Request By:
Mr. Donald E. Skeeters
Attorney at Law
705 North Dixie Boulevard
Radcliff, Kentucky 40160
Opinion
Opinion By: Steven L. Beshear, Attorney General; Robert L. Chenoweth, Deputy Attorney General
You have asked the Office of the Attorney General for an advisory opinion in the area of education law. The factual situation you have presented for our consideration is that a school board member's spouse is a salaried employee of a law firm. The spouse does not participate in the profits of the law firm. You continued stating it is possible the school board may wish to employ the law firm as legal counsel for the school system and/or the board of education. The question you presented is as follows:
"May the school board member legally vote to hire the law firm to represent the school system and/or the board of education while his wife is a salaried employee of the law firm. "
It is the advisory opinion of the Attorney General that under the facts outlined, no prohibition exists to prevent the school board member from voting to hire the law firm. Moreover, no disqualification will exist due to the fact the board member's spouse is a salaried employee of the law firm.
The provisions of school law involved in responding to your question are KRS 160.180(1)(f) and subsection (2) which read respectively as follows:
"(1) No person shall be eligible to membership on a board of education:
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(f) Who, at the time of his election is directly or indirectly interested in the sale to the board of books, stationery or any other property, materials, supplies, equipment or services for which school funds are expended;
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(2) If, after the election of any member of the board, he becomes interested in any contract with or claims against the board, of the kind mentioned in paragraph (f) of subsection (1) of this section, or becomes a candidate for nomination or election to any office or agency the holding and the discharging of the duties of which would have rendered him ineligible before election, or if he moves his residence from the district for which he was chosen, or if he does anything that would render him ineligible for re-election, he shall be subject to removal from office pursuant to KRS 415.050 and 415.060."
It is clear that KRS 160.180 provides for the qualification of local school board members and also sets out acts of disqualification which if found to exist can lead to an ouster proceeding pursuant to KRS 415.050, subject to being initiated solely by the Attorney General. See Chadwell v. Commonwealth, 288 Ky. 644, 157 S.W.2d 280 (1941).
As concerns the portions of KRS 160.180 pertinent to the facts under consideration in this opinion, the Court of Appeals in Brooks v. Commonwealth, Ky., 286 S.W.2d 913, 914 (1956), stated the gravamen of the provisions is "that a school board member must not become interested in a sale to the board for which school funds are expended." And, it is to be noted that a direct or indirect interest is prohibited.
This office over the years has been requested to consider many sets of circumstances against the "interest in the sale to" provisions of KRS 160.180. It is to be also noted that the statutory oath prescribed in 160.170 required to be taken by local board members sets forth that a board member "will not, while serving as a member of such board, become interested, directly or indirectly, in any contract with or claim against the board. . . ." The appellate courts have also looked at many cases and have given these provisions of KRS 160.180 a strict interpretation. See Commonwealth v. Coatney, Ky., 396 S.W.2d 72 (1965). The Court has said that even though the items sold by the board member are small and that full value was given is immaterial and a violation exists subjecting the board member to removal. See Stringer v. Commonwealth, Ky., 428 S.W.2d 203 (1968). Also, the Court has found the statute to be violated where the spouse owned the store that sold items to the local board of education. See Brooks v. Commonwealth, supra. Where the board member was the owner, stockholder or officer in a business selling goods or services to the school board, no real doubt as to the finding of disqualification has existed. See e.g., Douglas v. Pittman, 239 Ky. 548, 39 S.W.2d 979 (1931).
The one "type" of facts not litigated and about which you can admittedly find advisory opinions on both sides is that of the so-called "mere employee." In OAG 62-749 this office indicated an employee of a store that sold supplies to a board of education could serve on the board of education if the employee had no monetary interest in his employer's business or if he received no commissions or dividends due to the volume of sales by his employer. In OAG 63-320 we were not definite about whether a policy-making official of a private corporation doing business with a school board would be able to serve on the board. OAG 64-848, copy attached, is quite close to the facts under consideration in this opinion. In that opinion this office concluded that an employee of a building supply firm doing business with the school board would be eligible to serve on the board if the employee "is salaried, receives no commissions or bonuses, participates in no profit-sharing arrangement and has no financial interest in the business." In OAG 72-777 we concluded a "mere employee" of a construction company doing business with the school would not violate KRS 160.180. A similar conclusion was reached in OAG 72-691 with respect to a salesman for a local plumbing supply house that did business with the school board. We concluded that since the salesman's sales territory did not include his school district and further that the salesman was not an owner or a stockholder in the company, he could serve on the board of education. Employment of a school board member by a subcontractor on a school construction project was not deemed sufficient direct or indirect interest so as to disqualify the board member in OAG 73-455.
