CONFLICT OF INTERESTS LIMITATIONS
ON STATE CONTRACTS
California Public Contract Code Sections 10410-10430*
Sections 10410 footnote No. 11 and 10411 of the California Public Contract Code provide a two-level approach to potential conflicts of interests in connection with the making of state contracts. Section 10410 concerns potential conflicts of interests by persons currently holding office and section 10411 concerns potential conflicts of interests by those who have left state service. The prohibitions do not apply to unsalaried members of part-time boards and commissions who only receive payments in connection with preparing for meetings and per diem for travel and accommodations. (§ 10430(e).) The code also expressly exempts the Board of Regents for the University of California from its coverage and provides a limited exception for the trustees of the California State University. (§ 10430(a), 10430(c).)
Other specific exemptions are contained in section 10430(b)-(g). They include contracts for computer and telecommunication systems, architectural land engineering services, specified contracts exempt by section 10295, and contracts by spouses of state officers or employees and their employers for the provision of services to regional centers for persons with developmental disabilities pursuant to section 4648 of the Welfare and Institutions Code. With these exceptions, sections 10410 and 10411 generally cover all appointed officials, officers and civil service employees of state government.
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Reduced to its essentials, section 10410 provides that: (1) no state officer or employee (2) shall engage in any employment, activity or enterprise (3) from which the officer or employee receives compensation, or in which he or she has a financial interest and (4) which is sponsored or funded, in whole or in part, by any state agency or department through a contract. An exception is provided if the employment or enterprise is required as a condition of the individual's regular state employment. In addition to the general prohibition, section 10410 specifically prohibits any covered official from contracting on his or her own behalf with a state agency as an independent contractor to provide goods or services.
*Selected statutory materials appear in appendix H.
The prohibition contained in section 10410 does not appear to be a transactional disqualification provision such as that contained in the Political Reform Act. Rather, it is similar to the prohibition in Government Code section 1090 which forbids an individual from making a contract in which he or she has a financial interest. In the case of section 10410, the statute prohibits an individual from engaging in certain activities which are supported in whole or in part by a state contract. By prohibiting the "activity," the statute in effect prohibits the making of state contracts in which the individual has the specified interest. Thus, in many instances, the provisions of section 10410 will be duplicative of the provisions of Government Code section 1090. However, the provisions of section 10410 apply only to state contracts and are different than the restrictions contained in Government Code section 1090 in certain respects.
With respect to the prohibition against state officers or employees contracting on their own behalf as independent contractors, to provide goods or services, this office has orally advised that state employees who prepare educational film, video and printed materials as a part of their state employment cannot contract with another department as independent contractors to provide similar services in their off-hours.
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Section 10411 regarding former state officials is divided into two parts. Subsection (a) involves a two-year prohibition against participating in a contract with which the official was involved during his or her state service. Subsection (b) involves a one-year prohibition of any contract by former policy making officials with their prior agencies.
Section 10411(a) provides that no retired, dismissed, separated or formerly employed state officer or employee may enter into a state contract in which he or she participated in any of the negotiations, transactions, planning, arrangements or any part of the decision making process while employed in any capacity by an agency or department of state government. The statute does, however, place a two-year limit on the application of this statutory prohibition commencing on the date the person left state employment. For application of similar provisions under Government Code section 1090, see Stigall v. City of Taft, supra, 58 Cal.2d 565 and 66 Ops.Cal.Atty.Gen. 156 (1983).
Section 10411(b) establishes a 12-month moratorium on any former state officer or employee, entering into a contract with his or her former agency, if the covered official held a policy making position with the agency in the same general subject area as the proposed contract within 12 months prior to his or her departure from state government. The statute expressly exempts contracts for expert witnesses in civil cases and contracts for the continued services of an attorney regarding matters with which the attorney was involved prior to departing state service.
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Section 10420 provides that any contract made in violation of these prohibitions is void unless the violation is technical and non-substantive. Section 10421 provides the state or any person acting on behalf of the state, the right to bring a civil suit in superior court to have the performance of a contract temporarily restrained and ultimately declared void. Successful plaintiffs may be awarded costs and attorney's fees but the statute specifically provides that defendants may not receive either. Section 10425 provides that willful violation of the prohibitions is a misdemeanor and sections 10422 and 10423 provide felony penalties for persons involved in the corrupt performance of contracts.
