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District Superintendent Conference
December 2-4, 2009
Nashville, TN
Rick Rettberg, GCFA General Counsel
Dan Gary, GCFA Administrative Counsel
LEGAL ISSUES FOR DISTRICT SUPERINTENDENTS
Congress shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof . . .
FIRST AMENDMENT 101
2
THE FREE EXERCISE CLAUSE
Guarantees the right to hold religious beliefs, and to act in accordance with
them (within certain limits)
Thus, it would be okay to believe in ritual religious human sacrifices, but actually
carrying one out would still be illegal
The Free Exercise Clause has been the basis for striking down laws (or other
gov’t actions):
Prohibiting animal sacrifices
Mandating compulsory education
Requiring students to salute the American flag
Withholding unemployment benefits to employee fired for refusing to work on
the Sabbath
Laws/actions that have been upheld:
Prohibition of polygamy
Denial of unemployment compensation after loss of job for using peyote in
Native American ritual
Refusal to allow student qualifying for college scholarship to use the scholarship
to seek degree in theological studies
3
THE ESTABLISHMENT CLAUSE
At the very least, was designed to prevent the government from
creating a national religion (i.e., the Church of England)
Opinions differ as to whether or not it was also intended to prevent
government from supporting Christianity, generally
The Establishment Clause has been the basis for prohibiting:
Graduation prayers and prayer in schools, generally
Religious displays – such as the Ten Commandments, crosses, and
Christmas trees – on government property (parks, courthouses, etc.)
Supplementing teacher salaries at religious schools with state funds
On the other hand, it has not prevented:
Invocations to open legislative sessions
Government funding of busing and textbooks for private religious
schools
“Blue laws”
4
WHAT’S IT ALL MEAN?
“Excessive government entanglement” in
religion is forbidden
This leads to the “ministerial exception”
5
THE MINISTERIAL EXCEPTION
Not statutory, but constitutional – courts have interpreted
the Constitution to require the ministerial exception
Essentially stands for the concept that courts should not get
involved in the employment relationships between churches
and their ministerial personnel
This exception can cover more than just ordained ministers:
Choir directors
Teachers at private, religious schools
Can protect the church against a discrimination-based claim
by a former employee
We will see one example of this later
6
EMPLOYMENT LAW
7
AGE DISCRIMINATION IN EMPLOYMENT ACT (ADEA)
The ADEA protects individuals who are 40 years
of age or older from employment discrimination
based on age.
It applies to both employees and job applicants.
The ADEA applies to employers with 20 or more
employees, including churches.
However the First Amendment can come into
play when the employee is a minister.
Ministerial Exception (Hankins v. Lyght)
8
HANKINS V. LYGHT
The “Lyght” at the end of the tunnel?
9
(Petition for re-hearing is pending.)
10
FAIR LABOR STANDARDS ACT (FLSA)
The FLSA requires that certain employees receive the federal minimum wage and
are paid overtime for hours worked in excess of 40 hours per week.
The FLSA does not contain a specific exemption for churches or church employees
and it is the Department of Labor’s position that church employees, like all other
employees, are “individually covered” by the Act if their work regularly involves them
in “interstate commerce.” (However, depending on their particular salary and duties
they may be exempt from the FLSA minimum wage and overtime requirements.)
The requirement that the employee be regularly involved in “interstate commerce” is
not a very high hurdle. According to the Department of Labor:
“Employees of a church or synagogue are individually covered under FLSA where they regularly
and recurrently use the telephone, telegraph, or the mails for interstate communication or
receive, prepare, or send written material across State lines. Individual coverage will not be
asserted, however, for office and clerical employees of a church or synagogue who only
occasionally or sporadically devote negligible amounts of time to writing interstate letters or
otherwise handle interstate mail or make bookkeeping entries related to interstate
transactions.” (DOL FLSA Opinion Letter, November 4, 1983).
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FAIR LABOR STANDARDS ACT
In short, most church employees will be subject to the FLSA (and to
be safe, it is probably the better policy to assume all employees are
subject to the Act.)
Thus, churches should go through the usual salary/duties analysis
for each employee to determine whether he or she is exempt from
the overtime and minimum wage requirements of the FLSA.
Note: If a church employee is paid less than $455 per week
($23,660 per year) the employee is not exempt from the minimum
wage and overtime requirements of the FLSA. Period. Employees
who make more than this amount can be either exempt or not
exempt depending on their duties (i.e., whether they qualify for one of
the so called “white collar exemptions”)
12
INCORPORATION
13
SHOULD CHURCHES BE INCORPORATED?
