Day care center must pay unemployment taxes

Posted by: Jan 11, 2016By Brian Stutheit

Robert Morris served as a maintenance worker at A Child’s Touch from 1997 until his termination in September 2013. In September 2013, Mr. Morris took a medical leave for double hip replacement surgery. His position was eliminated during his absence. When he filed for unemployment compensation benefits, A Child’s Touch challenged his request on the ground that he was not in covered employment and that it was exempt from unemployment compensation taxes under Colorado’s unemployment laws because it is a religious organization.

A Child’s Touch is a state-licensed child care center providing infant and toddler day care, preschool, and kindergarten programs for children from six weeks to six years of age, and a summer camp for children ages six to twelve years.  Prayers, and devotions are incorporated into its daily curriculum. Students recite the pledge of allegiance to both the United States flag and a Christian flag. Religious-themed activities are a part of a typical day.  A Child’s Touch also promotes its religious-based education on its outdoor sign and Ten Commandments stone tablet. The Court’s decision does not say that A Child’s Touch tried to follow Jesus’ Golden Rule.

A divided Colorado Court of Appeals concluded that A Child’s Touch does not meet the statutory criteria for exemption from the Colorado Employment Security Act (CESA), because it is neither “operated, supervised, controlled, or principally supported by a church or convention or association of churches”, nor a religious “elementary or secondary school”.

A Child’s Touch was partially controlled by the Maranatha Christian Church, which had the authority to “sell” A Child’s Touch. However, that relationship ended when the church ceased operations in 2011. A Child’s Touch is run by a board of directors. Members of the board have included the founder of A Child’s Touch, his wife and daughter, and an ordained minister who has not served as pastor of any church.

To qualify for the religious exemption from paying unemployment,  A Child’s Touch must be either:

(1) a church or a convention or association of churches,

(2) an organization that is operated primarily for religious purposes and that is operated, supervised, controlled, or principally supported by a church or convention or association of churches, or

(3) an elementary or secondary school that is operated primarily for religious purposes.

The majority decision was that A Child’s Touch was not principally supported by an association of churches when claimant was discharged in September 2013.  The evidence presented showed only minimal association between A Child’s Touch and any church during the critical period surrounding claimant’s termination.

The Court of Appeals also ruled that A Child’s Touch was not a religious elementary school.  It was really a day care center with a kindergarten.