Contract Default Collection Process Page 1

Contract Default Collection Process – Page 1

Office of Catholic Education

Contract Default Collection Process

For Professional Educators

Rationale:CatholicSchools and the Archdiocese of Indianapolis dedicate considerable resources annually toward the recruitment and retention of professional educators (teachers, school administrators and other professional educational employees). Contracts are offered to professional educators in the Church as an expectation of the educational profession to protect them from unreasonable termination of employment during the school year, but also as an institutional protection against the undue disruption of an educational program during the year without just cause. The contract is a mutual covenant between the employer and the employee for a specified period of service. It is the expectation of the archdiocese that all parties will honor contracts.

The termination of an educator’s contract prior to the contract’s expiration by the educator without just cause, results in organizational and financial detriment to the schools and the archdiocese. We believe that the educator has a liability for this detriment that is not easily calculated. Therefore, we have settled on liquidated damages equal to 10 percent (10%) of the annual salary as a fair and accurate estimate of the detriment suffered by the educational program and the archdiocese. Generally, the liquidated damages are not invoked for the next school year until after July 1.

There is an increasing tendency in a very competitive market for professional educators for some contracted employees to default on the terms of their employment contracts and leave their positions for other, often more lucrative, positions. When this happens, the Catholic school is left with a number of challenges in covering classes; searching, interviewing and employing another highly qualified teacher (if one can be found) late in the hiring season and in simply maintaining a consistent educational program as expected and paid for by our school parents andparishioners.

Consistently collecting liquidated damages on contract defaults signals that the archdiocese takes the employment contract provisions very seriously, will enforce the fees for damages, and hopefully, help our employees to honor their contract obligations as well. This process provides an efficient and effective way for the Office of Catholic Education (OCE) to accomplish this objective. The process applies to teachers, school administrators, and other contracted educational employees.

Contracted employees are required to initial their contract acknowledging the provisions for Contract Default and Liability for Default. An employee who refuses to initial and/or sign the contract, is to be given a letter indicating that they will be employed on an “at will” basis rather than on a contracted basis (sample teacher letter attached).

1. When an educational administrator or supervisor believes that an employee has breached his or her employment contract without just cause, the default clause should be implemented:

a.In the event Teacher terminates this Teacher Contract without just cause (which shall be determined by the Archdiocese in its sole discretion), prior to the expiration of the contract term, Teacher agrees to pay to the Archdiocese/School as liquidated damages, a sum equal to 10% of the Teacher’s annual salary (hereinafter referred to as “Liquidated Damages”) within 30 days of the date of termination.

b.In the event Teacher fails to pay the Liquidated Damages in full within 30 days of the date of termination, the Archdiocese/School shall be entitled to such additional sums, including payment of interest at the rate of 10% per annum, cost of collection and attorney fees.

c.This Section 7 shall be governed by and interpreted in accordance with the laws of the State of Indiana. Teacher and Archdiocese/School hereby consent to the exclusive jurisdiction of the state courts located in Marion County, Indiana and waive any objection which may have been based on improper venue or forum non-convieniens to the conduct of any court proceedings.

Teacher shall initial here to indicate that he/she has read and accepts Section 6 - Defaults and Section 7 - Liability for Defaults.*

*Note: this is the default clause from the School Teacher Contract. The Administrator contract contains the same provisions.

1. Soon after being notified of the default, the administrator sends a letter to the former employee on school letterhead (sample letter attached) indicating the liability for default and specifying the amount owed as liquidated damages and the date (usually 30 days hence) by which the amount should be paid to the school. This letter should be sent with a Certificate of Mailing.* A copy of this letter is also sent to the Administrative Assistant for the Personnel Team at the Office of Catholic Education, who will begin a tracking process. Please Note: Archdiocesan legal counsel indicates that the amount of damages cannot be deducted from salary already earned and owed to the former employee.

*Certificate of Mailing is a proof of delivery returned to the sender indicating that the letter was delivered to the specified address (this is not the same as Certified Mail as the recipient does not have to sign upon receipt, but the sender has proof of delivery).

1. If a person who is in default:
2. does not pay within thirty (30) days; or,
3. does not attempt to make arrangements for payment satisfactory to the school; or,
4. refuses payment verbally or in writing; or,
5. responds with a letter or call from an attorney or another third party;

then, all correspondence regarding the case should be turned over to the Office of Catholic Education, Administrative Assistant for the Personnel Team for follow-up action. NOTE: Reasonable terms for payment may be worked out with the former employee by the school/parish or the archdiocese.

1. The Office of Catholic Education will immediately refer the case to the archdiocesan attorney’s office.

1. The archdiocesan attorney will write a general demand letter indicating that failure to respond will result in legal action, or compose an individualized response to an attorney’s letter or to a letter from the former employee.

