Managing the Entrepreneurial University

Legal Issues and Commercial Realities

J. Douglas Toma

• Publisher: Routledge
• Year: 2011
• Print ISBN: 9780415872423
• eBook ISBN: 9781136827891
• Topic: Education
• Subtopic: Education General

Managing the Entrepreneurial University is essential reading for both higher education administrators and those studying to enter the field. As universities have become more market focused, they have changed dramatically. But has the law kept up? This book explains fundamental legal concepts in clear, non-technical language and grounds them in practical management situations, indicating where doctrines and standards have evolved, identifying where legal difficulties may be more likely to arise, and suggesting where change may be merited.

In its chapters on process, discrimination, employment, students, and regulation, the book:

• Provides lively case studies applicable to every type of institution
• Includes a simulation exercise at the end of each chapter for use in teaching or training
• Draws on an over 550-source bibliography

A hypothetical case spans each chapter, addressing not only research universities and elite liberal arts colleges, but also community colleges, small private colleges, and regional comprehensive universities. Readers working across functional areas and at various institution types will find the book directly relevant in clarifying and deepening their understanding of the legal environment associated with their responsibilities within the entrepreneurial university.

1

PROCESS

Process is essential in managing the entrepreneurial university. Decisions made in an arbitrary or capricious manner, or following institutional rules that are underdeveloped or unreasonable, are likely to be rejected by the courts, resulting in the exposure of universities and colleges to liability. Expectations related to process have only heightened over the past few decades. But meeting such responsibilities has become more challenging for institutions as they expand in all directions, becoming ever more diffuse and complex. As situations in entrepreneurial universities and colleges thus become more particularized and less communal, institutions require more robust and nuanced approaches.

The discussion on process below begins with the sources of the law—constitutional, statutory, the common law, institutional rules, and custom and usage. The latter, in particular, has become more difficult to determine, as norms in higher education increasingly integrate commercial realities into traditional academic values. Although universities and colleges retain considerable autonomy, their increasing commercialization has caused—and it really should—the erosion of the deference that courts have long afforded academe in making values-based decisions on academic questions. Meanwhile, attempts to assert due process rights have expanded, but with the ongoing challenge of no real formula available to determine how much notice and how much hearing are appropriate in a given situation.

Whether courts hold university or college administrators and faculty personally liable for negligence continues to depend upon them acting within their authority. But even authority has become more difficult to define as the boundaries of institutions have expanded outward as they undertake a variety of more entrepreneurial activities at their peripheries. The same is true in determining the essential matter of who is the client in applying the attorney-client privilege. The chapter closes with an outline of the steps in litigation, providing a reference for the reader.

These matters of process apply in the various situations considered in the chapters that follow, beginning with discrimination. They are also relevant in cases involving employment, students, and regulation. The discussion that follows underscores developing fair procedures and following them in a neutral manner as the essential aspect in preventive legal strategies. What will also become clearer is that process is complicated by the situational nature of problems that arise.

Sources

The law derives from several sources: constitutional, statutory, and judicial. The rules a university or college itself adopts also have legal force, as do general practices and understandings within an industry or institution. How the U.S. Constitution is interpreted by a conservative U.S. Supreme Court, increases in applicable regulations, and the decline in deference to institutional decision making by courts are all relevant to managing increasingly entrepreneurial universities and colleges.

The federal constitution provides foundational rights, as do the constitutions of the various states. In higher education, the First and Fourteenth Amendments of the U.S. Constitution are most often relevant. Constitutional principles only protect against the state infringing upon basic rights—they do not apply directly to private institutions. The First Amendment guarantees freedom of expression, assembly, press, and religion. The right to due process within the Fourteenth Amendment requires that the government, if taking the property or seriously damaging the reputation of a person, provide the requisite notice and hearing. Equal protection demands that the state not discriminate in its treatment of citizens based upon immutable characteristics, such as gender, race, or religion—the government must treat different groups in a similar fashion. In working with students, constitutional provisions such as the Fourth Amendment (no unlawful search and seizure) and the Fifth Amendment (an individual cannot be compelled to provide testimony against him- or herself) can apply.

