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Employment Liability – Is Your Church At Risk?

Employment Liability – Is Your Church At Risk?

“Hiring, Disciplining, compensating, or terminating employees can expose your ministry to expensive litigation if the employment issue is not handled correctly.”

Churches are exposed to liability for various employment practices. This risk must be taken seriously, because it represents one of the most common sources of church litigation. Additionally, this risk is generally not covered by a church’s general liability insurance policy. Consequently, without coverage for this specific event, a church that is sued on the basis on an employment decision will be responsible for compensating its own attorney and paying any judgment, settlement, or defense costs – which can be substantial.

Perhaps the two leading issues concerning employment related lawsuits are those involving employee terminations and discrimination.

Termination 

There are several things a church needs to understand about Employee Termination:

  1. In most states, employees who are hired for an indefinite period of time are considered “at will” employees. This means that the employment relationship may be terminated at will by either the employer or the employee, with or without cause and with or without notice. However, some exceptions apply to this rule. For example, a church cannot dismiss an employee if such an action would violate a state or federal law. You cannot  dismiss an employee for participating in jury duty or filing a workers compensation claim. Some courts have even said that you cannot dismiss an employee if prohibited from doing so per a statement in an employee handbook, even if inadvertently state ( another good reason to have your employee handbook periodically reviewed by an attorney.) In short, do not rely on an assumption of “at will” employment to base your decision on terminating an employee.
  2. Depending on the circumstances, a church’s legal risk could be reduced by entering into a severance agreement with a terminated employee. If applicable, it is recommended that such an agreement be drafted by an attorney.
  3. Consider a probationary agreement. Give an employee a reasonable opportunity to correct work related problems. Prepare a form for the employee to sign that lists each problem and caution the employee that failure to improve within a reasonable period of time may lead to termination.
  4. Realize that ministers are treated differently than other employees. For example, (1) a minister’s termination may be outlined by the church’s bylaws and therefore those bylaws must be followed, and (2) if the church is affiliated with a denomination, then denominational rules and procedures may apply and knowledge of those is essential.
  5. The church should also know how they will respond concerning an employee’s termination of employment. Ideally, this would be discussed with the employee at the time of termination with his or her consent on how this is to be communicated with the church staff. If at all possible, this consent should be in writing and in some cases could be included in the severance agreement. You should restrict public comments to those who need to know!  You do not want to make a statement in the church service since there will be non-members present who do not need to be informed of this information. Provide factual information on a strict “need to know” basis. Do not offer opinions. The issue of communication is both complicated and complex and you may want to seek the advice of legal counsel.
  6. Understand the importance of being consistent. Handle similar cases similarly.
  7. Understand the importance of accurate employee evaluations. Often staff or supervisors give average performance reviews rather than below average or poor to avoid conflict, but conflicting performance reviews to actual performance could lead to allegations that the church had ulterior motives on the basis of their termination. Example: Dismissed employees often point to “performance reviews” as proof that their termination was discriminatory. To illustrate, assume that a church conducts an annual employee performances and that a disabled employee consistently received excellent or above average scores. Within a few months of a such a review, the employee is dismissed because of “poor quality” of work. The employee sues the church, claiming that it discriminated against him on the basis of disability. The church insists 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 is false.
  8. Lastly, understand the importance of communicating to employees the standards expected of them. Make sure that they understand what those standards are and that violation of those standards is subject to employment termination. New employees should be informed of these standards and required to sign a statement acknowledging them.

Discrimination: 

Federal law and laws of most states prohibit discrimination ( commonly including race, national origin, sex, religion, age, disability, and sexual orientation) in employment. While many federal statues require a minimum number of employees before they apply ( typically 15 or more employees inclusive of full-time and part-time employees), state statues and case law generally do not include this requirement. In fact, many states have enacted legislation that broadens the scope and damages of their federal counterparts.

Exceptions: 

  • The courts have ruled that religious organizations may discriminate on the basis of religion in their employment decisions, but they must be consistent. For example, a church that dismisses a female employee who are of extramarital sexual relations, but only warn or reprimand male employees cannot justify this as a practice of permissible religious discrimination.
  • Churches can consider only persons of faith when hiring pastors or lay workers so, in effect, they can discriminate on the basis of religion.

What Can a Church Do to Protect Itself? 

  1. Consult with your agent about obtaining Employment Practices Liability Insurance and purchase limits adequate to cover possible defense costs or the costs of a possible judgement against you. While it’s true that the risk increases with the number of employees, those with only a few employees are potentially at risk as well.
  2. Conduct annual performance reviews, document all disciplinary actions, maintain accurate records, and avoid emotional confrontations.
  3. Ensure that employment handbooks and policies are regularly reviewed by legal counsel.  An employment handbook is a great tool that can often be used to limit liability. Unfortunately, if the handbook has not been updated annually, has not been reviewed by an attorney, or is not followed, it may actually cause more damage than it prevents. Without appropriate disclaimers and limiting language, courts may find that you handbook constitutes an employment contract. In these situations, if procedures or policies have not been strictly followed, the organization could be held liable.
  4. Follow specific termination practices if unsure about your termination or discipline of an employee, seek the assistance of an attorney.
  5. Employers are, with a few narrow exceptions, responsible for the acts of their supervisory employees, regardless of whether the employer knew about it. Employers may also be held liable for sexual harassment policy that provides for zero tolerance of sexual harassment and educate  your staff as to what constitutes sexual harassment. Make sure that the sexual harassment policy and the complaint procedure have been communicated to all employees.

Final Review:

Churches are often sued based on wrongful terminations. Be informed on proper dealings with your employees. Listed below are just a few questions you’d want to ask yourself prior to the termination of an employee.

  1. Can we establish a nondiscriminatory basis for termination?
  2. Is our decision consistent with annual performance reviews?
  3. Was the basis of our decision clearly communicated to the employee in advance ( employee handbook?)

 

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