7th Circuit Determines Collective Bargaining Agreement Confers Property Interest

March 19, 2021

The U.S. 7th Circuit Court of Appeals (whose rulings apply to all Wisconsin employers) recently applied Illinois law to determine whether a collective bargaining agreement (CBA) conferred a property interest protected by the Fourteenth Amendment’s Due Process Clause. The court concluded that, when considered as a whole, the CBA did confer such a property interest. The case serves as an important reminder to employers that when negotiating or drafting a CBA, it’s critical to understand how the agreement will be read and considered as a whole to ensure it doesn’t confer more rights than intended.

Facts

Joshua Cheli worked for the Taylorsville Community School District as a computer systems administrative assistant. On September 28, 2018, his superiors (the superintendent and the computer services director) called him into a meeting during which he was terminated because a female student alleged he had sexually harassed her. He denied the allegations, but his superiors said a conclusion had already been reached on the matter.

On October 9, the school board entered a resolution memorializing Cheli’s termination. He didn’t receive notice of the board meeting, nor did he receive written notice of the charges or evidence against him.

After passing the resolution, the school board sent Cheli a notice of termination stating “the basis or grounds for discharge include incompetence.” The notice said he could ask for the written report the superintendent submitted about the reasons for his discharge. The district failed, however, to provide a copy upon his request.

A CBA governed Cheli’s employment with the district and contained a section titled “Discipline or Dismissal,” which stated:

8.1 An employee may be disciplined, suspended, and/or discharged for reasonable cause. Grounds for discharge and/or suspension shall include, but not be limited to, drunkenness or drinking or carrying intoxicating beverages on the job, possession or use of any controlled and/or illegal drug, dishonesty, insubordination, incompetency, or negligence in the performance of duties.

8.2 A conference with the employee shall be held prior to any suspension and/or discharge.

8.3 An employee shall have the right to a representative of his/her choice in any meeting which may result in suspension and/or discharge.

8.4 A written explanation for the suspension and/or discharge shall be given the employee so affected.

8.5 Upon initial employment with Taylorville Community Unit School District #3, non-certified employees will serve a one hundred twenty (120) day probationary period. During the period, the probationary non-certified employee will be an at-will employee. If the employee’s work is deemed unsatisfactory by the Administration and the Board during this period, the Board, at its discretion, may terminate the employment.

The district’s policy manual incorporated the CBA and provided additional detail about employee termination policies. The manual included a section titled “Employment At-Will,” which provided:

Unless otherwise specifically provided, District employment is at-will, meaning that employment may be terminated by the District or employee at any time for any reason, other than a reason prohibited by law, or no reason at all. Nothing in School Board policy is intended or should be construed as altering the employment at-will relationship.

Exceptions to employment at-will may include employees who are employed annually, have an employment contract, or are otherwise granted a legitimate interest in continued employment. The Superintendent is authorized to make exceptions to employing non-licensed employees at-will but shall maintain a record of positions or employees who are not at-will.

Cheli sued the district, claiming it violated his due process rights under the Fourteenth Amendment. Specifically, he claimed the CBA gave him a protected property interest in his employment. The district filed a request to dismiss the claim, asserting he had failed to state a claim upon which relief could be granted because he never had a protected property interest in his employment.

The U.S. District Court for the Central District of Illinois granted the school district’s request to dismiss. Cheli appealed the decision.

7th Circuit’s Decision

Under Illinois law, an individual has a property interest in his job only when he has a legitimate expectation of continued employment based on a legitimate claim of entitlement. To demonstrate he has a legitimate expectation of continued employment, he must point to a specific ordinance, state law, contract, or understanding limiting the ability of the state or state entity to discharge him. Illinois, like the vast majority of other states, assumes an employment relationship without a fixed duration is terminable at-will. The presumption of at-will employment can be overcome, however, if it’s shown the parties contracted otherwise, either expressly or impliedly.