These rights are not absolute, however. The state may make an exception if it has a sufficiently strong justification. For instance, speech that is unpopular is protected, but not that deemed to lack any value. Similarly, affirmative action programs are an exception to the principle of equal protection, provided they are deemed necessary and constructed as narrowly as possible. Furthermore, constitutional rights are paramount—all provisions from other sources, such as a state, that conflict with the U.S. Constitution are invalid. The U.S. Supreme Court, ultimately, makes such determinations. With its present conservative majority, neoliberal notions at the foundation of the entrepreneurial university—ideas that privilege individual gain over the public good—are likely to find support. Finally, the constitutions of the states contain provisions parallel to those in the U.S. Constitution, sometimes providing individuals with even stronger protection, as with the right of privacy formally articulated in 10 state constitutions, as opposed to being read into the federal constitution in certain contexts by the courts.

Another source of the law is federal and state legislation. Federal statutes include antidiscrimination laws, the Copyright Act, and the Internal Revenue Code. Workers’ compensation laws, commercial codes, and legislation creating public universities are representative state statutes. Legislation also creates administrative agencies, such as the U.S. Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB), that implement statutes in given areas, promulgating binding rules and adjudicating certain disputes. (There are state agencies, such as public service commissions and civil service commissions, that serve a similar function, and universities and colleges must also abide by certain local ordinances, such as zoning.) Regulation of higher education has increased over the past few decades. The need to comply with these mandates has been one justification for impressive increases in the number of administrators employed by universities and colleges.

Although constitutional provisions apply only to public universities and colleges, various constitutional principles embodied in statutes apply to private institutions. For instance, federal antidiscrimination statutes, such as Title VII or the Americans with Disabilities Act (ADA), incorporate equal protection rights aligned with the Fourteenth Amendment. Private institutions that receive federal funds, which all but a few do, must comply with such statutes. But only when a private university or college assumes a function delegated to it by the state or usually performed by the state will it be deemed to be a “state actor”—and thus subject to the provisions of the U.S. Constitution. Under the Free Exercise Clause of the First Amendment, institutions expressly religious in nature are protected from government interference, but can receive public support for nonreligious ends, such as conducting scientific research, without offending the Establishment Clause, which prohibits the government from supporting religion. Additionally, private institutions will voluntarily adopt various constitutional principles, such as free expression, into their internal rules, with individuals able to enforce these through contract theories.

A common law comprised of holdings in various matters by state and federal courts comprises another source of the law. The common law is grounded in the concept of precedent. In deciding cases, judges are guided by previous decisions on similar issues, introducing some degree of predictability into what courts will conclude. In framing arguments for courts, lawyers on both sides reference precedent that supports the result they seek. They also distinguish cases that apply relevant law, but in ways favoring their opponent. Doing so, they can argue that the case before the court is sufficiently different from the facts in the case that provides the precedent—and is thus inapplicable. Much of the law in areas such as contracts and torts is the product of the common law. Courts also interpret the meaning of constitutional provisions, legislative statutes, administrative regulations, and municipal ordinances. Although prior judicial decisions from other jurisdictions can be instructive to courts, precedents have a binding effect only in the jurisdiction where the case was heard. But a court, in reality, can deem any precedent inapplicable, as no fact situation in a case is identical to one in a previous case.

The rules that institutions derive themselves are also relevant in determining disputes. For instance, an employment contract with a faculty member implicitly incorporates the rules of the institution, such as those mandating due process in the event of a dismissal, and can be determinative in the event of a dispute. The sources of such rules can be governing boards, administrative units, or faculty committees charged with oversight in certain areas. Determinations by adjudicatory bodies, such as grievance committees or student judiciaries, also have some precedential value. Written or implied arrangements between institutions and others can additionally be determinative, particularly when articulated clearly. Written contracts are more certain, but informal agreements also have force, if understood, as can established but unwritten practices and understandings within an institution or across higher education. Such custom and usage define expectations, so they can be applicable in interpreting disputes, such as those involving contracts.

