5 Steps to Keep the EEOC Out of Your Church

By Raul Rivera

Bookstores, cell phone tower leases, private schools, distribution of sermons, and other activities that generate income for the church are under fire by the Equal Employment Opportunity Commission (EEOC).  The EEOC was created to enforce “federal laws that make it illegal to discriminate against a person based on their race, color, religion, gender or age.”  While fighting discrimination is a good thing, the temptation of government is to go too far.  Now, churches and ministries are finding themselves in the crosshairs of religious discrimination by the EEOC.      

Religious exemption

Since the creation of the Civil Rights Act of 1964, churches have always been exempt from certain provisions of the act when it comes to whom they hire and whom they let go.  For example: a church can choose to forego hiring someone who does not adhere to its doctrinal beliefs.  This is an important protection afforded to the church because it allows the church to practice its disciplines of faith without intrusion by the government.  That protection appears to be in the crosshairs. 

Narrowing the exemption

Over the last several years the EEOC and other branches of government have been working hard to narrow the religious exemption by using what I call the “commercial activity” argument.  In several cases the argument has been whether organizations that are religious in nature qualify for religious exemption if they engage in “commercial activities.”  This argument appears to be gaining traction.  In Spencer vs. World Vision, the court ruled that in order for an organization to be exempt from Title VII of the Civil Rights Act the organization must pass the test below. 

1.    The corporation must be exclusively religious: The best place to start is in the articles of incorporation.  Many churches and ministries get started without incorporating, or by simply using the state provided form if they do incorporate.  In many cases they do themselves an injustice because they lack the correct phraseology that will ensure they are set up as an exclusively religious, ecclesiastical organization.

2.    Consistency of actions:  Not only is it important to properly incorporate, it is also of more importance that you operate in a manner that is consistent with the purpose statement(s) in your articles of incorporation.  Take a few moments to analyze your church’s/ministry’s actions today and compare them with the purpose statement in the articles of incorporation.   Are they consistent? 

3.    Publicly profess its faith:  The church/ministry must make several declarations that make it obvious that it is an exclusively religious organization.  The most discernible place to start is in your Public Record.  Your church’s most widely accepted form of its public record is its 501(c)(3).   The New Jersey Supreme Court ruled against a Christian ministry that did not allow a same-sex wedding in its facilities because the ministry did not have any public records that revealed it was an exclusively religious organization.   Its 501(c)(3) was done as a standard non-profit without giving much thought to the fact that the ministry was a religious organization.  Now more than ever, a strong public record is of extreme importance.  

4.    Non-profit status:  I have heard the argument today that churches should drop their non-profit status and organize themselves as for profits.  I have even heard a well-respected former governor make this argument.  But, I could not disagree more.  If you are set up as a for-profit, you will lose all of your religious exemptions.  Your church will not be able to choose its employees based on your church’s doctrinal views.  There are over 25 reasons why being set up as a non-profit is still the best way for a church to go.

5.    Non-commercial activity:  One of the factors the court considered in the World Vision case was that it was “a profit-making commercial enterprise.”  Even though its income was from donations and other products brought in millions of dollars every year, the court acknowledged that they did not do it in a “commercial way.”   The court acknowledged, “World Vision does not charge its beneficiaries the market value of its services. So far as we can tell from the record.”  While the court did not rule against the sale of products, it weighed heavily on the manner in which the products are sold as the revealing incentive of an organization.  This test shows that advertising of products being sold at fair market value in competition with other for-profit organizations may bring cause that the organization will not qualify for the religious exception. 

Churches have always looked for more ways to generate income.  The law has never prohibited churches from generating income.  In fact, the time has never been better for churches to consider forming a for-profit arm that pays all of its profits to the church.  By creating a for-profit arm, the church has the benefit of enjoying the religious exemption provided to churches and generate the income it needs through for-profit activities.   

Closing

The Civil Rights Act has done many things to bring about equality.  It was also written wisely to protect churches and ministries in the application of their disciplines of faith.   Yet in today’s hostile government culture towards churches, many in government continue to make efforts to undermine the protection the Civil Rights Act provides to churches.  Staying ahead of the onslaught requires action and thoughtful planning.  Make sure your ministry stays ahead.