William H. Widen, Professor of Law at the University of Miami School of Law, in Coral Gables, Florida discusses the emerging issues with tenure and employment contracts...
The Kansas Board of Regents recently voted to endorse a policy making it easier to terminate tenured faculty members. Under existing policy, a Kansas state university first must recognize a “financial exigency.” If implemented, under the new policy a university could reduce tenured faculty positions without that declaration. This would make termination of a tenured faculty member easier, arguably changing contracts of employment represented by tenure.
This proposed change raises an interesting question under the Contract Clause of the United States Constitution.? Article I, Section 10, Clause 1 provides in relevant part: “No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . .”? This clause applies to state laws (not federal), and “Law” does not include court decisions. Thus, a court might give relief by excusing or changing performance due under a contract based on doctrines of excuse such as impossibility, impracticability or frustration of purpose. Parties might have agreed to a “force majeure” clause in a contract. A court legitimately interprets a force majeure clause to decide whether it covers the COVID-19 pandemic. This was the issue when an arbitrator decided that a force majeure clause allowed the University of Akron to lay off union faculty. And, contractual obligations might be compromised or discharged under Federal bankruptcy law.
The question remains: does the United States Constitution allow Kansas to make a material change to its own contractual obligations in the face of an emergency, but without recognizing a “financial exigency” as required by the existing policy? A subsidiary question is whether the Kansas Board of Regents is acting in a legislative capacity by endorsing the policy so as to fall within the Constitutional prohibition.
In Home Building & Loan Ass’n v. Blaisdell, the Supreme Court upheld a Minnesota mortgage moratorium law which delayed foreclosures contrary to the contract terms, reasoning that the emergency of the Great Depression “may justify the exercise of [the State’s] continuing and dominant protective power notwithstanding interference with contracts.” In this case, the Court expanded state power to address purely economic emergencies without “impairing” the obligation of contract in a constitutionally impermissible way. A closely divided Court, in an opinion by Chief Justice Hughes, stated that “emergency may furnish the occasion for the exercise of power . . .” Arguably, Kansas faces such an economic emergency. But, in Blaisdell, the issue centered on a moratorium and not a termination of a contract. Moreover, Minnesota did not purport to pass a law that affected its own obligations. In Blaisdell, Minnesota explicitly recognized an emergency—while Kansas seeks to avoid the declaration of “financial exigency.”
Though in modern times the Contract Clause is largely moribund, it is still part of the Constitution. The Court used it in United States Trust Co. v. New Jersey to strike down an attempt to eliminate a restrictive covenant in a state bond obligation. Justice Blackmun stated: “It long has been established that the Contract Clause limits the power of the States to modify their own contracts as well as to regulate those between private parties.” An employment contract providing tenure involves a financial obligation. As stated in United States Trust, “[t]he instant case involves a financial obligation, and thus, as a threshold matter, may not be said automatically to fall within the reserved powers that cannot be contracted away.” Application of the Constitutional standard does not give complete deference to determination by a legislature because the self-interest of a state is involved. Eliminating tenured faculty positions is not strictly necessary to meet the financial difficulties Kansas faces—the Constitution does not allow Kansas to place this option “on a par with other policy alternatives” because of its self-interest if that action is taken by legislative act.
Thus, the question arises whether the United States Constitution prohibits Kansas from making a retroactive change to the protection of tenure in existing employment contracts via the action of its Board of Regents. Beyond the specifics of this case, the Kansas situation raises the more general question of whether we should expect a resurgence in Contract Clause challenges to state legislative actions responding to challenges posed by the COVID-19 pandemic. These concerns differ from those relating to the scope of force majeure clauses and common law excuses which have generated so much attention as of late. Parties should remain alert for possible violations of the Contract Clause as state responses to the pandemic continue to unfold.
William H. Widen is a Professor of Law at the University of Miami School of Law.
Suggested citation:?William H. Widen, Kansas, Crisis, Tenure and the US Contracts Clause, JURIST – Academic Commentary, January 25, 2020, http://www.itbkb.cn/commentary/2021/01/william-widen-kansas-tenure/.
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