January 22, 1975
The Honorable Kenneth D. Caver. M. D. Opinion No. H- 502 Commissioner, Texas Department of.Mental Health and Mental Retardation Re: Whether residents and Box 12668. Capitol Station patients at MHMR faciAustin, Texas 78711 lities are entitled tothe benefits of state employees when they engage ininstituDear Dr. Gaver: tion-maintaining labor You have asked several questions related to the status ofpatients of state hospitals and residents of state schools for the mentally retarded (hereafter collectively referred to as “patient-worker-d’) as employees of the state for the purpose of receiving the “fringe” benefits of regular state employment. You state correctly that under the decision ofSouder v. Brennan. 367 F.Supp. 808 (D. C. 1973), patient-workers of non-federal hospitals, homes and institutions for the mentally retarded and mentally ill are “employees” covered by the minimum wage and overtime compensation provisions ofthe Fair Labor Standards Act (FLSA), 29 U.S. C.A. sections 201-219 and the regulations promulgated thereunder, 29 C. F. R. section 524 (providing for special minimum wages for certain handicapped workers). You then ask:

1. Will patients of State Hospitals and residents of State Schools for the Mentally Retarded, who are engaged ininstitutionlnaintaining labor, be employees ofthe State of Texas and. as such, subject to the laws, rules and regulations and entitled to the rights, privileges and ‘fringe’ benefits of regular State employees? 2. Will patients of State Hospitals and residents of State Schools for the Mentally Retarded, who are engaged inwork activities ofaSheltered Workshop or Work Activities Center that are notinstitution-maintaining labor, be employees of the State of Texas and, as such, subject tolaws, rules and regulations and entitled to the rights, privileges and ‘fringe’ benefits of regular State employees?

p. 2260The Honorable Kenneth D. Gaver, page 2 (H-502)

3. What funds are available for theuse ofMHMR to pay wages, overtime pay, and/or ‘fringe’ benefits to patient-workers? Your first question assumes that the patient-workers are engaged in labor activity covered under the FLSA, (“institution-maintaining” labor) and thus are “employees” for FISA purposes ofwages and overtime pay, as decided in Souder. However, the FLSA does not preempt Texas law in the area ofestablishing entitlements tothe rights, privileges and

“fringe” benefits of state employment. The FLSA has been described as a declaration ofpolicy ofthe United States as towhat constitutes fair labor standards and determines minimum standards for hours andwages, [Timberlake v. Day &Zimmerman, Inc. t 49 F.Supp. 28, 33 (S.D. Iowa 1943)], designed to accomplish the statutory purpose ofeliminating ”
. . . labor conditions detrimental to the maintenance ofthe minimum standard ofliving necessary for health, efficiency, and general well-being of workers

. . . ‘I[29 U.S. C.A. 5202 (a)]. While the FLSA deals with child labor, equal pay, and age discrimination, none ofthe provisions ofthe FLSA address employee “fringe” benefits. Thus, regarding such benefits, it cannot be said that the FLSA attempts to supersede the exercise of state law. Thus, to determine state law in the area offringe benefits for patientworkers, we must consider the text of the various state statutory provisions. Some ofthe rights, privileges and “fringe” bsnefits of“state employment” include: state woriunen’s compensation insurance (V. T. C.S., art. 8309g); unemployment compensation (V. T. C.S., art. 5221b-1, et seq. ); sick leave, vacations, holidays, emergency leave (V. T. C.S., art. 6252-8a); retirement (V. T. C.S., art. 6228a); and federal old age and survivors insurance (V. T. C.S., art. 695h). These statutes do not contain a general definition of~“state employment”; each has its own definition ofthe “employee” or “employments” entitled to benefits under it. Thus, instead ofa single general definition of “state employee, ” our statutes contain apatchwork of“employee” descriptions, each having specific exclusions and exceptions. Except for federal old age and survivors insurance, and unemployment compensation insurance, none ofthese statutes expressly exclude patient-workers from the persons eligible for benefits, and none expressly include any category ofpatient-workers.

, p. 2261The Honorable Kenneth D. Gaver. page 3 (H-502)

A. Workman’s Compensation Insurance for State Employees. Article 83096, section 1defines “employee” as:

. . . aperson inthe service ofthe state under an appointment or express contract of hire, oral or written, whose compensation is paid bywarrant issued by the Comptroller, except aperson employed by the State Highway Department or by an institution of higher education subject to a separate workman’s compensation law. B. Retirement System for State Employees.

