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December 5, 2011, Number 79
What Can A New Board Do Or Not Do?
By: and , Esquires
With newly-elected school board members taking seat, it is the appropriate time to revisit basic principles of law as to what board actions are binding on successor boards. In general, policy-making governmental actions are not binding on successor boards, whereas commercial proprietary actions usually are binding. The following provides guidance regarding the enforceability of a predecessor board’s actions and includes examples of binding and non-binding board actions.
The General Rule: Defining Proprietary vs. Governmental Functions
The trick to understanding what actions bind successor boards is distinguishing between governmental and proprietary functions. The difference is not always obvious. In general, “proprietary” functions can be thought of as if the school board were a private party doing business deals with another private party; whereas “governmental” functions are an exercise of those powers granted by the statute.
While the line between governmental and proprietary functions can be blurred, Pennsylvania courts have deemed an activity to be proprietary if any of the following questions is answerable:
(1) Whether the activity is one that the board is not statutorily required to perform;
(2) Whether the activity may also be carried on by a private enterprise, or
(3) Whether the activity is used as a means of raising revenue.
What Some Cases On This Topic Have Held
The following actions have been deemed proprietary:
• The operation and management of wastewater systems.
• The financing and managing of public revenue producing projects.
• Contracting with a private party for the construction of a sewage treatment plant.
On the other hand, the following actions have been deemed governmental:
• Contracting for the construction of a school building.
• Entering into contracts for the employment of principals and teachers.
• Establishing the age for beginners.
When a contract entered into by a board includes both governmental and proprietary functions, the distinction is based upon the “driving force” of the agreement. For example, in the case of Lobolito v. Pocono Mountain School District, the Pennsylvania Supreme Court held that a school board simultaneously acted in a proprietary and governmental capacity when contracting with a private party for the construction of a sewage treatment plant and contracting for the construction of an elementary school; however, the agreement was deemed “governmental” in nature because the “driving force” was a school construction.
Although a governmental function, an outgoing board’s decision to extend a superintendent contract within the 150-day period is binding upon the incoming board. The reorganized board must follow the procedures set forth in the School Code to remove a superintendent whose contract was extended by the outgoing board.
Now, for the Proverbial Exception To Every Rule
When a party relies upon a contract or agreement entered into with a school board, the agreement, even if governmental, may bind subsequent boards, provided that the contract does not contravene the law or public policy. For example, in the often-cited case of Hovart v. Jenkins School District, the Supreme Court of Pennsylvania held that a successor board was bound to a principal’s employment contract, even though appointments were clearly deemed a governmental function. The court reasoned that the board’s actions were lawfully taken and were not a last-minute decision made at the end of its term. Moreover, the court explained that the principal relied upon the contract to accept the position of principal and leave his previous job. The successor board, thus, could not undo the principal’s contract with the district.
Similarly, in the case of Chichester School District v. Chichester Education Association, the school district could not set aside the collective bargaining agreement executed by the previous school board. In Chichester, the Commonwealth Court of Pennsylvania held that, while collective bargaining agreements were undeniably governmental in nature, the school board did not impermissibly attempt to bind successor boards to a last-minute contract, and the Public Employee Relations Act provided statutory authority for the continuation of the contracts. Therefore, the Commonwealth Court held that the successor board could not undo the collective bargaining contracts. While not noted in the court, there are also due process considerations when removing individuals covered by collective bargaining agreements, even if entered into at the last-minute by an outgoing board.
The reliance exception extends to substantially completed jobs. In the case of Altman v. School District of Uniontown, Harry Altman, an architect, substantially completed plans for a new school building which were accepted by the school board during its term in office. When a new school board was elected, the school district erected a building, but the building was based upon new plans developed by a different architect. At that point, the school board attempted to get out of the contract with Harry Altman. However, the Pennsylvania Supreme Court explained that because Altman substantially performed (and the Board by its own actions prevented Alman’s plans from being utilized), it could not undo the contract and must pay Altman for services rendered.
Not all governmental contracts, however, will be binding even if relied upon. Governmental contracts entered into at the last-minute, at the end of a board’s term, without other statutory authority, are considered contrary to public policy and, thus, may be undone by successor boards. For example, in the case of Falls Township v. Scally, the outgoing board of township supervisors entered into a three-year employment contract with Paul Scally for the position of environmental control officer. The contract was executed one month before the conclusion of the board’s term. The Commonwealth Court held that not only was the contract for a governmental function, but it was improper for the outgoing board to enter into a contract that bound the incoming board when the term of the outgoing board was about to expire. Therefore, the Commonwealth Court permitted the successor board to undo Scally’s contract.
Bottom Line for Districts
Once again, the law provides districts with a general rule and then creates an exception that swallows the rule. The bottom line seems to be that where outgoing boards are acting pursuant to express powers and proper procedures, their actions will likely be binding. However, if the court perceives that an outgoing board has acted at the eleventh hour to tie the hands of a new board, the court is apt to intervene to untie the new board’s hands and set things straight as the court sees fit.
While the governmental/proprietary distinction is generally the key, not all governmental actions may be undone if relied upon and properly executed by the outgoing board. A renewed superintendent contract is binding to an incoming board, if the renewal comports with the procedure set forth in the School Code. Also, if a contractor detrimentally relies upon an outgoing board’s contractual promise, an incoming board could be responsible for any expected compensation. Also, appointments lawfully made and relied upon may be binding if made in the ordinary course and not as a last-minute decision.
If your school board is entering into a contract that it would like to be binding beyond its term, please contact your solicitor or an attorney in our .
* This School Law Bullet is meant to be informational and does not constitute legal advice.
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