

                  UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT
                                           

No. 96-2328

                         GUADALUPE ROJAS,

                      Plaintiff - Appellant,

                                v.

                     LAWRENCE FITCH, ET AL.,

                     Defendants - Appellees.

                                           

No. 97-1089

                         GUADALUPE ROJAS,

                      Plaintiff - Appellee,

                                v.

                    DR. LEE H. ARNOLD, ET AL.,

                     Defendants - Appellants.

                                           

          APPEALS FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF RHODE ISLAND

       [Hon. Francis J. Boyle, Senior U.S. District Judge]                                                                   

                                           

                              Before

                     Torruella, Chief Judge,                                                     

                 Campbell, Senior Circuit Judge,                                                         

                    and Boudin, Circuit Judge.                                                       

                                           

     John W.  Dineen, with whom  Yesser, Glasson &amp; Dineen  was on                                                                   
brief for appellant Guadalupe Rojas.
     Scott Glabman, Attorney, with whom J. Davitt McAteer, Acting                                                                   
Solicitor of Labor,  Charles D. Raymond, Associate  Solicitor for                                                 
Employment  and Training, Legal Services, and Harry L. Sheinfeld,                                                                          
Counsel for Litigation,  U.S. Department of Labor,  Office of the
Solicitor, were on brief for appellee Cynthia  A. Metzler, Acting
Secretary of Labor.
     Rebecca Tedford Partington, Assistant Attorney General, for                                          
appellee Dr.  Lee Arnold,  Director, Rhode  Island Department  of
Labor and Training.
     Michael G. Dolan,  with whom Cadwalader, Wickersham  &amp; Taft,                                                                          
and Gerard P. Cobleigh were on brief for appellee Salvation Army.                                

                                           

                         October 9, 1997
                                           

                               -2-

          TORRUELLA, Chief Judge.   Plaintiff-Appellant Guadalupe                    TORRUELLA, Chief Judge.                                            

Rojas,  a  former  employee  of  the  Salvation  Army,  sought  a

declaratory  judgment  that  exemptions  for religious  employers

under  the Rhode Island  unemployment tax  statute and  under the

Federal  Unemployment Tax Act  ("FUTA"), 26 U.S.C.     3301-3311,

violate  the Establishment Clause and the Equal Protection Clause

of  the federal Constitution,  as well as  Article I,    3 of the

Rhode  Island  Constitution,  which   protects  the  Freedom   of

Religion.   She  named as  defendants the  director of  the Rhode

Island  Department of  Employment and  Training  ("DET") and  the

Secretary of the federal Department of Labor.  The Salvation Army

intervened as  a defendant.   The district court rejected  all of

Rojas's substantive  arguments for declaratory  relief, see Rojas                                                                           

v. Fitch, 928  F. Supp. 155,  162-67 (D.R.I. 1996),  and now,  on                  

appeal,  she reasserts her federal Establishment Clause and Equal

Protection claims.  We affirm.

                            BACKGROUND                                      BACKGROUND

          The following facts are not disputed.  Rojas was a paid

employee of the  Salvation Army, serving as a  social case worker

from  1988 to 1994, except  for a short  interruption in 1990 and

1991 when  she worked  for Catholic Social  Services.   Rojas was

not, and  was not  required to  be, a  soldier or  member of  the

Salvation Army  when employed  as a case  worker.   The Salvation

Army   terminated  her  employment  on  March  18,  1994,  citing

financial constraints.  

                               -3-

          Approximately  one month  after her  termination, Rojas

applied for  unemployment insurance benefits  from the DET.   The

DET found that  Rojas was ineligible because her former employer,

the  Salvation  Army,  was  exempt  from  contributing  to  Rhode

Island's unemployment insurance scheme under sections  28-42-8(4)

and 28-44-11 of the Rhode Island General Laws.1  Pursuant to  the

exemption  for religious  employers under section  28-42-8(4), no

taxes were withheld from Rojas's wages by the Salvation Army, and

her income was  not reported  to the  DET.  The  DET's denial  of

benefits was upheld  by a DET referee after a  hearing, and later

the referee's  determination  was  upheld  by the  DET  Board  of

Review.

          On  September 9,  1994, Rojas  initiated  an action  in

federal district court against  the Director of the DET,  seeking

declaratory  invalidation  of  the  exemption  under  either  the

Establishment Clause,2  the Equal Protection Clause,3  or Article

I,     3 of  the  Rhode  Island  Constitution.4   In  an  amended
                                                  

1   In 1987,  the DET  determined that  the Salvation  Army is  a
"church" and thus entitled to  an exemption pursuant to R.I. Gen.
Laws   28-42-8(4).