..- Section 3(c)(l) ofarticle 6228a describes that the “membership” ofthe Texas Retirement System shall be composed (in part) as follows:

Any person who becomes an appointive officer or employee on or after the effective date ofthis Act shall become amember of the Retirement , System on the first day ofemployment as a condition ofemployment.~ The term appointive officer or employee shall mean aperson paid a monthly or hourly salary from the funds ofthe State and the position occupied by such person must be one that subjects that person to the laws, rules and regulations ofthe State as applicable toits employees. C. Accumulated Vacation or Sick Leave. Section 1of article 6252-8a provides yet another definition ofemployees entitled to the benefits under it:

‘Employee’ as used inthis Act means any appointed cfficer or employee in adepartment of the State who is employed on a basis or a position normally requiring notless than 900 hours per year, but shall not include members ofthe Legislature or any incumbent ofan office normally

p. 2262The Honorable Kenneth D. Gaver, page 4 (H-502)

filled by vote of the people; nor persons on piecework basis: nor operators of equipment or drivers of teams whose wages are included in rental rate paid the owners of said equipment or team: nor any person who is covered by the Judicial Retirement System of The State ofTexas; nor any person who is covered by the Teacher Retirement System of Texas, except persons employed by the Teacher Retirement System, the Central Education Agency, the Texas Rehabilitation Commission, and classified, administrative, and professional staff members employed by a State institution ofhigher education who have accumulated vacation or sick leave, or both, during such employment. D. Federal Old Age and Survivors Insurance for State Employees (OASI) Section 1of article 69511defines “Employment” and “State Employee” at subsection (b) and (c) respectively.

(b) The term ‘Employment’ means any service performed by aState employee except (1)service which in the absence ofan agreement entered into under this Act shall constitute ‘employment’ as defined in the Social Security Act; or (2) service which under the Social Security Act may not be included in an agreement between the State and the Secretary of Health, Education and Welfare entered into under this Act. (c) The term ‘State Employee’ inaddition to its usual meaning shall include elective and appointive officials of the state; and shall not include those persons rendering services inpositions the compensation for which is on afee basis. The term ‘State Employee’ shall not include any employees in positions subject to the Teacher

p. 2263The Honorable Kenneth D. Gaver, page 5 (H-502)

Retirement System except those employed by state departments, state agencies, and state institutions as construed in their usual meaning. The State ofTexas is a party to an agreement with the Secretary of Health, Education and Welfare (HEW) toprovide coverage ofState and local employees under the Federal OASI pursuant to 42 U.S. C. section 418. 42 U.S. C. section 418 provides a list of services which would be approved for coverage (if requested by the State), butit excludes patient-workers. 42 U.S. C. section 418(c)(b)(B) provides:

(6) Such agreement shall exclude -

. . . (B) service performed in a hospital, home or other institution byapatient or inmate thereof.

. . . Itappears that 42 U.S.C. section 418 (c)(6)(B), in conjunction with article 695h (1)(b)(2), V. T. C.S., excludes Texas patient-workers from the OASI agreements entered into by Texas with the Secretary ofHEW. E. Unemployment Compensation Act. Article 5221b-17(f)(6) defines “employer” inpart as: (f) ‘Employer’ means:

. . . (6) A hospital or an institution ofhigher education (or a group of such organizations) l.ocated in this State and operated by this State or by this State and one (1)or more other states or by an instrumentality thereof for which services are performed which constitute employment

. . . However, the same statute contains aprovision that excludes the service performed by patient-workers from its definition of“employment. ” Article 5221b-17(g)(5)(U) states:

p. 2264The Honorable Kenneth D. Gaver, page 6 (H-502)

(5) The term ‘employment’ shall not include:

. . . (U) Service performed in the employ ofa hospital, if such service is performed by a patient of such hospital. Attorney General Opinion H-75 (1973) can be construed as suggesting that the specific exclusion of patient-workers in the above section was overriden by the general election made inarticle 5221b-22d, which covers all services performed for the state: however, it should be noted that the portion ofthe opinion which lends itself to that construction is dicta, and special note should bemade that the Legislature , evincing a legislative intent not to treat the services that patient-workers render as employment, did exclude them from the employees eligible for unemployment compensation in article 5221b-17(g)(5)(U). G. The Texas Mental Health Code. The Texas Mental Health Code, article 5547-1, et seq., does not address itself to any employment relationship between the State and any ofthe patients or residents described in this opinion. Section 2. OlA ofarticle 554’ 202, V. T. C.S., provides for employees for MHMR:

