Can a Mississippi county refuse to contract with a company owned by someone who has been convicted of embezzling public funds?

Plain-English summary

A Sunflower County supervisor asked the AG whether § 25-1-113's bar on hiring people convicted of felonies involving public funds also extends to contracts with companies owned by such people. The AG answered no. § 25-1-113 prohibits employment, not contracting.

Section 25-1-113(2) reads:

From and after July 1, 2014, the state and any county, municipality or any other political subdivision shall not employ or continue to employ a person who has been convicted or pled guilty in any court of this state, another state, or in federal court of any felony in which public funds were unlawfully taken, obtained or misappropriated in the abuse or misuse of the person's office or employment or money coming into the person's hands by virtue of the person's office or employment.

The AG looked to a 2014 Hines opinion that worked through this question and provided three reasons:

1. The Legislature placed § 25-1-113 in Title 25, Chapter 1, dealing with public officers and employees, not contracts. The text speaks of "employ" and "continue to employ." If the Legislature wanted to cover contracts and contractors, it could have said so.
2. Reading the statute to cover contracts could impair existing contracts in a way that runs into the U.S. Constitution (Article I, Section 10) and Mississippi Constitution (Section 16). Both forbid laws impairing the obligation of contracts. Those prohibitions are not absolute, but the strongest impairment exception is for police-power legislation involving non-government contracts, which doesn't fit § 25-1-113.
3. A 2014 Austin opinion clarified that "employ" means a W-2 employer/employee relationship, not a contractor relationship.

So contracting with a corporation or LLC controlled or wholly owned by someone otherwise barred from employment is not prohibited by § 25-1-113.

The AG did not say county officials should ignore concerns about hiring or contracting with people who have embezzled public funds. The opinion is about what the statute requires, not about what is wise or politically advisable.

What this means for you

County attorneys and boards of supervisors

The opinion holds that § 25-1-113 prohibits a county from employing a person convicted of embezzlement, but does not prohibit a county from contracting with a corporation or LLC controlled or wholly owned by such a person. It rests on the Hines opinion's three reasons: the statute's placement in the public officers and employees title (and its use of "employ"); the contract-impairment problems that would arise (under U.S. Const. art. I, § 10 and Miss. Const. § 16) if the statute were read to void existing public contracts; and the Austin opinion's reading that "employ" means a W-2 employer/employee relationship.

State auditors and oversight investigators

The opinion ties § 25-1-113 to employment, which it (via the Austin opinion) describes as a relationship "wherein the employee's compensation is reported for tax purposes on a W-2." It distinguishes that from contracting with a corporation or LLC, which it holds the statute does not reach. The opinion does not lay out a multi-factor employee-versus-contractor test.

Corporations or LLCs bidding on a county contract

Under the opinion, § 25-1-113 does not bar a county from contracting with a corporation or LLC merely because a person who would be barred from employment controls or wholly owns it. The opinion addresses only that statute; it does not opine on other procurement or ethics rules.

A note on the policy question

The opinion reads § 25-1-113 as written and does not say the underlying policy is wrong. As Hines put it, "[t]he Legislature could have applied Section 25-1-113 to contracts and contractors by specifically including such references. It did not." Extending the bar to contractors would be a legislative choice, not something the opinion reads into the current text.

Common questions

Q: What does § 25-1-113 actually prohibit?
A: From July 1, 2014 onward, the state and any county, municipality, or political subdivision cannot employ or continue to employ a person convicted (or who pled guilty) of any felony in which public funds were unlawfully taken or misappropriated in the abuse or misuse of the person's office or employment or money coming into their hands by virtue of office or employment.

Q: Why doesn't this apply to contracts?
A: Three reasons from the AG opinions: (1) the statute uses "employ," which the AG interprets as a W-2 employer/employee relationship; (2) the statute is in the public-officers-and-employees chapter, not in a contract chapter; (3) reading it to cover contracts would create constitutional contract-impairment issues with existing public contracts.

Q: How does the opinion define "employ"?
A: It quotes the Austin opinion: "the term 'employ' contemplates an employer/employee relationship wherein the employee's compensation is reported for tax purposes on a W-2." That W-2 framing is why the opinion treats contracting with a corporation or LLC as outside § 25-1-113.

Q: Why would reading the statute to cover contracts cause constitutional problems?
A: The opinion (quoting Hines) explains that applying § 25-1-113 to contracts could require public entities to breach existing contracts, which runs into the contract-impairment prohibitions in U.S. Const. art. I, § 10 and Miss. Const. § 16. Those prohibitions are not absolute, but the opinion says the conditions under which a state may impair a contract are not satisfied here.

