New Laws on Videoconferencing

Under the Texas Open Meetings Act[1]

Does the Open Meetings Act (Act) allow a Charter School or School District to hold a meeting by videoconference call?

Yes, if certain conditions are met. See TEX. GOV’T CODE § 551.127. The special videoconference requirements set out below are in addition to requirements that otherwise apply to meetings under the Act.   If the below requirements are NOT met, a videoconference meeting would violate the Act, there are potential criminal liabilities and actions taken at the meeting are voidable.

What are the procedures that a governmental body must follow to meet by videoconference if a quorum will be in one physical location?

1.   The meeting notice must specify where the quorum of the governmental       body will be physically present and the intent to have a quorum present. See       TEX. GOV’T CODE § 551.127(d); Senate Bill 984 § 1(e).

2.   The video and audio feed of a remote Board member or employee must be   broadcast live at the meeting. See House Bill 2414 § 2 (a-1).

3.   Each portion of the meeting held by videoconference call that is required to be open to the public must be visible and audible to the public at the location      where the quorum is present. See TEX. GOV’T CODE § 551.127(f).

4.   The location where the quorum is present, and each remote location from     which a member of the governmental body participates, must have two-way        audio and video communication with each other location during the entire    meeting. Each participant’s face in the videoconference call, while speaking,   must be clearly visible and audible to each other participant and, during the             open portion of the meeting, to the members of the public in attendance at       the location where a quorum is present, and at any other location of the       meeting that is open to the public. See Senate Bill § 1(h); House Bill 2414 §    2(h).

5.   The audio and video signals perceptible by members of the public at each     location of the meeting must meet or exceed minimum standards established    by Texas Department of Information Resources (DIR) rules. See TEX. GOV’T   CODE § 551.127(i).

6.   The audio and video signals perceptible by members of the public at the       location where the quorum is present and, any other location open to the          public, must be of sufficient quality so that members of the public at each     location can observe the demeanor and hear the voice of each participant in             the open portion of the meeting. See House Bill 2414 § 2(j).

7.   If a problem occurs that causes a meeting to no longer be visible and audible            to the public at the location where a quorum is present, the meeting must be   recessed until the problem is resolved. If the problem is not resolved in six    hours or less, the meeting must be adjourned. See Senate Bill 984 § 1(f).

8.   The governmental body must make at least an audio recording of the             meeting, and the recording must be made available to the public. See TEX.    GOV’T CODE § 551.127(g).

What are the procedures that a governmental body must follow to meet by videoconference if a quorum will not be in one physical location?

1.     The meeting notice must specify the physical space, described in 2, below, and specify the intent to have the presiding officer physically present at the physical space. See TEX. GOV’T CODE § 551.127(d); Senate Bill 984 § 1(e); House Bill 2414 § 2(e).

2.   The governmental body must make available to the public at least one suitable physical space in, or close to, the School’s administrative office that is equipped with videoconference equipment that provides an audio and video display, as well as a camera and microphone, by which a member of the public can provide testimony or otherwise participate in the meeting. See Senate Bill 984 § 1(e), House Bill 2414 § 2(c)(1).

3.   The member of the governmental body presiding over the meeting must be present at the physical space described in 2, above, and the location must be open to the public. See Senate Bill 984 § 1(c),(e); House Bill 2414 § 2(c)(2).

4.   Any member of the public present at the physical space described in 2, above, must be provided the opportunity to participate in the meeting by means of a videoconference call in the same manner as a person who is physically present at a meeting of the governmental body that is not conducted by videoconference call. See House Bill 2414 § 2(c)(3).

5.   Each portion of the meeting held by videoconference call that is required to be open to the public must be visible and audible to the public. See Senate Bill 984 § 1(f).

6.   The video and audio feed of a remote board member or employee must broadcast live at the meeting. See House Bill 2414 § 2(a-1).

7.   The physical location described in 2, above, and each remote location from which a member participates, must have two-way audio and video communication with each member who is participating by videoconference call during the entire meeting. Each participant’s face in the videoconference call, while speaking, must be clearly visible and audible to each other participant and, during the open portion of the meeting, to the members of the public in attendance at the physical location described in 2, above, and at any other location of the meeting that may be open to the public. See Senate Bill 984 § 1(h); House Bill 2414 § 2(h).

8.   The audio and video signals perceptible by members of the public at each location of the meeting must meet or exceed minimum standards established by State DIR rules. See TEX. GOV’T CODE § 551.127(i).

