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DAN MORALES AlToRN* OENLRAL April 22,199l

Honorable Bruce Gibson Chairman Government Organization Texas House ofRepresentatives P.0. Box2910 Austin, Texas 78768-2910 Opinion No. DM-18 Re: Whether an individual who is an audiologist member of the Board of Examiners in the Fitting and Dispensing of Hearing Aids may be employed by a retail hearing aid company (RQ-2180)

Dear Representative Gibson: You have requested our opinion as to whether an individual who serves as the audiologist member of the Board ofExaminers in the Fitting and Dispensing of Hearing Aids may be employed by aretail hearing aid company. Article 4566-1.02, V.T.C.S., creates the board and provides that its nine members must have the following qualifications:

(1) Five of such members shall possess the necessary qualifications to fit and dispense hearing aids in this state and have been residents of this state actually engaged in fitting and dispensing hearing aids for at least five years immediately preceding their appointment. No more than two of such five members shall be employed by, franchised by, or associated exclusively with the same hearing aid manufacturer; (2) Two Board members must be members of the general public. Aperson iseligible for appointment asapublic member if the person and the person’s spouse are not licensed by an occupational regulatory agency in the field of health care; are not employed by and do not participate in the management of a business entity or other organization that provides health-care services or that sells, manufactures, or distributes health-care

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supplies or equipment; and do not own, control, or have, directly or indirectly, an interest in a business entity or other organization that provides health-care services or that sells, manufactures, or distributes health-care supplies or equipment; (3) One of such members shall be a citizen of the United States and a resident of this state for a period of at least two years immediately preceding his appointment, shall be an active practicing physician or surgeon duly licensed to practice in this state by the Texas State Board of Medical Examiners, and specialize in the practice ofotolaryngology. Such member shall not have a financial interest in a hearing aid manufacturing company or awholesale or retail hearing aid company; and (4) One of such members shall be a citizen of the United States and a resident of this state for a period of at least two years immediately preceding his appointment and shall be an active practicing audiologist. Such member shall not have a financial interest in a hearing aid manufacturing company or a wholesale orretail hearing aid company.
Subsection (a)(4) prohibits the audiologist member from having “afinancial interest in ahearing aid manufacturing company or awholesale or retail hearing aid company.” Under the facts you present, the audiologist member is an employee of such a company. You ask whether an employee. has a “financial interest” in his company for purposes ofsubsection (a)(4). Article 4566-1.02 does not define “financial interest.” Black’s Law Dictionary, however, defines “financial interest” as “an interest equated with money or its equivalent.” BLACK’S LAWDICTIONARY568 (5th ed. 1979). Article 6252:9b, V.T.C.S., defines “substantial interest” in a business entity to include any individual who is an employee of the business entity. Another statute, section 171.002 of the Local Government Code, declares that a person has a substantial interest in a business entity if, inter ufia, “funds received by the person from the business entity exceed 10 percent of the person’s gross income.” For most “employees,” their

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income from that employment would ordinarily exceed ten percent of their gross income for aparticular year. Furthermore, this office has long held that mere employment is sufficient to trigger the common lawprohibition against conflicts ofinterest on the part ofpublic officials. Mevers v.Walker, 276 S.W. 305 (Tex. Civ. App.--Eastland 1925,no writ), stands for the proposition that

[i]fapublic official directly or indirectly has apecuniary interest in acontract, no matter how honest he may be, and although he may not be influenced bythe interest, such acontract somade is violative ofthe spirit and letter ofour law, and isagainst public policy. 276 S.W. at 307. In Attorney General Opinion H-916 (1976), this office said that a school district official should not contract with a company that employs a member of the district’s board oftrustees in a managerial capacity, even though the trustee derives no direct financial benefit from the contract. The opinion relied on a series ofcourt decisions from other jurisdictions which had held that mere employment issufficient to invoke the common law prohibition against conflict ofinterest. See, e.g.,Edward E. Gillen Co.
.CtvofMilwaukee 183N.W. 679,681 (Wis. 1921); Miller v. Citv of Martinez. 82i2dr519. 523 (Cal. D;st. Ct. App. 1938); Stockton Plumbing & St&y Co. v.Wheeler, 229P. 1020, 1024(Cal. Dist. Ct.App. 1924); Peoule exrel.Pearsall v. m, 145N.E. 344,345-46 (Ill. 1924). Likewise, in Attorney General Opinion JM-171 (1984), this office, “[rlelying on Attorney General Opinion H-916,”concluded

that the conflict of interest prohibition is triggered when a member ofthe governing body of apolitical subdivision
...isan officer or employee of a firm seeking to do business with that political subdivision. (Emphasis added.) Finally, in Attorney General Opinion JM-884 (1988), this office said that the common lawprohibition against conflict of interest. prevents the Texas Commission

