Higher Education Report

Higher Education Report

Department of Education Issues Guidance on Campus Policing

Posted in Campus Safety, Higher Education

university pillarCiting the ongoing nationwide dialogue on law enforcement-community relations, racial justice and officer and public safety, on September 8 the U.S. Department of Education (in coordination with the Justice Department) released a Dear Colleague  Letter providing guidance to colleges and universities with respect to its expectations for campus policing.   In the main, the guidance encourages institutions to adopt and implement “applicable” recommendations from the Final Report of the President’s Task Force on 21st Century Policing .   As noted by the Department, the Task Force Report covers topics including  “changing the culture of policing, embracing community policing concepts, ensuring fair and impartial policing, focusing on officer wellness and safety, implementing new technologies, and building community capital.”

The Department encourages institutions to use the Task Force Report as a “template for self-assessment and organizational change,” with adjustments appropriate to context (for example, suggesting that in the campus environment, community engagement efforts should include diverse members of an institution’s campus community such as students, faculty, staff, and administrators, as well as community advocacy groups with relevant expertise).

The Department’s guidance also reiterates institutions’ security-oriented obligations under the Clery Act and applicable federal civil rights statutes.

NLRB Rules that Graduate (and Undergraduate!) Students are Employees and May Unionize

Posted in Employment

The National Labor Relations Board (Board), in Columbia University , has issued a 3-1 decision holding that graduate, and undergraduate, student assistants are common law employees within the meaning of the National Labor Relations Act and therefore are eligible to organize and bargain collectively under federal labor law.  In so doing, the Board overruled its 2004 determination in Brown University.    Board Member Miscimarra wrote a lengthy dissent, arguing that the educational nature of the relationship between student and educational institution should dictate that student assistants are not employees and therefore they should not be eligible to organize and bargain collectively.

After much speculation, and following an invitation for briefing in December 2015, the NLRB rejected the Brown holding that graduate assistants cannot be statutory employees because they are “primarily students and have a primarily educational, not economic, relationship with their university.”  The Board first noted that it has the statutory authority to treat student assistants as statutory employees.  The Board applied a common law test and indicated that when student assistants perform “work,” at the direction of a college or university, for which they are compensated, a common law employment relationship will be deemed to exist and the students will be eligible to organize and bargain collectively.

The Board indicated that the new test will apply to all student assistants, including graduate assistants engaged in research funded by external grants (and subject to the conditions of those grants). The Board also determined that the petitioned for bargaining unit at Columbia — which included graduate students, terminal Master’s degree students, and undergraduate students — constituted an appropriate unit and that none of the petitioned for classifications consisted of temporary employees who should be excluded from the unit.  Finally, the Board remanded the case to the Regional Director for consideration of whether student assistants not currently performing their assistant duties should be eligible to vote based upon a continuing expectation of future common law employment.

The Board’s decision was long the subject of speculation and has been anticipated by many commentators. In the wake of the decision, colleges and universities should anticipate increased organizing activity on their campuses and will have the obligation to bargain with units comprised of student assistants if they are recognized after an NLRB election.  Given the breadth of the Board’s decision, and the potential units that could be petitioned for by unions, this decision has the potential to represent a significant challenge if broad units of student assistants are voted in and certified under NLRB procedures.

United States District Court Enjoins Enforcement of Dear Colleague Letter on Transgender Students; Decision May Impact OCR Guidance on Sexual Violence

Posted in Sexual Assault, Sexual Violence, Title IX

On August 21, 2016, in a case entitled State of Texas et al. v. United States of America et al ., Judge Reed O’Connor of the United States District Court for the Northern District of Texas issued a nationwide preliminary injunction prohibiting the United States government (specifically, the Office for Civil Rights of the Department of Education (“OCR”), the Department of Justice (“DOJ”), the Department of Labor and the Equal Employment Opportunity Commission) from enforcing the terms of the May 13, 2016 Dear Colleague Letter issued by OCR and DOJ. As institutions are aware , the Dear Colleague Letter articulated OCR’s and DOJ’s interpretation of Title IX and its implementing regulations as requiring K-12 schools, colleges and universities to treat a student’s gender identity as the student’s “sex” for purposes of Title IX’s prohibition against discrimination based on sex, and described several areas where schools and institutions must provide transgender students with equal access to education programs and activities “even in circumstances in which other students, parents and community members raise objections or concerns.”

