Common Pitfalls to Avoid in Hiring and Firing
In our tight economy, hearing “You got the job!” may be one of the most thrilling moments a person can have, while hearing “You’re fired!” may consequently be one of the scariest moments. As an employer, you hold in your hand the fate of your employees and the fate of dozens of well-qualified potential employees. As this article will discuss, however, you also hold your own fate in your hand. Hiring and firing are two of the most legally risky times in the life of a Human Resources department, no matter how large or small the employer. There are numerous pitfalls that an employer encounters during these phases. The number of headlines that address wrongful termination lawsuits or discriminatory hiring practices is growing. This article addresses four high-risk areas to which churches and non-profit employers should give particular attention to stay safe and out of the news.
1. “You’re hiring who?!” – failing to check references or do a background check pre-hiring
In the world of churches and non-profit ministries, many new hires come from within a circle of friends, business partners, members, co-workers, and fellow ministries. Additionally, many employers focus much of their pre-hiring questions on their applicant’s faith, spiritual journey, or ministry passions. Both of these practices are important and well-justified. The down-side is that they lure many employers into a false sense of security, leading them to cut out an important part of their application process: reference and background checks.
Earlier in 2014, a Georgia court of appeals ruled against a church for its failure to check references on a volunteer who molested a minor. The perpetrator had just started attending the church and filled out an application saying he wanted to volunteer with the youth. His application included two references. The church administrator felt there was something wrong with the applicant, but the hiring staff didn’t take any action. The church never contacted the references, one of whom testified later that she would have never recommended the applicant since she suspected he was a sexual predator. However, the church allowed the volunteer to have unsupervised contact with children without checking his references first, resulting in the molestation.[1] They declined to give summary judgment to the church, noting that that because the volunteer was working with children, a jury could find that because the position was a more sensitive matter, the church should have at least checked references first.[2]
As the church in Georgia unfortunately learned the hard way, having an application (both for employees and volunteers) that requests references and gets their written permission to disclose information is only one of the steps needed to conduct responsible due diligence during the hiring process. The second step is actually checking the references before hiring. This is a particularly important step in two ways. First, it’s fundamentally important because the only thing worse than not doing a reference check is getting permission to do a reference check and still not doing it. This is tantamount to an admission to both the judge and the jury that you knew the right thing to do but chose not to do it. Second, if the position you’re hiring for is a particularly sensitive position—like child-care or children’s ministry—conducting a reference check can reveal information, opinions, and personal experiences that are highly relevant to such a sensitive position, but which would never be revealed in a background check or any application form or interview. For such a sensitive position, it may be held to be negligence not to ask for references in the first place, knowing that they could reveal important background information not revealed by other due diligence methods.
Finally, good reference checks only come when you get a proper waiver from the applicant. Many references won’t want to talk unless they are “indemnified” by the applicant for anything they say to you as the new employer. This is standard practice in the business world and sophisticated prior employers should have no problem. Smaller churches or other employers may be more reticent to disclose information, but knowing that you solicited their input and checked their reference is essential. You don’t want to be sitting in your office chair, a few weeks down the road, talking to a ministry friend about your recent hire and be the one to hear them say, “Wait, you hired who?! We just fired him a few weeks ago!”
2. “Don’t Ask, Don’t Tell”: discrimination and reasons for hiring and firing
Another issue that can create significant problems for churches and non-profits during the critical hiring and firing stages of employment is discrimination. Although churches enjoy some additional layers of protection when it comes to discriminatory hiring and firing practices, an ill-advised hire or fire can still expose your entity to liability, if not by instigating the filing of a lawsuit by an angry potential employee or ex-employee.
For example, earlier this year, a church diocese was sued for firing a lesbian church worker when her marriage to her lesbian partner appeared in a newspaper article along with the fact that she worked for the church. Colleen Simon v. Robert W. Finn and Catholic Diocese of Kansas City-St. Joseph, Circuit Court of Jackson County, Missouri, Case No. 1416-CV16699 (July 17, 2014). Although the worker, Ms. Simon, knew that her Iowa marriage to her partner might be a problem for the church and in fact brought it up several times with the pastor, she was still angry enough to sue the church when the pastor, who already knew she was lesbian and had assured her it wouldn’t be a problem, terminated her. The church even noted in their termination letter that they were firing Ms. Simon because her marriage conflicted with the church’s doctrinal teaching on marriage.
Although the Simon case is still pending, it illustrates how a church that may have a right to fire someone may nonetheless still be sued for the way they handled the hiring and firing. If the pastor, for example, had immediately brought up her lesbian marriage and explained the church couldn’t hire her because her practice conflicted with their sincerely held belief about the definition of marriage, the church may have staved off a lawsuit, since churches generally enjoy exemptions for religious discrimination in hiring.
One way to avoid lawsuits like these is to consult with legal counsel to know, not just the areas where you are protected from discrimination claims,, but the areas where you may appear to discriminate and how to prepare to defend those. For example, a 2008 federal court in Connecticut held that a church was not liable for discriminating against a job applicant based on age. Donahue v. Norwich Roman Catholic Diocesan Corp., 2008 U.S. Dist. LEXIS 23600 (D. Conn. Mar. 26, 2008). Even though it appeared that the church favored a younger applicant over the older applicant (which would be a violation of federal law), the church avoided liability because they were able to show that the true reason for hiring the younger applicant: she performed better in the interview than the older applicant. It is key that the court noted the plaintiff did make out a case that inferred she was discriminated against based on age. This means that if the church would have not been able to show the true reason for discriminating, they may have been liable for age discrimination.
In light of these and other cases, make sure you have reviewed your hiring and firing process with legal counsel. You should know where your entity is protected. You should also know how to create a paper trail that supports the exemptions applicable to your entity.
