Pastor, Church & Law

Termination of Employees

§ 8.22

Termination

Overview

In most states, employees who are hired for an indefinite period are considered “at will” employees. This means that the employment relationship may be terminated at will by either the employer or employee, with or without cause, and with or without notice. The courts and state legislatures have created a number of exceptions to the at will employment rule. These exceptions limit the right of an employer to terminate an at will employee. Employees who are hired for a specific term are not at will employees, and they may be terminated only if the employer has “good cause.”

The dismissal of an employee can be a traumatic experience. When an employee is dismissed who has been employed by the church for many years, there often is a desire by other employees and the congregation itself for information about the dismissal. After all, what could this trusted and faithful employee have done to warrant such harsh treatment? Often, church leaders resist sharing any of the details, fearing they will be sued if they do. This concern is understandable. However, problems can occur when nothing is disclosed to the staff or membership. Church leaders under these circumstances often are accused of acting arbitrarily, and there is a demand for an explanation. Refusal to respond to such demands may place the church leadership in an even worse light.

In the church context, this privilege protects statements made by members to other members concerning matters of common interest. Such communications cannot be defamatory unless malice is proven. Church leaders who decide to disclose why an employee was dismissed can reduce the legal risk to the church and themselves by following a few basic precautions:

• Only share information with active voting members of the church—at a membership meeting or by letter. The qualified privilege does not apply if the communication is made to non-members.

• Adopt procedures that will confirm that no non-member received the information.

• Limit your remarks to factual information and do not express opinions.

• Prepare a written statement that will be shared with members, and have it reviewed in advance by an attorney.

Key Point 8-22. In most states, employees who are hired for an indefinite period are considered “at will” employees. This means that the employment relationship may be terminated at will by either the employer or employee, with or without cause, and with or without notice. The courts and state legislatures have created a number of exceptions to the at will employment rule. These exceptions limit the right of an employer to terminate an at will employee. Employees who are hired for a specific term are not at will employees, and they may be terminated only if the employer has “good cause.”

A. The “At Will” Employment Rule, and Its Exceptions

In most states an employee hired for an indefinite term may be discharged by the employer at any time with or without cause.¹⁵²This principle is referred to as the “at will” employment rule. The idea is that either the employer or the employee has the right to terminate the employment relationship “at will.” This rule only applies to employees hired for indefinite terms of employment. The “at will” employment rule is subject to a number of exceptions in each state, including some or all of the following:

Tip. A church should avoid dismissing an employee who is a member of a protected class under a federal or state civil rights law unless there is a legitimate, nondiscriminatory basis for the dismissal. For example, a church should avoid dismissing a 60-year-old employee unless there is clear and convincing evidence of incompetency, incapacity, insubordination, or some other nondiscriminatory basis for dismissal.

Tip. Dismissed employees often point to “performance reviews” as proof that their termination was discriminatory. To illustrate, assume that a church conducts annual “performance reviews” for all employees, and that a disabled employee consistently received excellent or above average scores. Within a few months of such a review, the employee is dismissed because of the “poor quality” of his work. The employee sues the church, claiming that it discriminated against him on the basis of his disability. The church insists that the disability had nothing to do with its decision, but the employee points to the annual performance reviews as proof that the church’s alleged basis for termination was a “pretext.”

