Workers Compensation – Part 1

The Ohio Supreme Court ruled that an employee of a manufacturing company who was injured on the job and awarded workers compensation benefits was engaging in fraud by accepting compensation for performing services as pastor of a church.

Church Law and Tax2003-05-01

Workers’ Compensation

Key point 8-02. All states have enacted workers compensation laws to provide benefits to employees who are injured or become ill in the course of their employment. Benefits generally are financed through insurance premiums paid by employers. Churches are subject to workers compensation laws in most states.
Workers Compensation

* The Ohio Supreme Court ruled that an employee of a manufacturing company who was injured on the job and awarded workers compensation benefits was engaging in fraud by accepting compensation for performing services as pastor of a church. An employee (“Sam”) was injured while working for a secular employer, and he received a workers’ compensation award based on “permanent total disability.” Several years later, Sam’s former employer learned that for nearly 15 years following his “injury” he had been earning a weekly salary of $600 as a pastor. A state agency later issued an order terminating Sam’s benefits, charging him with fraud, and ordering him to repay all benefits he had received. The agency noted, in its order, “Sam’s functioning as a church pastor for which he received remuneration constitutes engaging in sustained remunerative employment. Therefore, [all benefits will stop immediately]. Sam’s employment while receiving compensation constitutes fraud. Specifically, he failed to notify the [state] of his position as pastor and receipt of compensation for that position. The state paid compensation based on Sam’s misrepresentation of his employment activities. He had knowledge of the falsity of his misrepresentation, as demonstrated by his indication that he was not working on forms sent to him. He intended to mislead the [state], knowing that his employment would cease the [workers] compensation paid to him.” Sam appealed this order, and a state appeals court ruled that the order was appropriate. Sam admitted to the court that for at least seven of the years that he received workers compensation benefits for an alleged inability to do sustained remunerative work he also received a yearly salary between $24,000 and $29,000 as a pastor. However, insisted that this was appropriate because he was a pastor. The court disagreed,

Permanent disability benefits are not payable to anyone who is performing or can perform sustained remunerative employment. Sam asserts that his pastoral duties cannot be considered “employment” because as a minister he is not an “employee.” He relies on [the state workers compensation law] which specifically exempts clergy from the definition of “employee” unless the employing church notifies the [state] in writing of its desire to have its minister considered an “employee” for workers’ compensation purposes. We disagree with claimant’s argument …. Sam is seeking to create a definition in [the statute] that was intended to guide employers on obtaining coverage and reporting payroll for premium coverage purposes. It was not intended as a method for permitting a claimant to receive both wages and workers compensation benefits. There is no justification for dual receipt, and the suggestion that claimant’s occupation creates a special exception is without merit.

Application. Does your church employ a pastor, or lay employee, who is receiving workers compensation benefits? If so, the employee may be committing fraud by engaging in compensated employment. This can have serious consequences, including charges of fraud, and repayment of benefits paid while engaged in gainful employment. Church leaders should consider asking employees at the time of hire if they are receiving workers compensation benefits. If they are, verify that the employee is legally permitted to pursue compensated employment. This will help to reduce the church’s risk of liability for paying wages to such a person. One more point. In most states, employers can be sued for dismissing or in any way discriminating against an employee who files a workers compensation claim. This principle was not involved in this case. State v. Pride Cast Metals, Inc., 764 N.E.2d 1021 (Ohio 2002).

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