The architecture of breach: We can violate your contract and you can’t do anything about it

It may have been disconcerting to San Francisco State University professors last week when university spokespersons referred publicly to their employment contracts as “perceived commitments.” As is typical among university administrators, SFSU deans often enter into contracts with current and prospective faculty members to entice them to decline outside job offers and to recruit them from other universities. What appears to distinguish SFSU from other campuses, according to a recent Inside Higher Education story, is that after professors comply with their parts of the bargains, administrators sometimes decline to honor the deals, usually without facing any consequences.

Readers unfamiliar with contract law may be surprised to learn that faculty members have been unable to hold university officials accountable for breaching written employment agreements, especially when the terms of those agreements are clear and when faculty members rely on them to their detriment — for example, by resigning from more prestigious universities to join a lower-ranked campus. In fact, it can be quite easy for administrators at California’s public universities to breach agreements without suffering consequences, because public employees often face significant obstacles in enforcing employment contracts, whether or not that seems fair.

Enforcing employment contracts with public employers has been particularly challenging in California. According to one reading of Miller v. State of California, a little-known case that the California Supreme Court decided in 1977, public employees cannot hold their employers accountable for breach of contract. Walter Miller was a state employee when California reduced the mandatory retirement age from 70 to 67. Miller sought to remain in his job until the age of 70, but the Court ruled that he could not do so, because “public employment is not held by contract but by statute and … no employee has a vested contractual right to continue in employment beyond the time or contrary to the terms and conditions fixed by law.”

For a generation following the 1977 case, California Courts often read the Miller decision broadly. Rather than finding that public employees could not assert contractual rights that never existed in the first place, some courts seemed to hold that public employees could not assert any contractual rights with their employers aside from rights authorized expressly in statute or contained in collective bargaining agreements. This meant that if an employee and employer entered into a contract that the employer subsequently breached, the employee might potentially have no way to force the employer to comply.

For instance, when former University of California employee Jo Kim sued the UC regents for violating the terms of her employment contract by compelling her to work overtime without compensation, a superior court cited the Miller decision to conclude that the terms of Kim’s employment were determined by law, not by contract, and that public employees could not sue their employers for breach of contract. The Kim decision in 2000 is one of a number of cases in which California courts cited Miller in refusing to allow public employees to hold their employers accountable for breach of contract.

At San Francisco State University, administrators have understood quite well that when they violated faculty members’ employment contracts, the Miller decision could shield them from accountability. In response to a professor’s threat in 2015 to sue SFSU over a breached contract, a university attorney responded via email that the faculty member “could not state a breach of employment contract claim against the University. It is well established that public employment is held by statute, not by contract, and no public employee can make a viable claim for breach of employment contract. See Miller v. State of California …”

Translation: We can breach your contract and you can’t do anything about it.

The robustness of SFSU’s breach strategy derives from a number of other factors as well. Because breach of contract claims do not generally entail punitive damages, attorneys tend to be unwilling to take breach cases on a contingency basis. As a result, professors seeking to enforce a breached contract must usually pay their attorneys on an hourly basis, and fees can accumulate quickly. Moreover, given that the university’s collective bargaining agreement requires employment disputes to be adjudicated in an internal grievance resolution process that usually culminates in arbitration, not court, there would be no legally-binding precedent even in the event of an adverse judgment against SFSU.

The final factor sustaining SFSU’s breach strategy is the lack of accountability for administrators who offer unconvincing rationales for breach. Because it is impossible for professors to question SFSU’s rationales for breaching contracts in court, and expensive for them to do so via the internal grievance resolution process, SFSU has been able to get away with violating agreements on the basis of some invalid rationales. In one of the cases documented in the Inside Higher Education story, former Attorney General of California Bill Lockyer concluded that SFSU’s rationale for breaching a professor’s contract was “wrong as a matter of law” and that SFSU’s conduct has been “unconscionable and illegal.”

Despite the difficulty of holding public employers accountable for breach of contract, the tide may be turning. After the publication of last week’s Inside Higher Education piece, a professor distributed a survey to almost all of SFSU’s tenure- and tenure-track faculty members. Of the 58 respondents, 25 (43 percent) answered affirmatively to the question, “Have administrators ever broken an agreement with you?” In responses to open-ended questions, many survey respondents indicated that their stories resembled the four cases documented by Inside Higher Education, in that written hiring, recruiting or retention contracts had been breached. Since the publication of the story, SFSU professors have petitioned the Academic Senate to request a strong campus policy prohibiting breach of contract.

As they make their case, SFSU professors and other public employees seeking to enforce breached contracts have a relatively new legal tool at their disposal. In November 2011, California’s Supreme Court overturned a key element of the Miller case in ruling that “[w]e wish to caution that our ‘often quoted language that public employment is not held by contract’ has limited force where, as here, the parties are legally authorized to enter (and have in fact entered) into bilateral contracts to govern the employment relationship.”

While the facts of the 2011 case did not pertain to a university setting, the Court was clear that its reasoning applies to public universities, as it offered a lengthy citation to a 1997 case, Shaw v. Regents of University of California, in explaining its 2011 ruling: “We find no merit in the University’s suggestion that as a public employee who is employed pursuant to statute, not contract, Shaw has no vested contractual right in his terms of employment, such terms being subject to change by the University … When a public employer chooses instead to enter into a written contract its employee (assuming the contract is not contrary to public policy), it cannot later deny the employee the means to enforce that agreement.”

While it may have been possible for public employers to violate contracts without facing any consequences in the past, the Miller decision no longer shields government entities from breach of contract claims. Public officials cannot simply reframe employment contracts as “perceived commitments” just by saying so. Violating employment contracts is ethically dubious and strategically questionable for entities such as universities that rely on agreements to recruit and retain faculty. What’s also clear in light of recent legal precedent, and as the former California Attorney General explained in the context of one of the cases at SFSU, violating employment contracts in California is illegal.

David Gamage is a law professor specializing in contract law at UC Berkeley.

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