An Independent Schools' Guide to Vendor Contract Management

Independent schools often contract with vendors to support the school's operations and delivery of its curriculum and programming, including transportation providers, food service, cleaning and facilities maintenance, after-school programming, and travel companies. It is wise for independent schools to carefully review and consider the following provisions of any vendor agreement:

• Parties to the Agreement: At the outset, the contract should name the entities that are entering into the contractual relationship. This would include identifying whether the vendor expects to subcontract out any of its services to another provider.
• Relationship of the Parties: To avoid potential joint and several liability under applicable employment laws, the contract should make clear that the school and its vendor are independent contracting parties and that the contract does not create a partnership, joint venture, joint employment relationship, or other principal-agent relationship between the parties. Under certain circumstances, the school may be considered a joint employer of its vendor's employee and, accordingly, jointly and severally liable with the vendor for violations of labor and employment laws. This September, the National Labor Relations Board issued a notice of proposed rulemaking that would significantly expand the scope of who would be considered a joint employer. Under the proposed rule, the school sets a low bar for joint employment status; accordingly, a school would be considered a joint employer of its vendor's employees if it shares or codetermines those matters governing these employees' essential terms and conditions of employment, including wages, benefits, and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules. To mitigate the risk of the school being considered a joint employer of its vendors' employees, independent schools should ensure that the contract clearly identifies the vendor as the party that is responsible for determining the terms and conditions of employment for its own employees, and that the vendor agrees to indemnify the school for any liability for violations of employment and labor laws arising from the alleged joint employer relationship. In addition, the contract should include language stating that the vendor's employees are not entitled to participate in the school's group insurance plans or other benefits that the school provides to its employees; that the vendor carries its own workers' compensation and unemployment compensation insurance covering its own employees; that the vendor is solely responsible for all employment and income taxes of its employees; and that the vendor agrees to comply with all applicable employment, income, or other tax laws in connection with its own employees.
• Term: The contract should clearly specify when the parties' relationship begins and ends. Is there an ability to renew the contract past the initial term? If so, the contract should set forth clear procedures for renewal. In particular, independent schools should be aware if the contract contains an autorenewal provision and, if so, whether it requires the school to take any action to convey its intent not to renew the term of the contract to prevent autorenewal.
• Termination: In conjunction with the term, this section should identify how the school is able to end the contractual relationship. In addition to addressing each party's right to terminate the contract for "cause," schools would also be wise to ensure that the contract contains a provision allowing the school to terminate the agreement for reasons that would not be considered for "cause," commonly done by providing a certain amount of written notice of the intent to terminate.
• Payment Terms: The contract should clearly indicate when payment is due, how payment must be made, and the penalties for late payment, if any.
• Description of the Parties' Responsibilities: The contract should establish the specific actions, activities, or services the vendor agreed to perform. Likewise, any responsibilities of the school should also be addressed in the contract.
• Compliance with the School's Policies and Procedures: Vendors or their employees who perform services on the school's campus should be required to comply with the school's rules, regulations, and policies that would normally apply to visitors to campus. Accordingly, the contract should provide that the school may enforce all of its rules, regulations, and policies against the vendor and/or its employees, and that the vendor agrees to comply with all such policies.
• Background Checks for Vendor's Employees: The school should ensure that all of the vendor's employees working on the school's campus have undergone background checks consistent with applicable law and as required by school policy. This may not be addressed in the vendor's template contract if the vendor does not regularly work with schools, but it is especially important to ensure that employees assigned to work on the school's campus have been successfully cleared to work with and/or around children.
• Indemnification and Release of Liability: It is important that the contract address the allocation of responsibility in the event of loss. Be sure that the contract states that the vendor is responsible for any loss incurred by the school because of the vendor's negligence or failure to perform its responsibilities. Accordingly, the contract should also state that the vendor will indemnify or cover the school for any loss the school incurs because of the vendor's provision of services to the school, including the school's reasonable attorney's fees incurred in defending against a legal action. In support of the indemnification provision, it is imperative that the contract also provide proof of insurance to cover the vendor's provision of services to the school, including coverage for sexual abuse and molestation, and that it name the school as an additional insured.
• Force Majeure: What are the parties' obligations in the event of an act occurring outside of their control, such as fire, pandemic, hurricane, war, or other act of nature? The contract should address whether the parties' obligations are excused under these circumstances.
• Governing Law: The governing law reflects the jurisdiction that will interpret and enforce the contract. Ideally, the school should ensure that disputes arising out of the vendor contract will be governed by the state in which the school is located.

The Venable Independent School Law team is available to assist with review and negotiation of vendor contracts. Independent schools with questions are encouraged to contact Caryn G. Pass, Grace H. Lee, Janice P. Gregerson, or Ashley E. Sykes.

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