Answer:
On balance, we encourage local churches to
incorporate.
14
THEOLOGICAL OBJECTIONS
Jesus is the sovereign Lord--Christ’s kingdom is
not of this world
The Church should not be subservient to the state
in any way
Corporations are creatures of the State: for the
Church to seek “permission” to operate, or a
license, or a franchise from the State elevates the
State above the Church
Incorporation is, in essence, a constitutionally
prohibited establishment of religion
15
OTHER OBJECTIONS
State laws already protect religious organizations
State Constitution prohibits incorporation of
churches (e.g., West Virginia)
Greedy lawyers promote incorporation of churches
to generate fees
Incorporated church must maintain corporate
formalities: failure to do so may result in loss of
corporate protection
Can cause organizational chaos: conflicts
between corporate structure and the Discipline
16
REASONS TO INCORPORATE
Liability risk of unincorporated associations to
members’ assets
Ownership of property
Ability to contract
Right to sue (and be sued) in the church’s
name
Limitation of liability to the assets of the
corporation (protection of members’ personal
assets)
17
¶ 140
Conferences, councils, boards, agencies, local
churches, and other units bearing the name
"United Methodist" are, for the most part, legal
entities capable of suing and being sued and
possessed of legal capacities.
18
¶ 2506.1
Conformity with Local Law – Church Corporations
All provisions of the Discipline . . . relating to the formation and operation of any
corporation . . .
are conditioned upon their being in conformity with the local laws,
and in the event of conflict therewith the local laws shall prevail;
provided, however,
that this requirement shall not be construed to give the consent of The United
Methodist Church
to deprivation of its property without due process of law
or to the regulation of its affairs by state statute
where such regulation violates the constitutional guarantee of freedom of
religion and separation of church and state
or violates the right of the Church to maintain its connectional structure.
Local laws shall be construed to mean the laws of the country, state, or other
like political unit within the geographical bounds of which the church
property is located.
19
STEPS TO INCORPORATION (GENERALLY)
Talk to/retain a local licensed attorney familiar
with local state law
Prepare and file “Articles of Incorporation”
Call/hold first meeting of members of new
corporation to:
Electofficers
Adopt by-laws
Begin business
20
BY-LAWS
The most difficult aspect of incorporating is the preparation
of a set of corporate by-laws that establish a functional
organization.
It is worth the time to spend the time working on good by-
laws, specific to your needs.
Avoid boilerplate “off the shelf” by-laws that may create a
corporate entity that doesn’t meet your Church’s needs.
Treat the by-laws as important documents. Keep them in a
place where you can find them and use them.
Don’t run the organization in a manner which is inconsistent
with the by-laws
don’t violate your own “laws”.
21
MAINTAINING CORPORATE FORM (GENERALLY)
Conduct annual meeting
File simple annual report with the Secretary of
State
Pay nominal annual fee
Isolate corporate finances
Do not commingle corporate finances with
personal finances
Do not treat the corporation and its assets as the
alter ego of any individual
22
CLERGY SUPERVISION
23
WHY TALK ABOUT THIS HERE?
The failure to properly supervise clergy can
become a major issue in a lawsuit
24
DISCIPLINARY RESPONSIBILITIES
Supervise clergy within the district - ¶ 421
Examine candidates for ordained ministry - ¶
422
Keep and maintain supervisory records on
ministerial personnel - ¶ 423.4
See GCFA’s guidelines at
http://www.gcfa.org/PDFs/LMPersonnelSec2.pdf
25
ALLEGATIONS OF MISCONDUCT
Document what you do
These records may be important years, or even decades,
later
Remember: your notes may be reachable by discovery if
litigation occurs
Be factual in what your write – it may be read by someone
else, including a jury
If the allegation involves abuse of a minor, determine
whether or not you are a “mandatory reporter”
See the links on GCFA’s site:
http://www.gcfa.org/LS_CSA_Statutes.html
26
CONFIDENTIALITY
What do you do if another clergyperson comes to and wants to talk about
something “confidentially”?
You may find yourself testifying to things that you might consider to be hearsay
that actually turn out to be admissions
The Discipline and the clergy/penitent privilege (¶ 340.2a[5]):
To maintain all confidences inviolate, including confessional confidences except
in cases of suspected child abuse or neglect, or in cases where mandatory
reporting is required by civil law.
