COURT OF APPEALS ISSUES DECISION UPHOLDING PAID ADMINISTRATIVE LEAVE OF SCHOOL BUSINESS MANAGER
March 12, 2019
The Wisconsin Court of Appeals recently issued a noteworthy decision in a case involving a Business Manager who was placed on paid administrative leave pending an investigation related to his job performance. Specifically, in Towle v. Kerr, No. 2017AP2528, 2019 WL 367035 (Wis. Ct. App. Jan. 29, 2019), the Business Manager filed suit in state court against the District Administrator, School District, and Board of Education, alleging contract claims, as well as due process claims under state and federal law. The federal claim was addressed separately by the federal court in Towle v. Bd. of Educ. Sch. Dist. of Brown Deer, No. 11-CV-542-JPS, 2016 WL 5478421 (E.D. Wis. Sept. 29, 2016). Both the state court and federal court found in favor of the District. Specifically, the District did not breach its contract with the Business Manager by placing him on paid administrative leave pending an investigation, and there were no violations of due process. Although the decisions of both courts are unpublished, they will likely serve as persuasive value in similar cases.
The Business Manager was hired by the District in February 2007. The term of his most recent contract was July 1, 2008 to June 30, 2010. On February 9, 2009, the District Administrator placed the Business Manager on paid administrative leave pending an investigation into “financial irregularities.” Id., ¶2. The District Administrator informed the president of the local education association about the Business Manager’s paid administrative leave as labor negotiations were in process and the Business Manager was on the District’s bargaining team. Id., ¶3. The president of the local education association informed eleven (11) members of the association. Id. An auditing firm conducted the investigation and found irregularities. Id., ¶5.
The Business Manager requested to return to work but the District Administrator continued his paid administrative leave. Id., ¶5. The Business Manager and District entered into a Memorandum of Understanding under which the District would provide letters of reference. Id., ¶6. In July 2009, the Business Manager filed a notice of claim with the District seeking damages and reinstatement. Id., ¶7. On November 3, 2009, the District provided notice that it was considering non-renewal. Id. Approximately a week later, the District denied the Business Manager’s notice of claim. Id.
The District Administrator intended to recommend that the Board non-renew the Business Manager’s contract. Id., ¶8. However, the District cancelled the non-renewal hearing when the Business Manager submitted his resignation effective July 1, 2010. Id., ¶9. The Business Manager had signed a contract of employment with a new school district in Illinois. Id.However, the Illinois school district later rescinded its offer after the local news media published articles related to the Business Manager’s administrative leave. Id., ¶10. The District Administrator then issued a public statement summarizing what occurred. Id.
The Business Manager subsequently filed suit against the District Administrator, District, and Board alleging contract-based claims and due process violations. Because one of the claims fell under federal law, the District Administrator brought the case before the federal court.
Federal Law Claim
The only federal claim in the case involved an alleged deprivation of a liberty interest without due process (a property interest was not alleged). Towle v. Bd. of Educ. Sch. Dist. of Brown Deer, 2016 WL 5478421 at *2. The Business Manager was required to show that (1) he was stigmatized by the District’s actions; (2) the stigmatizing information was publicly disclosed; and (3) he suffered a “tangible loss of other employment opportunities as a result of the public disclosure.” Id. at *6.
The court found that the e-mail notification to the local education association members was not a public disclosure. Id. at *8. Next, the court found that the District Administrator’s general statement to the media regarding the Business Manager’s business management skills was not “sufficiently stigmatizing to give rise to a liberty interest.” Id. at *9. After finding in the District’s favor on this claim, the court sent the remainder of the case back to state court.
State Law Claims
The lower court found in favor of the District. The Business Manager then appealed to the Court of Appeals. As to his breach of contract claim, the Business Manager argued that the District breached his contract by not allowing him to perform his duties and by constructively discharging him. The Court of Appeals found that the contract did not prohibit the District from placing the Business Manager on a paid administrative leave pending an investigation related to his job performance and that this was distinguishable from cases involving a unilateral reassignment of one’s position. Towle v. Kerr, 2019 WL 367035, ¶18. In addition, the Court found that the Business Manager was not constructively discharged, as there were no facts to suggest that the District Administrator had engaged in harassing behavior or created an “intolerable” working environment. Id., ¶21.
With regard to the Business Manager’s other contract-related claims, the Court upheld the lower court’s decision. Specifically, the Court affirmed the lower court’s dismissal of the Business Manager’s claim for tortious interference with contracts because the Business Manager failed to comply with the notice of claim statute and based on governmental immunity. Id., ¶26. In addition, the Court found that there was no evidence to support a violation of the duty of good faith and fair dealing as none of the District Administrator’s actions deprived the Business Manager of any rights under the contract. Id., ¶39.
Furthermore, the Court found that there was no violation of due process under the Wisconsin Constitution. Specifically, the Business Manager failed to show that he was entitled to perform his duties while on paid administrative leave during an investigation regarding his job performance. Id., ¶30. Therefore, there was no due process violation of a protected property interest. Id. In addition, with regard to a liberty interest, the Court reasoned that the federal court’s judgment precluded the Business Manager’s state claim which was based on the same facts. Id. Therefore, there was no due process violation of a protected liberty interest. Id.
These decisions support the conclusion that school districts may place administrators/employees on non-disciplinary paid administrative leave pending job-related investigations. School districts often use paid administrative leave to protect the integrity of investigations. Importantly, these decisions did not address unpaid leave, which would involve a different analysis.
For questions regarding this article, please contact the author, Attorney Jenna E. Rousseau (email: firstname.lastname@example.org; telephone: 844-833-0828), or your Strang, Patteson, Renning, Lewis & Lacy, s.c., attorney.
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