hire, fire, promote, and assign duties to its ministers as it sees fit not because churches are exempt from all employment regulations (for they are not) but rather because judicial review of those particular employment actions could interfere with rights guaranteed by the First Amendment.” But it concluded that the trial court’s decision dismissing the lawsuit was “premature and went too far, especially given the presence of conflicting accounts in the record as to the basis for the termination of the pastor’s employment.”

The court agreed that the trial court “would have been correct if the issue was doctrinal, but this case initially turns upon whether a contract existed at all and not the predicate for the termination; an issue that requires no doctrinal exegesis.”

The court conceded that “it could turn out that in attempting to prove his case [the pastor] will be forced to inquire into matters of ecclesiastical policy even as to his contract claim. Of course, in that situation, a court may grant summary judgment on the ground that pursuing the matter further would create an excessive entanglement with religion. On the other hand, it may turn out that the [pastor’s breach of contract claim] is subject to entirely neutral methods of proof. The speculative nature of our discussion here demonstrates why it is premature to foreclose the pastor’s contract claim. Once evidence is offered, the trial court will be in a better position to control the case so as to protect against any impermissible entanglements. Thus, while the First Amendment forecloses any inquiry into the assessment of the pastor’s suitability for a pastorship … it does not prevent the court from determining whether the contract alleged by the pastor in fact exists.”

The court concluded that the pastor “should be afforded the opportunity to demonstrate that he can prove his case without resorting to [religious doctrine].” The hearing conducted by the trial court “did not afford him the opportunity to prove that excessive entanglement into church matters need not occur to prove his breach of contract claim. On remand, if he is able to prove such a proposition, application of state law to his contract claim would not violate the First Amendment. If the facts prove to be otherwise, a motion for summary judgment may be granted infavor of the church.”

Application. 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.

There is one aspect to this case that should be noted. The pastor’s breach of contract claim was based on the following facts: (1) he and the church entered into a written contract of employment; (2) the contract specified that the pastor’s term of employment would be two years; and (3) the contract specified that it could only be changed by “unanimous consent” of both parties (i.e., the pastor and the church). The problem, of course, was that the pastor did not agree with the church’s decision to terminate his employment prior to the expiration of his two-year term, and as a result, there was no unanimous consent to this change in the contract. The lesson is clear. Employment contracts should be reviewed by legal counsel to protect against unforeseen legal liability. Had the contract contained a clause giving the church the unilateral authority to terminate the pastor’s tenure prior to the end of the two-year term, or if the duration of the employment was indefinite, the pastor’s claim would have been rejected by both the trial court and appeals court. Mundie v. Christ United Church of Christ, 987 A.2d 794 (Pa. Super. 2009).

This Recent Development first appeared in Church Law & Tax Report, March/April 2011.

Legal Developments

Court May Resolve Pastor’s Breach of Employment Claim

Not all church disputes involve matters of doctrine.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Court May Resolve Pastor’s Breach of Employment Claim

Not all church disputes involve matters of doctrine.

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

Key point. Some courts are willing to resolve disputes over the termination of clergy if they can do so without any inquiry into religious doctrine.

A Pennsylvania court ruled that the First Amendment guaranty of religious freedom did not prevent the civil courts from resolving pastors’ breach of employment contract claims if they can do so without delving into religious doctrine or spiritual qualifications. A church hired a pastor in 1999. The pastor’s status was confirmed by a written agreement in 2005 that stated, in part:

[The pastor’s] call is extended [for] a period of just over two years ….

The [church] will maintain the [pastor’s] pension fund at 14 percent of base salary, and provide a social security supplement at 7.65 percent of base salary, as well as the current auto allowance throughout the length of this agreement.

The [pastor] and [his wife] will continue to have the use of the parsonage throughout the length of this agreement ….

This agreement can be amended only by the unanimous consent of both parties [the pastor and church board].

In 2006, 22 members of the congregation notified the president of the church board that they demanded a meeting to discuss what they perceived as “church problems.” The president of the church board informed the dissidents by letter that no such meeting would be held. Instead, a special meeting of the board was held to discuss the pastor’s retirement at the end of 2006, his retirement package approved by the board totaling $21,000. However, before the pastor’s retirement plans became effective, the members of congregation who opposed the pastor took control of the board and terminated the pastor’s employment. This occurred prior to the end of the two-year term called for in the agreement.

The pastor sued the church for breach of contract and bad faith, and demanded damages in the amount of $77,000. The church asked the court to dismiss the lawsuit on the ground that it was an internal church matter over which the civil courts have no jurisdiction.

The court conducted a hearing at which two members of the church board shared their opinions as to the basis for the pastor’s dismissal. One testified that the termination was a “financial matter” while another stated that it had been based on the pastor having “damaged the spiritual welfare of the church,” divided the congregation, and caused a decline in the church’s membership. The court, in dismissing the pastor’s lawsuit, observed:

The relationship between an organized church and its ministers is fundamentally intertwined with the church’s doctrine and practice …. Invading this sacred relationship under the guise of contract law improperly interjects the court into questions of religious doctrine, polity, practice, and administration. It is precisely such conduct which is prohibited by the First Amendment of the United States Constitution.

The pastor appealed, claiming that the underlying dispute (breach of contract) did not turn on religious doctrine or polity but sought the enforcement of a secular right through civil contract law. As a result, he asserted that the First Amendment did not bar his claim that the church breached his written employment contract. The church insisted that the resolution of the pastor’s claims would “necessarily require the court to inquire into matters involving church polity, doctrine and administration, which is prohibited” by the First Amendment.

The appeals court began its opinion by observing:

The First Amendment does not exempt religious institutions from all statutes that regulate employment. For example, the First Amendment does not exempt religious institutions from laws that regulate the minimum wage or the use of child labor, even though both involve employment relationships. However, the First Amendment protects a church’s right to hire, fire, promote, and assign duties to its ministers as it sees fit not because churches are exempt from all employment regulations (for they are not) but rather because judicial review of those particular employment actions could interfere with rights guaranteed by the First Amendment.

The court in this case was willing to let the pastor prosecute his breach of contract claim so long as no issues of doctrine or spiritual qualifications were implicated.

The court noted that not all disputes among members of a congregation are doctrinal disputes:

Some are simply disputes as to the meaning of agreements on wills, trusts, contracts, and property ownership. These disputes are questions of civil law and are not predicated on any religious doctrine. While it is true that parties may agree to settle their disputes according to their own agreed fashion, the question of what they agreed to, or whether they agreed at all, are not doctrinal and can be solved without intruding into the sacred precincts [quoting the Pennsylvania Supreme Court in The Presbytery of Beaver-Butler of the United Presbyterian Church in the United States of America v. Middlesex Presbyterian Church, 489 A.2d 1317 (1985)].

The court remanded the case back to the trial court for disposition with the stipulation that it not resolve any issues pertaining to doctrine of the spiritual qualifications of the pastor.

The court concluded that the pastor “should be afforded the opportunity to demonstrate that he can prove his case without resorting to impermissible avenues of discovery or remedies.” If the pastor can demonstrate that excessive entanglement into church matters need not occur to prove his breach of contract claim, then “application of state law to his contract claim would not violate the First Amendment.” On the other hand, “if the facts prove to be otherwise, a motion for summary judgment may be granted in favor of the church.”

Application. Most courts have refused to get involved in internal church disputes over the dismissal of ministers on the ground that any intervention would violate the First Amendment guaranty of religious freedom. This case illustrates that this view is not universally held. The court in this case was willing to let the pastor prosecute his breach of contract claim so long as no issues of doctrine or spiritual qualifications were implicated. Mundie v. Christ United Church of Christ, 987 A.2d 794 (Pa. Super. 2009).

This Recent Development first appeared in Church Law & Tax Report, November/December 2010.

Legal Developments

Breach of Contract and the Ministerial Exception

Court agrees to hear church organist’s breach of contract lawsuit.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Breach of Contract and the Ministerial Exception

Court agrees to hear church organist’s breach of contract lawsuit.

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

Key point. 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 Pennsylvania court ruled that a trial court erred in dismissing a church organist’s breach of contract lawsuit against her employing church on the basis of the “ministerial exception” without any analysis of the functions that she performed or their importance to the church’s mission. A woman (the “plaintiff”) was employed by a church as its organist. She and the church entered into a six-year contract, renewable annually, obligating her to play the organ for worship services in exchange for a weekly fee of $275. This arrangement continued for several years until the church unilaterally reduced her pay to $50 per week. The plaintiff sued the church for breach of contract. The trial court dismissed the plaintiff’s complaint with the following observation:

We accept the argument of [the church] that [the plaintiff’s] contract claim is barred by the Free Exercise Clause of the First Amendment to the United States Constitution which prohibits judicial encroachment upon decisions made by a religious institution concerning the employment of its ministers. Because the Roman Catholic Church views music as an integral part of Catholic worship, the Organist/Musical Director is considered a minister of the church. Therefore, this court has no jurisdiction.

A state appeals court reversed the trial court’s dismissal of the case. It acknowledged that the “ministerial exception” precludes civil courts “from considering claims involving the employment relationship between a religious institution and its ministerial employees, based on the institution’s constitutional right to be free from judicial interference in the selection of those employees.” The court noted that the ministerial exception “applies only to ministers, and whether a person is or is not a minister requires an evaluation of the person’s actual functions within the church.” The courts generally have applied a “ministerial-function” test under which the exception applies “if primary duties include teaching, spreading the faith, church governance, supervision of a religious order, or supervision of participation in religious ritual and worship.”

The court concluded that the trial court erred by ruling that because “the Roman Catholic Church views music as an integral part of its Catholic worship,” anyone who holds the position of “Organist/Musical Director” is a minister for purposes of the ministerial exception. The court found “no basis in either state or federal cases applying the ministerial exception for such a per se classification based merely upon the person’s title.”

The court was unable to say, based on the evidence presented, whether the plaintiff’s primary duties involved teaching, spreading the faith, church governance, supervision of a religious order, or supervision of participation in religious ritual and worship, as required by the “ministerial function” test. Indeed, the evidence presented by the church “did not even establish that the Roman Catholic Church views music as an integral part of its Catholic worship,” a point central to the trial court’s decision.

Alternatively, the church asked that the appeals court affirm the trial court’s decision based on Pennsylvania’s presumption that all employment is “at-will.” The church pointed out that the plaintiff signed a written contract with the church acknowledging her at-will status. The court rejected this argument, noting that the at-will doctrine only applies to employees hired for an indefinite term, and that the plaintiff had been hired for a six-year term, renewable annually.

Application. Many courts have ruled that the ministerial exception applies to church music directors. This court did not reject those rulings, but rather refused to adopt a rule that church organists and music directors are always deemed “ministers” for purposes of the ministerial exception. Instead, the court insisted that a “ministerial function” test must be applied to ensure that an employee in fact is functioning as a minister. It remanded the case back to the trial court with the instruction to decide, on the basis of the ministerial function test, whether the ministerial exception should bar judicial resolution of the plaintiff’s claims. Cooper v. Church of St. Benedict, 954 A.2d 1216 (Pa. Super. 2008).

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

Legal Developments

Denominational Agency Employee Sues for National Origin Discrimination

Employers generally cannot be sued for discrimination based on isolated comments.

Richard R. Hammar, Attorney, CPA
Bio

Key Point 8-11. Employees and applicants for employment who believe that an employer has violated a federal civil rights law must pursue their claim according to a specific procedure. Failure to do so will result in the dismissal of their claim.

A federal court in Pennsylvania ruled that a denominational agency did not engage in unlawful "national origin" discrimination against a Romanian-born employee as a result of (1) a single comment that the employee heard another employee make about immigrant workers, and (2) a requirement that the employee have a doctor's note authorizing all future sick days.

An American citizen of Romanian birth (the "plaintiff") was employed by a denominational agency for five years in the accounting department. From the beginning of her employment, the plaintiff's superiors complained about the quality and slowness of her work.

At a meeting to address these complaints, the plaintiff alleged that two fellow employees engaged in an inappropriate conversation about immigrants after the presidential election in 2004. Specifically, she claimed that they pointed at her and said that the reason Americans do not have enough jobs is because President Bush brings immigrants to the United States.

She filed a complaint with the human resources director, who investigated the matter and assured the plaintiff that any similar comments would not be tolerated.

After four years of employment, the plaintiff was informed that she must obtain a doctor's authorization for any future sick days. This requirement was due to concerns the plaintiff's superiors had concerning the number of sick days she was taking as well as discrepancies involving the number of sick days she took and the employer's payroll records.

The plaintiff's supervisor was asked by an assistant treasurer to submit to him a draft of her annual performance evaluation for her fourth year of employment. The treasurer instructed the supervisor to include in her evaluation a summary of work-related problems. The supervisor refused to do so, and submitted an evaluation that rated the plaintiff's overall performance as "exceeds expectations."