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VIII.
THE CONSTITUTIONAL PROHIBITION ON THE ACCEPTANCE OF
PASSES OR DISCOUNTS FROM TRANSPORTATION COMPANIES
Cal. Const., Art. XII, § 7
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The prohibition on the acceptance of passes or discounts from transportation companies by public officers was originally contained in article XII, section 19, of the California Constitution. In 1970, the Constitutional Revision Commission proposed that the provision be repealed. However, the proposal to eliminate this provision was defeated by the electorate. In 1974, the prohibition was moved from section 19 to section 7 of article XII. The genesis of the prohibition is in the historical relationship between the railroads and the state government in California.
In 67 Ops.Cal.Atty.Gen. 81 (1984), this office indicated that the origins of the prohibition were in the corruptive influences which might be brought about by gifts of free transportation to public officials. The opinion provided:
"Article XII, section 7 (formerly 19), was adopted to control the perceived corruptive influences of the railroads on the legislative process. (See Debates and Proceedings of the Constitutional Convention, p. 379; John K. McNulty, `Background Study -- California Constitution Article XII, Corporations and Public Utilities' (1966) p. 100.) . . . It is apparent that the perceived corruptive influence consisted of the granting of special benefits in exchange for legislative favor. Thus, explicitly or implicitly, legislation favorable to the railroads was the quid pro quo. . . ."
The 1982 quo warranto authorization letter, regarding Santa Monica, stated:
"It appears that the intention of the framers of what is now article XII, section 7 was to inhibit and if possible preclude the undue influence of railroads and other transportation companies over legislators and public officials." (In re Knickerbocker, Feb. 1982.)
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The constitutional prohibition on the acceptance of passes or discounts from transportation companies by public officials currently is contained in article XII, section 7 of the California Constitution. It provides:
"A transportation company may not grant free passes or discounts to anyone holding an office in this state; and the acceptance of a pass or discount by a public officer, other than a Public Utilities Commissioner, shall work a forfeiture of that office. A Public Utilities Commissioner may not hold an official relation to nor have a financial interest in a person or corporation subject to regulation by the commission."
Reduced to its component parts, this office has interpreted the prohibition to apply in the following manner:
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The prohibition specifically provides that it applies to "public officers." In 3 Ops.Cal.Atty.Gen. 318 (1944), this office reiterated its interpretation that the prohibition applied only to officers and not employees. "As to the question of passes, it has always been the opinion of this office that the constitutional prohibition does not operate to include `employees'. . . ." Accordingly, the prohibition did not bar a state employee from receiving gifts of free transportation from a transportation company in connection with part-time private employment.
It is generally said that an "office" requires the vesting in an individual of a portion of the sovereign powers of the state. (See Parker v. Riley (1941) 18 Cal.2d 83, 87.) This office has provided informal advice as to the distinction between an officer and an employee. (I.L. 75-294 (1975).) There, we stated that if a particular individual actually sets or makes policy, he is an officer, if he merely advises policy makers, he is probably not an officer.
I.L. 75-294, supra, addressed the issue of whether officers and employees of the Division of Tourism could accept free airline transportation in the course of their duties. In that letter, this office concluded that the constitutional prohibition applied only to the officers but not the employees. The letter stated:
"If a particular individual actually sets or makes policy, he is an officer, if he merely advises policy makers, he is probably not an officer. See Parker v. Riley, 18 Cal.2d 83, 87 (1941); 42 Ops.Cal.Atty.Gen. 91, 95 (1963); 56 Ops.Cal.Atty.Gen. 556 (1973)."In Parker v. Riley, supra, the court said:
"`Thus, it is generally said that an office or trust requires the vesting in an individual of a portion of the sovereign powers of the state. (Patton v. Board of Health, supra, pp. 394, 398; Curtin v. State, supra, p.390; Leymel v. Johnson, 105 Cal.App. 694, 699 [288 Pac. 858]; Couts v. County of San Diego, 139 Cal.App. 706, 712 [34 Pac. (2d) 812]; State ex rel. Barney v. Hawkins, supra, p. 520; State ex rel Kendall v. Colt, supra; 53 A.L.R. 595, 602.) The positions here created do not measure up to so high a standard. They involve merely the interchange of information, the assembling of data, and the formulation of proposals to be placed before the legislature. Such tasks do not require the exercise of a part of the sovereign power of the state.'
