April 20,200O

The Honorable Michael P. Fleming Harris County Attorney 1019 Congress, 15th Floor Houston, Texas 77002-l 700 Opinion No. JC-0210

Re: Whether amember ofthe board ofmanagers of a hospital district must abstain in matters involving prevailing wage disputes under chapter 2258 ofthe Government Code (RQ-0148-JC)

Dear Mr. Fleming:

You ask whether amember ofthe Harris County Hospital District’s Board ofManagers (the “Board’) who is President ofthe Harris County AFL-CIO Council (the “Council”) should abstain t?om voting on alleged violations of the prevailing wage law, TEX.GOV’TCODEANN.ch. 2258 (Vernon 2000). Chapter 171 ofthe Local Government Code does not apply to the Board member’s participation in these matters and therefore does not require him to abstain from voting on alleged violations of the prevailing wage law.

The Harris County Hospital District (the “District”), a countywide hospital district established pursuant to chapter 281 ofthe Health and Safety Code, is apolitical subdivision. See TEX.HEALTH&SAFETYCODEANN. 5281,02l(c)(Vemon 1992);Tex.Att’yGen. Qp.No.JM-1006 (1989) at6. Your question relates tocomplaints tothe Board about violations ofthe prevailing wage act, TEX.GOV’TCODEANN.ch. 2258 (Vernon 2000), which entitles workers employed on apublic work by or on behalf of the state or a political subdivision to receive “not less that the general prevailing wage rate ofper diem wages for work of a similar character in the locality in which the work is performed.” Id. 5 2258.021(a). The purpose of this statute is (1) to inform the bidder/contractor ofthe wages he must pay his employees engaged inwork onpublic contracts, and (2) to protect the workman from working at rates below the prevailing wages in the locality. Cullipher v. Weather-by-Godbe Constr. Co., Inc., 570 S.W.2d 161,164 (Tex. Civ. App.-Texarkana 1978, writ ref d n.r.e.). The public body awarding the contract for apublic work determines the general prevailing wage rate to be paid by the contractor and subcontractors and includes the wage rates in the call forbids and the contract itself. TEX.GOV’TCODEANN.$92258.022; .023 (Vernon 2000). The contractor who is awarded the contract and its subcontractors must pay not less than the prevailing wage determined by the public body to the workers itemploys in executing the contract. Contractors and subcontractors must keep records ofwages paid each employee, and these are open for inspection by officers and agents ofthe public body. Id. $2258.024.The Honorable Michael P. Fleming - Page 2 (JC-0210)

A contractor or subcontractor that violates the prevailing wage requirement must pay the public body amonetary penalty of $60 for each worker employed for each calendar day or part of

acalendar day, and the money collected for this purpose is used to pay the costs of administering the law. Id. 52258.023. The public body shall “take cognizance” of claims that the contract has been violated. Id. 52258.05 1. On receiving information, including acomplaint by aworker, about

an alleged violation ofthe prevailing wage law, the public body “shall make aninitial determination

as to whether good cause exists to believe that the violation occurred,” and shall give written notification to the contractor or subcontractor and any affected worker of its initial determination. Id. 5 2258.052. The public body must retain any amount due under the contract pending a final determination ofthe violation and shall use these amounts topay the worker the difference between the amount the worker received in wages and the amount he should have received atthe prevailing wage rate. Id. $9 2258.052, ,056.

The contractor or subcontractor and an affected employee have until the 15th day after the public body makes its initial “good cause” determination toresolve any issues relating tothe alleged violation of the prevailing wage law. Id. 5 2258.053. If they are unable to resolve an issue by agreement, including apenalty owed to apublic body or an affected worker, the issue “shall be submitted to binding arbitration.” Id. The public body is not aparty to the arbitration. Id. The arbitrator’s decision and award is final and binding and may be enforced in any court ofcompetent jurisdiction. Id. §2258.055.

You state that allegations have been made that the prevailing wage law has been violated at

some District construction sites, and attorneys for some of the contractors have asserted that the Board member who is president of the Council has apotential conflict of interest with respect to addressing these complaints. Letter from Honorable Michael P.Fleming, Harris County Attorney, to Honorable John Comyn, Attorney General of Texas (Nov. 15, 1999) (on tile with Opinion Committee) [hereinafter “Fleming Letter”]. You ask whether the Board member has aconflict of interest under chapter 171of the Local Government Code so that he must abstain from voting on matters involving prevailing wage complaints under chapter 2258 ofthe Government Code in the following cases:

1. The local labor union is affiliated with the Harris County AFL-CIO Council and has tiled acomplaint on behalf of an affected worker and ispursuing the complaint onthe worker’s behalfl.]

2. The local labor union has tiled a complaint on behalf of an affected worker and ispursuing the complaint onthe worker’s behalf, but the union is not affiliated with the Harris County AFL-CIO Council[.]

Id. at 2.The Honorable Michael P. Fleming - Page 3 (JC-0210)

Chapter 171ofthe Local Government Code regulates the manner inwhich local government officials may transact business with the public agencies they serve. DaNas County Flood Control Dist. No. I v. Cross, 815 S.W.2d 271, 277 (Tex. App.-Dallas 1991, writ denied). Members ofthe Hospital District Board are “local public officials” within this statute. TEX.LOC.GOV’TCODEANN. 517l.OOl(l)(Vemon 1999) (“1ocalpublicofticial”includes amemberofthegovemingbodyofany district). Under this law, a local public official with a substantial interest in abusiness entity is prohibited from participating in avote or decision affecting the business entity if it is reasonably foreseeable that the action would economically benefit the business entity. Id. 5 171.004. A “business entity” “means a sole proprietorship, partnership, firm, corporation, holding company, joint-stock company, receivership, trust, or any other entity recognized by law.” Zd.5 171.001(2).

