Pastor, Church & Law

Treatment of Churches

§ 08.07.01

Key Point 8-07.01. 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. Workers compensation laws were enacted to give injured workers a quicker, less costly, and more certain recovery than was possible by suing an employer directly for negligence. Prior to the general acceptance of workers compensation statutes in the early part of the twentieth century, injured employees were often unsuccessful in collecting damages from their employers. When they did collect, the awards were sometimes so high that they threatened the solvency of the employer. In every case, the costs to the injured employee of suing an employer were high. Churches are subject to workers compensation laws in most states.

Some state workers compensation laws contain one or more of the following religious exemptions:

Employees of religious organizations are exempted from mandatory coverage.
Ministers are exempted from the definition of covered employee.
Employees are exempted from coverage who are members of a religious sect that is doctrinally opposed to the acceptance of public insurance benefits.
In addition, some states exempt activities not carried on for monetary gain, or exempt any employer having fewer than a specified number of employees.

Are churches exempt from workers compensation laws that contain no specific exemption for churches, nonprofit organizations, or organizations employing less than a specified number of employees? Although few courts have considered the question, the prevailing view is that religious organizations are subject to workers compensation laws unless specifically exempted.⁶One court stated the rule as follows:

The fact that [a religious organization] is a purely charitable enterprise does not of itself release [it] from the obligations of our workers compensation act, which, unlike the acts of some states, does not except charitable or religious institutions, as such, from its operation, nor exclude their employees from its benefits. Where the relationship of employer and employee actually exists between a charitable institution and an injured workman, the latter is entitled to the benefits of our act, otherwise not.⁷

A federal court in Ohio rejected the claim that subjecting churches to workers compensation laws violates their constitutional rights.⁸

A church argued that the state of Ohio, through its workers compensation system, had “assumed lordship over the church in direct contravention to the biblical principle that Jesus is ‘head over all things to the church’ (Eph. 1:22) and that ‘in all things [Christ] might have preeminence’ (Col. 1:18).” In addition, the church argued that “it would be a sin to contribute to workers compensation out of church funds designated for biblical purposes and that tithe and offering money … belongs to God.” The court concluded that these allegations were “sufficient to allege infringement of [the church’s] religious beliefs.” However, “the mere fact that a religious practice is burdened by a governmental program does not mean that an exemption accommodating the practice must be granted,” since “the state may justify a limitation on religious liberty by showing that it is essential to accomplish an overriding governmental interest.”

The court concluded that a state’s interest in assuring the efficient administration and financial soundness of the workers compensation fund, and in protecting the interests of injured workers, amounted to a compelling interest that overrode the church’s religious beliefs. The court noted that the Ohio law did exempt clergy from coverage under the workers compensation, and this limited exemption sought “to obviate excessive interference with the religious ministry of churches.” Also rejected was the church’s claim that the workers compensation program would impermissibly “entangle” government and church, since other courts had upheld even greater reporting requirements as constitutionally permissible. The court observed that exempting churches from coverage under the workers compensation law would force injured workers to sue churches in the civil courts, “an even more undesirable result from a scriptural standpoint.”

An Ohio state appeals court, in upholding the coverage of church employees under a state workers compensation law, observed:

The workers compensation law has been characterized by the broadest possible coverage with frequent amendments to insure that no class of employers or employees was unintentionally excluded. If the legislature had intended to exclude religious institutions, it had ample opportunity to do so. We believe that the legislature intended for employees of religious institutions to come under the protections of the [law].⁹

The court rejected the church’s claim that subjecting it to the workers compensation law violated the constitutional guaranty of religious freedom. It relied on a 1982 decision of the United States Supreme Court rejecting the claim of Amish employers that their constitutional rights were violated by subjecting them to Social Security taxes.¹⁰The Supreme Court had agreed that the religious beliefs and practices of Amish employers were burdened by the Social Security tax, but it concluded that “because the broad public interest in maintaining a sound tax system is of such a high order, religious belief in conflict with the payment of taxes affords no basis for resisting the tax.” The Ohio court concluded:

The state has an “overriding governmental interest” in compensating workers and their dependents for death, occupational disease, and injury arising out of and occurring during the course of employment. To accomplish this purpose, the state has enacted comprehensive legislation creating a system that requires support by mandatory contributions by covered employers. Widespread voluntary coverage would undermine the soundness of the program and be difficult, if not impossible, to administer with a myriad of exceptions flowing from a wide variety of religious beliefs. The assessments imposed on employers to support the system are uniformly applicable to all, except as the [legislature] provides explicitly otherwise. Thus, we find no constitutionally required exemption for [a church] from the operation of the Workers Compensation Act.¹¹