"Government Code section 1001 includes in the definition of civil executive officers `. . . the head of each department and all chiefs of divisions, deputies and secretaries of a department. . . .'"
In I.L. 70-155 (1970), this office concluded that the executive director of a redevelopment agency was a public officer within the meaning of the constitutional prohibition. This office specifically concluded that the prohibition applied to any officer, not just those who succeeded to office through the electoral process. The letter also reiterated that the constitutional prohibition did not apply to employees as contrasted with officers. (I.L. 71-159 provides additional discussion of these principles and is based on the same factual situation.)
I.L. 64-111 (1964) concluded that the prohibition, at least in some circumstances, did not apply to the families of public officers. Thus, where the spouse of a covered official legitimately earns or receives a free pass or discount on travel from a transportation company, the acceptance of such a pass or discount would not be attributed to the officer. However, this conclusion might be different if the circumstances surrounding the pass or discount suggested that it was provided in order to curry favor or extend a benefit to the officer.
In 67 Ops.Cal.Atty.Gen. 81, supra, this office analyzed a situation involving application of the prohibition to a state legislator. Under the unique facts of that case, the opinion concluded that the legislator was not covered by the prohibition. There, the member of the Legislature was the spouse of a flight attendant. As a part of the flight attendant's employment package all spouses were offered specified free airline trips. The opinion concluded that a state legislator was a public officer for the purposes of the section and that the airline company in question was a transportation company within the meaning of the prohibition. However, the free transportation was offered to the legislator as a member of a larger group under a generally authorized or approved plan.
"If, as we assume in the absence of contrary advisement or indication, the sole condition of the receipt of the propounded benefit is the spousal relationship, then the element of corruptive influence appears to be lacking, and the application of the constitutional prohibition would fail to serve its intended objective."Accordingly, it is concluded that the acceptance by a member of the California Legislature who is the spouse of a flight attendant of a free or discounted air travel pass is not prohibited by article XII, section 7, of the California Constitution when such passes are offered on the same conditions to spouses of all flight attendants." (67 Ops.Cal.Atty.Gen. 81, supra, at p. 84.)
In 74 Ops.Cal.Atty.Gen. 26 (1991), this office indicated that a free upgrade from coach class to first class constituted a "discount" within the meaning of the constitutional prohibition. However, under those facts the receipt of the discount did not violate the prohibition because the officer received the tickets in his capacity as a member of a group unrelated to his official status. The official, who was on his honeymoon, received the free upgrade pursuant to the airline's policy of providing free first class upgrades to all honeymooning couples.
These situations are distinguishable from the circumstances described in 76 Ops.Cal.Atty.Gen. 1 (1993) in which a mayor received a free first class airline upgrade as a part of a promotion designed to bestow such upgrades on high profile, prominent individuals in the community. The opinion concluded that the mayor received the free first class upgrade as a result of his status as mayor and not as a result of his participation in some larger group unrelated to his official status. (Id. at p. 4.) The opinion also concluded that the official need not be aware of the prohibition against the receipt of free transportation in order to violate it. (Id. at p. 2-3.)
Thus, if the pass or discount is provided to the official because of his or her position as a government official, the prohibition applies. If, on the other hand, the pass or discount is provided to the official as a member of a larger group, that is not related to the function of his or her office, the prohibition may not be applicable.
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Over the years, this office has interpreted the constitutional prohibition against the acceptance of passes or discounts from transportation companies to apply to interstate as well as intrastate carriers and transportation. This interpretation applies irrespective of whether the interstate carrier in question does business in California and therefore applies to airline carriers over which the official had no jurisdiction. (See, 76 Ops.Cal.Atty.Gen. 1, supra.)