In reaching its decision, the Court found that there was a likelihood that the plaintiffs (13 states and two school districts) would prevail on their claim that the Departments’ interpretation of Title IX is contrary to the plain language of the statute and its implementing regulations, and is therefore incorrect as a matter of law. Specifically, the Court determined that the term “sex,” as understood at the time that the statute and regulations were initially adopted, was understood to refer to an individual’s biological sex, rather than the individual’s gender identity.

Perhaps more significantly, in an aspect of the decision that could impact OCR’s enforcement strategy in other areas, the Court also determined that OCR and DOJ were required to comply with the federal Administrative Procedure Act (the “APA”) prior to issuing the Dear Colleague Letter, and that their failure to do so rendered the Dear Colleague Letter invalid. By way of background, the APA requires federal agencies to publish proposed rules in the Federal Register, and to provide the public a period of time to comment on them (this is commonly referred to as the “notice and comment” process). The purpose of this requirement is to enable an agency to consider the perspectives of persons or entities that would be impacted by proposed rules before they are finalized.  However, not every action an agency takes is required to go through the notice and comment process, and the APA specifically excludes from its ambit agency pronouncements that amount merely to interpretations of existing rules (rather than the imposition of new substantive requirements).

In concluding that OCR and DOJ were required (and failed) to comply with the APA prior to issuing the Dear Colleague Letter, the Court noted that OCR and DOJ have applied the guidance contained in the Dear Colleague Letter as if it were binding law in a manner different than the underlying regulation had previously been applied, and that the guidance is “compulsory in nature” in that schools must comply with the guidance or be deemed in breach of their Title IX obligations.

This decision is obviously significant insofar as it impacts the enforceability of the May 13, 2016 Dear Colleague Letter. However, colleges and universities that have voluntarily implemented measures consistent with the Dear Colleague Letter may certainly continue to do so, unless they are located in states that have adopted legislation prohibiting such action.   Where the decision (or, at a minimum, the reasoning underlying the decision) may have a greater impact is in its potential effect on OCR’s subregulatory guidance with respect to institutions’ obligations to prevent and address sexual violence (e.g., OCR’s April 3, 2011 Dear Colleague Letter  and its April 29, 2014 Questions and Answers on Title IX and Sexual Violence). Although the arguments for and against the validity of OCR’s substantive interpretation of Title IX are different as between these two subject areas, there are certainly parallels between OCR’s use of purported subregulatory guidance on both issues.  Indeed, the District Court noted the impact of the May 13, 2016 Dear Colleague Letter on institutions, as evidenced by the government’s efforts to enforce its requirements, as a significant factor in characterizing it as legislative (and thus subject to the APA) rather than interpretive in nature, and OCR’s enforcement of its guidance on sexual violence is undeniable, with over 250 active investigations at more than 200 institutions currently pending.

It is certainly possible, and perhaps even likely, that the federal government will appeal the Court’s decision in State of Texas, and in any event OCR can be expected to assert that the Court’s rationale does not apply to its guidance on sexual violence.  However, the Court’s decision will certainly be used in support of pending litigation challenging the validity of OCR’s guidance on sexual violence, and in connection with congressional efforts to overturn that guidance.  Needless to say, the situation merits further watching.

IRS Issues New Management Agreement Safe Harbor Provisions, Providing Enhanced Flexibility for College and University Food Service, Facilities Management and Similar Relationships

Posted in Higher Education

New management agreement guidelines were issued by the IRS today in a new Revenue Procedure (Rev. Proc.) 2016-44.  Rev_Proc_2016-44 provides revised safe harbors under which a private management contract does not result in impermissible private business use of projects financed with tax-exempt bonds.  The former limits on fixed and variable compensation in management contracts involving tax-exempt bond financed facilities have been eliminated.