. . . The number of employees and the salaries shall be as fixed in the general appropriations Bill. If the Legislature had intended toprovide for patient-workers as “employees it could have done so by way ofthe general appropriations bill, in conformity with article 5547-202. This survey ofthe various fringe benefit statutes shows that the Legislature has not created a general definition of “state employee” or otherwise defined that employment relationship. The most logical explanation for legislative inaction on the question ofpatient-worker eligibility for benefits is that the Legislature never considered patient-workers tobe State employe and therefore, had no reason to deal with them in that capacity. The Legislature did consider patient-workers in their capacity as patients but not as employees, in article II, se&Ion 3(d) ofthe Appropriations Act for fiscal

p. 2265The Honorable Kenneth D. Gaver, page 7 (H-502)

year 1974-1975, (Acts 1973, 63rd Leg., ch. 659,~. 1786 at 1885) which provides a limited gratuity to such persons:

d. Patient or Student Assistance. Subject to the approval and rules and regulations ofthe governing .boards covered bythis Section,patients or students in any state hospital or special school under thejurisdiction ofthe boards, who are assisting in the **oper** ation ofthe institutions **as part**  of their therapy, may receive gratuities out ofany funds available to the respective institutions in amounts not to exceed five dollars ($5) per week for each such student or patient participating. (Emphasis added) The Texas Legislature used the same language in the Appropriation Acts for fiscal years 1970-71 and 1972-73. Before 1970-71, the Legislature employed different language toprovide for patient or student assistance. For example, the language ofthe Appropriation Act for fiscal 1968-69 **(Acts 1967,**  60th Leg., R.S., ch. 784, p.2097 at 2137) is: Sec. 18. Patient or Student Employment. Subject

to the approval and rules and regulations ofthe governing boards, patients or students in any State Hospital or Special School under thejurisdiction of the board, who are assisting in the operation of the institutions, may be paid out of any funds available to the respective institutions an amount notto exceed Two Dollars ($2) **per** week for each working student or patient. (Emphasis added) Thus, before fiscal 1970-71, patient-workers were paid a “compensation” for “Patient or Student employment” instead ofa gratuity. Patientworkers were paid this “compensation” for “Patient or Student employment” instead ofa gratuity. Patient-workers were paid this “compensation” beginning with fiscal. 1960-61 (the first time the Legislature appropriated money for patient-workers) and again infiscal years 1962-63, 1964-65, 1966-67, and 1968-69. The switch from a compensation to a “gratuity” is evidence that the Legislature intended totreat patient-workers as non-employees by removing all doubt about their non-employee status.

p. 2266The Honorable Kenneth D. Gaver, page 8 (H-502)

We note that article II, section 3d ofthe current Appropriations Act limits only the amount ofthegratuity apatient-worker can receive. That section does not, in our opinion, affect the status ofpatient-workers as

“employees’
.’ for FLSA purposes ofwage and overtime compensation, nor limit their compensation under FLEA standards to $5 per week. Section 3dis a clear expression of the legislative intent oftreating patient-workers as non-employees and supports the conclusion that although Souder brings them within FLSA for wage and hour purposes, they do not thereby become “employees ” for the purpose of statutory fringe benefits of state employment. Furthermore, to the extent that the fringe benefit statutes are ambiguous we believe they are subject to the rule of statutory construction stated inState v. Arkansas Dock and Channel Co., 365 S.W. 2d 220, 224 (Tex. Civ. App., -- San Antonio 1963, err. refd. )that:

