Key point. Employees of churches and church-affiliated schools are ineligible for unemployment benefits in most states.
A Pennsylvania court ruled that a terminated employee of a church-affiliated school was eligible for unemployment benefits since her employment was not exempt from coverage.
A common question for any church that operates a school or preschool is the application of state unemployment laws to its employees. Are employees entitled to unemployment benefits if they resign or are terminated? This question was addressed by a Pennsylvania court. An assistant (the "plaintiff") to the principal of a religious school was terminated, and she applied for unemployment compensation benefits under state law. A state agency determined that she was ineligible for benefits because she did not have sufficient wages entitling her to benefits. In reaching this conclusion, the agency excluded wages from her employment with the school since it considered such employment to be excluded from the definition of "employment" under the unemployment compensation law on the basis of the following exemption:
Service performed in the employ of (i) a church or convention or association of churches or (ii) an organization which is operated primarily for religious purposes and which is operated, supervised, controlled or principally supported by a church or convention or association of churches.
The plaintiff appealed this ruling to a state unemployment compensation board of review, which reversed the agency's determination that the plaintiff's services were exempt from the definition of covered employment under the unemployment compensation law. The board cited the following facts that had been established in this dispute:
- The school was a Christian school that "operates for educational purposes with strong religious influence" from its founding church.
- The school is a nonprofit organization separate and apart from the church.
- Many of the church's elders serve on the school's board of directors and many of the school's employees are both members of the church and elders of the church.
- While the school and church at one time shared a building in which there was a rental agreement, the school currently operates in a separate space.
- The school pays its own bills and receives zero funding from the church.
The board determined that the school is a nonprofit organization legally separate from its founder (the church), and operated primarily for educational purposes. The board also found that the school received no funding from the church, and, even though it rented a facility from the church when the plaintiff began employment, the school later purchased its own facility. The board concluded that, based on these circumstances, the school did not constitute a church or convention or association of churches or an organization that is operated primarily for religious purposes and that is operated, supervised, controlled or primarily supported by a church, or convention or association of churches. As a result, services performed by the plaintiff constituted covered employment, and wages earned for the school were to be considered in determining financial eligibility for unemployment benefits. The school appealed to the civil courts. The Commonwealth Court of Pennsylvania affirmed the board's determination that the plaintiff's employment with the school was covered employment under the unemployment compensation law.
The court quoted the above-cited exemption of services performed for religious organizations from the definition of "employment" in determining eligibility for unemployment benefits, and concluded that it did apply to the school in this case:
Here, the record … includes little evidence of the extent to which the religious underpinnings pervade the curriculum. Instead, it appears that the board's factual finding that the school is "operated primarily for educational purposes with a strong religious influence" is almost a verbatim quote from school's witness. Unfortunately, the employer's witness provided nothing further of substance. Accordingly, this case comes down to the board's fact finding …. We give primacy to the board's finding that the school "operated primarily for educational purposes." Therefore, we conclude that the board did not err in determining that the plaintiff's employment is not exempt from coverage under the Law because the school does not operate primarily for religious purposes based on the Board's findings. Imani Christian Academy v. Unemployment Compensation Board of Review, 42 A.3d 1171 (Pa. Common. 2012).