2  U.S. Const. amend. I  ("Congress shall make no law  respecting
an  establishment of religion,  or prohibiting the  free exercise
thereof . . . .").

3  U.S. Const. amends. V, XIV.

4   Article I,   3 provides, in pertinent part:

          .  .  .  no  person  shall  be  compelled  to
          frequent or to support any religious worship,
          place,  or   ministry  whatever,   except  in
          fulfillment   of   such   person's  voluntary
          contract; nor enforced, restrained, molested,

                               -4-

complaint, Rojas added  the Secretary of the  Department of Labor

as  a defendant,  on the  theory that  FUTA's allowance  of state

exemptions   for   religious  employers   in   the  federal-state

unemployment  insurance system  was an  underlying  cause of  the

Rhode  Island exemption  she challenged.   See 26  U.S.C. 3309(b)                                                        

(FUTA   provision   listing  permissible   employer   exemptions,

including exemption for religious employers).  The Salvation Army

was allowed to intervene, without objection, as a defendant.

          FUTA establishes  a federal-state  unemployment benefit

scheme requiring  employers to pay  a federal excise tax,  see 26                                                                        

U.S.C.    3301 (computing the  tax as  a percentage  of wages  of

covered employees),  but  encouraging the  development  of  state

unemployment  insurance programs  in  the following  ways: first,

employers  paying into a  qualifying state unemployment  fund are

entitled to a  credit on the federal  tax, see 26 U.S.C.    3302,                                                        

and second,  a qualifying  state is entitled  to receive  federal

grants  toward the cost of administering the state's unemployment

                                                  

          or   burdened   in   body   or   goods;   nor
          disqualified  from  holding any  office;  nor
          otherwise suffer on  account of such person's
          religious belief; and that every person shall
          be  free  to  worship  God according  to  the
          dictates of such person's  conscience, and to
          profess  and  by  argument  to maintain  such
          person's opinion in matters of religion;  and
          that  the same  shall  in no  wise  diminish,
          enlarge, or affect the  civil capacity of any
          person.

R.I. Const. art. I,   3.  Rojas also appealed the decision of the
DET board in  state court, a suit  which has been  stayed pending
resolution of her federal civil action. 

                               -5-

compensation  program,  see 42  U.S.C.     503.   Rhode  Island's                                     

unemployment fund qualified for participation in the FUTA system.

          FUTA  exempts   certain  classes   of  employees   from

mandatory  state coverage  by a  qualifying state  plan.   See 26                                                                        

U.S.C.    3309(b).    The current  scope  of  exemptions reflects

amendments made to FUTA by Congress in 1976.  The 1976 Amendments

narrowed  the set  of employees  who  were exempt  from mandatory

state  coverage,  by  requiring,  for  example,  that  previously

exempted school employees be covered.  In 1970 as well, the scope

of FUTA exemptions was narrowed significantly by Congress when it

repealed  a broad exemption previously available to all nonprofit

organizations.    See  generally  California  v.  Grace  Brethren                                                                           

Church, 457  U.S. 393, 397  (1982) (describing the 1970  and 1976                

FUTA Amendments).  

          Currently, the  segments of  the labor  force that  the

states are  not  required to  cover  under FUTA  section  3309(b)

include persons "in  the employ of (A) a  church or convention or

association of churches, or (B) an organization which is operated

primarily   for  religious  purposes   and  which   is  operated,

supervised, controlled, or  principally supported by a  church or

convention or association  of churches."  26 U.S.C.   3309(b)(1).

Also  exempt  are  employees  of  small  nonprofit  organizations

(having  fewer than  four  regular  employees),  see     3309(c),                                                              

elected  state employees, see    3309(b)(3), employees at certain                                       

rehabilitation  facilities,  see     3309(4)(A), and  inmates  of                                          

custodial or penal institutions, see   3309(b)(6).                                              

                               -6-

          The  Rhode Island  Employment  Security Act  ("RIESA"),

R.I.G.L.     28-42-1  et  seq.,  exempts a  variety  of kinds  of                                        

employment from coverage.   See R.I. Gen. Laws    28-42-8 (1995).                                         

Apparently tracking the  language of FUTA, Section  28-42-8(4)(i)

exempts  service performed  "in the  employ of:  (A) A  church or

convention or  association of  churches, or  (B) an  organization

which  is   operated,  supervised,  controlled,   or  principally

supported by a church or  convention or association of churches."