Rev. Proc. 2016-44 will be published in Internal Revenue Bulletin Number 2016-36, dated September 6, 2016.

These revised safe harbors give colleges and universities the ability to enter into management contracts with private entities to manage or operate tax-exempt bond financed projects with more flexibility for incentives in reasonable compensation arrangements and longer terms of up to 30 years (subject to an economic life limit). The revised safe harbors also remove the previous requirements for prescribed percentages of fixed compensation for management contracts for different time periods.

The revised safe harbors continue a longstanding existing prohibition against sharing of net profits, and add certain new principles-based constraints (governmental control, governmental risk of loss, and no inconsistent tax positions by private service providers).

The revised safe harbors are effective for any management contract that is entered into on or after August 22, 2016.

Universities Are Targets of Lawsuits over Retirement Plan Fees

Posted in Employment, ERISA, Higher Education

Three lawsuits filed in early August suggest that plaintiffs’ law firms, representing employees of colleges and universities, are looking at higher education retirement plans as potential targets for lawsuits seeking millions of dollars in damages.

The New York Times reported[1] that class action lawsuits were commenced on August 9, 2016 against three prominent universities – New York University, Yale, and the Massachusetts Institute of Technology – alleging that the schools had allowed their employees to be charged excessive fees on their retirement savings.  The law firm bringing the lawsuits – Schlichter Bogard & Denton – has already brought and settled many similar lawsuits against companies such as Lockheed Martin, Boeing, and Novant Health, for amounts in the tens of millions of dollars.  The Lockheed Martin settlement, for example, was for $62 million.  The new lawsuits suggest that Schlichter, and potentially other plaintiffs’ law firms, are now looking at college and university plans as potential targets for similar kinds of claims.

The new lawsuits are putative class actions, which means that the law firm represents certain named employees who are participants in the universities’ retirement plans, and purports to represent all other similarly situated employee participants – plaintiff classes that may have thousands of members each. Once a handful of the college or university’s employees agree to be part of the lawsuit, it can be brought on behalf of all the employees in the retirement plan.

The claims against NYU, MIT and Yale are similar to claims made in many of the previous retirement plan lawsuits brought by the Schlichter firm and others: that retirement plan fiduciaries breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) to prudently select investment vehicles for the plans so as to maximize returns, often by  minimizing fees.[2] Under ERISA, the “fiduciaries” of a covered retirement plan – plan fiduciaries can include administrative and investment committees and, frequently, officers and other members of management of the college or university – are subject to strict fiduciary responsibilities and can be held personally liable for any losses caused by a breach of these duties.  In short, it means the college or university is obligated to administer the retirement plan funds of employees in a manner that results in the highest possible prudent growth.

Beginning about ten years ago, a wave of lawsuits have been brought on behalf of retirement plan participants alleging that fiduciaries had breached their duties by selecting improper investment options, and in particular by allowing excessive fees to be paid from plan assets. If the investment fees paid by a retirement plan are deemed to be excessive, even by a seemingly small margin, the aggregate losses over an employee’s working career can be very large.  A frequently cited calculation stated in a U.S. Department of Labor publication more than 10 years ago – and repeated in the Times article – recites that if investment fees are one percentage point higher than a reasonable amount, the participant’s retirement account will be 28 percent lower after a 35 year career.  If that is true, then for large plans (like those sponsored by the three universities), the potential losses are enormous – the complaint against MIT alleges that the plan could have saved more than $8 million in fees in a single year by selecting investments prudently. (The complaint’s damage claim is of course not limited to a single year’s losses.) Significantly, these lawsuits also involve claims against major college and university retirement plan managers, including TIAA-CREF and Fidelity.  Accordingly, any college currently using these companies for its employee retirement plans could face some of the same claims.

