Seven Building Blocks of the 21st Century

The Church is under ever-increasing scrutiny, from its own congregation, from the media, from the government, along with other persons claiming to have been harmed by it.  The news headlines are full of religious organizations, once thought immune from lawsuit, rocked by damage claims and huge, and sometimes fatal, monetary judgments.  The perils are real.Tragically, the constant drumbeat of lurking dangers can become persistent white noise, unremarked, unheard, unheeded.Needed plans for necessary risk management are easily lost in a rip tide of bad tidings.

The Church Law Group is devoted to producing usable and effective materials and timely information for its clients.  We believe proper risk management begins with the thoughtful creation of an organization that can operate safely and effectively, while working diligently to avoid problems, and survive a legal attack, should it ever come.

The Church Law Group can assist your organization, in the seven critical areas for building a 21st Century Church.

1. Organizational Governance – The Church, Inc.

Jesus said a wise man builds his house on a foundation of rock. That way, when the rain falls, and the floods come, and the winds blow and beat on the house, it will not fall, because it is founded on solid ground. From a legal perspective, a religious nonprofit organization, the “house,” rests upon the quality of its foundation, the governance and operational documents.

Why are proper corporate governance documents so important? Because a religious nonprofit is a legal entity whose conduct will be judged, in part, according to how it complies with its own governance and operational documents.

The Church Law Group works with its clients to create and modify corporate and operational documents that work to ensure their clients are protected from liability, while ensuring day-to-day operational flexibility.

Seven Questions about Your Church’s Organizational Governance

1. Is your organization incorporated? If not, why not?
2. What are Articles of Incorporation and can you locate yours?
3. What are Bylaws-Constitution and can you locate yours?
4. Can Members, Officers and Directors be sued personally if they make a mistake?
5. What is an Independent Compensation Committee, and why should you have one?
6. Do you have a Conflict of Interest Policy? A Whistleblower Policy? The law requires you to.
7. What happens if your organization is investigated by the IRS? By the State Attorney General?

2. Children's Ministry – Handle with Care

This point cannot be more strongly made: the Church faces enormous potential legal liability in the area of Children’s Ministry. Many studies show this to be the number one category that brings liability claims against the Church.

Three major areas of concern for our clients are:

· Prevention of accidental injury

· Prevention of the spread of disease

· Prevention of child abuse

The most dangerous aspect of children’s ministry is the specter of child abuse.

Churches, being by their very nature trusting and accepting organizations, are targets of child molesters. In the past two decades, countless churches have been sued for the sexual molestation of minors by church employees and volunteers. The lawsuits are generally based on two theories: (1) negligence in hiring the individual perpetrator without adequate screening or evaluation, or (2) the church was negligent in its selection and supervision of the alleged perpetrator, whether an employee or a volunteer. As a result of the frequency of claims, the public sometimes assumes the church and its staff to be “guilty until proven innocent” of any allegations automatically creating legal liability, instead of the other way around. Hence, the Church needs to find the proper balance between protecting the children under its care and also attract and keep qualified volunteers.

Seven Questions about Your Church’s Children’s Ministry

1. Has a qualified professional reviewed the Church’s liability insurance policy to determine whether or not the Church has coverage for acts of molestation occurring on church property or during church activities, and if so, whether the coverage is limited in any way?
2. Has the Church adopted effective policies and procedures for the hiring and selection of church employees and volunteers? The Church Law Group has developed the “S.T.O.P.” program contained in The Guardian System to help its client’s Screen, Train, Operate and Plan to respond to situation where allegations of abuse arise.
3. Has the Church reviewed its activities with a risk management specialist to determine how your Church’s risk profile can be reduced?
4. Has the Church adopted a communicable disease policy and trained its volunteers and employees?
5. Has the Church conducted first aid training for its employees and key volunteers?
6. Does the Church have policies and procedures for the use of its playground, for off-site trips, youth meetings, and other programs?
7. Who is responsible at your Church to make sure the policies are actually followed? As a way of self-examination, assume the Church has been sued for not providing a safe environment for these various church activities. Is there someone on the staff who acknowledges responsibility in that area and can defend church practices or is there finger-pointing and blame-shifting? The time to find out is before a real complaint is made.

