Opinion  EC-COI-87-19

Date:	06/30/1987
Organization:	State Ethics Commission

The administrator of a county hospital is a county employee.

Facts

John J. Barmack (Barmack) is the Administrator of Norfolk County
Hospital (Hospital). He is employed pursuant to a management
agreement (Agreement) between a private corporation, HCA Management Company, Inc. (HCA) and the Trustees of the Norfolk County Hospital and Commissioners of the County of Norfolk. The Agreement states that HCA will provide "its experience, skills, supervision and certain personnel in the operations of the Hospital... with the full authority and ultimate control of [the Hospital] remaining with the Boards [referring to the Norfolk County Commissioners and the Hospital Trustees]." Agreement at 1. With regard to personnel, the Agreement states that HCA "shall provide a qualified Hospital Administrator whose initial and continuing appointment shall be subject to the approval of the Hospital Board of Trustees. Id. at 7-8. The Agreement regards the Administrator as an employee of HCA. Id. at 8.

Barmack was the Hospital Administrator prior to and after the
Hospital and HCA entered into the Agreement. The Agreement provides that Barmack's salary and fringe benefits are the responsibility of HCA. In turn, the Hospital pays HCA a management fee which is deposited in a bank account against which HCA draws checks to pay the Administrator's salary.

Barmack's employment arrangement with HCA gives him the
opportunity to acquire stock, or exercise future stock options, in
HCA's parent company which owns all of the stock of HCA. (HCA is not publicly traded but HCA's parent company is.) Barmack presently owns less than one percent of the stock of HCA's parent company.

In 1984, Barmack married Mehbooba Anwar, M.D. Dr. Anwar was
approved as Acting Medical Director effective July 4,1977, and
became the Medical Director of Norfolk County Hospital in August
of 1977.

Questions

1. Does Barmack's status as Hospital Administrator pursuant to
the Agreement render him a county employee within the meaning of
c. 268A?

2. If Barmack is a county employee, does c. 268A permit his
financial interest in the Agreement?

3. If Barmack is a county employee, does c. 268A permit HCA to
pay his salary and allow him to act as HCA's agent pursuant to the
Agreement?

4. If Barmack is a county employee, what restrictions will the
conflict of interest law place on his official dealings with the
Medical Director, his wife?

Answers

1. Yes.

2. Yes.

3. Yes.

4. The restrictions of G.L. c. 268A, s. 13 apply.

Discussion

1. Status as a County Employee

The conflict of interest law broadly defines "county employee"
to include any person performing services for or holding an office, position, employment, or membership in a county agency, whether by election, appointment, contract of hire or engagement, whether
serving with or without compensation, on a full, regular,
part-time, intermittent or consultant basis. G.L. c. 268A, s.
1(d).

Page 152

Barmack fits squarely within the above definition as a "person
performing services for... a county agency."[1] Id. Barmack's role
as Hospital Administrator is, in all respects, a job that requires
him to perform substantial services for the Hospital in overseeing
its day to day business operations. Furthermore, the Agreement is
clear that the Hospital delegated to the management company the
responsibility of appointing the Hospital Administrator, retaining
the right to approve the appointment Barmack was selected for and maintains this position pursuant to the explicit terms of the
contract. Agreement at 7-8. The logical implication of this
arrangement is that Barmack, as Administrator, is performing
services for a county agency by contract of hire or engagement.[2]

The Commission has previously stated that not all employees of
corporations which contract with a public agency will be considered public employees. Compare, EC-COI-83-129 (discussing the status of state employee). However,there is substantial precedent that an employee of a corporation may be included in the definition of a public employee (be it a state, county or municipal employee) if the contract with the public agency contemplates the services of that particular individual. See EC-COI-86-21 (where an employee of a private corporation which contracted with the state was deemed a state employee when he provided highly specialized services which were specifically bargained for by the parties); 87-8 (where the owner of a private corporation was considered to be a city employee when his corporation contracted with the city and he played a significant role in the contract's performance); and 83-165 (where the president of a private company was considered a state employee because of his company's contract with the Metropolitan District Commission).