Other exempted  employees under  RIESA include  certain insurance

brokers, golf  caddies, certain rehabilitation  center employees,

and  certain real estate brokers. R.I.  Gen. Laws    28-42-8(11),

(9), (4)(B)(iii), (10).

          The  defendants raised  a  number of  procedural claims

below, all of  which were rejected  by the district court.   Upon

reaching the merits of Rojas's suit,  the district court rejected

all of her claims.  On appeal, Rojas argues that the Rhode Island

and  FUTA  exemptions  for religions  violate  the  Establishment

Clause  and   the  Equal   Protection  Clause   of  the   federal

Constitution, while  the  appellees reassert  their  claims  that

jurisdiction is  lacking because of  the Tax  Injunction Act,  28

U.S.C.   1341 and that the appellant lacks standing.

                            DISCUSSION                                      DISCUSSION

          Because we find that the appellant's claims fail on the

merits, we  need not reach  either the  claim put forward  by the

federal defendant-appellee that Rojas lacks standing to challenge

FUTA or  the claim  put forward  by the  state defendant-appellee

                               -7-

that the  Tax Injunction Act  bars federal jurisdiction  over the

suit.   See  Norton v.  Matthews,  427 U.S.  524, 530-31  (1976);                                          

Hachikian v. FDIC, 96 F.3d 502, 506  n.4 (1st Cir. 1996) ("'It is                           

a  familiar tenet that  when an appeal  presents a jurisdictional

quandary,  yet the  merits of  the underlying issue,  if reached,

will in any  event be resolved in favor  of the party challenging

the   court's  jurisdiction,  then  the  court  may  forsake  the

jurisdictional riddle  and simply  dispose of  the appeal  on the

merits.'")(quoting United  States v.  Stoller, 78  F.3d 710,  715                                                       

(1st Cir. 1996)).

I.  The Establishment Clause Claim          I.  The Establishment Clause Claim

          At the  core of  the Establishment  Clause is the  idea

that  government cannot  "favor  religion over  nonreligion,  nor

sponsor a  particular sect, nor try to encourage participation in

or abnegation of  religion."  Walz v.  Tax Comm'n, 397  U.S. 664,                                                           

694   (1970)  (Harlan,   J.,  concurring)   (noting  that   while

disagreements  over  applications  of  Establishment  Clause  are

common,  its  core ideal  is  well  established).   In  order  to

vindicate this  constitutional  guarantee, two  tests  have  long

guided  judicial review of any challenged legislation: first, the

law  must  have  a  purpose  other than  to  advance  or  inhibit

religion; second,  the primary effect  of the law must  not be to

advance or inhibit religion.  See, e.g., Abington School District                                                                           

v. Shempp, 347 U.S.  203, 222 (1963) ("The test may  be stated as                   

follows:    what  are  the  purpose and  primary  effect  of  the

enactment? If either is the advancement or inhibition of religion

                               -8-

then  the enactment  exceeds the  scope of  legislative power  as

circumscribed  by the Constitution.").  A third practical concern

under  the  Establishment  Clause  is  that  the  net  effect  of

governmental programs avoid  "excessive governmental entanglement

with religion."  Walz, 397 U.S. at 674.                               

          These threads were united in the well-known  three-part

test in Lemon  v. Kurtzman, 403 U.S. 602  (1971), which provides:                                    

"First,  the statute  must have  a  secular legislative  purpose;

second, its principal or primary  effect must be one that neither

advances  or inhibits  religion; finally,  the  statute must  not

foster 'an excessive government entanglement with religion.'" Id.                                                                           

at 612-13 (quoting  Walz)(citation omitted).  The  district court                                  

applied the Lemon test in the course of holding that FUTA and the                           

RIESA did not violate the Establishment Clause.  See 928 F. Supp.                                                              

at 163-66.  This approach was appropriate, for the Supreme Court,

despite  criticisms of previous  applications of the  Lemon test,                                                                     

essentially  confirmed in  Agostini v.  Felton, 117  S. Ct.  1997                                                        

(1997), that the Lemon  criteria still apply.  See 117  S. Ct. at                                                            

2010, 2015.

