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Federal laws, as well as the laws of many states, permit churches and religious schools to discriminate in employment decisions on the basis of religion. As a result, religious employers are free to employ only persons of a certain religious faith. They also are permitted to impose their religious standards upon their employees, and they may discipline or dismiss employees who violate those standards. However, religious employers may not apply religious standards in a way that discriminates against a protected class of employees, such as women, minorities, the aged, or disabled. A federal appeals court ruled that a church school may have violated a federal ban on employment discrimination based on pregnancy when it dismissed a female employee who was four months pregnant on the day she was married.

The plaintiff sued the church, claiming that it had unlawfully discriminated against her on the basis of pregnancy in violation of Title VII of the Civil Rights Act of 1964, which prohibits discrimination in employment on the basis of several grounds including gender or pregnancy. Title VII applies to any employer engaged in interstate commerce and having 15 or more employees.

In arguing that she was singled out for termination because of her pregnancy, the plaintiff testified that she was aware of one teacher who taught at the school while pregnant and separated from her husband during at least part of the pregnancy.

The church insisted that the "ministerial exception" required the plaintiff's lawsuit to be dismissed. The ministerial exception generally prohibits the civil courts from resolving employment disputes between churches and their ministers.

The court agreed that this rule has been applied in some cases to non-ordained church employees whose primary duties consist of "teaching, spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship." However, the court concluded that the ministerial exception did not apply in this case since the plaintiff's teaching duties were primarily secular, and her religious duties were limited to one hour of Bible instruction per day and attending religious ceremonies with students once per year. The court stressed that there was no evidence that the plaintiff included church teachings when she taught secular subjects.

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However, the court cautioned that even if a church employee's primary duties do not implicate the ministerial exception, it may resolve the employee's discrimination claims only if it can do so without "impermissibly entangling the court in matters of religious doctrine" in violation of the First Amendment's nonestablishment of religion clause. The court noted that the risk of impermissible entanglement is greatest "in situations … where a secular court is asked to second-guess a religious organization's decision to terminate a member of its clergy." In contrast, "employment disputes that a court can decide without having to question the validity or plausibility of a religious belief, or having to favor a certain interpretation of religious doctrine, do not pose a similar risk." Indeed, judicial resolution of a discrimination claim brought by a lay employee against a religious employer "generally does not run the risk of excessive entanglement, as such an inquiry constitutes only the sort of routine regulatory interaction which involves no inquiries into religious doctrine, no delegation of state power to a religious body, and no detailed monitoring and close administrative contact between secular and religious bodies."

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