Op. Atty. Gen. 104a-9

COUNTHIS: OFFICERS; COMPENSATION: County ma_v not provide car allowance
subsrdrztng personal use ot`` automobile in addition to maximum authorized salary' authorized
vacation leave is not considered severance a ‘
471_665_ v y. an. Scar. §§ 43A.17, gubd. 9, 465.722;
lO4a-9
(Cr. ref. 104a-8)
December 28, 1994
Michael O. Freernan
Hennepin County Attomey
2000 Government Center
Minneapolis, Minnesota 55487
Dear Mr. Freeman:
In your communications with the ()ffice of the Attorney General you provide
substantially the r``ollowing:
FACTS
In a recent audit, the Minnesota State Auditor has taken issue with certain
aspects of the compensation package provided to the Hennepin County
Adminisu'a'.:or pursuant to the employment agreement executed on June 7, 1993.
That agreement provides for an annual salary equal to 95 percent of the
Govemor’s salary, which is the maximum salary generally permitted for persons
employed )y local units of govemmeut. §e_e Minn. Stat. §43A.17, subd. 9
(Supp. 1993). ln addition to salary, the agreement provides for 5600 per month
as an "automobile allowance," in accordance with Article IV of the contract
which provides:
The County Administrator shall receive a mileage allowance for the
acquisition cost, insurance, maintenance and operation of an automobile in an
amount to be approved by the County Board Chair.
The amount of 5600.00 per month was apparently subsequently approved by the
Board Chair. S_e§ June 29,y 119_93 Memorandum of James Bourey t0
Mark Andr:w. The Board expects the administrator to be able to respond to any
need or crisis within the county at any time. The allowance was provided in lieu
Of providing a county-owned automobile due to severe restrictions imposed upon
the use of publicly-owned vehicles by Minn. Stat. § 471.666 (Supp. 1993).
The auditor has also questioned the provisions of Articles II and III of the
contract which grant to the administrator initial vacation and sick leave balances
of 1,093 hours and 800 hours respectively. In addition, the administrator accrues
Michael O. Freeman
Page 2
December 28, 1994
vacation leave at the rate of 4 weeks annually to a maximum of 1,520 hours, and
sick leave at the rate of 12 days annually. Article VIII of the contract provides
for a "termination allowance" of up to 800 hours as permitted for other
employees in the unclassified service of the county. See also Minn. Stat.
§ 383B.103 (1992)(administrator’s termination allowance equal to unclassified
employees). The contract also permits the administrator to use up to a maximum
of 1,520 hours of accumulated vacation leave prior to actual termination The
auditor takes the position that the effect of these contract provisions is contrary to
terms of Minn. Stat. § 465.722 (Supp. 1993) which generally restricts the amount
of "severance pay " for "highly compensated" employees to an amount equivalent
to six-month’s wages. The auditor notes that the section permits "accumulated
vacation“ to be paid to highly compensated employees in addition to severance.
However, the auditor observes that the concept of "accumulated" vacation does
not contemplate establishment of an initial balance and "instantly creating
amounts to be paid at termination" in excess of the six-month’s severance
permitted by law.1 Minn. Stat. §465.722 (Supp. 1993) became effective on
Aug'ust 1, 1993 after the contract was entered on June 7, 1993.
You then ask substantially the following questions:
QUESTION ONE
Did the Hennepin County Board of Commissioners act within its authority in
granting the automobile allowance. in light of its determination that use of an
automobile on a 24-hour basis is directly related to the performance of the county
administrator’s job?
OPINION
While a complete answer to this question is, to a certain extent, dependent upon
resolution of factual issues which are beyond the scope of opinions of this office, it appears,
from the material supplied, that the automobile allowance in question exceeds the authority of
the Board.
Minn. Stat. § 43A_l7, sude 9 (1992) provided in part:
The salary of a person employed by a statutory or home rule charter city,
county. town. school district. metropolitan or regional agency, or other political
subdivision of this state, or employed under section 422A.03, may not exceed
l. We note, however, that the agreement provides that these initial balances are not available
for inclusion in the termination payment if termination occurs m the first year of
employment
Michael O. Freeman
Page 3
December 28, 1994
95 percent of the salary of the governor as set under section 15A.082, except as
provided in this subdivision
"Salary" as defined by section 43A.17, subd. l, means:
"hourly, monthly, or annual rate of pay, including any lump-sum
payments and cost-of-living adjustment increases. . . .