9.   The audio and video signals perceptible by members of the public at each location of the meeting that is open to the public, and each remote location, are of sufficient quality so that members of the public at each location can observe the demeanor and hear the voice of each participant in the open portion of the meeting. See House Bill 2414 § 2(j).

10.  If a problem occurs that causes the meeting to no longer be visible and audible to the public at the physical space described in 2, above, the meeting must be recessed until the problem is resolved. If the problem is not resolved in six hours or less, the meeting must be adjourned. See Senate Bill 984 § 1(f).

11.  The governmental body must make at least an audio recording of the meeting, and the recording must be made available to the public. See TEX. GOV’T CODE § 551.127(g).

Do Skype or similar platforms meet the requirements for videoconferencing under the Act?

Under prior law, and the law as recently amended, State DIR is responsible for establishing the minimum standards for the audio and video signals related to videoconferencing. Id. § 551.127(i); 1 TEX. ADMIN. CODE. ch. 209. While we are informed that DIR has verbally confirmed that Skype is acceptable, there is no widely-available written guidance from DIR regarding which Internet-based communication technologies meet those standards. DIR has indicated to various interest groups (TASB, TML, etc.) that they expect to make few, if any, revisions to their rules in response to Senate Bill 984 and House Bill 2414. They do, however, plan to release guidelines or FAQs related to videoconferencing by the end of 2013.

Any DIR rule changes will be published in the Texas Register, available at http://www.sos.state.tx.us/texreg/index.shtml. DIR videoconferencing guidelines or FAQs will be posted in the agency’s document library, available at http://www.sos.state.tx.us/texreg/index.shtml.

If a member of the Board participates in a meeting by videoconference call is the member counted for purposes of a quorum?

Yes. The Act expressly provides that a member of a governmental body who participates remotely in a meeting by means of a videoconference call must be counted present at the meeting for all purposes. TEX. GOV’T CODE § 551.127 (a-2).

May a member of the public testify at a meeting by videoconference call even when the entire Governing Body is physically present at its regular meeting location?

Yes. The Act provides that “[w]ithout regard to whether a member of the governmental body is participating in a meeting from a remote location by videoconference call, a governmental body may allow a member of the public to testify at a meeting from a remote location by videoconference call.” Id. § 551.127(k). The Act does not expressly require any special notice of this type of remote participation by a member of the public.

Is a videoconference call the same thing as a telephone conference call?

No. The Act makes it clear that a videoconference call and a telephone conference call are alternative types of communication. See e.g., id. § 551.129 (authorizing a governmental body to use a telephone conference call, videoconference call, or communications over the Internet to conduct certain consultations).

The Act defines a “videoconference call” to mean “a communication conducted between two or more persons in which one or more of the participants communicate with the other participants through duplex audio and video signals transmitted over a telephone network, a data network, or the Internet.” Id. § 551.001(7). The phrase “telephone conference call” is not defined in the Act, and there appears to be no reported case or opinion addressing its meaning. Nonetheless, one primary difference between a telephone conference and a video conference call is that a telephone conference call involves only audio communication.

When may a Board hold a meeting by telephone conference?

Like most governmental bodies, a School Board may hold a meeting by telephone conference call only if both (1) an emergency or public necessity exists; and (2) the convening at one location of a quorum of the governmental body is difficult or impossible. Id. § 551.125(a); see also Tex. Att’y Gen. Op. Nos. GA-0908 (2012), JC-352 (2001).

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[1] This blog was borrowed from content released by the Texas Municipal League and other sources including Texas Association of School Boards, Texas Legislative Counsel, but has been customized for charter schools and school districts.  The Firm makes no claim to ownership over this content and it is provided purely for educational purposes.

As you may know, if a Texas charter school maintains a website, Texas law requires certain information be posted on the website.  To assist you in compliance with the current laws, I have summarized the requirements for two categories of website postings: required and allowed postings.  Please thoroughly check your website for compliance with the required postings and consider adding the allowed postings to your school website if you have not already done so. 

Required Postings (Only if a website is maintained)

Administrative

1.     Post all Board meeting notices.

Notice of School Board Meeting (Government Code, § 551.056(a)-(b))

2.     Post the Board meeting agenda concurrent with the posting of the meeting notice. (Does not apply UNLESS the charter school's primary geographic area includes all or part of a municipality with a population of 48,000 or more.)