1. If the former employee fails to respond to the archdiocesan attorney’s letter within thirty (30) days of the date of the letter, then the referring administrator will be notified and the matter will be turned over to IMC Credit Services for collection as follows:

• IMC will use all means at their disposal to collect the liquidated damages including:
• Assign a professional collection agent;
• Send written notification of debt;
• Telephone collection efforts;
• Allow for full payment or re-payment on a reasonable schedule;
• Provide negative reports to credit bureaus;
• Recommend possible litigation in small claims court that can result in wage garnishment, etc.

• When IMC collects, they will keep one-third of the amount collected.

• The balance of all collections from IMC will be paid first to the Office of Catholic Education and then to the school via the Office of Accounting Services.

• IMC will give regular written acknowledgements to OCE of account status including a debtor activity report with percent of recovery and will remit the balance of collections to OCE every thirty (30 days).

1. If litigation in small claims court is recommended by IMC, OCE will notify the referring administrator and will authorize IMC to file claims on a case-by-case basis utilizing a “Permission to Proceed Letter” provided by the company.

• If no attorney is involved the cost will be nominal, and permission to proceed will normally be granted.

• If the former employee retains an attorney, IMC will consult with OCE and the archdiocesan attorney will be notified.
• A decision to proceed or not to proceed will be made in consultation with the archdiocesan attorney who will serve as counsel to the OCE for the case.

• Litigation costs will be taken from any funds recovered and/or covered by OCE up to a maximum of the amount owed by the former employee.

1. OCE will be responsible for correspondence with schools/parishes about the status of contract defaults referred to them.

1. Send default letter to former employee with copy to OCE

1. Collect default fees/notify OCE

1. Notify OCE of non-payment

1. Notify archdiocesan attorney

1. Archdiocesan attorney sends letter

1. Collect default fees

1. Issue check request to OAS/Notify local administrator

1. Non-payment -- Notify IMC Credit Services and local administrator

1. Collection actions taken

1. Status report to OCE

1. Status report to local administrator

1. Collection distribution to OCE

1. Collection distribution to local administrator

1. Non-payment -- Recommend suit in Small Claims Court

1. Sign “Permission to Proceed Letter”

1. File suit in Small Claims Court

1. Former Employee introduces attorney into Small Claims Process

1. Decision to pursue case with attorney (with limits)

1. Court ruling enforced

1. Collection distribution to OCE

1. Collection distribution to local administrator (deposit to account)

*OCE Administrative Assistant for Personnel Team

Sample Letter for Refusal to Initial Contract

School Letterhead

Date

Teacher: ______

RE: School Teacher Contracts – Liability for Default

Dear:

I recently received your School Teacher Contract for the school year ____/____. Please be advised that sections 6, “Defaults” and Section 7, “Liability for Default”, are not properly acknowledged by your initials. In order to accept this Contract, the Archdiocese of Indianapolis must have written acknowledgement of these provisions.

If you are unable or refuse to acknowledge the responsibilities set forth in Sections 6 and 7, then the Archdiocese is not in a position to accept your employment contract. You may continue to be employed by the Archdiocese as a teacher for the school year ____/____, but only as an “at will” employee.

As an “at will” employee, you will serve at the discretion of the school administrator and your position may be terminated with or without cause at any time by you or the administrator.

I hope that you will reconsider your position and return the agreement acknowledging Sections 6 and 7 by adding your initials. Thank you in advance for your courteous and prompt attention.

Sincerely,

Administrator

Sample Letter for Default of Contract

School Letterhead

Date

Employee Name

Home Address

City, State ZIP

RE: School Teacher Contract Default

Dear:

This letter is to notify you of a financial obligation that results from the default of your contract with (Name of) School. Section 7 of the school teacher contract which you signed states:

a. In the event Teacher terminates this Teacher Contract without just cause (which shall be determined by the Archdiocese in its sole discretion), prior to the expiration of the contract term, Teacher agrees to pay to the Archdiocese/School as liquidated damages, a sum equal to 10% of the Teacher’s annual salary (hereinafter referred to as “Liquidated Damages”) within 30 days of the date of termination.

b.In the event Teacher fails to pay the Liquidated Damages in full within 30 days of the date of termination, the Archdiocese/School shall be entitled to such additional sums, including payment of interest at the rate of 10% per annum, cost of collection and attorney fees.

c.This Section 7 shall be governed by and interpreted in accordance with the laws of the State of Indiana. Teacher and Archdiocese/School hereby consent to the exclusive jurisdiction of the state courts located in Marion County, Indiana and waive any objection which may have been based on improper venue or forum non-convieniens to the conduct of any court proceedings.

Therefore, since you terminated your contract without just cause, you owe $(amount) in liquidated damages, which should be paid in full no later than (date, 30 days hence). Please make your check payable to (Name of) School and return it to me.

I would appreciate your prompt attention to this matter, which avoids the time and expense of taking legal action to recover this sum. Thank you in advance for your cooperation.

If you have any questions about this matter, please do not hesitate to contact me or Joe Peters at the Office of Catholic Education (317) 236-1430 or (800) 382-9836, ext. 1430.

Sincerely,

Administrator

OCE rev 2010