The supervisor was cited for insubordination and removed as the plaintiff's immediate supervisor. The treasurer proceeded to complete the plaintiff's annual performance evaluation himself. He referred to her work-related problems, and downgraded her overall rating from "exceeds expectations" to "meets expectations." The treasurer continued to receive complaints about the plaintiff's performance.

In her fifth and final year of employment, the plaintiff submitted a doctor's note to her employer stating that she would be out indefinitely because of depression. She never returned to work, but remained employed until the expiration of her 12 weeks of unpaid leave under the federal Family and Medical Leave Act.

She had been warned by letter that her failure to return to work during this 12-week period would result in the termination of her employment. This letter informed the plaintiff that the employer was not required to hold her job open, and provided her with the names and telephone numbers of contact persons with whom she could discuss her options. She did not contact anyone.

She later sued her former employer for discriminating against her on account of her national origin in violation of Title VII of the Civil Rights Act of 1964 which prohibits employers with 15 or more employees and engaged in interstate commerce from discriminating in any employment decision on the basis of a person's race, color, national origin, gender, or religion.

Hostile work environment

The court noted that "employers violate Title VII when they harass their employees so severely or pervasively that they alter the conditions of the employee's employment and create an abusive working environment." The plaintiff insisted that this occurred when she overheard the two other employees make the comment about immigrant workers taking jobs from American citizens. The court disagreed: "[The plaintiff] has failed to produce any evidence showing that the discrimination she was subjected to was severe or pervasive. The evidence only shows that one comment was ever made … which referenced Immigrants in any manner. She needs to show more than this one incident. While she has presented evidence showing that these women made other disparaging comments, such as calling her stupid, she has not shown that these comments, which are offensive and unprofessional, were motivated by her national origin. Verbal harassment, no matter how unpleasant and ill-willed, is simply not prohibited by Title VII if not motivated by the plaintiff's [national origin.] The evidence does not establish that the discrimination [the plaintiff] suffered on account of her national origin was severe or pervasive."

Doctor's authorization

The plaintiff claimed that the requirement that she obtain a doctor's authorization for any future sick leave was intended to discriminate against her because of her national origin. The court noted that to establish a case of national origin discrimination, the plaintiff had to show are that she (1) was a member of a protected class, (2) was qualified for the position in question, (3) suffered an adverse employment action, and (4) the circumstances support an inference of discrimination.

The court noted that the plaintiff proved the fi rst two elements, but failed to prove the third since there was no evidence of an adverse employment action against her based on her national origin. It noted that an adverse employment action "is an action by an employer that alters the employee's compensation, terms, conditions, or privileges of employment, deprives her of employment opportunities, or adversely affects her status as an employee."

The employer's "employee handbook" contained the following provision: "A doctor's release to return to work may be required after any illness of 3 days or more in duration. A doctor's release to return to work may be required after any illness resulting in any time missed from work. Your supervisor will notify you when a doctor's release is required for an illness less than three days in duration."

The court noted, based on this provision, that "one of the terms of [the plaintiff's] employment was that she could be required at anytime to present a doctor's note following an absence for illness. The fact that the provision was not enforced until [the employer] deemed it necessary did not effect a change in the terms of [the plaintiff's] employment. She has not shown that she suffered an adverse employment action. Other courts … have also held that the imposition of a doctor's note requirement is not an adverse employment action."

The court also concluded that the plaintiff failed to prove the fourth element (the circumstances surrounding the imposition of the requirement of a doctor's note did not give rise to an inference of discrimination). Quite the contrary, the plaintiff "was treated similarly to other employees with regard to the doctor's note requirement."

What this means for churches

This case illustrates the importance of objective employee evaluations. The plaintiff's immediate superior wanted to give the plaintiff an overall evaluation of "exceeds expectations," without any reference to her chronic absenteeism and performance problems.

This is a typical response by supervisors, since inflated evaluations are deemed preferable to the confrontation that often accompanies more candid and objective evaluations. In this case, the assistant treasurer acted properly by amending the evaluation to recount the absenteeism and performance problems, and by reducing the overall evaluation to "meets expectations."

Annual performance evaluations generally are not legally required for church employees. In fact, churches often are better off not using them at all as opposed to having evaluations that are inflated. inflated evaluations will significantly limit a church's ability to dismiss an employee who is protected by a state or federal employment discrimination law, since a strong inference arises that the "real" reason an employee with inflated evaluations is terminated is not job related, but rather due to discriminatory intent.

Second, this case demonstrates that employment discrimination claims based on a hostile working environment require proof of a level of discrimination that is both severe and pervasive, and this generally is not possible with isolated, off-hand comments. 2007 WL 2461822 (E.D. Pa. 2007).

Legal Developments

Church Liability for the Sexual Molestation of Minors

A recent case provides helpful guidance.

Richard R. Hammar, Attorney, CPA
Bio

A recent case provides helpful guidance; Doe v. Liberatore, 478 F.Supp.2d 742 (M.D. Pa. 2007)


Article summary. In 1986 Congress enacted the Child Abuse Victims' Rights Act in order to allow victims of various sexual offenses, including child molestation and exploitation, to sue for money damages in federal court. Does the Act permit minors who are sexually molested by a church employee or volunteer to sue their church? Or, are victims only authorized to sue the person who committed the offense? These are important questions that were addressed for the first time by a federal court in Pennsylvania. The court also addressed a number of other theories of church liability, including the relevance of sexual orientation in selecting a church worker, and its conclusions will be of relevance to every church leader. This article will review the facts of this significant case, summarize the court's ruling, and evaluate the significance of the case to churches and other religious institutions.



Key point 4-08. Every state has a child abuse reporting law that requires persons designated as mandatory reporters to report known or reasonably suspected incidents of child abuse. Ministers are mandatory reporters in many states. Some states exempt ministers from reporting child abuse if they learned of the abuse in the course of a conversation protected by the clergy-penitent privilege. Ministers may face criminal and civil liability for failing to report child abuse.



Key point 10-04. A church may be liable on the basis of negligent selection for a worker's molestation of a minor if the church was negligent in the selection of the worker. Negligence means a failure to exercise reasonable care, and so negligent selection refers to a failure to exercise reasonable care in the selection of the worker. Liability based on negligent selection may be imposed upon a church for the acts of employees and volunteers.



Key point 10-13.1. A few courts have found churches and denominational agencies liable on the basis of a breach of a fiduciary duty for the sexual misconduct of a minister. In some cases, the church or agency is found to be vicariously liable for the minister's breach of a fiduciary duty, but in others the church or agency is found to have breached a fiduciary duty that it had with the victim.



Key point 10-17.1. Punitive damages are monetary damages awarded by a jury "in addition to compensation for a loss sustained, in order to punish, and make an example of, the wrongdoer." They are awarded when a person's conduct is reprehensible and outrageous. Most church insurance policies exclude punitive damages. This means that a jury award of punitive damages represents an uninsured risk.

Does the Child Abuse Victims' Rights Act, enacted by Congress in 1986, represent a new theory of legal liability that can be asserted against churches in federal court? This question was addressed by a federal court in Pennsylvania in a recent case. A young man who had been sexually molested by his pastor on numerous occasions sued his church and a denominational agency on the basis of several theories of liability including the Child Abuse Victims' Rights Act. Does this Act provide child abuse victims with a new theory of liability that can be asserted against churches in federal court? This was the central question that the court addressed. Every church leader should be familiar with the court's conclusion.

Background

A man (Allen) was ordained as a Catholic priest in 1989. Following several years of study in Europe Allen was assigned to a seminary in Pennsylvania. He also taught classes at a state university where he met a male student (Richard) who expressed an interest in becoming a priest. The two of them began spending a great deal of time together. Allen frequently took Richard out to dinner and to bars, purchased gifts for him, drove him to New York City on multiple occasions, and traveled to Los Angeles with him as a graduation gift following Richard's graduation. During the trip to Los Angeles Allen attempted to have sexual contact with Richard. These efforts continued upon their return to Pennsylvania.

The local bishop, upon being informed of Allen's activities, reassigned him to serve as pastor of a church in another city. Soon after assuming his duties as pastor, Allen met a 14-year-old altar boy (the "plaintiff"). Over the course of the next year Allen "groomed" the plaintiff, meaning that he undertook to establish an intimate friendship with him in preparation for sexual activity. During this time Allen took the plaintiff to movies and restaurants, and gave him expensive gifts such as a Movado watch, a cellular phone and fencing equipment. Allen provided counseling to the plaintiff after his father's death, and became a father figure to him.

Eventually, Allen began to make sexual overtures toward plaintiff. More than two years of sexual abuse followed.

On several occasions the bishop and diocese were informed of some of Allen's behavior. These communications included the following: (1) A female friend of plaintiff's mother informed two priests with whom she had been long-time friends of her suspicions concerning Allen's relationship with the plaintiff. She told them that Allen had given him extravagant gifts, taken him on overnight trips, and spent the night with him on several occasions in the church rectory. (2) A church custodian also shared her concerns about Allen's relationship with the plaintiff to four other priests. (3) A female employee of the diocese told one of her superiors that the plaintiff was "around the rectory more than she thought he should be," and that the relationship between Allen and the plaintiff "just didn't seem right [and] didn't look good." (4) A priest informed a diocesan official that he believed Allen was obsessed with the plaintiff and that Allen spent an inordinate amount of time with him, including wrestling and taking overnight trips together. He also stated that the church staff suspected that Allen was sexually abusing the plaintiff.

The plaintiff informed a Benedictine monk who worked at the church about Allen's behavior, but the monk instructed him "to forgive [Allen], to keep the issue private, and to not let other people know because it would ruin his life and the lives of others."

A year later, a new bishop was appointed. Soon after assuming his new duties, the bishop became aware of the rumors and incidents involving Allen. After reviewing Allen's personnel file the bishop became "alarmed" at the history of inappropriate behavior. A few months later, the plaintiff and another young man came forward and informed the bishop that Allen had sexually abused them. In response, the bishop hired an investigator to investigate the allegations.

Allen was arrested and charged with sexual abuse in the State of New York, as well as multiple counts of indecent assault and corruption of minors in Pennsylvania. He pleaded guilty to those offenses. The bishop thereafter dismissed Allen as a priest.

The lawsuit

The plaintiff sued his church as well as the diocese and bishop in federal court. He claimed that the defendants were responsible for Allen's wrongful acts on the basis of the following theories:

  • The federal Child Abuse Victims' Rights Act of 1986
  • Vicarious liability
  • Aiding and abetting
  • Negligent hiring, supervision and retention
  • Failure to report child abuse
  • Breach of fiduciary duty

The church defendants asked the court to grant a summary judgment in their favor. In ruling on a motion for summary judgment, a court generally construes the evidence in favor of the other party (in this case, the plaintiff), and grants the motion only if it concludes that reasonable jurors would not accept the plaintiff's claims.

The court's ruling

The court's response to each of the plaintiff's theories of liability are summarized below.

(1) Child Abuse Victims' Rights Act of 1986

Congress enacted the Child Abuse Victims' Rights Act in 1986 to expand the scope of the Protection of Children Against Sexual Exploitation Act of 1977 by providing a civil remedy for personal injuries suffered by victims of child sexual exploitation.

The Act specifies that any person who, while a minor, was a victim of sexual abuse, aggravated sexual abuse, sexual abuse of a minor, sexual exploitation of children, selling or buying of children, child pornography, or child prostitution, and who "suffered personal injury as a result of such violation, regardless of whether the injury occurred while such a person was a minor, may sue in any appropriate United States District Court and shall recover the actual damages such person sustains and the costs of the suit, including a reasonable attorney's fee." 18 U.S.C. 2255.

In summary, the Child Abuse Victims' Rights Act provides child victims of sexual abuse, molestation and exploitation with a federal cause of action for money damages. The court noted that the issue in this case was "against whom may that federal cause of action be brought?" The Act simply states that the victim "may sue in any appropriate United States District Court." It does not say against whom the lawsuit may be brought. The church defendants insisted that the Act only permitted a civil lawsuit against the perpetrator (Allen), and not them. The plaintiff argued that the church defendants could be sued under the Act on the ground that Allen was acting as their "agent."

The court noted that in the 20 years since its enactment, the Act has been addressed by only one other court. Smith v. Husband, 376 F.Supp.2d 603 (E.D. Va. 2005). In the Smith case, a federal district court in Virginia ruled that a criminal conviction for child molestation or exploitation, or child pornography, was not a prerequisite to bringing a lawsuit under the Act. Rather, Congress' intent was "to make the civil remedies provision available to any victim able to show by a preponderance of the evidence that the defendant committed the acts described in any of the listed offenses."