Agenda for School Board Meeting (Government Code, § 551.056(c))

3.     Post completed Conflict Disclosure Statements and Questionnaires.

Conflict Disclosure Statements and Questionnaires (Local Government Code, § 176.009(a), as amended by HB 1491 (80th Legislature))

4.     Post names of the members of the governing body on the home page of the school’s website.

Names of Members of Governing Body Listed on Website (Education Code § 12.1211, as amended by SB 2 (83rd Legislature))

5.     Post a prominently displayed link – no more than one click away from home page of the school’s website – to an online message board or similar Internet application owned or controlled by the school through which a communication or exchange of information between Board members about public business or school policy.

Written Electronic Communications Accessible (Government Code §551.006, as amended by SB 1297 (83rd Legislature))

Finance

6.     Post a copy of the budget adopted by the board of trustees [directors] upon final approval of the budget and prominently display an electronic link to the adopted budget.  The budget must remain on the website until the third anniversary of the date the budget was adopted. 

Posting of Adopted Budget (Education Code § 39.084)

7.     Post a copy of the school’s financial statement prepared under Local Government Code § 140.005.

Publication of Annual Financial Statement (Local Government Code § 140.006, as amended by SB 2 (83rd Legislature))

8.     Post the salary of the school’s superintendent or, as applicable, of the administrator serving as educational leader and chief executive officer.

Posting of Chief Executive Officer Salary (Education Code § 12.136, as amended by SB 2 (83rd Legislature))

Academic

9.     Post, at least 72 hours prior to a hearing, the Targeted Improvement Plan the board of trustees [directors] will consider as required by a Campus Intervention Team. 

Targeted Improvement Plan (Education Code § 39.106(e-1)(2); 19 Tex. Admin. Code § 97.1063)

10.  Post notice of an Accredited-Warned or Accredited-Probation status and provide a link to information about the accreditation status, the implications of such status, and the steps taken to address the areas of deficiency identified by the commissioner.  The notice shall use the format and language determined by the commissioner.  The required format and notification language is located at http://ritter.tea.state.tx.us/accredstatus/ (scroll to the “Authority and Background” section, locate “TEA required Notification Language,” and choose either “Charter School District Accredited-Warned” or “Charter School District Accredited-Probation”).  The notice must appear no later than 30 calendar days after the status is assigned and must remain until the school is assigned an Accredited status. 

Accreditation Status (19 Tex. Admin. Code § 97.1055(f)(3)(A))

Health

11.  Post a statement of physical activity policies for elementary, middle, and junior high schools with a statement of: (1) the number of times during the previous year the school health advisory council met; (2) whether the school adopted and enforces policies to ensure schools comply with vending machine and food service guidelines to restrict student access to vending machines; and (3) whether the school adopted and enforces policies and procedures which penalize the use of tobacco products by students and others on school grounds or at school-sponsored or school-related activities.  Additionally, post a statement which provides parents with notice that they may require in writing their child’s physical fitness assessment results at the conclusion of the school year. 

Physical Activity Policies (Education Code § 28.004(k) and § 38.0141)

12.  Post prominently, in English and Spanish, the required or recommended immunizations or vaccines for public school students, all known health clinics within school boundaries that offer the influenza vaccine, and a link to the Department of State Health Services website on which a person may obtain information concerning the procedures by which someone may claim an exemption from the immunization requirements. 

Immunization Awareness (Education Code § 38.1019(a))

General Topics

13.  Post the “Transition and Employment Guide” for special education programs and their parents developed by the Texas Education Agency.

Transition and Employment Guide (Education Code § 29.0112(a), as amended by HB 617 (83rd Legislature))

Allowed Postings

Administrative

1.     Schools may post the superintendent’s contract as opposed to submitting it to the school’s annual financial management report. 

Superintendent’s Contract (19 Tex. Admin. Code § 109.1005(b)(2)(A))

If you require further assistance on the above, please do not hesitate to ask.

Procuring Architects, Engineers and Land Surveyors by Texas School Districts and Charter Schools: Do I have to RFQ or Not?

We have recently received a number if inquiries, many of which appear to have been generated after a recent training event on charter school facilities (not by our Firm) about whether or not a "request for qualifications" or "RFQ" for professional services for architects, engineers and land surveyors is required or not. Sure, in a pinch maybe you can get away with something less than a full-blown RFQ.  But why then is it that almost everyone falls back on the good old stand by RFQ?

