Failure to renew a non-tenured instructor's contract can trigger a discrimination claim against a college, just as much as if it dismissed an employee or took some other "adverse employment action," a federal appeals court ruled Friday.

The decision by the U.S. Court of Appeals for the Second Circuit, which came in a case involving Cornell University, does not break significant new legal ground, but has potentially important implications for colleges and universities that are eliminating positions because of shrinking budgets.

The situation at the core of the appeals court's ruling Friday resulted not from the current recession, but from the last economic downturn to hit higher education, at the start of this decade. The plaintiff in the case, Margaret Leibowitz, sued Cornell's School of Industrial and Labor Relations in federal court in 2003 charging that its officials had discriminated against her on the basis of age and gender in 2002 by failing to renew her contract as an instructor and "senior extension associate" (the labor school is one of several state-funded elements at Cornell, which is otherwise a private institution. And yes, there's a bit of irony in the fact that the university's labor school is being sued over employment practices.).

The federal judge in the case twice dismissed Leibowitz's charges against Cornell without a trial, saying that she could not bring a discrimination claim -- which under federal and state law can be brought only to challenge an "adverse employment action" -- because Cornell's failure to renew her five-year contract did not qualify as an adverse action, in the way that an outright dismissal or even a demotion of a tenured professor would.

Cornell had argued, and the judge had agreed, that because Leibowitz did not have even an unofficial form of tenure, she "did not have a guarantee of lifetime employment, and therefore suffered no material adverse change in the terms of her employment when she was advised that she would not be rehired in the future when her five-year contract expired."

On appeal, the three-judge panel of the Second Circuit saw the situation very differently. Under Cornell's reasoning, which the lower court judge mistakenly accepted, the appeals panel wrote, a prospective employee could "bring a discrimination lawsuit if an employer refused to hire her based on her age and/or gender, but not if the same employer failed to renew an employment contract for the same discriminatory reasons."

"The mere fact that the employer's decision not to renew is completely discretionary does not mean that it is not an 'adverse' employment decision," the appeals panel wrote. "[W]hether plaintiff was 'laid off' or 'terminated,' or her employment was 'not renewed' is not critical to the legal analysis; rather, she suffered an adverse employment action because she was denied the requested continued employment, regardless of the label."

Upon determining that Cornell did indeed, under the law, take action to end Leibowitz's employment, the court then turned its attention to the question of whether she has a strong enough discrimination case to make that Cornell should be forced to defend itself at trial. (As is standard practice in cases of this type, and at this stage of the proceedings, the court bases its assessment on the evidence that Leibowitz presented, viewing them "in the light most favorable to the plaintiff.")

Several of those facts led the appeals panel to conclude that Leibowitz had a reasonable chance of proving that Cornell discriminated against her. Among them:

• All six of the employees that the industrial and labor relations school laid off from late 2001 to early 2003, citing the economy, were women over the age of 50.
• Leibowitz's teaching and other duties were reassigned to "at least three male instructors."
• When the labor relations school had vacant positions in 2002, before Leibowitz left, it did not consider her for any of them.
• While Cornell cited budgetary concerns as the primary reason for not renewing Leibowitz's contract, it hired 12 new employees at the same time it was eliminating her position and those of the other five women.

Based on those and other findings, the appeals panel directed the lower court judge to grant Leibowitz a trial at which she can try to prove that Cornell's ILR school discriminated against her.

Leibowitz's lawyer, David M. Marek, said the appeals panel's conclusion that non-renewal of a contract can be grounds to bring a discrimination claim is important not just for his client, but for anybody who might be let go in the current recession, too. "Colleges and other employers may find themselves needing to eliminate jobs when the economy's bad, it's true," he said. "But they also still sometimes try to get rid of people they want to get rid of anyway, and people need to be able to bring discrimination claims when they think that's happened to them."

Ann M. Franke, a leading higher education lawyer and president of Wise Results, a consulting firm, said the court's ruling "does not break bold new legal ground," but it "does serve as a strong reminder that you can't abuse the discretion you have [when a college finds itself in the position of eliminating jobs] by discriminating."

The court's finding that the Cornell school may have failed to make other opportunities available to Leibowitz also shows that an institution "has to work doubly hard to make sure it is taking care of its people as best it can" -- not only because it's right, but also because not doing so can later cause legal headaches.