But as relationships evolve within institutions as they become more commercialized, custom and usage grounded in more traditional values may become less applicable. For instance, at aspiring research universities, expectations of faculty members increasingly incorporate conducting research. But the research culture at these institutions can be less developed than its ambitions, with those seeking tenure and promotion finding standards unclear. Faculty members up for tenure may also be subject to voting by senior colleagues who have not been active in research and thus have a poor understanding of appropriate benchmarks.

Over the past five years, since the arrival of Elihu Smails as president, Bushwood Community College has expanded in size and scope. The college now enrolls 23,000 students in academic and vocational programs, as well as offering nondegree training courses. In addition to its original location in Davie, it has developed campuses in Plantation and Sunrise. For the past decade, it has partnered with Boca Raton University, which is about 30 miles away, to offer selected BRU courses on its Davie campus. Several BCC students have taken advantage of the arrangement to complete their bachelors degree.

Smails’s signature initiative is to establish bachelors programs at BCC. He argues that students in the area are limited by distance from being able to complete all but the few four-year degrees BRU offers there. He has attempted to convince the state higher education coordinating board to allow Bushwood to offer bachelors degrees in fashion merchandising, hospitality management, and nursing administration—areas in which BCC already has strong programs, BRU has none, and for which there is strong student interest. Given opposition from Boca Raton University and Tamiami University, another public university located 20 miles in the other direction from BCC, the state has been unwilling to approve Bushwood’s petition.

Bushwood is governed by a board drawn from the local community, which is as frustrated as Smails about the state throwing cold water on the ambitions of the college. The board envisions BCC becoming a state university someday relatively soon, following the same path as did BRU and TU and other newer universities in the state. With Smails encouraging them, they have imagined an institution, perhaps called Bushwood State University, with masters’ (and even doctoral) degrees, Division I athletics, student residences, and various other trappings of a university. Smails and members of the board, meeting informally, have begun to consider strategies to get around what they see as the state’s unreasonable position.

Although unprecedented nationally, the conversation keeps coming back to privatizing Bushwood. Smails knows that the board is quite politically conservative and keeps steering the discussion to government oppression. Through the small foundation—under $2 million in endowment—that he and his predecessor have built, Smails has hired a prominent local law firm, O’Hooligan and O’Hooligan, to quietly consider what would be involved in taking a public community college private. He has also asked his institutional research and finance and administration heads to run the numbers. Smails wrote his doctoral dissertation at TU on the business model for for-profit higher education, so he understands possibilities for charging higher tuition and providing students with popular majors, better services, and enhanced convenience. He thinks the business aspects of the privatization scheme might just work, believing there is a local market for a higher-tuition, higher-service provider.

Maggie O’Hooligan is similarly unwilling to reject the privatization idea as too steep a legal climb. She does not envision any federal constitutional issues. There is no right to public higher education under the U.S. Constitution. If existing students are grandparented into paying public tuition, as planned, there is not even a due process argument (which would be a stretch anyway), as they would not be losing something. As a private institution, Bushwood would still be exempt from federal taxation and subject to antidiscrimination laws, such as Title VII of the 1964 Civil Rights Act, because it would continue to accept federal funding through financial aid programs.

There also does not appear to be a problem with precedent—a court having ruled that a public university cannot choose to turn private. There have been cases of private universities and colleges becoming public institutions. Custom and practice in the higher education industry may also favor Bushwood’s position. Elite public universities, such as the University of Michigan, have certainly discussed privatizing, as endowments and funded research have expanded and tuition and fees have increased—and annual state appropriations continue to decline in relative terms, dipping to a small fraction of the overall budget.

Bushwood would have to renegotiate its contacts with its unions, but the new situation would not necessarily disadvantage the employees, assuming the college could fix issues such as having to transition out of the state pension program to a private one. (The board views this as an advantage, not trusting the government as investors.) The faculty appears to be supportive of moving toward being a four-year college, expecting the lower teaching loads associated with that sector. BCC would also maintain various institutional rules, so as to not enable current employees to oppose privatization—and there would be some who would do so for reasons of principle—by arguing that the college is taking something from them.