3. Adult Ministry - The Heart of the Church Experience

Why do people come to the Church? Hopefully, it is to experience the meaningful message and the chance to fellowship with other Believers. But, many people expect more from the Church than just services. In particular, they want instructive classes, fun activities, and personal attention including counseling. Does your Church meet these needs? Is there accountability for making sure these activities are handled properly? Is the Church protected? Is the Church staff protected from personal liability claims?

In particular, aside from claims against the Church based upon allegations of child abuse, the other most common source for church liability claims is with pastoral counseling. These claims most frequently spring from marriage counseling and are based upon allegations that the pastoral staff was alone with the counseling recipient and that something improper occurred.

Does your Church sponsor sporting activities or adult trips or outings? If so, this is another area of potential liability.

 Seven Questions about your Adult Ministry:

1. As a matter of stated policy, do you offer pastoral counseling or does it just tend to happen on a case-by-case basis?
2. Does your Church have effective procedures to reduce or eliminate claims of inappropriate conduct related to pastoral counseling?
3. Can you prove that the church member knew the Church was providing spiritual counseling and not psychological or psychiatric therapy?
4. Does the church insurance cover the counseling or other activities of the Church? Some jurisdictions have some immunity from personal liability if the church maintains certain kinds or levels of insurance.
5. If an adult is injured while on a church activity, could he/she bring a liability claim against the Church?
6. What are the activities of the Church? Does the staff know of every activity and how it is conducted?
7. Does the Church use volunteers to help provide these services? How were these people selected or supervised?

4. Employment Law – Human Resources

Employment Law - What is Title VII, FMLA, and ADA?

Any church of any size will have employees. It might just be the senior pastor or it might be a staff of hundreds. As a result, the Church, as an employer, is subject to some, but not all of the various state and federal laws dealing with employment issues. While the Church is immune from some liability issues related to injuries due to negligence, it has no such immunity from these employment laws. Ignorance of these laws is not a defense. Acting in good faith or with good intentions is not enough. The Church is either in compliance with employment laws or it is not. On the other hand, if it is ever shown that a Church was aware of a particular employment law, but purposely disregarded it, there are usually heavy penalties associated with that decision.

The Church is also responsible for the activities of its employees. As the Church grows in size and scope, it becomes impractical for the senior staff to personally supervise every employee. So, there need to be written job descriptions and an employee handbook. There need to be ways for employees to be held accountable and to allow them to also make sure the Church is doing its job as a responsible employer.

Seven Questions about your Church’s employment practices:

1. Do you have an employee handbook that sets out church policy on various employment practices?
2. Do you have written job descriptions for employees to avoid future disputes or controversies?
3. Do you have confidentiality agreements with employees to protect proprietary information such as donor lists or giving records?
4. If you need to terminate an employee, is there a procedure to reduce or eliminate claims or lawsuits?
5. Do you have an enforceable agreement with employees to keep disputes from going to court?
6. Can your Senior Pastor or other pastoral staff be terminated or are they entitled to any protections not available to other employees? Does there have to be a particular reason for the termination?
7. Is the Church in compliance with wage and hour laws? Many churches have been found not to be.

5. Business Activity

Commercial Activity - Can the Church also operate an Italian restaurant?

In the “Norman Rockwall” past, the Church was a little white church in the valley that got by on the weekly donations of its congregation. Today, many churches have expansive campuses with millions of dollars worth of sophisticated video, sound, and computer equipment, satellite campuses, fleets of cars and trucks, and other extensive holdings. They operate coffee shops and book stores, bowling alleys, and even water parks. At any given time, the Church may have a finance or building project to further expand the operations of the Church.

These activities involve hiring third-party contractors, signing finance documents, and entering into long-term lease and other contracts. Many churches are now entering into joint venture projects with for-profit companies. In all of these instances, the Church needs to make sure the documents it is signing are fair and in its best interests and do not jeopardize the church’s non-profit, tax-exempt status. In some instances, income earned by the Church will be treated as unrelated business income for which there is a tax liability. If that unrelated business income is too great, the Church’s non-profit, tax-exempt status can be revoked. That revocation would only come after the IRS or local state attorney general had conducted an extensive and invasive investigation into the Church practices.

Finally, the Church is a frequent and recurring target for con men, which prey upon the trusting nature of a church organization.