The privilege in TN (Tenn. Code Ann. § 24-1-206):
(a)(1) No . . . regular minister of any religious organization or denomination . . .
shall be allowed or required in giving testimony as a witness in any litigation, to
disclose any information communicated to that person in a confidential manner,
properly entrusted to that person in that person’s professional capacity, and
necessary to enable that person to discharge the functions of such office
according to the usual course of that person’s practice or discipline, wherein
such person so communicating such information about such person or another
is seeking spiritual counsel and advice relative to and growing out of the
information so imparted.
...
(d) Any . . . regular minister of any religious organization or denomination . . .
who violates the provisions of this section, commits a Class C misdemeanor. 27
CONFIDENTIALITY
The lesson:
Know the law for the state(s) in which you operate
Good places to start:
http://www.churchlawtoday.com/private/library/pcl/p0
3g.htm
http://www.childwelfare.gov/systemwide/laws_policies
/statutes/clergymandated.cfm
There is no substitute for actually reading the law
Case law may be relevant in some states
28
And it came to pass in those days, that there went out a decree from Caesar
Augustus that all the world should be taxed. - - New Testament
TAXES
29
UMC CLERGY: EMPLOYEES FOR TAX PURPOSES?
Q: I’m a local church treasurer. Should I give our pastor an
IRS Form W-2 or 1099 at the end of the year?
A: Form W-2
Weber case (60 F.3d 1104 (4th Cir. 1995))
By statute, ministers are self-employed for social security
purposes (SECA not FICA)
But what about for income tax purposes?
The real issue in Weber: Unreimbursed business expenses (Schedule A
vs. Schedule C)
20 Factor Test/12 Factor Test/7 Factor Test
The crucial factor is typically the degree of control exercised by
the employer over the details of the work.
Weber Bottom line: UMC clergy are employees
30
HOUSING ALLOWANCE/EXCLUSION
I’m a local church pastor. What’s the difference
between a housing “allowance” and a housing
“exclusion”?
There is no set convention as to the use of these terms
(which is partly the source of the confusion)
The only important thing is to understand the rule:
A minister may exclude from gross income the
lesser of:
Amount of the designated housing allowance,
Amount of “qualified expenses” actually incurred, or
Fair rental value of the home (furnished, plus utilities).
31
HOUSING ALLOWANCE/EXCLUSION
32
HOUSING ALLOWANCE – DOTS & DASHES
“Double Dipping” – Ministers who own their
homes and who itemize their deductions are
eligible to deduct mortgage interest and property
taxes even though these amounts are already
excluded from income as part of a housing
allowance. (IRC § 265(a)(6)).
Clergy Housing Allowance Clarification Act of 2002
Newdow Complaint (2009 U.S. Dist. (ED CA, filed
October 14, 2009)
33
“LOVE OFFERINGS”
Q: I’m a local church pastor. Is a “love offering” I
receive from the church taxable?
A: Yes.
Person to Person Gifts
Distributions from Church Funds
Organized Collections of Individual Donations
Donors are entitled to receive a charitable contribution
deduction only for gifts “to or for the use of” a qualified
organization (e.g., a church)
Goodwin case (67 F.3d 149 (8th Cir. 1995))
34
DONATIONS TO THE NEEDY
Q: I’m a member of a local church. I’d like to
help a needy family in my neighborhood. Can I
send money to the family “through” my church,
and thereby, take a tax deduction for my gift?
A: No.
Thisis frequently referred to as a “conduit”
contribution, i.e., attempting to use the church as a
vehicle to accomplish something indirectly that
can’t be done directly.
35
DONATIONS TO THE NEEDY
Donors are entitled to receive a charitable
contribution deduction only for gifts “to or for the
use of” a qualified organization (e.g., a church)
Gifts to individuals are never deductible
As one court stated: "Charity begins where certainty in
beneficiaries ends . . . .”
For a gift to the church to be deductible:
The donor must intend to make a gift to the church (not
a particular individual), and
The church must exercise discretion and control over
the gift
36
LOBBYING AND POLITICAL CAMPAIGN ACTIVITY
Lobbying by churches is generally permitted
Church participation in political campaign
activity is absolutely not permitted
37
District Superintendent Conference
December 2-4, 2009
Nashville, TN
Rick Rettberg, GCFA General Counsel
Dan Gary, GCFA Administrative Counsel
LEGAL ISSUES FOR DISTRICT SUPERINTENDENTS
