Imagine an organization that welcomes children in the name of Jesus, seeks above all to bring them to faith, and bathes every aspect of its activities with religious dimensions. Yet it is characterized by the government as not “religious” enough to qualify for religious exemption from state unemployment coverage. That’s what happened to By The Hand Club For Kids, a ministry controlled by The Moody Church in Chicago, when it objected to the Illinois Department of Employment Security’s (IDES) characterization of its religiously-infused afterschool program as merely “secular.”
The Ruling: Religious Qualification for Unemployment Tax Exemption
On December 30, 2020, the Illinois Court of Appeals delivered a resounding victory for By The Hand and more broadly for religious liberty, when the Court ruled that the IDES must defer to By The Hand’s own bona fide and well-established description of its programs as primarily for “religious” purposes. This judicial victory comes nearly eighteen months after the Cook County Circuit Court (on administrative appeal) likewise ruled that the IDES must defer and recognize By The Hand’s primarily religious nature, after much additional time and effort to challenge the IDES’ wrongful efforts to impose unemployment tax liability.
Wagenmaker & Oberly was honored to assist Alliance Defending Freedom with By The Hand’s efforts in this and related litigation. For additional information about the litigation’s background and lower court’s ruling, please see our blogs here and here. See here for the appellate court’s opinion.
As the Illinois Court of Appeals recognized:
[T]he undisputed record shows that By The Hand considers it an act of Christian faith to care for the whole child, “mind, body, and soul.” According to By The Hand, the activities of feeding hungry children, helping struggling readers, and occasionally caring for children’s medical needs are no less religious activities than leading Bible studies, chapel services, scripture memorization, and prayers. Every aspect of the afterschool program was intended to be ‘a way of loving kids as Jesus would’ because [w]hen Jesus walked on the Earth, he met physical needs, and spiritual needs.” As stated by one court, “the concept of acts of charity as an essential part of religious worship is a central tenet of all major religions.”
The IDES thus erred when characterizing such activities as inherently “secular” for purposes of imposing unemployment tax coverage. In other words, By The Hand may indeed provide tutoring, safe play, healthy food, medical treatment, and other social services to inner city children. But doing so primarily for religious purposes, as was made abundantly clear through extensive evidence in the record, means that the organization qualifies for religious exemption under applicable Illinois law. (For more information about By The Hand, see their website.)
To what extent is this judicial ruling helpful for other organizations seeking to optimize religious liberty protections, especially within the context of available statutory protections and exemptions? The answer likely depends on both the individual case facts and specific law. Some important lessons can be learned, though.
First, the Appellate Court recognized the case’s novelty in relation to other Illinois cases concerning religious unemployment tax exemption:
Whether an afterschool program qualifies for a religious purposes exemption from the Illinois unemployment compensation system is a case of first impression. As pointed out above, each exemption case must be determined on its individual facts, but we agree with By The Hand’s contention that parochial school cases, particularly Unity Christian School, are the most factually similar cases and that they should frame our analysis of whether By The Hand is an exempt employer.
Second, the Appellate Court relied heavily on cases from other jurisdictions for its ruling. That should be encouraging for organizations in other states with similar religious liberty concerns.
Third, the Appellate Court’s deference to By The Hand’s self-identification as primarily religious is notable by itself. For purposes of government determinations about religious employment matters, it matters how the organization at issue characterizes its own mission, operates its programs, and presents itself to others. The government should not substitute its own judgment for that of the employer.
Fourth, and on a related note, the stronger an organization’s religious nature and the clearer its religious purposes are articulated, the more likely statutory exemptions will be recognized - even considering the various requirements of particularized contexts. For example, in this unemployment tax exemption context, the statutory unemployment exemption still required that By The Hand be church-controlled. Different requirements will apply in, for example, a religious property tax exemption context. Notably, however, the Appellate Court rejected the IDES’ heavy reliance on property tax cases, instead focusing on By The Hand religious evidence and other cases more in accord with such strongly evident religious nature.
One Sour Note, and Caution
In this 2-1 appellate decision, the lone dissenter favored deferring more to the government agency’s judgment as to what activities were inherently “religious” or “secular.” But along that path lies danger—for ministry and government alike. Such deference to the state’s definitional power would result in untenable and unconstitutional entanglement between the state and religion.
Instead, the Appellate Court chose the wiser option – namely, to defer to the religious ministry’s characterization of its own activities as religious, and then to require the government agency to follow the applicable Illinois legal framework and statutes governing this particular situation. In so doing, the Court upheld a fundamental principle of liberal democracy recognized by courts across the nation: a limited government is essential to human flourishing, and it requires the State to respect its own limits of power over its constituents.