In 1993 section 43A.17, subd. 9 was amended to read in part as follows:
Subd. 9. Political subdivision compensation lirnit. The salarv and the
value of all other forms of compensation of a person employed by a statutory or
home rule charter city, county, town, school district, metropolitan or_regional
agency, or other political subdivision of this state, or employed under
section 422A.03, may not exceed 95 percent of the salary of the governor as set
under section 15A.082, except as provided in this subdivision. Deferred
compensation and payroll allocations to purchase an individual annuity contract
for an employee are included in determining the employee’s salary. Other forms
of compensation which shall be included to determine an employee’s total
compensation are all other direct and indirect items of compensation which are
not specifically excluded bv this subdivision Other forms of compensation
which shall not be included in a determination of an employee’s total
compensation for the purposes of this subdivision are:
(1) employee benefits that are also provided for the majority of all other
full-time employees of the political subdivision, vacation and sick leave
allowances, health and dental insurance, disability insurance, term life insurance,
and pension benefits or like benefits the cost of which is borne by the employee
or which is not subject to tax as income under the Internal Revenue Code of
1986;
(2) dues paid to organizations that are of a civic, professional, education,
or governmental nature; and
(3) reimbursement for actual expenses incurred by the employee which
the governing body determines to be directly related to the performance of job
responsibilities, including an relocation expenses paid during the initial year of
employment .
(Emphasis added).
'I``hat amendment became effective on August 1. 1993. §§ Minn. Stat. 645.02 (1992).
Local units of government are authorized to reimburse officers and employees for expenses
Michael O_ Freeman
Page 4
Decen\ber 28, 1994
involved in using their personal vehicles on public business Minn. Stat. §471.665 (1992)
provides:
Subdivision l. The maximum amount which shall be paid by any county,
home rule charter or statutory city, town, or school district, to any officer or
employee as compensation or reimbursement for the use by the officer or
empl_ovee of the officer’s or emplovee’s own automobile in the performance of
duties shall be set by the town board or other governing body of the unit in an
amount to be determined by the governing body.
Subd. 2. Except as provided in subdivision 3, the governing body of the
city of St. Paul may determine to pay, and in counties having more than 550,000
inhabitants, the county board may determine that the county shall pay a base
allowance of 51.50 per day for each day the employee or officer’s automobile is
officially used. This base allowance shall not be paid for more than 20 days in
each month. The minimum base allowance shall be $20 per month for each
employee or officer required to have a personal automobile available for official
public business and using that automobile for such business periodically
throughout the month. If a base allowance is paid it shall be in addition to a
mileage allowance which shall not exceed 7-1/2 cents a mile for the first
500 miles in any one month and five cents a mile thereafter.
Subd. 3. ln lieu of the mileage allowance provided in subdivision l, the
governing body or town board of any city, county, town, or school district may
pay any officer or employee thereof as compensation or reimbursement for the
use bv the officer or emplovee of a personal automobile in the performance of
official duties a monthly or periodic allowance; but no allowance in lieu of
mileage shall be paid to the members of the governing body or town board except
as otherwise provided by special law or home rule charter.
(Emphasis added).
Based upon the above provisions, the $600 per month provided for the administrator
would appear to be a monthly payment which would fall within the definitions of "salary
and . . . all other forms of compensation" for purposes of computing compliance with the
95 percent limit, unless excluded. There is no suggestion that this benefit is available to all
county employees Thus, exception (l) in section 43A.17, subd. 9 would not apply.
Exception (2) in the same subdivision is plainly inapplicable The third exception does
permit exclusion reimbursement of actual expenses determined by the governing body to be
Michael O. Freeman
Page 5
December 28, 1994
job-related. However, we cannot conclude based on materials supplied that the $600 per
month payment falls in whole. or any definable part, within this exception. While the
Administrator’s employment agreement speaks in terms of a "mileage allowance," the amount
fixed is set in terms of a monthly allowance as authorized by section 471.665, subdivision 3.2
You note that the amount of a mileage or monthly allowance is largely in the discretion of the
governing body and that both subdivisions 1 and 3 indicate that the allowance is to be allowed
"as compensation or reimbursement." 'l``hus, you suggest that the amount need not be a
reimbursement for specific documented amounts expended by the employee.