For your consideration, here is legal authority for why an RFQ should be conducted:

The Texas Attorney General has determined that “the most reasonable way to assure that such service providers [architects, engineers, surveyors] are selected on the basis of demonstrated competence and qualification to perform the services, as the statute mandates, is through a request for qualifications or similar competitive process” followed by the necessary negotiation process.[1]  In its Financial Accountability System Resource Guide (“FASRG”), the Texas Education Agency (“TEA”) states that the PSPA:

"requires a two-step procedure … for the procurement of architectural and engineering services. Competitive proposal procedures are recommended, where other procurement procedures are not required … to stimulate competitive prices for services.  In connection with … architectural or engineering, Chapter 2254, Government Code, requires a two-step negotiation process.  The two-step process only allows negotiation of price after an initial selection based upon demonstrated competence and qualifications of the person/firm."[2]

FASRG also provides that, “Chapter 2254 of the Government Code does specify a two-step proposal process for obtaining services from architects and engineers.”[3]  FASRG emphasizes the use of "proposal" which for professional services is essentially the RFQ process or something so close to it that it might as well be an RFQ.

As the PSPA itself does not prescribe the exact process that must be followed, specific advice may vary from attorney to attorney in regard to methods for compliance.  Nevertheless, it cannot be disputed that the two-step process must take place, and a school district must keep adequate records to document compliance with both steps.  As the Attorney General and TEA have opined in their opinions and regulations, the only safe way to assure full compliance with the PSPA is to utilize something like a structured Request for Qualifications process, and such is the recommendation, and we suggest, expectation of the Texas Attorney General and the TEA have recommended.



What is the potential exposure:  If your documentation is inadequate in demonstrating compliance, the contracts are subject to legal challenge by non-selected competitors and the contracts entered into may be "void" as a matter of public policy.

[1] Tex. Atty. Gen. Op. No. GA-0494 (2006) (emphasis added).

[2] TEA Financial Accountability System Resource Guide (FASRG), v. 12.0 (2004) (Competitive Proposals Defined) (emphasis added)

[3] FASRG § 3.2.3.2 (emphasis added).  The FASRG is not merely a guide as the title suggests, but is given the power and effect of law under 19 Texas Administrative Code § 109.41, which adopts FASRG as the TEA’s official rule and incorporates it by reference as a formal regulation.

Recent Legislative Updates Affecting

Required Website Postings for Charter Schools

Texas law requires charter schools who maintain a website to post certain information on their websites.  During the recently concluded 83rd Legislative Session, a handful of additions to these requirements were made.  The following notes summarize these new required postings. 

·      Names of Governing Bodies

As part of Senate Bill 2, Chapter 12 of the Education Code was amended by adding Section 12.1211, which requires charter schools to list the names of board members on the home page of the school’s website.  This requirement takes effect on September 1, 2013. 

·      Superintendent’s Salary

Senate Bill 2 also amended Chapter 12 of the Education Code by adding Section 12.136, which requires charter schools to post the salary of the school’s superintendent (or the administrator serving as educational leader and chief executive officer) on the school’s website.  This requirement also takes effect on September 1, 2013.

While this requirement may seem a bit jarring and invasive at first, please remember that superintendent salaries are already a matter of public record, as they are reported on your charter holder’s IRS Form 990. 

·      Written Communications of Board Members

Senate Bill 1297 amended Chapter 551 of the Government Code (the Open Meetings Act) by adding section 551.06, provides an additional opportunity for board members to communicate with each other without fear of violating the Open Meetings Act.  Specifically, section 551.06 allows a charter school to create an online message board or similar Internet application through which board members may communicate about public business or school policy so long as:

1.     The message board or other application is supervised or controlled by the school;

2.     The communication is in writing;

3.     The message board or other application is viewable and searchable by the public; and

4.     The communication is displayed in real time and for no less than 30 days after the communication was first posted. 

Schools are limited to only one message board or similar application for posting online messages, and the online forums may only be used by board members or staff members who have been given authorization from the board to post.  Most importantly, the board cannot vote or take action required to be taken during a meeting through the message board service, and no message board postings are to be considered an action of the board.  This requirement also takes effect on September 1, 2013.

