Court Willing to Resolve Pastor’s Lawsuit Against Church for Compensation Dispute

Court ruled that it was not barred by the “ministerial exception” and “ecclesiastical abstention doctrine” from resolving a claim by a pastor that his church had failed to pay him the salary and benefits to which they had contractually agreed.

Key point 2-04.2.
Some courts are willing to resolve disputes over the termination of clergy if they can do so without any inquiry into religious doctrine.

A North Carolina court ruled that it was not barred by the "ministerial exception" and "ecclesiastical abstention doctrine" from resolving a claim by a pastor that his church had failed to pay him the salary and benefits to which they had contractually agreed.

A pastor (the "plaintiff") was employed by a church in 1975 on a part-time basis. He also worked for a secular employer. In order to be eligible for retirement at his secular employer, the plaintiff was required to continue working until 2013. However, in 2001, the plaintiff resigned his secular job and entered into a contract with the church titled "Agreement of Full Time Pastorship." This contract consisted of several provisions, including the following:

The Pastor shall serve the church for an indefinite period since there is no scriptural support of tenure.

If the Pastor should become disabled to carry on his work, he shall be paid his full salary until the disability insurance begins to be paid (which is provided by the church) and relieves the church of its responsibility to Pastor.

Whereas, at any time the church shall become dissatisfied with the services of Pastor and ask for his resignation, the congregation at that time shall take a vote and be governed by the majority of voting members eligible (members in good standing with church). At that time the church shall pay the Pastor the total package in advance or his services shall continue until such time the church shall meet this requirement.

The plaintiff claimed that he was guaranteed under the contract "salary continuation upon his disability" and "salary, housing, utilities, social security, and medical insurance through 2013" in consideration of resigning from his secular job and losing his retirement and other benefits to which he would have been entitled had he continued his employment.

After 10 years of serving as head pastor of the church, the plaintiff contracted kidney disease, was hospitalized, and underwent surgery. As a result, he was no longer able to serve as the pastor of the church. In addition, because the long-term disability insurance policy mentioned in the employment agreement lapsed prior to the plaintiff's disability, he was without any disability coverage. The plaintiff claimed that the church ceased all payment of his salary and benefits.

The plaintiff sued the church and its board of deacons (the "church defendants") in 2013. The church defendants filed a motion asking the court to dismiss the case on the ground that it lacked jurisdiction to resolve an internal church dispute. The trial court agreed with the defendants and dismissed the case. The plaintiff appealed.

The at-will employment doctrine

On appeal, the church defendants argued that, in the absence of an employment contract providing for a specified term of employment, the plaintiff was an "at will employee" and could not sue for breach of contract.

The state wage and hour law

The court agreed that employees hired for indefinite periods are deemed to be "at will employees" whose employment can be terminated by the employee or employer at any time, with or without cause. But it noted that the at-will employment doctrine "does not preclude an at-will employee from suing for breach of contract with respect to benefits or compensation to which the parties contractually agreed." Because the plaintiff "is not challenging the basis for his dismissal, but only seeks to recover money and benefits owed under the employment contract he alleges he entered into with defendants, the at-will doctrine is inapplicable."

The plaintiff also alleged a claim under the state Wage and Hour Act, which provides: "Every employer shall pay every employee all wages and tips accruing to the employee on the regular payday. Pay periods may be daily, weekly, bi-weekly, semi-monthly, or monthly." Further, "any employer who violates the Act … shall be liable to the employee … in the amount of their unpaid compensation."

The court noted that the plaintiff's allegations that the contractually promised "salary" constituted wages as defined in the Wage and Hour Act, along with his allegation that the church defendants wrongfully failed to pay that salary, "sufficiently alleged a claim under the North Carolina Wage and Hour Act." The court noted that "once the employee has earned the wages and benefits under [the Act] the employer may not rescind them."

The ministerial exception doctrine

The defendants' main argument in support of their motion to dismiss the plaintiff's lawsuit was that the civil courts are barred by the "ministerial exception" and "ecclesiastical abstention" doctrine from resolving internal church disputes. The court noted that the defendants, in citing the ministerial exception and ecclesiastical abstention doctrine, "address almost exclusively the doctrine's applicability to wrongful discharge claims." However, the court noted, the plaintiff's lawsuit was not challenging the termination of his employment, but "the non-payment of contractually agreed upon compensation and benefits." Therefore, the court concluded, neither doctrine applied to the plaintiff's claims.

In affirmatively recognizing the ministerial exception, a unanimous United States Supreme Court observed in a 2012 case:

[The courts] have uniformly recognized the existence of a "ministerial exception," grounded in the First Amendment, that precludes application of [employment discrimination] legislation to claims concerning the employment relationship between a religious institution and its ministers … . By imposing an unwanted minister, the state infringes the Free Exercise Clause, which protects a religious group's right to shape its own faith and mission through its appointments. According the state the power to determine which individuals will minister to the faithful also violates the Establishment Clause, which prohibits government involvement in such ecclesiastical decisions. Hosanna-Tabor Evangelical Lutheran Church & School v. E.E.O.C., 132 S.Ct. 694 (2012).

