The Fruits-of-Their-Labor Clause

It's right there in the North Carolina Constitution -- and the N.C. Supreme Court has just enforced it, in a case brought by a public employee, but potentially applicable to economic liberty claims brought by private businesses in the future.

The North Carolina Constitution provides, "We hold it to be self-evident that all persons are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, the enjoyment of the fruits of their own labor, and the pursuit of happiness." In today's decision in Tully v. City of Wilmington, the court applied the Fruits of Their Labor Clause as a constraint on government action, and summarized past cases that had done the same.

Kevin Tully was apparently a quite successful Wilmington police officer, who took the exam for promotion to Sergeant. He failed the test, but, according to his Complaint,

Tully had based his answers on the prevailing law at the time, and, after receiving a copy of the official examination answers, he discovered that the official answers were based on outdated law. Tully filed a grievance regarding this discrepancy through the City's internal grievance process but was informed in a 3 January 2012 letter from City Manager Sterling Cheatham that "the test answers were not a grievable item." A supervisor also told Tully that "[e]ven if you are correct, there is nothing that can be done."

This, though, seems to have been a misstatement of the written police department policies, which apparently do allow appeals based on supposed errors in tests. The question in the case was whether this error (if it could be factually shown to be an error) was actually a constitutional violation—and the North Carolina Supreme Court unanimously said yes:

This Court has previously recognized claims against government defendants rooted in the right to enjoy the fruits of one's labor. In State v. Balance (1949), in which we held that a statute regulating photographers violated Sections 1 and 19 of Article I, we explained that the "fundamental guaranties" set forth in Sections 1 and 19 "are very broad in scope, and are intended to secure to each person subject to the jurisdiction of the State extensive individual rights." In State v. Warren (1960) we observed that

Section 1, Article I, of the Constitution of North Carolina guarantees to the citizens of the State "the enjoyment of the fruits of their own labor" and declares this an inalienable right.

The basic constitutional principle of personal liberty and freedom embraces the right of the individual to be free to enjoy the faculties with which he has been endowed by his Creator, to live and work where he will, to earn his livelihood by any lawful calling, and to pursue any legitimate business, trade or vocation. This precept emphasizes the dignity, integrity and liberty of the individual, the primary concern of our democracy.

We have also addressed a public employee's liberty interest in pursuing her chosen profession free from unreasonable actions of her employer. In Presnell v. Pell (1979) a school employee sued her employer school district and certain administrators for defamation and wrongful termination after, as her complaint alleged, the school's principal caused her to be fired based upon his false allegation that she had distributed liquor to maintenance contractors on school premises. Although we held that the plaintiff's at-will employment status meant that she had no cognizable property interest in continued employment, we explained that her "complaint does however sketch a colorable claim that a constitutionally protected 'liberty' interest may be at stake."

"One of the liberty interests encompassed in the Due Process Clause of the Fourteenth Amendment is the right 'to engage in any of the common occupations of life,' unfettered by unreasonable restrictions imposed by actions of the state or its agencies. Meyer v. Nebraska (1923); Truax v. Raich (1915). The right of a citizen to live and work where he will is offended when a state agency unfairly imposes some stigma or disability that will itself foreclose the freedom to take advantage of employment opportunities….

"The liberty interest here implicated—the freedom to seek further employment—was offended not by her dismissal alone, but rather by her dismissal based upon alleged unsupported charges which, left unrefuted, might wrongfully injure her future placement possibilities…."

More recently, in King v. Town of Chapel Hill (2014), which concerned a tow truck company's challenge to a local towing ordinance, we explained that "[t]his Court's duty to protect fundamental rights includes preventing arbitrary government actions that interfere with the right to the fruits of one's own labor."

The City here correctly notes that cases involving the right to pursue one's profession free from unreasonable governmental action generally involve the government acting as regulator or sovereign rather than as an employer (with the exception of Presnell). Nevertheless, we are persuaded that Article I, Section 1 also applies when a governmental entity acts in an arbitrary and capricious manner toward one of its employees by failing to abide by promotional procedures that the employer itself put in place….

Here Tully has adequately stated a claim under the portion of Article I, Section 1 safeguarding the fruits of his labor because, taking all the facts in his complaint as true, he alleges that the City arbitrarily and capriciously denied him the ability to appeal an aspect of the promotional process despite the Policy Manual's plain statement that "[c]andidates may appeal any portion of the selection process." Tully's allegations state that by summarily denying his grievance petition without any reason or rationale other than that the examination answers "were not a grievable item" despite their being a "portion of the selection process," the City ignored its own established rule. Tully then alleges that in so doing, "the City arbitrarily and irrationally deprived [him] of enjoyment of the fruits of his own labor." Accordingly, we conclude that the City's actions here implicate Tully's right under Article I, Section 1 to pursue his chosen profession free from actions by his governmental employer that, by their very nature, are unreasonable because they contravene policies specifically promulgated by that employer for the purpose of having a fair promotional process.

This right is not without limitation, however. Based upon our distillation of the admittedly sparse authority in this area of the law, we hold that to state a direct constitutional claim grounded in this unique right under the North Carolina Constitution, a public employee must show that no other state law remedy is available and plead facts establishing three elements: (1) a clear, established rule or policy existed regarding the employment promotional process that furthered a legitimate governmental interest; (2) the employer violated that policy; and (3) the plaintiff was injured as a result of that violation. If a public employee alleges these elements, he has adequately stated a claim that his employer unconstitutionally burdened his right to the enjoyment of the fruits of his labor.

Here the Policy Manual set forth clear rules specifying that "[c]andidates may appeal any portion of the selection process" and examination "instruments used shall have demonstrated content and criterion validity." These rules serve the legitimate governmental interest of providing a fair procedure that ensures qualified candidates move to the next stage of the promotional process. The Policy Manual itself explains that "[i]t is the objective of the City of Wilmington to provide equal promotional opportunities to all members of the Police Department based on a candidate's merit, skills, knowledge, and abilities."

Second, in his complaint Tully alleges facts showing that the City violated the above rules by arbitrarily denying his appeal challenging inaccurate official examination answers. Third, Tully has sufficiently alleged an injury in that the City's arbitrary denial of his appeal meant that, if proven, the examination defects—and his flawed test score resulting from those defects—were never addressed. Tully's allegations show that the City's actions injured him by denying him a fair opportunity to proceed to the next stage of the competitive promotional process, thereby "unfairly impos[ing] [a] stigma or disability that will itself foreclose the freedom to take advantage of employment opportunities."

At this stage we express no opinion on the ultimate viability of Tully's claim. Accordingly, we need not speculate regarding whether Tully would likely have received the promotion had the Police Department followed its own policy….

The court expressly stressed that it was not relying on substantive due process or on the equal protection clause, but relied solely on the Fruits-of-Their-Labor Clause. And, as the citation to King v. City of Chapel Hill shows, the Clause can be used by private businesses that want to challenge economic regulations as well.