Your Nine Greatest Legal Risks - Christianity Today

Gardner Taylor likes to tell the story of the little town that for many years had no lawyers. A young lawyer came along, opened a practice there, but struggled to make a living. Just as he was about to give up and move to a bigger town, a second lawyer opened an office across the street—and both of them became rich.

Church officers can be sued personally on several grounds.

Churches face an increasingly litigious and regulated environment. Over the past five years, church litigation has dramatically increased, according to the annual church litigation survey conducted by my Church Law & Tax Reportnewsletter.

For many years, only 1 percent of churches reported being sued during the previous year. This number jumped to 2 percent in 1997 and 1998, and to 3 percent in 1999.

Larger churches face even higher risk of litigation. In 1999, 7 percent of churches having attendance of 1,000 or more at their principal weekly worship service were sued. This increase in church litigation far surpasses the relatively modest increases in litigation for the society as a whole.

This troubling trend means church leaders must inform themselves about legal risk and implement appropriate risk-management strategies. This will reduce the risk of litigation but, more important, will help safeguard the congregation—especially its most vulnerable members.

Let’s review nine of the most significant legal risks facing churches and church leaders today.

1. Negligent selection of church workers

Hiring and volunteer issues are at the center of many legal actions involving churches. Negligent selection suggests carelessness or a failure to exercise reasonable care in choosing workers, for instance, bus drivers and bookkeepers. But the most significant risk occurs in the selection of employees and volunteers who will be working with minors.

Many churches have been sued on the basis of negligent selection because an inadequately screened worker sexually molested a child. Remarkably, despite all the media publicity that has been devoted to this issue over the past several years, only one-third of churches do any screening of volunteers who will work with children.

This means a staggering number of churches are exposing their most innocent members to potential abuse, and the church itself to potentially astronomical jury verdicts that may not be fully covered by liability insurance.

The good news, however, is that you can take relatively simple yet effective steps to significantly reduce the likelihood of such an incident.

2. Negligent retention of church staff

A church may have used reasonable care in selecting youth workers, for instance, but still be responsible for their misconduct if it “retained” them after receiving information indicating that they posed a risk of harm to others.

Say a church employs an associate pastor, and a few years later church leaders learn that the pastor was dismissed by another congregation because of inappropriate sexual contact with an adult church member. The church takes no action regarding this allegation. A few months later, a church member informs leaders that she has had a sexual relationship with the pastor for several months. That woman could later sue the church, claiming that it is responsible for her injuries on the basis of negligent retention. That is, the church retained the pastor after receiving information suggesting that he represented a risk to others. While churches cannot eliminate this risk, they can take steps to reduce their liability.

To begin, whenever a church leader receives credible information suggesting that a church employee or volunteer may represent a risk of harm to others, an immediate and thorough investigation should be initiated. Once such information is received, the church is “put on notice” of the risk and may be legally responsible if it does nothing to investigate or respond to the information.

If the church’s investigation results in credible evidence to support the victim’s allegations, then the church can reduce its risk of negligent retention by imposing appropriate restrictions on the alleged wrongdoer. The nature and extent of such restrictions will vary depending on the nature and severity of the alleged wrongs and the strength of the evidence.

If a church ignores credible evidence of wrongdoing and imposes no restrictions on the alleged wrongdoer, it is exposed to liability based on negligent retention from the time it learned of the allegations.

Churches that ignore such allegations face a number of risks in addition to negligent retention, including liability based on “ratification” of the minister’s actions; punitive damages, which are not covered by insurance; and possible personal liability for members of the church board or hiring committee.

3. Negligent supervision of church staff and activities

Churches can use reasonable care in selecting workers but still be liable for injuries sustained during church activities on the basis of negligent supervision. This refers to a failure to exercise reasonable care in the supervision of church workers and church activities.

Churches have been sued on the basis of negligent supervision in several contexts, including child molestation, injuries to children participating in church-sponsored events, and injuries to infants in a church nursery. Churches are not “guarantors” of the safety and well-being of those participating in their programs and activities. Generally, they are responsible only for those injuries that result from their negligence.

There are a number of precautions that churches can take to reduce the risk of liability based on negligent supervision. For example, adopt a “two-adult” policy specifying that no minor is ever allowed to be alone with an adult during any church activity. This rule reduces the risk of child molestation and also reduces the risk of false accusations of molestation. Be especially careful in planning off-site youth activities such as field trips and camping. It is essential that an adequate number of adults be present.

