Compatibility- Employee of a county MR/DD board serving as an executive officer of a nonprofit corporation

OAG 96-007 Attorney General OPINION NO. 96-007 Syllabus: 1. R.C. 5126.03(C) does not prohibit an employee of a county board of mental retardation and developmental disabilities (county MR/DD board), in his official capacity, from serving as an executive officer of a nonprofit corporation created pursuant to R C. Chapter 1702 that has entered into a contract with the county MRIDD board. 2. In the case of a nonprofit corporation established pursuant to RC. Chapter 1702, and provided that there is no violation of a statutory provision subject to interpretation by the Ohio Ethics Commission pursuant to RC. 102.08, an employee of a county MRlDD board, in his official capacity, may serve as an executive officer of the nonprofit corporation if: (1) the county MPJDD board has participated in the nonprofit corporation; (2) the 2-27 1996 Opinions OAG 96-007 county MRIDD board formally designates the position in question to represent the county MRIDD board; (3) the county MRIDD board employee is formally instructed to represent the county MRIDD board and its interests; and (4) there is no other conflict of interest on the part of the particular county MRIDD board employee. (1991 Op. Att'y Gen. No. 91-007, approved and followed.) To: Dean Holman, Medina County Prosecuting Attorney, Medina, Ohio By: Betty D. Montgomery, Attorney General, January 22, 1996 You have requested an opinion concerning the propriety of an employee of a county board of mental retardation and developmental disabilities (county MRIDD board) serving as an executive officer of a nonprofit corporation. You state that the nonprofit corporation in question was created under RC. Chapter 1702 (nonprofit corporation law) to provide employment services to the clients of the county MRIDD board, and that the county MRIDD board has entered into a contract whereby the nonprofit corporation provides these services to the county MRIDD board. The employee of the county MRIDD board seeks to serve as an executive officer of the nonprofit corporation pursuant to an agreement between the county MRIDD board and nonprofit corporation, and would receive no compensation from the nonprofit corporation. You wish to know whether an employee of a county MRIDD board, in his official capacity, may serve as an executive officer of a nonprofit corporation that has entered into a contract with the county MRIDD board. Pursuant to RC. 5126.03(C), "[n]o employee of an agency contracting with a county board of mental retardation and developmental disabilities ... shall serve as... an employee of the county board." Because a nonprofit corporation created pursuant to RC. Chapter 1702 for the purpose of offering a particular kind of assistance constitutes an agency for purposes of R.C. 5126.03(C), see 1992 Op. Att'y Gen. No. 92-069 at 2-286, no employee of such a nonprofit corporation that has entered into a contract with the county MRIDD board may be employed by the county MRIDD board. See, e.g., 1984 Op. Att'y Gen. No. 84-019 at 2-65 (an employee of the Sheltered Workshop Fund, Inc., a private nonprofit corporation, may not be employed by a county MRIDD board). Accordingly, since the nonprofit corporation referenced in your letter has contracted with the county MRIDD board to provide employment services to the clients of the county MRIDD board, it must be determined whether an individual employed by a county MRIDD board who serves in his official capacity as an executive officer of a nonprofit corporation is an "employee" of that nonprofit corporation. The term "employee" is not defmed in RC. 5126.03 or elsewhere in R.C. Chapter 5126. Terms left undefmed by statute are to be accorded their common, everyday meanings. State ex rei. Rear Door Bookstore v. Tenth Dist. Court ofAppeals, 63 Ohio St. 3d 354,358,588 N.E.2d 116, 120 (1992); see also RC. 1.42 ("[w]ords and phrases shall be read in context and construed according to the rules of grammar and common usage"). Black's Law Dictionary 525 (6th ed. 1990) provides the following defmition of the term "employee": A person in the service of another under any contract of hire, expresft or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be perfonned. One Man:h 1996 2-28 OAG 96·007 Attorney General who works for an employer; a person working for salary or wages. (Citation omitted.) Accord Webster's New World Dictionary 459 (2nd college ed. 1986). An employment relationship arises by contract either exprt;ss or implied, and is evidenced by payment of salary or wages by the employer to the employee. 1982 Op. Att'y Gen. No. 82·020 at 2·64; see also Home Indem. Co. v. Vii/age of Plymouth, 146 Ohio St. 96, 64 N .E.2d 248 (1945) (for purposes of an insurance contract, an employee is a person who works for another for salary or wages); Pantall v. Shriver·Allison Co., 61 Ohio App. 119, 122,22 N.E.2d 497,499 (Mahoning County 1938) ("[g]enerally the relation of master and servant exists where one person for payor other valuable consideration enters into the service of another and devotes to him his personal labor for an agreed price"), appeal dismissed, 135 Ohio St. 164, 19 N.E.2d 901 (1939); 19840p. Att'y Gen. No. 84·019 at 2·65 (a person could be considered an employee of a nonprofit corporation if he receives compensation from the nonprofit corporation). With respect to your specific inquiry, you have described a situation in which