          In Agostini,  the  Court  overruled  its  Establishment                               

Clause  decision in  Aguilar v.  Felton, 473  U.S. 402  (1985) --                                                 

which  had barred  the  New  York City  Board  of Education  from

sending  public school teachers into sectarian private schools to

teach remedial classes  pursuant to Title  I -- but  nevertheless

stated  that the  general  tests  used  in  analyzing  challenged

legislation under the Establishment Clause  had not changed.  The                                                             

                               -9-

Agostini decision reaffirmed the need to ascertain that laws have                  

a  secular purpose  and  a primary  effect  other than  advancing

religion, see 117 S. Ct. at 2010, and explicitly incorporated the                       

entanglement  prong into the effects calculus, thereby making the

third prong of Lemon a part of the second prong, see id. at 2016.                                                                  

The Court in  Agostini noted that what has  changed since Aguilar                                                                           

are  certain presumptions regarding  the effects of  neutral laws

that incidentally confer  benefits to religions.  See  117 S. Ct.                                                               

at  2010-13 (stating  that  the  Court  no longer  considers  the

presence  of public school employees on parochial school property

to  lead ineluctably to the impermissible  effect of advancing or

endorsing  religion where  their  presence  is  part  of  neutral

program).

          The district  court properly  found that  the FUTA  and

RIESA exemptions  had neither  an impermissible  purpose, nor  an

impermissible effect on  religion.  First, both the  FUTA and the

RIESA  exemption   provisions  serve   the  secular   purpose  of

facilitating the administration of the federal-state unemployment

insurance program by excluding from coverage a variety of workers

whose employment  patterns are irregular  or whose wages  are not

easily accountable.  With regard to FUTA, Rojas concedes that the

original  purpose of  the  coverage  exemptions  was  to  address

administrability  concerns.    She contends,  however,  that  the

current 26 U.S.C.   3309, viewed in the wake of the 1970 and 1976

Amendments, reflects the purpose of favoring religion rather than

the secular purpose  of providing ease of  administration.  Rojas

                               -10-

is unable  to direct  our  attention to,  nor  can we  find,  any

indications  in the  legislative  history of  the  1970 and  1976

Amendments  that suggest  an impermissible  purpose of  advancing

religion in  general  or any  particular  religion.   See,  e.g.,                                                                          

Wallace  v.  Jaffree,  472  U.S.  38,  56  (1985)  ("[T]he  First                              

Amendment requires  that a statute  must be invalidated if  it is

entirely   motivated  by   a  purpose  to   advance  religion.").

Moreover, the  current exemption  for religious employment,  even

after the amendments, still rests within the context of a variety

of  other exemptions,  all  of  which appear  to  share a  common

secular purpose.   Efficient administration  of the  unemployment

compensation  system   is  particularly   enhanced  through   the

exemptions  for religion because  it eliminates the  need for the

government to  review employment decisions  made on the  basis of

religious rationales.  These considerations are  also true of the

exemptions listed in R.I. Gen.  Laws   28-42-8(1).  The exemption

for  religions  contained  therein, when  viewed  in  context, is

innocuous.  It appears to  serve the interest in facilitating the

administration  of   federal  and  state   unemployment  benefits

programs,  and Rojas  can point  to  no other  evidence that  the

"purpose   that  animated  adoption"  was  to  advance  religion.

Edwards v.  Aguillard, 482 U.S.  578, 585 (1987).   In  Walz, the                                                                      

Supreme  Court  upheld  property  tax  exemptions  for  religious

institutions, arguing that such exemptions, although not required

by  the Free  Exercise Clause,  were  valid governmental  actions

"productive   of  a  benevolent   neutrality  which  will  permit

                               -11-

religious  exercise to  exist  without  sponsorship  and  without

interference."     397  U.S.   at  669.     Including   religious

institutions  within   a  set   of  unemployment   tax  exemption

recipients -- selected on the  basis of reducing difficulties  in

administering an unemployment insurance program --  reflects less

of  a desire  to sponsor  religion than  the direct  property tax

exemptions upheld in Walz.                                   

          Rojas's brief  on appeal  places much  weight on  Texas                                                                           

Monthly v. Bullock, 489 U.S. 1 (1989), which struck down a narrow                            

Texas  sales and  use tax  exemption for  "'periodicals that  are

published or  distributed by a  religious faith and  that consist

wholly of  writings promulgating  the teaching  of the faith  and

books that  consist  wholly of  writings  sacred to  a  religious

faith.'"   Id.  at 5  (quoting  Texas statute).   Although  Texas                                                                           

Monthly stands for the proposition that a subsidy that is granted                 

only  to  religious   publications  and  not  to   other  similar

publications "lacks sufficient breadth to pass scrutiny under the

Establishment Clause," it also stated that "[i]nsofar as [a  tax]

subsidy is conferred upon a wide array of non-sectarian groups as

well as  religious organizations  in pursuit  of some  legitimate

secular  end, the fact that religious groups benefit incidentally

does not deprive  the subsidy of the secular  purpose and primary

effect mandated by the Establishment Clause."  489 U.S. at 14-15.

