• Key point. Ministers and lay church employees are not entitled to unemployment benefits under federal and most state laws. Limited exceptions exist in some states.
An Oregon court ruled that a church's constitutional rights were not violated by an award of unemployment benefits to a dismissed youth pastor. In 1993 a youth minister (the "minister") was employed by a local church. Several months later, the minister was dismissed. His supervisor later testified that the minister had been dismissed because he "disrupted the cohesiveness of the church's staff, and support of the congregation was decreasing significantly." The minister filed a claim for unemployment compensation benefits. The church resisted this claim on the ground that constitutional guarantees of religious freedom prohibited the state from including ministers in the unemployment compensation system. After protracted hearings before a state agency, the minister was awarded unemployment benefits. The church immediately appealed that ruling in court.
A state appeals court began its opinion by noting that the state unemployment compensation law excluded services performed for a "church" and services performed by a minister of a "church." The court ruled that this exemption was invalid since it improperly singled out ministers who performed services for a "church," or who had been credentialed by a church, and excluded ministers employed or credentialed by other kinds of religious organizations. As such, the law violated the "constitutional rule that Oregon must treat all religious organizations similarly whether or not they would qualify as churches."
The church also asserted that the state unemployment law denied benefits to employees who are dismissed because of misconduct, and that the church's determination that the youth pastor had been dismissed for misconduct could not be questioned by the government since this would amount to an unconstitutional interference with a church's selection of its clergy. The court conceded that "the unfettered ability to choose and control a minister goes to the heart of a religious organization's ability freely to practice its faith," and that several federal court decisions "stand for the principle that the application of federal employment laws to the hiring and firing of ministers constitutes an excessive burden on religious freedom that outweighs the important state interest of prohibiting discrimination in employment." However, the court concluded that the interests asserted by the church were embodied in the first amendment guaranty of religious freedom, and that this guaranty was not violated by awarding unemployment benefits to a dismissed minister even if that meant that the employing church would have to prove "misconduct" in order to avoid liability. The court noted that the church's first amendment right to freely exercise its religion must be balanced against the harm to the state's objectives in recognizing an exemption. It acknowledged that "no court has squarely addressed the unique circumstance here, and, thus, no court has determined the proper weight to ascribe to the free exercise interest implicated by including ministers in the unemployment compensation system." But, drawing on cases in other contexts, the court noted that "the weight of a church's right to free exercise is related to two factors: (1) the degree to which the state action affects matters at the heart of a religious organization's internal structure, such as the selection of clergy and matters of faith, custom or ecclesiastical law; and (2) the degree to which the state action will directly affect, change or coerce a religious organization's decision making about such matters." The court conceded that first factor favored the church, but it concluded that the second factor did not, since
even by including ministers in the unemployment compensation system, a church retains substantial discretion to choose and control its ministers. That is so because, despite the outcome of the benefits process, the [state] has no authority in any case to change or modify a church's discharge decision. In that light, the inquiry as to the reasons for the discharge does not have the same kind of direct, coercive effect as, for example, the situation in [employment discrimination cases] where the application of Title VII to a church's hiring decision would have directly added to the church's pastoral selection standards. In the absence of direct coercion, church's claimed right to free exercise is best described as concerning generally its right to remain free of any requirement that it explains to the state its ministerial employment decisions. We agree that such an explanation is offensive to principles of church autonomy. However, because the inquiry does not by itself have the power to change a church's decision as to a minister's work status, it is in that sense reasonably characterized as an "incidental" burden on church's free exercise rights.
As a result, the court concluded that the church's first amendment rights were not violated by the award of unemployment benefits to the dismissed youth minister.
Fortunately, the conclusion of this court is limited to the state of Oregon. No other state has extended unemployment compensation benefits to all ministers. The court's decision will now entangle the state in decisions by churches to dismiss ministers. If churches can prove that they dismissed a minister on account of "misconduct," they will avoid liability for unemployment benefits. If they cannot, the dismissed minister will qualify. This court was not unduly troubled by the prospect of state agencies and civil courts becoming embroiled in such questions. Hopefully, the state supreme court will be, and it will reverse this ruling. Newport Church of the Nazarene v. Hensley, 983 P.2d 1072 (Ore. App. 1999).