AGO 1973 No. 9 - Mar 30 1973
DISTRICTS ‑- SCHOOLS ‑- EMPLOYEES ‑- CONTRACTS ‑- RETIREMENT ‑- INSURANCE
(1) An agreement by a school district in reducing its force of certificated teachers for financial reasons to grant those teachers whose contracts are not to be renewed an unpaid leave of absence coupled with a right to return at some future date, if and when future teaching vacancies occur within the district for which they are qualified, will be enforceable by a separated teacher only if it is supported by an adequate legal consideration.
(2) Such an agreement must be in writing in order to satisfy the requirements of RCW 28A.67.070, and of RCW 19.36.020 as well if the rights thereby granted are intended to be enforceable for more than one year beyond the date of its execution.
(3) Considerable doubt must be expressed as to the enforceability of such a leave of absence coupled with a right of return if the term of leave exceeds one year in duration.
(4) During the period of an unpaid leave of absence a teacher will not be eligible for active participation in the state teachers' retirement system as an employee of the district granting the leave.
(5) Whether during the period of an unpaid leave of absence a teacher will be eligible to continue participating at his own expense in a medical insurance program provided for by the school district under RCW 28A.58.420 or RCW 41.04.180 will depend upon the terms of the particular insurance contract involved.
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March 30, 1973
Honorable Albert Bauer
State Representative, 49th District
Olympia, Washington 98504
Cite as: AGO 1973 No. 9
[[Orig. Op. Page 2]]
By recent letter you have asked for our opinion on the legality and enforceability of certain employee leave policies currently being considered by some school districts in this state under circumstances which you have described as follows:
"Some school districts faced with the possibility of a severe financial crisis are considering reducing their certificated staff, but the districts and the employee organizations representing such staffs wish to afford those individuals affected with certain rights and opportunities in order to lessen the damage to their careers and employment opportunities. . . ."
You have then set forth the following general outline of the proposed response to this problem with respect to which you have requested our opinion:
"1. Employees who are subject to nonrenewal because of the financial crisis, after being afforded the opportunity to question their selection pursuant to RCW 28A.67.070, would be given the opportunity to apply for and be granted unpaid leave from their employment for one or more years.
"2. Individuals holding such leave status will be considered employed for medical insurance and retirement benefit purposes if they so elect, if they make all payments required of them and the school district for those programs and if they do not become employed with another school district or some other employer where the terms of such employment would conflict with the maintenance of such programs.
"3. Individuals holding such leave status would not be under an active employment contract with the school district, but would be placed in predetermined order on a list for first priority right to fill open positions within the school district in accordance with the qualifications and procedures previously established. If such vacancy opens up [[Orig. Op. Page 3]] while the individual is under contract with another employer and he cannot obtain a release from that contract, he shall be passed over, but shall retain the right to reemployment when he and such an open position are both available."
We respond to this inquiry in the manner set forth in the following analysis.
RCW 28A.67.070, which is cited in your letter, is the statute commonly known as the "continuing contract" law for certificated teachers employed by public schools in this state. See, AGO 1973 No. 3 [[to Christopher T. Bayley, Prosecuting Attorney, King County on January 15, 1973]], copy enclosed, for a detailed analysis of the legal relationships involved in the renewal or nonrenewal of teachers' contracts under its provisions. Insofar as is pertinent to your present request, we need only here quote so much of this statute as reads as follows:
"No teacher, principal, supervisor, superintendent, or other certificated employee, holding a position as such with a school district, hereinafter referred to as 'employee', shall be employed except by written order of a majority of the directors of the district at a regular or special meeting thereof, nor unless he is the holder of an effective teacher's certificate or other certificate required by law or the state board of education for the position for which the employee is employed.
"The board shall make with each employee employed by it a written contract, which shall be in conformity with the laws of this state, and limited to a term of not more than one year. . . .
