Legal Standpoint: What is the Legal Nature of a University?

By Steve Dunham    //    Volume 28,  Number 2   //    March/April 2020

This column starts with two caveats. First, colleges and universities come in many forms—public/private, research/undergraduate, community colleges, religious/nonsectarian, etc. (all referred to here as “universities”). The legal nature and structure of different kinds of institutions vary significantly. Second, this is not a topic for 650 words. Each of the points below deserves its own book chapter. Nevertheless, the following 10 fundamental concepts about the legal nature of a university and how the law helps to define what universities are and do may be a useful starting point for further consideration.

1. Universities are corporations. They can sue and be sued. They have governing boards who owe fiduciary duties to their institutions. Private universities are typically subject to state corporation laws. Public institutions are more typically subject to other state laws, but in many respects, they act like and have the same legal powers as corporations.

2. Universities are employers. At will employees, tenured faculty, unionized employees, civil servants, and presidents all have a legal relationship with their university. The terms of employment (e.g., what does “cause” mean, issues of misconduct, compensation) vary, but the scope and meaning of the employment relationship is determined by law.

3. Universities are subject to laws of federal, state, and local governments. Compliance with these external laws is a legal function with legal consequences. The relationship between universities and governments is itself a legal relationship, defined by applicable laws. Some external laws apply to universities because they apply to all corporate entities or all employers (e.g., nondiscrimination, FMLA, FLSA, common law of torts, and contracts). Some laws apply as conditions of receipt of money or programs (federal research, student financial aid) and are unique to universities (e.g., Title IX, Clery).

4. Universities owe legal duties to third parties, including students. Universities’ relationships with students are defined in part by the tort law of negligence and “duties.” Whether and when universities have legal duties to protect students from harm is one of the central issues of higher education law. Based on university policies, universities may also have contractual obligations to students and other third parties.

5. Public universities are subject to the U.S. Constitution. This creates legal rights and obligations, such as through the First Amendment and Due Process. Private universities may by policy commit themselves to equivalent legal requirements.

6. Universities are business entities. They buy and sell goods, real property, and services; make investments; and borrow money. As participants in commerce, universities are subject to the laws and regulations to which any other business is subject, including health and safety regulations and taxes (with exceptions based on nonprofit or governmental status).

7. Based on governing legal documents and through policies, universities adopt mission statements, core values, and operating principles. These documents regulate, in the form of internal law, the relationships among university constituents, such as trustees, administrators, faculty, students, and alumni. Many such policies are unique to higher education and have significant legal implications, including academic freedom, shared governance, freedom of expression, tenure, adherence to academic standards, and institutional autonomy from government action.

8. Based on their legal status, universities owe legal duties to the public. The nonprofit 501(c) (3) tax status is a form of government regulation with commensurate legal obligations. The same is true for public universities subject to state law.

9. Universities create knowledge, including intellectual property (patents, copyrights, trade secrets). Universities also develop and market their names and reputations, which are a form of legally recognizable property rights.

10. Universities provide services to students (teaching), the public (creation of knowledge), and the community (public service and economic development). As such, universities are a critical sector of society and of the economy. Universities are also public interest organizations that contribute to the public good. The external and internal laws that govern higher education institutions are instrumental in helping (or, at times, hindering) efforts by colleges and universities to serve these public purposes.

Steve Dunham, JD, is the vice president and general counsel for Penn State University. 

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