President Trump has just signed the Coronavirus Aid, Relief and Economic Security Act (the “CARES” Act). We are still analyzing the full impact of the Act, but here is a brief summary of what it means to the public schools, including a possible mandate to continue to pay all employees and contractors, even if they may not be providing services.
GRANT MONIES: The Act authorizes an “Educational Stabilization Fund,” with the states then getting approximately $13.5 billion as part of the “Elementary and Secondary School Emergency Relief Fund.” Each state will then allocate not less than 90% of such grant funds as subgrants to local educational agencies (including local and regional school districts and charter schools that are local educational agencies) in proportion to the amount of Title I (Part A) funds that such local educational agencies received in the most recent fiscal year. While the Act enumerates specific purposes for which local educational agencies may spend these monies (including special education, homeless students, providing meals and technology to low income students, summer and afterschool learning programs, and basic health and sanitation measures), the Act broadly states that these grants may be used for such “other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency.” It appears that there will be sufficient flexibility for the use of the funds.
MAINTENANCE OF STATE FUNDING: The Act provides that a state’s application for grant monies shall include assurances that the state will maintain support for elementary and secondary education for the 2019-2020 and 2020-2021 fiscal years “at least at the levels of such support that is the average of such State’s support for elementary and secondary education … provided in the three fiscal years preceding the date of enactment of this Act.” The hope is that this “maintenance of effort” provision will hold school districts harmless from potential state funding cuts. However, the Secretary of the U.S. Department of Education can waive this requirement for the purpose of “relieving fiscal burdens on States that have experienced a precipitous decline in financial resources.”
SO DO YOU HAVE TO CONTINUE TO PAY CONTRACTORS (AND EMPLOYEES) FOR SERVICES THEY ARE NOT PROVIDING? Under a section entitled “Continued Payments to Employees,” the Act states that a local educational agency who receives grant funds:
“shall to the greatest extent practicable, continue to pay its employees and contractors during the period of any disruptions or closures related to coronavirus.”
One immediate question that comes to mind is, of course, whether school districts must continue to pay their bus contractor despite the schools being closed. Moreover, some bus companies may have already laid off drivers in anticipation of the lack of revenue during the closures. Nonetheless, this language from the Act could be cited by bus companies to seek continued compensation, even though no services are being provided. But does this not remove the right of school districts to rely on contracts that they have negotiated with vendors? For example, many bus contracts contain a force majeure clause that releases the Board’s obligation to pay for bus services in times of emergency or natural disaster. Other contractual escape clauses may exist as well, along with other provisions governing when and how payments are to be made when there is an interruption in service. The Act, unfortunately, does not address such a case and the issue remains open for the time being.
Similarly, collective bargaining agreements may only require a school district to pay employees for days actually worked or they may permit furloughs and layoffs. Union and non-union employees may contend now that layoffs are impermissible and/or that they cannot be laid off or furloughed, despite the fact that the applicable bargaining agreement explicitly gives those rights to the school district. Moreover, many school districts have recently negotiated agreements with unions to define their salaries and work duties during the school closure. Stated differently, if taken to its most extreme interpretation, the Act could unreasonably impact the rights of school districts to rely upon the consideration they received in the agreements that they have negotiated in good faith.
While the Act appears to be most relevant when thinking about bus contracts and/or employees’ salaries, it should be emphasized that it may also require continued payment for other vendors. This could potentially include payments to vendors such as special education outplacement providers, related service providers and possibly other vendors.
There is, however, an “escape clause” in the Act, which states that school districts must only continue to pay their employees and vendors “to the greatest extent practicable.” The broad language here would seem to give school districts at least some discretion in determining what payments must continue. School districts may wish to take advantage of this broad language when vendors call seeking payment for services they have not performed since the schools have closed. However, without further guidance, it is not yet entirely clear what types of continued vendor payments would fall into this categorical exception.
WHAT DOES THIS ALL MEAN? This Act will require much guidance (and possible regulations) from the U.S Department of Education, and perhaps the State of Connecticut. It is possible that our state may view the broad commands and construe the language regarding payment of employees and contractors as a mandate for payment of expenses for bus contracts, employees (and even special education outplacements). In theory, our state could enact guidance or even legislation conditioning the maintenance of the current level of state aid to a local or regional school district upon on the district complying with these mandates.
While a lot of noise might emerge in the immediate aftermath of this Act, school districts are advised to avoid taking rash action and consult with legal counsel. School districts may also decide to negotiate new agreements with its transportation providers, employees and other vendors to create a mutually agreeable solution. If such is the case, it would be wise to place into any such agreement a clause that states the parties agree that it satisfies the district’s obligations under the Act.
PLEASE NOTE: While this article focused on its impact on school bus and other vendor contracts, as well as salary obligations, there will be further discussion of the general employment aspects of this Act in our sister blog, “Working Together.”
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