Employment Practices – Part 2

A federal court dismissed a lawsuit brought by the EEOC against a church school claiming that the school violated the Americans with Disabilities Act.

Church Law and Tax2000-07-01

Employment Practices

Labor Laws , Americans with Disabilities Act

Key point 8-05. Congress has enacted a number of employment and civil rights laws regulating employers. These laws generally apply only to employers that are engaged in interstate commerce. This is because the legal basis for such laws is the constitutional power of Congress to regulate interstate commerce. As a result, religious organizations that are not engaged in commerce generally are not subject to these laws. In addition, several of these laws require that an employer have a minimum number of employees. The courts have defined “commerce” very broadly, and so many churches will be deemed to be engaged in commerce.

Key point 8-05.1. Many federal employment and civil rights laws apply only to those employers having a minimum number of employees. In determining whether or not an employer has the minimum number of employees, both full-time and part-time employees are counted. In addition, employees of unincorporated subsidiary ministries of a church are counted. The employees of incorporated subsidiary ministries may be counted if the church exercises sufficient control over the subsidiary.

Key point 8-10. The federal Americans with Disabilities Act prohibits employers with at least 15 employees, and that are engaged in interstate commerce, from discriminating in any employment decision against a qualified individual with a disability who is able, with or without reasonable accommodation from the employer, to perform the essential functions of the job. Accommodations that impose an undue hardship upon an employer are not required. Religious organizations may give preference to nondisabled members of their faith over disabled persons who are members of a different faith.

A federal court dismissed a lawsuit brought by the EEOC against a church school claiming that the school violated the Americans with Disabilities Act. Are churches, church-operated schools, and other religious organizations subject to the wide array of federal civil rights laws that apply to employers engaged in commerce and having a minimum number of employees? This is a troublesome question that the courts have seldom addressed. The lack of judicial interpretation has increased the confusion over the application of these laws to religious organizations. A federal court has addressed this issue directly in an important ruling. A church school placed an ad in a local newspaper for a part-time music teacher. A woman (the “plaintiff”) with multiple sclerosis, and confined to a wheelchair, called the school in response to the ad. The plaintiff’s recollection of that telephone conversation differs substantially from the school’s account. According to the plaintiff, she spoke with the principal’s secretary, who informed her that the school was in the process of scheduling appointments for interviews. The secretary asked the plaintiff if she had an educational background in music. When the plaintiff replied that she did, the secretary scheduled an appointment. The plaintiff then asked the secretary if the building was “wheelchair accessible.” At this point the secretary placed the plaintiff on hold for several minutes. When the secretary returned to the phone, she informed the plaintiff that the interview had been canceled. The plaintiff then suggested that the school “accommodate” her disability by conducting the interview outside. She was again put on hold, and was later informed that the school would not make this accommodation. The plaintiff then asked, “You mean you won’t even make an accommodation for an interview because of my disability?” The secretary responded, “I wouldn’t put it that bluntly,” and informed the plaintiff that she should direct further questions to the principal.

The school’s account of the telephone conversation was quite different. It acknowledged that the plaintiff had called about the advertisement, and had asked if the building was wheelchair accessible. The school claimed that the secretary informed the plaintiff that the building was not accessible, but then informed her that the part-time music teacher position had already been filled. The plaintiff then became upset and asked if the position had been filled because she had indicated that she was handicapped. The secretary denied this motive, but the plaintiff remained agitated. The secretary placed the plaintiff on hold to let her “calm down,” and when she picked up the phone again she asked for the plaintiff’s name and phone number so that the principal could call her. The plaintiff did not disclose this information, saying that she would call the principal later.

The plaintiff filed a complaint with the Equal Employment Opportunity Commission (EEOC), which determined that the plaintiff had been a victim of discrimination on account of her disability. The EEOC sued the church and its school (the “defendants”), claiming that they both had violated the Americans with Disabilities Act (ADA) as a result of their refusal to “accommodate” the plaintiff’s disability, and their failure to hire her because of her disability. The ADA prohibits employers engaged in an activity “affecting commerce” and having at least 15 employees from discriminating in any employment decision on account of the disabled status of an employee or applicant for employment who is able to perform the essential functions of the job with or without reasonable accommodation by the employer. The church and school argued that they were not covered by the ADA since they were not engaged in “commerce” and had less than 15 employees.

A federal district court dismissed the lawsuit, and the EEOC appealed. A federal appeals court noted that the school did not have 15 employees as required by the ADA, but that this requirement would be met if the school’s employees were combined with the employees of the church and a preschool operated by the church. The appeals court concluded that it was unclear whether the school, church, and preschool were “distinct legal entities capable of being sued in their own names,” and so it sent the case back to the district court to determine “whether to aggregate the employees of these entities in order to determine the number of employees defendants actually had.” The appeals court’s decision is discussed in a feature article in the March-April 1998 issue of this newsletter.