·      “Transition and Employment Guide” for Special Education Programs

Finally, House Bill 617 amended Chapter 29 of the Education Code by adding section 29.0112, which requires the TEA to develop a “transition and employment guide” for students enrolled in special education programs and their parents to provide information on statewide services and programs that assist in the transition to life outside the public school system.  Once TEA publishes this guide, charter schools are required to post it on their websites.  However, since this will be a huge undertaking, the Legislature gave TEA until September 1, 2014 to complete the guide.  Charter schools are then required to post the guide as soon as it is made available.

We recommend that you begin updating your school websites as soon as possible so that you don’t miss any deadlines set by these new requirements. 

Sequestration Goes Into Effect

News from the Office of Grants and Federal Fiscal Compliance

Sequestration Goes into Effect

On Friday, March 1, 2013, President Obama signed an order putting into effect the automatic across-the-board cuts to the federal budget known as the sequester.

The following text is taken from testimony provided to the House Subcommittee on Budget Transparency and Reform on February 25, 2013. That testimony is also available online, from a link in the Chief Grants Administrator section of the Grants page of the TEA website.
Mostly No Retroactive Cuts

Most federal education programs are forward- or advance-funded, meaning the state receives the majority of the federal fiscal year funding on July 1, at the end of the federal fiscal year for use primarily in the following fiscal year. USDE has reported that forward-funded programs will not be retroactively cut back to the October 1 beginning of the federal fiscal year, but will take the full reduction from the July 1 allocation. What this means for LEAs is that their school year (SY) 2012-2013 entitlements will not be reduced mid-year, but rather the full reduction will be taken from their SY 2013-2014 entitlement amounts.

However, some local educational agencies (LEAs) receiving direct grants from USDE, such as Impact Aid programs, will start seeing federal reductions as quickly as USDE is able to calculate the reductions to grantees.


Projected Amount of Reductions

Many education groups following the sequestration process are calculating the estimated potential impact of the reductions. USDE has used an estimated impact of 5% while other groups have calculated reductions of 5.1% to 5.3%, which due to the two month postponement of the sequester is less than prior estimates of 8.2% reductions.

Since Congress has not yet completed work on appropriations for fiscal year 2013, TEA can only model data based on federal fiscal year 2012 data. Actual reductions will differ slightly once federal fiscal year 2013 appropriations are finalized. The Office of Management and Budget (OMB), which has responsibility at the federal level for determining the actual percentage of the reductions, will release the amount and percentage of reductions required by the Budget Control Act. This process is expected to take at least 30 days.


Potential Impact

For discussion purposes, the state’s largest federal programs demonstrate the potential impact on LEAs.

• ESEA, Title I allocation could be reduced by $67-71 million depending on a 5.0% or 5.1% reduction.  
• Based on a 5.1% reduction, the Individuals with Disabilities Education Act (IDEA, Part B) allocation is expected to be reduced by approximately $50 million.  
• The ESEA, Title III, Part A—English Language Acquisition allocation is expected to be reduced by approximately $5.2.
• The Perkins Career and Technical Education allocation is expected to be reduced by approximately $4.5 million.

Planning for Next Year

One of the largest concerns for LEAs (school districts and open-enrollment charter schools) is the need for more information to be able to plan for next year’s staffing, services, and program budgets. Also of concern to states and LEAs are the impact on the sequestration reductions on federal maintenance of effort (MOE) and supplement, not supplant requirements at both the state and/or local levels.

Currently, TEA has only modeled a 10% reduction (based on earlier projected reductions). However, for some programs with hold-harmless provisions, such as Title I, Part A, in the statutory formula this 10% model suggests the "worst case" scenario. In Title I, Part A statute, the hold-harmless provision applies to state appropriations as well as LEA entitlement calculations. The LEAs that by the data are at or below the hold-harmless amounts must be guaranteed the hold-harmless amount while the LEAs above their hold-harmless amount actually have the sequester reductions taken from their allocations. All LEA hold-harmless calculations are aggregated up to the state level; meaning Texas’ overall state allocation could be reduced more than the estimated 5-5.3% by the statutory formula.

The Texas Education Agency (TEA) has not yet received guidance from the US Department of Education (USDE) regarding the amount of cuts to federal education spending. Once the state receives more detailed information, TEA Grants Administration staff will model the reductions and make planning amounts available to LEAs. It is estimated that the entitlement/planning amount calculations will take three weeks to complete once data are received.

