University Students: Employees Or Customers?

University-student contracts have become a topic of interest in recent years, especially in light of the COVID-19 pandemic and its impact on higher education. A university agreement is a legal agreement between a university and a matriculating student, outlining the rights and responsibilities of both parties. While these contracts are not common in traditional higher education, they have been increasingly used by some schools, particularly for-profit colleges, to protect their financial interests and limit students' legal rights. The COVID-19 pandemic brought to light the ambiguous nature of these contracts, as students sued universities for refunds, claiming that remote learning was not equivalent to in-person instruction. The courts' inconsistent views on the university-student contract have led to discussions about the need for more explicit contracts and greater scrutiny of universities' promises.

Enrollment contracts limit students' legal rights and their ability to seek redress

Enrollment contracts are formal, legalistic agreements that are not generally found in traditional higher education. They are designed to protect the financial interests of schools by limiting students' legal rights should something go wrong.

The types of restrictions placed upon incoming students by enrollment contracts fall into four basic categories: forced arbitration clauses, go-it-alone clauses, gag clauses, and internal process requirements.

Forced Arbitration Clauses

These provisions prohibit students or former students from going to court to seek resolution of any complaints, such as a student seeking a refund for an inadequate education. Instead, the college requires students to take any complaints to an arbitrator in a private, binding process.

Go-it-alone Clauses

When these provisions are included in enrollment contracts, students and former students who have complaints are not allowed to join with peers who may have similar complaints against the school (such as through a group or class action). Instead, the contractual provision requires each student to seek resolution alone.

Gag Clauses

These provisions prohibit students or former students from telling other people about the complaint resolution process or about the specifics of any final ruling. These types of agreements have long been common in settlements of disputes, but they are now appearing in contracts and other documents that colleges require students to sign as a condition of enrollment, before a dispute even arises.

Internal Process Requirements

While all colleges encourage students to make use of internal grievance procedures, these provisions prohibit students from taking their complaints to other forums for resolution without first going through the school's internal process.

While restrictive clauses are frequently imposed by for-profit colleges participating in the federal financial aid program, they are used only rarely at traditional nonprofit colleges or at for-profit colleges not using federal funds, and almost never at public institutions.

The use of enrollment contracts by colleges has led to students feeling cheated and trapped. For example, students of UEI College in Long Beach, California, discovered that among the enrollment paperwork they signed was a provision prohibiting them from going to court. Instead, they were legally compelled to take their complaints to an arbitrator chosen and paid by UEI, with no chance for depositions before the hearing and essentially no way to appeal the arbitrator's ruling.

In response to the growing, strategic use of mandatory arbitration and class action waiver clauses in enrollment agreements, Congresswoman Maxine Waters and Senator Dick Durbin introduced the Court Legal Access & Student Support (CLASS) Act. This bill prohibits any school receiving student aid funding from the Department of Education from including any restrictions on students' ability to pursue legal claims, individually or with others, against higher education institutions in court.

Enrollment contracts are designed to protect the financial interests of universities

Enrollment contracts are formal, legalistic agreements that students sign with their universities. They are designed to protect the financial interests of universities by limiting students' legal rights. While not common in traditional higher education, these contracts are becoming more prevalent, particularly at for-profit colleges. The contracts include language that outlines the options available to the student in a range of situations.

The restrictions placed on students by these enrollment contracts fall into four main categories: forced arbitration clauses, go-it-alone clauses, gag clauses, and internal process requirements.

Forced arbitration clauses prohibit students from going to court to seek resolution for any complaints they may have, such as seeking a refund for an inadequate education. Instead, they are required to take their complaints to a private, binding arbitration process. Go-it-alone clauses prevent students from joining with peers who may have similar complaints and require each student to seek resolution alone. Gag clauses prohibit students from sharing information about their complaints or the resolution process with anyone else. Internal process requirements mandate that students go through the university's internal grievance process before taking their complaints further.

These types of restrictions are most frequently imposed by for-profit colleges that participate in federal financial aid programs. They are rarely used by traditional nonprofit colleges or for-profit colleges that do not receive federal funding, and almost never by public institutions.

Enrollment contracts are designed to protect universities financially by limiting students' legal rights. They give universities the upper hand in the event of a dispute, as students are often unaware of the restrictions and limitations they are agreeing to.

