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Federal Court Rejects A Breach Of Contract Claim Against An ESC Following A Reduction In Force

In the case of Umali v. Edn. Service Ctr. Of Lake Erie W., N.D. Ohio No. 3:15CV02663, a federal district court rejected a breach of contract claim against an educational service center (“ESC”) following a reduction in force.

The case involved a student services director (“Director”) who was in the second year of a three year administrative contract when the ESC suspended the director’s written contract for financial reasons. The administrative contract specifically incorporated a governing board policy regarding reductions in force. The director argued that the ESC breached his administrative contract when it failed to comply with a provision in the policy which specified that the primary factor in any reduction in force will be the best interest of the ESC. In the director’s humble opinion, “his educational accomplishments, training, experience, and unblemished prior performance made” his retention over other employees in the best interest of the ESC. And by not keeping him, the ESC ignored the administrative reduction in force policy and breached his contract which referenced this policy.

The court rejected this novel argument. There are two takeaways from this case. One is that, by expressly incorporating the administrative reduction in force policy into the director’s contract, the ESC opened itself up to a breach of contract claim. The second is that courts are reticent to second guess the business judgments of employers with regard to personnel decisions. As the federal district court stated, it did not wish “to substitute willy-nilly [its] subjective, largely uniformed sense of what was ‘best’ for that of the agency’s Governing Board.” This means that, so long as public employers follow the procedural requirements in implementing a reduction in force, a court is unlikely to examine the business justification for that reduction – particularly when that reduction in force is based on financial reasons.

Authors: Matthew John Markling and Patrick Vrobel.

Note: This blog entry does not constitute – nor does it contain – legal advice. Legal jurisprudence is like the always changing Midwestern weather. As a result, this single blog entry cannot substitute for consultation with a McGown & Markling attorney. If legal advice is needed with respect to a specific factual situation, please feel free to contact a McGown & Markling attorney.

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