This same rationale has been articulated by many of the courts finding that churches are covered by workers compensation laws. As one commentator has observed: “The basic reamp;hellip; is straightforward. It is that the compensation act expressly covers all employers, then specifically exempts such employers as it wants to exempt, so that if charitable [or religious] employers are not expressly exempted the only possible conclusion is that they are covered¹²

In 1979, the United States Supreme Court ruled that in determining whether or not the National Labor Relations Board (NLRB) could assert jurisdiction over parochial school teachers, the courts must first ask whether an assertion of jurisdiction would give rise to serious constitutional questions under the First Amendment.¹³If serious constitutional questions would arise, then the agency cannot assert jurisdiction over religious institutions without demonstrating an “affirmative intentions of the Congress clearly expressed” to confer such jurisdiction. Arguably, this same analysis could apply to the application of workers compensation laws to churches that are opposed, on the basis of doctrinal considerations, to coverage. Few state workers compensation laws expressly include churches among the employers that are covered, and so there is no “affirmative intention of [the legislature] clearly expressed” to cover churches. This argument has never been addressed by any court, and should not be used without legal counsel.

Some have maintained that workers compensation laws were intended to apply only to commercial businesses and should not be extended to non-business activities such as the operation of a church. Many courts have rejected this reasoning as a basis for exempting charitable organizations from workers compensation laws, largely on the ground that the term business is so broad that it encompasses charitable activities.¹⁴One court has observed: “It is well to remember that in His earthly career the Head of the Christian Church seriously declared, ‘I must be about my Father’s business.’ Wherefore does not church activity qualify as business? This term has such recognition apart from pecuniary gain.”¹⁵Another court, in holding that a church is engaged in a “business” subject to the state’s workers compensation law when constructing a new sanctuary, observed: “The business of a church is not strictly confined to charitable purposes, spiritual uplift, and the saving of souls. Such, no doubt, is the ultimate object and purpose of all church associations; but it is a matter of common knowledge that, in order to attain such ends, it is also necessary to construct and maintain houses of worship in which the business of the church is carried on.”¹⁶The court also noted that a church could be a business under a state workers compensation law since there was no requirement that a business be “profit seeking.”

If a church is not exempt from workers compensation law, what is the effect of its failure to obtain workers compensation insurance? Most workers compensation laws are compulsory. The employer has no prerogative to remain outside the system. In a “compulsory” jurisdiction, a covered employer that fails to obtain workers compensation insurance will ordinarily be subject to a direct action by an injured employee, or may be treated as a “self-insurer” and accordingly be liable for the damages prescribed by the workers compensation law.¹⁷A few states permit employers to elect coverage under workers compensation law. To coerce employers into electing coverage, these states impose various legal disabilities upon employers that do not elect coverage.

Workers compensation laws only cover injuries and illnesses suffered by employees on the job. The term employee generally is defined very broadly to effectuate the objectives of the workers compensation law.¹⁸As a result, persons whom a church may deem self-employed for income tax purposes may be deemed employees for purposes of the workers compensation law. In some cases, however, a court may conclude that a particular worker in fact is self-employed and accordingly not covered by the workers compensation law.

Case studies

A Kansas court ruled that a volunteer worker who was injured while removing a tree from church property was not an employee of the church and therefore was not eligible for workers compensation benefits.¹⁹
A South Carolina state appeals court ruled that a construction company president who donated his labor in constructing a new church was not eligible for workers compensation benefits following an injury on the job.²⁰The court noted that workers compensation benefits are available only to “employees,” and that state law defined the term employee as one who works for wages under a written or oral contract of hire. The injured worker in this case “donated his labor in the construction of the church. There is no evidence he was paid wages or had a right to demand payment. There is also no evidence [that he] entered into a tithing agreement with [the church] so that his work could be considered as a credit toward his tithe obligation. We find no evidence of an employment relationship between [him and the church]. He was not hired by [the church] and he was not performing any paid service for [the church].” As a result, the court concluded that the worker “was a volunteer and not an employee” under the state workers compensation law. Accordingly, the church, through its workers compensation insurance carrier, was not obligated to pay benefits to the injured worker.

Churches are subject to workers compensation laws in most states. Yet, many churches have not procured workers compensation insurance. This may expose them to an uninsured risk for injuries sustained by employees in the course of their employment. Churches should review their liability insurance policies to ascertain what, if any, coverage exists for injured employees. Often, general liability policies exclude the insured’s employees on the assumption that they are covered under a workers compensation policy. This can create a dangerous gap in coverage.

