Unemployment Taxes

A Washington state appeals court ruled that the exemption of churches from the state unemployment compensation law did not violate state or federal constitutional provisions.

Church Law and Tax 2000-07-01

Unemployment Taxes

Key point. Churches are exempt fromunemployment compensation laws in most states. This exemption does not violate the first amendment’sprohibition of the establishment of religion.

A Washington state appeals court ruled that the exemption ofchurches from the state unemployment compensation law did not violate stateor federal constitutional provisions prohibiting the establishment ofreligion. A woman was employed as a counselor in a drug treatment programadministered by a church. She applied for unemployment benefits following hertermination. When benefits were denied no the ground that the church was exemptfrom coverage under the state unemployment compensation law, the womanchallenged the constitutionality of the exemption. The court applied theUnited States Supreme Court’s so-called Lemon test in determining whetherthe church exemption constituted an impermissible establishment of religion.Under this test, first announced in a 1971 decision (Lemon v.Kurtzman), a government law or practice challenged as an establishment of religion will bevalid only if it satisfies the following three conditions-a secularpurpose, a primary effect that neither advances nor inhibits religion, andno excessive entanglement between church and state. The court concluded that allof these tests were met. Saucier v. Employment Security Department,954 P.2d 285 (Wash. App. 1998).

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