Less than a week ago, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES” Act).  For school districts, the CARES Act required them to “the greatest extent practicable,” continue to pay its employees and contractors during school closures.  As we reported previously, however, the CARES Act provides no definitive guidance that defined the employees and contractors who were not “practicable” to continue to employ.  Accordingly, notwithstanding the Act’s goal of continuing employment, this particular issue has been open for debate.   

On April 1, Governor Lamont issued Executive Order 7R (the “Order”) which imposes the same and/or additional obligations upon Connecticut school districts when it comes to their employees and contractors.  In the Order, Governor Lamont directs districts maintain individuals’ employment “to the greatest extent practicable” and to negotiate agreements with their providers that will look to cover certain actual costs incurred by their bus contractors and certain service providers.  However, there are points that do not appear to be entirely clear.

First, some good news.  The Order secures funding for boards of education through the end of the school year.  It directs specifically “[t]he State Department of Education shall continue to process appropriated state grant funds intended to support boards of education through the fiscal year ending June 30, 2020, including, but not limited to, entitlement grants such as the Education Cost Sharing (ECS) grant…payments for special education excess costs…and Choice programming…”  It further states that Municipalities “shall continue to provide funding to local boards of education as set forth in the approved annual school budgets for the fiscal year ending June 30, 2020.”

Now, let’s move on to what appears more complicated.  Just as the CARES Act requires school districts to continue to employ individuals to the “reasonable extent practicable,” so does Executive Order 7R.  In fact, the Order goes so far as to say that school districts should restore the employment of those who have already been laid off.  The specific language states, in relevant part, that school districts:

“[s]hall continue to employ or restore to employment if already laid off, and pay school staff who are directly employed by the local or regional board of education, including but not limited to teachers, paraprofessionals and other support staff, cafeteria staff, clerical staff and custodial workers, to the greatest extent practicable.”

The intent behind the Order is clear; school districts should seek to maintain their employees as best they can.  But, the Order is not absolute as it does not require school districts to continue to employee those if it is not “reasonably practicable” to do so.  Unfortunately, as with the CARES Act, there is definition of the important phrase “to the greatest extent practicable,”  thereby leaving school districts to speculate whose ties may be severed.

Notably, the Order states that school districts may “require school staff to provide services,” in other words work, during the school closure.  But, what if a school district acts in good faith and finds work for most of its employees, but lays off a few employees because there is simply no work at all for them to perform?  Here, it is perhaps reasonable that re-hiring or continuing to employee these individuals would not be “reasonably practicable.”  Alternatively, how far must a school district go in finding new responsibilities for an employee and how would this impact its collective bargaining responsibilities?  The CARES Act did not answer this question definitively and, unfortunately, Executive Order 7R does not either.  Moving forward, school districts would be well-advised to seek counsel prior to laying off employees through the balance of the school year.

Here it is also important to emphasize that school districts may terminate someone who finds employment elsewhere or if they are terminated for reasons other than those related to COVID-19.  Thus, employees may still be terminated for cause.  Moreover, the Order allows school districts to reduce the number of staff members prior to the 2020-2021 school year due to budget restrictions.  Accordingly, school districts may reduce its workforce for next school year if necessary to meet its budgetary demands.

Moving on to contractors and service providers,  the Order states that when a school district has a contract with a bus company or special education services provider, and it determines that such contract “requires amendment to more accurately reflect the actual costs incurred during the duration of the public health and civil preparedness emergencies, all parties shall promptly negotiate amendments to such contracts…”  The negotiations must be consistent with the goals of:

• Sustaining continuity of service when school resumes;
• Continuing (a) to make tuition payments to special education providers so that they may compensate their active employees and provide them health insurance and (b) to make payments to transportation providers so that they may compensate their active employees and provide them health insurance; and
• Requiring the contracted company to attest and provide reasonable documentation of the fact that it is charging only the actual and reasonable cost of sustaining wage and health insurance payments for active employees and/or fleet while also engaging best efforts to avoid unnecessary costs.

The Order seems to contemplate situations where school districts have cut off payments to its bus company and/or service provider(s) due to school closures.  Thus, it appears to be intended to provide some means for such vendors to seek some compensation.

However, there are some things school districts should consider.  First, the Order does not require school districts to pay for services not being performed.  In other words, districts do not have to pay its provider as if they services were uninterrupted.  Moreover, the Order explicitly prohibits any windfall to the providers, stating “[N]othing in this provision shall allow for contracted companies to be enriched beyond the actual and reasonable costs incurred for the purposes set forth above.”  Here, if school districts must negotiate, they should take full advantage of the Order’s direction that contractors first provide “reasonable documentation of the fact that it is charging only the actual and reasonable cost of sustaining what and health insurance payments for active employees and/or fleet while also engaging best efforts to avoid unnecessary costs.” Some contractors may have already taken cost-mitigation measures, perhaps including layoffs, prior to approaching the district.  School districts should have a full opportunity to review such costs prior to agreeing to anything through the negotiation contemplated by the Order.  

Next, school districts may wish to consider whether those vendors who are continuing to provide services in a limited capacity are doing so at reduced cost to them.  For instance, a contractor for special education services may be continuing to provide services, but at a reduced level and therefore at a reduced cost.  Similarly, school districts may have made advanced payments for services that are either not being performed or are being done at a reduced level.  Here, the Order would arguably benefit the school district.  Under the Order, it seems reasonable that a school district could seek to reduce its payment obligations because the actual costs of the provider have decreased. 

Finally, school districts should carefully read the applicable contract.  As we reported here previously, bus contracts and possibly others may have a form of a force majeure clause that excuses school districts from paying under a contract in times of emergencies such as these.  Other clauses may also exist that define the payment obligations under similar circumstances. Here, it may be reasonable to assert that the district’s payment obligations have already been negotiated.  Stated differently, if a contract that was already negotiated in good faith has defined the costs a school district must pay in situations such as these, it seems fair to rely on it.  The Order, however, provides no particular clarity for situations where such clauses are involved and whether the Order trumps these contractual provisions.

Executive Order 7R is likely to initiate several discussions between school districts, its bus contractors and other service providers.  School districts would be well-advised to seek counsel prior to engaging in such discussions to evaluate their options.  

Pullman & Comley attorneys have been closely monitoring the many developing implications of the COVID-19 pandemic for businesses and for professionals, including law firms.  The firm’s FOCUS page for the latest COVID-19 advisories may be found here.

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