Catholic Charities Bureau, Inc. v. State Labor & Indus. Review Comm'n

• Decision Date: 13 December 2022
• Docket Number: 2020AP2007
• Parties: CATHOLIC CHARITIES BUREAU, INC., BARRON COUNTY DEVELOPMENTAL SERVICES, INC., DIVERSIFIED SERVICES, INC., BLACK RIVER INDUSTRIES, INC. AND HEADWATERS, INC., PETITIONERS-RESPONDENTS, v. STATE OF WISCONSIN LABOR AND INDUSTRY REVIEW COMMISSION, RESPONDENT-CO-APPELLANT, STATE OF WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT, RESPONDENT-APPELLANT.
• Court: Wisconsin Court of Appeals

CATHOLIC CHARITIES BUREAU, INC., BARRON COUNTY DEVELOPMENTAL SERVICES, INC., DIVERSIFIED SERVICES, INC., BLACK RIVER INDUSTRIES, INC. AND HEADWATERS, INC., PETITIONERS-RESPONDENTS,
v.
STATE OF WISCONSIN LABOR AND INDUSTRY REVIEW COMMISSION, RESPONDENT-CO-APPELLANT,

STATE OF WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT, RESPONDENT-APPELLANT.

No. 2020AP2007

Court of Appeals of Wisconsin, District III

December 13, 2022

APPEAL from an order of the circuit court for Douglas County: No. 2019CV324 KELLY J. THIMM, Judge.

Before Stark, P.J., Hruz and Gill, JJ.

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STARK, P.J.

¶1 This unemployment insurance case requires us to determine the proper interpretation of the religious purposes exemption under Wis.Stat. § 108.02(15)(h)2. (2019-20).^[1] The petitioner-respondents are the Catholic Charities Bureau, Inc. (CCB) as well as four of its sub-entities: Barron County Developmental Services, Inc.; Diversified Services, Inc.; Black River Industries, Inc.; and Headwaters, Inc.^[2] CCB asserts that it is exempt from Wisconsin's Unemployment Compensation Act under § 108.02(15)(h)2. because it is "operated primarily for religious purposes." In considering whether it is exempt under the statute, CCB argues that the proper consideration is whether it is operated primarily for a religious motive or reason.

¶2 Conversely, the Department of Workforce Development (DWD) and the Labor and Industry Review Commission (LIRC)^[3] contend that whether CCB is operated primarily for religious purposes depends on whether its activities are primarily religious in character. The parties also dispute whether the religious purposes exemption is ambiguous and, if so, how that ambiguity should be resolved. Finally, both CCB and DWD argue, albeit for different reasons, that adopting the opposing party's interpretation of the religious purposes exemption will violate the First Amendment to the United States Constitution.

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¶3 For the reasons that follow, we conclude that the reviewing body must consider the nonprofit organization's motives and activities to determine whether that organization is "operated primarily for religious purposes" under Wis.Stat. § 108.02(15)(h)2., such that the religious purposes exemption to unemployment taxation applies. We further determine that the First Amendment is not implicated in this case. Given the facts here, we conclude that LIRC correctly determined that CCB and its sub-entities are not organizations operated primarily for religious purposes; thus, employees of the organizations do not perform their services under excluded employment as that is defined under § 108.02(15)(h)2. We therefore reverse the circuit court's order and reinstate LIRC's decision.

BACKGROUND

¶4 The facts of this case are undisputed. Every Roman Catholic diocese in Wisconsin has a Catholic Charities entity that functions as the diocese's social ministry arm. Catholic Charities' stated mission is "to provide service to people in need, to advocate for justice in social structures and to call the entire church and other people of good will to do the same." During the administrative proceedings in this case, Archbishop Jerome Listecki testified that this mission is "rooted in scripture," which "mandate[s]" that the Catholic Church "serve the poor." According to Archbishop Listecki, inherent in the church's teachings is a "demand" that Catholics respond in charity to those in need.

¶5 CCB is the Catholic Charities entity for the Diocese of Superior, Wisconsin. CCB's statement of philosophy provides that the "purpose" of CCB is "to be an effective sign of the charity of Christ" by providing services that are "significant in quantity and quality" and are not duplicative of services already

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adequately provided by public or private organizations. CCB provides these services according to an "Ecumenical orientation," such that "no distinctions are made by race, sex, or religion in reference to clients served, staff employed and board members appointed."

