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Ninth Circuit Allows Faith-Based Organization to Dismiss Employees Based on Religious Beliefs
August 31, 2010

Last week, the Ninth Circuit issued an important decision affirming the right of a faith-based organization to terminate employees based on their religious beliefs. Under the ruling in Spencer v. World Vision, Inc., employers may require adherence to Christianity as a condition of employment.

World Vision characterizes itself as a Christian humanitarian organization that works to address issues of poverty and injustice worldwide. Among other activities, it provides disaster relief services and runs a child sponsorship program. The case arose after it dismissed three longtime employees upon learning that they did not believe in the Christian faith. At the time of their respective hirings, the employees had submitted required personal statements describing their religious beliefs.

The employees sued, alleging religious discrimination. The trial court, however, decided in World Vision's favor, finding that it was a religious entity not subject to the general bar on religious discrimination. The Ninth Circuit upheld the ruling, with two of three judges agreeing that World Vision permissibly dismissed the employees.

Employers seeking guidance from the court's reasoning may be slightly disappointed to learn that while the majority judges agreed on the outcome, they did not agree on the factors underlying that determination. Thus, there is still no conclusive set of criteria by which similar claims will be addressed in the future. Both judges agreed that to qualify as a religious entity, the entity must be organized for a self-identified religious purpose, and engaged in religious activity consistent with that purpose. Additionally, the organization must hold itself out to the public as a religious entity. However, one judge thought that only nonprofit organizations should be permitted to discriminate based on religion; the other judge would have simply required that the organization provide its goods or services free or at a nominal cost. World Vision ultimately qualified under both judges' formulations.

Notwithstanding its failure to provide a definitive test, the ruling serves as an important reminder that churches are not the only entities permitted to make employment decisions based on religious beliefs. World Vision prevailed despite the fact that it is not affiliated with a particular church or denomination, and does not condition receipt of its services on Christian faith.

The true effect of this ruling may be felt over time, as courts decide how to implement those factors that the majority judges agreed on, and perhaps harmonize the points of disagreement. In the meantime, employers seeking to qualify as religious entities should be careful to ensure that their religious purposes are both conspicuous on key organizational documents (such as the Articles of Incorporation, bylaws, and mission statement) and easily discernable in dealings with the public. Additionally, such organizations should note that a court may consider their nonprofit status and/or the rate they charge for services when ruling on their classification as a religious entity.

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Barran Liebman is pleased to announce that Melissa Healy has joined the firm as an attorney specializing in employment law.