Court May Rule on ‘Secular Contract’ Between Church and Former Employee

Church Law and Tax Report Court May Rule on ‘Secular Contract’ Between Church and Former

Church Law and Tax Report

Court May Rule on ‘Secular Contract’ Between Church and Former Employee

Key point 8-24. A reference letter is a letter that evaluates the qualifications and suitability of a person for a particular position. Churches, like other employers, often use reference letters to screen new employees and volunteers. Churches often are asked to provide reference letters on current or former workers. The law generally provides employers with important protections when responding to a reference letter request. However, liability may still arise in some cases, such as if the employer acts with malice in drafting a reference letter.

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

A Texas court ruled that the “ecclesiastical abstention doctrine” and the “ministerial exception” did not prevent it from resolving various legal claims brought by a former church employee against the church. A woman (the “plaintiff”) was dismissed from her position as Elementary Ministries Director at a Presbyterian church. She sent a demand letter to the church asserting that she had been terminated for making allegations of sexual harassment against a church elder. She later signed a “Confidential Separation Agreement and Release” under the terms of which the church paid her $25,000 and agreed that she could “classify the end of the employment relationship as a resignation, rather than a termination … for purposes of … future employment offers.”

The agreement included a confidentiality clause applicable to the plaintiff and a provision that “in the event that she is asked about her separation of employment, she may reply only with the words ‘we have reached an amicable parting,’ but will not otherwise indicate the nature of the resolution of these matters.” In addition, the parties agreed not to “disparage” the other.

The plaintiff subsequently was hired by a seminary as its development officer. This position required her to participate in fundraising efforts for the seminary. An elder at the church where she was previously employed also served on the board of trustees for the seminary. He contacted the seminary’s board chair to ask whether the plaintiff’s references had been checked. The board chair contacted the president of the seminary, who instructed its vice president for business affairs to check the plaintiff’s references. The vice president then contacted the head of human resources at the church, who told him that she could not discuss the reason the plaintiff left “because of a severance agreement,” but she added that she “could not think of a circumstance under which the church would rehire her or that she would want to come back.”

The vice president also contacted the church’s executive pastor, who stated that he “could not disclose the reasons why the plaintiff left because of the existence of an agreement … but it should be obvious that there were issues, otherwise there would not be an agreement.” The executive pastor also stated that “it would be difficult for her to carry out her duties to raise funds from the church” or from “anywhere in Houston.”

The seminary terminated the plaintiff’s employment because she misrepresented the circumstances surrounding her departure from the church, and its concern that she would not be able to solicit donations for the seminary.

The plaintiff sued the church on the following grounds:

  • breach of contract (for violating the severance agreement’s “non-disparagement” clause);
  • intentional infliction of emotional distress;
  • defamation; and
  • fraudulent inducement.

The church claimed that the trial court lacked jurisdiction because the church is immune from liability under both the “ecclesiastical abstention doctrine” and the “ministerial exception.” The church also claimed that (1) the plaintiff had waived her right to enforce the provisions of the severance agreement by giving the church “authorization to provide full details concerning her past employment” to the seminary in her employment application; (2) the church’s behavior was not extreme and outrageous for purposes of the intentional infliction of emotional distress claim; and (3) the plaintiff waived her fraudulent inducement claim by releasing all claims that existed as of the date of the agreement.

The trial court dismissed all claims against the church, and the plaintiff appealed.

Application of the ecclesiastical abstention doctrine and ministerial exception

The plaintiff argued on appeal that the trial court erred in ruling that the ecclesiastical abstention doctrine prevented it from resolving her legal claims because they involved the breach of a “secular contract.”

The court noted that the ecclesiastical abstention doctrine provides that the First Amendment guaranty of religious freedom prohibits the civil courts “from exercising jurisdiction over matters concerning theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them.” Under this doctrine, “courts will not attempt to right wrongs related to the hiring, firing, discipline, or administration of clergy … . Although such wrongs may exist and be severe, and although the administration of the church may be inadequate to provide a remedy, the preservation of the free exercise of religion is deemed so important a principle it overshadows the inequities which may result from its liberal application.”

