Seventh Circuit Rules Indiana’s Reduction-In-Force Statute Unconstitutional as Applied to Tenured Teachers

In a note-worthy and important decision for Illinois school districts to monitor, the Seventh Circuit Court of Appeals (which covers Illinois, Indiana and Wisconsin) recently ruled that Indiana’s newly enacted reduction-in-force law was unconstitutional as it applied to tenured teachers. Indiana’s new reduction-in-force law, similar in some ways to SB 7 in Illinois, required that teachers be laid off only “on the basis of performance rather than seniority”.

The Board of Trustees of Madison Consolidated Schools, in reliance on this new reduction-in-force statute, laid off tenured teacher Joseph Elliot, while simultaneously retaining several non-tenured teachers in positions for which Elliot was qualified. Indiana’s tenure statute has been construed as forming an employment contract between the teacher and the school corporation.  Elliot sued, claiming that Indiana’s new law violated the U.S. Constitution’s Contract Clause, which prohibits states from passing any law impairing the obligation of contracts.  The Seventh Circuit agreed with Elliot, ruling that Indiana’s new law, requiring schools to lay off teachers only on the basis of performance, not seniority, “substantially impaired Elliot’s tenure contract rights by disrupting his reasonable contractual expectations” and, therefore, violated the Contracts Clause of the U.S. Constitution.

The Court stated that retroactively applying Indiana’s new law to dismiss Elliot, a tenured teacher, in favor of non-tenured teachers was fundamentally unfair because Elliot and teachers like him “built their entire careers relying on the contractual rights” guaranteed by tenure. According to the Court, people in Indiana entered the teaching profession expecting to gain tenure, which, once earned, could not be taken away as long as their performance remained satisfactory. Indiana’s change to its reduction-in-force law took away this reasonably relied on contractual guarantee of job security in a way that no person could have foreseen when entering the teaching profession. This result, the Court held, amounted to a broken promise in violation of the Constitution.

Illinois’ reduction-in-force statute, SB 7, is similar in some respects to the Indiana statute found unconstitutional by the Seventh Circuit.  However, SB7 does allow for consideration of the seniority of teachers in making reduction-in-force decisions (e.g., RIF Groupings 3 and 4).  Additionally, Illinois’ tenure statute, unlike Indiana, has not been interpreted as forming an “employment contract” between the teacher and school district. While Illinois schools should continue to follow SB 7, they should consult with legal counsel in the event of any similar lawsuits filed in Illinois by teachers subject to a reduction in force.

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