4. Negligent and irresponsible counseling practices

Most churches offer some form of counseling services. The most common example is counseling of church members by a minister. Many churches also offer lay counseling. Some limit these services to members of the congregation, while others target the general public. Some churches use counselors or psychologists who are licensed by the state, while others use unlicensed lay persons with little if any professional training.

Counseling ministries can provide a needed service and represent a “point of contact” with the community. However, there are a number of important legal concerns, including negligent counseling, sexual misconduct, maintaining confidences, and the unauthorized practice of psychology or counseling by unlicensed persons who are not serving as pastoral counselors.

Churches that offer counseling services can reduce these legal risks in various ways, including:

Adopt a policy prohibiting any male minister or counselor on staff from counseling privately with an unaccompanied female. Since the vast majority of cases of inappropriate sexual behavior involve male counselors and female counselees, churches can significantly reduce their risk by using women to counsel women.
Install a window in the pastor’s office, making all counseling sessions clearly visible to office staff. Of course, such a precaution is effective only if other staff are present and visible throughout the counseling session. This means that the church should implement a policy limiting counseling sessions to office hours when other staff are present.
Both pastors and unlicensed lay counselors should have a clear understanding of those cases that should be referred to a professional counselor.

5. Failure to report child abuse

Child abuse is of epidemic proportion in our country. Ministers often learn of incidents of abuse in the course of counseling, or from reports they receive from nursery or youth workers. It is essential for ministers to understand clearly their responsibilities under state law to report known or reasonably suspected incidents of abuse.

In many states, ministers are “mandatory reporters,” meaning that they can be criminally liable for failing to report. Several states now permit a minister who is a mandatory child abuse reporter under state law to be sued for monetary damages by a victim of child abuse who discovers that the minister was aware of the abuse but did not report it.

A number of courts have rejected the defense made by some ministers that they failed to report abuse because they wanted to deal with the problem “within the church” as a matter of discipline. Some states, however, excuse ministers from the reporting obligation if they learn of child abuse in the course of a confidential “privileged communication.” Be sure to check your state law at least a few times each year, since this is an area of law that changes often.

6. Securities law violations

Violating securities law represents the second highest source of damages in civil litigation involving churches. The Uniform Securities Act, which has been adopted by a majority of states, defines a security to include a wide range of instruments, including bonds, promissory notes, and many other investment vehicles used in church fundraising campaigns.

Enacted to protect the public against fraudulent and deceptive practices in the sale of securities and to provide full and fair disclosure to prospective investors, most securities laws impose the following conditions on the sale of securities: (1) registration of proposed securities with the federal or state government in advance of sale; (2) filing of sales and advertising literature with the federal or state government; (3) registration of agents and broker-dealers who will be selling the securities; and (4) prohibition of fraudulent practices.

Although the federal government and most states exempt from registration securities offered by any organization “organized and operated not for private profit but exclusively for a religious … purpose,” it is important to note that some states do notexempt religious organizations; others impose conditions on the exemption; and many require that an application for exemption (or “notice” of exemption) be submitted and approved before exemption will be recognized.

Church securities always will be subject to some degree of regulation. The question is how much. Church leaders should not consider securities as a means of raising funds without the counsel of a securities attorney.

7. Violating employment laws

The risk of liability for employment practices increases with the number of employees.

One practice that can result in liability is “wrongful termination” of an employee. Let’s say a church dismisses an employee who later sues the church, claiming that his or her termination was wrongful. In most states, employees who are hired for an indefinite period are considered “at will” employees. This means that the employment relationship may be terminated at will by either the employer or employee, with or without cause, and with or without notice. The courts and state legislatures have created several exceptions to the “at will” rule.

These exceptions limit the right of an employer to terminate an at will employee. Employees who are hired for a specific term are not at will employees, and they may be terminated only if the employer has “good cause.”

Churches also may face liability for violating state and federal discrimination laws that prohibit certain employers from discriminating against employees on the basis of several grounds, including race, national origin, sex, religion, age, disability, sexual orientation, and the off-duty use of lawful products such as tobacco and alcohol. Keep in mind: churches must be engaged in interstate commerce and have at least 15 employees to be subject to federal laws banning discrimination in employment on the basis of race, national origin, sex, or disability. No federal law prohibits churches from discriminating on the basis of sexual orientation. Several states have such laws, but they exempt churches. (The courts have ruled that religious organizations may discriminate on the basis of religion in their employment decisions, but they must be consistent. A church that dismisses only female employees on the basis of adultery could not justify this practice as permissible religious discrimination.)

Church leaders should seek the assistance of an attorney when considering the termination or discipline of an employee, or any employment action that may violate a state or federal discrimination law. Remember, employment practices are not covered under most church insurance policies.