no employment contract exists between the nonprofit corporation and the individual as an executive officer. Instead, the county MRiDD board designates the individual to serve in his official capacity as an executive officer of the nonprofit corporation. The individual thus remains an employee of the county MRIDD board. Moreover, the individual receives no compensation from the nonprofit corporation for serving as an executive officer. The individual receives compensation only from the county MRIDD board for services rendered as an employee of the county MRIDD board. In light of the fact that no employment contract exists between the nonprofit corporation and the individual as an executive officer, and the fact that the individual, as an executive officer, does not receive any compensation from the nonprofit corporation, it must be concluded that an individual employed by a county MRIDD board who serves in his official capacity as an executive officer of a nonprofit corporation is not an "employee" of that nonprofit corporation for purposes of R.C. 5126.03(C). See 1982 Op. Att'y Gen. No. 82·020 at 2·64 ("(a]bsent an employment contract between the county and its jail inmates, and in view of the fact the county does not pay the inmates for work performed in a work-release program, I must conclude that county jail inmates working outside the jail as part of a work·release program are not employees of the county"). Accordingly, R.C. 5126.03(C) does not prohibit an employee of a county MRIDD board, in his official capacity, from serving as an executive officer of a nonprofit corporation created pursuant to R. C. Chapter 1702 that has entered into a contract with the county MRiDD board. In addition to the prohibition in R.C. 5126.03(C), ethical principles, which are set forth in RC. Chapter 102 and RC. 2921.42, and general common law principles prohibit an employee of a county MRIDD board from having a personal interest in a contract of the county MRiDD board. Because the General Assembly has authorized the Ohio Ethics Commission pursuant to RC. 102.08 to render advisory opinions on the applicability of the ethical provisions of R.C. Chapter 102 and R.C. 2921.42, it is appropriate that the Attorney General decline the issuance of opinions on matters arising under these provisions. See, e.g., 1994 Op. Att'y Gen. No. 94·079 at 2-397; 1994 Op. Att'y Gen. No. 94-039 at 2-200. It is, therefore, recommended that you contact the Ohio Ethics Commission for an analysis of the situation you have described to ensure that all problems have been recognized and honored. I am, however, able to examine the general common law principles to detennine whether an employee of the county MRiDD board who serves in his official capacity as an executive officer of a nonprofit corporation that contracts with'the board has a prohibited personal interest in a contract of the board. 2-29 1996 Opinions OAG 96-007 1991 Op. Att'y Gen. No. 91-007, which concluded that a county employee may serve as a trustee, officer, or director of a nonprofit corporation established pursuant to R.C. 307.696, determined that, under general common law principles, a county employee does not have a prohibited personal interest in a public contract when the individual participates in the nonprofit corporation on behalf of the county, rather than to represent personal interests. As stated in 1991 Op. Att'y Gen. No. 91-007 at 2-36 through 2-38: The letter requesting this opinion notes that the Ohio Ethics Commission has concluded, in various instances, that public officials may serve as members or trustees of nonprofit corporations with which their public entities contract. ... Those opinions have set forth four criteria that must be met before it may be determined that a public official who also serves a private organization does not have a prohibited personal interest in a contract between the public entity and the private organization. The relevant criteria are these: (1) [T]he governmental entity must create or be a participant in the non-profit corporation; (2) any public official or employee connected with the jurisdiction, including a council member, may be designated to serve on the non-profit corporation, but the elected legislative authority or the appointing governing body must formally designate the office or position to represent the governmental entity; (3) the public official or employee must be formally instructed to represent the governmental entity and its interests; and (4) there must be no other conflict of interest on the part of the designated representative. Ohio Ethics Commission Advisory Op. No. 88-005, slip op. at 4 (quoting Ohio Ethics Commission, Advisory Op. No. 84-(01). The Ohio Ethics Commission has, thus, found that, when these four criteria are satisfied, a particular public servant does not have a prohibited personal interest in a public contract. While opinions of the Attorney General have not formally adopted these same criteria, the result reached under these criteria is consistent with the analyses undertaken in various Attorney General opinions considering questions of ethics. See, e.g., Op. No. 89-063; 19880p. Att'y Gen. No. 88-041. The Ohio Ethics Commission has, in essence, concluded that an individual does not have a prohibited personal interest in a contract by virtue of serving a nonprofit corporation when his service to the nonprofit corporation is performed in his official capacity, as a formal representative ofa