Church Law and Tax 1992-07-01 Recent Developments

Employment Practices

Richard R. Hammar, J.D., LL.M., CPA

• A federal district court in Indiana ruled that the “Equal Pay Act” applies to a church-operated school. A Baptist church operated a private school. The federal Equal Employment Opportunity Commission (“EEOC”) sued the church for alleged violations of the Equal Pay Act. The EEOC alleged that the church unlawfully paid higher wages and benefits to male teachers than to a class of female teachers performing equal work, and further that the church unlawfully reduced the male teachers’ wages in an attempt to comply with the Equal Pay Act. The Equal Pay Act was enacted in 1963 as an amendment to the Fair Labor Standards Act (the federal minimum wage and overtime law). The Equal Pay Act provides that no employer covered by the Act shall discriminate … between employees on the basis of sex by paying wages to employees … at a rate less than the rate at which he pays wages to employees of the opposite sex … for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions …. provided, that an employer who is paying a wage rate differential in violation of this subsection shall not, in order to comply with the provisions of this subsection, reduce the wage rate of any employee.

The church claimed that the EEOC had no jurisdiction over the school, since the Equal Pay Act did not apply to church schools. The church claimed that Congress did not intend for the Fair Labor Standards Act, or the Equal Pay Act, to apply to churches or church-operated schools. Accordingly, the church claimed that neither the EEOC nor the federal court had “jurisdiction over the church” under either the Fair Labor Standards Act or the Equal Pay Act. The church relied primarily on a 1979 decision of the United States Supreme Court (NLRB v. Catholic Bishop) addressing the applicability of the National Labor Relations Act to church-operated schools. The National Labor Relations Act is a federal law guarantying the right to organize labor unions. The Supreme Court devised a test for determining the applicability of the Act to church schools. The test (known as the Catholic Bishop test) provides that if the exercise of jurisdiction by a federal agency over a religious organization would give rise to serious constitutional questions under the first amendment religion clauses, then the agency may not exercise jurisdiction without showing an “affirmative intention of the Congress clearly expressed” to confer such jurisdiction. The EEOC rejected the application of the Catholic Bishop test, arguing that it applied to the National Labor Relations Act and not the Fair Labor Standards Act or Equal Pay Act. It pointed out that every federal court that has addressed the Equal Pay Act’s applicability to church-operated schools has found that such organizations are subject to the Act and that no court has extended the holding in Catholic Bishop to the Equal Pay Act or Fair Labor Standards Act.

The court agreed with the EEOC’s interpretation of the Catholic Bishop case. It noted that the Catholic Bishop case addressed the National Labor Relations Act—a statute without expressed congressional intent with respect to church-operated schools. Further, the Supreme Court, in the Catholic Bishop case, pointed out the significant risk of infringement upon the first amendment guaranty of religious freedom in applying the Act to church-operated schools. The Court also found that neither the Act’s language nor its legislative history disclosed any “affirmative intention of the Congress clearly expressed” to subject church-operated schools to the Act.

The court noted that the Fair Labor Standards Act does specifically apply to church-operated schools. It “explicitly includes schools (public or private) and other not for profit organizations within the definition of `enterprises’ subject to that statute.” It referred to several court decisions reaching this same conclusion. Moreover, the court noted that “when parties have relied on Catholic Bishop as a basis for the argument that the Fair Labor Standards Act is not applicable to churches or church-operated schools, federal courts have rejected that position.” The court concluded:

Accordingly, the court rejects the church’s contention that Catholic Bishop deprives this court of the subject matter jurisdiction to entertain actions against church-operated schools brought under the Equal Pay Act. Catholic Bishop addressed the National Labor Relations Act and no other federal statute. Moreover, several courts addressing the applicability of Catholic Bishop to the Fair Labor Standards Act have found the Court’s holding distinguishable. The courts that have been faced with Equal Pay Act complaints brought against church-operated schools by the EEOC or the Department of Labor have found the jurisdiction to hear those claims.

Accordingly, the court upheld EEOC jurisdiction over the church-operated school. Equal Employment Opportunity Commission v. First Baptist Church, 1991 WL 270110 (N.D. Ind. 1991 unpublished).

See also the feature article in this issue entitled “Liability of a Church and Parent Denomination for Acts of Sexual Harassment by Clergy.”