March 23, 1989 

Mr. Dennis R. Jones 

Commissioner 

Texas Department of Mental 

Health and Mental Retardation 

P. 0. Box 12668 

Austin, Texas 78711-2668 

Opinion No. JR-1031 

Re: Authority of the Department of Mental Health 

and Mental Retardation to 

impose certain requirements 

on contracts for communitybased mental health and 

mental retardation services 

(RQ-1599) 

Dear Mr. Jones: 

You inform us that the Texas Department of Mental 

Health and Mental Retardation enters into numerous contracts 

for community-based mental health and mental retardation 

services pursuant to section 2.13 of article 5547-202, 

V.T.C.S. This provision states as follows: 

The Department may cooperate, negotiate and 

contract with local agencies, hospitals, 

private organizations and foundations, 

community centers, physicians and persons to 

plan, develop and provide community-based 

mental health and mental retardation services. 

V.T.C.S. art. 5547-202, !j 2.13. 

The department is considering a policy which would prohibit its facilities from entering into such contracts with 

former employees of the department for a specific period of 

time.1 The *'facilities*' of the department consist of the 

central office of the department and the state hospitals, 

state schools, and other institutions set out in section 

1. You refer to ~*employees,~* but, for purposes of this 

opinion, we presume that *'employees" includes both employees 

and officers. 

p. 5327 
Mr. Dennis R. Jones - page 2 (JM-1031) 

2.01 of article 5547-202, V.T.C.S. The department is also 

considering prohibiting community mental health and mental 

retardation centers from entering into contracts for 

services with their former employees for a specific period 

of time. You first ask the following question: 

Does the Texas Department of Mental Health 

and Mental Retardation have the authority to 

prohibit its facilities from entering into 

contracts for community-based mental health 

and mental retardation services with former 

employees, their spouses, or business entities in which the former employees or their 

spouses have a substantial financial interest 

for a specific period after the employees 

have terminated employment with the Department? 

What the department contemplates is a restriction on 

its own authority to contract under section 2.13 that would 

prohibit contracts in which former employees or their 

spouses have a substantial financial interest. It is not a 

proposal to restrict former employees from working for a 

third party that the department regulates. The contemplated 

policy is therefore unlike the post-employment restrictions 

of the public Utility Regulatory Act, which bar former employees from working for certain public utilities or from 

representing certain business entities before the commission 

or a court. See V.T.C.S. art. 1446c, 5 6(i), (j). 

We find no provision requiring that contracts entered 

into under section 2.13 be awarded on competitive bids. The 

department's authority to cooperate and to negotiate with 

various entities for community-based services is inconsistent with a competitive bidding requirement. See aenerallv 

Attorney General Opinion MW-296 (1981) (city may not negotiate contract terms with lowest bidder when statute requires competitive bidding); Attorney General Opinion MW-55 

(1979) (discussing department's authority under section 2.13 

of article 5547-202). Thus, we need not consider whether 

the proposed restriction would constitute an impermissible 

restriction on the competition required by a competitive 

biddina statute. See Texas Hiahwav Comm*n v. Texas Ass'n of 

Steel imvorters. Inc 372 S.W.2d 525 (Tex. 1963); 

v. Bell, 240 S.W.2d '416 (Tex. Civ. App. 

Sterrett 

- Dallas 1951, no 

writ): Attorney General Opinions MW-440 (1982); MW-139 

(1980); H-1219 (1978); H-1086, H-972 (1977). 

The Board of Mental Health and Mental Retardation has 

the following rule-making authority: 

P. 5328 
Mr. Dennis R. Jones - Page 3 (JM-1031) 

The Board shall formulate the rules and the 

basic and general policies, consistent with 

the purposes, policies, principles, and 

standards stated in this Act, to guide the 

Department in administering this Act. 

V.T.C.S. art. 5547-202, 5 2.11(a). 

The purpose of the Mental Health and Mental Retardation 

Act is to "provide for the effective administration and coordination of mental health services at the state and local 

levels." V.T.C.S. art. 5547-201, 5 1.01(a). The state's 

goal in adopting the act is to provide a comprehensive range 

of services for mentally ill and mentally retarded persons 

"who are in need of publicly supported care, treatment, or 

habilitation." Id. !j 1.01(b). It is also a purpose of the 

act to provide for a continuum of services, which is to 

include %ommunity services provided by the department and 

other entities through contracts with the department.** Id. 

s 1.01(c). 

The proposed policy appears designed to prevent former 

employees of the department from using their contacts with 

the department and an insider's knowledge of its procedures 

to receive favored treatment in the award of contracts under 

section 2.13. If the board determines that adopting such a 

policy would contribute to the effective administration of 

mental health services and would otherwise be consistent 

with the purposes and policies of the Act, we believe it 

could adopt a reasonable policy or rule to that effect, 

In Attorney General Opinion MB-540 (1982), this office 

determined that the Texas Employment Commission had authority to adopt a nepotism policy stricter than that set out in 

article 5996a, V.T.C.S., the nepotism statute. The opinion 

stated as follows: 

The proposed nepotism policy . . . merely 

prescribes the duties and limits the powers 

of those persons to whom the commission has 

delegated authority to hire, promote, or 

approve the hiring or promotion of other 

persons. 