"Every board of directors determining that there is probable cause or causes that the employment contract of an employee should not be renewed by the district for the next ensuing term shall [[Orig. Op. Page 4]] notify that employee in writing on or before April 15th preceding the commencement of such term of that determination of the board of directors, which notification shall specify the cause or causes for nonrenewal of contract. . . . If any such notification or opportunity for hearing is not timely given by the district, the employee entitled thereto shall be conclusively presumed to have been reemployed by the district for the next ensuing term upon contractual terms identical with those which would have prevailed if his employment had actually been renewed by the board of directors for such ensuing term."
Your opinion request assumes that a given school district, for financial reasons, finds it necessary to reduce its staff of certificated teaching personnel for the ensuing school year and, accordingly, gives timely notices of nonrenewal to the teachers to be terminated as required by this statute. Then, after giving these teachers an opportunity to question their selection for nonrenewal, the district offers them an "unpaid leave of absence" for a period of time of at least one or possibly more years. During this "leave," however, the teachers thus separated would be permitted, at their own option and expense, to continue participation in both the state teachers' retirement system and whatever medical insurance program has been made available to them by the school district. And finally, those teachers would be promised places on a priority list for reemployment at a later date ‑ if and and when future teaching vacancies occur within the district for which they are qualified.
The first question to be considered in responding to your request is that of the legal enforceability of this last described promise of priority status for later reemployment.
As indicated in AGO 1973 No. 3, supra, the employer-employee relationship between a school district and its teachers is based upon essentially the same principles of contract law as are any other employer-employee relationships. In order, however, for a contract to be legally enforceable, it must [[Orig. Op. Page 5]] include what is generally referred to as "consideration." See, 17 Am.Jur.2d, Contracts, § 86, wherein the rule is stated as follows:
". . . In order for a contract to be valid and binding, each party must be bound to give some legal consideration to the other by conferring a benefit upon him or suffering a legal detriment at his request. . . ."
From our reading of the terms of the proposal which is outlined in your letter it is not apparent to us what the consideration for the school district's promise would be in this case; in other words, what reciprocal promise or undertaking by the separated teacher either of benefit to the district or of detriment to the teacher would be involved? As the proposal is described, the separated teacher would be under no legal obligation to return to the school district when and if offered reemployment ‑ but, instead, would merely have a "right" to do so if, at that time, he or she was still free and desired to return. In this respect the "leave" policy here contemplated is materially different from that previously considered by this office in AGO 57-58 No. 49 [[to Paul Klasen, Prosecuting Attorney, Grant County on April 16, 1957]], copy enclosed, wherein we upheld a school district's proposal to grant one year sabbatical leaves to (a) a teacher desiring to take graduate studies for one year; (b) a teacher desiring to spend one year with her children before they attend public school; and (c) a teacher desiring to accept overseas employment for a one‑year period.
A review of our background file on this prior opinion reveals that in the situation there involved it was clearly anticipated that the subject teachers would, in some manner, be contractually obligated to return to teaching positions in the district at the end of their authorized periods of leave. In fact we were specifically asked in this opinion whether, in order to cover this aspect of the plan, the district could actually execute future teaching contracts with these teachers before they left ‑ a question which we also answered in the affirmative, saying:
"In answer to your second question as to whether the board can contract for teachers' employment in the future for one year, it is our opinion that this matter is also one which has been left [[Orig. Op. Page 6]] to the discretion of the board of directors by the legislature and that the courts will not interfere with the actions of the board as long as there is no unreasonable or arbitrary exercise of such discretion. In the early case ofTaylor v. School District, 16 Wash. 365, the court discussed the authority of a board to contract as follows:
"'The district school board is a corporation representing the district. It is a continuous body. While the personnel of its membership changes, the corporation continues unchanged. It has power to contract. Its contracts are the contracts of the board, and not of its individual members. An essential characteristic of a valid contract is that it is mutually binding upon both the parties to it. A contract by the school board the duration of which extends beyond the term of service of one of its members is not therefore invalid for that reason."
Absent any comparable obligation on the part of the separated teacher to return at the end of his leave in the case presented by your request the only other possible sources of consideration in this case are (1) the teacher's bargained for performance under his previously executed formal teaching contract, or (2) the relinquishment of a disputed claim arising in connection with his nonrenewal.
