The Prince George's County aboard of Education and the county teacher's union have reached an out-of-court settlement of a suit stemming from a school board ruling that would have required teachers to take reading courses and administrators to teach classes for one week every three years, school officials announced yesterday.

Under the agreement, only new teachers will be required to take reading courses and only administrators seeking promotions or transfers will be required to teach classes, a school spokesman said.

The school board adopted two policies containing the directives to improve the quality of reading instruction, and to remind the administrators of problems teachers faced each day in 1975.

The Prince George's County Board of Education however, objected to the policies, saying they were matters that affected the working conditions of teachers and administrators and therefore could only be implemented after becoming part of the union contract.

The educators association, which represents more than 8,000 teachers and administrators, filed a grievance with the county school board in an effort to block the imposition of the new policies. When the grievance was turned down by former county School Supt. Carl W. Hassel, the teacher's union hired an arbitrater to make findings on the issues, a move that under Maryland law would have required the school board to submit to binding arbitration.

The school board adopted two policies containing the teacher's union to prevent arbitration and won a temporary injunction to bar arbitration.

The county Circuit Court, however, eventually ruled in the teacher union's favor, and the board then filed the appeal with the Maryland Court of Special Appeals that was outstanding at the time the compromise was announced yesterday.

At the heart of the court battle was the scope of Maryland's collective bargaining law, which allows public school employers to negotiate wages, hours and "other working conditions" with its employees.

The Prince George's County school board court challenge had been the first in the state to ask the courts to define what issues can be ruled on by the board and what fall under the "working conditions" clause requiring arbitration.

The school attorney contended in the suit that the issue was not "working conditions" but whether local boards have control over "educational policies of the county and educational matters affecting the county."

The out-of-court settlement, according to school board member Maureen K. Steinecke, marks a change in attitude by school board members.

"Before, we thought reading classes were necessary for everyone who teaches, including the industrial arts teacher for example," said Steinecke, who explained that her views have "moderated" since then.

She said they have changed because the school system has adopted a successful program of special volunteer in-school training classes for teachers.