# The Attorney General of Texas
December 22, 1978 JOHNL.HILL AttorneyGeneral
Honorable Joseph N.Murphy, Jr. Executive Director Employees Retirement System ofTexas P. 0. Box12337,Capitol Station Austin, Texas 78711 Opinion No.H- 1203 Re: Whether the state or a political subdivision may establish a special program to make payments to an employee on account ofsickness. Deer Mr. Murphy: You ask: “May the State or any of its political subdivisions establish a special, separate, program to make payments to an employee on account of sickness, such payments not being e continuation of wages?” Your question pertains to the relationship of sick pay to “wages” as that term isused in the Social Security Act and as it has been interpreted by the Secretary of the Department of Health, Education, and Welfare. The inclusion or exclusion of amounts paid public employees as “wages” determines the contribution to be made by public employers end employees, and the rate of benefits to be received ,bythe employee. The Social Security Act defines wages of public employees to exclude sick pay as follows:

[Tlhe term “wages” means remuneration paid

... for employment

... except that

... such term shall not include -

. . . . fb) The amount of any payment
.. . made to
... en employee

...under aplan or system established by an employer which makes provision for his employees generally

... on account of

. .. sickness or accident disability.

... 42U.S.C. S409. The Secretary of Health, Education, and Welfare has interpreted this exclusion as follows:

P- 5129Honorable Joseph N.Murphy, Jr. - Page 2 (H-1303)
[Playments made by a governmental entity to en employee on sick leave are excluded from “wages” only if there is legal authority for the employer to make payments specifically on account of sickness es distinguished from authorization to merely continue salary payments during periods ofabsence due to illness. SSR 72-56 (19721. (Compere the Commissioners of Internal Revenue’s Rev. Rul. 65-275 (19651, applicable to exclusion of sick pay in <private sector). The Secretary’s interpretation of the sick pay exclusion in this manner was upheld in State of New Mexico v. Weinberger, 517P.2d 989 (10th Cir. 1975),cert den., 423 U.S. 1051(1976). The court interpreted the Secretary’s interpretation and clarified the matter as follows:

&at993. [Tlo be excluded from “wages”, sick leave payments mustbe

paid solely s account g sickness. Such payments by a State - as opposed to e mere continuation of wages during periods of absence due to illness - would allegedly amount to an improper “donation” of State funds absent express w authority for the State to appropriate funds for such use. . ..

. . . . If

.. . the State here has no authority to make “payments onaccount of sickness” such es would qualify to be excluded from “wages” under the Act, wehold thet the Secretary has the nuthority to bar the exclusion from “wages” of such payments irregerdless of how they ere denominated or treated under the State’s “plan.” (Footnote omitted, emphasis inoriginal). With this clarification of the context inwhich your question isposed, welook to Texas law on the subject. Pertinent provisions of article 3 of the Texas Constitution are as follows:

Sec. 44. The Legislature shall provide by law for the compensation of all officers, servants, agents and public contractors, not provided for in this Constitution, but shall not grant extra compensation to any officer, agent, servant, or public contractors, after such public service shall have been performed or contract entered into

... :nor grant, by appropriation or otherwise, any amount of money out of the Treasury of the State, to any individual, on a claim, real or

P- 5130Honorable Joseph N.Murphy, Jr. - Page 3 (H-13031
pretended, when the same shell not have been provided for by pre-existing law.

... Sec. 51. The Legislature shall have no power to make eny grant or authorize the making of any grant of public moneys to any individual, association of individuals, municipal or other corporations whatsoever.

... Sec. 52. inhe Legislature shall have nopower to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever.

... Sec. 53. The Legislature shall have nopower to grant, or to authorize any county or municipal authority to grant, any extra compensation, fee or allowance to e public officer, agent, servant or contractor, afler service has been rendered, or a contract has been entered into, and performed in whole or in pert; nor pay, nor authorize the payment of, any claim created against any county or municipality of the State, under any agreement or contract, made without authority oflaw. It is well established that these constitutional provisions do not prohibit the payment ofbenefits to employees under the terms of e contract of employment, or the expenditure of pub1 v. City of Dallas. 6 S.W.2d 738 (Tex. 1928); 36 S.W.2d 653 (Tex. Civ. App. - Corpus Ch alveston v. Landrum, 533 S.W.2d 394(Tex. Civ. App. ref’d n.r.e.); Devon v. City of San Antonio, 443 S.W.?d 598 (Tex. Civ. App. - Waco 1969, writ a City of Orange v. Chance, 325 S.W.2d 838 (Tex. Civ. App. - Beaumont 1959,no writ); Attorney General Opinions H-797, H-786 (1976); H-336 (1974);M-836 (19711; ww-215 0957); O-4140 (i94i). It is our opinion that sections 44, 51, 52, or 53 of article 3 of the Texas Constitution do not prohibit legislative authorization ofan employment agreement between the state or Rpolitical subdivision and its employees for payment to be made’ to en employee under a plan or system established by the employer which makes provision for the employees or e class ofemployees generally on account of sickness or accident disability. InCity of Orange v. Chance, the issue was whether section 53ofarticle 3of the Constitution prohibits payment of money for accumulated sick leave under a statute after severance of employment. The court described “sick leave” as follows:

P- 5131Honorable Joseph N.Murphy, Jr. - Page 4 (H-1303)

It wes an emolument or grant which would help the employee if during his employment he wasunable to work2 account of sickness.

. .. Id. et 841. (Emphasis added). The court also said that the method or time of payment wesnot significant. Thus, webelieve it isclear that the Constitution does not prohibit the establishment ofapublic employee sick leave plan or system which meets the precise requirements of the Secretary of Health, Education, end Welfare’s interpretation in SSR72-56 (1972). SUMMARY Sections 44, 51, 52, or 53 of article 3 of the Texas Constitution do not prohibit the state or a political subdivision from establishing a plan or system for sick leave payments for its employees.

APPROVED: Attorney General ofTexas

Opinion Committee ’

P- 5132