Client Alert: COVID-19 Legal Issues for Educational Institutions

By: Kai McGintee, Sara Hellstedt, Tara Walker, Amber Attalla, Ron Schneider, and Molly Gilligan

Colleges, universities, and K-12 schools are facing unprecedented challenges from the COVID-19 pandemic.  While schools are facilitating distance learning for students across the country, they are also wading through a mass of new laws, economic realities, and concerns about how to best support their communities in this difficult time.  This alert summarizes some of the most pressing legal issues and decision points for schools as we enter month two of this pandemic.

I. The CARES Act – Financial Assistance for Schools

On March 27, 2020, Congress enacted the CARES Act, which provides direct support to taxpayers, student borrowers, states, certain private industries, and educational institutions. With schools and college campuses closed in multiple states over the COVID-19 crisis, the CARES Act contains a range of measures to offer financial relief and help maintain educational continuity during the emergency period.  This summary addresses those major provisions of the CARES Act that may offer financial relief to institutions of higher education and public and private K-12 schools.

Education Stabilization Fund

Institutions of Higher Education (“IHE”)

Of the $2 trillion available, the CARES Act creates a $30.75 billion Education Stabilization Fund. About $14.23 billion of the Education Stabilization Fund, roughly 46%, is allocated to the Higher Education Emergency Relief Fund. The Higher Education Emergency Relief Fund, in turn, is apportioned as follows:

• $12.81 billion (90%) directly to institutions to prevent, prepare for, and respond to COVID-19.
  • In allocating these funds, 75% of what each institution receives would be based on its relative share of full-time equivalent students who are federal Pell Grant recipients, and 25% of its relative share of full-time equivalent students who are not federal Pell Grant recipients. Students enrolled exclusively in distance education courses are excluded from this calculation.
• $1.067 billion (7.5%) for minority-serving institutions.
• $355 million (2.5%) for grants to institutions particularly impacted by coronavirus.

Institutions may use the funds received “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus, so long as such costs do not include payment to contractors for the provision of pre-enrollment recruitment activities; endowments; or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.” At least 50% of the funds awarded must be used for emergency financial aid grants to students. Institutions receiving funds must submit a report to the Department that describes the use of the funds.

K-12 Schools

Of the $30.75 billion in emergency relief funds provided by the CARES act, approximately $13.5 billion is to be used for ​K-12 emergency relief grants.

The bill also includes $8.8 billion for Child Nutrition Programs to help ensure students receive meals when school is closed, and $3.5 billion for Child Care and Development Block Grants, which provides childcare for low-income families.

Governor’s Emergency Education Relief Fund (IHE & K-12)

Under the Act, an additional $3.5 billion is to be reserved for state governors to use and distribute based on local need. This program will provide funding to governors to support their states’ K-12 school districts and higher education institutions. By April 27, governors will be invited to apply for funding. Applications will be approved or denied within 30 days.

Paycheck Protection Program (IHE & K-12 Schools with under 500 employees)

Included in the CARES Act is $349 billion for Small Business Administration forgivable loans. Businesses or non-profits with less than 500 employees, or the applicable size standard for the industry, can apply for a loan through June 30, 2020. The maximum loan amount is the lesser of  $10 million or 2.5 times the employer’s average pre-COVID-19 payroll costs, and it may be used for payroll costs, costs related to the continuation of group health care benefits, salaries, payments of mortgage interest, rent, utilities, and debt obligations that were incurred before February 15, 2020. Part or all of the loan may be forgiven depending on the amount used for payroll.  Forgiveness is also reduced to the extent the business or non-profit reduces the number of employees on its payroll or wages greater than 25%. The law also includes other Small Business Administration loans and program changes that may ultimately be of interest to the education community.