governmental entity - for then his interest in the nonprofit corporation is public and official, rather than private; he represents and serves the governmental entity and not his own interests. This conclusion is eminently reasonable and a valid statement of general ethical principles governing participation by public servants in the affairs of nonprofit corporations, and I embrace it wholeheartedly. .... Applying [these four] criteria to [your] second question, I conclude that, in the case of a nonprofit corporation established pursuant to R.C. 307.696, the county administrator andlor any other county official or employee other than a county commissioner may legally serve as a trustee, officer, or director of the corporation if: (1) the county has created or participated in the nonprofit March 1996 2-30 OAG 96-007 Attorney General corporation; (2) the board of county commissioners fonnally designates the office or position in question to represent the county; (3) the county administrator or other county official or employee is fonnally instructed to represent the county and its interests; and (4) there is no other conflict of interest on the part of the particular county administrator or other county official or employee. (Emphasis added.) 1991 Op. Att'y Gen. No. 91-007 thus concluded that, absent a violation of an ethical provision subject to interpretation by the Ohio Ethics Commission and other conflicts of interest, a county employee does not have a prohibited personal interest in a contract between the county and a nonprofit corporation by virtue of serving as a trustee, officer, or director of the nonprofit corporation when his service to the nonprofit corporation is perfonned in his official capacity. In accordance with this conclusion, 1991 Op. Att'y Gen. No. 91-007 approved and adopted four criteria that must be met before it may be detennined that a county employee who also serves a nonprofit corporation does not have a prohibited personal interest in a contract between the county and the nonprofit corporation. In regard to the situation posed in your opinion request, I fmd that the four criteria adopted in 1991 Op. Att'y Gen. No. 91-007 provide a useful fonnat for detennining whether a county employee may participate in the affairs of a nonprofit corporation created pursuant to R.C. Chapter 1702. Therefore, with some modification of the wording used in 1991 Op. Att'y Gen. No. 91-007 to fit your situation, I conclude that an employee of a county MRlDD board, in his official capacity, may serve as an executive officer of a nonprofit corporation established pursuant to RC. Chapter 1702 if: (1) the county MRIDD board has participated in the nonprofit corporation; (2) the county MRJDD board fonnally designates the position in question to represent the county MRJDD board; (3) the county MRIDD board employee is fonnally instructed to represent the county MRIDD board and its interests; and (4) there is no other conflict of interest on the part of the particular county MRlDD board employee. I Whether the four criteria set forth above are satisfied, however, requires the resolution of factual questions that can only be answered on a case-by-case basis. 1991 Op. Att'y Gen. No. 91-007 at 2-38. Because the Attorney General is not authorized to decide questions of fact by means of a fonnal opinion, see 1987 Op. Att'y Gen. No. 87-082 (syllabus, paragraph three), it is appropriate for local officials, rather than the Attorney General, to determine whether these four criteria have been met. Moreover, as stated above, it is also appropriate to contact the Ohio Ethics Commission for an opinion under RC. Chapter 102 and RC. 2921.42 concerning the situation you have described. See RC. 102.08. In summary, it is my opinion and you are advised that: 1. RC. 5126.03(C) does not prohibit an employee of a county board of mental retardation and developmental disabilities (county MRIDD board), in his official capacity, from serving as an executive officer of a nonprofit This opinion does not address the propriety of an employee of a county MRIDD board, in his official capacity, serving as an executive officer of a nonprofit corporation when the employee receives compensation from the nonprofit corporation. Whether such a situation is pennitted requires an analysis of the situation in light of the four criteria set forth in the text above - with particular consideration given to the existence of a conflict of interest on the part of the county MRIDD employee. 1 2-31 1996 Opinions OAG 96-008 corporation created pursuant to R. C. Chapter 1702 that has entered into a contract with the county MRJDD board. 2. In the case of a nonprofit corporation established pursuant to R.C. Chapter 1702, and provided that there is no violation of a statutory provision subject to interpretation by the Ohio Ethics Commission pursuant to R. C. 102.08, an employee of a county MRJDD board, in his official capacity, may serve as an executive officer of the nonprofit corporation if: (1) the county MRIDD board has participated in the nonprofit corporation; (2) the county MRIDD board formally designates the position in question to represent the county MRJDD board; (3) the county MRIDD board employee is fonnally instructed to represent the county MRIDD board and its interests; and (4) there is no other conflict of interest on the part of the particular county MRIDD board employee. (1991 Op. Att'y Gen. No. 91­ 007, approved and followed.) Man:h 1996