Enrollment contracts are not generally found in traditional higher education

The four basic types of restrictions placed on students by enrollment contracts are forced arbitration clauses, go-it-alone clauses, gag clauses, and internal process requirements. These provisions limit students' ability to seek redress of grievances against the institution. For example, forced arbitration clauses prohibit students from going to court and instead require them to take their complaints to an arbitrator chosen and paid by the school. Go-it-alone clauses prevent students from joining with peers who have similar complaints, requiring each student to seek resolution alone. Gag clauses prohibit students from sharing information about their complaints or the resolution process with anyone outside the institution. Internal process requirements mandate that students go through the school's internal grievance process before taking their complaints further.

These types of restrictive clauses are more commonly imposed by for-profit colleges that participate in federal financial aid programs. They are rarely used at traditional nonprofit colleges or for-profit colleges not using federal funds, and almost never at public institutions. The inclusion of such clauses in enrollment contracts has been criticised as a way for colleges to create room for unscrupulous marketing and lower-quality education.

While enrollment contracts are not standard in traditional higher education, university agreements are common. University agreements are legal agreements between a university and a matriculating student that outline the student's financial responsibilities and the terms of their enrollment. These agreements typically include sections on enrollment terms, tuition and fees, refund policies, academic policies, student conduct, housing and residence life, health and safety, data privacy, and termination conditions.

Enrollment contracts may include forced arbitration clauses, go-it-alone clauses, gag clauses, and internal process requirements

Enrollment contracts are formal, legalistic agreements that are not generally found in traditional higher education. They are designed to protect the financial interests of schools by limiting students' legal rights. Enrollment contracts are often hidden in the stack of paperwork that students receive upon enrollment. The types of restrictions placed upon incoming students by enrollment contracts fall into four basic categories: forced arbitration clauses, go-it-alone clauses, gag clauses, and internal process requirements.

Forced Arbitration Clauses

These provisions prohibit students or former students from going to court to seek resolution of any complaints, such as a student seeking a refund for an inadequate education. Instead, the college requires students to take any complaints to an arbitrator in a private, binding process. Arbitration was originally intended as a way for two parties to resolve a dispute without the cost and delays of going to court. However, in recent years, the use of forced arbitration has grown, becoming a strategy used by businesses to prevent consumers from holding them accountable for their wrongdoing.

Go-it-alone Clauses

When these provisions are included in enrollment contracts, students and former students who have complaints are not allowed to join with peers who may have similar complaints against the school. Instead, the contractual provision requires each student to seek resolution alone. When individuals have complaints about the practices of a single company or individual, they often have the choice to bring their disputes jointly in a single case or file representative suits. Group approaches are common in consumer cases because individual consumers often lack the knowledge or financial resources to pursue a claim. By prohibiting group action, schools enable worse behavior.

Gag Clauses

Gag clauses prohibit students or former students from telling other people about the complaint resolution process or the specifics of any final ruling. While confidentiality agreements are common in settlements, requiring consumers to keep their complaints secret is a new strategy by companies to prevent tales of disputes from reaching the media or law enforcement agencies. Like requiring individual processes, this strategy inserts a firewall between wronged students, reducing the likelihood that they will work together.

Internal Process Requirements

All schools have internal dispute processes to help students with issues, and it is good practice to encourage students and former students to use these procedures first. However, some schools are attempting to prohibit their students and former students from ever taking their complaints elsewhere, even if internal mechanisms offer no relief. Our research found sixteen institutions, all for-profits receiving federal aid, that included language in their contracts mandating students to go through the institution's internal grievance process before taking their complaints to arbitration.

The COVID-19 pandemic and related university closures led to lawsuits from students, challenging the university-student contract

The litigation raised questions about the legal relationship between a college and its students. Law professor Max Schanzenbach asked what universities promise their students in exchange for tuition. He and his colleague, Kim Yuracko, outlined three possible ways of answering this question:

• Universities simply owe students the delivery of courses and the awarding of credits and degrees.
• Universities promise goods for consumption, such as enjoyable classes, social events, athletics, and comfortable dorms.
• Universities provide students with a community that develops skills useful in the labour market, requiring in-person classes, dorm life, clubs, etc.

Schanzenbach and Yuracko argued that the third option, the human capital model, is the best way to describe the university-student contract. They pointed to universities' extensive use of human capital-focused language and promises in their student handbooks as support.

Courts were divided in their view of the university-student contract, and any remedies for breach of contract were unclear. While some courts held that general marketing statements and administrative information were not enough to plausibly plead a specific promise of in-person instruction, other courts, such as the U.S. Court of Appeals for the Second Circuit, held that marketing and informational statements could be sufficient to plead a "generalized obligation" to provide in-person instruction.

The ongoing litigation around COVID-19 closures and mandates is expected to lead to more explicit contracts, with courts scrutinizing universities' promises more closely in the future.

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