To reduce the risk of liability going forward, retirement plan fiduciaries should, among other things:

  • exercise “procedural prudence” in analyzing, vetting, and selecting investment options and advisors for the retirement plan, with a view to the risk, return and cost characteristics of each investment and the plan portfolio as a whole,
  • continually monitor the chosen investments and make changes if and when appropriate,
  • discuss fees and fee options with retirement plan companies to secure the most favorable arrangements for employees,
  • require that retirement plan managers disclose fees and charges so they may be communicated to employees;
  • avoid any conflicts of interest in the selection and monitoring processes, and
  • consult with third party advisors whenever “in-house” fiduciaries lack necessary expertise.

Colleges and universities may also want to confer with existing retirement plan managers regarding responses to questions which may arise at this time from employees about current retirement plans.

Attorneys in Bond Schoeneck & King’s Employee Benefits Practice Group frequently counsel clients with respect to best practices for fulfilling fiduciary duties and avoiding ERISA liability. Often this takes the form of “fiduciary training” we provide to retirement plan committees and other plan fiduciaries.  In addition, the firm’s Litigation Group has substantial experience in defending ERISA lawsuits.

[1] Tara Siegel Bernard, “M.I.T., N.Y.U. and Yale Are Sued Over Retirement Plan Fees”, NY Times (Aug. 9. 2016, accessed at http://www.nytimes.com/2016/08/10/your-money/mit-nyu-yale-sued-4013b-retirement-plan-fees-tiaa-fidelity.html.

[2] We discussed some of the numerous issues pertinent to these types of claims in previous Memoranda – see, for example: ERISA Fiduciary Guidance – Fairness for Defined Contribution Fees, and ERISA Fiduciary Guidance – Making a “Watch List” Work.

 

Recent U.S. Department of Education Dear Colleague Letter Raises the Bar on Standards for Protecting Federal Financial Aid Data

Posted in Higher Education, Title IV

doe-logoOn July 1, 2016 the U.S. Department of Education issued a follow-up Dear Colleague Letter to the Dear Colleague Letter of July 29, 2015. This most recent letter reminds institutions of their legal obligation to protect student data under Title IV and sets forth the new standards and methods the DOE will use when evaluating data security compliance.

An institution’s Title IV Program Participation Agreement (PPA) requires that they must protect all student financial aid data. The Student Aid Internet Gateway (SAIG) Enrollment Agreement, the system used by educational institutions and third-party servicers to exchange data electronically with the U.S. Department of Education, contains similar requirements.

In addition, the letter reminds institutions that the specific requirements of the Gramm-Leach-Bliley Act (GLBA) governing data security at financial services organizations apply to post-secondary institutions. These include implementing a written information security program, designating an individual to coordinate information security, performing ongoing risk assessments, and properly vetting third-party service providers. It is also noted that compliance with the GLBA will be incorporated into the DOE’s annual student aid compliance audit requirements.

Most significantly, the letter “strongly encourages institutions to review and understand the standards defined in NIST SP 800-171.”  These standards were developed by the National Institute of Standards and Technology (NIST) to protect sensitive federal information that is used and stored in non-federal information systems and organizations. NIST SP 800-171 sets forth a significant expansion of the data security requirements and controls expected in the handling of student financial aid data and other types of federal data and information. In citing these standards, the DOE acknowledges “the investment and effort by institutions to meet and maintain the standards set forth in NIST SP 800-171” but “strongly encourages those institutions that fall short of NIST standards to assess their current gaps and immediately begin to design and implement plans to close those gaps using NIST standards as a model.”

The message from the US DOE is clear – institutions of higher education that use student financial aid data, and other forms of federal data are expected to “immediately” begin to integrate the specific requirements of NIST SP-171.

Updated Clery Act Handbook Released

Posted in Clery Act, Higher Education

cleary actThe Handbook for Campus Safety and Security Reporting (the “Handbook”), which provides important guidance for institutions as it relates to their compliance with the Clery Act’s safety and security requirements, was recently revised and a new version (the 2016 Edition) released by the United States Department of Education. This valuable resource had not been updated since 2011.  The 2016 Edition of the Handbook contains updated provisions with respect to, among other things, the Violence Against Women Reauthorization Act of 2013.

The 2016 Edition of the Handbook, which replaces all previous versions of the Handbook, can be accessed here.