We agree that an employee need.not normally demonstrate dollar-for-dollar expenditures
in order to obtain reasonable mileage or periodic allowances established as authorized by
section 471.665. However,_ in our view, such payments, whether denominated as
"compensation" or "reirnbursement", to be excluded from salary and other compensation for
purposes of computing the salary cap, still must be limited to payment for the reasonable
expenses associated with use of the employee’s personal automobile for official duties. ln
Op. Atty. Gen. 161 b-12, Jan. 24, 1989, we concluded that a school district was not
authorized to provide its superintendent with an automobile for both business and personal use.
In reaching that conclusion, we emphasized that section 471.665, subd. 3 authorized a periodic
allowance only for use of an employee’s vehicles "in the performance of official duties."
Thus, we concluded that subsidizing both business and personal automobile use was not
permitted See also Ops. Att. Gen. 359b, October 24, 1989 (clarifying the January 24, 1989
holding) and 104a-8, June 4, 1953 (Deputy Sheriff not entitled to car allowance for month
when no duties were performed). "M §§ Op. Atty. Gen. 166b-4, January 24, 1989, where
2. Subdivision 2. which could also be applied by Hennepin County, would not result in a
payment of 3600 in any month unless the employee’s automobile use on official business
exceeded 10.000 miles.
Michael O. Freernan
Page 6
December 28, 1994
we concluded that a school district could not pay a "housing allowance" in addition to
authorized salary, but it could provide money for housing as part of total salary.
While it is perhaps possible that the $600 per month allowance provided to the
administrator could reflect a good faith determination of the portion of reasonable ownership
and maintenance costs which are directly related to official use of the vehicle by the
administrator, there are no facts submitted which either compel or support such a conclusion,
Neither the agreement itself nor the June 29, 1993 memorandum fixing the amount of the
allowance, makes any distinction between business and personal use, nor do the documents
provide any mechanism for apportioning such use. Nor does there appear to be any formal
determination by the governing body concerning these matters. Rather, the agreement merely
provides an allowance for the "acquisition cost, insurance, maintenance and operation of an
automobile " d
The implication is that the allowance is intended to subsidize the administrator’s
ownership of a personal automobile without specific regard to the amount of personal use in
relation to business use to which the vehicle is put. Your statement that section 471.666
(Supp. 1993) imposes "severe" restrictions on the use of a county-owned vehicle which might
be provided to the administrator also suggests that substantial personal use of the subsidized
automobile may, in fact, be contemplated by the agreement.3
As noted in the previous opinions cited above, it has been our view that neither Minn.
Stat. § 471.665, nor general authority to compensate, authorizes a unit of local government to
provide compensation or reimbursement for personal use of an automobile in addition to
maximum authorized salary. For purposes of applying the 95 percent "salary" cap, that
principle is also emphasized in Minn. Stat. §43A.17, subd. 9 (Supp. 1993) which limits
3. In this regard there appears no support for a blanket determination that all use of the
automobile "on a 24-hour basis" is job related
Michael O. Freeman
Page 7
December 28, 1994
expense reimbursement, excluded from salary limitation, to "reimbursement for actual
expenses incurred by the employee which the governing body determines to be directly related
to th;perfomance of iob responsibilities - initial year of employment," (emphasis added); and
§471.66 (Supp. 1993) which, as you point out. severely restricts personal use of
government-owned vehicles.
While it is true that section 43A.17, subd. 9 as amended grants discretion to the
governing body to determine reimbursable expenses_. such expenses must still be directly
related to job perforrnance. We do not believe that subsidy for personal vehicle use was
intended to be within the scope of that discretion
Consequently, it is our view that, while the matter does involve certain factual issues,
the material supplied does not support a determination that the automobile allowance as set
forth in the contract and the June 29, 1993 memorandum is based upon, or limited to,
reimbursement for the administrator’s required use of his own automobile in performance of
official duties as required under current law.