At the conclusion of the Hosanna-Tabor ruling, the Supreme Court limited its holding to the narrow circumstance of "employment discrimination suits brought on behalf of a minister, challenging her church's decision to fire her" and specifically "expressed no view on whether the exception bars … actions by employees alleging breach of contract."

Contractual transactions, and the resulting obligations, are assumed voluntarily. Underneath everything, churches are organizations. And, like any other organization, a church is always free to burden its activities voluntarily through contracts, and such contracts are fully enforceable in civil court. Surely, a church can contract with its own pastors just as it can with outside parties. Enforcement of a promise, willingly made and supported by consideration, in no way constitutes a state-imposed limit upon a church's free exercise rights.The church defendants vigorously argued that "it is the decision of a church to hire or fire its pastor that is protected from judicial scrutiny" by the ministerial exception. But the court retorted that "defendants cite no authority and provide no argument why the ministerial exception, as articulated in Hosanna-Tabor, should apply to claims based on nonpayment of compensation and benefits." The court quoted with approval from a 2014 ruling by the Kentucky Supreme Court:

We are not presented with a situation where the government is inappropriately meddling in the selection of who will minister to the congregation. Limits on a religious institution's ability to choose—or the criteria for choosing—who will minister to its faithful are not being foisted on the religious institution … . This is a situation in which a religious institution has voluntarily circumscribed its own conduct, arguably in the form of a contractual agreement, and now that agreement, if found to exist, may be enforced according to its own terms. That cannot breach church autonomy. Arguably, instead, this exemplifies religious autonomy because religious institutions are free to set forth policies that align with their respective mission. Kirby v. Lexington Theological Seminary, 426 S.W.3d 597 (Ky. 2014).

Accordingly, "because plaintiff's complaint does not challenge the church's decision to terminate his employment, but instead seeks to enforce a contractual obligation regarding his compensation and benefits, we hold that the ministerial exception does not apply and is not a basis for dismissal of plaintiff's claims."

The ecclesiastical abstention doctrine

The "ecclesiastical abstention doctrine," which has been recognized by state and federal courts, "is a jurisdictional bar to courts adjudicating ecclesiastical matters of a church." The courts "have no jurisdiction over and no concern with purely ecclesiastical questions and controversies." The Supreme Court "has interpreted [the First Amendment's prohibition of any establishment of religion] to mean that the civil courts cannot decide disputes involving religious organizations where the religious organizations would be deprived of interpreting and determining their own laws and doctrine."

However, the court again noted that "while the courts can under no circumstance referee ecclesiastical disputes," they "do have jurisdiction, as to civil, contract and property rights which are involved in, or arise from, a church controversy." It continued:

The question of liability for the salary of a minister or pastor is governed by the principles which prevail in the law of contracts, and it is generally held that a valid contract for the payment of such a salary will be enforced … . However, the controversy must be resolved pursuant to neutral principles of law … .

Defendants seem to argue, without citing any pertinent authority, that the First Amendment of the United States Constitution immunizes, without exception, a religious institution from liability arising out of a contract between the religious institution and its ministerial employees. This unsupported assertion cannot be reconciled with [prior cases] … . A holding that a religious body must be held free from any responsibility for wholly predictable and foreseeable injurious consequences of personnel decisions, although such decisions incorporate no theological or dogmatic tenets, would go beyond First Amendment protection and cloak such bodies with an exclusive immunity greater than that required for the preservation of the principles constitutionally safeguarded … .

Although defendants cite numerous decisions holding that civil courts cannot interject themselves into ecclesiastical disputes, they again focus their argument on the bar against courts determining the propriety of a church's decision to dismiss a plaintiff from his position as pastor—an issue not present in this case … .

Accordingly, because a court can decide plaintiff's contract-based claims applying "neutral principles of law," without entangling the court in an ecclesiastical dispute or interpretation, we hold that the ecclesiastical abstention doctrine does not require dismissal of plaintiff's complaint. We, therefore, hold plaintiff has sufficiently stated claims for relief and, therefore, reverse the trial court's order dismissing plaintiff's complaint.

What this means for churches

The court concluded that while the ministerial exception bars discrimination claims by current or dismissed ministers, it does not bar breach-of-contract claims that can be resolved without recourse to church doctrine. While some other courts have disagreed with the conclusion, there is sufficient support for it that it is imperative for church leaders to obtain legal review of employment agreements and handbooks and other contractual documents to ensure that they will not give rise to breach-of-contract claims that the civil courts may be able to adjudicate. Through careful drafting, this risk can be significantly reduced, if not eliminated. Bigelow v. Baptist Church, 786 S.E.2d 358 (N.C. App. 2016).

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