The turning point in the advisory opinions in this office on the subject came with OAG 76-408, copy attached. In that opinion we concluded that an individual employed as a salaried clerk in a department store that did business with the school board would not be able to hold the office of school board member. Strength for this position was garnered from a consideration of cases pertaining to similar statutes relating to members of city councils. One case referred to held that even though a member of the council is merely an employee of the firm under contract with the city, this relationship by itself would constitute a violation of the statute. This case was Byrne & Speed Coal Company v. City of Louisville, 189 Ky. 346, 224 S.W. 883 (1920). Very importantly, we now believe, is the specific difference in the language of the city statute in question in that case with that of KRS 160.180. The city statute looked at in Byrne & Speed Coal Company read as follows:
"They [members of the council] shall not be directly or indirectly interested in any contract with said city, or in any application therefor, or a candidate for or hold any office or employment for pay in any company or corporation which holds or is an applicant for any contract with the city." (Emphasis ours.)
Under the city statute, "employment for pay" with a company doing business with the city was explicitly prohibited. As such, no such language is found in KRS 160.180. OAG 77-519 followed the line of reasoning expressed in OAG 76-408.
We are of the opinion the best guidance regarding this issue comes from the touchstone case of Commonwealth v. Withers, 266 Ky. 29, 98 S.W.2d 24 (1936). The Court of Appeals, in looking at a question involving the predecessor statute to KRS 160.180, stated the following legal precepts:
"It is a salutary doctrine that he who is intrusted with the business of others cannot be allowed to make such business an object of profit to himself. This is based upon principles of reason, of morality, and of public policy. These are principles of the common law and of equity which have been supplemented and made more emphatic by the foregoing and other statutory enactments. Nunemacher v. City of Louisville, 98 Ky. 334, 32 S.W. 1091, 17 Ky.Law Rep. 933. In their application and operation it is impossible to lay down any definite rules defining the nature of the interest of the officer, or indicating the line between that which is proper and that which is unlawful. In general, the disqualifying interest must be pecuniary or proprietary by which he stands to gain or lose something. Falling within the principle are conflicts with firms in which the member of the municipal body is a partner or a corporation of which he is an officer, or sometimes only a stockholder or employee. Byrne & Speed Coal Co. v. City of Louisville, 189 Ky. 346, 224 S.W. 883; Douglas v. Pittman, 239 Ky. 548, 39 S.W.(2d) 979. Furthermore, it is not material that the self-interest is only indirect or very small.
However, the interest is not sufficient to disqualify the officer if the opportunity for self-benefit is a mere possibility or is so remote or collateral, such as being only a debtor, that it cannot be reasonably calculated to affect his judgment or conduct in the making of the contract or in its performance." 98 S.W.2d at 25-26.
When we review the facts you have presented against the statute, and taking into account the Withers decision, we do not believe the board member is placed in a disqualifying position simply because the spouse of the board member is a salaried employee with the law firm to be retained to represent the school system and/or school board. This spouse-employee is not in a position to control or even have input as to who the law firm does business with. The spouse-employee is not an owner or an officeholder in the law firm and actually has no financial interest in the law firm in that we are of the belief receiving a salary does not as such create a financial interest. Any sums of school money paid by the school board to the law firm would not move directly or indirectly to the board member or his spouse. Cf. Chadwell v. Commonwealth, supra, at 157 S.W.2d 283. We believe the "mere employee" relationship of the board member's spouse is insufficient to disqualify the board member in that "the opportunity for self-benefit is a mere possibility or is so remote or collateral, . . . that it cannot be reasonably calculated to affect his judgment or conduct in the making of the contract or in its performance." Withers, supra, at pp. 25 and 26.