8. Exerting undue influence in estate matters

Over the next several years, more wealth will be transferred intergenerationally in this country than at any time in human history. There has never been a greater opportunity for churches to benefit from this wealth by emphasizing stewardship. Recognize, however, that gifts to churches may be challenged by the donor’s family if they believe that the church exerted “undue influence” on the donor. Courts will consider several factors in deciding whether undue influence occurred, including the age and mental health of the donor, the donor’s prior giving practices, and the presence of independent legal advice.

Many “disinherited heirs” who bring such lawsuits often recognize that they have a weak case, but they sue anyway, hoping that the church will quickly settle with them in order to avoid the adverse publicity associated with such lawsuits. After all, what church wants to be accused publicly of coercing elderly members into making gifts to the church?

But keep in mind these considerations. Undue influence usually is very difficult to prove, particularly when the donor was in reasonably good mental and physical health at the time the will was executed. If you become aware that an elderly or infirm person is considering leaving the church a portion of his or her estate, you can reduce the risks even further by ensuring that the person obtains the independent counsel of an attorney in drafting the will or trust. Ideally, the attorney should not be a member of the same church.

Finally, recognize that church leaders have a moral obligation to assist in implementing the estate plans of deceased members so long as they are satisfied that no improper influence was exercised. In fact, if a deceased member intended that a portion of his or her estate be distributed to the church, and church leaders too quickly succumb to threats of attorneys hired by disgruntled family members, then they have violated a sacred trust.

9. Personal liability of church board members

Traditionally, the officers and directors of nonprofit corporations performed their duties with little risk of personal legal liability.

In recent years, however, church officers and directors have been sued personally on several grounds, including (1) tort liability for such actions as negligent operation of a church vehicle, negligent supervision of church workers and activities, copyright infringement, and wrongful termination of employees; (2) contract liability for executing a contract without authorization; (3) violating one of the “fiduciary duties” that every officer or director owes to a corporation, including the duties of due care and loyalty to the corporation; (4) selling securities without registering as an agent, or engaging in fraudulent activities in the offer or sale of church securities; (5) willfully failing to withhold or pay over federal payroll taxes to the government; (6) approving a loan to an officer or director.

A number of states have adopted statutes limiting the liability of uncompensated directors of nonprofit corporations for their ordinary negligence. These laws do not protect officers and directors who are compensated for their duties, or who engage in gross negligence or intentional misconduct.

“Directors and officers” insurance provides coverage for various acts committed by board members in the course of their official duties. Such insurance may offer coverage for claims that are excluded under a church’s general liability policy. It also may cover acts not protected by the federal and state charitable immunity laws.

Though the church is in the business of redemption, pastors and church leaders must remember we live in a decidedly fallen and litigious world. So we must make every effort to protect our churches and their members from legal (and potentially physical) danger. A working knowledge of the legal issues affecting church life will better equip leaders to blamelessly and compassionately minister to their people.

Know Your Recruits

Before you put to work a church employee or volunteer, protect yourself by implementing these rules.

Require written application forms. All prospective workers and volunteers should complete one. At a minimum, it should ask for the applicant’s name and address, the names of other youth-serving organizations in which the applicant has worked as an employee or volunteer, a full explanation of any prior criminal convictions, and the names of two or more references.
Contact every reference. Follow up with each person and organization listed as a reference in the application, and specifically request a reference addressing the suitability of the applicant to work with minors.
Do criminal records checks. No court has found a church liable for a youth worker’s sexual misconduct on the ground that it failed to conduct a criminal records check, and so relatively few churches use them. But such checks will further reduce a church’s risk of being found liable for the negligent selection of youth workers.
Conduct interviews with candidates. This allows the church to inquire into each applicant’s background and make a determination as to each person’s suitability.
Use the six-month rule. Adopt a policy restricting eligibility for any volunteer position involving the custody or supervision of minors to those persons who have been church members in good standing for a minimum period of time, such as six months. Such a policy gives the church an additional opportunity to evaluate applicants, and will help to repel persons seeking immediate access to potential victims.
Limit “second chances.” Church leaders often “err on the side of mercy” when making employment decisions. This attitude can contribute to a negligent selection claim—if a church gives an applicant a “second chance” despite knowledge of prior sexual misconduct, and the conduct is repeated. What the church views as mercy may be viewed as gross negligence by a jury.

Richard R. Hammar (rhammar@ag.org), editor of the Church Law & Tax Report, serves as general counsel to the General Council of the Assemblies of God; 1445 Boonville Avenue; Springfield, MO 65802