The exemption provisions at issue in the instant case fall within

the latter category.  We decline Rojas's invitation to read Texas                                                                           

Monthly  as requiring that  a provision  incidentally benefitting                 

                               -12-

religion must grant a like benefit to every group that could also                       

conceivably fall within  the secular rationale for  the exemption

provision.        Texas    Monthly    nowhere    requires    this                                            

underinclusiveness analysis, but  instead indicates  that when  a

"wide array" of groups are benefitted by a provision that pursues

a single, unifying,  secular end, one of these  groups may indeed

be religious  institutions.   In Texas Monthly,  the other  Texas                                                        

sales tax exemptions did not serve the same purpose as the narrow

exemption  for religious  periodicals, and  thus their  existence

could  not rescue  the  challenged exemption.    By contrast,  an

adequate array  of groups are  exempted under the FUTA  and RIESA

provisions,  reinforcing  our   conclusion  that  the   religious

exemptions  here   serve  the  legitimate   secular  purpose   of

facilitating  the administration  of  the unemployment  insurance

system.5

          The second  basic Establishment Clause concern  is that

of  avoiding the effective promotion or advancement of particular

religions or of religion in  general by the government.  Although
                                                  

5    We therefore  need not  address the  defendants' alternative
legal argument  in defense of  the exemptions,  namely that  even
were the  exemption provided  only to religions,  it would  still                                            
serve the legitimate  secular purpose of  decreasing governmental
entanglement with religion.  It is well established that "it is a
permissible   legislative   purpose  to   alleviate   significant
governmental   interference   with  the   ability   of  religious
organizations  to define and carry out their religious missions."
Corporation of the Presiding Bishop of the Church of Jesus Christ                                                                           
of  the Latter-Day  Saints  v.  Amos, 483  U.S.  327, 335  (1987)                                              
(upholding  exemption for religious institutions from Title VII's
prohibition  against religious  discrimination in  employment for
secular activities of a nonprofit).  But again, we do not need to
consider whether  the exemptions at  issue here are  supported on
this accommodation rationale.

                               -13-

favoritism toward any  particular sect is not an  issue raised by

this appeal, it is not  disputed that religious institutions as a

whole  benefit  from the  FUTA  and  RIESA  tax exemptions.    An

incidental  benefit to religion does not, however, render invalid

a  statutory scheme  with a  valid secular  purpose.   See, e.g.,                                                                          

Agostini, 117 S. Ct. at  2014; Zobrest v. Catalina Foothills Sch.                                                                           

Dist., 509 U.S. 1 (1993);  Witters v. Washington Dept. of Servs.,                                                                          

474 U.S. 481, 488-89 (1986); Walz,  397 U.S. at 664.  It  is also                                           

worth  noting that while  religious employers may  be benefitted,

the  employees   of  exempted  religious  institutions,   as  the

appellant   has  discovered,  may  be  ineligible  to  enjoy  the

attendant  benefits  of  the  unemployment  compensation  scheme.

Thus, the  primary effect of the  exemptions is not to  force the

general  public to  subsidize  religion.    Rather,  the  primary

practical  effect of the exemptions for religious institutions is

to   exclude  former   employees   of   such  institutions   from

participating in the Rhode Island unemployment insurance system.

          Finally,  as  the  district  court correctly  reasoned,

entanglement concerns are in fact reduced through the adoption of

the exemptions in this case.  See 928 F. Supp. at 165.                                           

II.  Equal Protection          II.  Equal Protection

          With  regard to Rojas's  claim that the  FUTA and RIESA

tax  exemptions for  religious  employers violate  constitutional

equal protection  principles, we  affirm the  district court  for

substantially the grounds given in its opinion.  See 928 F. Supp.                                                              

at  166.   Although  Rojas  recasts  her equal  protection  claim

                               -14-

slightly  on appeal,  arguing that  the district  court erred  by

focusing on the difference in treatment of employers  rather than

on the  difference in treatment  of employees of exempt  and non-

exempt  entities,  the rationality  requirement  under  the equal

protection clause  is equally lenient  from either vantage.   The

same considerations that led the  district court to find no equal

protection violation with  regard to the difference  in treatment

of exempt  and non-exempt  employers applies  to exempt  and non-

exempt employees as well.

                            CONCLUSION                                      CONCLUSION

          For  the  reasons  stated above,  the  decision  of the

district court is affirmed.                             affirmed                                    

                               -15-