If a formal teaching contract executed under RCW 28A.67.070, supra, were, in a given case, itself to include a stipulation that in the event of nonrenewal because of a reduction in force the teacher would have the option to apply for a leave of absence coupled with a right to return when and if a future vacancy occurs then, of course, the teacher's reciprocally promised performance under that contract would constitute sufficient consideration to support the district's promised right to return. This, however, would have to have been written into the contract at the outset in order to have such effect ‑ for otherwise it would in all probability amount to an unconstitutional gift in violation of Article VIII, § 7 of our state Constitution which provides that:
[[Orig. Op. Page 7]]
"No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation."1/
The other remaining possible source of consideration above noted is based upon the following well-established rule of contract law stated in 17 Am.Jur.2d, Contracts, § 111:
"It is the general rule that in the absence of fraud or other invalidating circumstances, the surrender of a disputed or doubtful right or claim is a sufficient consideration for an agreement compromising or settling the claim, or for an executory contract. As a general rule, however, the relinquishment of a claim that is without merit or foundation in law or equity, or in fact, is not sufficient consideration for a contract. Therefore, the relinquishment of an invalid claim is ordinarily insufficient consideration for a promise. Where, however, the claimant has an honest and reasonable belief in the validity of an invalid claim, the relinquishment of such claim is sufficient consideration to support a promise."
In a given case it might be found by a court that the "right to return" which was granted to a separating teacher under the plan outlined in your letter was actually bargained for and granted at the time of initial separation (or even earlier) ‑ in exchange, perhaps, for the teacher's agreement not to contest a disputed nonrenewal of his or her teaching contract at that time. In other words, in a particular case the "leave" agreement might be found to have been the product of a negotiated settlement of the initial termination of the teacher's employment. If, in addition, the [[Orig. Op. Page 8]] court were to find that this settlement agreement involved a relinquishment of some truly disputed or doubtful claim by the separated teacher in exchange for the district's settlement offer of a leave with right to return, then the agreement could be rendered enforceable under the above‑stated rule.
With this we move from the question of consideration to another issue regarding the enforceability of the promised "right to return" which is involved in the plan you have described. In AGO 57-58 No. 49,supra, we indicated that the granting of a leave of absence (unpaid)for a single school year would not constitute an abuse of discretion on the part of the school district involved, but in so doing we plainly indicated that the adoption of any such policy involved an exercise of discretionary authority. Accord,Seattle High School Ch. No. 200 v. Sharples, 159 Wash. 424, 293 Pac. 994 (1930). Thus it is entirely possible, independent of any other legal restrictions, that a court would regard the granting of a leavefor more than one year to be unreasonable in duration in a given case ‑ and for this reason hold it to be unauthorized and, accordingly, the concomitant "right to return" to be unenforceable even if supported by an otherwise valid consideration. See, 10 McQuillin, Municipal Corporations, § 29.10, with respect to the enforceability of unauthorized, or ultra vires, contracts of public agencies.
Moreover, as will be recalled from a reading of RCW 28A.67.070,supra, anycontractual commitment by a school district to a teacher employed by the district is expressly limited by statute to a term of not more than one year. If, as seems likely, a court were to hold a contractual leave of absence with right to return (such as we are here discussing) to be governed by this statute, then it would follow that this right would only be enforceable for one year following the date of commencement of the term of the contract. For example, if the commencement date of the contracted for leave were September 1, 1973 (the day following the terminal date of the prior, nonrenewed teaching contract), then the right to return would only be enforceable through August 31, 1974 ‑ assuming the applicability of the one year limitation set forth in RCW 28A.67.070.
Finally, we should also make note in regard to this durational issue to RCW 19.36.020, commonly known as the statute [[Orig. Op. Page 9]] of frauds. Insofar as it could be germane to the matter here under consideration, this statute provides as follows:
"In the following cases, specified in this section, any agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof, be in writing, and signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized, that is to say: (1) Every agreement that by its terms is not to be performed in one year from the making thereof; . . ."