The district court began its opinion by noting that

A determination that these entities are divisions of a corporation has two implications. First, it suggests that defendants are not proper parties to the lawsuit because case law reflects that unincorporated divisions of a corporation lack the capacity to sue or be sued. Second, assuming defendants can be sued, it leads to the conclusion that the employees of the church, the school, and the [preschool] should be aggregated for the purpose of the [15] employee requirement.

Nature of the religious entities

While the church and school were unincorporated divisions of a corporation (the archdiocese of Washington), the EEOC insisted that they were “sufficiently autonomous” from the archdiocese to render them “suable entities.” The court disagreed. The Archbishop of Washington is a “corporation sole,” meaning that the office itself is a perpetual corporation. The archdiocese is made up of all of the Catholic parishes and related facilities within its jurisdiction. Although the Canon Law of the Roman Catholic Church views each parish as a separate entity for religious purposes, the parishes are not separately incorporated under civil law. The church that operated the school in this case is a parish within the jurisdiction of the archdiocese, and it operates independently of other parishes within the jurisdiction. The archdiocese owns all of the parish’s property, and exerts varying degrees of control over different aspects of the parish’s operations. As to financial matters, the archdiocese maintains control over the parish’s budget by requiring the parish to submit an annual financial report on all of its operations and to undergo periodic financial audits. Although the archdiocese does not oversee the parish’s daily expenditures, its approval is required for any expenditure exceeding $10,000. As to personnel matters, the archdiocese appoints the pastor and, through the archdiocese’s personnel director, helps to determine the staffing of other priests assigned to work at the parish. The archdiocese also influences other parish personnel decisions, such as the hiring of the school’s teaching staff, by providing guidelines on appropriate hiring criteria.

The capacity of the church and school to be sued

The EEOC insisted that the church and school could be sued because the Federal Rules of Civil Procedure permit “unincorporated associations” to be sued. The court disagreed, noting that the church and school were not separately incorporated but rather were “unincorporated divisions of a corporation.” The court continued:

[As such] their presence in this case triggers a line of precedent holding that unincorporated divisions of a corporation lack legal capacity to be sued …. The rationale for this precedent is, above all, pragmatic, as an unincorporated division does not possess separate assets; all of its assets are owned by the corporation. Thus, “[u]nless the organization is liable there can be no levy of execution against the division’s assets, and if the organization is not liable none of its assets can be used to satisfy the judgment.”

The court disagreed with the contention of the EEOC that the church and school were “unincorporated associations,” noting that it was “unaware of any reason to treat a division of a corporation in this manner.” It explained:

Although the term “unincorporated association” has not been defined uniformly under federal law, the definitions propounded by courts are substantially identical …. While all of these definitions describe an unincorporated association as a collection of persons working together for a common objective, they also describe it as an entity operating without a corporate charter. The court finds this latter characteristic determinative of whether an unincorporated division of a corporation meets the definition of an unincorporated association. Unlike unincorporated associations … a division of a corporation does operate with a charter-the charter of the larger corporation. Although the division is not separately incorporated, it is still governed by the terms of the corporate charter and still enjoys corporate status because it is a unit of the larger corporation. Thus, the court concludes that the federal law definition of an unincorporated association does not encompass an unincorporated division of a corporation.

Finally, the religious character of the corporation involved in this case does not remove the normal prohibition on suing unincorporated divisions of a corporation. Although [the EEOC] cites to cases in which religious organizations were sued for violating employment discrimination laws, these cases do not suggest that the nature of an incorporated religious entity is such that its unincorporated divisions have the legal capacity to be sued. Nor is there any reason to fragment the legal status of an incorporated religious entity in this manner.

The court referred to an earlier federal appeals court decision. F.E.L. Publications, Ltd. v. Catholic Bishop of Chicago, 754 F.2d 216 (7th Cir.1985). In the F.E.L. Publications case, the question before the court was whether a plaintiff could recover against the Bishop for interfering in the plaintiff’s business relationship with one of the parishes in the Chicago archdiocese. The Catholic Bishop of Chicago is organized as a “corporation sole” under Illinois law and, as such, owned all of the property in the archdiocese. The court held that the plaintiff could not recover damages because “the parishes within the archdiocese are not legal entities separate and independent from the Catholic Bishop, but are subsumed under the Catholic Bishop.” This case “makes clear that an incorporated religious organization constitutes a single legal entity, and that unincorporated divisions of that organization lack any independently recognized legal status. Because the Archdiocese of Washington is incorporated as a corporation sole and holds title to all Archdiocese assets, its unincorporated divisions also lack any independently recognized legal status.”

As a result, the court dismissed the EEOC’s lawsuit against the church and school on the ground that they were divisions of a corporation and lacked the capacity to be sued.

Application. This case suggests that an unincorporated division or department of a church or denomination cannot be sued individually. As a result, a lawsuit brought against such an entity should be dismissed by the court. Of course, the plaintiff may be able to amend the lawsuit to include the church or denominational corporation as the defendant, but this will not always be possible because of the passage of time. Equal Employment Opportunity Commission v. St. Francis Xavier Parochial School, 77 F.Supp.2d 71 (D.D.C. 1999).

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