Exemption of Unemployment Services in the Employ of a Church Doesn’t Violate First Amendment

Terminated employee unable to sue church for lack of unemployment benefits.

Key point. The exemption of church employees from state unemployment compensation laws does not violate the First Amendment's Establishment or Free Exercise of Religion Clauses.

A Texas court ruled that the exemption of services in the employ of a church from the unemployment compensation system did not violate the First Amendment's prohibition of the establishment of religion.

A church terminated the employment of its pianist and organist (the "plaintiff"). The plaintiff filed a claim for unemployment benefits. His claim was denied because he had not earned sufficient covered wages to establish a claim for unemployment benefits. The plaintiff filed a lawsuit arguing that exemption of church employment in establishing a claim of unemployment benefits violated the First Amendment's guarantees of the nonestablishment and free exercise of religion.


Under the Texas unemployment compensation system, employers make contributions in the form of excise taxes to the compensation fund. Eligible individuals who are unemployed through no fault of their own may receive unemployment benefits from the compensation fund. An individual is eligible for unemployment benefits if he or she is totally unemployed in a "benefit period." Employment covered by the unemployment compensation system generally includes service performed by an individual for wages. There are, however, a number of exemptions, including "service in the employ of a church." The Federal Unemployment Tax Act (FUTA) contains an identical exemption from the definition of "employment." Service in the employ of a church or a religious organization has been exempted from the Texas unemployment compensation system since it was established in 1936.

First Amendment's "Establishment Clause"

The plaintiff claimed that the exemption of services performed for a church from the definition of covered employment violated the Establishment Clause of the First Amendment. The Establishment Clause provides that "Congress shall make no law respecting an establishment of religion."

When, as in this case, a law "affords a uniform benefit to all religions," rather than "drawing distinctions on religious grounds," a court should evaluate whether the law violates the Establishment Clause under the three-part test in Lemon v. Kurtzman, 403 U.S. 602 (1971). Under this test, a law (1) must have a secular legislative purpose, (2) must have a principal or primary effect that neither advances nor inhibits religion, and (3) must not foster "an excessive government entanglement with religion."

The plaintiff claimed that the tax exemption for churches under the unemployment statute did not meet the first prong of the Lemon test because it did not have a secular purpose. The court noted that "a statute need not have exclusively secular objectives to meet the secular purpose standard; the touchstone is neutrality, and it is only when the government acts with the ostensible and predominant purpose of advancing religion that it violates the first prong of the Lemon test."

In this case, the Texas legislature stated the purpose of establishing the unemployment compensation system was to provide for the support of individuals who were unemployed through no fault of their own. The purpose for the exemption of service in the employ of a church from the definition of employment in the FUTA (which is identical to the exemption in the Texas statute) was "to address a concern that coverage of workers whose employment patterns are irregular or whose wages are not easily accountable would adversely affect administration of the program. These purposes are secular in nature."

The court also noted that the exemption of church employment was not the only variety of employment that was exempt under the unemployment statute. Rather, "a number of types of work are excluded from employment … reflecting the legislature's decision that the entities for whom that work is performed should not be subject to the burden of paying the tax required by the unemployment compensation system." The breadth of the exemptions "demonstrates the exemption [of church employment] was not aimed at establishing, sponsoring, or supporting religion."

The court concluded that the exemption of church employment from unemployment coverage did not violate the second or third prongs of the Lemon test (a principal effect that neither advances nor inhibits religion, and no excessive entanglement between church and state).

First Amendment's "Free Exercise of Religion" Clause

The plaintiff claimed that the exemption of church employment from unemployment coverage under the Texas statute violated his constitutional right to the free exercise of his religion, specifically his right to play music during worship services. The Free Exercise Clause provides that "Congress shall make no law … prohibiting the free exercise [of religion]."

The court noted that a free exercise claim will be sustained only if the government "has placed a substantial burden on the observation of a central religious belief" without "a compelling governmental interest justifying the burden." The government imposes a substantial burden on the free exercise of religion by forcing an individual to choose between "following the precepts of his religion and forfeiting benefits," or by "putting substantial pressure on an adherent to modify his behavior and to violate his beliefs." However, an individual's right to freely exercise his religion "is not necessarily violated simply because his religious practice is burdened by a governmental program."

The court concluded that the plaintiff provided no explanation of how the exemption in the unemployment statute put substantial pressure on him "either to modify his behavior or to violate his religious beliefs. Further, we can discern nothing about the exemption that affected his ability to play music during church services, violated his religious beliefs, or required him to work under conditions forbidden by his religion … . We conclude that exempting service performed in the employ of a church from the definition of employment placed, at most, an inconsequential burden on the plaintiff's ability to play music during church services and does not violate his right to freely exercise his religion."

What this means for churches

This is one of the few cases to directly address the constitutionality of the exemption of church employees from coverage under state unemployment compensation laws. The court's conclusion that this exemption is constitutional will be a useful precedent in future challenges in other states. Spicer v. Texas Workforce Commission, 430 S.W.3d 526 (Tex. App. 2014).

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