Loan Program for Large Employers (IHE & K-12 Schools with 500-10,000 employees)

The CARES Act sets aside an additional $500 billion for loans, loan guarantees, and other investments including the purchase of debt obligations, directed to U.S.-based businesses of any size, including U.S.-based large businesses not eligible for the above Paycheck Protection Program, as well as state and local governments. Unlike the Paycheck Protection Program, there is no limit on the use or size of the loans however there is no loan forgiveness under this program.  The employer must certify that it will retain 90% of its workforce through September 30, 2020.  Loan terms are limited to five years and the Secretary of the Treasury has discretion to set the interest rates and other terms.  You can find more information in our related client alerts and webinars on the CARES Act Loan programs.

Unemployment Insurance & Direct Reimbursement Employers (IHE & K-12 Schools)

The CARES Act also provides employees an enhanced unemployment benefit of $600/week under the CARES Act if they are partially or totally unemployed in addition to whatever amount they are entitled to under existing state law.  The Act makes clear that the federal government will reimburse 100% of the cost of this enhanced $600/week additional benefit, which means direct reimbursement employers will not need to pay this additional cost.

For non-profit and governmental direct reimbursement employers, the CARES Act directs that federal funds will be transferred to the states for 50% of the amounts paid by direct reimbursement employers for the period starting on March 13, 2020 through December 31, 2020. The states must use these funds to reimburse direct reimbursement employers.

It is widely believed that Congress will need to consider and pass additional emergency funding packages in the coming weeks and months. While the CARES Act provides important funding to support schools during this difficult time, it is likely that more federal relief will be needed to assist students and campuses across the country.

*While many private K-12 schools may qualify for the financial relief available under the CARES Act, there is no definitive guidance as of yet as to whether accepting such funds will trigger compliance requirements under certain federal civil rights laws, including the ADEA, Section 504 of the Rehabilitation Act, and Title IX.  Thus, private schools interested in this program should consult with legal counsel to understand the implications before accepting any federal funds under the CARES Act.

II. Employer Paid Leave for Employees Affected by COVID-19

Congress enacted the Families First Coronavirus Response Act (“FFCRA”), which requires schools with less than 500 employees to provide paid leave to employees for certain qualifying reasons.

Generally, there are two types of paid leave, described below. Schools should look at prior alerts dedicated solely to this law for more information:

1. The Emergency Paid Sick Leave Act requires employers to provide up to 80 hours of paid leave to full-time employees (the equivalent of two weeks for part-time employees).  There are 6 possible reasons an employee may be eligible for this leave, which largely fall into two groups: the employee is experiencing symptoms consistent with COVID-19 or is under quarantine, or he or she is caring for children due to school/day care closures or for sick family members.  This distinction is important because the first type of leave (where an employee may be sick) is paid at 100% of the employee’s regular rate of pay, and the caring for others type of leave is paid at 2/3 (66.6%) of the employee’s regular rate of pay.
2. The Emergency Family and Medical Leave Expansion Act allows up to a total of 12 weeks of leave at 2/3 the regular rate of pay to care for a dependent child due to a school or daycare closure because of COVID-19.We strongly recommend that covered schools adopt a policy for administering leave pursuant to these new laws. Policies should set out who is eligible and describe the caps on the amount of pay an employee is eligible for (generally applicable if an employee earns more than $37.50/hour, but this may vary), and how the leave intersects with other leave policies or laws.  Any amount of paid leave that schools provide can be offset by payroll tax credits. This payroll tax credit is not available to public institutions.

III. Layoffs and Furloughs

For many schools, there have been and will continue to be difficult decisions around layoffs and furloughs.  There is more information about unemployment benefits and mechanics of layoffs and furloughs in prior alerts, but this is intended to focus on additional considerations.

Many schools have asked whether they need to pay leave under the FFCRA to laid off employees.   DOL guidance has made clear that employers do not need to pay employees who are laid off for the leave under the FFCRA.  Nonetheless, employers should be careful about how they select employees for layoffs or furloughs in order to avoid risking a discrimination and/or FFCRA interference claims.  Further, if a school is applying for loan under the Paycheck Protection Program, layoffs and furloughs will reduce the amount of loan forgiveness that a school receives.