Attorney General Opinion MW-540 (1982), at 2. 

In Attorney General Opinion JR-188 (1984) we considered 

whether the Texas Department of Human Resources could prohibit its child protective service workers from performing 

court ordered social studies on their own time. We 

P. 5329 
Mr. Dennis R. Jones - Page 4 (JM-1031) 

concluded that the department could adopt a rule prohibiting 

such dual employment when a conflict of interest resulted 

from employees' competition with the department for the same 

appointments and fees. 

Thus, prior rulings of this office demonstrate that a 

state agency may adopt policies designed to prevent favoritism in hiring decisions and conflicts of interest between 

the agency and its employees. The Board of Mental Health 

and Mental Retardation may adopt restrictions necessary to 

prevent favoritism of former employees in contracting decisions and to ensure that while an employee is on the staff 

he will serve the department's interests, rather than his 

own anticipated interest in a future contract with the department. The duration of the restriction, the definition 

of "substantial financial interest," and other provisions of 

the rule must be reasonable in light of all the facts and 

circumstances. 

Your second question is as follows: 

Does the Texas Department of Mental Health 

and Mental Retardation have the authority to 

require by contract community centers established pursuant to Article 5547-203, 

V.T.C.S., to implement a policy similar to 

that in question number 1, above, regarding 

contracting for services with former employees of community centers? 

Article 5547-203, V.T.C.S., authorizes 'a county, a 

city, a hospital district, a school district, or any 

organizational combination of two or more of these, to 

establish and operate a community center for mental health 

and mental retardation services. Such community centers 

formerly received grants-in-aid allocated by the Department 

of Mental Health and Mental Retardation from appropriated 

funds. See, e.a, Attorney General Opinions JM-424 (1986); 

JM-12 (1983); H-241 (1974); M-314 (1968) ; C-584 (1966). In 

1985 the legislature replaced the authorization for grantsin-aid for community centers with provisions for financing 

community-based services through contracts with community 

centers and other local providers. Acts 1985, 69th Leg., 

ch. 496, at 4155; Attorney General Opinion JM-424 (1986). 

These provisions are set out in article 5547-204, V.T.C.S. 

The department "shall insure II that specified communitybased mental health and mental retardation services are 

available in each service area and shall identify and 

contract with one or more designated providers for each 

P. 5330 
4 

Mr. Dennis R. Jones - Page 5 (JM-1031) 

local service area. V.T.C.S. art. 5547-204, 5 4.03(a), (b). 

Preference in identifying providers is to be given to a 

community center. & 5 4.03(b). 

Section 4.01(a) provides as follows: 

me Devartment shall vrescribe such rules. 

g 'stent 

with the Constitution and laws of this State, 

a s * n t to 

Dure adeouate vrovision of communitv-based 

menta 1 health and mental retardation sex-vi ces 

bv devartmental facilitv outreach vroarams or 

Y communitv centers and other vroviders 

receivina contract funds as desianated nroyiders vursuant to Se tion 4.03 

Each designated przvider 

of this Act. 

contract shall 

contain a provision authorizing the Department to have unrestricted access to all 

facilities, records, data, and other information under the control of the designated 

provider or subcontractor of the designated 

provider as necessary to enable the Department to audit, monitor, and review all 

financial and programmatic activities 

and services associated with the contract. 

(Emphasis added.) 

V.T.C.S. art. 5547-204, 5 4.01(a). 

This provision gives the department broad authority to 

make rules applicable to community centers that receive 

contract funds under section 4.03. The same rules that 

apply to community centers also apply to the provision of 

community-based services by the department's own facilities. 

See also V.T.C.S. art. 5547-204, s 4.03(c). 

centers and other providers 

Community 

are moreover fully accountable 

to the department for the use of the funds they receive 

under contract. 

The department may adopt rules that are "necessary and 

appropriate to insure adequate provision of community-based 

mental health and mental retardation services" by community 

centers receiving contract funds. If the department 

reasonably determines that it would be necessary and 

appropriate under the statutory standard to adopt a rule 

prohibiting the community centers receiving state funds from 

making contracts for community-based services in which 

former employees or their spouses have a substantial 

interest, the department could adopt such a rule. The rule 

P. 5331 
Mr. Dennis R. Jones - Page 6 (JM-1031) 

itself, the duration of the restriction, the definition of 

"substantial financial interest," and any other provisions 

of the rule must be reasonable in light of the surrounding 

facts and circumstances. 

SUMMARY 

The Texas Department of Mental Health and 

Mental Retardation has authority under section 2.11(a) of article 5547-202, V.T.C.S., 

to adopt reasonable rules prohibiting its 

facilities from entering into contracts for 

community-based mental health and mental 

retardation services with former officers and 

employees, their spouses, and business 

entities in which the former employees or 

their spouses have a substantial financial 

interest for a specific period after the 

employees have terminated employment with the 

department. The department also has 

authority to adopt such rules for community 

centers established under article 5547-203, 

V.T.C.S., that receive contract funds from 

the department under section 4.03 of article 

5547-204. V.T.C.S. 

JIM MATTOX 

Attorney General of Texas 

MARYKELLER 

First Assistant Attorney General 

Lou MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Susan L. Garrison 

Assistant Attorney General 

p. 5332