The Pennsylvania court agreed with this conclusion, noting that "in order to be subject to liability under [the Child Abuse Victims' Rights Act] a defendant must be proven to have violated at least one of the criminal statutes listed in [the Act] by a preponderance of the evidence." No criminal conviction is required.

The court concluded that there was sufficient evidence to persuade a jury that such violations occurred since plaintiff "offered evidence that Allen knowingly transported him, while a minor … in interstate and foreign commerce, with the intent of engaging in illegal sexual activity with him." Therefore, the plaintiff could sue Allen for money damages and attorneys fees under the Child Abuse Victims' Act. But did the Act authorize the plaintiff to sue the church and diocese for monetary damages and attorneys fees? The church defendants insisted that it did not, since they did not take part in Allen's criminal activities.

In resolving this question, the court relied on the following section in the federal criminal statutes: "Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission is punishable as a principal." 18 U.S.C. § 2(a). In other words, "one who criminally aids or abets a listed offense is punishable as though he himself committed the offense." As a result, "if one has aided or abetted another in violating one of the statutes listed in [the Child Abuse Victims' Rights Act] then he himself has committed an act indictable under that listed statute. As the aider or abettor has himself committed an indictable act, he is liable to the plaintiff under [the Act]." Therefore, "if the church defendants criminally aided or abetted Allen in the commission of his sexual offenses, they may be held liable under [the Act]."

In order to establish the offense of criminal aiding and abetting, it must be shown that: (1) the underlying offense has been committed; (2) the defendant knew the offense was being committed; and (3) the defendant acted with the intent to facilitate it. Unknowing participation is not sufficient to constitute an offense under the aiding and abetting statute. Acting with intent to facilitate an offense requires that one acted with the "intent to help those involved with a certain crime …. Indeed, the state of mind required for conviction as an aider and abettor is the same state of mind as required for the principal offense."

Since there was sufficient evidence that multiple offenses were committed by Allen, the first element of criminal aiding and abetting was met. However, the court concluded:

No reasonable jury could find that the second and third elements of the aiding and abetting offense are satisfied. While plaintiff's evidence demonstrates that the church defendants had reason to suspect that Allen was sexually abusing the plaintiff, there is nothing in the record demonstrating that the defendants consciously shared his knowledge of the underlying offenses, as well as the specific criminal intent to commit them. Indeed, a general suspicion that an unlawful act may occur is not enough. While it is possible to infer knowledge from a combination of suspicion and indifference to the truth … there still remains no evidence even remotely suggesting that the church defendants shared Allen's specific intent to commit the sexual offenses. While the defendants may have avoided learning of his offenses, there is no evidence that they desired that his crimes be accomplished. Also absent from the record is any evidence showing that the defendants actively participated in some manner to assist Allen in the commission of his offenses.

As a result, the church defendants could not be liable under the Child Abuse Victims' Act, and this portion of the plaintiff's lawsuit had to be dismissed.

(2) Vicarious liability

The plaintiff claimed that the church defendants were "vicariously liable" for Allen's acts of sexual molestation since these acts were committed during the course of and within the scope of his duties as a priest. The church defendants asked the court to dismiss this theory of liability on the ground that Allen's acts were committed outside the scope of his employment.

The court noted that "an employer is held vicariously liable for the negligent acts of his employee which cause injuries to a third party, provided that such acts were committed during the course of and within the scope of the employment." The conduct of an employee is considered within the scope of employment if: (1) it is of a kind and nature that the employee is employed to perform; (2) it occurs substantially within the authorized time and space limits; (3) it is prompted, at least in part, by a desire to serve the employer; and (4) if force is intentionally used by the employee against another, the use of force is not unexpected by the employer."

The court concluded that Allen's sexual molestation of the plaintiff was not within the scope of his employment as a priest since it was "wholly inconsistent with the role of one who is received into the Holy Orders as an ordained priest of the Roman Catholic Church. Moreover, the acts of sexual abuse perpetrated by Allen were … certainly not actuated by any purpose of serving the church or diocese."

As a result, the court dismissed this theory of liability against the church defendants.

(3) Aiding and abetting

The plaintiff sued the Benedictine monk to whom he shared the details of Allen's wrongful acts, claiming that he had aided and abetted in those acts by not divulging them to church officials and by instructing the plaintiff to forgive Allen and not report the misconduct to civil authorities.

The court noted that the monk could be liable for Allen's wrongful acts if he gave "substantial assistance" to Allen in committing those acts. It concluded that this standard could not be met in this case since "there is simply no evidence that [the monk] aided the efforts of Allen or encouraged or incited him to commit his abusive acts. There is no evidence that [the monk] was present during the commission of the abuse. Moreover, despite [the monk's] advice, plaintiff and his mother were entirely free to ignore him and contact the authorities on their own accord. As such, his efforts to dissuade plaintiff and his mother from contacting the authorities cannot be viewed as substantial assistance."

(4) Negligent hiring

The plaintiff's lawsuit alleged that the church defendants were responsible for Allen's wrongful acts on the basis of negligent hiring. The word "negligence" means carelessness, and so the plaintiff was claiming that the church defendants had been careless in selecting and employing Allen.

The court concluded that a reasonable jury would not conclude that the church defendants were negligent in hiring Allen because there was no evidence suggesting that he "was or would become a child sex predator when he was hired."

(5) Negligent supervision and retention

The plaintiff's lawsuit alleged that the church defendants were responsible for Allen's wrongful acts on the grounds that they were negligent or careless in supervising and retaining him. The court concluded that "viewing the evidence in the light most favorable to plaintiff, a reasonable jury could find that the church defendants were negligent or reckless in retaining Allen because the jury could conclude that he … posed a risk of sexual abuse to minor males."

The court pointed out that the previous bishop had been informed that the plaintiff was sleeping in Allen's bedroom at the church rectory and that Allen had taken the plaintiff on several overnight trips. He later acknowledged that he would characterize this activity as "grooming" behavior. The previous bishop also had been informed of Allen's inappropriate behavior with the plaintiff and another young man. On the basis of these accusations he removed Allen from his position at the seminary, but rather than dismiss him as a priest he assigned him to another parish within the diocese. Based on this evidence, the court concluded that "a reasonable jury could infer that this provided Allen the opportunity to befriend plaintiff and then sexually abuse him."

The court noted that Allen was both a homosexual and a pedophile, but stressed that "it does not follow that a homosexual is more likely than a heterosexual to prey on minors of the same sex. As such, standing alone, Allen's homosexual behavior with adults would be irrelevant as to the issue of whether the church defendants had notice that he had a propensity to sexually abuse a minor male."

The court did find Allen's homosexual behavior with Richard (the seminary student) relevant as to the issue of the church defendants' notice of his propensity to molest minors because his grooming behavior with Richard was so "strikingly similar" to his behavior with the minor plaintiff. It noted that Allen was in Richard's company a great deal, bought him expensive gifts, took him on overnight trips and had him sleep in his room at the seminary. This behavior was noticed by colleagues, who, in turn, made their observations and concerns known to the church defendants. At the church, Allen counseled plaintiff regarding the death of his father, hired him to perform various duties at the church, was in his company an inordinate amount of time, purchased expensive gifts for him, took him on overnight trips and had him sleep in his room at the rectory. Like his relationship with Richard, Allen's relationship with the plaintiff drew comment from people who were in a position to view, on a daily basis, much of what occurred between them. These people, in turn, informed the church defendants of their observations and concerns.

As a result, the court concluded that "Allen's homosexual behavior with regard to Richard is legally relevant as to the issue of whether the church defendants had notice that he was, at the very least, grooming the plaintiff for a homosexual relationship, if not already involving him in one."

But even ignoring Allen's prior relationship with Richard, the court concluded that "a reasonable jury could conclude that there was adequate warning to the church defendants that Allen was grooming the plaintiff for a homosexual relationship, and that it may well have already begun. The notice of the plaintiff's sleepovers in the rectory, the gifts given to him and the overnight trips is sufficient to allow a reasonable jury to conclude that the church defendants were negligent or reckless in retaining Allen as a priest." A reasonable jury also could conclude that the church defendants "were negligent or reckless in permitting, or failing to prevent, Allen's conduct upon church premises, given the plaintiff's statement that Allen routinely sexually abused him while they slept in his bedroom in the church rectory."

As a result, the court refused to grant the church defendant's motion for summary judgment on this basis of liability.

(6) Failure to report child abuse (negligence "per se")

Under the doctrine of "negligence per se" a person who violates a statute can be sued for monetary damages if:

(1) The purpose of the statute must be, at least in part, to protect the interest of the plaintiff, individually, as opposed to the public; (2) the statute must clearly apply to the conduct of the defendant; (3) the defendant must violate the statute; and (4) the violation of the statute must cause the plaintiff's injury.

The plaintiff claimed that the church defendants were liable on the basis of negligence per se for Allen's acts of sexual molestation as a result of their failure to comply with the following provision in the Pennsylvania child abuse reporting law: "Persons who, in the course of their employment, occupation or practice of their profession, come into contact with children shall report or cause a report to be made [to the state] when they have reasonable cause to suspect, on the basis of their medical, professional or other training and experience, that a child coming before them in their professional or official capacity is an abused child." The reporting law specifies that "persons required to report … include, but are not limited to, any member of the clergy."

The court concluded that a reasonable jury could conclude that all four requirements for establishing liability on the basis of negligence per se were satisfied, and therefore it denied the church defendants' motion to dismiss this basis of liability. The court noted:

The first element of plaintiff's negligence per se action is easily met [since the child abuse reporting law] was clearly promulgated so as to protect abused children such as plaintiff. Second, clergy are expressly included within the list of individuals who have a duty to report suspected child abuse. As such, the statute clearly applies to the church defendants …. Third, a reasonable jury could find that the defendants violated the statute. Viewing the record in the light most favorable to the plaintiff, there is evidence which supports the conclusion that the defendants had "reasonable cause to suspect" that Allen was sexually abusing the plaintiff. The defendants were informed of Allen's past incidents involving Richard. They had also been informed of the fact that the plaintiff was sleeping in Allen's bedroom in the rectory. In addition, several people had voiced their own concerns and suspicions regarding the relationship between Allen and the plaintiff, and supported these suspicions with their own personal observations of Allen's behavior towards the plaintiff. As plaintiff was a parishioner, altar server and sacristan at the church, and the reports concerned a priest's abuse, the church defendants were in sufficient "contact" with the plaintiff to bring them within the reporting requirements of the law …. Accordingly, there was sufficient evidence within the knowledge of defendants to create "reasonable cause to suspect" that Allen was sexually abusing the plaintiff. As … the defendants did not report Allen's suspected abuse of the plaintiff to law enforcement authorities, a reasonable jury could conclude that they violated [the child abuse reporting law]. Fourth, when viewing the evidence in the light most favorable to the plaintiff, a reasonable jury could find that the defendants' failure to report Allen's sexual abuse of the plaintiff, in violation of [the child abuse reporting law] caused the injuries plaintiff suffered. Allen was convicted of sexual abuse, indecent assault and corruption of minors based on his assaults upon the plaintiff [occurring after the church defendants had notice of his propensity to engage in such acts]. As such, a reasonable jury could find that, had the defendants reported Allen to law enforcement authorities, he would not have had the opportunity to sexually abuse the plaintiff.

(7) Breach of a fiduciary duty

The plaintiff claimed that the church defendants were liable for Allen's acts of sexual molestation on the basis of a breach of a fiduciary duty. Specifically, he argued that the defendants breached their fiduciary duty by (1) placing Allen in a position to serve as the plaintiff's priest and counselor; (2) by failing to remove him from that position; and (3) by failing to report him to law enforcement authorities after having ample reason to believe that he had committed acts of sexual abuse.

The court noted that under Pennsylvania law "a fiduciary relationship will be found to exist when the circumstances make it certain the parties do not deal on equal terms, but, on the one side there is an overmastering influence, or, on the other, weakness, dependence, or trust, justifiably reposed; in both an unfair advantage is possible." The court concluded:

This definition fits the relationship of a priest and a parishioner once the priest accepts the parishioner's trust and accepts the role of counselor. In such a case, the parishioner has justifiably placed his trust in the priest. In order to receive and make use of a priest's advice and counsel, a parishioner must necessarily depend upon the priest's knowledge and expertise, resulting in the priest's superiority and influence over the parishioner. Thus, once a counseling relationship has commenced, the parishioner and priest no longer deal on equal terms. This unequal relationship affords the priest opportunity to abuse the trust and confidence reposed in him or prey on a weak and dependent parishioner to his own benefit. The relationship therefore becomes fiduciary in nature and the recognition of a breach of fiduciary duty claim is necessary to protect a beholden parishioner from a self-serving priest.

