While by no means a recent law, Section 508 of the Pennsylvania Public School Code, 24 P.S. § 5-508, is becoming one that school districts are repeatedly relying upon to avoid paying contractors for work performed outside the original scope of their contracts. Specifically, Section 508 requires a majority vote of all members of a district’s school board any time the district enters into “contracts of any kind … where the amount involved exceeds one hundred dollars ($100).” A school board’s failure to comply with this Section renders any agreement reached with the school district void and unenforceable.
Application of Section 508 is mandatory not only to the underlying contract but also to any subsequent modifications to the contract that would increase the district’s indebtedness under that contract, i.e., change orders. Unless a contractor can satisfy the heavy burden of producing evidence that a majority of the school board approved a change order, there is no obligation on the part of the district to pay for the additional work, even on equitable claims of unjust enrichment and quantum meruit.
While it may be common and, at times, necessary under the project schedule for contractors to perform additional work first and submit a change order request later, under Section 508, unless a majority of the school board voted to ratify the contract to include that additional work, no payment is required, even if it was performed at the direction of the district’s superintendent or other representative.
Section 508 is a law that contractors are rarely aware of and one that can be difficult to defeat once in litigation, given its mandatory application. While the practical application of Section 508 may be burdensome, it is critical for contractors to demand executed written change orders prior to performing work outside the scope of the original contract. Addressing this requirement upfront in the underlying contract may also serve to protect a contractor’s rights. Otherwise, contractors run the risk of waiving their right to receive payment later for performing additional work.
Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC.
Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.