3. Be considerate! – trying to enforce handbook changes without “consideration”
While you may have heard from other ministry partners (or even from your family friend who’s an attorney) that you should always have written contracts with employees, you may not know that these contracts are only enforceable if they have consideration to back them up. Best practices in church and non-profit human resources includes getting employees to sign offer letters and contracts that include the new employee’s written agreement to be bound by the Handbook/Manual and other policies of the employer. When a new employee signs in exchange for a job and payment, the agreement between the employer and employee magically becomes an enforceable contract. Just as “magically,” however, making an update to that Handbook or adding a new policy immediately can make the agreement unenforceable for all current employees who didn’t agree to it in exchange for something else of value.
For example, a Pennsylvania appeals court recently held that an employee could not be bound by an agreement he signed without an exchange of something for value. His employer had hired him in 2007 and in 2010 asked him to sign a new employment contract with an added “non-compete” clause. He signed the agreement, but subsequently left the job and went to work for a competitor. The court refused to uphold the non-compete clause because the employee did not receive any “corresponding benefit or change in job status.” Socko v. Mid-Atlantic Sys. of CPA, 2014 PA Super 103, at *19 (Pa. Super. Ct. 2014).
Let’s apply this to your church or non-profit. Suppose your organization implements a new electronic use policy that monitors employees’ use of employer-owned equipment and prohibits employees from using the equipment for their personal use. One of your employees violates this policy and you’d like to fire him for it. Did the new policy becoming binding on the employee? In some states, if the employee knew about the policy and then continued working, his continued employment constitutes an exchange of something of value and makes the policy binding. Other states, like Pennsylvania, may require a specific change in status or benefits to qualify as an exchange of value that binds the parties.
Best practice is to make sure you know your state’s law on employment contract changes so you know how to enforce changes in your policies, your handbook, your statement of faith as applied to your employees, or your employee code of conduct. Without knowing this, you could find that your employees cannot be held answerable for changes you thought were already finalized and implemented.
4. What’s in a name? Independent contractor vs. employee
When a church or non-profit hires a new staff member, the excitement of bringing on a ministry partner with fresh passion and a new skill set can cloud an important question: does the position have the appropriate classification?
Two of the most basic classifications—employee vs. independent contractor—are easily overlooked, but can have long-term consequences. For example, the federal Tax Court in 2013 took up the issue of whether or not a church was liable to the IRS for over $100,000 in penalties. Allegedly, the church had hired an employee but failed to withhold federal income taxes and social security taxes on several years’ worth of “wages” that were paid to the individual. The church argued that they had treated the “employee” as an independent contractor and therefore qualified for an exemption from withholding. Relying on a well-respected factor-based test, the Tax Court agreed with the church. Ungvar v. Commissioner, T.C. Memo. 2013-161. If they had not, however, the church would have been liable for the years of penalties for their failure to withhold wages.
Knowing whether or not your new hire is an employee or an independent contractor is essential. Independent contractor status may allow the church to avoid complicated withholding regulations, while employee status gives the employer more control over the manner and means of how the work is completed. The test used by the court in Ungvar illustrates the many factors that distinguish between the two classifications. In determining whether a worker is an employee or an independent contractor, the court will look at:
- The degree of control exercised by the employer over the details of the work
- Whether the employer or the worker invest in the facilities and tools used for the work;
- Whether the worker can realize profit or loss based on their performance;
- Whether the employer can fire the worker;
- Whether the work is part of the regular business of the employer;
- How permanent the relationship is between the employer and the worker; and
- What kind of relationship the parties think they are creating.
While all these factors are key, the primary analysis focuses on the first factor: the degree of control. In order for this factor to tip towards making the worker an employee, the employer doesn’t have to direct or control all the details of the work; they simply need to have the right to do so. For example, a church may hire a new youth pastor, but may allow him to set his own hours. Just based on this, the church could not classify the pastor as an independent contractor. On the other hand, if a school teacher who attends the church is hired to write a Sunday School curriculum, the church would not have the right to tell her when to write the curriculum or what hours to work and she would likely be an independent contractor. While these analyses can be time-consuming, the Ungvar case illustrates that the potential for penalties make them worth the trouble.
There are other employee classifications that are important to consider and discuss with legal counsel. For example, the Fair Labor Standards Act generally applies to churches and non-profits, and requires that employees be classified either as exempt or non-exempt. FLSA covers a broad range of employment requirements, but one of the most important is pay for overtime. A non-exempt employee must always be paid for overtime, while an exempt employee is not entitled to overtime. The FLSA has narrow categories for exempt employees and presumes that all employees are non-exempt unless their job duties clearly show otherwise. A common mistake employers make is assuming that because they pay their employees on a “salary” basis, they don’t have to pay overtime. Salary is only one of several FLSA factors required for an employee to fall into an exempt category. Having legal counsel confirm that a position is exempt from overtime is key. Like the penalties from the IRS, FLSA penalties can be cripplingly burdensome and could put a stop to your ministry.
Hopefully these four tips illustrate the need to pay close attention to your organization’s hiring and firing practices. Making assumptions about employment law can be painful and costly down the road. Involving legal counsel before-hand on employment decisions and policies will help set up your organization for successful ministry, hopefully for years to come.
Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. Please contact Robert Showers, Daniel Hebda at djh@simmsshowerslaw.com or Justin Coleman at jrc@simmsshowerslaw.com for specific legal advice on this issue for your needs. Simms Showers LLP © 2014
[1] Allen v. Zion Baptist Church, 2014 Ga. App. LEXIS 511, at *13–*14 (Ga. Ct. App. July 11, 2014).[2] Id.
