Dec. 28, 2022 – A group of Catholic charities do not qualify for an exemption to the state’s unemployment compensation act because their activities are not primarily religious, the Wisconsin Court of Appeals has ruled.

In Catholic Charities Bureau, Inc. v. Labor and Industry and Review Commission, 2020AP 2007 (Dec. 13, 2022) the Court of Appeals District III also held that denying the exemption to the charities did not implicate their free expression rights under the First Amendment.

Social Ministry Charities

Each of Wisconsin’s five Roman Catholic dioceses has charitable entity that performs social ministry. For the Diocese of Superior, the charitable entity is Catholic Charities Bureaus, Inc. (CCB).

According to CCB’s statement of philosophy, the entity’s purpose is “to be an effective sign of the charity of Christ” by providing significant services that don’t duplicate services provided by other public or private organizations.

Incorporated nonprofit organizations operating under CCB’s umbrella provide 63 programs. CCB and its sub-entities provide services without regard to the recipients’ religion.

In 2015, a Douglas County Circuit Court ruled that one of the CCB sub-entities was operated primarily for religious purposes and was exempt from the state’s Unemployment Compensation Act (UCA) under the religious purposes exemption provided by Wis. Stat. section 108.02(15)(h)2.

CCB and four of its sub-entities then asked the state’s Department of Workforce Development to determine whether they were also exempt from the UCA. The four sub-entities provide a variety of services to persons with developmental disabilities, mental health issues, and limited incomes.

DWD determined that CCB and the four sub-entities did not qualify for the exemption.

Administrative Appeals

CCB appealed the determination to an administrative law judge (ALJ). The ALJ concluded that CCB and the sub-entities qualified for the exemption because they were operated primarily for religious purposes and reversed the DWD decision.

DWD appealed to the state Labor and Industry Review Commission (LIRC); LIRC reversed the ALJ.

CCB appealed to the Douglas County Circuit Court, which reversed the LIRC and ruled that CCB and the sub-entities qualified for the exemption.

DWD appealed.

Activities and Motivation Both Count

Writing for a three-judge panel, Judge Lisa Stark explained that to qualify for the exemption under section 108.02(15)(h)2, CCB and its sub-entities must be “operated primarily for religious purposes.”

On appeal, DWD argued that the activities of CCB and the sub-entities, rather than their motivations, should govern whether they were operated for religious purposes. CCB argued that the religious motive or reasons behind the activities of its and its sub-entities should govern.

Stark reasoned that section 108.02(15)(h)2 required the court to examine both the motives and the activities of CCB and the sub-entities, because while “operated” connoted actions, the dictionary meaning of “purposes” includes the reasons why something is done.

“Both words appear in the statute and therefore both must be given meaning,” Judge Stark wrote.

As a result, Stark wrote, “for an employee’s services to be exempt from unemployment tax the organization must not only have a religious motivation, but the services provided – its activities – must also be primarily religious in nature.”

To accept CCB’s argument that religious organization’s motivation alone governed the analysis under section 108.02(15)(h)2, Judge Stark pointed out, would render purposeless the inclusion of the phrase “operated primarily.”

Additionally, Stark reasoned, looking to both CCB’s activities and motivations was appropriate because the state’s unemployment act was remedial in nature and, according to the conventions of statutory interpretation, exceptions to the act should be interpreted narrowly.

Alternate Benefits Not Relevant to Analysis

CCB argued that the Catholic Church provided its own unemployment benefits to CCB employees. But Judge Stark labeled that argument “a nonstarter.”

“CCB has not identified any language in the statute altering the analysis if an employer provides additional or other coverage, and as, DWD argues, considering the availability of coverage in the analysis would impermissibly add words to the statute,” Stark wrote.

First Amendment Claim

CCB also argued that considering its activities in judging whether it qualified for the exemption under section 108.02(15)(h)2 violated the First Amendment’s Free Expression clause, because an analysis that includes activities would favor religious entities that provided services only to members of their own religion.

Such an analysis, CCB argued, would burden its Free Exercise of religion because a tenet of the Catholic faith requires the Catholic Church to provide social ministry on an ecumenical basis.

But Stark pointed out that CCB hadn’t properly developed its First Amendment argument that it had been denied a benefit because of religious belief. Furthermore, Judge Stark concluded, the exemption under section 108.02(15)(h)2 was not a benefit denied to CCB.

“CCB is simply being treated like every other employee in the state, including other nonprofit organizations operated by a church,” Stark wrote.

Application of the Test

Judge Stark concluded that CCB and the sub-entities had a professed religious motivation in providing services. But, she concluded, those services were neither inherently nor primarily religious.

“CCB and its sub-entities do not operate to inculcate the Catholic faith; they are not engaged in teaching the Catholic religion, evangelizing, or participating in religious rituals or worship services with the social service participants; they do not require their employees, participants, or board members to be of the Catholic faith; participants are not required to attend any religious training, orientation, or services; their funding comes almost entirely from government contracts or private companies, not from the Diocese of Superior; and they do not disseminate any religious material to participants,” Stark wrote.