The Seventh Circuit Court of Appeals Addresses Public Sector Employee Property Rights

The Seventh Circuit Court of Appeals recently decided a case involving the property rights of a former school employee – Concluding that neither the former school employee’s employment contract nor performance improvement plan that he was subject to created a property interest in continued employment.  Barkow v. School District of Athens, et al., Case 22-1521 (October 20, 2022).

Under a series of one-year contracts, Todd Barkow (“Barkow”) worked as the Buildings and Grounds Supervisor for the School District of Athens between 2011 and 2019 (none of the contracts were subject to Wis. Stat. § 118.24).  His final contract (for the 2018-2019 school year) did not contain any language about renewal or mention employment subsequent to June 30, 2019.

During his tenure, there were various concerns raised as to Barkow’s performance.  In August of 2018, multiple community members and co-workers raised concerns about his communication with them as well as his attitude.  After investigating, the School Board placed Barkow on a performance improvement plan identifying six (6) areas in which his performance was unsatisfactory and outlined the expectations for improvement in those areas.  The performance improvement plan specifically addressed Barkow’s continued employment with the District, as follows:

The School Board will evaluate your interactions and your performance on a bi-monthly basis over the next seven months.  The School Board will decide whether or not you will continue employment with the School District at the expiration of your current employment contract on June 30, 2019.  You will not receive a new employment contract from the School District but rather will be advised of the School Board decision regarding your continued employment in writing.

. . .

Failure to properly perform your duties will result in a decision to discontinue your employment at the end of your current employment contract.

In April of 2019, Barkow was informed in writing that the District would not continue employing him for the following contract year (for the 2019-2020 school year).

Barkow sued the District under 42 U.S.C. § 1983, alleging the termination of his employment without a hearing violated his right to due process.  The District moved for Summary Judgment and the Federal Court for the Western District of Wisconsin granted the motion.  It concluded that neither Barkow’s employment contract nor the performance improvement plan created a property interest in continued employment.

On appeal to the Seventh Circuit, Barkow conceded that his employment contract did not create a property interest in continued employment.  However, he continued to argue that his entitlement to future employment stemmed from the performance improvement plan – Barkow argued that, by negative implication, the performance improvement plan promised that if he fulfilled its requirements, he could continue working beyond the contract for the 2018-2019 school year.

The Seventh Circuit Court of Appeals ultimately concluded that the performance improvement plan did not modify the at-will nature of Barkow’s employment beyond the contract for the 2018-2019 school year.

First, the Seventh Circuit noted that a document containing guidance for an employee, such as a handbook or a performance improvement plan, can modify an at-will relationship.  To do so, however, it must contain “express provisions from which it reasonably could be inferred that the parties intended to bind each other to a different relationship.”  The Seventh Circuit concluded that here, the performance improvement plan contained no express provisions, such as explicit promises or mutually beneficial commitments, from which the Seventh Circuit could infer that Barkow and the District intended to modify the at-will relationship.

Second, the Seventh Circuit concluded that the performance improvement plan did not bind the parties to any employment terms other than those set forth in the employment contract.  Barkow argued that the specific language in the performance improvement plan (“failure to properly perform your duties will result in a decision to discontinue your employment at the end of your current employment contract”) guaranteed his employment would continue if he did improve in the six (6) areas outlined in the performance improvement plan.  However, the Seventh Circuit relied upon the employment contract itself, which set out the terms of his employment.  The Seventh Circuit concluded that Barkow did not establish a negative implication based upon the language set forth in the performance improvement plan (i.e., that his alleged improvement created a right to continued employment) and, therefore, the performance improvement plan did not alter his at-will employment and create a right of continued employment.

This case has two (2) important take-aways for public sector employers when drafting employment contracts and performance improvement plans:

1. The specific language of the employment contracts issued to employees such as Barkow is important. Here, Barkow had to concede that, based upon his one-year contract, renewal (continuation of employment with or without a new contract) was at-will.  The employment contract contained no provision for, or presumption of, employment past the end date, based upon his performance or any other reason.  Accordingly, the employment contract permitted the District to deny Barkow further employment at its discretion.  To this end, it is important that the terms of the employment contract specify an end date and do not provide for automatic renewal (where not otherwise addressed by statute).
2. The language in a performance improvement plan can modify an at-will employment relationship. Accordingly, it is important to use language that clearly addresses continued employment – Communicating that an employee’s performance will be evaluated as part of a performance improvement plan and that any decision as to continued employment will be made at the discretion of the party evaluating the employee’s performance at some point prior to the end of the current employment term.