Opinion ID: 773854
Heading Depth: 2
Heading Rank: 1

Heading: Tenured Professors

Text: 16 The parties agree that tenure is a protected property right. In this circuit, a tenured professor at a state institution not only has a constitutional right to procedural due process, but also has a substantive due process right to be free from discharge for reasons that are 'arbitrary and capricious,' or in other words, for reasons that are trivial, unrelated to the education process, or wholly unsupported by a basis in fact. Morris v. Clifford, 903 F.2d 574, 577 (8th Cir. 1990) (refusing to grant qualified immunity to university personnel for discharging a tenured professor at the University of North Dakota because a tenured professor's right to substantive due process was clearly established); see also Mueller v. Regents of the Univ. of Minn., 855 F.2d 555, 559-60 (8th Cir. 1988) (requiring substantial evidence to support the university's decision to terminate a tenured professor protected by substantive due process). NDSU policy also provided that tenured faculty could not be terminated absent fiscal restraints or adequate cause. Thus, the faculty who gave up their tenure rights at NDSU in exchange for early retirement gave up the right not only to invoke proper procedure before tenure was lost, but a right not to lose tenure at all without justification. 17 Despite the fact that tenure at a state institution is a constitutionally protected property interest and that the tenured faculty had clear contractual rights not to be terminated absent specific circumstances, the government argues that tenure rights are not contract rights that can be relinquished because the tenure rights have no economic value that can be bought and sold. We are unpersuaded by this argument. Rarely would we expect to find an employment contract that would have recognizable economic value to anyone other than the employee. 8 Lack of a market in which to sell tenure rights does not prevent those rights from having value to the faculty member to whom tenure has been granted. Cf. Vail v. Bd. of Educ. of Paris Union Sch. Dist. No. 95, 706 F.2d 1435, 1451 (7th Cir. 1983) (Posner, J., dissenting) (A contract that gives a teacher the right to be employed till he retires is special, for unless he is old or rich the present value of his tenure right is probably his biggest asset.), aff'd, 466 U.S. 813 (1984). 18 The government next argues that tenure rights accrue over time, similar to seniority, making this case analogous to Revenue Ruling 75-44. Although past service plays a part in the decision to grant tenure, tenure is much more than a recognition for past services. Importantly, tenure is not automatic upon completing service for a specified time period, which is a hallmark of ordinary seniority rights. Prior to an award of tenure, a professor is employed pursuant to one-year contracts for a period of time, generally six years at NDSU. The six years during which a professor teaches before being granted tenure is not consideration for the grant of tenure. Rather, it is ordinarily a prerequisite for tenure and serves as a probationary period during which the university may evaluate the professor to determine whether he or she has the qualities necessary to be worthy of tenure. After serving the probationary period, the professor must still qualify for tenure through his or her scholarship, research, and service to the university and society. The decision to award tenure rests on criteria that reflect the potential long-term contribution of the faculty member to the purposes, priorities, and resources of the institution, unit, and program. (NDSU policy 352, Appellant's App. at 74.) At the end of the probationary period, the professor's contract is either not renewed and the professor discontinues teaching at the university, or the professor is granted tenure and a lifetime appointment, as long as the grounds for removal are not triggered. See generally Mayberry v. Dees, 663 F.2d 502, 514-16 (4th Cir. 1981) (discussing the tenure process in-depth, including the value of the probationary period as an evaluation tool), cert. denied, 459 U.S. 830 (1982). 19 A tenured professor, therefore, experiences two successive relationships with the university: the initial at-will relationship during the probationary period and the subsequent tenured relationship. They are two distinct relationships. The tenured position is a significantly different status-effectively a new job. Mayberry, 663 F.2d at 516 (discussing the distinct differences between the relationship a professor has with the university during the probationary period and following the grant of tenure). 20 Thus, contrary to the government's argument that tenure rights are earned by past service to the university, tenure rights are established at the outset of the tenured relationship. Tenure is a recognition of contributions to the academic world and is given in exchange for continuing contributions. Under NDSU and Board policy, tenure also serves the purpose of protecting academic freedom. It provides a secure forum for the germination, cultivation, and exchange of ideas without fear that expression of viewpoints will result in retribution. It is this unique relationship and its accompanying rights, formed only when and if tenure is granted, that give tenure its significance and value. Because we reject the government's underlying premise that tenure accrues over time and is similar to seniority, we reject its argument that Revenue Ruling 75-44 should control the outcome of this case. 21 The government also argues that the retirement payments are FICA wages because the amount of the payments was based in part on the employee's past performance and current salary. Although we have previously relied on the method used to calculate a payment to determine whether it is subject to FICA taxation, particularly when the payment is measured by factors traditionally associated with compensation, those cases involved at-will employees. See Mayberry, 151 F.3d at 860 (holding that payments in class action settlement of an ERISA claim to at-will employees were FICA wages where each class member's award was based on the member's length of service with the employer); The Lane Processing Trust v. United States, 25 F.3d 662, 665-66 (8th Cir. 1994) (holding that payments to employees, from a trust set up by their employer with the agreement that the trust funds would be distributed to employees who agreed to stay on at reduced wages, were FICA wages where the funds were allocated between the employees based on length of service and position with the company). The tenured faculty in the case at hand clearly were not at-will employees. They were protected by a contractual relationship with NDSU and by constitutional principles of procedural and substantive due process. Additionally, past performance and current salary were not the only factors considered in determining the amount of the early retirement payments; in fact, there was no limit on what factors could be considered. Thus, although the method used to calculate a payment is relevant to whether the payment is wages for FICA purposes, it is not dispositive, see Associated Elec., 226 F.3d at 1328, and we do not deem the inclusion of past performance and current salary as some of the factors in the decisional mix here to be controlling in this case. 22 We also find the government's reliance on cases involving dismissal payments unavailing. Treasury regulations provide that [a]ny payments made by an employer to an employee on account of dismissal, that is, involuntary separation from the service of the employer, constitute wages, regardless of whether the employer is legally bound to make the payments. Treas. Reg. 31.3401(a)-1(b)(4). See also Rev. Rul. 74-252, 1974-1 C.B. 287 (defining dismissal payments for FICA purposes the same as defined for withholding purposes in Treas. Reg. 31.3401(a)-1(b)(4)). The terminations involved here were totally voluntary by both parties; it is uncontroverted that neither NDSU nor a tenured faculty member could enter an Early Retirement Program agreement unless the other party freely consented. This case clearly does not involve dismissal payments. 23 Under the terms of the Early Retirement Program, the tenured faculty received a negotiated amount of money in exchange for giving up their constitutional and contractual rights to tenure. In other words, they relinquished their tenure rights. They did not receive what they were entitled to under their contracts, which was continued employment absent fiscal constraints or adequate cause for termination. Rather they gave up those rights, making this case more analogous to Revenue Ruling 58-301 than to Revenue Ruling 74-252. 9 We hold that payments made to tenured faculty under NDSU's Early Retirement Program were made in exchange for the relinquishment of their contractual and constitutionally-protected tenure rights rather than as remuneration for services to NDSU. Thus, the payments are not subject to FICA taxation.