Discrimination based on race, color, national origin, sex, or religion. Title VII of the Civil Rights Act of 1964 is a federal law that makes it unlawful for an employer that is engaged in “commerce” and that has at least 15 employees to discharge any individual on the basis of race, color, national origin, religion, or sex (including both pregnancy and sexual harassment). The Act does permit religious organizations to discharge or otherwise discriminate against employees on the basis of religion. Many states have their own civil rights laws that ban this type of employment discrimination, and they are more likely to apply to churches since there is no “commerce” requirement and the minimum number of employees often is fewer than 15.
Discrimination based on age. The federal Age Discrimination in Employment Act makes it unlawful for an employer that is engaged in “commerce” and that has at least 20 employees to discharge any individual on the basis of age (if the person is at least 40 years of age). Many states have their own civil rights laws that ban this type of employment discrimination, and they are more likely to apply to churches since there is no “commerce” requirement and the minimum number of employees often is fewer than 20.
Discrimination based on disability. The federal Americans with Disabilities Act is a federal law that makes it unlawful for an employer that is engaged in “commerce” and that has at least 15 employees to discharge any individual on the basis of disability—if the employee is able to perform the essential functions of the job with or without reasonable accommodation by the employer (so long as the accommodation would not impose an undue hardship on the employer). The Act does permit religious organizations to discriminate against employees on the basis of religion. Many states have their own civil rights laws that ban this type of employment discrimination, and they are more likely to apply to churches since there is no “commerce” requirement and the minimum number of employees often is fewer than 15.
Discrimination based on military status. The Uniformed Services Employment and Reemployment Rights Act specifies that a person “who is a member of, applies to be a member of, performs, has performed, applies to perform, or has an obligation to perform service in a uniformed service shall not be denied initial employment, reemployment, retention in employment, promotion, or any benefit of employment by an employer” on the basis of his or her military service or application for service. The law applies to all employers, including churches, whether or not they are engaged in interstate commerce and regardless of the number of their employees. The law defines “service in the uniformed services” to include “active duty, active duty for training, initial active duty for training, inactive duty training, full-time National Guard duty, and a period for which a person is absent from a position of employment for the purpose of an examination to determine the fitness of the person to perform any such duty.” The law only protects employees whose military absences from an employer have not exceeded five years, with certain exceptions. An employee’s reinstatement rights depend upon the time he or she is away on military leave.
Discrimination based on sexual orientation. A number of states have enacted laws prohibiting employers from discriminating against employees and applicants for employment on the basis of their sexual orientation and gender identity. Most of these laws exempt religious organizations. Even without such an exemption, it is unlikely that most courts would apply such a law to the relationship between a church and its ministers.
Dismissal based on polygraph testing. The federal Employee Polygraph Protection Act prohibits any employer engaged in commerce, regardless of the number of employees, from requiring, requesting, suggesting, or causing any employee or applicant for employment to take a polygraph exam. This law applies to all employers, including religious organizations, engaged in an activity affecting interstate commerce. The law contains a few exceptions that ordinarily will not apply to churches. For example, employers can ask an employee to take a polygraph exam if an incident of theft or embezzlement has occurred and there is evidence pointing to the employee as the perpetrator. Employers relying on this exception must comply with several requirements. The assistance of legal counsel is essential.
State laws regulating off-hours conduct of employees. Many states have enacted laws prohibiting employers from disciplining employees for using lawful products (such as tobacco or alcohol) off of the employer’s premises during non-working hours. Some of these laws exempt religious organizations.
Violation of public policy. A number of courts have protected “at will” employees by permitting them to sue their former employer if their dismissal violated “public policy.”¹⁵³To illustrate, employees terminated for refusing to commit perjury or some other crime, for performing jury service, or for filing a workers compensation claim against their employer have been allowed to sue their employer for wrongful discharge. The “public policy” exception to the employer’s right to discharge employees hired for indefinite terms has been narrowly construed, and is rejected by some courts. One court rejected the argument that the “national policy” against religious discrimination is sufficiently compelling to create an exception to the “at will” doctrine in the context of religious employers.¹⁵⁴
Employment handbook exception. Some courts have restricted an employer’s right to fire “at will” employees as a result of binding assurances and commitments contained in an employee manual or handbook.¹⁵⁵This view has been rejected by other courts.¹⁵⁶Many courts have upheld the validity of “disclaimers” appearing in employment contracts and handbooks, which purport to disclaim any contractual meaning or intent.
Invasion of privacy. Some courts have allowed dismissed employees to sue their former employer if their dismissal was based on an “invasion of privacy” by the employer. Examples include dismissals based on evidence obtained through illegal telephone wiretapping, or through unauthorized access to the employee’s personal property.¹⁵⁷
“True cause” letters. Although not directly limiting an employer’s right to discharge an employee engaged for an indefinite term, some states have enacted laws requiring employers to provide discharged employees with a letter setting forth the “true cause” of the discharge.¹⁵⁸Ordinarily, however, the employer is not obligated to provide such a letter unless it receives a written request from a discharged employee.
Fraud. A few courts have permitted dismissed employees to sue their former employers on the basis of fraudulent representations. For example, an employee who was assured by his employer that his position would be “permanent” was fired. While the court concluded that an employee hired on a “permanent” basis is in fact an “at will” employee who ordinarily can be terminated at any time with or without cause, the employee could sue his former employer on the basis of the fraudulent representation.¹⁵⁹
Statutory elimination of the “at will” rule. At least one state (Montana) has enacted a statute prohibiting employers from dismissing employees except for “good cause.”¹⁶⁰Such a statute in effect repeals the “at will” rule.
Covenant of fair dealing. A few courts have ruled that a “covenant of fair dealing” is implied in every contract of employment. A dismissed employee can sue a former employer for violating this covenant.
Union activities. The National Labor Relations Act makes it unlawful for an employer engaged in a business or activity “affecting commerce” to discharge an employee on the basis of union activities.¹⁶¹

