Church Employment Practices Liability: HR Risks Every Growing Congregation Faces

Feb 19

Last Updated: March 16, 2026

Why Employment Practices Are a Growing Risk for Churches

Most church leaders spend their time thinking about ministry, not HR compliance. But the moment your congregation hires its first staff member, you become an employer in the eyes of the law. And with that comes a set of risks that many churches are dangerously unprepared for.

Employment practices liability is one of the fastest-growing sources of litigation involving churches. Claims of wrongful termination, discrimination, harassment, and wage disputes can surface even in the most well-intentioned ministries. And unlike other risks that can be addressed with a standard directors and officers policy, employment claims require specific coverage. A single lawsuit can cost tens of thousands of dollars in legal fees alone, and that is before any settlement or judgment. For growing congregations adding staff, expanding programs, and navigating the complexities of modern employment law, understanding these risks is not optional.

Common Employment Practices Mistakes Churches Make

Churches often operate with a family-like culture, which is one of their greatest strengths. But that same informality can create serious legal exposure when it comes to employment decisions. Here are the most common mistakes we see in growing congregations.

Rushing the hiring process. When a ministry need is urgent, churches sometimes skip critical steps like formal job descriptions, structured interviews, and thorough background checks. A rushed hire can lead to a bad fit, and a bad fit can lead to a messy separation that opens the door to legal claims. Industry data suggests that a single bad hire can cost an organization $17,000 or more when you factor in recruitment, training, lost productivity, and potential legal exposure.

Misclassifying workers. Many churches use a mix of full-time staff, part-time employees, and independent contractors. But if your church dictates how, when, and where someone performs their work, that person is likely an employee under federal and state law, regardless of what their contract says. Worker misclassification can trigger back taxes, fines, and penalties that add up quickly.

Firing without documentation. Terminating a staff member without a clear paper trail is one of the most common paths to a wrongful termination claim. Even when the decision is justified, the absence of written warnings, performance reviews, or documented policy violations makes it nearly impossible to defend. Churches sometimes assume that the ministerial exception protects all termination decisions, but this legal doctrine only applies to employees who perform ministerial functions. Non-ministerial staff, including administrative assistants, custodians, and bookkeepers, are fully subject to standard employment law.

Operating without an employee handbook. A surprising number of churches have no written employment policies at all, or they are using a handbook that has not been updated in years. Without clear, documented policies on topics like anti-harassment, discipline procedures, leave policies, and grievance processes, churches expose themselves to claims of inconsistency and unfair treatment.

The Ministerial Exception: What It Does and Does Not Protect

The ministerial exception is a First Amendment protection that allows churches to make employment decisions about ministerial staff based on religious doctrine. This means a church can generally hire, discipline, or terminate a pastor, worship leader, or religious educator without being subject to employment discrimination claims.

However, this protection is narrower than many church leaders realize. Courts determine who qualifies as a "minister" based on the employee's actual duties, not just their title. A church administrator with a pastoral title but purely administrative responsibilities may not qualify. And even for employees who do fall under the ministerial exception, other employment laws, such as wage and hour requirements, may still apply.

The safest approach is to assume that every non-ministerial employee is fully subject to federal, state, and local employment law. This includes Title VII protections (for churches with 15 or more employees), the Americans with Disabilities Act, the Fair Labor Standards Act, and state-specific requirements that may apply to even smaller employers.

What Church Employment Practices Liability Insurance (EPLI) Covers

Employment practices liability insurance, commonly called EPLI, is specifically designed to protect organizations against claims made by current, former, or prospective employees. For churches, this coverage is increasingly important as congregations grow and add staff.

A typical church EPLI policy covers legal defense costs, settlements, and judgments arising from claims including wrongful termination, discrimination based on protected characteristics (age, race, gender, disability), sexual harassment, retaliation against employees who report concerns, breach of employment contract, failure to promote, negligent hiring or supervision, and emotional distress claims related to employment decisions.

The cost of EPLI coverage for most churches ranges from $150 to $300 per month, depending on the number of employees, turnover history, and the coverage limits selected. Many churches can add EPLI as an endorsement to their existing commercial general liability (CGL) policy, while others may need a standalone policy.

Given that the average employment practices lawsuit costs between $75,000 and $125,000 to defend, even before any settlement, EPLI is one of the most cost-effective protections a growing church can put in place.

Steps Every Growing Church Should Take to Reduce Employment Risk

Insurance is a critical safety net, but the best strategy combines coverage with proactive risk management. Here are practical steps every growing congregation should implement.

Create and maintain an employee handbook. Your handbook should clearly outline hiring procedures, anti-discrimination and anti-harassment policies, disciplinary procedures, leave policies, compensation practices, and termination procedures. Have it reviewed by an employment attorney, and update it at least once per year.

Conduct background checks on every hire. This applies to pastoral staff, administrative employees, custodians, and anyone who will work with children or vulnerable populations. This is also a foundational element of your volunteer risk management program. Background checks are not just good practice; they are a key factor in defending against negligent hiring claims.