Is a homeless person who is paid $10 per hour by a church for performing miscellaneous services as part of a “charitable work program” an employee covered by state workers compensation law? Yes, concluded a California appeals court. A church operated a charitable program for homeless or transient persons. Sometimes, the church made small payments directly to needy individuals. In other cases, when persons “wished to maintain their dignity and asked to do work,” the church would attempt to find work for them to do (generally at a rate of $5 per hour). Most persons worked at most a day. However, one individual worked for nearly 4 weeks, performing a variety of tasks including roofing, gardening, digging, drywall work, painting, and laying a carpet. This individual sustained serious injuries when he fell off a ladder while doing roofing work. The victim later asserted that he had been an “employee” of the church and accordingly was entitled to workers compensation benefits. The church vigorously rejected this position, claiming that the victim was a volunteer who was paid an “honorarium” for participating in the church’s charitable work program. A state agency ruled in favor of the church, noting that private charities should not be discouraged from providing aid by requiring them to pay workers compensation. The agency noted that “in fact, [the church] has apparently discontinued its benevolence fund program due to the litigation and liability issues raised in this case.” The victim appealed, and a state appeals court concluded that he was an employee of the church, and as such was entitled to workers compensation benefits. The court concluded: “[The victim] worked shoulder to shoulder with covered employees, did the same work, received wages, and ran the same risks. … He worked at a set hourly rate, for cash wages. … They were hourly wages, indistinguishable in any way from the wages paid to any laborer, except that they were probably considered below the prevailing wage rate for the kind of work done.”²¹

Case studies

The Delaware Superior Court ruled that workers compensation was the sole remedy available to a teenage counselor at a church camp who was sexually molested by an older counselor, and so the teenage counselor could not sue the church camp for damages based on negligent hiring or negligent supervision.²²The court noted that the state workers compensation law specifies that “every employer and employee, adult and minor, shall be bound by the [workers’ compensation statute] to pay and to accept compensation for personal injury or death by accident arising out of and in the course of employment, regardless of the question of negligence and to the exclusion of all other rights and remedies.” Based on this language, the victim’s lawsuit had to be dismissed if the camp and church could prove that (1) she was an employee, (2) she suffered a personal injury, and (3) the injury arose in the course of employment. Under these circumstances, workers compensation would be the counselor’s sole remedy and her negligence claim would have to be dismissed. The court concluded that all three requirements were met, and so the counselor’s sole remedy was workers compensation. This case suggests that a church employee who is a victim of sexual misconduct in the course of employment cannot sue his or her employing church based on negligence or any other “common law” theory of liability. The employee’s sole remedy is workers compensation. However, note that this defense may be unavailable to a church that fails to secure workers compensation insurance.
A New York court ruled that workers compensation insurance is an exclusive benefit for job-related injuries, and therefore a worship leader who was injured when she tripped over a bass guitar cable could not being a civil lawsuit against her church.²³
A Pennsylvania court ruled that the widow of a man who suffered a heart attack as a result of stress he experienced while working at a church was entitled to workers compensation benefits.²⁴A man suffered a heart attack while performing repairs at a church, and his heart attack eventually led to his death. The deceased worker’s widow filed a claim for workers compensation, in which she requested compensation for her husband’s death plus an additional $256,000 to reimburse Medicare for monies it expended for medical care of the worker following the accident. A workers compensation judge ruled that the widow had proven that her husband’s activities at work substantially contributed to his heart attack, and therefore she was entitled to benefits. This case demonstrates an important principle. While most church leaders continue to believe that churches are “exempt” from state workers compensation laws, the opposite is often the case. Failure to purchase workers compensation insurance can result in a significant uninsured risk, as this case illustrates. In the case of a fatality, the damages can be in the hundreds of thousands of dollars.
The Rhode Island Supreme Court ruled that workers compensation benefits are an exclusive remedy, and therefore a church employee who received workers compensation benefits could not sue her church as a result of serious injuries she suffered when she fell down a church stairway.²⁵The state workers compensation law provides that the right of employees to receive workers compensation benefits for work-related injuries or illnesses “shall be in lieu of all rights and remedies as to that injury now existing, either at common law or otherwise against an employer, or its directors, officers, agents, or employees.” As a result, the court ruled that the woman could not sue for damages in addition to the workers compensation benefits she received.

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