The Commission has recognized that certain factors are relevant
in determining whether an individual who is an employee or officer
of a private corporation which contracts with a public entity
should be deemed to be a public employee. EC-COI-87-8. These
factors include:

1. whether the individual's services are expressly or
impliedly contracted for;

2. the type and size of the corporation;

3. the degree of specialized knowledge or expertise required
of the service. For example, an individual who performs highly
specialized services for a corporation which contracts with
a public agency to provide those services may be deemed to be
performing services directly to that agency;

4. the extent to which the individual personally performs
services under the contract, or controls and directs the terms
of the contract or the services provided thereunder; and

5. the extent to which the person has per-formed similar
services to the public entity in the past. Id.

Given the fact that the county must approve of Barmack's initial
and continuing appointment and that Barmack has performed the
identical services for the Hospital in the past, we believe that
the Hospital specifically contemplated that Barmack would continue to act as the Hospital Administrator pursuant to the Agreement.  Additionally, Barmack provides a degree of specialized expertise in the area of hospital administration and plays a significant role in implementing the management agreement as the chief administrative officer responsible for supervising hospital operations. Where, as here, many factors determinative of public employee status are met, Barmack will be considered a county employee.[3]

2. Financial Interest in a County Contract

A county employee is prohibited from having a financial interest
in a contract made by a county agency. G.L. c. 268A, s.14. A
literal interpretation of this prohibition would prevent a county
employee from having a financial interest in his own contract of
employment. It would be absurd, however, to place a public
employee, such as Barmack, in violation of the conflict of interest
law because of his financial interest in his own job.

In order to give s.14. A workable and common sense meaning, s.14 (like its s.7 "state" counterpart) "cannot reasonably be
interpreted to prohibit an ... employee from receipt of his own
paycheck." EC-COI-86-21. See also, Buss, The Massachusetts Conflict of Interest Statute: An Analysis, B.U. Law Rev. 299(1965).
Barmack's financial interest is in his compensation which results
from the Agreement.

In such a case, the contract which creates [public] employee
status is the same contract which results in the financial
interest. Therefore, there is no opportunity to gain an inside
track on a second [public] contract. EC-COI-86-21.

Accordingly, the Commission does not regard Barmack in violation
of the law for getting paid to do his county job.[4]

9. Barmack's Arrangement for Compensation and Action a HCA's
Representative Pursuant to the Agreement

Because Barmack is paid by and maintains an employment
relationship with HCA, an issue is raised under s.11 of the
conflict law. Section 11 generally prohibits a county employee from
being paid by or acting as the agent for a private entity in
relation to a matter in which a county agency is a party or has a
direct and substantial interest. However, for the reasons stated
above, these prohibitions do not prevent an individual who attains
public employee status by contract from performing services under
that contract and being paid accordingly. Compare, EC-COI-87-8; 86-21; 83-129.

Page 153

Here, the Agreement provides that the Hospital Administrator
"will be and remain the employee of [HCA]..." and that HCA will be
"responsible" for his salary and fringe benefits. Agreement at 8.
In addition, Barmack will implement the policies of the management company, presumably as its agent, subject to the Hospital's approval. Agreement at 2-5 and 7. In essence, Barmack becomes an agent of HCA to the extent that HCA is the agent of the Hospital.  HCA pays Barmack's salary and Barmack acts as HCA's agent solely in the context and as a consequence of the Agreement.