Document everything. Every performance review, disciplinary conversation, warning, and termination decision should be documented in writing. If it is not written down, it did not happen in the eyes of the law. Maintain employee files with consistent documentation practices across all staff members.

Train your leadership team. Pastors, board members, and ministry directors who supervise staff need basic training in employment law compliance. Topics should include anti-harassment policies, proper documentation practices, and how to handle employee complaints. Many EPLI carriers offer free training resources as part of the policy.

Review worker classifications annually. As roles evolve, so can their proper classification. A volunteer who starts receiving a stipend, or a contractor who begins working set hours under church direction, may need to be reclassified as an employee. Annual reviews prevent costly misclassification issues.

Consult an employment attorney before terminations. When a termination is necessary, a brief consultation with an employment attorney can help you identify potential risks and ensure the process is handled properly. This is especially important for non-ministerial staff and in situations involving potential discrimination claims.

How Church Size Affects Employment Practices Risk

Employment practices risk does not scale linearly with church size. There are specific thresholds that trigger additional legal obligations.

Churches with 1 to 14 employees are still subject to most state employment laws, wage and hour requirements, and workers' compensation obligations. While federal Title VII does not apply at this size, many states have their own anti-discrimination laws that kick in at lower employee counts. Massachusetts, for example, applies its anti-discrimination protections to employers with as few as six employees.

Once a church reaches 15 employees, federal Title VII applies, along with the Americans with Disabilities Act. At 20 employees, the Age Discrimination in Employment Act takes effect. And at 50 employees, the Family and Medical Leave Act (FMLA) requires churches to offer job-protected leave for qualifying events.

Growing churches often cross these thresholds without realizing it, especially when they count part-time staff and regular volunteers who receive compensation. Understanding where your congregation falls on this spectrum is essential for proper compliance and insurance planning.

Frequently Asked Questions

Does my church need employment practices liability insurance?

Any church with paid employees should strongly consider EPLI coverage. Employment disputes are among the most common sources of litigation involving churches, and a single claim can cost $75,000 or more to defend. Even churches with only one or two paid staff members face exposure to wrongful termination, discrimination, and harassment claims.

Are churches exempt from employment discrimination laws?

Churches have limited exemptions under the ministerial exception, which applies only to employees performing ministerial functions. All non-ministerial staff are fully subject to federal and state employment laws, including anti-discrimination protections. The ministerial exception does not provide blanket protection for all church employment decisions.

How much does church EPLI coverage cost?

Most churches pay between $150 and $300 per month for EPLI coverage, depending on the number of employees, claims history, and coverage limits. Many carriers offer EPLI as an endorsement to an existing general liability policy, making it relatively affordable to add. Coverage limits typically range from $100,000 to $1,000,000.

What is the most common employment claim against churches?

Wrongful termination is the most frequently filed employment claim against churches, often arising from terminations that were not properly documented or that did not follow the church's own written policies. Harassment and discrimination claims are also common, particularly in churches without formal anti-harassment training programs.

Can a church be sued for firing a pastor?

Under the ministerial exception, courts generally defer to a church's decision to terminate a pastor or other ministerial employee. However, this protection is not absolute. If the termination involves non-religious factors (such as wage disputes or retaliation for reporting safety concerns), the exception may not apply. Churches should document the religious basis for any ministerial termination decision.

What should a church employee handbook include?

A comprehensive church employee handbook should cover anti-discrimination and anti-harassment policies, hiring and onboarding procedures, compensation and benefits information, leave policies (including FMLA if applicable), disciplinary and grievance procedures, termination policies, and a statement about the church's religious mission and how it informs employment practices. The handbook should be reviewed by an employment attorney and updated annually.

Does the ministerial exception apply to all church employees?

The ministerial exception only applies to employees whose primary duties involve ministerial functions, such as leading worship, teaching doctrine, or providing spiritual guidance. Administrative staff, custodians, bookkeepers, and other employees with non-ministerial duties are not covered by this exception and are fully subject to employment law protections.

Protect Your Church with the Right Coverage and Practices

Employment practices liability is a risk that grows alongside your congregation. Every new hire, every policy decision, and every personnel change creates potential exposure. The good news is that with proper documentation, clear policies, leadership training, and the right insurance coverage, your church can manage this risk effectively. For a broader look at how operational risks interconnect, explore our guide to church employment practices and staffing liability.

At Hale Street Insurance, we help growing churches understand their employment risk exposure and build insurance programs that protect both the ministry and the people who serve it. If you are unsure whether your current coverage includes EPLI, or if your church has outgrown its existing protections, we are here to help.

Jake Lubinski is the founder of Hale Street Insurance and a licensed insurance broker with years of church board and stewardship experience. That time inside church operations gave him a clear view of how congregations end up carrying coverage that does not actually reflect how they operate. Based in Boxford, MA he works primarily with medium and large churches throughout Massachusetts and the US to build insurance and risk programs designed around how ministry actually operates. Reach Jake at [email protected] or 978.712.0111.

Jake Lubinski