The most significant challenge is likely with state statutes. Public universities and colleges in the state are established by act of the legislature, vesting authority in a local board. O’Hooligan interprets this as the board having the latitude to simply abandon the state charter and replace it with a corporate one, similar to other private universities and colleges. If there is going to be litigation, it might well be with the state arguing that a public community college cannot simply declare itself to be private, given the greater good served by public higher education. The state may go further and contend that it has made an investment in Bushwood over the years; for example, by financing construction. BCC can counter that the more entrepreneurial and commercialized nature of universities and colleges tends to weaken public good arguments—higher education is framed more commonly as not only about individual gain, but also a return on investment for the state. Smails has even considered “buying” Bushwood from the state, compensating it for its investments, adjusting for depreciation. Perhaps it is possible to take Bushwood private, he continues to think, assuming the local market is there.

Deference and Process

Courts have traditionally deferred to decisions on academic questions made by universities and colleges. The idea is that courts presume administrators and faculty members to be better positioned to make determinations on such matters, given the unique nature of the academic milieu. Academic decisions tend to be made within a collegial environment, based on norms, as in areas like granting tenure that are unfamiliar to outsiders. Courts make certain that universities and colleges have developed reasonable rules and apply them properly, without being discriminatory or arbitrary and capricious. They are more comfortable addressing behavioral issues because these do not necessarily involve the same specialized expertise as grading or tenure. They are also more likely to expect institutions to extend greater process in behavioral situations than in academic contexts.

A challenge is that seemingly behavioral disciplinary matters can be connected with academic concerns, as with plagiarism having both behavioral and academic aspects (Dutile, 2003). There is also the situation in Board of Curators of the University of Missouri v. Horowitz (1978), decided by the U.S. Supreme Court, in which a medical student challenged her dismissal for both poor academic performance and personal hygiene problems. Dutile (2003) argues that the academic-disciplinary distinction is not sensible, as the subjectivity inherent in academic decisions should prompt the same formal due process that typically attaches to disciplinary matters.

Deference has weakened over time, with expanded access to the judicial system, needing to balance institutional autonomy with state accountability, and higher education becoming more entrepreneurial in nature. Only relatively recently have individual litigants had realistic channels to challenge institutional authority in court. Before the 1960s, actions against institutions by faculty, administrators, and students were likely to have been dismissed. Federal regulation, as with the enforcement of the antidiscrimination statutes that followed the 1964 Civil Rights Act, now provides individual litigants with processes, standards, and remedies in challenging decisions by institutions in areas such as employment and admissions. The application of federal and state labor law to higher education, as with the introduction of collective bargaining, has also opened new avenues to challenge actions by universities and colleges. Additionally, there is more regulation specific to higher education, as in funded research and financial aid; federal courts have inserted themselves into state higher education policy in desegregation efforts; and states increased their coordination of public higher education in the 1960s, with the emergence of the “multiversity” and rapid expansion of enrollments.

Deference aligns with the traditional autonomy afforded higher education institutions in the United States, with universities and colleges expected to govern and regulate themselves. Even at public institutions, there remains wide discretion, certainly as compared with other units of state government. Higher education continues to be responsible for its own accreditation, both through regional associations and groups specific to disciplines. Additionally, funding tends to come from states through university systems and not directly from the state legislature, and in large blocks as opposed to detailed line items. Institutions are thus somewhat insulated from political pressure in determining how they spend funds appropriated. And for faculty members and senior administrators, the ethos is not one of a civil servant, but instead specific to higher education and a given institution.

But for public universities that have always been accountable to the states that provide a portion of their annual funding, there has been an increase in formal means to ensure performance over the past decade. The rationale for annual appropriations from the legislature has shifted from only advancing the public good, with states now seeking assurance that they will receive a return on investment. Similarly, students and parents are demanding more accountability, given increases in tuition and tightening employment opportunities following graduation—and institutions are assuming additional responsibilities, whether in student support or information technology. Additionally, more data are available, as with benchmarking and rankings, which enable the reporting that accompanies (and often seems to be the extent of) accountability.

Although universities and colleges continue to rely on academic values in making decisions, they do not do so exclusively as they commercialize, opening the door to courts be...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Acknowledgments
• Introduction
• 1 Process
• 2 Discrimination
• 3 Employment
• 4 Students
• 5 Regulation
• Conclusion
• References
• Index