However, the Texas Supreme Court has also recognized that while the First Amendment affords broad protection to the free exercise of religion, it does not necessarily bar all claims which may touch on religious conduct. For example, “churches, their congregations, and hierarchy exist and function within the civil community [and] can be as amenable to rules governing civil, contract, or property rights as any other societal entity.

In determining whether the ecclesiastical abstention doctrine applies, “courts must analyze whether a particular dispute is ecclesiastical or simply a civil law controversy in which church officials happen to be involved.” To resolve this issue, courts “must look to the substance and effect of a plaintiff’s complaint to determine its ecclesiastical implication … . A court may interpret church documents under neutral principles of law when it can do so in purely secular terms without relying on religious precepts in resolving the conflict … . However, if the matter cannot be determined by the court without resolving a religious controversy, then the court must defer to the resolution of the doctrinal issue by the authoritative ecclesiastical body.”

The plaintiff claimed that the severance agreement stated that “the church agrees that it will not disparage [the plaintiff],” and that the church violated the agreement by stating, through its agents, that: (1) she “would not be able to raise funds on behalf of the seminary anywhere in Houston or within her region”; (2) it “could not think of a circumstance under which the church would rehire her or that she would want to come back”; and (3) “it should be obvious that there were issues, otherwise there would not be an agreement.”

The church claimed that a determination of whether it disparaged the plaintiff would fall within the ecclesiastical abstention doctrine because it would require the court to evaluate (1) the reasons the church decided to terminate her and to settle her claims for sexual harassment, (2) the decision to notify the seminary of the church’s issues with her, and (3) whether such decisions were in the best interest of the church, the seminary, and the Presbyterian community in Houston.

The court concluded that the ecclesiastical abstention doctrine did not apply:

We may interpret a contract in a civil law controversy in purely secular terms when doing so does not require us to rely on religious precepts or resolve a religious controversy … . We are not required to intervene in the hiring, firing, discipline, or administration of the church’s clergy, address the church’s standards of morality, or address any other matters traditionally held to involve religious doctrine. Similarly, we are not required to interpret any church constitution, by-laws, or other governing documents. Finally, we are not asked to decide matters relating to the congregational or hierarchical nature of the church. We conclude that this lawsuit, revolving around the church’s purported disparagement of the plaintiff in violation of the Agreement, is a civil law controversy in which church officials happen to be involved. Accordingly, the ecclesiastical abstention doctrine does not apply.

The ministerial exception

The church claimed that the “ministerial exception” required dismissal of the plaintiff’s claims. Under this doctrine, “if an employee is a minister, courts are precluded from reviewing the employment decision regardless of whether the claims are ecclesiastical in nature.” The court noted that the United States Supreme Court has recognized the ministerial exception; however, “the Court concluded that the exception operates as an affirmative defense to an otherwise cognizable claim, not a jurisdictional bar.” Hosanna-Tabor Evangelical Lutheran Church & School v. E.E.O.C., 132 S.Ct. 694 (2012).

The court ruled, on procedural grounds, that the ministerial exception did not apply, since the church had used it in an attempt to deprive the court of jurisdiction rather than raising it as an “affirmative defense” in its response to the plaintiff’s lawsuit.

Waiver of claims

The church argued that the plaintiff waived all her claims by filling out an online employment application for her position at the seminary in which she “authorized all her prior employers to provide full details concerning her past employment.”

The plaintiff insisted that this authorization did not waive her rights under the confidentiality and antidisparagement clauses of the severance agreement, and that she was entitled to rely on the church to honor its obligation under the agreement not to disparage her.

The court concluded that even if the plaintiff had authorized the church to speak with the seminary when it was considering her for employment, the church “nevertheless was bound to communicate in accordance with the terms of its Agreement. We conclude that in signing the authorization, the plaintiff did not unequivocally manifest the intent not to assert any of her rights under the Agreement. In other words, she did not authorize the church to disparage her. Accordingly, the church has not conclusively established that the plaintiff intended to waive her claims by signing the authorization.”