Excess Benefit Transactions and Intermediate Sanctions: Determining Reasonable Compensation

Texas charter schools are no strangers to regulation.  In addition to the myriad of rules and requirements that must be followed to maintain their charter agreement with the State of Texas, the charter holder of a Texas open enrollment charter school is a 501(c)(3) public charity and must maintain 501(c)(3) exempt status as a condition to keeping the open enrollment charter.  Thus, it is necessary for charter leaders to be as informed about IRS regulations as much as any other area of charter regulation.

One area of particular concern and continued focus by the IRS are the  intermediate sanctions rules under Section 4958 of the Internal Revenue Code regarding excess benefit transactions. What might at first sound like total bafflegab, the intermediate sanction rules on excess benefit transactions actually set forth the basic rules and roadmap on how the board of directors of a charter school, or any public charity, should handle a transaction with an interested party, and provides a simple roadmap of compliance not only for IRS purposes, but also conflict of interest rules generally.

Simply put, an interested party may not be overpaid or enriched at the expense of the organization. A prohibited excess benefit transaction occurs when a public charity (or a 501(c)(4) organization) provides an economic benefit to a “disqualified person” and that benefit exceeds the fair value of the consideration received by the charity.  If an organization engages in an excess benefit transaction with a disqualified person, the regulations impose a penalty tax on the disqualified person – not the public charity – and any manager (board members included) who knowingly participated in the improper excess benefit.  A disqualified person must correct the excess benefit transaction by making a payment in cash or cash equivalents equal to the correction amount to the charity (plus interest) and paying a tax equal to 25% of the excess benefit amount. A manager who “knowingly” participated in the transaction would be liable for a penalty equal to 10% of the amount of the excess benefit amount. A board member participating in the affirmative vote of the transaction by the board satisfies the “knowingly  participated” standard.

The penalty tax on the disqualified person gives rise to the name of the rules as “intermediate sanctions” as it is an “intermediate” sanction imposed by the IRS whereas previously, the only sanction available or a violation of private inurement was revocation of the organization’s tax-exempt status. However, it should be noted that while the excess benefit regulations  are the current  enforcement mechanism by the IRS for these types of transactions, the IRS retains the right to revoke an exempt organization’s status for violations of private inurement.

A “disqualified person” is defined broadly and includes any person who is in a position (including a five year look back period from the date of the transaction) to exert substantial influence over the affairs of the organization. The definition also includes family members of those that exert substantial influence over the organization, and an entity owned (at least 35% or more) by such person. For charter holders, this includes board members, officers, superintendents and other highly compensated managers, major contributors, and founders.

Nearly any transaction with a disqualified person qualifies as a transaction subject to the excess benefit transaction regulations. The most common form, and those often the subject of IRS scrutiny, include compensation and benefits to executives,  real property transfers, and the payment of personal expenses of executive employees. The standard of determining whether or not an excess benefit has occurred is one of reasonableness and fair market value. The regulations do not set forth any specific criteria for determining the reasonableness of compensation or the fair market value of property, and thus, an organization must rely on pre-existing tax law standards, particularly concerning fair market value determinations.

Instead, the regulations offer compliance procedures known as the “safe harbor rebuttable presumption procedures”.  If an organization follows these procedures,  the compensation to a disqualified person is presumed to be fair and reasonable and the burden shifts to the IRS to prove otherwise:

(i)            The Board approves the transaction in advance without the participation of the disqualified person;

(ii)          The Board obtains and relies upon appropriate comparability data; and

(iii)         The decision is appropriately and contemporaneously documented.

Appropriate comparability data in the case of compensation means obtaining data on similarly situated organizations for functionally comparable positions, including current compensation surveys compiled by independent firms and actual written offers from similar institutions competing for the services of the disqualified person.  For example, in determining the compensation of a school superintendent, the charter school would want to look at comparable salaries of other superintendents in Texas and the same city and county.  Ideally, data would be drawn from charter schools of a similar size and budget, but can also include data from private and public schools. While the regulations do not specify the amount of comparability data an organization should rely upon, it is clear that an organization with gross receipts over $1 million should, at a minimum, obtain more than 3 sources of comparability data.  

In the case of property, appropriate comparability data includes current (at the time of transfer) independent appraisals, market reports, and offers received as part of an open and competitive bidding process.