Seven Questions about your Church’s Commercial Activities:

1. What contracts is your Church currently obligated under? Are there any unforeseen or “gotcha” provisions? Who reviewed these before the Church signed them?
2. Does your Church have a conflict of interest policy regarding who it can do business with?
3. Does your Church have a standard independent contractor agreement or standard contractual language it requires before accepting goods or services?
4. Does your Church have contractual provisions that allow it to stay out of court in the event of a dispute?
5. Is your Church getting a fair deal in its current financing documents? Could it lose all of its property if there was a dispute?
6. Is your Church engaged in activity that the IRS would characterize as unrelated business income? If so, what is it supposed to do?
7. Could your Church be tricked or defrauded out of its money? What safeguards are in place to prevent that possibility?

6. Copyright and Trademark - Keeping the Creativity Going

Churches are some of the most creative places on the planet. Those creative ideas and works are sometimes created by church staff and they are sometimes based upon making use of creative materials from the outside world. All of these creative works, whether created internally or brought in from the outside world, are subject to trademark and copyright laws. If the Church is not following the laws regarding the use of these creative works, it can be subject to some serious penalties. The landmark Chicago Catholic Archdiocese case resulted in a several million dollar judgment against that church based upon improperly copying songs out of a hymnal.

When church staff creates new works, such as the Senior Pastor’s weekly sermon or the Music Director’s new musical composition or the Children’s Director’s new Sunday School teaching series, the ownership and use of those materials is controlled by law. The Church can change the operation of those laws, but so many churches never get around to dealing with the issue until the works begin to generate income.

 Seven Questions about your Church’s creative works:

1. Do you have any written agreements with Church staff regarding ownership of creative works? Any royalty arrangements?
2. Do you need to formally register Church creative works as trademarks and copyrights? Can someone else use those materials?
3. Does your Church use popular secular music or video clips from popular movies as part of its services or other religious activities? Can it legally do that?
4. Does your Church make copies of third-parties’ books, songs, or other materials? Can it legally do that?
5. Is there a difference in copyright and trademark laws between when they are used in an actual service and when they are used in other Church activities?
6. What should the Church do if someone has stolen its creative works?
7. Are there third-parties who are impersonating your Church on the Internet, getting unwitting persons to send them money or making statements that are falsely attributed to your Church? What can you do?

7. Peacemaking - Practicing What We Preach

Mediation and Litigation - The world is a place of conflict

Church ministry is not easy. While the Church, through its staff and its members, will try to model good scripturally-based behavior, there will inevitably be conflict. This could be an employment dispute where a Church employee alleges that he/she has been the victim of discrimination or harassment. It could be a dispute between staff members about areas of control or responsibility. It could be from a former or current member who alleges he/she was mistreated by the Church. It could be from a third-party who claims the Church owes him/her money or was responsible for an injury. In the more extreme example, we have seen church “civil wars” with competing groups claiming to have control of the Church. In every example, the Church has a variety of possible reactions from ignoring the problem in hopes it will go away to a full-blown lawsuit.

Our experience tells us that the best way to deal with conflicts is to try to prevent them from ever developing. This can be accomplished through good policies and procedures that are not only written out, but actually followed. When conflict does arise, it is best to deal with it immediately. We encourage our Church clients to adopt alternative faith-based conflict resolution as the policy of the Church. This needs to be included in the Church governance documents, employment agreements, handbook, contracts and anywhere else where the policy can be restated. This alternative process, accomplished as a mediation or arbitration, has the best prospect for a mutually-acceptable resolution, it is private, it is faster than conventional lawsuits, and tends to save the Church a great deal of money.

In the instances in which the Church cannot avoid being involved in a lawsuit, we are prepared to assist in developing and implementing a strategy and to make sure the Church is given a fair hearing. Most jurisdictions allow “discovery” whereby the Church’s private business affairs are made public. We can address that as well.

Seven Questions about your Church’s Dispute/Conflict Resolution policies:

1. Does your Church have Alternative Dispute Resolution as its written policy? What is that policy? Who will provide those services? Is it faith-based or secular?
2. Do the Church employees have a good understanding of the Church policy? Or, would they believe themselves to be compelled to file a lawsuit to get their complaints heard?
3. Can the Church require third-party vendors to agree to Alternative Dispute Resolution rather than going to court?
4. Are there any pending, threatened, or anticipated claims against the Church? Could anything be done to address them?
5. Can Church employees, officers, or directors be sued personally for church-related business or activities? Has the Church properly protected them?
6. What kind of insurance is available to settle claims? Is it enough? Are there other policies the Church should consider?
7. What are the reputation and media considerations? How can the Church protect itself? How can the Church make sure it doesn’t lose members?