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for the Deaf from contracting with a local council for the deaf if a commission member serves the local council as apaid employee or in a decision-making capacity that authorizes him to contract for the council. It has been suggested that the term “financial interest” was not meant to include employment, because subsection (a)(2) provides that the lay members ofthe board may neither be employed bynor “own, control, or have, directly or indirectly, an interest in a business entity or other organization that provides health-care services or that sells, manufactures, or distributes health-care supplies or equipment.” According to this argument, the statute recognizes a distinction between employment and having an interest in a company, and the failure to include a prohibition against employment in subsection (a)(4) indicates that the legislature did not intend that “financial interest” be construed as encompassing employment. We disagree with this argument. A more reasonable approach isto view the prohibitions listed in subsection (a)(2) as overlapping rather than discrete. Clearly, some of the specific prohibitions in subsection (a)(2) are also included in the more general ones. We do not believe it can be reasonably argued that employment in a company would not constitute at least an indirect interest in it,but subsection (a)(2) sets out separately itsprohibitions against these connections. Moreover, subsection (a)(2) was drafted at a different time than subsections (a)(3) and (a)(4). Before revision, the statute provided that neither the lay member, the physician, nor the audiologist could have a “financial interest” in a wholesale hearing aid company (the audiologist and physician members could not have a financial interest in a retail hearing aid company either). A 1981amendment ofthe statute changed subsection (a)(2) by adding another lay member, broadening the prohibition against industry affiliation by extending it to all health-care related businesses, and specifying various types of forbidden connections. Acts 1981, 67th Leg., ch. 774, at 2903, 9 1,eff. Sept. 1, 1981. Subsections (a)(3) and (a)(4) remained the same. The amendment wasclearly intended to strengthen the provisions against conflict ofinterest (a specific conflict ofinterest provision was also added as section (g)); it would be ironic ifthe addition of language to accomplish this purpose were used asevidence for allowing additional industry affiliation under subsection (a)(4). Furthermore, construction of “financial interest” to include employment seems necessary to preserve the legislature’s intent in carefully structuring the

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composition of the board. The statute lays out a specific structure for the board, balancing the need for expertise in the field against the need for independence from the industry as a whole and impartiality toward individual entities within it. Thus, subsection (a)( 1),which presupposes that members within it will be affiliated with the hearing aid industry, provides that no more than two of such members may be employed or associated exclusively with the same hearing aid manufacturer. It could destroy this scheme ifmembers within other sections were also permitted to have such industry ties. In such a scenario, the audiologist member could be affiliated with the same hearing aid manufacturer as two of the subsection (a)(l) members, defeating the purpose of the subsection (a)(l) provision. This cannot have been the intent of the legislature. Rather, the legislature seems to have intended that only subsection (a)( 1)members, the fitters and dispensers of hearing aids, who inevitably have ties to the manufacturers and retailers of hearing aids, be industry-affiliated. An audiologist meeting the requirements of subsection (a)(l), and employed by ahearing aid company, may be amember ofthe board, but only in asubsection (a)( 1)position. On the basis of the prior decisions of this office ‘which construe the term
“pecuniary interest” for purposes ofcommon law conflict ofinterest, aswell aswhat we deem to be the intent of the legislature in enacting article 4566-1.02, we conclude that “financial interest” as used in that statute encompasses employment. As aresult, itisour opinion that an individual who serves asthe audiologist member ofthe Board ofExaminers in the Fitting and Dispensing ofHearing Aids may not be employed by a hearing aid manufacturing company or awholesale or retail hearing aid company. SUMMARY

An individual who serves .asthe audiologist member of the Board of Examiners in the Fitting and Dispensing of Hearing

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Aids may not be employed by a hearing aid manufacturing company or awholesale or retail hearing aid company.

DAN MORALES Attorney General ofTexas WILLPRYOR First Assistant Attorney General MARY KELLER Executive Assistant Attorney General JUDGE ZOLLIE STEAKLEY (Ret.) Special Assistant Attorney General RENEA HICKS Special Assistant Attorney General MADELEINE B.JOHNSON Chair, Opinion Committee Prepared byRick Gilpin &Faith Steinberg Assistant Attorneys General

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