In I.L. 75-294, supra, this office concluded that the prohibition applied to members of the Division of Tourism who wished to attend informational seminars at various locations to which the airlines would provide free transportation. In order to avoid any conflict with federal regulatory powers over the issuance of free passes, the letter indicated that the prohibition with respect to interstate transportation prohibited the officer from accepting the pass or discount and not on the transportation company for offering it. The prohibition applied to interstate as well as intrastate travel in I.L. 64-111, supra. That letter concluded that the prohibition applied to Los Angeles City Airport Commissioners who wished to take a free airline trip to Tahiti.
In 1982, this office authorized the filing of a quo warranto lawsuit to remove two officers from the Santa Monica City government for violating the prohibition against the acceptance of free travel. The allegations were that the two officers had accepted free round trip transportation from Los Angeles to London provided by Laker Airline.
In I.L. 71-159, supra, this office authorized another quo warranto lawsuit against the executive director and treasurer of the Redevelopment Agency of the City and County of San Francisco. There the officeholder accepted free round trip passage from San Francisco to Taipai on China Airlines. In 1985, this office advised the Mayor of Burbank that acceptance of free transportation from Burbank, California to Durango, Colorado and free transportation on a railroad in Durango could violate the constitutional prohibition.
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The issue of public versus private business is generally not viewed as relevant to the application of the prohibition. Except for Public Utility Commissioners who are specifically authorized to accept free transportation in connection with the performance of official duties, the prohibition against the acceptance of free passes or discounts for transportation applies equally to acceptance of transportation in connection with one's official duties as it does in connection with one's personal business. Although the focus may be somewhat different, interpreters of the prohibition have concluded that the purpose of guarding against corruption and undue influence from transportation companies can result from the acceptance of free or discounted transportation in either context.
In I.L. 75-294, supra, members of the Division of Tourism wished to attend informational seminars to which they would receive free airline transportation. The attendance at such seminars clearly was within the scope of the member's official public duties. Without discussing the distinction between public and private use of transportation, this office concluded that the constitutional prohibition acted to bar the members from accepting the free airline transportation. Similarly, in I.L. 70-155, supra, this office concluded that the executive director of a redevelopment agency was barred from accepting free transportation to assist him in the performance of his official duties. Again, the matter of the public versus the private use of the transportation was not discussed as a relevant factor in determining whether the prohibition applied.
In several other instances the issue of public versus private business was not viewed as relevant to the application of the prohibition. (E.g., I.L. 64-111, supra, in which the City of Los Angeles Airport Commissioners accepted free trips to Tahiti; 1982 quo warranto authorization regarding officers of Santa Monica accepting a free round trip from Los Angeles to London; 1985 letter to Burbank mayor regarding transportation from Burbank to Colorado and rail transportation in Colorado.)
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Article XII, section 7, specifically provides that the acceptance of a pass or discount by a public officer other than a Public Utilities Commissioner, shall work a forfeiture of that office. The appropriate means for enforcing this forfeiture of office is the filing of a suit in quo warranto.
A quo warranto proceeding pursuant to Code of Civil Procedure section 803 is a civil action by which title to any public office may be determined. (Barendt v. McCarthy (1911) 160 Cal. 680, 686-687; 53 Cal.Jur.3d, Quo Warranto, § 7.) The action may be commenced only under the authority of the Attorney General in the name of the People. (People ex rel. Conway v. San Quentin Prison Officials (1963) 217 Cal.App.2d 182.) Where the proceeding is brought in the name of the People on the relation of a private individual (relator), the relator is not a party and the entire control remains in the Attorney General. (People v. Milk Producers Assn. (1923) 60 Cal.App. 439, 443; People ex rel. Conway v. San Quentin Prison Officials, supra, 217 Cal.App.2d 182.)
In practice, the Attorney General requires submission of an application for leave to sue on behalf of the People. (C.C.R., tit. 11, §§ 1-10.)
