Federal Funding and Federal Laws: What Participating in Federal Loan Programs Means for California Private Schools

CATEGORY: Special Bulletins
CLIENT TYPE: Private Education
PUBLICATION: LCW Special Bulletin
DATE: Apr 17, 2020

Federal funds are available to assist California private schools respond to the COVID-19 pandemic.  The Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL), both offered through the Small Business Administration (SBA), as well as the recently announced Main Street Lending Program, established by the Federal Reserve, are designed to provide economic relief and continued employment.  Whether schools should apply for these loans depends on a multitude of factors.  One significant consideration is that participation likely will trigger compliance obligations under certain federal laws that otherwise would not apply.  Below are some frequently asked questions regarding participation in these federal loan programs.

Which Federal Laws will Apply to our School?

1.  Title IX of the Education Amendments of 1972

Title IX provides that “[n]o person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.”  This law imposes extensive procedural requirements that would not normally apply to private schools such as the following:

  • Title IX Coordinator: A school must designate at least one employee to coordinate its efforts to comply with and carry out its responsibilities under Title IX.  The school must notify all students and employees of the name and contact information of this individual.  A Title IX Coordinator shall oversee the reporting of Title IX complaints, oversee a school’s response to those complaints, and identify and address any patterns of incidents reported.  The Coordinator may also hold additional responsibilities, such as training students, faculty, and staff on Title IX, conducting investigations, and implementing interim measures required to stop and prevent sexual misconduct under Title IX.  The Title IX Coordinator must be sufficiently familiar with the Title IX requirements to ensure effective implementation.
  • Grievance Procedures: A school must adopt and publish grievance procedures that provide for the prompt and equitable resolution of student and employee complaints alleging a violation of Title IX.
  • Investigations: A school’s procedures must provide for adequate, reliable, and impartial fact-finding investigations, and provide for written notice to the complainant and respondent of the outcome of the complaint.
  • Employee Reporting Obligations: Title IX responsible employees must report any possible sexual misconduct to the Title IX Coordinator or other appropriate school designee (subject to a few exceptions).  Responsible employees are those with the authority to redress sexual misconduct or those that a student reasonably believes to have that authority.  This Title IX requirement may overlap with other separate mandated reporting requirements.
  • Taking Effective Action: Title IX requires schools to take steps to ensure equal access to its educational programs and activities.  This often will include discipline against someone who violates school policy, providing accommodations to a victim, and implementing interim measures necessary to protect a complainant during an investigation.
  • Training and Education: A school must ensure that responsible employees and employees who may encounter student sexual misconduct are trained in identifying, preventing, and investigating sexual misconduct as required by Title IX.  Students and employees must also receive training regarding their rights under Title IX.  Certain California laws are relevant for this training.
  • No Retaliation: Title IX prohibits retaliation against any individual asserting rights under Title IX.  A school must take steps to prevent retaliation against a student or employee who files a complaint.  A school must also take steps to ensure that its own remedial efforts to protect the complainant are not retaliatory in and of themselves.

Title IX is a heavily litigated area of the law.  The list above is a summary of some of the statute’s most significant requirements.  Obligations may vary by state despite the fact Title IX is a federal law and court cases have further expanded these requirements.  Please also note that new Title IX regulations are pending and the Department of Education could publish them at any time.

2.  Title VI of the Civil Rights Act of 1964

Title VI prohibits discrimination based on race, color, or national origin.  The law applies to both employees and students.  It will likely have a relatively low impact in regards to employment practices, since most California private schools already must comply with similar employment laws, such as Title VII of the Civil Rights Act and California’s Fair Employment and Housing Act (“FEHA”).

In terms of students, California’s Unruh Civil Rights Act may apply to some schools.  It prohibits discrimination based on the same protected classifications as Title VI, plus several additional protected classifications.  Still, Title VI will provide an additional, well-worn path to litigation.