¶6 Under CCB's umbrella, numerous separately incorporated nonprofit sub-entities operate sixty-three "programs of service," which provide aid "to those facing the challenges of aging, the distress of a disability, the concerns of children with special needs, the stresses of families living in poverty and those in need of disaster relief." As noted above, four of those sub-entities are at issue in this appeal.

¶7 Barron County Developmental Services, Inc. (BCDS) is a "[c]ommunity rehabilitation program providing services to individuals with developmental disabilities" that focuses "on the development of vocational and social skills that allow a person to reach their highest potential within the community." BCDS contracts with DWD's Division of Vocational Rehabilitation (DVR) to perform job placement, job coaching, and other employment services to assist individuals with disabilities to obtain employment in the community. BCDS is funded "primarily" through government funding via DVR, but it also receives some funding from private companies. It receives no funding from the Diocese of Superior. BCDS was formerly known as Barron County Developmental Disabilities Services, but in December 2014, its board of directors "requested to become an affiliate agency" of CCB and its name was changed. Prior to becoming a sub-entity of CCB, BCDS had no religious affiliation. The type of services and programming provided by the organization did not change after it became affiliated with CCB.

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¶8 Black River Industries, Inc. (BRI) provides "in-home services, community-based services, and facility-based services" to individuals with developmental disabilities, mental health disabilities, and limited incomes. To serve those in need, BRI works with DVR to provide participants with job training skills; it provides transportation services to disabled adults and seniors; it has a contract with Taylor County to provide mental health services; and it has a food service production facility, a paper shredding program, and a mailing services program to serve the community and provide job training. "[M]uch" of BRI's funding comes from government organizations, including "county services, Department of Health Services, Long-Term Care Division[,] as well as" DVR. BRI receives no funding from the Diocese of Superior.

¶9 Diversified Services, Inc. (DSI) provides services to individuals with developmental disabilities. To do so, DSI offers "meaningful employment opportunities" to these individuals and also hires individuals without disabilities to do production work. Most of DSI's funding comes from Family Care, a Medicaid long-term care program, and from private contracts. DSI receives no funding from the Diocese of Superior.

¶10 Headwaters, Inc., provides "various support services for individuals with disabilities," including "training services related to activities of daily living," employment-related training services, and job placement. In addition, Headwaters has work-related contracts for individuals to learn work skills while earning a paycheck; provides Head Start home visitation services to eligible families with children; and provided birth-to-three services before Tri-County Human Services assumed providing those services. The majority of Headwaters' funding comes from government grants, and it too receives no funding from the Diocese of Superior.

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¶11 CCB's role is to provide management services and consultation to its sub-entities, establish and coordinate the sub-entities' missions, and approve capital expenditures and investment policies. CCB's executive director, who is not required to be a Catholic priest, oversees each sub-entity's operations. Nonetheless, CCB's internal organizational chart establishes that the bishop of the Diocese of Superior oversees CCB in its entirety, including its sub-entities, and is ultimately "in charge of" CCB. New CCB employees are provided with CCB's mission statement, statement of philosophy, and code of ethics, and they are informed that their employment "is an extension of Catholic Social Teachings and the Catechism of the Church." Employees of CCB and its sub-entities are not required to be members of the Catholic faith, but they are prohibited from engaging in activities that violate Catholic social teachings.

¶12 As noted above, CCB's sub-entities provide services to all people in need, regardless of their religion, pursuant to the Catholic social teaching of "Solidarity," which is a belief that "we are our brothers' and sisters' keepers, wherever they live. We are one human family." Program participants are not required to attend any religious training or orientation to receive the services that CCB's sub-entities provide. Neither CCB nor its sub-entities engage in devotional exercises with their employees or program participants nor do they disseminate religious materials to those individuals, except for providing new hires with the CCB mission statement and code of ethics and philosophy. Neither CCB nor its sub-entities "try to inculcate the Catholic faith with program participants."

¶13 CCB became subject to Wisconsin's Unemployment Compensation Act, Wis.Stat. ch. 108, in 1972, following CCB's submission of an employer's

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report stating that the nature of its operations was charitable, educational, and rehabilitative.^[4] CCB's sub-entities report their employees under CCB's unemployment insurance account. In 2015, a Douglas County Circuit Court judge ruled that Challenge Center, Inc.-another CCB sub-entity providing services to developmentally disabled individuals-was operated primarily for religious purposes and was therefore exempt from the Unemployment Compensation Act under the religious purposes exemption, Wis.Stat. § 108.02(15)(h)2. CCB and the four sub-entities at issue in this appeal then sought a determination from DWD that they, too, were exempt.

¶14 DWD determined that CCB and the...