Failure to Renew Contracts

Can a school be sued for failing to renew an administrator’s contract?

Church Law and Tax 1991-01-01 Recent Developments

Employee Relations

Can a church school be sued for failing to renew an assistant principal’s one-year employment contract? No, concluded a California state appeals court. The assistant principal’s contract specified that “the term of the employment agreement shall be for a one-year period.” The contract further specified that “it is understood that [the assistant principal] is being employed for a one-year period and that there is no obligation on the part of the school [or the assistant principal] to renew this contract at the end of that term.” Prior to the expiration of the assistant principal’s one-year contract, the principal notified her in writing that her contract would not be renewed. She was offered and accepted a teaching position in the school, and she appealed her termination as assistant principal to the church. When her appeal was denied, she sued the church for actual and punitive damages. She alleged that due to her many years of faithful employment at the school (as both a teacher and assistant principal), her employment contract contained an “implied condition” to act in good faith that required the church to renew her contract unless it had “just reason” for not doing so. She also claimed that the church was guilty of “negligent discharge” because it failed to renew her contract without giving her any advance notice of any performance problems that she could correct. Finally, she claimed that the church had intentionally caused her emotional distress. A trial court granted the church’s request for a “summary judgment,” and the former employee appealed. A state appeals court upheld the trial court’s ruling in favor of the church. With regard to the former employee’s first claim, the court agreed that “the law imposes a duty of good faith and fair dealing in every contract.” However, it emphasized that this implied duty cannot be used to alter the terms of a clear, written agreement. The court observed: “Here, we are not confronted by a written employment contract which is uncertain in duration, or as to the parties’ obligation to renew. This written contract expressly limits the term of employment to one year and provides that neither party need renew the agreement. Consequently, by express language, the contract precludes the existence of any contrary implied agreement to employ [the former assistant principal] for more than a year or require renewal in the absence of good cause for not doing so.” Further, the court noted that the assistant principal had not been “fired.” Rather, her one-year contract had not been renewed. The court observed that “although termination contrary to the express terms of an employment contract may [be the basis of a lawsuit], a decision not to enter into a new contract or renew an expired one is not …. It is the general rule that when a contract specifies the period of its duration, it terminates on the expiration of such period.” The court also rejected the former employee’s claim that her long and faithful service prevented the church from not renewing her contract without good cause. It observed that “lengthy service combined by promotions and salary increases are natural occurrences for an employee who remains with an employer for a substantial length of time and does not create an implied agreement for permanent employment terminable within the context of nonrenewal only upon just cause.” The court also refused to recognize the former employee’s claim of “negligent discharge,” since no California court had ever recognized such a theory of liability. Finally, the court rejected the former employee’s claim that the church had intentionally caused her emotional distress. This would have required outrageous conduct on the part of the church, and this was something that the court refused to recognize. Tollefson v. Roman Catholic Bishop of San Diego, 268 Cal. Rptr. 550 (Cal. App. 1990).

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