The court also concluded that a fiduciary relationship existed between the church defendants and the plaintiff:

As to a diocese and its officials, a diocese exerts an overmastering influence over a plaintiff, or a plaintiff exhibits weakness, dependence on or justifiable trust in the diocese and its officials when, as here, the plaintiff is a minor and is involved in the church beyond that of a mere parishioner, whether by virtue of his serving the church, participating in church-sponsored activities, or receiving counseling from a priest. When the plaintiff is a minor, the power differential between the plaintiff and priest is magnified. This power differential makes it difficult for a minor who is involved in the church to refuse the unwelcome sexual advances of a priest or report such an advance to his parents or the authorities. Minors participating in church activities are therefore dependent on the diocese for protection, and the diocese is responsible to provide it. This vulnerability requires the diocese to be vigilant so that minors who are serving the church, participating in church activities, or receiving counseling from a diocesan priest are doing so in an environment free from the threat of sexual abuse.

The court stressed that recognition of the plaintiff's breach of fiduciary duty claim against the priest and church defendants did not offend the First Amendment since the claim "only raises the issues of whether the parties did not deal on equal terms, but, rather, on the one side there was an overmastering influence, or, on the other, weakness, dependence, or trust, justifiably reposed; in both an unfair advantage is possible, whether that unfair advantage was exploited by Allen, and whether the church defendants failed to provide and maintain a safe environment for the plaintiff to participate in church activities. No inquiry need be made into church doctrine or other ecclesiastical matters. No professional standard of care need be set for clergy. There is no risk of excessive governmental entanglement with religion."

(8) Punitive damages

In his lawsuit, the plaintiff asked the court to award him punitive damages. The court noted that under Pennsylvania law, "punitive damages may be awarded for conduct that is outrageous, because of the defendant's reckless indifference to the rights of others," and that "as the name suggests, punitive damages are penal in nature and are proper only in cases where the defendant's actions are so outrageous as to demonstrate willful, wanton or reckless conduct."

In determining whether punitive damages are warranted in a particular case, "the state of mind of the actor is vital. The act, or the failure to act, must be intentional, reckless or malicious …. As such, a showing of mere negligence, or even gross negligence, will not suffice to establish that punitive damages should be imposed. However, notwithstanding this heightened standard, punitive damages may be awarded based on a cause of action sounding in negligence if the plaintiff is able to show that the defendant's conduct not only was negligent but that the conduct was also outrageous."

The court concluded that a reasonable jury would assess punitive damages against the church defendants, and so it rejected the defendants' request to dismiss the plaintiff's request for such damages. It pointed out that the defendants "knew that the plaintiff was routinely sleeping in Allen's bedroom and that he had taken the plaintiff on several overnight trips. The church defendants also knew about Allen's past involvement with Richard …. A reasonable jury could conclude that a minor's sleeping in a priest's bedroom and a priest's taking a minor alone on overnight trips are facts which create a high degree of risk of physical harm to the minor. The failure to end this conduct, with its high degree of risk of physical harm to the plaintiff, could reasonably be viewed by a jury as reckless. As such, the court will deny the defendants' motion for summary judgment as to the plaintiff's claim for punitive damages."

Relevance to church leaders

What is the relevance of this case to church leaders? Consider the following points:

1. In general. A decision by a federal district court in Pennsylvania is not binding in any other state, and is not binding on other federal courts in Pennsylvania. However, there are some aspects to the court's decision that are instructive for all churches.

2. Child Abuse Victims' Rights Act of 1986. The case addressed in this article is the first to address the application of the Child Abuse Victims' Rights Act in the context of incidents of child molestation occurring on church property. Here are the main points to note about the court's ruling:

  • The Act provides a civil remedy for personal injuries suffered by victims of various federal laws pertaining to child sexual molestation and exploitation, and child pornography.
  • The Act allows not only the recovery of monetary damages, but also attorneys fees.
  • A person need not be convicted of child molestation or exploitation, or child pornography. All that is required is that a victim be able to show by a preponderance of the evidence that the defendant committed one or more of these offenses.
  • A church cannot be sued for monetary damages and attorneys fees under the Act as a result of acts of child molestation or exploitation committed by a church employee or volunteer unless it "aided or abetted" in the commission of the offense. In order to establish the offense of criminal aiding and abetting, it must be shown that: (1) the underlying offense has been committed; (2) the church knew the offense was being committed; and (3) the church acted with the intent to facilitate it. Unknowing participation is not sufficient to constitute aiding or abetting. Acting with intent to facilitate an offense requires that one acted with the "intent to help those involved with a certain crime …. Indeed, the state of mind required for conviction as an aider and abettor is the same state of mind as required for the principal offense." In this case, the court concluded that the church defendants did not satisfy the second and third requirements since there was no evidence "demonstrating that the defendants consciously shared [Allen's] knowledge of the underlying offenses, as well as the specific criminal intent to commit them. Indeed, a general suspicion that an unlawful act may occur is not enough. While it is possible to infer knowledge from a combination of suspicion and indifference to the truth … there still remains no evidence even remotely suggesting that the church defendants shared Allen's specific intent to commit the sexual offenses."


Example. A church volunteer molests a child at church. The victim's family sues both the volunteer and the church on several grounds, including the Child Abuse Victims' Rights Act. Assuming that the offender's acts violate one of the federal crimes pertaining to child abuse and exploitation specified in the Act, the family will be able to sue the offender for money damages in federal court. They also can sue the offender for their attorneys fees. The church is not liable under the Act, however, unless it aided or abetted in the commission of the offense. The church may be liable on other grounds, including negligent selection and negligent supervision.

3. Advising the victim not to report the abuse. The plaintiff claimed that he shared the details of Allen's wrongful acts with a Benedictine monk who aided and abetted in those acts by not divulging them to church officials and by instructing the plaintiff and his mother to forgive Allen and not report the misconduct to civil authorities. The court rejected this basis of liability since the monk's acts fell below the "substantial assistance" required for aiding and abetting. Further, the court noted that the plaintiff and his mother were free to ignore the monk's advice and contact the authorities on their own initiative.

4. Negligent supervision and retention. The court found the church defendants liable for Allen's wrongful acts on the basis of negligent retention. It concluded: "A reasonable jury could find that the church defendants were negligent or reckless in retaining Allen because the jury could conclude that he … posed a risk of sexual abuse to minor males," and, "rather than dismiss him as a priest [Allen] was assigned to another parish within the diocese."

The takeaway point is this. Church leaders assume a significant risk of liability in retaining an employee or volunteer after becoming aware of credible evidence of misconduct. Such evidence should be promptly evaluated, and appropriate actions taken based on the strength of the evidence and the nature and severity of the wrongdoing.

5. Reckless behavior. It should be noted that the court concluded that "a reasonable jury could find that the church defendants were negligent or reckless in retaining Allen because the jury could conclude that he … posed a risk of sexual abuse to minor males." A finding of recklessness would have two important consequences for the church defendants.

Elimination of limited immunity

It would result in a loss of "limited immunity" for the defendants' directors and officers. Most states have enacted laws limiting the liability of church officers and directors. The most common type of statute immunizes uncompensated directors and officers from legal liability for their ordinary negligence committed within the scope of their official duties. These statutes generally provide no protection for "willful and wanton" conduct, intentional or criminal acts, or "gross negligence."

Church officers and directors who are guilty of recklessness or gross negligence are more likely to be sued personally than if their behavior is merely negligent. Indifference by church leaders to information that clearly demonstrates improper behavior by a staff member or volunteer worker might be viewed by a court as gross negligence, and this would make it more likely that church leaders will be sued personally.

Why have states enacted such laws? The primary reason is to encourage persons to serve as directors of nonprofit organizations. In the past, many qualified individuals have declined to serve as directors of such organizations out of a fear of legal liability. The immunity statutes respond directly to this concern by providing directors of nonprofit organizations with limited immunity from legal liability.

Statutes immunizing the directors and officers of nonprofit organizations from liability do not prevent the organization itself from being sued on the basis of the negligence of an officer or director. The immunity statutes only protect the officers or directors themselves. Many of the immunity statutes apply only to the directors and officers of organizations exempt from federal income tax under section 501(c) of the Internal Revenue Code.


Example. A New York court ruled that a charitable immunity law granting limited legal immunity to the uncompensated directors of a nonprofit organization did not protect a church's trustees from liability for the sexual misconduct of their minister. An unincorporated church and its trustees were sued as a result of their minister's alleged rape of a number of minor females in the church. Among other things, the lawsuit alleged that the church and trustees were responsible for the victims' suffering as a result of their "negligent supervision" of the minister's actions. In their defense, the trustees relied on a state law granting uncompensated directors of nonprofit organizations limited immunity from liability for their actions. The court rejected this defense for two reasons: "The [trustees] did not present presumptive evidence of uncompensated status in that they did not present an affidavit of a chief financial officer of the [church]. Further, there is a reasonable probability that the specific conduct of such [trustees] constitutes gross negligence. If the [trustees] did act as the [victims] allege, they may be found to have proceeded in reckless disregard of the consequences of their acts." Karen S. v. Streitferdt, 568 N.Y.S.2d 946 (A.D. 1 Dept. 1991).

The federal Volunteer Protection Act provides limited immunity to uncompensated officers and directors of nonprofit organizations. It applies only to conduct that is negligent. Officers and directors who engage in gross negligence or reckless misconduct are not protected. The Act "preempts the laws of any state to the extent that such laws are inconsistent with this [Act] except that this [Act] shall not preempt any state law that provides additional protection from liability relating to volunteers or to any category of volunteers in the performance of services for a nonprofit organization or governmental entity."

Punitive damages

Courts can award "punitive damages" for conduct that is especially reprehensible. The purpose of such damages is to deter such behavior by punishing those who engage in it. The basis for punitive damages varies from state to state, but typically includes reckless behavior or gross negligence.

Church leaders should understand that any conduct that might be perceived by a jury as reckless, or grossly negligent, may expose a church to punitive damages, and that such damages may not be covered by the church's liability insurance policy. It is critical to note that many church insurance policies exclude punitive damages. This means that a jury award of punitive damages represents a potentially uninsured risk. As a result, it is critical for church leaders to understand the basis for punitive damages, and to avoid behavior which might be viewed as reckless or grossly negligent.

6. The relevance of Allen's homosexual orientation. The court concluded that "a homosexual is [no] more likely than a heterosexual to prey on minors of the same sex. As such, standing alone, Allen's homosexual behavior with adults would be irrelevant as to the issue of whether the church defendants had notice that he had a propensity to sexually abuse a minor male."

The court's conclusion that homosexual adults are no more likely to molest children than heterosexuals, and therefore pose no elevated risk of harm to minors, has been reached by several other courts. A few illustrative cases are summarized below.

(1) Doe v. British Universities N.A. Club, 788 F. Supp. 1286 (D. Conn. 1992)

A federal district court in Connecticut rejected the argument that child molestation was a "foreseeable consequence of sexual orientation," noting that there was not "one scintilla of credible evidence to suggest that homosexuals pose a greater risk of committing sexual molestation, assault, or criminal conduct than heterosexuals" and that "to find otherwise would be to hold that homosexuals are predisposed towards molesting or sexually assaulting minor males simply by virtue of their sexual orientation. The court cannot and will not adopt such a position absent sufficient evidentiary support."

(2) Kendrick v. East Delavan Baptist Church, 886 F. Supp. 1465 (E.D. Wis. 1995)

A church hired a full-time teacher at its private school. The teacher removed a young boy (the victim) from class and disciplined him on at least ten occasions. On four of these occasions, the teacher engaged in sexual contact with the victim. The victim never informed either his parents or any church or school officials about the teacher's behavior. Two months before the end of the teacher's tenure at the school, the school administrator received complaints from the parents of another boy regarding inappropriate behavior by the same teacher. The administrator immediately launched an investigation of these charges under the direction of the church board. He interviewed the teacher and the boy whose parents made the accusations, held a number of meetings with the parents and the church board, and ultimately concluded that the allegations involving the teacher could not be "proved or disproved."

The boy's parents were not satisfied with this result, and they continued to demand the teacher's removal. It was at this time that the administrator heard a rumor that the teacher had "had some problem with homosexuality" prior to his employment by the church. In response to this rumor, the administrator contacted the church-affiliated college the teacher had attended, and was informed that the teacher had been temporarily dismissed from the college for a brief period after confessing that he had engaged in homosexual activity on a weekend retreat. Another round of meetings occurred involving the teacher, the administrator, and the president of the college. The three agreed that, even though no wrongdoing by the teacher had been proven, the best way to resolve the controversy was for the teacher to resign. He immediately did so—both as a teacher and as a member of the church.

