Case Information

*1 The Attorney General of Texas December 22, 1978 JOHN L. HILL

Attorney General Opinion No. H- 1203

Executive Director

Employees Retirement System Re: Whether the state or a

of Texas political subdivision may estab- P. 0. Box 12337, Capitol Station lish a special program to make to an employee on Austin, Texas 78711

account of sickness.

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 is used 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 benefits received ,by the 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 . . . under a plan or system established by an

employer which makes provision for his employees . . . on account of . . . sickness or accident generally disability.

42 U.S.C. S 409.

The Secretary of Health, Education, and Welfare has interpreted this exclusion as follows:

[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 specif- ically on account of sickness es distinguished from authorization to merely continue salary payments during periods of absence 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, 517 P.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:

[Tlo be excluded from “wages”, sick leave payments must be 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 on account of sickness” such es would qualify to be excluded from “wages” under the Act, we hold thet the Secretary has the nuthority to bar the exclusion from “wages” of such irregerdless of how they ere denominated or treated under the State’s “plan.”

&at993. (Footnote omitted, emphasis in original).

With this clarification of the context in which your question is posed, we look to Texas law on the subject. Pertinent provisions 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 *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 individuals, municipal or other corporations whatsoever. . . .

Sec. 52. inhe Legislature shall have no power 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 no power 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 per- formed 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 of law.

It is well established that these constitutional provisions do not prohibit payment of benefits 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 of an employment agreement between the state or R political subdivision and its employees for payment made’ to en employee under a plan or system established by the employer which makes provision for the employees or e class of employees generally on account of sickness or accident disability.

In City of Orange v. Chance, the issue was whether section 53 of article 3 of the Constitution prohibits payment of money for accumulated sick leave under a statute after severance of employment. The court described “sick leave” as follows:

It wes an emolument or grant which would help if during his employment he was unable to work 2 account of sickness. . . .

Id. et 841. (Emphasis added). The court also said that the method or time of payment wes not significant. Thus, we believe it is clear that the Constitution does not prohibit the establishment of a public employee sick leave plan or system which meets the precise requirements of the Secretary of Health, Education, end Welfare’s interpretation in SSR 72-56 (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.

Attorney General of Texas APPROVED:

Opinion Committee ’