FFRF's major legal coup in 2007 was ending the first chaplaincy for state workers ever set up in the nation, in which a pastor was hired by Indiana to bring "faith into the workplace" for state employees in the Family and Social Services Administration. The state abolished the chaplaincy and fired the chaplain in the fall of 2007, ending the lawsuit. The lawsuit brought media attention, resulting in several exposes in Indiana newspapers revealing that in nearly 18 months and after $120,000 in tax money, the program had met few of its goals.
The Foundation and four of its Indiana members and taxpayers filed a lawsuit on May 2, 2007, in the courtroom of Judge David Hamilton, U.S. District Court of the Southern District of Indiana, challenging the creation of a chaplaincy for the Indiana Family and Social Services Administration (FSSA). The FSSA hired Pastor Michael L. Latham, a Baptist minister, in 2006, at a salary of $60,000 a year, paid with revenue from state taxpayers. The job description stated that Rev. Latham "serves as the Chaplain for the Family and Social Services Administration and functions as a staff advisor on all problems involving spiritual needs of the employees. He also serves as the strategic director for policy, procedures and communication efforts on faith-based services. The position reports directly to the FSSA Chief of Staff." The job description required the chaplain to be an ordained or licensed minister, who will minister to FSS employees, develop a statewide network of volunteer ministers, train staff to encourage a "faithful environment in the workplace," participate in outreach to faith-based groups and prepare "faith-based services, including for legislators and service providers.