When the victim was twenty years old, he sued the church claiming that it was legally responsible for the teacher's misconduct. The victim claimed that the church was responsible for his injuries on the following grounds, including negligent selection. The victim insisted that the administrator's failure to more adequately screen the teacher prior to hiring him was the cause of his injuries since the administrator would not have hired the teacher had he more thoroughly checked his academic and work history and discovered that he had been temporarily suspended from college for "homosexual activity." The court disagreed:

[T]here is a complete lack of evidence in the record regarding any connection between engaging in homosexual activity (whether or not one identifies himself as a homosexual) and pedophilic behavior. There is no evidence in the record to indicate that the incident at [college] involved children. Based on this, it seems clear that, had [the administrator] learned of this information prior to [the time he hired the teacher] he would not have breached a duty of care to protect students had he hired [the teacher]. And if hiring [the teacher] under such circumstances would not have constituted a breach of duty, then hiring him without the benefit of such information cannot … be considered a cause in fact of the [victim's] harm. Even assuming, then, that a more thorough background check would have uncovered this information, a [jury] would have no logical basis for concluding that, based on issues relating to sexual orientation, [the administrator] would have found [the teacher] to be unfit to teach, or an increased risk to children.

(3) Porter v. Harshfield, 948 S.W.2d 83 (Ark. 1997)

The Arkansas Supreme Court ruled that homosexuality "in no way" indicates that a person is a higher risk of committing a sexual assault. While this case involved an employee of a medical clinic, the court's ruling is relevant to all employers including churches and other religious organizations. A radiologist hired a male medical technician to work in his clinic. The technician sexually assaulted a male patient while performing an ultrasound examination for possible gallbladder problems. The patient sued the doctor, claiming that he was responsible for the technician's actions on the basis of negligent hiring since he (1) failed to contact the hospital where the technician previously had worked to find out why he left; and (2) was aware that the technician was a homosexual. The court repeatedly rejected the victim's assertion that homosexual orientation renders a person a higher risk of committing sexual assaults. It concluded that evidence of the technician's homosexuality was not enough to make the doctor guilty of negligent hiring. It noted that "we know of no" connection "between sexual orientation and a predisposition to commit sexual assault."

(4) Dale v. Boy Scouts of America, 734 A.2d 1196 (N.J. 1999)

The New Jersey Supreme Court ruled that the Boy Scouts of America violated a state public accommodations law by barring homosexuals from serving as scout leaders. This ruling was later reversed by the United States Supreme Court (see next case). However, the case is relevant because it represents a unanimous decision by a state supreme court that homosexuals pose no greater risk of molestation or harm to minors than heterosexuals. To illustrate, one of the court's justices, in a concurring opinion, observed:

[A] lesbian or gay person, merely because he or she is a homosexual, is no more or less likely to be moral than a person who is a heterosexual. Accordingly … there is no reason to view a gay scoutmaster, solely because he is a homosexual, as lacking the strength of character necessary to properly care for and impart BSA humanitarian ideals to the young boys in his charge …. Another particularly pernicious stereotype about homosexuals is implicit in Boy Scouts' arguments: the sinister and unspoken fear that gay scout leaders will somehow cause physical or emotional injury to scouts. The myth that a homosexual male is more likely than a heterosexual male to molest children has been demolished.

The concurring justice cited the following articles in support of his conclusion:

  • Carole Jenny et al., Are Children at Risk for Sexual Abuse by Homosexuals?, 94 Pediatrics 41 (1994) (concluding that most child abuse appears to be committed by situational child abusers who present themselves as heterosexuals)
  • Nicholas Groth & H. Jean Birnbaum, Adult Sexual Orientation and Attraction to Underage Persons, 7 Archives Sexual Behav. 175 (1978) (concluding that "homosexuality and homosexual pedophilia are not synonymous [and] that the adult heterosexual male constitutes a greater sexual risk to underage children than does the adult homosexual male")
  • Gregory M. Herek, Myths About Sexual Orientation: A Lawyer's Guide to Social Science Research, 1 L. & Sexuality 133 (1991) (citing studies and concluding that "it appears from these studies that gay men are no more likely than heterosexual men to molest children")
  • David Newton, Homosexual Behavior and Child Molestation: A Review of the Evidence, 13 Adolescence 29 (1978) (surveying data concerning male homosexuality and child molestation and concluding that "there is no reason to believe that anything other than a random connection exists between homosexual behavior and child molestation").

The concurring justice concluded: "In light of this evidence, the belief that a gay scoutmaster poses a risk to young boys because of his sexual orientation is patently false, and cannot in any way bolster Boy Scouts' First Amendment defense. Accordingly, it must be rejected as an unfounded stereotype."

(5) Boy Scouts of America v. Dale, 530 U.S. 640 (2000)

The United States Supreme Court ruled, by a vote of 5-4, that a New Jersey civil rights law requiring the Boy Scouts to use a gay activist as a scout leader violated the Boy Scouts' First Amendment right of association. When scouting officials learned from a newspaper article that one of their scoutmasters was a homosexual activist, they terminated his services, explaining that the Boy Scouts "specifically forbid membership to homosexuals." The former scoutmaster sued the Boy Scouts claiming that it had violated a New Jersey "public accommodations" law by dismissing him. The New Jersey law prohibits, among other things, discrimination on the basis of sexual orientation in places of public accommodation.

The Supreme Court conceded that the public perception of homosexuality in this country has changed, and that homosexuality "has gained greater societal acceptance." However, "this is scarcely an argument for denying First Amendment protection to those who refuse to accept these views. The First Amendment protects expression, be it of the popular variety or not …. [T]he fact that an idea may be embraced and advocated by increasing numbers of people is all the more reason to protect the First Amendment rights of those who wish to voice a different view."

This case is significant because four of the Court's nine justices saw no reason why homosexual men should not be allowed to oversee adolescent males in scouting programs, and the other five justices did not specifically address the issue.


Key point. These cases do not suggest that churches are legally required to employ homosexuals as volunteer or compensated youth workers. Rather, they suggest that churches that choose to utilize homosexuals as children's and youth workers are not exposing minors or themselves to an elevated risk so long as they do a proper background check that discloses no information suggesting that the person poses a risk of harm to minors.


Key point. While the court concluded that Allen's homosexuality did not make the church defendants liable on the basis of negligent selection, it did conclude that his "grooming" behavior with an adult homosexual was relevant in assessing the church defendants' response to similar behavior involving a minor, since such behavior (which included gifts, overnight trips, and spending the night at the church rectory) indicated the likelihood of sexual contact.


Resource. Are churches subject to state employment discrimination laws barring discrimination in employment on the basis of sexual orientation? This issue is addressed fully in section 8-21.2 in Pastor, Church & Law, Volume 3 (4th ed. 2007)

7. Failure to report child abuse (negligence "per se"). One of the most significant aspects of the court's decision is its conclusion regarding negligence per se. Under the doctrine of "negligence per se," a person who violates a statute can be sued for monetary damages if (1) the purpose of the statute is to protect the interest of the plaintiff, individually, as opposed to the public; (2) the statute must clearly apply to the conduct of the defendant; (3) the defendant must violate the statute; and (4) the violation of the statute must cause the plaintiff's injury.

The court concluded that the church defendants were liable on this basis for their failure to comply with a state child abuse reporting statute. The significance of a finding of negligence per se is that actual negligence is presumed. There is no need to show any culpability on a defendant's part other than a violation of the underlying statute. This means that a mandatory child abuse reporter's failure to comply with a state child abuse reporting law's requirement to report a known or reasonably suspected incident of child abuse would render that person automatically liable for monetary damages without a need for the victim to prove actual negligence. In other words, the mere failure to comply with the reporting requirement constitutes negligence per se. This sweeping conclusion has not been reached by any other court.

8. Breach of a fiduciary duty. The court concluded that the church defendants could be liable for Allen's molestation of the plaintiff on the basis of their breach of a fiduciary duty. While the court acknowledged that a mere "church-parishioner" relationship was not enough to create a fiduciary duty, "when, as here, the plaintiff is a minor and is involved in the church beyond that of a mere parishioner, whether by virtue of his serving the church, participating in church-sponsored activities, or receiving counseling from a priest," a fiduciary duty arises to act in the best interests of the minor. This duty, the court concluded, "required the church defendants to be vigilant so that minors who are serving the church, participating in church activities, or receiving counseling from a diocesan priest are doing so in an environment free from the threat of sexual abuse."

9. Punitive damages. Punitive damages may be assessed by a court for actions that are so outrageous as to demonstrate willful, wanton or reckless conduct. The court concluded that a reasonable jury would assess punitive damages against the church defendants, and so it rejected the defendants' request to dismiss the plaintiff's request for such damages. It pointed out that the defendants "knew that the plaintiff was routinely sleeping in Allen's bedroom and that he had taken the plaintiff on several overnight trips. The church defendants also knew about Allen's past involvement with Richard …. A reasonable jury could conclude that a minor's sleeping in a priest's bedroom and a priest's taking a minor alone on overnight trips are facts which create a high degree of risk of physical harm to the minor. The failure to end this conduct, with its high degree of risk of physical harm to the plaintiff, could reasonably be viewed by a jury as reckless. As such, the court will deny the defendants' motion for summary judgment as to the plaintiff's claim for punitive damages."

A finding of punitive damages is significant because most insurance policies do not insure against such damages, and many courts have ruled that it violates public policy to do so. This means that a finding of punitive damages represents a potentially uninsured risk. This court concluded that a church may be liable for such damages if it ignores evidence that an employee or volunteer poses a risk of molesting a minor.

Legal Developments

Are Church Volunteers Eligible for Workers’ Compensation Benefits?

The case illustrates that workers’ compensation is available only to work-related injuries to employees.

Richard R. Hammar, Attorney, CPA
Bio

Background

Most churches utilize volunteers to perform a variety of routine maintenance tasks, including cleaning, snow and ice removal, painting, roof repair, and grass cutting. If a church member is injured while performing such tasks, is the injury compensable under the state's workers’ compensation law? If so, what are the consequences to the church? These are important issues that were addressed by the Pennsylvania Supreme Court in a recent case.

An elderly man (Burt) and his wife began attending a small church. Because contributions were meager, church members performed most church maintenance. The church constitution designated the board of trustees as the persons responsible for "maintenance and protection of church building, grounds, furnishings and equipment." These duties were carried out on a voluntary basis. The single exception to the obligations of the board was that the church paid to have the grass cut on its 1.5-acre property. The trustees completed all other grounds maintenance, such as edging the lawn, planting flowers, and pruning the shrubs and trees.

Burt and his wife became members of the church, and a short time later Burt was appointed a church trustee. As a trustee, he performed various maintenance duties for the church such as painting the men's bathroom, changing light bulbs, vacuuming rugs, washing windows, cleaning restrooms, and other chores. He also began cutting grass on church property for $25 per week using a tractor and gasoline provided by the church.

On one occasion Burt took his hedge cutting shears with him when going to church to cut grass. When another trustee arrived at the church at 8:30 a.m., Burt was trimming the bushes beneath one of the church windows. The trustee waived at Burt, and then went into the church and began cleaning. Within a few minutes he heard a loud noise, saw a cloud of black smoke, and observed Burt emerge from the smoke engulfed in flames. Apparently, Burt had gathered up the shrub clippings, piled them on the grass in the far corner of the church driveway, and set fire to them using a can of gasoline.

The fire department and an ambulance were called, with the fire chief arriving moments later. Burt was conscious and said, "I think I screwed up." Burt died from severe burns a month later.

Burt's widow filed a workers’ compensation claim with the state, claiming that her husband died as a result of the work-related injuries he sustained while acting within the scope of his "employment" with the church. The church objected to the workers’ compensation claim. It asserted that Burt was a "volunteer" and that the money he received for cutting the grass was a "nominal honorarium." The church further noted that Burt was not cutting the grass when he sustained the fatal injury, but rather was performing volunteer services for the church by trimming the bushes. As a result, his efforts to trim the bushes (which led to his injury) were uncompensated trustee duties.

A workers’ compensation tribunal found that Burt's widow was entitled to workers’ compensation benefits since: (1) Burt was employed to cut the grass; (2) the church provided all of the materials and equipment necessary to carry out the task; (3) trimming the bushes was "incidental and necessary for Burt to accomplish his task of grass cutting"; and (4) Burt was paid on a weekly basis. The church appealed, arguing that Burt was either a volunteer or an independent contractor, and that the $25 paid to him was an honorarium rather than compensation.

