## Facts

- Independent School District No. 38 adopted an American Indian teacher retention policy relying on Minn. Stat. § 126.501, which permits retaining less senior American Indian teachers during layoffs or unrequested leaves of absence (ULAs) notwithstanding ordinary tenure-based seniority rules.
- Several tenured, non-Indian teachers with greater seniority were placed on ULAs while less senior American Indian teachers were retained under the policy.
- The district also retained some less senior non-Indian teachers in grant-funded positions, asserting that grant conditions effectively required those particular individuals to remain employed to avoid loss of funding.
- After an administrative hearing, the hearing examiner recommended relief for the senior teachers based on a narrow reading of § 126.501 tying its application to when individual teachers obtained tenure.
- The school board rejected that interpretation, treated § 126.501 as applicable through the parties’ master contract, and implemented the ULAs.
- The senior teachers sought appellate review, challenging statutory interpretation, equal protection, contracts clause impairment, and the grant-funded retention decisions.

## Issues

1. Whether § 126.501’s limitation to “contracts entered into after May 7, 1988” refers to the master labor contract or to individual teachers’ tenure/contract dates.
2. Whether § 126.501 and the district’s American Indian retention policy violate equal protection by permitting retention of less senior American Indian teachers over more senior non-Indian teachers.
3. Whether § 126.501 unconstitutionally impairs contractual rights under the Contracts Clause by altering seniority-based layoff expectations.
4. Whether the district may retain less senior non-Indian teachers in grant-funded positions over more senior teachers based on asserted grant requirements.

## Decision

- The court affirmed the district’s interpretation that “contracts entered into after May 7, 1988” refers to the master contract, making § 126.501 applicable to the affected employment relationship.
- The court held § 126.501 constitutional under equal protection because it is rationally related to legitimate governmental objectives connected to American Indian education and staffing.
- The court rejected the Contracts Clause challenge, concluding the legislature permissibly modified the statutory framework governing continuing contracts without unconstitutional impairment.
- The court reversed the district’s retention of less senior non-Indian grant-funded teachers over more senior teachers, holding grant considerations did not authorize departure from the tenure and seniority scheme.
- The matter was remanded for further proceedings consistent with the ruling on grant-funded positions.

## Legal Principles

- For § 126.501, the phrase “contracts entered into after May 7, 1988” is construed as referring to the applicable master contract between the district and teachers, not individual tenure dates.
- A statutory exception allowing discretionary retention of less senior American Indian teachers during ULAs may be upheld under equal protection when tied to legitimate governmental objectives regarding American Indian education and teacher representation.
- Legislative adjustment of statutes governing continuing teacher contracts and seniority rules does not, by itself, constitute unconstitutional contract impairment where core contractual obligations remain and the change serves a legitimate public purpose.
- A school district may not bypass statutory tenure and seniority requirements to retain less senior non-Indian teachers solely because positions are grant-funded or because a grantor prefers particular employees, absent express statutory authorization.

## Conclusion

The court upheld a statutory, limited exception to seniority-based ULAs allowing retention of less senior American Indian teachers, rejected equal protection and contracts clause challenges to that exception, and held that grant-funded staffing concerns do not permit retaining less senior non-Indian teachers over more senior teachers contrary to Minnesota’s tenure and seniority rules.


Krueth v. Indep. Sch. Dist. No. 38, Red Lake, 496 N.W.2d 829 (Minn. Ct. App. 1993)