It is not only permitted but expected that an employee of a
private company which has a contract with a public agency will
continue to be paid by, and may be called upon to act as the agent
for, the private company. Provided that these circumstances occur
in the context of the same agreement which creates the public
employee status, there is no conflict. If on the other hand, the
employee of the private company sought multiple contracts with a
public agency, then his actions as the company's agent or his
private compensation in connection with, for example, a second
contract could create a conflict under s.11(a) and (c) of G.L. c.
268A.[5]

4. Restrictions on Official Dealings with the Medical Director

The conflict law prohibits a county employee from participating
as such an employee in a particular matter in which, among others, he or his employer or his immediate family member[6] has a financial interest,[7] The financial interest must be "direct and
immediate, or at least reasonably foreseeable." EC-COI-84-123; 84-98; 84-96. An employee's participation[8] is broadly defined to
include, among other things, any discussion, recommendation, vote (binding or non-binding) or investigation. See, e.g., Commission Advisory No, 11 regarding Nepotism at 3-5. A public employee also may not delegate the responsibility of dealing with a family member to another. Id. at 5. Therefore, because Barmack's wife is the Hospital Medical Director, he must abstain from every action which would have a reasonably foreseeable affect on her financial interests.[9] This includes salary reviews, personnel evaluations or other like recommendations to the Hospital. [10]

* Pursuant to G. L c. 268B, s.3(g), the requesting person has
consented to the publication of this opinion with identifying
information.

[1] The Norfolk County Hospital is a "county agency." G.L. c. 268A,
s.1(c).

[2] The Hospital has chosen to fill the Administrator position by
engaging a private management company. Even if Barmack can be said
to hold an "appointment" in a county agency, he holds that
appointment only pursuant to a contract between the Hospital and
HCA.

[3] This status, however, would not necessarily extend to other,
less specialized employees of HCA who also perform services for the
Hospital. These determinations would have to be made on a case by
case basis in light of the factors articulated above.

[4] It is unnecessary to reach the issue of Barmack's ownership of
stock as he owns less than one percent of the stock of HCA's parent
company. See, G.L. c. 268A, s.14. we would note, however, that any
financial interest resulting from such stock ownership would, like
his compensation, relate to the same contract which creates his
status as a county employee.

[5] In light of the Commission's reasoning, it is unnecessary to
determine whether Barmack's activities are provided for the proper
discharge of his official duties within the meaning of G.L. c.
268A, s.11.The Commission notes that its opinion is limited solely
to the application of G.L. c. 268A and that its opinion is not
intended to evaluate the sufficiency of the county's authorization
to contract with HCA.

[6] "Immediate family," is defined as the employee and his spouse,
and their parents, children, brothers and sisters. G.L. c. 268A,
s.1(e).

[7] This prohibition restricts Barmack from participating in
matters outside the scope of the Agreement which would affect HCA's
financial interests. For example; if HCA became a vendor of medical
supplies to the Hospital, Barmack could not represent the Hospital
in purchasing these supplies.

[8] "Participate," means to participate in agency action or in a
particular matter personally and substantially as a state, county
and municipal employee, through approval, disapproval, decision,
recommendation, the rendering of advice, investigation or
otherwise. G.L. c. 268A, s.1(j).

[9] G.L. c. 268A, s.13 provides an exemption to this prohibition
if Barmack "advise[s]" the official responsible for appointment to
his position and the state ethics commission of the nature and
circumstances of the particular matter and make full disclosure of
such financial interest, and the appointing official shall
thereupon either:

(1) assign the particular matter to another employee; or

(2) assume responsibility for the particular matter; or

(3) make a written determination that the interest is not
substantial as to be deemed likely to affect the integrity of
the services which the county may expect from the employee,
in which case it shall not be a violation for the employee to
participate in the particular matter. Copies of such written
determination shall be forwarded to the county employee and
filed with the state ethics commission by the person who made
the determination." Thus, it may be possible for the Board of
Trustees to grant Barmack permission to act on matters
affecting the financial interests of his wife. In such an
event, however, the Commission would carefully scrutinize all the
facts to determine whether Barmack has received an unwarranted
privilege of substantial value. See, G.L. c. 268A, s.23.

[10] Ethics Commission's opinions are addressed to the prospective
conduct of the individual requesting the opinion. Therefore, any
conduct which has already occurred at the time of the request is
neither sanctioned nor analyzed by this opinion.