QUESTION T\VO
Did the legislature intend that Mirm. Stat. §465.722, which limits the
severance pay of certain highly compensated employees, apply retroactively to
the Hennepin County administrator’s employment agreement entered on June 7,
1993?
OPINION
We answer this question in the negative.
Sections 465.772 was enacted in Act of May 20, 1993, ch. 315. § 1_5, 1993 Minn.
Laws 1863. The section was effective on August 1, 1993. §§ Minn. Stat. § 645.02 (1992).
According to the facts supplied, the administrators employment agreement was executed on
June 7, 1993. As a general proposition. new laws are not construed to have "retroactive effect
unless clearly so intended by the legislature." In addition. it appears that the legislature here
Michael O_ Freeman
Page 8
December 29, 1994
did not intend to apply the restrictions of section 465.722 to defeat entitlements to benefits
arising under a preexisting contract. Minn. Stat. §465.722, Subd. 3, expressly provides in
part:
Severance pay for a highly compensated employee may exceed an amount
equivalent to six months of wages if:
(1) the severance pay benefit is included in an employment contract
between the employee and the local unit of government that is in effect on
August l, 1993, and the termination of employment occurs before the expiration
date of said contract;
Thus, it seems clear that retroactive effect is not to be given to the six-months pay
restriction.
QUESTION THREE
Must accrued or credited vacation hours which may be used at anytime prior to
termination of employment, be included in the determination of the
administrator’s severance pay for purposes of this statute, section 465.722?
OPINION
In our view, the contractual provisions do not, on their face, contravene those
restrictions lnitially it should be observed that the question of whether any termination
allowance or related benefit which may be ultimately provided to the administrator at the time
of his termination will exceed the limits of section 465.722 is premature and entirely
hypothetical at the present time. That section permits severance pay equivalent to six month’s
pay or approximately 1,040 hours. At this time it cannot be known either how much
"terrnination allowance" will be payable to the administrator at the time of terrnination, or how
much vacation time, if any, will be available to the administrator should he elect to use such
vacation time irrunediately prior to termination
Furthe_rnore. the allowance of paid vacation time to be taken, if at all, prior to the
termination appears to be a benefit distinct from severance pay as defined by section 465.722
Michael O. Freeman
Page 9
December 28, 1994
(Supp. 1993). According to subdivision 2 of that section, severance pay includes benefits or
compensation payable "upon termination of employment, " Also, severance pay which remains
unpaid at the time of a terminated employee’s death is payable to the decedent’s named
beneficiary or estate. As you have described the contract with the administrator, all vacation
time permitted. whether from the initial balance granted or from hours subsequently accrued,
must actually be taken m t_o termination of employment Should the administrator die or
otherwise terminate employment prior to using such vacation time, it would be lost.
Section 465.722, subd. 2 itself appears to recognize a distinction between'liquidation of
leave balances and severance pay in providing that "severance pay shall not include payments
for accumulated vacation. . .
Thus, the provision for vacation time in general is distinguished from the concept of
severance pay as defined by statute. If cash payments for accrued vacation time are not
considered severance, a fortiori vacation actually taken should not be included. 'l``his
conclusion is consistent with previous opinions of this office which have drawn a distinction
between the use of vacation and the right to be paid for unused vacations. S_e§, e_.g_., Op.
Atty. Gen. 125-a-33 August 24, 1951 (no implied authority to pay estate of deceased officer
for unused vacation); 107-A-3, March 20, 1979 (no authority under prior statute to provide
payment for unused vacation upon retirement). C_f. Minn. Stat. §43A.17, subd. 8 (1992)
which prohibits employee conversion of vacation to cash prior to separation from service.
Thus, while circumstances may arise in which the granting of unreasonably large
vacation allowances to be converted to cash upon termination could be viewed as contrary to
Michael O. Freeman
Page 10
the intended spirit of section 465.722 (Supp. 1993); we cannot say that paid vacation actually
taken prior to termination can be construed as severance pay as defined therein.
Best regards,
HUBERT H. HUMPHREY III
Attomey General
.ezé