Under this statute it will be seen that even if (a) supported by a valid consideration and (b) not deemed to be for a duration beyond the authority of the school board to contract, a contractual leave with right to return purporting to run for more than one year from the date of its execution (which may, notably, be earlier than the date of commencement of its term ‑ to which RCW 28A.67.070 refers) will be unenforceable unless it is made in writing.2/
The sum and substance of all of the foregoing points of law related to the enforceability of the "right to return" aspect of the leave policy described in your letter, then, is as follows: If (but only if) supported by an adequate consideration in one of the ways above outlined, a contracted for leave of absence with right to return will be enforceable for a term not in excess of one year; however, in order to comply with RCW 28A.67.070,supra, the agreement should be in writing, regardless of the date of commencement of its term ‑ and if that term is to extend for more than one year beyond the date of execution of the contract it must be in writing under RCW 19.36.020, supra, in order to be enforceable. If the term of the leave itself is in excess of one year we must express considerable doubt as to the enforceability of an accompanying promised right to return onultra vires grounds ‑ and most certainly any agreement purporting to cover any such an extended term must be in writing in [[Orig. Op. Page 10]] order to satisfy the requirements of RCW 19.36.020, the statute of frauds (as above quoted).
We turn, next, to the matter of continuing participation in the state teachers' retirement system. Here, the answer is purely statutory, and quite basic. In order to participate in the teachers' retirement system and to receive service credit for such participation a teacher must be in "service" as that term is defined in RCW 41.32.010 (28); i.e.,
". . . 'Service' means the time during which a member has been employed by an employer for compensation."
See, RCW 41.32.270, which provides as follows:
"Service rendered for four-fifths or more of the official school year of the school district or institution in which a teacher is employed shall be credited as a year's service regardless of the length of the school term, but in no case shall more than one year of service be creditable for service rendered in one fiscal year. Service rendered for less than four-fifths of the official school year shall be credited for that portion of the school year for which it was rendered: Provided, That no service of less than twenty days in any school year shall be creditable."
Thus it seems clear that a teacher who has been granted a "leave of absence" without pay from a school district cannot be regarded as being in service during such period ‑ and hence cannot be considered as being eligible for participation in the teachers' retirement system or for the receipt of service credit as an employee of the granting district for such period of time.
[[Orig. Op. Page 11]]
Finally, insofar as the matter of medical insurance coverage is concerned, here we must distinguish, basically, between two separate types of coverage. Under the applicable statutes governing the provision of medical insurance coverage for school district employees,3/ many school districts have actually become the holders of master plans issued by an insurance carrier solely for the purpose of covering employees of the district. In any such case, it follows that the eligibility of an individual to continue in coverage under such a plan, even at his own expense as here contemplated, is dependent upon his remaining an "employee" of the district ‑ however that term may be defined for the purposes of the particular insurance contract.
On the other hand, we understand that there are also some instances in which, instead of itself becoming the holder of a master group medical insurance policy, a school district may simply be making premium payments on behalf of its employees to an insurance carrier which has issued a group medical insurance policy to an employee association or organization of which the subject teachers are members.4/ In any such case as this, the separated teacher's right to continue under the coverage of the plan will presumably be dependent upon his continuing membership in the organization to which the policy had been issued rather than upon his employment by a particular school district ‑ so that as long as he retains this membership and pays the requisite premiums himself he will be able to continue in coverage, regardless of any termination of his employment relationship with the district.
[[Orig. Op. Page 12]]
This completes our evaluation of the legal aspects of the proposed policies outlined in your letter. It is hoped that the foregoing will be of some assistance to you.
Very truly yours,
PHILIP H. AUSTIN
Deputy Attorney General
*** FOOTNOTES ***
1/See, also, Article II, § 25 (Amendment 35).
2/As is, of course, also the case with respect to any contract to which RCW 28A.67.070 itself applies. See, AGO 1973 No. 3 at page 3 [[to Christopher T. Bayley, Prosecuting Attorney, King County on January 15, 1973]].
3/See, RCW 28A.58.420, as well as RCW 41.04.180 and 41.04.190.
4/See, AGO 65-66 No. 90 [[to R. Ted Bottiger, State Representative on June 22, 1966]], in which this alternative method of providing medical coverage under RCW 41.04.180 was specifically considered and approved.