B. The Dismissal of Employees Hired for a Definite Term

The courts generally hold that employees hired for a definite term may not be discharged before the end of their term of employment unless good cause exists. An employer need not demonstrate good cause to justify a failure to rehire an employee upon the expiration of a definite term of employment.

Good cause may include serious illness; abandonment of employment; breach of contract; refusal to perform assigned duties; incompetency; neglect of duties; misconduct; insubordination; intoxication; intemperance; doctrinal deviation; or conduct contrary to the church’s moral teachings.

Tip. Many churches reserve the right to dismiss an employee for conduct in violation of the church’s moral teachings. Unfortunately, this can lead to confusion since dismissed employees often insist that their behavior did not violate such teachings. One way to reduce the likelihood of such disputes is to state (in the church’s employee handbook, or in some other appropriate document) that the church board is the sole arbiter of what behavior violates the church’s moral teachings.

An employee who is discharged without good cause before the end of a specified term of employment generally is entitled to recover as damages the salary and other benefits agreed upon for the remainder of the employment term less the amount the employee earned, or with reasonable diligence might have earned, from other employment of the same or a similar nature during the period.

Key Point. The civil courts generally will not interfere with a church’s decision to terminate a minister’s services. This subject is covered fully in chapter 2.

C. Communicating with Other Employees and the Congregation

There is a possible answer to this dilemma. Many states recognize the concept of “qualified privilege.” This means that statements made to others concerning a matter of common interest cannot be defamatory unless made with malice. Statements are made with malice if they are made with a knowledge that they are false, or with a reckless disregard as to their truth or falsity. In the church context, this privilege protects statements made by members to other members concerning matters of common interest. Such communications cannot be defamatory unless malice is proven. Church leaders who decide to disclose why an employee was dismissed can reduce the legal risk to the church and themselves by following a few basic precautions:

Only share information with active voting members of the church—at a membership meeting or by letter. The qualified privilege does not apply if the communication is made to non-members.
Adopt procedures that will confirm that no non-member received the information.
Limit your remarks to factual information and do not express opinions.
Prepare a written statement that will be shared with members, and have it reviewed in advance by an attorney.

Tip. In some cases, it is helpful to obtain a signed confession from an employee who is being terminated because of misconduct. The confession should state that it can be read to the staff and congregation.