In deciding whether to issue leave to sue to a relator, the basic question is whether a public purpose would be served. (39 Ops.Cal.Atty.Gen. 85, 89 (1962).) This office must determine whether a substantial issue of fact or law exists which should be judicially determined. (City of Campbell v. Mosk (1961) 197 Cal.App.2d 640, 648.) However, it is not the province of the Attorney General to pass upon the issues in controversy for that is the role of the court. (35 Ops.Cal.Atty.Gen. 123 (1960).)
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IX.
INCOMPATIBLE ACTIVITIES OF LOCAL
OFFICERS AND EMPLOYEES
Government Code Section 1125 Et Seq.*
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These sections, which were originally enacted in 1971, provide a statutory prohibition against any officer or employee of a local agency from engaging in any employment or other activity which is in conflict with his or her public duties. Government Code section 1125 footnote No. 12 defines local agency to mean a "county, city, city and county, political subdivision, and municipal corporation." Section 1126 contains the basic prohibition, and focuses on the remunerative activities of agency officials. See section 1098 concerning prohibition against disclosure of confidential information, which is punishable as a misdemeanor.
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Section 1126 provides that a local officer or employee shall not engage in any employment, activity or enterprise for compensation which is inconsistent, incompatible, in conflict with, or inimical to his or her official duties or the duties, functions or responsibilities of his or her appointing authority or employing agency. This general prohibition usually is not self-executing and, in order to give notice of what activities are incompatible, must be accomplished through promulgation of a statement of incompatible activities by the agency. The incompatible activities statement may address a broad range of conflict of interests issues. But an officer or an employee may not have sanctions imposed on him or her unless the officer or employee has violated a duly noticed statement. If a statement is adopted, the local agency shall enact rules providing notice to employees regarding prohibited activities, disciplinary action and appeal procedures.
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In 1980, the court in Mazzola v. City and County of San Francisco (1980) 112 Cal.App.3d 141 (hereinafter "Mazzola"), ruled that section 1126 provided only authorization to implement a statutory prohibition by adoption of an incompatible activities statement as set forth in section 1126(b). The court reasoned that without notice, an employee could be subject to charges under section 1126 at any time. Therefore, before the prohibition can be applied to an employee based on his or her outside activities, the employee must be informed that those activities constitute a conflict of interests. (See also 70 Ops.Cal.Atty.Gen. 271, supra.) In addition, the court indicated that the employee was entitled to receive notice of the agency's intended disciplinary action and the procedures for appealing that action. Thus, aside from a narrow exception applicable only to school board members, discussed below, the prohibition is not self-executing.
*Selected statutory materials appear in appendix I.
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Section 1126 applies to officers and employees of local agencies. This office has opined that employees include temporary consultants such as special counsel hired as independent contractors. (See, 70 Ops.Cal.Atty.Gen. 271 (1987); 61 Ops.Cal.Atty.Gen. 18 (1978).)
In 64 Ops.Cal.Atty.Gen. 795 (1981), this office concluded that, in light of the Mazzola case, section 1126 did not apply to a member of the board of supervisors or any other elected official. This conclusion was based on an interpretation of the language of section 1126(b). By its terms, subdivision (b) provides that the guidelines, which the Mazzola court stated were a prerequisite to activating the prohibition, are to be adopted by the "appointing power." Since elected officials have no appointing authority, the opinion concluded that section 1126 was applicable only to local employees and not to elected officials.
In 1986, Education Code section 35233 was amended to make school boards subject to the requirements of section 1126. Since school boards have no appointing authority, this office concluded in 70 Ops.Cal.Atty.Gen. 157 (1987), that the provisions of section 1126(a) must be self-executing with respect to school boards if the amendment to Education Code section 35233 was to have any effect. Thus, section 1126 remains inapplicable to elected officials except for school board members where it is both applicable and self-executing.
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In Long Beach Police Officers Assn. v. City of Long Beach (1988) 46 Cal.3d 736, the California Supreme Court ruled that local governments have broad discretion to limit incompatible activities of their employees. (Id. at p. 748.) After an involved analysis of legislative history, the court concluded that the enumerated activities set forth in subdivision (b) did not constitute the exclusive list of prohibited activities. Rather, the court concluded that the list of enumerated activities was exemplary and did not represent either a floor or a ceiling on the activities which local governments could restrict as incompatible with public employment.