A state appeals court ruled that Burt was an employee of the church because he received "valuable consideration" for his services. It relied on a previous case in which a church member fell from the roof of the church he attended while it was under construction. The victim had volunteered to help with the construction of the church and, in exchange, the value of his labor was to be applied toward the payment of his tithes. The court found that the victim was an employee and had received valuable consideration. Schreckengost v. Gospel Tabernacle, 149 A.2d 542 (Pa. Super. 1959). A dissenting judge concluded that Burt was "a volunteer, or possibly an independent contractor, but definitely not an employee." She noted that the church exercised little, if any, control over the grass-cutting activities, and that Burt alone decided when and how to cut the grass.

The supreme court's ruling

The state supreme court agreed to review the case. It began its opinion by noting that the state workers’ compensation law "defined the liability of an employer to pay damages for injuries received by an employee in the course of employment." The law defined an "employee" as "all persons who perform services for another for a valuable consideration, exclusive of persons whose employment is casual in character and not in the regular course of the business of the employer." The court noted that according to this definition a finding of employee status requires a consideration of three factors: (1) the presence of valuable consideration; (2) whether the employment was casual in character; and (3) whether the employment was in the regular course of employer's business. The court considered each factor individually.

Valuable consideration

The court acknowledged that Burt "performed numerous services for the church, among them were painting, interior maintenance, exterior maintenance, and grass cutting." Though his wife testified that he "was not compensated in this life for the majority of the tasks he performed," the court noted that he was paid by either an honorarium or an actual fee to cut the grass. The court observed: "Ordinarily, if services are performed for the payor directly, the presumption is that the amount received is for the service and it is not a gift or honorarium. The fact that the parties may have called the payment an honorarium is important, but not conclusive, for in light of all the circumstances, the term is often loosely or inaccurately used."

The court, in concluding that the $25 the church paid Burt each week was "valuable consideration" for services performed, observed:

The church treasurer testified that Burt was paid $25 per week "because that's what he agreed to cut it for." This negotiation for payment indicates that the weekly payment amount was not truly in the form of an honorarium but in the form of wages. An honorarium, in common understanding, means a voluntary reward for a service for which no remuneration could be collected by law. Thus, an honorarium is given to one who performed services for little or nothing and its tender is decided by the one for whom the services were performed without an obligation to give it. Here, the amount to be paid was clearly the subject of some discussion between the church and Burt. The fact that he received $25 every week for cutting the grass, even though the checks were issued approximately every four weeks, clearly constitutes wages as well as valuable consideration. The church supplied the mower and the gasoline so that he had little in the way of expenses to diminish the consideration he was receiving.

"Casual employment"

The court noted that the workers’ compensation law exempted "persons whose employment is casual in character." It defined "casual employment" as employment that is "occasional, irregular, or incidental as distinguished from regular and continuous." The court concluded that Burt's employment was not casual:

He was employed on a regular basis to cut the grass once per week during the growing season. He negotiated the wage and utilized the materials and equipment supplied by his employer, the church. The employment was not irregular, sporadic, or incidental and was, therefore, not casual in nature. He is more properly a seasonal employee rather than a casual employee. Further, he had been employed by the church for nearly three years to perform the same task, the same way, and during the same time period. Thus … he was an employee of the church for purposes of cutting the grass.

Business of the church

The court noted that the workers’ compensation law exempted "persons whose employment [is] not in the regular course of the business of the employer." The court defined this exception as follows:

While there may be a certain reluctance to characterize the activities of a church or temple in terms of the marketplace, the term business does not always connote a profit objective. The business of a religious institution is not strictly confined to charitable purposes, spiritual uplift, ministering to the needy, conducting religious services, and saving souls. Those courts that have considered what constitutes the business of the church, have concluded that, in order to attain the goals of the church or the temple, it is also necessary to construct and maintain a house of worship in which the religious work is conducted …. The maintenance and repair of church property and keeping the property in presentable condition is generally considered the usual course of business conducted on those premises by the trustees or other church management personnel. Therefore, we conclude that Burt was employed in the business of the church when he was cutting the grass.

However, the court stressed that Burt was not cutting the grass when he was injured. Rather, he was trimming bushes, a task that he was expected to perform gratuitously and for which he received no compensation. The appeals court had concluded that trimming bushes was "incidental" to Burt's employment, and therefore was indistinguishable from it. But the supreme court disagreed:

Burt was clearly not cutting the grass at the time of his injury. Although the testimony of the individuals on site that day unanimously agreed that the tractor was still in the shed at the time of the injury, the lower court found that trimming the bushes was incidental to the task of cutting the grass …. However, the proper question is not whether trimming the bushes was incidental to the grass-cutting task, but whether that activity was part of the employment arrangement. We hold that in this case it was not.

Burt was intimately involved in the work of the church. He wore several "hats" during the years of his church membership for he was not only a member, he also served as a trustee as well as a seasonal employee. The duties of a trustee included building and grounds maintenance. Several witnesses testified as to the various activities of the trustees in this regard, but they were unanimous in stating that the only paid position was for running the tractor to cut the grass. In fact [another trustee] testified that he, not Burt, usually completed the hand mowing in those areas that could not be reached with the tractor, and for which he received no compensation …. No trimming of bushes and overhanging tree limbs, no edging, picking up sticks, hand mowing, or garden work, all of which are necessary to maintain the grounds of the church, were ever included in the fee to cut the grass. The church paid an individual for running the tractor to cut the grass …. The trustees were responsible for all other tasks included in grounds maintenance …. Accordingly, we must find that Burt was acting as a trustee while trimming the bushes, rather than as an employee, and was not in the course of his employment when he was injured.

What this means to churches

Consider the following points:

1. Are we subject to workers’ compensation? Churches should know whether their church is subject to state workers’ compensation law. If you are not sure if your church is covered, consider one or more of the following steps: (1) ask a local attorney; (2) ask your church insurance agent; or (3) call the agency in your state that administers the workers’ compensation program.

2. The risk of being uninsured. Employers that are covered by workers’ compensation law generally pay insurance premiums to cover the cost of benefits paid to injured workers. However, many churches have failed to obtain workers’ compensation insurance, often because of a false assumption that they are "exempt" from workers’ compensation law. This can expose a church to significant liability, for two reasons. First, an injured employee may be able to sue the church for damages in a civil lawsuit. Unlike workers’ compensation benefits, there is no limit on the amount a court can award in a civil lawsuit. Second, the damages a court awards in a civil lawsuit will not be covered under most church insurance policies. Often, general liability policies exclude employee injuries on the assumption that they are covered under a workers’ compensation policy. This can create a dangerous gap in coverage.

3. Do we have workers’ compensation insurance? If your church is subject to workers’ compensation law, then be sure you have obtained workers’ compensation insurance. If in doubt, ask your church insurance agent.

4. Employees. Workers’ compensation laws only cover injuries and illnesses suffered by employees on the job, but the term employee is defined very broadly to further the objectives of workers’ compensation laws. As a result, the fact that a church treats a worker as self-employed for income tax reporting purposes does not mean that the worker is self-employed for purposes of workers’ compensation.

However, as the case addressed in this article illustrates, workers’ compensation is available only to work-related injuries to employees. The court concluded that Burt's injuries occurred while he was performing duties as a trustee, and not as a compensated employee. Brookhaven Baptist Church v. Workers Compensation Appeal Board, 2006 WL 3798180 (Pa. 2006)

Legal Developments

Disability Discrimination

The application of the ministerial exception to FMLA claims.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Disability Discrimination

The application of the ministerial exception to FMLA claims.

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

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

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

* A federal court in Pennsylvania ruled that it was barred by the First Amendment from resolving a church music director’s claims that her employing church discriminated against her on the basis of her disabilities, and violated the Family Medical Leave Act. A woman (Ann) performed ministerial responsibilities as the director of music for a church. As its director of music, the church considered Ann to be a non-ordained liturgical minister who was an integral part of the pastoral and spiritual mission of the church and not simply a member of the custodial, clerical, or office personnel. Ann herself repeatedly referred to her employment as her ministry, and, eventually, she admitted that her responsibilities were ministerial in nature.

Ann claimed that she had a neurological disorder, and, as a result of her condition, was experiencing physical difficulties and decreased stamina and energy. She claimed that she approached the senior pastor of the church and requested a break from her employment as director of music. The pastor reportedly denied her request after she informed him that she did not know how long of a break she would need. Ann claimed that at that point she had no choice but to resign from her position, which she did in writing. Later, she requested reinstatement, which was denied. She then filed a “Charge of Discrimination” with the Equal Employment Opportunity Commission (EEOC), and later sued the church in federal court. She eventually dropped her disability claim, and proceeded with her Family Medical Leave Act (FMLA) claim. The church asked the court to dismiss the case on the basis of the so-called “ministerial exception,” which exempts employment relationships between religious institutions and their ministers from various federal employment laws. Ann argued that the ministerial exception did not apply to FMLA claims.

The court concluded that Ann’s duties as director of music made her a “minister” for purposes of the ministerial exception, and that the ministerial exception applied to FMLA claims. As a result, the court dismissed Ann’s FMLA claim.

The church sought a court order compelling Ann to pay its attorneys’ fees. It based this request on Title 28, section 1927 of the United States Code, which specifies that “any attorney who multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses and attorneys’ fees reasonably incurred because of such conduct.” Specifically, the court noted that there must be “willful bad faith, which is evident when claims advanced were meritless, that counsel knew or should have known this, and that the motive for filing the suit was for an improper purpose such as harassment.” The court concluded that the behavior of Ann’s attorney was not “of an egregious nature, so stamped by bad faith that is violative of recognized standards in the conduct of litigation.” It conceded that Ann’s attorney “initially and obdurately refused to acknowledge that she was a minister in the church in the face of a significant evidentiary array that she was a minister and so considered herself, he ultimately acted reasonably by stipulating to that fact and by voluntarily dismissing the ADA claim.”

Application. This case is significant because it is the first court to address the application of the ministerial exception to FMLA claims. The court concluded that the exception applies. This ruling will be directly relevant to any church or denominational agency having 50 or more employees (the minimum number of employees required for FMLA coverage). Fassl v. Our Lady of Perpetual Help Roman Catholic Church, 2005 WL 3135921 (E.D. Pa. 2006).

* See also (1) “Defamation,” Trice v. Burress, 137 P.3d 1253 (Okla. App. 2006); (2) “Sexual misconduct by clergy, lay employees, and volunteers,” 2006 WL 1009283 (W.D. Wash. 2006), in the recent developments section of this newsletter.

Legal Developments

Personal Injuries on Church Property and During Church Activities – Part 2

The Pennsylvania Supreme Court upheld the involuntary manslaughter conviction of the driver of a 15-passenger van who fell asleep at the wheel.

Richard R. Hammar, Attorney, CPA
Bio

Key point. Drivers of church vehicles may be criminally liable for involuntary manslaughter if they operate a vehicle in a grossly negligent or reckless manner that results in the death of one or more persons.

The Pennsylvania Supreme Court upheld the involuntary manslaughter conviction of the driver of a 15-passenger van who fell asleep at the wheel while transporting 21 children, causing an accident in which two children were killed and many more seriously injured.

At 5 p.m. on a sunny afternoon, an adult male (Steve) was driving a Ford 15-passenger van when, by his own admission, he fell asleep. He claimed he awoke just before the van collided with another vehicle, causing it to veer sharply to the right and hit an embankment. The van rode up the embankment, flipped, and came to rest on its passenger side. At the time of the collision there were 24 occupants in the van, including 21 minors. All but one of the minors was under the age of 12. Two of the children were killed in the crash, and numerous others were taken to hospitals with injuries. Because the van had only 15 passenger seats, some of the 23 passengers were crowded into seats while others were seated on the floor. An investigation by an accident reconstruction expert revealed that, at the time of the collision, none of the passengers was restrained by a seatbelt and the van was traveling at 78 miles per hour (23 miles over the posted speed limit of 55 miles per hour).

Steve was charged with several crimes, including two counts of involuntary manslaughter. A trial judge dismissed the manslaughter charges on the ground that the state had failed to demonstrate the recklessness or gross negligence necessary to support such a charge. The state appealed.

Pennsylvania law defines involuntary manslaughter as follows: "A person is guilty of involuntary manslaughter when as a direct result of the doing of an unlawful act in a reckless or grossly negligent manner, or the doing of a lawful act in a reckless or grossly negligent manner, he causes the death of another person." Most states define involuntary manslaughter in the same way. The sole issue in this case was whether the state produced sufficient evidence that the children's deaths were the result of an act undertaken in a reckless or grossly negligent manner. The state insisted that falling asleep at the wheel constituted grossly negligent or reckless behavior, "especially while driving a van full of children—indeed, a van severely overloaded with children, at least some of whom were not seated in the van's seats, much less protected by safety restraints." The risks resulting from this reckless behavior "should have counseled strict compliance with the traffic laws and yet Steve compounded his initial recklessness by intentionally driving at an excessive rate of speed directly before he fell asleep."