If a school is doing mass layoffs or layoffs in which it is offering an exit incentive in exchange for a release of claims (in other words, a Severance Agreement), it is wise to consult with counsel before doing so because there are certain notice requirements that must be met under state and federal laws.

IV. Tutition and Fee Refunds

During the COVID-19 crisis, schools have suspended in-person classroom instruction and moved to distance learning for several weeks if not the remainder of the school year. This suspension of in-person instruction has prompted a flood of inquiries from parents and students seeking a refund of money already paid for fees like room and board, meal plans, and, in some cases, tuition. There was recently a bill introduced in the ME legislature, L.D. 2165 requiring all post-secondary educational institutions to provide pro-rata refunds of room and board expenses, parking, student activities, and—if there is no distance learning option—tuition. That bill has not been acted on and has been held over to any special session of the current legislative session.

Some schools may have “force majeure” clauses in their enrollment contracts. Such clauses provide that performance under a contract may be excused if some unanticipated and uncontrollable event prevents the party (in this case the school) from performing under the contract (in this case the provision of room and board and other non-tuition related fees, such as activity or lab fees). Even if a school did not have an express force majeure clause in its enrollment contracts, the common law recognizes the doctrine of impossibility that operates in a similar fashion, i.e. excusing performance when such performance is rendered impossible by an unforeseen and uncontrollable event. If a school is considering invoking this clause or doctrine, it should speak with counsel to understand the risks and applicability.

For those schools who decide to provide refunds, it is important to examine all costs, including variable and seasonal costs, to determine the value of the room and board not provided because of the COVID-19 crisis. The differential between day tuition and boarding tuition may not be the precise way to determine the amount of any refund. Alternatively, some schools have considered applying any refunds as a credit to the upcoming school year. Schools may also consider asking families, who have the ability, to donate any refund offered back to the institution in the form of a gift. If schools opt to do this, they should check with their accountants to ensure that such contributions or donations would qualify as a deductible contribution. Finally, schools should know that refunds do not necessarily have to be paid yet and decisions about refunds can wait until schools have a better sense of the financial impact of this crisis on their budgets.

V. E-Learning Policies

During this pandemic crisis, administrators, faculty and staff have worked at lightening speed to implement e-learning programs to maintain educational continuity for students.  Schools have also worked to supports students and families from afar in order to maintain a sense of community and connection during this uncertain and difficult time.  As we move further along in this crisis, schools may want to consider whether they have set appropriate e-learning policies and expectations for both students and employees.

First, schools must ensure that their programs meet applicable state or accrediting body requirements for instructional time unless those requirements have been waived due to the COVID-19 pandemic.  Seconds, schools should create policies and procedures by which the distance learning program will be implemented.  Because this is unchartered territory, everyone will need to understand their roles and expectations and how expectations will be enforced. These policies should be clear and binding for administrators, teachers, students, and families. These policies may address the length of the school day, how student attendance and participation will be tracked, what technology will be needed and how it will be used, how alterations of the program will be made for students with disabilities, what disclosures and consent requirements are needed for electronic recording of classes and meetings, and expectations for appropriate online communications and conduct (both between students and between faculty and students).

The importance of communication during this time cannot be understated.  Given the changes and uncertainty, everyone from students, parents, faculty and staff are bound to have questions and concerns.  Clear policies and ongoing communications can help mitigate and address issues before they arise.

VI. Telehealth Considerations for Schools

It is essential that schools understand that every state’s laws and regulations differ regarding telehealth.  As a general rule, the location of the client/ patient at the time of treatment is the location where the treatment occurs. This means that licensed providers should be careful about not practicing in states where they are not licensed.  However, as a result of COVID-19, some states are permitting licensed providers from other states to obtain licenses exclusively for the purpose of providing services by telehealth.  Before schools offer telehealth services, such as mental health counseling, to students we recommend checking with legal counsel to understand the legalities and risks involved.  We also recommend checking with the school’s insurance carrier to determine if there is coverage for telehealth services, or whether a rider can be added to the school’s policy for this purpose.