3.  The Age Discrimination Act of 1975

This Act, as the name suggests, prohibits discrimination based on age.  However, it allows age to be taken into account “as a factor necessary to the normal operation or the achievement of any statutory objective of a program or activity.”  As a result, for K-12 schools, the law is not likely to have substantial relevance in regards to students.  Since the federal Age Discrimination in Employment Act (“ADEA”) already applies to schools, and California’s FEHA also applies to many schools, this law should not have a substantial impact.  However, failure to comply with the Age Discrimination Act, after being informed of noncompliance and not taking remedial measures, may result in a suspension, termination, or refusal of financial assistance not yet dispersed to a school.  The Act does not provide for monetary damages; although injunctive relief and attorneys’ fees may be available.

4.  Section 504 of the Rehabilitation Act of 1973 (“Section 504”)

Section 504 prohibits disability discrimination against students.  Specifically, it regulates how to evaluate students in need of services, the means for providing those services, and methods of discipline for covered students.  Many, though not all, of these requirements bear similarities to requirements present in Title III of the Americans with Disabilities Act (ADA), which already applies to many schools.

Department of Education regulations provide numerous procedural requirements for schools in regards to Section 504, such as designating a Section 504 Coordinator and adopting and publishing grievance procedures.  However, these regulations appear only to apply to recipients of federal financial assistance from the Department of Education.  As a result, we do not believe that private schools will be obligated to comply with these procedural requirements solely because of receipt of federal loans.

Are There Exemptions for Religious Schools?

Title IX contains an exemption for “… an educational institution which is controlled by a religious organization if the application of [the law] would not be consistent with the religious tenets of such organization.”  A religious school may request assurance that it indeed qualifies for this exemption.  In order to do so, a school’s highest-ranking official must submit a written statement identifying the provisions of Title IX that conflict with a specific tenet of the religious organization.

Title VI, the Age Discrimination Act, and Section 504 do not exempt religious schools.  These laws are therefore likely to be particularly significant for most religious schools because their California counterparts, the FEHA and Unruh Civil Rights Act, do not apply.  Similarly, Title III of the ADA does not apply to most religious schools but Section 504, which has similar requirements, will now cover them.

What about Single-Gender Schools?

All of the laws listed above apply to single-gender schools.  However, Title IX provides a significant exception to its general prohibition on sex-based discrimination.  Title IX exempts from its coverage the admissions practices of non-vocational elementary and secondary schools.  As a result, while single-gender schools must generally comply with Title IX, these schools do not violate the law by maintaining admissions policies that deny admission to a particular gender.

How Long will our School be Subject to these Additional Laws?

Non-binding guidance from the SBA provides as follows: “Any legal obligations that you incur through your receipt of this loan are not permanent, and once the loan is paid or forgiven, those nondiscrimination obligations will no longer apply.”  Still, schools should be aware that even once a loan has been paid or forgiven an individual could still bring a claim alleging a violation during the time the law applied.  Moreover, there are regulations that suggest if schools use federal funds to pay rent or a mortgage, the applicability period could be tied to the length of those debts.

Finally, please note that the PPP Borrower Application Form provides that all borrowers must display the “Equal Employment Opportunity Poster” prescribed by the SBA (SBA Form 722).  SBA’s website states that this poster must be posted “where it is clearly visible to employees, applicants for employment, and the general public.”

Guidance and regulations regarding these loan programs are continuously evolving.  You can find updates on these programs, as well as other guidance on how to respond to matters related to the COVID-19 health crisis, by visiting our website.

We understand that the obligations required upon acceptance of federal financial assistance may be new to our private K-12 clients.  It is not new for LCW.  We have been assisting our private higher education and public school clients with these obligations for decades.  We have experience creating compliant policies and procedures, providing trainings, conducting investigations, and handling litigation,  that take into consideration California and federal law.  We are offering our private K12 clients a Toolkit that includes policies, procedures and training to help them navigate their obligations.  We will be sending information regarding this Toolkit in a separate communication, but if you have any questions about this you can contact any of our offices.