Employee Relations

Church Law and Tax 1990-01-01 Recent Developments Employee Relations Richard R. Hammar, J.D., LL.M., CPA

Church Law and Tax 1990-01-01 Recent Developments

Employee Relations

Can church employees who are fired for refusing to “backdate” or otherwise falsify records sue the church? A recent Illinois appeals court ruling suggests that they can. Occasionally, a church with poor recordkeeping procedures will ask a bookkeeper or other church employee to backdate a document. Examples include a contribution receipts (to assure a deduction in a prior year), or a housing allowance designation (which must be declared in advance to be effective). If an employee refuses to backdate such a document, the church should recognize that it may be legally liable for firing the employee. The Illinois case involved an employee of a pension consulting firm who allegedly was fired when he refused to backdate certain documents in order to provide clients with tax advantages that otherwise would not have been available. The court observed that the fired employee could sue his former employer for “retaliatory discharge” if he could prove “(1) that he was discharged; (2) in retaliation for his activities; and (3) the discharge violates a clear mandate of public policy.” There was no doubt, the court observed, that the fired employee had properly alleged the first two requirements. The court also found that discharging an employee for failure to violate federal tax law (by backdating documents) violated a “clear mandate of public policy.” The court noted that federal law imposes criminal liability on any person who “aids or abets” in the preparation of a knowingly false or fraudulent tax return or related document, and that “the backdating of documents for the fraudulent purpose of obtaining a deduction constitutes an offense.” Accordingly, a church employee who complies with a request to backdate a contribution receipt or housing allowance designation may be criminally liable. Clearly, requests to “backdate” documents are not only unethical, but they may result in civil or criminal liability. Russ v. Pension Consultants Company, Inc., 538 N.E.2d 693 (Ill. App. 1989).

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