The emotional distress claim

The court noted that to succeed with an intentional infliction of emotional distress claim, a plaintiff is required to prove that a defendant’s conduct was “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” This means that “except in circumstances bordering on serious criminal acts, even claims stemming from heinous acts … rarely have merit as intentional infliction claims.”

The court concluded: “Here, the church’s actions purportedly resulted in the plaintiff’s termination of employment with the seminary based on the church’s instigating a conversation with the seminary about her departure from the church and providing an unfavorable reference. While these actions may be interpreted as callous, meddlesome, mean-spirited, officious, overbearing, and vindictive, they do not rise to the level of extreme and outrageous conduct required to maintain an intentional infliction of emotional distress claim.”

The severance agreement

The plaintiff asserted that the church was guilty of “fraudulent inducement” by inducing her to sign the severance agreement on the basis of its confidentiality and nondisparagement provisions which it subsequently violated. In the agreement, the plaintiff released the church “from any and all claims … which [the plaintiff] now has or may have … whether now known or unknown.” The agreement further provided that the release “extended to all claims of every nature and kind, known or unknown, arising from, attributable to, or related to any of the claims released” and agreed to

waive and assume the risk of any and all claims for damages which existed as of the date of the release, but of which she did not know or expect to exist, whether through ignorance, oversight, error, negligence, or otherwise, and which, if known, would materially affect her decision to enter into the release.

The church argued that the plaintiff released her fraudulent inducement claim because it would have existed at the time she signed the agreement.

The court noted that “a release that clearly expresses the parties’ intent to waive fraudulent inducement claims … can preclude a claim of fraudulent inducement, depending on the circumstances.” But it concluded that the plaintiff had not clearly expressed such an intent:

The plaintiff released all claims that existed at the time she signed the Agreement. However, reading the Agreement as a whole, there is no express waiver of any fraudulent inducement claims or any indication that she disclaimed reliance on any of the church’s representations about the matters in dispute in this case. Thus, the Agreement does not reflect a clear and unequivocal intent to disclaim reliance on representations or to waive fraudulent-inducement claims … . We conclude that the church has not established as a matter of law that the plaintiff released her fraudulent inducement claim by agreeing to release her claims existing at the time she signed the Agreement.

What This Means For Churches:

This case is relevant to church leaders for the following reasons:

1. The “ecclesiastical abstention” doctrine does not preclude civil courts from resolving all internal church disputes. While the courts may not exercise jurisdiction “over matters concerning theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them,” they can resolve “civil law controversies in which church officials happen to be involved.”

2. The “ministerial exception” generally bars the civil courts from resolving employment disputes between churches and clergy. However, the court noted an important procedural limitation: the exception operates as “an affirmative defense, not a jurisdictional bar.” This means that the exception must be raised as an affirmative defense in a church’s response to a lawsuit, and not in a motion to dismiss a case based on a civil court’s lack of jurisdiction to adjudicate a claim.

3. Perhaps most importantly, the court concluded that a provision in the plaintiff’s employment application with the seminary authorizing the seminary and all prior employers to “provide full details concerning her past employment” did not amount to a waiver of the confidentiality and nondisparagement provisions in the severance agreement.

Churches often use severance agreements when a decision is made to terminate an employee, and such agreements may contain a confidentiality or nondisparagement clause. This case demonstrates that such provisions may take priority over a “release” that is later signed by a terminated employee that releases former employers from liability for anything they share about the employee. As a result, church leaders should not provide a reference on a former employee, even if the employee signed a release that releases former employers from liability for what they share in a reference, if a severance agreement was executed by the church and the employee that contains a nondisparagement clause.

4. It is also worth noting that the court concluded that the plaintiff’s fraudulent inducement claim against the church had not been waived by the general language in the severance agreement waiving all claims against the church since it had not been specifically identified as a claim that was being waived. As noted in a Feature Article in the September/October 2016 issue of Church Law & Tax Report, releases must explicitly reference claims that are being released in order to be legally valid. Presbyterian Church, 476 S.W.3d 612 (Tex. App. 2015).

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