The court ruled that Steve could be prosecuted and convicted for involuntary manslaughter. It concluded:

A motor vehicle can be a dangerous instrumentality. Driving is a correspondingly heavily regulated privilege, both as to licensure and the rules of the road, the regulation being a necessary concomitant of the dangers to self and others inherent in driving. The danger increases with the speed at which a vehicle is operated, since speed both reduces reaction times and heightens the consequences of any collision. The danger also may increase if other safety measures are ignored—whether those measures involve vehicle maintenance, internal safety features such as seating capacity or restraints, or the rules of the road. No driver can get behind the wheel without an acute awareness of the "responsible post of duty" he is assuming ….

We need not resolve the question of whether falling asleep alone is enough to raise a jury question of recklessness, since the state proved additional circumstances which revealed a conscious disregard of the serious risk involved here. Steve allowed himself to fall asleep despite the fact that he was driving a van filled with children. The presence of these children would have led a prudent person to be extra-cautious; far from acting cautiously, however, his van was filled to over-capacity and, in addition, the children were not secured with safety belts. Steve elected to drive at an excessive rate of speed—at least 23 miles beyond the 55 m.p.h. speed limit—at the time he allowed himself to fall asleep. Each of these additional factors, beyond the mere fact of falling asleep at the wheel, increased the risk of collision, injury, and death. Moreover, each was a circumstance within Steve's knowledge and control. Viewed in their totality, the circumstances here reveal a pattern of conscious disregard for circumstances that placed the lives of these children in increasing danger. Accordingly, we hold that the state proved a prima facie case of two counts of involuntary manslaughter so as to warrant submission of those charges to a jury.


Application
. This case illustrates two important points. First, gross negligence or recklessness while driving a church vehicle may result in criminal liability for involuntary manslaughter if a person is killed. Second, the court concluded that gross negligence and recklessness were proven, in part, by driving a 15-passenger van overloaded with children at an excessive rate of speed. Anyone who drives church vehicles, especially with minors on board, should be familiar with the ruling. Commonwealth v. Huggins, 836 A.2d 862 (Pa. 2004).

Legal Developments

Child Abuse Reporting

A Pennsylvania court ruled that a victim of child abuse could not sue ministers who knew of the abuse but failed to report it.

Richard R. Hammar, Attorney, CPA
Bio


Key point 4-08 . Every state has a child abuse reporting law that requires persons designated as mandatory reporters to report known or reasonably suspected incidents of child abuse. Ministers are mandatory reporters in many states. Some states exempt ministers from reporting child abuse if they learned of the abuse in the course of a conversation protected by the clergy-penitent privilege. Ministers may face criminal and civil liability for failing to report child abuse.

A Pennsylvania court ruled that a victim of child abuse could not sue ministers who knew of the abuse but failed to report it, but he could sue the church for breaching its promise to pay his counseling bills.

A 36-year-old male (Eric) claimed that he was sexually molested by three priests some 20 years before when he was 16 years of age. He sued his former church and diocese on the basis of several theories of liability including a failure to report the abuse when it happened pursuant to the state child abuse reporting law, breach of a fiduciary duty, and negligent supervision. In addition, Eric claimed that when he informed the diocese of the abuse in 2002, he was assured by diocesan officials that the diocese would pay for psychological treatment which was not covered by insurance. However, he claimed that a year later the diocese ceased payment of these bills and instead imposed "oppressive conditions" that would have to be met for the payments to resume. These conditions required the diocese to review a clear treatment plan that would include both comprehensive psychiatric and psychological evaluation "to ensure that the recommended treatment plan is well reasoned and has a high probability of being a benefit to him."

failure to report child abuse

Eric claimed that the church and diocese were responsible for his injuries because they failed to report suspected child abuse pursuant to the state child abuse reporting law. At the time of the alleged abuse in 1980 and 1981, the reporting law did not specifically list clergy as a category of those required to report abuse. Clergy were not added to the list of mandatory reporters until the law was amended in 1995. The court refused to apply the 1995 amendment retroactively to make church and diocesan officials mandatory reporters in 1980 and 1981. It concluded that "no statute shall be construed to be retroactive unless clearly and manifestly so intended by the General Assembly." Such an intent was not present in this case.

counseling fees

While the diocese's promise to pay Eric's counseling bills was initially an unenforceable, oral commitment, it may have become enforceable as a result of the legal doctrine of "promissory estoppel." The doctrine of promissory estoppel "is invoked when there is no enforceable agreement between the parties" and is applied "to avoid injustice by making enforceable a promise made by one party to another, when the promisee relies on the promise, and therefore changes his position to his own detriment." The court noted that Eric began treatment in reliance upon the otherwise unconditional promise to pay, and then discontinued his treatment because the diocese failed to continue to make payments.

Application . This case is important for two reasons. First, it affirms the general view that ministers who fail to report known or reasonably suspected incidents of child abuse do not thereby expose either themselves or their employing church to civil liability unless they are mandatory reporters under the reporting law and civil liability for failing to report is imposed either by the reporting law itself or by court decisions in that state.

Second, this is one of the few courts to address the issue of counseling fees paid by a church to a victim of clergy sexual abuse. The court concluded that the church's promise to pay Eric's counseling fees was unenforceable at the time it was made, based on the principle of "consideration." It is a fundamental principle of contract law that a promise is not legally binding or enforceable unless the party making the promise receives something of value (called "consideration") in exchange. Since the diocese received nothing in exchange for its promise to pay Eric's counseling bills, its promise was unenforceable. However, there are certain exceptions to this rule, including the doctrine of promissory estoppel. As the court noted, this doctrine may make an unenforceable promise enforceable "when the promisee relies on the promise, and therefore changes his position to his own detriment." The court noted that Eric began treatment in reliance upon the otherwise unconditional promise to pay, and then discontinued his treatment because the diocese failed to continue to make payments. As a result, the church's promise to pay the counseling bills may have become enforceable. Morrison v. Diocese of Altoona-Johnstown, 2004 WL 3141330 (Pa. Com. Pl. 2004).

Legal Developments

Denominations—Legal Liability

A Pennsylvania court ruled that a church and diocese could be liable for a priest’s acts of child molestation.

Richard R. Hammar, Attorney, CPA
Bio


Key point 4-08. Every state has a child abuse reporting law that requires persons designated as mandatory reporters to report known or reasonably suspected incidents of child abuse. Ministers are mandatory reporters in many states. Some states exempt ministers from reporting child abuse if they learned of the abuse in the course of a conversation protected by the clergy-penitent privilege. Ministers may face criminal and civil liability for failing to report child abuse.


Key point 10-16.01. Under the principle of comparative negligence, a church is liable only to the extent of its percentage share of fault for an accident or injury.


Key point 10-17.01. Punitive damages are monetary damages awarded by a jury "in addition to compensation for a loss sustained, in order to punish, and make an example of, the wrongdoer." They are awarded when a person's conduct is reprehensible and outrageous. Most church insurance policies exclude punitive damages. This means that a jury award of punitive damages represents an uninsured risk.


Key point 10-18.01. Some courts have found denominational agencies liable for the acts of affiliated ministers and churches on the basis of a number of grounds, including negligence and agency.

A Pennsylvania court ruled that a church and diocese could be liable for a priest's acts of child molestation.

A Catholic priest engaged in repeated acts of sexual molestation with a 10-year-old boy (the "victim"). These acts continued until the victim was 17 years old. The victim later sued the priest, his former church, and the diocese. The victim claimed that the "church defendants" (the church and diocese) negligently hired, supervised, and retained the priest, and deliberately ignored pedophilic behavior of priests in general. After an 11-week trial, the jury found the priest and church defendants liable, and awarded compensatory damages of $519,000 and punitive damages of $1 million. The church defendants appealed on several grounds, some of which are described below.

First Amendment

The church defendants argued that the first amendment religion clauses, which bar excessive entanglement between church and state and guaranty religious autonomy, prevented the civil courts from resolving negligent hiring, supervising, and retention claims against clergy. Incredibly, the church defendants' attorneys failed to raise this issue at trial, and so the appeals court ruled that it could not be raised on appeal.

A Pattern of Ignoring Pedophilic Behavior

The church defendants argued that the trial court erred in finding them liable on the basis of a "pattern" or practice of ignoring pedophilic behavior by priests, and that the prejudicial impact of this evidence far outweighed its relevance and on that basis should not have been presented to the jury. The court disagreed. It concluded, "The course of dealing of the church organization with pedophilic behavior within the church, if any, could tend to establish how the church reacted to [the priest's] pedophilic behavior [in this case] if it knew or should have known about it." The court also noted that the priest had testified that his fear of losing a parish could have been affected by the church's having a policy of not acting on complaints of pedophilia, and, in this way, could have affected his engaging in sexual acts with minor males. The court concluded,

The prejudicial impact of the evidence concerning the knowledge of [the church defendants] concerning pedophilic activity of priests within the diocese was not so prejudicial as to outweigh its probative value …. The crucial issue with respect to [the church defendants'] liability is their knowledge when confronted with signs that [the priest] was engaging in improper conduct. Liability could attach … only if the jury determined that they "knew or should have known" that they should exercise control over [the priest]. Whether the priest was the first known priest-pedophile with whom [the church defendants] had experience is clearly relevant to a determination of whether they "should have known" about his improper conduct at some point prior to [the victim's] unfortunate experiences. Clearly an individual or organization which has been exposed to and has had some experience in dealing with a particular situation may better be able to recognize a subsequent, similar situation. Therefore, we reject [the church defendants'] assertion that there was a prejudicial taint in this matter such that the jury could not arrive at a proper verdict.

Failure to comply with Child Abuse Reporting Law

The trial court allowed the victim to introduce evidence showing that the church defendants failed to report incidents of sexual abuse to the police or other civil authorities. For example, the victim's attorney asked the bishop of the diocese during the trial whether he had ever reported incidents involving the sexual molestation of minors to the police or other agencies. The bishop testified that he had never done so. The victim insisted that this evidence showed the church defendants' knowledge of improper conduct by priests. The church defendants argued on appeal that this evidence was not relevant to any issue and should not have been allowed. In particular, they claimed that they had no duty to make such reports, and so their failure to do so did not prove that they failed to adequately investigate reports of sexual abuse.

The court concluded that the trial court acted properly in admitting evidence showing that the church defendants had not reported incidents of child molestation by priests to the civil authorities. It concluded,

[E]vidence that no reports were made to police or other authorities by [the church defendants] was relevant to a determination of whether they knew or should have known that such incidents were occurring. The extent of [their] actual or constructive knowledge was an issue material to whether they were negligent in supervising [the priest], and thus formed the basis of [the victim's] cause of action against them …. Accordingly, this evidence was both competent and relevant to a material issue, and therefore admissible subject to the trial court's sound discretion.

The court emphasized that the trial judge had given the jury the following warning, "The church defendants had no legal duty to report activities of a pedophilic natures to law enforcement authorities or to children or youth services or to government agencies. And any failure to do so can't be a basis for finding them liable under these theories. This testimony was permitted to be placed before you to permit plaintiffs to exclude those courses of action in terms of the investigation that the defendants did conduct as being possible steps that they took."

Comparative Negligence

The church defendants argued that the trial court erred in not allowing the defense of comparative negligence. The theory of comparative negligence assigns damages to defendants in proportion to their degree of fault. For example, had the jury determined the priest to be 90% at fault, and the church defendants only 10%, the church defendants would only have been liable for 10% of the jury's verdict. The court stressed that the theory of comparative negligence only applies to negligence. It then observed,

For several reasons, we share the trial court's concern about entering into a comparison of the parties' respective negligence in this case. First, it is problematic that [the priest's] conduct is central to the negligent acts alleged on the part of the [church defendants]. In the context of liability insurance coverage … pedophilic sexual abuse is intentional conduct on the part of the abuser, as a matter of law, and is not negligent conduct …. [S]ince [the priest's] acts of pedophilic sexual molestation were intentional, the doctrine of comparative negligence has no application here. The acts that directly caused the harm are, in essence, what must be compared. [The priest's] intentional act and the alleged negligence of [the victim] are not equal forms of conduct …. [C]omparative negligence is only an appropriate consideration in matters where there is negligence on the part of both the plaintiff and the defendant involved in causing the harm that results, not where the conduct of one is willful.

Punitive Damages

The appeals court reversed the trial court's award of $1 million in punitive damages against the church defendants. The court explained that punitive damages are designed to punish wrongdoers for reckless or wanton misconduct, and cannot be awarded on the basis of negligence. Therefore, to the extent that the church defendants' liability was based on negligence (in hiring, supervising, or retaining the priest), there was no basis for punitive damages.

Application. This case is important for the following reasons:

1. It illustrates the importance of making all available defenses at the trial stage. The church's first amendment defense was waived by its attorneys' failure to raise it at trial.

