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Not Renewing an Employment Contract Could Lead To a Discrimination Suit

In order to bring a lawsuit based on federal anti-discrimination laws such as Title VII or the Age Discrimination in Employment Act (ADEA), an employee has to show there was an “adverse employment action.” That term has generally been interpreted to include actions such as discipline, discharge, demotion, or a failure to hire. But what about failing to renew an employment contract? Under principles of contract law and constitutional law, parties are generally free to decide whether they want to enter into a contract. Following a recent opinion of the U.S. Court of Appeals for the Second Circuit, however, employers who fail to renew an employment contract based on illegal discrimination may face significant damages.

In Leibowitz v. Cornell University, Margaret Leibowitz, a contract teacher alleged her five-year contract was not renewed because of her age, in violation of the ADEA, and her sex, in violation of Title VII. She began teaching for Cornell in 1983 and has had her contract renewed three times. During her last term, she complained to the dean that the compensation she received to cover her travel was inadequate and negotiated for a higher amount. Leibowitz alleged that although male faculty members commonly negotiated for more compensation, her efforts were labeled by the dean as “forceful,” “demanding,” and “pushy.” Leibowitz also pointed to the fact that during the relevant time period, Cornell laid off five other employees who were all female and over 50.

Although the trial court ruled that a nonrenewal of a contract is not an “adverse employment action,” the U.S. Court of Appeals for the Second Circuit (which covers New York, Connecticut, and Vermont) reversed. The court, ruling on this issue for the first time, reasoned that it did not make sense to allow an employee to file a discrimination suit if the employer failed to hire based on age or gender, but not if the employer failed to renew an employment contract for the same discriminatory reasons.

The lesson is simple: employers must treat contract renewal situations like hiring/firing situations or be prepared to defend their decision. Decisions which are, or appear to be, based on unlawful discrimination may lead to expensive litigation and possibly a significant damages award.

Brody and Associates regularly provides counsel on civil rights issues and employment litigation in general. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.