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Prompt Examination of COVID-19 Impact on School Business Operations Advisable

March 17, 2020

The COVID-19 pandemic has profoundly impacted the operation of schools and school districts in Connecticut.  While education officials across the state react to rapidly changing circumstances, we will continue to highlight important legal issues resulting from the impact of the pandemic on the educational system. The sections below discuss certain legal issues affecting school and school district business operations as a result of the pandemic. 

Contract Law Considerations

The Governor’s order closing public schools and encouraging the closure of nonpublic schools through March 31 does not, by itself, free schools and school districts from performing their contractual obligations. We urge school and district business officials to promptly examine their contracts with outside organizations and vendors to assess the pandemic’s impact on each party’s ability to perform their obligations thereunder. Such examinations are time sensitive tasks, as notice requirements, deadlines and timelines are often implicated. When examining contracts, officials should consider the immediate impact on ability to perform, but also impact of the school closure on ability to perform over the life of the contract (e.g., meet contractual annual guarantees).    

If the pandemic and/or school closure will impact the school or school district’s ability to perform contractual obligations, school business officials should take prompt action to address such circumstances. It may be possible to excuse or temporarily suspend performance in light of the unforeseen circumstances. Most commonly, this would be accomplished by asserting that the pandemic is a force majeure event. A force majeure clause in a contract is a means of addressing events (e.g., natural disasters, wars) that were not foreseeable at the time of contract execution and which substantially impact a party’s ability to perform. The application of a force majeure clause to a particular circumstance is dependent on the inclusion of such a clause in the contract and the specific verbiage of such a clause. Notably, certain force majeure clauses include a deadline to provide notification of the occurrence of the force majeure event and to the other party. Parties who do not meet such deadlines risk their ability to suspend or excuse performance, so timely consideration of this option is recommended.     

Other contract law doctrines may also excuse performance in the event that circumstances beyond a party’s control frustrate performance or render performance impossible or impracticable, even in the absence of a force majeure clause in the contract. 

Contract cancellation or termination is another option to consider when circumstances warrant (e.g., non-essential or time-limited services). School and district officials should be cautious to examine limitations on ability to terminate or cancel, such as notice requirements, as well as the implication of a decision to terminate or cancel the contract on other contractual duties and rights (e.g., assessed charges, indemnification obligations).

While it may also be possible to renegotiate aspects of a contract in light of the circumstances, notice requirements and other timeline issues may warrant that officials assert their rights under a contract before attempting to negotiate with the other party. It is also important that renegotiated terms be reduced to writing to memorialize the parties’ agreement.

Officials should also examine the ability of outside organizations and vendors to perform their contractual obligations to schools and school districts.  In the instance of anticipated or actual non-performance, it is advisable that officials confer with counsel when considering protective actions. Consideration should be made of all options available to the contractor (e.g., termination, force majeure, subcontracting) when making such examinations. It is also necessary to consider all options and remedies available to the school or school district (e.g., damages, recovery of costs, liquidated damages, calling of performance bonds). Again, consideration of deadlines for action is important.   

Further, in regard to any contract action, we note that officials should consider where the legal authority to take action under the contract resides. Authority might rest with the superintendent or head of school, for example, or their designee. In other instances, it might rest with the board of education, board of trustees, etc. To ensure the validity of the action taken, the issue of authority should be carefully considered.  

If a contractual dispute arises, we advise that schools and school districts consider the availability of insurance policies or contractual relief available to defer litigation costs.

Trip/Event Cancellations

The COVID-19 pandemic has necessitated the cancellation of numerous school trips and events and has jeopardized others. Whether an event or trip was backed by a formal contract or not, schools and school districts should consider their rights in regard to actual or potential cancellation, keeping in mind the importance of prompt notification to avoid a contractor acting in reliance on the expectation that the trip or event will proceed as planned (e.g., incurring expenses that might be recoverable). The terms controlling the applicability of trip or event insurance should be considered.

Student Data Privacy

School districts in Connecticut are developing plans to educate students at home -- whether through formal “distance learning” or otherwise -- during the COVID-19 pandemic. While plans may include hardcopy paperwork being sent home, many if not all of those plans will include a component of online learning, which may trigger obligations under Connecticut’s student data privacy laws, Connecticut General Statutes §§ 10-234aa through dd.  Connecticut public school districts are cautioned to understand these laws, including the requirement that districts enter into written contracts with the providers of these types of software/applications, and be mindful of them when planning interim learning opportunities for students. For more on this subject, please click here.  

Budget Considerations

The COVID-19 pandemic response of schools and school districts is likely to result in unanticipated costs during the current fiscal year.  In the public school context, to the extent that these costs may be funded within the appropriation available to the board of education, the board of education has the authority to transfer funds between line items. The board of education can authorize the Superintendent or other designated personnel to make limited emergency transfers, but only so far as such emergency transfers are necessary and the urgency of the matter would prevent the board of education from meeting in time to make the transfer itself. Such emergency transfers must be announced at the next board of education meeting and explained in writing to the town/municipality. 

To the extent that the unanticipated costs would cause the budget to exceed the available appropriation, it must be noted that Connecticut law prohibits public school districts from operating in a deficit. The statutory process for requesting a supplemental appropriation must be adhered to whenever costs are anticipated to exceed the available appropriation. Failure to follow such procedures could subject board of education members or other officials to personal liability for cost overruns. It is also noted that a supplemental appropriation during the current fiscal year would impact the applicable Minimum Budget Requirement for the 2020-2021 fiscal year, absent legislative intervention.

Please continue to monitor ctschoollaw.com for updates concerning COVID-19. If you have specific questions about the business operations, contract law, and data privacy issues included in this post, please contact Chris Tracey, Danielle Braun or Gwen Zittoun.

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