What You Don’t Know Will Hurt You: Myths and Misconceptions About Church/Nonprofit Employment Liability
Lawsuits alleging wrongful employment practices are the fastest-growing area of civil litigation today. In fact, according to church and non-profit insurers, well over half of the claims annually stem from employment problems such as wrongful termination, discrimination, sexual harassment, disability, or other employment related claims. Unfortunately, many churches and nonprofits are unaware or treat them as low priority in comparison to the other legal risks they face as employers. Mistaken assumptions about employment law and human nature can only add to the growing risks. Let’s review the top ten misconceptions and how to prevent and protect the ministry.
“We have never been sued by an employee or volunteer before and it will never happen to us.”
Employment claims are the most prevalent claims against churches and nonprofits, averaging between 50-75% of all claims per year against churches and nonprofits. Human nature and today’s culture encourage such retaliation when employment relationships are tested, so wisdom and prudence is needed.
Solution: Use employment offer letters and agreements, as well as employment handbooks, that have been reviewed by competent nonprofit employment law counsel to minimize your exposure and insert Christian conciliation clauses to keep the claims out of court and within the Christian context and confidential.
“We are a religious organization and are protected by the First Amendment.”
While a church or religious nonprofit may have limited protection under the First Amendment in a few employment situations, such as terminating clergy, discussing concerns in a board meeting, or requiring certain employees to be of a specific faith, they are clearly NOT immune and may be vulnerable to legal action.
Solution: Consult local counsel before making employment decisions to determine whether you are complying with federal and state laws.
“Disability laws do not apply to churches and religious nonprofits since we are exempt.”
While federal public accommodation components of Americans with Disability Act may not apply, all the other disability requirements and accommodations do apply and state and local laws sometimes may be stricter.
Solution: Know your disability laws as it applies to your nonprofit or religious organization and attend legal risk management seminars that include employment related issues.
“Our employees are like family. Even if they were terminated, they would not sue us.”
Discrimination lawsuits have increased exponentially in the past 20 years and the fastest growing realm recently has been against nonprofits and churches according to church insurance companies. The fact is that most employers do not anticipate problems during the hiring process which is often a honeymoon phase; issues surface after the employment relationship begins and adequate protective documents are not in place and documentation is scarce or tells a rosy story of good productivity rather than the truth that this employee has long been a problem.
Solutions:
- Conduct annual performance reviews and issue performance improvement plans if necessary for probation terms.
- Document all disciplinary actions, verbal or written and avoid emotional confrontations especially if no witnesses.
- Maintain accurate records such that the employment handbook acknowledgements are signed, offer or employment letters kept and disciplinary documents current and truthful.
“We only have a few employees, so the laws do not apply to our organization.”
While many federal statutes (such as the Americans with Disabilities Act, Title VII of the Civil Rights Act, and the Family and Medical Leave Act) require a certain number of employees in order to apply, state statutes and case law generally do not. Legislation in many states broadens the scope and damages of federal statutes.
Solution: Know the federal and state laws affecting your church or organization and then number of employees triggering each act such as Title 7 discrimination and American Disability Act requires 15 or more plus interstate commerce, ADEA and Older Workers Benefit Protection Act requires 20 or more employees which COBRA and Family and Medical Leave Act (FMLA) require 50 or more employees plus interstate commerce; however, Employee Polygraph Protection Act, Immigration Reform and Control Act, OSHA and Fair Labor Standards Act have no minimum number of employees required . State equivalent of these laws may require fewer employees and be more stringent.
“Our staff/congregation have a right to know the reasons for disciplining or terminating an employee.”
Confidentiality relating to discipline or termination is extremely important. While many states provide some protection for statements made to a limited number of people with a “need to know,” legal protection can be affected if: 1) False information is provided, 2) Information is given to individuals deemed not to have a “need to know”, and/or 3) Private information about an employee is shared without the employee’s prior permission.
Solution: Provide factual information on a strict “need to know” basis. Never reveal information to people other than your staff or congregation.
“If we are not aware that sexual harassment had taken place, we are not responsible.”
With a few narrow exceptions, employers are held responsible for the acts of their supervisory employees, regardless of whether an employer prohibited or was unaware of the conduct. An employer may be liable for sexual harassment between coworkers if the employer knew or should have known about the conduct, unless it can be shown that the employer took immediate and appropriate action.
Solutions:
- Draft and put in place a zero-tolerance policy on sexual harassment.
- Communicate the policy which includes how to complain and process of investigation and discipline to all employees.
- Train your staff to recognize and report sexual harassment to one key individual who is trained to know how to properly handle and call a knowledgeable attorney to guide the process.
“Since we are an at-will employment state, we can terminate employees for any reason as long as no written contract exists.”
The “at-will” employment doctrine only provides that absent a contract between an employer and employee, the employer may terminate an employee for any reason not prohibited by law.” However, this general rule has been limited in many states where an employer may be bound among other things by: 1) Oral assurances made to an employee; 2) An employment handbook provision that appears contractual; or 3) Employer conduct leading the employee to believe he or she would not be terminated (written contract or not).
Solution: The most important times to consult a knowledgeable employment nonprofit attorney are before firing an employee. Do not rely on an assumption of “at will” employments but discuss with legal counsel how to take the proper steps to terminate the employee and when a separation agreement may be useful.
“Employment handbook protects us from being sued or at least severely limits our legal exposure.”
An employment handbook can be used to limit liability, but only if the handbook has been updated regularly, reviewed by a competent nonprofit employment attorney (not some attorney on the board or in your congregation that may not do this specific kind of law practice); contains Christian Conciliation clauses and proper polices, has an acknowledgment page signed by all employees and is consistent with actual practice. Without appropriate disclaimers and limiting language, a handbook may be found to constitute an employment contract. If procedures or policies have not been strictly followed, the organization could be held liable.
Solution: Conduct a mini HR audit by a knowledgeable nonprofit legal counsel who regularly handle employment matters for nonprofits and churches.
“Insurance will cover us if an employment lawsuit were filed.”
Most general liability insurance and personal injury policies specifically exclude employment relationship claims. Some insurance companies now offer employment practices liability coverage but they are limited and costly. Some also offer defense reimbursement coverage, which may be helpful since the average defense costs can range from $20,000 to $200,000, regardless of a lawsuit’s legitimacy.
Solution: Contact your insurance agent to request an insurance audit on at least every 3 years and get quotes on these types of employment practices coverage.
Conclusion
An ounce of prevention is worth a pound of cure in the employment arena. Proactively managing risk and seeking legal counsel to conduct mini employment audits and change the hiring, management and termination process will save you thousands of dollars and more emotional stress that money cannot buy. Be “wise as serpents and gentle as doves” in the nonprofit and church employment area so that your ministry will continue to flourish.
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 or Justin Coleman at jrc@simmsshowerslaw.com for legal advice that will meet your specific needs.
