(Cincinnati, Ohio) A federal appeals court was asked Tuesday to reinstate a lawsuit accusing a Baptist childcare agency of proselytizing youngsters in its care and firing gay employees.

It asserts that Kentucky Baptist Homes has no right to accept public funding while imposing religious dogma on the children in its programs, and that the Homes’ religion-based anti-gay employment policy violates civil rights laws.

The lawsuit was filed on behalf of Alicia Pedreira, a former employee at the Louisville home who worked with troubled young people. Despite her excellent performance reviews, Pedreira was terminated in 1998 after officials at the facility learned she is a lesbian.

A federal district court dismissed the case last year, ruling that the plaintiffs do not have legal standing to bring it.

Americans United and the ACLU Tuesday asked the 6th U.S. Circuit Court of Appeals to reinstate the case.

The lawsuit also asks the appeals court to strike down public funding for Kentucky Baptist Homes.

In the appellate brief filed with the 6th Circuit, Americans United and the ACLU note numerous examples of the religious nature of the childcare agency. Its president has touted the Homes’ success in converting children, and the agency calls itself “Christ centered.”

The document also cites a report by the Children’s Review Program, a private contractor hired by Kentucky officials to monitor programs for children. The report noted numerous instances where young people complained about being forced to attend Baptist services or said they were not permitted to attend services of other faiths.

The federal court action comes at a time when government support for “faith-based” social services remains a deeply controversial national issue. Former President George W. Bush supported government funding of religion and religiously based job discrimination through his faith-based initiative. President Barack Obama has drawn criticism for continuing the Bush plan.

“This is a vitally important lawsuit for all Americans,” said the Rev. Barry W. Lynn, Americans United executive director. “It will determine whether taxpayers can be forced to subsidize religious indoctrination and religious discrimination. The civil rights and civil liberties of every American are very much at stake.”

Ken Choe, a senior staff lawyer with the American Civil Liberties Union’s Lesbian, Gay, Bisexual & Transgender Project, said, “This case illustrates the all-too-real dangers of the government funding religious organizations without adequate safeguards. Alicia Pedreira was fired because she didn’t conform to the religious beliefs of her government-funded employer.”

There is no indication when the court will issue a ruling.