The administrators of a Salvation Army rehabilitation center in Indianapolis may not recover minimum wages or overtime pay under the Fair Labor Standards Act because they were employed as ordained ministers whose supervision of the center had a religious function, the U.S. Court of Appeals for the Seventh Circuit ruled Feb. 28 (Schleicher v. Salvation Army, 7th Cir., No. 07-1333, 2/28/08).

Writing for the court, Judge Richard A. Posner found that Steve and Lorrie Schleicher supervised thrift shop workers who are covered by the FLSA, but that the Salvation Army's rehabilitation centers were the “functional equivalents of cathedrals or monasteries,” and as such the Schleichers were engaged in “ecclesiastical administration” and were exempt from the FLSA under the statute's ministerial exception.

Posner said that a ministerial exception that courts have read into the FLSA would be more appropriately termed an “internal affairs” doctrine, and that courts should apply a rebuttable presumption that ministers and clerics are not covered by the federal wage and hour law.

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Administrators Sought FLSA Remedy.

The Schleichers, who were married, each held the Salvation Army rank of captain and were ordained ministers who were assigned as administrators of the organization's adult rehabilitation center in Indianapolis. Each of the Schleichers received an allowance of about $150 per week, an amount that was below the minimum wage for the hours they worked and that did not compensate the administrators for overtime work they performed.

The rehabilitation center supervised by the Schleichers included five thrift shops that were staffed by 20 to 40 workers. Most of the employees, Posner said, were “drunkards, drug addicts, and other unfortunates whom the Salvation Army is attempting to redeem.” The shop workers themselves are covered by the FLSA, Posner said.

In April 2006, the Schleichers filed a lawsuit in the U.S. District Court for the Southern District of Indiana alleging that the Salvation Army's failure to pay them FLSA-mandated minimum wages and overtime compensation violated the act.

The Salvation Army moved to dismiss the lawsuit, arguing that because of the ministerial exception recognized in FLSA cases, the district court did not have subject matter jurisdiction over the lawsuit. The trial court agreed, and dismissed the couple's claims.

According to the decision, the Schleichers were expelled from the Salvation Army for filing the lawsuit, but they did not claim that the expulsion violated the FLSA's anti-retaliation provision, 29 U.S.C. §215(a)(3), or any other law.

However, the Schleichers appealed the dismissal of their FLSA wage claims to the Seventh Circuit. The appellate panel affirmed the dismissal.

Court Rejects Commercial Activity Argument.

Posner said that the FLSA's ministerial exception recognized by courts does not represent an effort to lighten legal burdens on religious organization, but is a rule for interpreting statutes. The rule, he said, is based on the assumption that “Congress does not want courts to interfere in the internal management of churches, as they sometimes do in the management of prisons or school systems.”

But he observed that the ministerial exception would be better termed the “internal affairs doctrine,” commenting that “[t]he point is simply that it is no more appropriate for courts to govern churches than for legislatures to do so.”

The Schleichers argued that in Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 27 WH Cases 209 (1985), the Supreme Court held that employees of commercial businesses operated by a religious organization were protected by the FLSA.

Posner rejected that argument, noting that the employees at issue in the Supreme Court case were laypersons, and the situation was different when the issue was the application of the FLSA to religious ministers.

The Schleichers were not employed by the Salvation Army thrift shops, but supervised a rehabilitation center that was more than simply an “umbrella“ for the shops. The Seventh Circuit said that the district court heard uncontradicted testimony that a Salvation Army rehabilitation center was itself a church, and was administered by church officials.

“[T]he question,” Posner said, “comes down to whether the fact that a church has a commercial dimension (the thrift shops, at least viewed from their customers' perspective) brings its ministers under the Fair Labor Standards Act.”

The court said that the Schleichers argued that monks selling wine to support a monastery would be covered by the FLSA because they were engaged in a commercial activity in competition with purely commercial enterprises.

Posner rejected the argument. “The vow of poverty is a hallowed religious observance; an intent to destroy it cannot reasonably be ascribed to the draftsmen of the Fair Labor Standards Act. No one could think the curious precapitalist economy of a monastery an ordinary commercial activity actuated by a business purpose.”

Role of Administrators Was 'Ecclesiastical.'

The court also said important distinctions exist between ministers and the shop employees they might supervise.

The Schleichers admitted that they were responsible for preaching, leading worship activities and overseeing or conducting religious classes for the rehabilitation center's residents, who worked in the gift shops as “work therapy.”

“Suppose a Catholic cathedral contains a gift shop that sells crucifixes, rosaries, religious postcards, and religious art,” Posner wrote. “The employees of the gift shop are subject to the Fair Labor Standards Act; the bishop who administers the cathedral is not.”

Stating that “[t]he commercial tail must not be allowed to wag the ecclesiastical body,” the court found that “[t]he Salvation Army's Adult Rehabilitation Centers are functional equivalents of cathedrals or monasteries, and the ministers who administer them are therefore engaged in ecclesiastical administration.” The Salvation Army's thrift shops engaged in commercial activity and paid sales taxes, the court said, but the selling had a “spiritual dimension” and so did the Schleichers' supervision of the shops.

Court Suggests Rebuttable Presumption.

Posner said that the “best way to decide a case such as this” is to adopt a presumption that “clerical personnel are not covered by the Fair Labor Standards Act.”

The presumption, he said, “can be rebutted by proof that the church is a fake, the 'minister' a title arbitrarily applied to employees of the church even when they are solely engaged in commercial activities, or, less flagrantly, the minister's function entirely rather than incidentally commercial.”

The court said that the Schleichers did not offer any evidence to rebut a presumption that they were outside the protection of the FLSA. “The Salvation Army, which has existed in the United States since 1880, is acknowledged to be a completely legitimate church; our description of the Adult Rehabilitation Centers is not contested; and the Schleichers were properly ordained ministers,” Posner concluded.

District Court Corrected on FLSA Jurisdiction.

Holding that dismissal of the Schleichers' lawsuit was proper, the Seventh Circuit said that the district court “made one mistake, though a harmless one.”

The trial court's finding that it did not have subject matter jurisdiction over the Schleichers' lawsuit was incorrect, Posner said. “A federal court could not entertain a suit to restore the Latin mass or to declare Christian Science a heresy,” but the court did have jurisdiction to hear a case brought under the FLSA.

“The fact that enforcement of the Act in a particular case would entangle the court in an ecclesiastical controversy would be a compelling reason to dismiss that case,” the court said, but “[j]urisdiction is determined by what the plaintiff claims rather than by what may come into the litigation by way of defense.”

Affirming dismissal of the case, the Seventh Circuit modified the district court's judgment to reflect that the lawsuit was dismissed because the plaintiffs' claim lacked merit, rather than on a lack of federal jurisdiction.

Judges Richard D. Cudahy and Terence T. Evans joined in the opinion.

Ronald E. Weldy represented the Schleichers. Edward E. Hollis of Baker & Daniels represented the Salvation Army. Both attorneys practice in Indianapolis.

By Lawrence E. Dube

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Text of the decision may be accessed at http://op.bna.com/dlrcases.nsf/r?Open=ldue-7c9neg.

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