Cheli pointed to the CBA as the contract establishing his legitimate expectation of continued employment. To show a protected property interest in the employment context, the terms of employment must generally provide termination will only be “for cause” or otherwise demonstrate there’s a mutually explicit understanding of continued employment. To determine whether the CBA provided the district could terminate him only for cause, the court was required to interpret the agreement’s plain language.

Section 8.1 of the CBA

The court began by analyzing Section 8.1 of the CBA, which stated “an employee may be disciplined, suspended, and/or discharged for reasonable cause” (emphasis added). The “for reasonable cause” language is similar to the “just cause” language courts regularly hold to create an expectation of continued employment for purposes of the due process analysis. The district argued, however, the phrase “may be” was permissive, meaning that while an employee may be terminated “for reasonable cause,” the district wasn’t required to find “reasonable cause” before letting an employee go. Conversely, Cheli argued the language was mandatory, meaning the district could terminate employees only “for reasonable cause.”

Under Illinois law, when courts construe contracts, they should adopt a construction that ascribes meaning to every clause, phrase, and word used, which requires nothing to be rejected as meaningless, which in turn avoids the necessity of supplying any word or phrase that isn’t expressed and harmonizes all the various parts so that no provision conflicts with or neutralizes another.

Using the foregoing principles, the 7th Circuit reversed the district court’s decision and held the only way the school district could terminate employees who were parties to the CBA was by showing “reasonable cause.” Because Section 8.1 confined its discretion to terminate Cheli (a deviation from the presumption of at-will employment), he had a protected property interest in the employment.

The other language in Section 8.1, which lists certain employee conduct that would establish “reasonable cause” for termination, further supports the court’s conclusion. If the school district could fire employees for any reason at all, the language would be rendered unnecessary, an outcome courts seek to avoid when interpreting contracts.

Section 8.5 of the CBA

The court went on to analyze the language in Section 8.5 of the CBA about the probationary period. The section expressly provided a 120-day probationary period during which an employee “will be an at-will employee,” and the “Board, at its discretion, may terminate the employment.”

The court reasoned that if new employees were expressly classified as at-will employees, by implication, employees serving longer than 120 days were not at-will employees. If that weren’t the result, the contract language would be meaningless. Because it was undisputed Cheli had worked for significantly longer than 120 days, he had a property right to continued employment.

Importantly, though, the court clarified the mere existence of a probationary period in a CBA doesn’t, by implication, create an enforceable property right in continued employment for nonprobationary employees. Under the facts of Cheli’s case, however, the probationary period language coupled with the “for reasonable cause” language gave rise to an affirmative, clear promise of a property interest.

Sections 8.2-8.4 of the CBA

Finally, the court noted the clearly articulated termination and grievance procedures in Section 8.2-8.4 of the CBA also weighed in favor of its conclusion that the CBA conferred a property interest. The court was careful to note the presence of the procedures, standing alone, isn’t necessarily indicative of a deviation from at-will employment.

Such procedures, however, are a fundamental and necessary part of an employment contract, which provides for an employee’s discharge only for just cause. Once again, if employees who were parties to the CBA were truly at-will employees who could be terminated without cause, the contract language would be meaningless because the school district could terminate them for any reason without undergoing any of the procedures.

The presence of the procedures, in conjunction with the probationary period language and the “for reasonable cause” language, lent itself to the conclusion that Cheli had a protected property interest in continued employment. Cheli v. Taylorville Community Sch. Dist., no. 20-2033 (7th Cir., Feb. 3, 2021).

Bottom Line

Although the court applied Illinois law in rendering its decision, because all states within the 7th Circuit presume employment is at-will, the takeaway is universal. The court didn’t arrive at its decision based on any single provision in the CBA. Rather, it relied on three distinct sections of the CBA to conclude that it conferred a property interest protected by the Due Process Clause.

When drafting or negotiating CBAs, you should enlist the assistance of counsel to ensure the agreement is drafted with the appropriate level of specificity and doesn’t grant more rights than you intend. It’s critical to understand how all sections of the agreement will read as a whole. If you intend to retain the presumption of at-will employment, the CBA should include express language to that effect and shouldn’t contain any language that could be interpreted to contradict the presumption.

This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.