In the matter of the contribution liability,
or status, under Chapter 108, Stats., of
MHS, INC, Employer
On December 11, 1989, the Department of Industry, Labor and Human Relations (the Department) issued an Initial Determination and Assessment of Employer's Contribution Liability (Initial Determination) which computed the appellant's liability based on employment from the third quarter of 1986 through the third quarter of 1989. The appellant filed a timely request for hearing and a hearing was held before an Appeal Tribunal on May 2, 1990. The Appeal Tribunal issued a decision on August 2, 1990, which found that the services upon which liability for unemployment compensation contributions was based constituted work for a non-profit organization in the employ of a church: As a result, the Appeal Tribunal Decision reversed the Initial Determination and found that the appellant was not liable for unemployment compensation contributions. The Department filed a timely petition for Commission review.
Based on the applicable law, records, and evidence in this case, and after consulation with the Appeal Tribunal, the Commission make the following:
The appellant is a nonprofit corporation that has operated Messmer High School since 1983. The school is located in a building at 742 West Capitol Drive in Milwaukee. Prior to the incorporation of the appellant in 1983, a school known as Messmer High School was operating in the same building. At that time, the building was owned by the Catholic Archdiocese of Milwaukee. Although the record is not entirely clear on the issue, the Archdiocese operated and controlled Messmer High School until 1983.
In 1983, the Archdiocese decided to close Messmer High School, apparently for financial reasons. Alumni, parents of Messmer High School students, and interested parties formed the appellant and persuaded the DeRance Foundation, a charity in Milwaukee, to purchase the building at 742 West Capitol Drive. After the DeRance Foundation purchased the building from the Archdiocese, it leased it to the appellant, rent free. The appellant then continued to operate the school, financed principally by tuition, contributions and grants from alumni, local businesses and charities. It also receives donated services from local religious orders
The appellant and its board of directors operate and control Messmer High School. The Archdiocese no longer operates the school or controls its budget. However, priests from the Archdiocese do provide liturgical services to the school. The Archdiocese at least tacitly approves of the school's operation; indeed, the Archdiocese allows the appellant to recruit students from its parishes.
Messmer High School's stated mission is "education in the Catholic tradition." The current principal is a Capuchin priest. Two other Catholic ecclesiastical orders, the Dominicans and the Notre Dame nuns, are involved in the operation of the school. The high school conducts regular religious services and requires students to attend weekly prayer sessions. According to the principal, courses in Catholic theology are required of all students. Membership on the appellant's board of directors is limited to Catholics, which the Commission considers to mean practicing Roman Catholics belonging to the Catholic church.
The appellant contends that it is not liable for unemployment compensation contributions because the services its employes provide are excluded from the definition of employment under sec. 108.02 (15)(h), Stats. That statute provides, in part:
108.02 (15)(h) "Employment" as applied to work for a nonprofit organization, except as such organization duly elects otherwise with the department's approval, does not include service:
1. In the employ of a church or convention or association of churches;
2. In the employ of an organization operated primarily for religious purposes and operated, supervised, controlled, or principally supported by a church or convention or association of churches; or
3. By a duly ordained, commissioned or licensed minister of a church in the exercise of his or her ministry or by a member of a religious order in the exercise of duties required by such order.
The issue is whether the appellant, MHS, Inc., meets one of the alternative exceptions set out in sec. 108.02 (15)(h), Stats. The Appeal Tribunal concluded that the appellant meets the first exception. However, because the Commission finds that the second subdivision applies, it shall not consider the first subdivision or the issue of whether the appellant is a "church or convention or association of churches."
In order to fit the exception under sec. 108.02 (15)(h)2, Stats., the appellant must be an organization operated primarily for religious purposes and operated, supervised, controlled, or principally supported by a church or convention or association of churches. Messmer High School's mission, "education in the Catholic tradition", implicates both an educational and a religious purpose. While perhaps a major function of Messmer High School is educational, the reason it is operated is primarily to provide a Catholic religious influence on high school education. The emphasis on "Catholic tradition" makes the high school different from other public schools and many other private schools. Thus, while it is possible to characterize Messner High School as an educational institution, the primary reason for the institution is to continue the "Catholic tradition." Therefore, the Commission concludes Messmer High School is operated for a religious purpose.(1) Because the appellant was organized to operate Messmer High School, the appellant too is operated primarily for religious purposes.
The next issue is whether the appellant is operated, supervised or controlled or principally supported by a church or convention or association of churches. The Commission notes first that in sec. 108.02 (15)(h)2, Stats., the adverb "principally" modifies the word "supported" only, implying that the second prong of that statutory subdivision could be met if a church or convention or association of churches provides less than principal operation, supervision, or control over the appellant. The Commission also notes that the factors in the second prong are written in the disjunctive, so not all of them need be met for the second prong to apply.
The testimony of the witnesses at the hearing indicates that they believe the appellant is not controlled by the Catholic Archdiocese of Milwaukee. The Commission tends to agree that the appellant is free from the direct financial control of the Archdiocese. However, independence from the financial control of the Archdiocese does not bar operation, supervision, control or support from the Catholic church itself. The Catholic church is an entity larger than the Archdiocese and the Commission does not read sec. 108.02 (15)(h)2, Stats., to be limited to the type of financial or heirarchical support the Archdiocese provided to Messmer High School before the incorporation of the appellant. Indeed, that statute seems to recognize that an excluded employing unit may be an organization separate from the church or convention or association of churches that operates, supervises, controls or principally supports it.
The Commission has considered Nampa Christian School Foundation v. State,110 Idaho 918, 719 P.2d 1178 (1986), a case cited but distinguished by the Department. The Idaho Supreme Court in that case held that a Christian school that got "moral support" but no financial help from a convention or association of churches fell within the Idaho equivalent of see. 108.02 (15)(h)2, Stats. The "moral support" seemed to be limited to allowing the school to recruit church members for students. The Commission agrees that that case is not particularly persuasive.
However, the influence of the Catholic church in this case far exceeds allowing the appellant to recruit for students from the Catholic Archdiocese of Milwaukee. The Catholic church establishes the doctrine and theology under which the school is operated, thereby exercising control. Moreover, should the Catholic church withdraw its tacit approval of Messmer High School as a "Catholic high school", the effect would no doubt be substantial. Messmer High School's principal testified that the Capuchin order would not allow him to serve as principal if the school were not a "Catholic high school." The Catholic church's approval may thus be viewed as a form of support and control. The Catholic church also provides supervision, control and support through staff and board members who are not only practicing Catholics, but in some instances members of ecclesiastical orders that are part of the Catholic church. The appellant exists to preserve and advance Catholic tradition and the Catholic doctrine. Under the circumstances, the appellant is, to an extent sufficient to satisfy sec. 108.02 (15)(h)2, Stats., controlled, operated, supervised or principally supported by the Catholic church.
The Commission therefore finds that the services provided to the appellant constitute work for a non-profit organization operated primarily for religious purposes and operated, supervised, controlled or principally supported by a church or convention or association of churches within the meaning of sec. 108.02 (15)(h)2, Stats.
The decision of the Appeal Tribunal is modified to conform to the foregoing and, as modified, is affirmed. Accordingly, the appellant is not liable for contributions, interest or penalties based on payroll for periods including the third quarter of 1986 through the third quarter of 1989.
Dated and mailed July 12, 1991
101 : CD3333 ET 483.01
/s/ Kevin C. Potter, Chairman
Carl W. Thompson, Commissioner
/s/ Pamela I. Anderson, Commissioner
cc:
Enforcements Section,
Attn: David P. Jenkins
Peter J. Salza, Ltd.,
Attorney at Law
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