November 5, 2009

Religious Institutions Update: November 2009

Holland & Knight Update
Nathan A. Adams IV

Timely Topics

Identity theft is a serious problem in the United States. Chances are that if you have not been the victim of it, you know somebody who has. Consequently, federal and state governments are beginning to adopt and enforce laws protecting personal information. For example, many states now require organizations to adopt reasonable procedures to protect from unlawful use or disclosure names, addresses, birthdates, social security numbers, driver license or other government-issued identification number, or account information (with passwords) used alone or in conjunction with one another. See, e.g., Tex. Bus. & Com. Code § 521.052(a).

Some state laws also require notice of any breach of unencrypted data security by an unauthorized person. See, e.g., § 817.5681, Fla. Stat. Fines, penalties or criminal liability may attach if an institution fails to comply. Many faith-based organizations are subject to these laws, as well as federal and state laws specially protecting physical and mental health data. A few also are subject to the federal government’s so-called Red Flag rules. Beginning in June 2010, these rules require certain entities that extend credit (such as do some religious healthcare organizations and schools) to implement a written Identity Theft Prevention Program. Consult with counsel to determine whether and what type of policies your organization should adopt.

Key Cases

Separate Educational and Religious Institution Held “Single Employer” and Mutually Liable

In the context of employment discrimination cases, the so-called “single employer” doctrine can impute to separate entities common liability for the acts of the employee of just one of them after analysis of a four-factor test that examines the following: (1) the interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership. Also relevant are the use of common facilities and equipment, family connections among the enterprises, and, in general, the absence of an arm’s-length relationship. Applying this doctrine in Nunez v. Mariners Temple Baptist Church, No. 103308/07, 2009 WL 3254510 (N.Y. Sup. Ct. Oct. 8, 2009), the court found a church could be liable for the sexual harassment and abuse of an employee of a not-for-profit educational institution known as Mariners Educational Center, Inc., which had its office on the church’s premises. The pastor was executive director of the not-for-profit and in charge of the church. In addition, the not-for-profit corporation had no written lease agreement with the church and paid rent to the church only when it had available funds. Before becoming employed by the not-for-profit, the supposed perpetrator was employed by the church. The alleged harassment occurred at a summer camp for children held on the premises of the church by the educational institution. As a result, the court held there was a triable issue whether the church and not-for-profit were a “single employer” and mutually liable for the alleged perpetrator’s acts.

Rehearing Denied Concerning Arizona Corporate Tax Credit Scholarship Program

A divided Ninth Circuit Court of Appeals refused to grant rehearing by the full court in Winn v. Ariz. Christian Sch. Tuition Org., No. 05-15754, 2009 WL 3365936 (9th Cir. Oct. 21, 2009), concerning the constitutionality of the Arizona tax credit scholarship program. Under the program, individuals may voluntarily contribute money to private, non-profit corporations known as student tuition organizations (STOs), and, in return, receive a tax credit of up to $500 for individual taxpayers or $1,000 for married copies filing jointly. STOs, which anyone can form, choose which schools to support; parents then decide which school they would like their child to attend and apply to the appropriate STO for a partial scholarship. Three judges concurring in the decision not to grant rehearing argued that the program violated the Establishment Clause, because 85 percent or more of the scholarship money was available to students whose parents wanted to send their children to religious schools. Id. at *1 (Nelson, Reinhardt, and Fisher, JJ., concurring). They found the disparity was evidence that the program was not one of “’true private choice,’” but “’skew[e]d … toward religious schools.’” Id. (quotation omitted). They also argued that a tax credit is more suspect than a tax deduction, because it allows a dollar-for-dollar reduction in tax liability, “in effect allowing individual taxpayers to directly allocate public funds.” Id. at *1 n.2. Furthermore, they questioned whether the program really had a secular purpose. Id. at **7-8. In contrast, the dissent found that the program does not “encourage, promote or otherwise incentivize private actors to direct aid to religious schools.” Id. at *9 (O’Scannlain, Kozinski, Kleinfeld, Gould, Tallman, Bybee, Bea and Smith, JJ., dissenting). They focused on four “layers of private, individual choice”: (1) an individual or group must choose to create an STO; (2) STOs must then decide to provide scholarships to religious or secular schools; (3) taxpayers have to contribute to the STO in question; and (4) parents need to apply for a scholarship for their student. Id. at *11. They framed the question not as whether a parent’s choice is somehow limited, but whether the government has done the limiting. Id. at *12 (emphasis original). The dissent found no Establishment Clause violation because this “is not government endorsement,” but “government nonchalance.” Id. at **11. To these judges, a tax credit is less regressive and, thus, constitutionally superior to a tax deduction. Id. at *10 n.3.