2. The court allowed the jury to consider the pattern of practice of the church defendants in ignoring pedophilic behavior by priests. Denominational leaders must bear this in mind when they learn of similar acts of misconduct by their own clergy. A practice of ignoring such incidents can be the basis for liability in future cases.

3. The court agreed with the church defendants that they had no legal duty to report incidents of child molestation by priests to civil authorities, and that they could not be found liable in this case for failing to report. However, the court ruled that it was appropriate for the jury to know whether the church defendants reported such incidents since this evidence tended to prove whether the church defendants were ignoring pedophilic behavior by priests. Denominational leaders should bear this ruling in mind. When confronted with credible evidence of child molestation by a minister, they should consult with legal counsel concerning the need to file a report under the relevant state's child abuse reporting law. While in many cases such a report will not be legally required (i.e., denominational leaders are not mandatory reporters, the incident does not involve reportable abuse under state law, or the incident occurred in another state), the making of a report may be viewed as evidence of an appropriate response to such claims. On the other hand, evidence that such incidents are not reported may be viewed later as evidence of a pattern of neglect. It is imperative for denominational leaders to consult with their own legal counsel on this issue. The same is true of local church leaders when they are confronted with allegations of child molestation by a church employee or volunteer. Even if there is no legal duty to report under state law, it may be advantageous to do so.

4. The court rejected comparative negligence in cases involving intentional misconduct (such as sexual molestation) by a defendant. This ruling removes a potent defense to churches in Pennsylvania.

5. The court ruled that punitive damages cannot be awarded if a defendant's liability is based on negligence. This is a huge victory for churches and denominational agencies in sexual misconduct cases. Churches and denominational agencies do not "intend" for such incidents to occur. Their liability ordinarily is based on negligence in the hiring, supervision, or retention of the wrongdoer. The court concluded that punitive damages are not available in such cases. There must be proof of intentional or criminal conduct. Since punitive damages are often the biggest component of a jury's award in sexual misconduct cases, and such damages are not covered by insurance, this aspect of the court's ruling will be of considerable relevance to churches and denominational agencies that are sued on account of the sexual misconduct of a minister, lay employee, or volunteer. Hutchison v. Luddy, 2000 WL 1585672 (Pa. 2000).

Legal Developments

Sexual Misconduct by Clergy and Church Workers

A Pennsylvania court ruled that a church was not liable for its pastor’s molestation of a young girl since it exercised reasonable care in screening him.

Richard R. Hammar, Attorney, CPA
Bio


Key point 4-08. Every state has a child abuse reporting law that requires persons designated as mandatory reporters to report known or reasonably suspected incidents of child abuse. Ministers are mandatory reporters in many states. Some states exempt ministers from reporting child abuse if they learned of the abuse in the course of a conversation protected by the clergy-penitent privilege. Ministers may face criminal and civil liability for failing to report child abuse.


Key point 10-04. A church may be liable on the basis of negligent selection for a worker's molestation of a minor if the church was negligent in the selection of the worker. Negligence means a failure to exercise reasonable care, and so negligent selection refers to a failure to exercise reasonable care in the selection of the worker. Liability based on negligent selection may be imposed upon a church for the acts of employees and volunteers.


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 10-04.3. Churches can reduce the risk of liability based on negligent selection for the sexual molestation of minors by adopting risk management policies and procedures.


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.

A Pennsylvania court ruled that a church was not liable for its pastor's molestation of a young girl since it exercised reasonable care in screening him.

This case provides an excellent review of the legal issues and potential liability associated with the selection of minister. A church was in need of a pastor, and began considering several candidates. One candidate ("David") was asked by the church to complete a questionnaire and submit a videotaped sermon. He also submitted a resume and list of 14 references, including former church employers, elders, and members. David had had no criminal record and had never been investigated for the commission of a crime.

Members of the church's pastoral search committee contacted every one of the 14 references and received favorable information and positive recommendations. None of the references provided any information suggesting that David had ever committed a criminal act or had a history of improper sexual conduct. The pastoral search committee then asked David to visit the church and conducted a lengthy interview with him, which also did not produce any information that would have suggested that he was unsuitable for the ministerial position.

The church also gave serious consideration to several other candidates for the pastoral position, some of whom were also interviewed. Ultimately, however, the church hired David. During David's employment with the church, he lived with his wife and their two minor children in a private residence that they owned. The church had no ownership in or control over the use of the residence.

David's 8-year-old daughter soon struck up a friendship with a 7-year-old girl ("Amy") who lived in the same neighborhood. Amy was often at David's house and sometimes attended David's church. She participated occasionally in other church activities, including an elementary level "after school program" called King's Kids. However, she and her mother maintained their membership in a Roman Catholic Church, and Amy attended a parochial school. David began to sexually abuse Amy. The abuse continued for about a year. All incidents of abuse occurred at David's house except on one occasion when some of the abuse may have occurred in Amy's home. None of the abuse occurred on church premises.

After a year of abusing Amy, David attempted suicide. He later confessed that he had been sexually abusing Amy and pled guilty to numerous counts of rape, involuntary deviate sexual intercourse and aggravated indecent assault. He was sentenced to a term of 14 to 62 years in a state penitentiary.

Amy and her parents (the "plaintiffs") sued David's church, claiming that it (1) negligently failed to report suspected child abuse in violation of state law; (2) was liable for David's acts on the basis of negligent hiring, supervision, and retention; (3) was responsible on the basis of "respondeat superior" for David's acts; and (4) was responsible for David's "ministerial malpractice." A trial court dismissed all claims against the church, and the plaintiffs appealed.

Failure to report child abuse

The plaintiffs claimed on appeal that two church employees, and David himself, failed to comply with the state's child abuse reporting requirement, and this failure should be "imputed" to the church. The Pennsylvania child abuse reporting law states: "Persons who, in the course of their employment, occupation or practice of their profession, come into contact with children shall report or cause a report to be made … when they have reasonable cause to suspect, on the basis of their medical, professional or other training and experience, that a child coming before them in their professional or official capacity is an abused child."

Plaintiffs argued that a few months before David began molesting Amy he told two church employees (a church secretary and a youth group teacher) that he suspected that Amy might be a victim of abuse either by her own father or by unidentified "boys" in her neighborhood. Neither employee, nor David himself, reported this alleged child abuse.

The court rejected the plaintiffs' claim that this evidence made the church legally responsible for David's acts of molestation. It acknowledged that the two church employees were mandatory child abuse reporters under state law, but it insisted that they did not have a legal duty to report Amy's alleged abuse since they did not have "reasonable cause to suspect" that she had been abused "where the only information they ever had on the subject was a comment by [David] concerning his own passing suspicions, which he did not support by reference to any specific evidence of abuse." The court concluded: "[B]eyond a mere unsupported assertion … plaintiffs have offered nothing to indicate that a failure by [the two church employees] to report [David's] own completely unsupported statement regarding abuse of [Amy] by others was in any way the proximate cause of plaintiffs' injuries, which arose from [David's] own abuse. There is nothing to suggest that a report of such an unfounded suspicion, which was apparently untrue, would have had any effect on [David's] own abuse of [Amy] or the damages caused thereby."

As to the plaintiffs' claim that the church was liable on the basis of negligence for David's failure to report his own criminal conduct, the court observed that "we can only respond that such an interpretation of the statute is clearly unreasonable and not within the intended scope or purpose of the [child abuse reporting law]. There is nothing in the law to suggest that it was intended to require self-incrimination by persons who are themselves committing child abuse and we doubt that the statute would pass constitutional muster if it did."

Negligent hiring

The plaintiffs asserted that the church inadequately investigated David's background and personal behavior before hiring him. Although conceding that the church required David to complete an extensive questionnaire, interviewed him at length and discussed his suitability with all 14 references that he provided, the plaintiffs insisted that the church "should have investigated further." They claimed that the church should have questioned the 14 references "more closely" and should have asked additional questions of David himself concerning his prior sexual behavior. If the church had done so, the plaintiffs argued, it would have discovered that David had a homosexual affair while in high school, had made a subtle advance on his wife's younger brother more than ten years prior to his employment by the church, had exposed himself from the window of his previous home, and may have abused his own son.

The court conceded that employers have a duty "to exercise reasonable care in selecting, supervising and controlling employees." However, it insisted that employers cannot be liable unless "it is shown that the employer knew or, in the exercise of ordinary care, should have known of the necessity for exercising control of his employee." The court reviewed the facts cited by the plaintiffs as proof of the church's alleged failure to exercise reasonable care in the selection, supervision, and retention of David, and concluded:

Our review convinces us that, despite lengthy and thorough discovery, plaintiffs have produced nothing that could lead a jury reasonably to conclude that [the church's] failure to act with reasonable care in hiring or supervising [David] legally caused the injuries plaintiffs have suffered. As to the church's hiring process, we find that it was reasonably thorough under the circumstances present at the time. We do not agree that the church had a duty specifically to inquire about all of David's prior sexual conduct in an attempt to ascertain if, for example, he had ever had a homosexual liaison or abused a child. David was apparently a happily married man with a stable family. He fully cooperated in the application and interview process. He had no criminal record and had never been arrested or investigated for any crime, sexual or otherwise.

In addition, as noted above, the church contacted every reference David provided, which included people who had knowledge of David in his previous ministerial positions and throughout his military service. Not a single person contacted provided information that would have given a reasonable person any hint that David's sexual propensities needed to be investigated further. All of the references expressed very positive sentiments regarding David personally as well as his suitability for the senior minister position. Lastly, even if the church members who were engaged in the hiring process had inquired further of David himself regarding his past personal behavior, he testified that he might well not have revealed anything negative since he was both anxious to get the job and in a state of denial.

Negligent supervision

The plaintiffs also argued that the church was negligent in failing to supervise David closely enough to discover that he was abusing a young girl in his neighborhood. They pointed to an alleged rumor that David was having an extramarital affair and certain comments he made regarding his excessive interest in pornography as a much younger man. This information should have alerted the church that David needed to be watched more closely. Once again, the court rejected the plaintiffs' position:

We also find nothing in the record that could lead a jury reasonably to conclude that the church failed to supervise or control David or that any better supervision or control would have prevented the abuse of Amy. There is no evidence of conduct by David of which the church was aware that would have led it even remotely to suspect that David was a pedophile who was abusing a small girl who lived in his neighborhood. This is particularly true given that none of the abuse occurred on church property. The fact that there might have been an unsubstantiated rumor that David was having an extramarital affair or that he mentioned to some church members that as a young man he had an excessive interest in pornography could not possibly have put the church on suspicion that he was abusing a child in his home.

"Church property"

The plaintiffs insisted that because some of David's housing expenses were covered by a housing allowance the church paid him as part of his compensation, this converted his home into "church property" and as a result all of the acts of molestation that occurred there were on "church premises," making the church fully liable. The court disagreed, noting that David and his wife were the legal owners of the home and that the church had no right to supervise or control the premises. The court also rejected the plaintiffs' argument that the home should be treated as "church property" because prayer meetings and Bible studies occasionally were conducted there. It noted simply that "these occasional private religious meetings do not transform the home into church premises."

Respondeat superior

The plaintiffs argued that the church was responsible for the pastor's acts of molestation on the basis of the legal doctrine of respondeat superior. Under this doctrine, an employer generally is responsible for the acts of employees committed within the scope of their employment. In rejecting this basis of liability, the court observed, "Nothing about David's sexual abuse of Amy had any connection to the kind and nature of his employment as a minister. None of the abuse occurred at his place of employment. Nor was his abusive behavior actuated by any purpose of serving the church. As David himself testified at his deposition, he was not Amy's spiritual advisor and was certainly not acting as such when he was abusing this helpless seven year old girl …. It is not reasonable to conclude that David's conduct should have been anticipated by his employer. Furthermore, it was outside the scope and nature of his employment."

Ministerial malpractice

In rejecting the plaintiffs' argument that the church was legally responsible for David's "ministerial malpractice," the court observed, "Our research confirms that ministerial malpractice is not a recognized cause of action in this Commonwealth or elsewhere in the nation. We reject the plaintiffs' invitation to expand the existing bases of tort liability to include such a claim."


Application. There are many aspects of this case that are of direct relevance to all church leaders, including important insights into what constitutes "reasonable suspicion" of child abuse; the importance of adequately screening pastoral candidates; and the relevance of rumors and other kinds of hearsay evidence in evaluating a church's duty of supervision. Perhaps the most important lesson of this case is the importance of adequately screening pastoral candidates. Had the church not done so thorough a job in screening David it might have been found liable on the basis of negligent selection for his awful misdeeds. R.A. v. First Church of Christ, 2000 WL 232599 (Pa. Super. 2000).

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