Where anAct of the Legislature is ambiguous, the Courts are inclined to follow the administrative construction ofthe Act over a long period oftime by the officials charged with its administration. The Department ofMental Health and Mental Retardation has consistently taken the position that nopatients of state hospitals or students of state schools are state employees for fringe benefits purposes. Inaddition, there has been a long standing custom oftreating Texas patient-workers as non-employees. The authority ofthe State toutilize patient labor has been judicially recognized since Clough v. Worsham, 74S.W. 350 (Tex. Ct. App. --1903, writ refd). Thus, given the expression oflegislative intent in several appropriations acts and the long standing administrative construction, it is our opinion that patient-workers engaged in institution-maintaining labor are not employees ofthe State for fringe benefits purposes. For reasons outlined above in response toyour first question, we also answer your second question negatively. Patient-workers engaged in work activities ofaSheltered Workshop or Work Activities Center that are not institutionmaintaining labor are not state employees for fringe benefit purposes even though they may be considered as employees for

p. 2267The Honorable Kenneth D. Gaver, page 9 (H- 502)

purposes ofthe FISA and the regulations promulgated thereunder. 29 C. F.R. 5525 (Employment ofHandicapped Clients inSheltered Workshops). The **answer** toyour final questionis that the necessary specific appropriations for the payment ofwages and overtime pay to FLSAcovered patient-workers are available toMHMR from a number of appropriated items in the current Appropriations Act. Article 3. section 44 ofthe Texas Constitution provides in part that: The Legislature shall.

. . [not] grant. by

appropriation or otherwise, **any** amount of money out ofthe Treasury ofthe State, to any individual, on a claim, real or pretended, when the same shall nothave been provided for bypre-existing law; nor employ anyone in the name ofthe State, unless authorized by preexisting law. The pre-existing law for payment ofminimum wages and overtime pay to FLSA-covered patient-workers is supplied by the FLSA. See Attorney General Cpinion M-341 (1969). Section 6 ofarticle 8ofthe Texas Constitution provides that nomoney shall be drawn from the Treasury butin pursuance of specific appropriations made by law. However, in National Biscuit Co. v. State, 135S.W.2d 687, 693 (Tex.Sup. 1940). the Court stated:

. . . , one ofthe provisions ofSection 6 of Article 8of our Constitution requires all appropriations ofmoney out ofthe State Treasury to be specific. Itis settled that noparticular form of words is required to render an appropriation specific within the meaning ofthe constitutional provision under discussion. Itis sufficient if the Legislature authorizes the expenditure by law, and specifies the purpose for which the appropriation is made

. . .

p. 2268The Honorable Kenneth D. Gaver, page 10 (H-502)

The necessary items of specific appropriation for payment of wages and overtime pay topatient-workers are available in a number of **cate** gpries of the current Appropriation Act. See, for example, the various items authorizing “unclassified personnel-r “temporary labor. ” In addition, the special provisions of article IIofthe Appropriation **Act** empower the h4HMR Board to allocate funds from a number ofvery broad categories, including the following: unexpended balances, gifts, donations and federal grants, [Acts 1973. 63rd Leg., ch. 659, at p. 1880, sections 2(c)(d)] and line item 13 for the Central Office, Departments ofMental Health and Mental Retardation, (Acts 1973, 63rd Leg. , ch. 659, atp. 1827). The special provisions ofarticle IIalso provide for the hiring of hourly workers to be paid out ofthe appropriations for salaries of classified positions:

Itis further provided that appropriations for salaries of classified positions may beused to pay thewages ofhourly workers when theutilization of such personnel is in the best interest ofan economical and efficient program. [Acts 1973, 63rd Leg., ch. 659, at p. 1879, ,section 2(a)(4)]. Thus, depending onadministrative considerations and the fiscal condition of MHMR. sufficient flexibility has been provided by the Legislature for the commitment ofMHMR funds tomeet FLSA minimum wage and overtime pay monetary obligations. Since, we conclude that such patient-workers are not “state employees ” for fringe benefit purposes we do notneed to discuss the source of funding for any such state benefits. SUMMARY

The FLSA does not preempt Texas law in the area of establishing entitlements to the rights, privileges and

“fringe ” benefits of state employment. Patient-workers ofa state hospital or residents ofa state school for the

p. 2269The Honorable Kenneth D. Gaver, page 11 (H-502)

mentally retarded whether performing institutionmaintaining labor or engaged in activities ofa sheltered workshop or awork activities center are not state “employees, ” for fringe benefit purposes. The necessary specific appropriations for the payment ofwages and overtime pay to patient-workers covered by the FLSA are available to MHMR from a number of appropriated items in the current 1974-1975 Appropriations Act. Very truly yours,

Attorney General of Texas APPROVED: 

# - . ._ \ he%&

DAVID M. KENDALL, First Assistant

C. ROBERT HEATH. Chairman Opinion Committee
.

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