Leibowitz sued in federal district court, claiming that the decision not to renew her contract constituted gender and age discrimination. The school asked the court to dismiss the claims. It argued that Leibowitz failed to establish her case because non-renewal of her term contract was not an adverse employment action since the contract merely expired by its own terms. The district court agreed that Leibowitz failed to show that the school had a policy of granting tenure to term employees, and since Leibowitz did not have a guarantee of lifetime employment, she suffered no material adverse change in the terms of her employment when her contract expired and the school did not renew it. Leibowitz appealed.
The U.S. Court of Appeals for the Second Circuit saw the case differently and held that the school's decision not to renew Leibowitz's contract could constitute an adverse employment action. In reaching this conclusion, the Second Circuit defined "adverse employment action" for purposes of both the Age Discrimination in Employment Act and Title VII as "more disruptive than a mere inconvenience or an alteration of job responsibilities" to include "termination of employment, a demotion evidenced by a decrease in wage or salary, a less distinguished title, a material loss of benefits, significantly diminished material responsibilities, or other indices . . . unique to a particular situation." The Court explained that where renewal of an employment contract is sought by an employee, non-renewal alone could constitute an adverse action.
Many – But Not All – Courts Agree: Non-Renewal Is The Same As Termination
In the Leibowitz case, the Second Court cited decisions of the Third, Sixth, Seventh and Tenth Circuits, and several district court decisions, where those courts expressly concluded that non-renewal of an employment contract satisfies the adverse-action requirement. Some circuit courts, such as the Ninth circuit, have yet to consider this precise issue. Other courts have simply adopted with little analysis the parties' express or implicit agreement that non-renewal of a contract is an adverse employment action.
Only a few courts have found non-renewal of an employment contract not to be an adverse employment action. For instance, in California, an employee whose fixed-term contract is not renewed cannot state a common law tort claim for wrongful termination in violation of public policy. Illinois state courts have held similarly. Significantly, these cases did not concern statutory discrimination or retaliation actions.