They are an employee of the Diocese they are in. that’s what it says on my Pastor’s W-2 form.
The big test is what the Court of Appeals will say once this gets appealed. I note the case was filed in a 9th Circuit court so that’s who will hear the appeal. I’m sure that’s not a coincidence.
First of all, it will limit losses from lawsuits starting at the congregation/diocese level. In other words, the Lincoln diocese has no financial obligation (under the law) for what happens in the Davenport diocese.
But, from experience, the next step will not be pretty. By doing this, every diocese and in some cases every congregation is a stand alone congregation. The Vatican and even the local Bishop will not have any legal control over them. Just wait till a diocese decides it wants bishop A when the Vatican says bishop B.
A similar thing happened in the LCMS a few years ago, after 911 (long story). You ended up with a court ruling stating that the local pastors were not employees of the Synod, which led to a lot of chaos.
The way that churches are incorporated in the US is insane, and in many ways hypocritical. The legal paperwork does not match the doctrine.