Pastor May Not Sue Church for Age Discrimination

In Hankins v. N.Y. Annual Conf. of the United Methodist Church, No. 07-4556-cv, 2009 WL 3259425 (2d Cir. Oct. 13, 2009), the U.S. Court of Appeals for the Second Circuit ruled that the “ministerial exception” doctrine required the dismissal of a pastor’s claim against a church for age discrimination under the Age Discrimination in Employment Act and New York State Human Rights Law, because the church’s mandatory over-70 retirement policy was a rule contained in the central governing document of the United Methodist Church. The court cited as justification another decision holding that the ministerial exception applied in the case of a minister denied a pastorage allegedly due to his age. See Minker v. Balt. Annual Conf. of the United Methodist Church, 894 F. 2d 1354, 1355, 56 (D.C. Cir. 1990).


RLUIPA Does Not Prevent Zoning Change

The Religious Land Use and Institutionalized Persons Act (RLUIPA) applies when a “substantial burden is imposed in the implementation of a land use regulation…under which a government makes, or has in place formal or informal procedures or practices that permit the government to make, individualized assessments of the proposed uses for the property involved.” RLUIPA also provides that “[n]o government shall impose or implement a land use regulation in a manner that treats a religious assembly or institution on less than equal terms with a nonreligious assembly or institution.” The first protection is called the “substantial burden” provision; the second is known as the “equal terms” provision. Interpreting both, the court in Elijah Group, Inc. v. City of Leon Valley, Tex., No. SA-08-CV-0907 OG, 2009 WL 3247996 (W.D. Tex. Oct. 2, 2009), held that the substantial burden provision did not apply to a zoning change that went into effect during the interim between one church abandoning a property to the bank and another bidding on it. The ordinance converted the property from one where church services could be conducted under a special use permit to one where they could not be conducted at all. The court held that the zoning change did not require an individualized assessment. Furthermore, the court found that the church suffered no “substantial burden” as a result of the zoning change because it had not shown it could not locate elsewhere and because it could conduct other activities on the property like counseling, day care and administration. With respect to the equal terms provision, the court held it was not enough for the church to show that the zoning code permitted non-religious assemblies such as auditoriums, convention centers, meeting facilities and private clubs, but not religious ones in the zone. The court said the church must show, in addition, that it was treated dissimilarly with respect to the regulatory purpose of the ordinance, which in this case was to create a retail corridor. The court found that the church failed to identify a non-religious assembly treated more favorably than a religious assembly in creating a retail corridor; therefore, there was also no violation of the equal terms provision.

Religious Institutions in the News

The Vatican announced plans to enable Anglicans to enter into communion with the Roman Catholic Church. See For the Vatican, New Resolve to Expand the Catholic Fold; Pope's Wooing of Anglicans Challenges Archbishop; Vatican Bidding to Get Anglicans to Join Its Fold; Offer Raises Idea of Marriage for Catholic Priests.

More religious institutions are reportedly getting serious about security. See Many religious institutions get serious about security.

The Church of Scientology was convicted of fraud in France. See French court convicts Church of Scientology of fraud.

The Diocese of Wilmington, Delaware is the seventh U.S. Catholic diocese to seek Chapter 11 bankruptcy protection.

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