Tag: California

CHURCH CONTRACTS ENFORCEABILITY

The sanctity of contracts is so revered in the United States that contracts are preserved and protected in the Constitution of the United States. Article 1, §10, US Constitution. Indeed, the section prohibits any state from making any law that impairs the obligation of contracts. Thus, it should not be a surprise that a claim based on a written employment contract might survive assertion of the Ministerial Exception and the Ecclesiastical Abstention Doctrine arising from the First Amendment. The idea is not that one clause overshadows the other, but rather that they are co-equal in force and must be reconciled so that both survive.

In Sumner v Simpson University, Slip Op. (Cal. App. 3rd, 2018), the Dean of the Tozer Theological Seminary, a part of Simpson University, asserted a breach of contract claim and state tort claims, such as defamation arising from her second termination. She was reinstated after her first termination and compensated for lost wages so the first termination was not argued. However, violation of what might be characterized as a corrective action plan, an insubordination charge, was alleged to be the basis of the second termination that resulted in the lawsuit. The trial court granted summary judgment because Simpson University and the seminary were religious organizations and the Dean, who also taught in the seminary, was deemed to be subject to the Ministerial Exception. The California appellate court sustained summary judgment as to the tort claims under the Ministerial Exception. However it reversed the trial court as to the breach of contract claim. Succinctly, the conclusion of the appellate court was that a contract claim could be decided under Neutral Principles of Law. The appellate court held that a charge of insubordination might or might not be based on religious doctrine. The facts recited by the Court would lead to the conclusion the alleged insubordination may have been regarding secular administrative matters rather than religious matters. However, because the trial court might still be confronted with a religious question as the proceeding developed on remand the appellate court did not foreclose a future dismissal of the claim.

While church hierarchy, ministers, pastors and priests may not be able to assert claims arising from an alleged breach of a written contract in most cases, employees of parachurch organizations with dual roles, secular and religious, may still be able to do so. Much will be determined by whether the termination arises from religious matters or secular matters. Characterization of a termination as religious will be reviewed for authenticity. Therefore, written employment contracts should be written and negotiated carefully. Adverse employment actions should always be carefully documented and especially consistently with any existing written contract governing the relationship. A contract is at its core a promise, and churches should expect to have to keep those they enshrine in written contracts.

CHURCHES AND THE INSURANCE INDUSTRY

While for property and casualty (think auto, personal injury, etc.) insurance coverage specialty companies have arisen that sell coverage to churches, in the health insurance arena there has not yet arisen a company willing to tailor coverage to a church, at least not in all states.  Believing that the reluctance of companies to offer tailored coverage (excluding abortion or other procedures) came solely from regulatory pressure, in Skyline Wesleyan Church v California Department of Managed Health Care, Order on Cross Motions for Summary Judgment, (SD Ca., 2018), the church sued the regulatory agency to force a change in policy.  Unfortunately, the regulator had never refused to approve a tailored insurance policy and none were ever offered to it to consider.  The church was unable to prove that there was behind the scenes a conspiracy or unwritten regulatory pronouncement in place.  Because the church could not obtain an injunction against a regulation that did not appear to exist, the case was dismissed.

Denominations and church associations can only address this by becoming self-insured, or establishing stop loss programs, or buying or forming their own insurance company.  In the health insurance area these are extremely difficult plans to manage.  In stop loss plans operated by the author, two or three years of below market costs would be followed by an adjustment year where the plan costs exceeded the market.  This was caused by the roll over of the excess coverage policies the plans purchased adjusting to the incredible rate of price increase in medical services prevalent for decades in western civilization.

The lesson from the Skyline case may also be that political or economic solutions are not always found in litigation.  While there are areas in which a failure to engage in legal process could cost churches their freedoms, some areas require political or economic action.  A person with one vote is not as powerful as one person with a check in moving political walls.  While the church corporation may not be able to do much politically, there is no stopping the membership.