Case studies

A Massachusetts court ruled that a pastor could sue his denomination for publishing a statement informing other pastors and the media that he had been suspended from all pastoral duties because of “formal charges of sexual misconduct.”¹⁶²However, the court acknowledged that the denomination’s public statements concerning the pastor’s sexual misconduct may well have been protected by a conditional privilege. It stated the general rule as follows: “An occasion makes a publication conditionally privileged if the circumstances lead any one of several persons having a common interest in a particular subject matter correctly or reasonably to believe that there is information that another sharing the common interest is entitled to know. … The common interest of members of religious associations is recognized as sufficient to support a privilege for communications among themselves concerning the qualifications of the officers and members and their participation in the activities of the society.” In summary, the First Amendment did not prevent the pastor from suing his denomination for libel or slander as a result of public statements concerning his alleged sexual misconduct, but the denomination might be exempted from liability on the basis of the common interest privilege.
An Ohio court ruled that a former teacher at a church-operated school could not sue school officials for defamation since the allegedly defamatory statements made by the school officials concerned a matter of “common interest” and accordingly were privileged. The teacher was convicted of contributing to the delinquency of a minor for providing alcohol to one of his students. He advised school officials of his conviction, and was permitted to remain on the faculty both as a teacher and yearbook adviser. A few years later, his teaching contract was not renewed. A priest was hired to replace him as teacher and yearbook adviser. When the former teacher continued to associate with student members of the yearbook staff, two priests (who served as administrators at the school) contacted the parents of two of these students and informed them that the former teacher had been convicted of “corrupting a minor,” implied that he was a homosexual, and recommended that they not permit their sons to associate with such a person. The former teacher learned of these statements, and sued the priests for defamation. A state appeals court ruled that the statements made by the priests were not defamatory since they were protected by a qualified privilege. It observed: “As a matter of public policy, educators and parents share a common interest in the training, morality and well-being of the children in their care. … [S]tatements made by a teacher and a principal which relate to a former teacher’s … commission of acts which are potentially harmful to the well-being of a student, when made to the parents of the student involved, can be motivated by a common interest in the education or safety of that student.”¹⁶³
A Texas court ruled that a church was not liable for defaming a former secretary as a result of statements made to church members claiming that she had misappropriated church funds. A church operated a private school. Its minister of education, who also served as principal of the school, resigned after admitting that he misappropriated church funds, destroyed church records, forged signatures, and committed other criminal acts. He later pleaded guilty to criminal charges for his admitted conduct in misappropriating school funds. He informed the church that a woman who served as a secretary at the school participated in the misappropriations. After an audit confirmed the principal’s accusations the church asked the secretary to resign. The church published (1) a letter to its members claiming that the secretary misappropriated school funds; (2) a letter to the school children’s parents claiming that the secretary deposited tuition funds into the wrong accounts and later used the funds for her personal benefit; destroyed checks, financial records, and bank records; forged signatures; covered up these indiscretions; received seventy dollars extra per pay period for nearly two years as well as other undocumented “reimbursements”; and (3) a report to the church members reporting the secretary’s resignation and claiming that she deposited tuition funds into the wrong account and then used the funds to support programs and individuals outside of and over the budget adopted by the congregation. At a meeting of church members, church officials orally accused the secretary of depositing tuition funds into the wrong account and then using the funds for her personal benefit or for other people or projects as she and the principal saw fit; destroying checks, bank records, and financial records; forging signatures; and covering up many of these indiscretions. The secretary later sued the church and the individual members of the church audit committee, claiming that the church’s actions defamed her. A state appeals court rejected all of the secretary’s claims. It concluded that words that otherwise might be defamatory may be “legally excused” by a qualified privilege. It observed: “All of the members of [the church] have a common interest in the church’s use of their financial contributions to the church; thus, the members have a common interest in information about those funds. The members who made the statements in question reasonably believed that the misappropriation took place and that the board, the members, and the parents shared a common interest in the use of the funds and information about those funds. [The church] reasonably believed that these people were entitled to know of the misappropriation. [It] had a duty to perform for the board, the members, and the parents. [It] made the communications without actual malice. [The principal] confessed his and [the secretary’s] involvement, and [he] later pleaded guilty to criminal charges. [The church’s] audit confirmed all of [his] statements. [The secretary] never swore under oath in an affidavit in opposition to summary judgment that the statements were lies. [She] kept the misappropriated funds in a shoe box in her closet and returned the funds when accused. [The principal] testified that the statements were true. [The secretary] admits receiving personal benefit from the misappropriation of funds. [She] admits she destroyed records. [The church] neither entertained serious doubts as to the truth of the statements nor made these statements with a high degree of awareness of their probable falsity. The communications appeared accurate, [the church] reasonably believed [the principal], and church members and parents who received information had an interest in the funds and information about the funds.” ¹⁶⁴

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