Our threshold question is whether the Board member who is president of the Council has

a“substantial interest” in abusiness entity affected by decisions ofthe Board. The Council is “the umbrella organization for unions in the Harris County area.” Brief from Richard Levy, Deats & Levy, P.C., to Honorable John Comyn, Attorney General ofTexas, at 1(Jan. 19,200O) (on file with Opinion Committee) [hereinafter “Levy Brief’]. It is composed of delegates from local unions affiliated with the AFL-CIO or with certain other AFL-CIO-affiliated entities noted in its constitution. See Fleming Letter, Exhibit A, Harris County AFL-CIO Council Constitution, Art. II [hereinafter “Council Constitution”]. An executive board, apresident, and other officers areelected from among the delegates. Id. It is supported by aper capita tax assessed against the member unions. Levy Brief, supra, at 2. You state that his union receives membership fees from some of the affiliated local unions involved in the prevailing wage dispute. Fleming Letter, supra, at 2.

We will assume for purposes ofthis opinion that the Council is a “business entity” within chapter 171oftheLocalGovernment Code. S~~TEX.LOC.GOV’TCODEANN. 5 171.001(2) (Vernon 1999) (“business entity” includes “any other entity recognized by law”). The Board member will have asubstantial interest in the Council ifhe has anownership interest that exceeds the percentage of stock or the dollar amount stated in the statute or if “funds received by the person from the business entity exceed 10 percent of the person’s gross income for the previous year.” Id. 5 171.002(a). See also id. 5 171.002(c) (“substantial interest” ofrelative within the first degree of consanguinity or afftnity is attributed to the local officer). The Council isnot subject to ownership interests within section 171.002(a) ofthe Local Government Code, and the Board member does not receive any compensation for serving aspresident ofthe Council. See Fleming Letter, supra, at2; Levy Brief, supra, at 2; Council Constitution, Art. XI (sets salary of Secretary Treasurer and provides that delegates representing the Council will be paid for lost time and receive per diem at
arate of $25 when out of town and $35 when out of state). Based on the information you have provided, we conclude that the Board member in question does not have a“substantial interest” in the Council for purposes of chapter 171 ofthe Local Government Code.

You note, however, that apublic officer may indirectly receive compensation from abusiness entity, citing Cross, 815 S.W.2d 271, and inquire “whether it may still appear that the Board Member isindirectly receiving financial benefits from voting onprevailing wage disputes.” FlemingThe Honorable Michael P. Fleming - Page 4 (JC-0210)

Letter, supra, at 3. You state that the Board member in question has been actively monitoring District construction sites to ensure compliance with the Prevailing Wage Act. Id.

Cross addressed aconflict ofinterest under chapter 171that arose when the Dallas County Flood Control Dist. No. 1bought an easement in land from the district’s president. The president recused himself asrequired by chapter 171ofthe Local Government Code, but two members ofthe district board who voted for the purchase had indirectly received large cash payments from the president. Cross, 815 S.W.2d at 280-82. Although the president did not make these payments directly to the other two officers, the evidence showed that he had “funneled” the money through third parties to the other officers. Id. The court determined that the local public officers had a substantial interest in the business entity because the evidence showed that the requisite amount of funds moved from the entity to the officers. See Cross v.Dallas County Flood Control Dist. No. I, 773 S.W.2d 49, 55 (Tex. App.-Dallas 1989), appeal after remand, Dallas County Flood Control Dist. No. I v. Cross, 815 S.W.2d 271 (Tex. App.-Dallas 1991, writ denied) (considering summary judgment evidence). Your request letter does not allege that the Council has transferred, directly or indirectly, any money to the Board member in question. Based on the information you have provided us, the Board member has no financial interest inthe Council and chapter 171 ofthe Local Government Code does not prevent him from participating in “good cause” determinations of prevailing wage complaints under chapter 2258 of the Government Code. Chapter 171 does not prevent the Board member from participating in and voting on a “good cause” determination, regardless ofwhether the complaining labor union is affiliated with the Council.The Honorable Michael P. Fleming - Page 5 (JC-0210)

SUMMARY

A member of the Harris County Hospital District Board of Managers who isthe unpaid President ofthe Harris County AFL-CIO Council does not have a “substantial interest” in the Council for purposes ofchapter 171ofthe Local Government Code. Chapter 171 therefore does not bar him from participating in the Board’s “good

cause” determinations ofcomplaints under the Prevailing Wage Act, TEX. GOV’T CODE ANN., ch. 2258 (Vernon 2000), regardless of whether the complaining labor union is affiliated with the Harris County AFL-CIO Council.

Attorney General ofTexas

ANDY TAYLOR First Assistant Attorney General

CLARK RENT ERVIN Deputy Attorney General -General Counsel

ELIZABETH ROBINSON Chair, Opinion Committee

Susan L. Garrison Assistant Attorney General -Opinion Committee