Public Employees and the Curious Mini-Revival of Contract Clause Jurisprudence

40 Pages Posted: 26 Mar 2013 Last revised: 25 Jan 2018

See all articles by James W. Ely

James W. Ely

Vanderbilt University - Law School

Date Written: March 21, 2013


This article examines the role of the often-overlooked contract clause in the context of the current financial crisis experienced by many states and localities. In the face of severe budget shortfalls, state and local governments have sought to modify public employee contacts, especially with respect to health and pension benefits. Federal and state courts have reached confliction opinions concerning legislation that curtails existing contractual rights for such employees. The article criticizes the prevailing multi-prong test for determining contract clause violations as vague and malleable. It also calls into question the notion that courts should employ a heightened standard of review when states alter their own contractual undertakings. Further, the article proposes a return to a principled reading of the contract clause, arguing that financial problems are not a excuse to avoid contractual obligations of any sort, and that all contracts, public as well as private, should be held to the same standard of review. It maintains that public employees should not be singled out for harsh treatment in economically distressed times, but that neither should they be treated as a privileged class.

Keywords: Contracts, contract clause, public sector employees, budget deficits, economic emergency, New Deal, Bronson v. Kinzie, Home Building and Loan Association v. Blaisdell, Fletcher v. Peck, U.S. Trust Co. v. New Jersey, Roger B. Taney, Charles Evans Hughes, George Sutherland, Richard A. Epstein

Suggested Citation

Ely, James W., Public Employees and the Curious Mini-Revival of Contract Clause Jurisprudence (March 21, 2013). Vanderbilt Law and Economics Research Paper No. 13-11; 2 Brigham-Kanner Property Right Conference Journal, 37 (2013); Vanderbilt Law and Economics Research Paper No. 13-11; Vanderbilt Public Law Research Paper No. 13-12. Available at SSRN:

James W. Ely (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

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