It's a sad fact that many parents with school-aged children are living in a state of anxiety, whether they are preparing for a fall of remote learning or bracing themselves to send their children back to in-person school. A supportive and safe learning environment to provide students with an opportunity for social interaction (while giving parents a break from full-time childcare and learning support) feels like an impossible dream in our COVID-19 era. Many parents are consequently exploring the concept of alternative learning structures, in some instances banding together with other families in learning pods to collectively hire one or more employees to facilitate remote learning or provide a homeschool environment. At their most organized, learning pods are endeavors that face many of the same considerations and challenges we see at the start of any new business venture. While the learning pod trend has raised many valid ethical and societal questions, we will be using this article to consider the business and legal implications of setting up a pod.
Embrace the LLC (It's Not Just for Businesses!)
Families forming a learning pod can reduce their risk of liability and proactively address future disagreements by forming an LLC and entering into a contract governing its operations.
A limited liability company (an "LLC") is a distinct legal entity that can operate to shield its owners from liability for the obligations of the LLC. The LLC's owners stand to lose their investment in the LLC, and could still be liable for their own bad behavior, but their personal assets are generally not at risk. Put another way, the owners are largely protected from debts, liabilities, and losses incurred by the LLC. This is a powerful and meaningful protection for the owners of any venture.
Similarly, forming an LLC and entering into an agreement regarding how it will operate forces partners to think through issues of governance, dispute resolution, financial contributions, and other important matters. Often, potential partners are surprised to discover fundamental disagreement about how a venture should operate once they start discussing the terms of this operating agreement.
Hiring a Teacher or Facilitator
Rather than requiring several families to develop a strategy for jointly employing a teacher or facilitator, the learning pod itself – set up as an LLC – could be the employer.
Hiring employees takes a fair amount of planning and preparation. Some of the first things a learning pod will need to obtain are federal and state tax identification numbers. Before a learning pod may issue a paycheck to its teacher or facilitator in Oregon, for example, the learning pod must file an application with the Oregon Department of Revenue to receive a Business Identification Number. New employers will also need to familiarize themselves with reporting and paying payroll tax, withholding obligations, and related payroll requirements. Employers must also obtain workers' compensation insurance, which will be particularly important during the COVID-19 era.
Once the learning pod is ready to hire a teacher or facilitator, it will need to consider important questions about who to hire, expectations for qualifications and experience, and what sort of compensation the market commands. The job-posting and interview questions should be vetted to ensure they don't contain anything that could be interpreted as discriminatory – whether explicit or implicit in nature. Some learning pods may also want to consider a post-job offer background check, but should be prepared to navigate the web of associated legal hurdles and requirements. In any case, a learning pod that hires a teacher or facilitator must be prepared to collect mandatory post-hire documentation, such as an I-9, IRS Form W4, etc.
The learning pod should also consider whether to enter into an employment agreement with the teacher or facilitator. While employment agreements are often disfavored for a number of reasons, they might make sense for some learning pods. For example, continuity will likely be important to the learning pod, and the agreement could be drafted to incorporate incentives if the facilitator or teacher gives sufficient (or extended) notice of intent to resign, which may help the learning pod avoid scrambling to find a replacement if needed. On the other hand, employment agreements may also make clear that the employment relationship will only last for a certain term, and may, for example, be cut short if and when schools return to regular (and safe) in-person learning experience.
Things to Consider
Identifying and working through disagreements, and developing a framework for addressing future disagreements, is a good investment to make at the beginning of a partnership. In the context of a learning pod, for example, how should it interview and hire a teacher? Who decides if the teacher needs to be replaced? What happens if a family that is a learning pod member can no longer pay? What if a child is out sick or the family goes on vacation? Will there be health and safety guidelines that learning pod families are required to follow, and if so, what are they and what are the consequences for non-compliance? If one of the children requires more of the teacher's time and attention for any reason, should that family pay more towards the teacher's compensation? In the event of a disagreement, does the majority decide or can any member veto a change to the status quo?
We often counsel partners on these and similar issues when they form a business, and are encountering many of the same issues when thinking through potential learning pod challenges. A guided discussion regarding these issues, resulting in a document reflecting the outcome of the discussion, can help ensure that the partnership continues to function smoothly.
Hiring even a single employee creates a host of obligations employers must adhere to in order to remain above board with the myriad of employment laws. For example, employers must abide by wage and hour regulations, including minimum wage requirements and meal and rest periods. Depending on the duties and expectations of the facilitator or teacher, they may qualify to be exempt from overtime requirements, provided they also meet the minimum compensation requirements under the Fair Labor Standards Act and state law.
The learning pod – as an employer – will have a general duty to provide a workplace free from recognized hazards, meaning that the learning pod would need to implement appropriate health and safety protocols related to the COVID-19 pandemic.
And while some laws may not technically apply unless the learning pod has reached a threshold number of teachers or facilitators (for example, certain medical leave laws, sick leave laws, and disability accommodation laws), that doesn't mean that employers won't have to be prepared to handle situations when an employee does get sick, or is otherwise unable to work for reasons outside the employee's control. Accordingly, learning pods should also think about back-up options, such as inquiring with staffing companies who may be able to provide substitutes in a pinch (but for a fee).
Beyond the scope of this article, but worth noting, are applicable state requirements for registering homeschooled children, teacher certification requirements, and tracking student progress through testing. Fortunately, states typically make user-friendly guides on these topics available online.
Families using learning pods should take steps now to make sure that they can spend the upcoming school year focusing on supporting their children during what is sure to remain a challenging time. Ensuring that your learning pod is set up to foster a positive working relationship between all partners and act properly as an employer will help.
This update is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have questions about the issues raised here, please contact Claire Brown, Christopher Morehead, or the attorney with whom you normally consult.