New York Institutions: NYSED Activates Electronic Submission System for Article 129-A and 129-B Compliance

Posted in Higher Education

university buildingThe New York State Education Department has activated its electronic submission system for institutions to file certificates of compliance with Education Law Articles 129-A and 129-B, as well as the copies of rules and policies required to be filed this year pursuant to Article 129-B.  A link to the portal, as well as instructions for using it, can be found on the Department’s website.

When making the required Article 129-B filings, institutions are instructed to submit only the documentation specified in the portal, and not copies of MOUs, training session rosters or other materials required or necessitated by Article 129-B’s provisions.  Rather, these documents should be retained by the institution as evidence of compliance and provided to the Department, upon request, in connection with compliance monitoring or auditing.

All filings are due by July 1, 2016, (though institutions do not risk loss of State funding for failure to file until September 1).

The Second Coming of Fisher: UT Austin’s Race-Conscious Admissions Policy Upheld by SCOTUS

Posted in Admissions, Higher Education

college higher ed blogYesterday, the U.S. Supreme Court upheld the University of Texas at Austin’s use of race in its admissions policies and procedures by rendering a decision in the second case brought by Abigail Fisher, a white woman who was rejected for admission to UT Austin over eight years ago. In June 2013, the Supreme Court remanded Ms. Fisher’s case to the U.S. Court of Appeals for the Fifth Circuit so it could reconsider the constitutionality of the university’s race-conscious admissions policies and procedures under the strict scrutiny standard articulated in prior affirmative action Supreme Court decisions.  In July 2014, the Fifth Circuit again held in favor of UT Austin, finding that its use of race in admissions was constitutional since the university had considered race-neutral alternatives in its admissions process and still could not achieve sufficient diversity.  Dissatisfied, Ms. Fisher appealed to the Supreme Court again, arguing that UT Austin’s use of race in its admissions process disadvantaged her and other non-minority applicants.

In yesterday’s Fisher v. University of Texas at Austin decision, the Supreme Court found that UT Austin’s use of race in its admissions process meets the strict scrutiny standard since the university’s goal to provide its students with educational benefits that result from having a diverse student body advances a compelling interest.  Further, the Court found that UT Austin validly demonstrated that race-neutral alternatives (e.g., scholarships, outreach programs, etc.) were not sufficient to achieve a diverse student body, even when used in conjunction with Texas’ Ten Percent Plan which guarantees Texas students graduating in the top tenth of their class admission to a public college or university of their choice in the state.

While this decision puts an end to Ms. Fisher’s case against UT Austin and appears to be a win for the use of affirmative action by colleges and universities in admissions, the Court’s decision did include a warning to UT Austin – and colleges and universities across the country — that the need for race-conscious admissions processes may change over time. In the Court’s majority opinion, Justice Anthony M. Kennedy stressed that institutions must periodically reassess the constitutionality of their admissions processes and procedures.  Specifically, he stated that the university “must continue to . . . scrutinize the fairness of its admissions program; to assess whether changing demographics have undermined the need for a race-conscious policy; and to identify the effects, both positive and negative, of the affirmative-action measures it deems necessary.”  Given this charge, colleges and universities that use race as a factor in their admissions process should avoid complacency and periodically audit their policies and procedures to ensure compliance with the Court’s mandate.

New York Institutions: NYSED Posts Update on Status of Article 129-A and Article 129-B Filing System

Posted in Higher Education

university building5In a new update posted to its website, the New York State Education Department has indicated that it is continuing work on its electronic system for the submission and recording of this year’s required certificates of compliance under Education Law Articles 129-A and 129-B, and the copies of written rules and polices required to be filed this year pursuant to Article 129-B. As before, the Department indicates that once the system is operational, information will be posted on its website on how to access the system and submit the required documentation.

As institutions are aware, the statutory deadline for filing certifications, rules and policies is July 1 (though institutions do not risk loss of State funding for failure to file until September 1).  However, all documentation must be submitted through the yet-to-be-released electronic filing system, and the Department will not accept, or record as received, hard copy documents or documents submitted via email.  Consequently, institutions necessarily find themselves in a holding pattern until further notice.