• Key point. Churches that dismiss an employee for reporting financial improprieties may be liable for wrongful dismissal.

A Missouri court ruled that a charity could be sued by a bookkeeper who was dismissed as a result of her reporting financial improprieties by her supervisor. A bookkeeper became aware that her supervisor was engaged in a number of financial improprieties, including (1) stealing money from his employer; (2) charging personal expenses to his employer and not paying these charges back; (3) keeping some of the cash sent to his employer in the mail; and (4) obtaining reimbursements for travel expenses that were never incurred. She reported her findings to a member of the charity’s personnel committee who told her to “get more evidence.” She continued to gather evidence, and spoke with two other members of the personnel committee. She was later dismissed. The reason for her dismissal was hotly contested. The charity insisted that her dismissal had nothing to do with her accusations against her supervisor. Rather, it insisted that she had been fired for missing several days of work, failing to perform assigned duties, and arriving late to work. The bookkeeper claimed that she had been dismissed because of her “whistleblowing.” She sued her former employer, and a jury awarded her $100,000 in damages.

A state appeals court upheld the trial court’s ruling. It conceded that employees (such as the bookkeeper in this case) “who have no contract for a certain term of employment are employees-at-will. An employee-at-will normally has no right to sue for wrongful discharge even if the employee was terminated without cause.” However, the court pointed out that there are limited exceptions to this rule. The so-called “whistleblower” exception protects employees who report “wrongdoing or violations of law or public policy by the employer or fellow employees to superiors or third parties.” Such persons cannot be dismissed without cause, even though they are “at will” employees hired for an unspecified term.

The court rejected four defenses asserted by the charity. First, the charity argued that the whistleblower exception does not apply to simple acts of theft of an employer’s own property. The court rejected this argument, noting that “it is a strong mandate of Missouri public policy to prevent theft of charitable donations to and funds of a nonprofit organization.” Second, the charity argued that the bookkeeper’s actions in telling three members of the personnel committee about her supervisor’s stealing did not constitute whistleblowing because she never reported her suspicions to the police or other civil authorities. Such “internal” reporting, the charity insisted, does not “blow the whistle” on the alleged wrongdoer. The court rejected this argument, noting simply that there is no requirement under the whistleblower exception that a report be made “to outside, as opposed to internal, authorities.” Third, the charity claimed that it did not “know” of the bookkeeper’s whistleblowing activities at the time she was dismissed. In rejecting this argument, the court noted that the bookkeeper’s statements to three members of the personnel committee had the effect of putting her employer on notice of her actions. Fourth, the charity argued that it could not be liable for dismissing the bookkeeper on account of whistleblowing unless this was the “exclusive” basis for its action. The court concluded that there was no such requirement, and that all an employee has to prove is that his or her dismissal was based in part on whistleblowing activities.

Application. Unfortunately, financial improprieties can occur in a church. These may take the form of embezzlement, theft, or improper or unauthorized reimbursements. In some cases, an employee becomes aware of these activities and reports them to one or more church leaders. Church leader must understand that a decision to terminate such an employee will expose the church to potential legal liability based on wrongful termination, even if the employee is an “at will” employee who ordinarily could be dismissed for any or no reason. As this case demonstrates, this is true even if the employer has legitimate grounds to terminate the employee. The fact that the termination comes close in time to an employee’s “whistleblowing” activities may well convince a jury that the employer’s alleged grounds for dismissal were a “pretext.” Brenneke v. Department of Veterans of Foreign Wars, 984 SW.2d 134 (Mo. App. 1999). [Termination of Employees]

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