The court cited with favor the opinions of this office and stated that an examination of these opinions revealed a consistent interpretation applying the statute to any factual situation involving a potential conflict of loyalties, whether or not specifically enumerated in subdivision (b). (Id. at 747-48, citing, 58 Ops.Cal.Atty.Gen. 109 (1975) (section 1126, subd. (b) doctrine of incompatibility applies to a member of a school board concurrently serving as a member of a city personnel board); 63 Ops.Cal.Atty.Gen. 868 (1980) (county assessor may determine, pursuant to § 1126(b), that employee's purchase of land at tax-deeded land sale within the county is incompatible with his duties as an appraiser in the assessor's office); 68 Ops.Cal.Atty.Gen. 175 (1985) (pursuant to § 1126(b), a city police department may determine whether the police chief may undertake to contract with private parties to provide private security services by off-duty police officers for a fee); 70 Ops.Cal.Atty.Gen. 157, supra, (a school board may determine, pursuant to § 1126(b), that a board member's operation of a private preschool facility for profit, conflicts with his duties as a member of the board).)
A variety of potential incompatible activities are enumerated in section 1126, subdivision (b). An outside activity which involves the use of the agency's time, resources, uniforms, or prestige may be prohibited. (§ 1126(b)(1).) If the outside activity involves double remuneration, i.e., private payment for the performance of an activity which he or she is already required to perform in his or her public capacity, such employment may be prohibited. (§ 1126(b)(2); see also Pen. Code, § 70.) If the result of this outside activity will ever in any way be subject to the control or audit or other scrutiny of the official's agency, it may be prohibited as well. (§ 1126(b)(3).) Finally, if the outside activity makes such great demands on the official's time that the official is hampered in the performance of his or her public duties, the activity may be forbidden. (§ 1126(b)(4).)
A local agency does not have as broad discretion to restrict the political activities of its officers or employees. footnote No. 13 Section 3203 prohibits placing restrictions upon the political activities of such officers or employees unless the restriction is otherwise authorized by sections 3201-3209 or is necessary to meet federal requirements relative to a particular employee or employees. Authorized restrictions include a prohibition from participating in political activities while in uniform, and prohibition or restrictions from engaging in political activity during working hours or on the local agency's premises, if the agency has adopted rules in that regard. (§§ 3206, 3207.) In addition, while officers or employees may solicit funds for ballot measures that may affect the working conditions of their employing agency, the agency may restrict its employees' activities during their working hours. Sections 3201-3209 also provide for restrictions upon an employee's political activities such as using one's office to influence, positively or negatively, another person's position within the state or local agency, and knowingly soliciting political funds from other local agency employees unless the request is made to a "significant segment of the public" that otherwise includes local agency officers or employees.
In addition to these provisions, employees should be aware of Penal Code section 424, which prohibits the misuse of public funds and property for political or personal use. (See also Stanson v. Mott (1976) 17 Cal.3d 206; League of Women Voters v. Countywide Crim. Justice Coordinating Com. (1988) 203 Cal.App.3d 529.)
Section 1127 specifically states that off-duty employees (e.g., firefighters, police officers) may accept private employment which is related to and compatible with their public employment. To do so, the employee must receive permission from his or her supervisor and must be certified by the appropriate agency.
For a discussion of the special incompatibility provisions for public attorneys, see section F of chapter XI, concerning Government Code section 1128.
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The statute does not set forth any penalties or remedies for its violation. However, several enforcement vehicles would appear to be available. First, with respect to a local government employee, disciplinary action such as a letter of reprimand, suspension, or firing may be available depending upon the gravity of the violation. With respect to an appointed officer, a complaint could be filed with the appointing authority which may have the power to punish the officer or even terminate the officer's appointment in the case of a particularly serious violation. In addition, a taxpayer or member of the public may have the right to seek relief through injunction or mandamus.
If you have a question about an officer or employee's outside activities, you should contact the appointing authority or employing agency for a copy of the applicable statement of incompatible activities, if one has been adopted. A member of the public is entitled to a copy of the statement through the Public Records Act as set forth in Government Code sections 6250 et seq.
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