Putting the rebuttable presumption procedures into practice is not difficult and will safeguard not only against excess benefit transactions, but conflicts of interest generally. Organizations seeking to comply with the safe harbor rebuttable presumption procedures often make the mistake of not gathering appropriate comparability data sufficiently in advance of the board decision regarding the transaction, and do not “adequately and contemporaneously” document, in the minutes of the board, the procedures taken by the board (including documenting the comparability data relied upon) to ensure that the organization receives the benefit of the presumption of reasonableness. The minutes of a board decision will be the only evidence demonstrating whether or not a board has complied with the safe harbor procedures, and thus, charter school leaders should ensure that board minutes are properly and adequately recorded. It is also advisable that the safe harbor procedures be incorporated into a written conflict of interest policy that is easy to follow so that identifying and addressing conflicts through proper procedures becomes routine practice for the board of directors.

Lindsey B. Jones

Of Counsel

Schulman, Lopez & Hoffer, LLP

Recent EEOC Guidance on Using Criminal History in Employment Decisions

The EEOC recently issued updated guidance on the use of criminal history record information in employment decisions. While the EEOC had previously warned against the use of arrest records in employment decisions, since arrests alone do not establish that criminal conduct occurred, this new guidance stakes out a more extreme position.  Now, the EEOC suggests that even the use of criminal convictions as an absolute bar to employment can have a disparate impact based on race and national origin, thus exposing employers to potential Title VII claims.

For a potential plaintiff to make a claim for discrimination based on the employer’s use of a criminal conviction record, the plaintiff first has to establish that the policy creates a disparate impact.  The burden then shifts to the employer to demonstrate “that the challenged practice is job related for the position in question and consistent with business necessity.”  See Griggs v. Duke Power Co., 401 U.S. 424, 431 (1971).  To meet this rebuttal burden, the employer must show that the policy or practice is one that “bears a demonstrable relationship to successful performance of the jobs for which it was used” and “measures the person for the job and not the person in the abstract.”  See id. 

The new EEOC guidance includes in its recommended “Employer Best Practices” that employers eliminate policies that exclude people from employment based on any criminal record.  In its place, the EEOC suggests that an employer develop a “narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct.”  The EEOC suggests that this policy should identify the essential job requirements and determine the specific offenses that might demonstrate unfitness for performing such jobs.  We believe that conforming to these recommended “best practices” would be somewhat prohibitive for an employer like a charter school, which is going to have so many different types of positions to fill.  While these are the recommended best practices, based on the legal authority on which the EEOC builds its disparate impact argument against using criminal conviction background in employment decisions, there may be other less-burdensome policy options.  Any such policy will have to be closely aligned with requirements of this new guidance, which is essentially using criminal conviction history as an employment “screen” and providing an opportunity for individual review of the policy’s application based on the position sought.

There are two potential circumstances in which the EEOC believes employers will consistently meet the “job related and consistent with business necessity” defense to a disparate impact claim.  They are as follows:

·      The employer validates the criminal conduct exclusion for the position in question in light of the Uniform Guidelines on Employee Selection Procedures (if there is data or analysis about criminal conduct as related to subsequent work performance or behaviors); or

·      The employer develops a targeted screen considering three factors: (i) the nature of the crime; (ii) the time elapsed; and (iii) the nature of the job.  See Green v. Missouri Pacific Railroad, 549 F.2d 1158 (8th Cir. 1977). The employer’s policy then provides an opportunity for an individualized assessment of the screened applicant’s to determine if the policy as applied (barring employment) is job related and consistent with business necessity.

Although Title VII does not require individualized assessment in all circumstances, the EEOC believes that the use of a screen that does not include an individualized assessment is more likely to violate Title VII.  Thus, the EEOC’s guidance confirms that if en employer develops a screening policy that meets these established criteria, then it will satisfy this defense.  However, if an employer’s targeted criminal records screen is sufficiently narrowly tailored to identify criminal conduct with a demonstrably tight nexus to the position in question, the individualized assessment process may not even be required.

To establish that a criminal conduct exclusion that has a disparate impact is job related and consistent with business necessity under Title VII, the employer needs to show that the policy operates to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position.  Policy should therefore include a factor that is job related, but it is possible that this might also be accomplished broadly, such as “any job that involves contact with students or gives access to students.”  This could be applied to cover almost all positions at a public school.  An additional suggestion might be to establish a criminal record review committee process within the school’s employment screening process where the purpose of the committee is to give an opportunity for an individual assessment to “determine if the policy as applied is job related and consistent with business necessity.” 

Please consult your legal counsel for specific guidance relating to the above EEOC Guidance.

Joe Hoffer