Higher education institutions face mounting pressure from prospective students, accrediting agencies and ﬁnancial aid providers to disclose graduates’ job placement rates. Several recent high-proﬁle legal battles have called attention to the issues facing university career services ofﬁces charged with calculating and disclosing this information.
In August 2013, the Career Education Corporation (“CEC”), a for-proﬁt educational services company that operates over 90 physical and virtual post-secondary campuses throughout the United States and Europe, entered into a highly publicized $10.25 million settlement with the Attorney General of New York. Press Release, New York Attorney General Eric T. Schneiderman (August 19, 2013) (available at New York Attorney General website*). The Attorney General’s investigation revealed that CEC had consistently mischaracterized job placement rates for its New York campuses, misleading the State and accreditors and giving prospective students a distorted and overly-favorable impression of CEC graduates’ employment outcomes.
Pursuant to the settlement, CEC is to pay $9.25 million in restitution to students who had attended CEC campuses and $1 million in civil penalties. In addition, the settlement requires regular independent audits of CEC’s future job placement calculations, annual reporting to the Ofﬁce of the Attorney General and speciﬁc limitations on where and when job placement rates may be disclosed. CEC admissions personnel will also provide students with placement assistance services to help them ﬁnd jobs after graduation. CEC was later sued by its shareholders in connection with its misleading disclosures and inﬂated placements rates, which resulted in a $27.5 million settlement. Lead Plaintiffs’ Mem. of Points and Authorities at 1, Ross v. Career Education Corp., 1:12-cv-00276 (N.D. Ill. Nov. 4, 2013), ECF No. 111.
This is not the ﬁrst time CEC’s job placement rates have come under ﬁre. In June 2013, a CEC campus in California, the California School of Culinary Arts-Le Cordon Bleu, was assessed with a $217,000 arbitration award in favor of a former student. Berkowitz v. California Sch. of Culinary Arts, Inc., 2013 WL 3340509 (Cal. June 12, 2013). The arbitrator agreed with the student that an admissions representative had systematically misrepresented the student’s career and earnings potential, inducing her to borrow over $40,000 in student loans to attend the campus.
Other institutions have fared better. In July 2013, the dismissal of a class-action lawsuit against the Thomas M. Cooley Law School was afﬁrmed by a federal appellate court. MacDonald v. Thomas M. Cooley Law Sch., 724 F.3d 654 (6th Cir. 2013). The court found that the school’s advertised post-graduation employment statistics were “literally true,” although potentially misleading, and that any detrimental reliance on these statistics by students was patently unreasonable. Id. at 664-65.This ongoing scrutiny of the job placement rates that are disclosed by universities has come from both state investigation and legal action from disillusioned students and does not appear to be subsiding.
In particular, New York State has voiced a renewed interest in investigating the practices of private educational institutions, most recently by launching a $40 million lawsuit against Donald Trump’s “Trump University” this past August. State of New York v. Trump Entrepreneur Initiative LLC, Index No. 451463 (Sup. Ct. N.Y. Cnty. Petition ﬁled Aug. 24, 2013).
These recent developments reveal what is at stake for universities when they release or advertise post-graduation employment statistics. The lesson for all organizations is to develop and implement comprehensive, transparent and veriﬁable disclosure systems that are consistently applied by all personnel, particularly admissions and career services representatives.