Q: Did the AG say the underlying policy is wrong?
A: No. The opinion reads the statute as written and notes the Legislature could have extended the prohibition to contracts and contractors but did not.

Background and statutory framework

§ 25-1-113(2), as quoted in the opinion, provides that from and after July 1, 2014, the state and any county, municipality, or other political subdivision "shall not employ or continue to employ" a person convicted (or who pled guilty) of a felony in which public funds were unlawfully taken or misappropriated in the abuse or misuse of the person's office or employment.

The opinion follows two prior AG opinions on the contracts question:

• Hines (Oct. 10, 2014) concluded the prohibition does not apply to contracts or contractors, pointing to the statute's placement in Title 25 ("Public Officer and Employees; Public Records"), Chapter 1 ("Public Officers; General Provisions"), the absence of any reference to contracts, and the contract-impairment problems that a contracts reading would raise.
• Austin (Oct. 10, 2014) read "employ" to contemplate a W-2 employer/employee relationship.

On the constitutional point, the opinion quotes Hines: applying § 25-1-113 to contracts could require public entities to breach otherwise valid contracts, implicating the contract-impairment clauses of U.S. Const. art. I, § 10 and Miss. Const. § 16. As Hines explains, a state's ability to pass a law impairing a contract is strongest when the law is an exercise of police power and the contracts do not involve a governmental entity, and the opinion says those circumstances are "inapplicable to the application of Section 25-1-113."

Citations and references

Statute:

• Miss. Code Ann. § 25-1-113 (prohibition on public employment of persons convicted of felonies involving public funds)
• Miss. Code Ann. § 25-1-113(2) (text effective July 1, 2014: state and political subdivisions shall not employ or continue to employ such persons)

Constitution:

• U.S. Const. art. I, § 10 (no state shall pass any law impairing the obligation of contracts)
• Miss. Const. § 16 (a law impairing the obligation of contracts shall not be passed)

Prior AG opinions referenced:

• MS AG Op., Hines (Oct. 10, 2014): § 25-1-113 does not apply to contracts or contractors; statutory placement, contract-clause concerns, and absence of any reference to contracts in the statute support this reading.
• MS AG Op., Austin (Oct. 10, 2014): "employ" in § 25-1-113 contemplates a W-2 employer/employee relationship.

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/11/B.Gaston-November-3-2023-Prohibition-from-Hiring-Convicted-Embezzlers-for-Public-Employment.pdf

Original opinion text

November 3, 2023

The Honorable Ben Gaston
District 3 Supervisor, Sunflower County
100 Dogwood Circle
Indianola, Mississippi 38751

Re: Prohibition from Hiring Convicted Embezzlers for Public Employment

Dear Mr. Gaston:

The Office of the Attorney General has received your request for an official opinion.

Question Presented

If a county is prohibited from hiring or contracting with a person convicted of a felony under Mississippi Code Annotated Section 25-1-113, is this county also prohibited from hiring or contracting with a corporation or limited liability company that is controlled or wholly owned by a person convicted of a felony?

Brief Response

Section 25-1-113 prohibits a county from employing a person convicted of embezzlement. It does not prohibit a county from contracting with a corporation or limited liability company that is controlled or wholly owned by a person who would otherwise be prohibited under Section 25-1-113 from being employed by the county.

Applicable Law and Discussion

Section 25-1-113(2) provides:

From and after July 1, 2014, the state and any county, municipality or any other political subdivision shall not employ or continue to employ a person who has been convicted or pled guilty in any court of this state, another state, or in federal court of any felony in which public funds were unlawfully taken, obtained or misappropriated in the abuse or misuse of the person's office or employment or money coming into the person's hands by virtue of the person's office or employment.

This office previously opined that the prohibition in Section 25-1-113 does not apply to contracts or contractors. MS AG Op., Hines at *1 (Oct. 10, 2014). Explaining further, Hines states, in pertinent part:

Section 25-1-113 is found in Title 25 which is entitled "Public Officer and Employees; Public Records" and in Chapter 1 which is entitled "Public Officers; General Provisions." The Legislature could have applied Section 25-1-113 to contracts and contractors by specifically including such references. It did not. Moreover, as your opinion request points out, Section 25-1-113, if applied to contracts, would have to be read to avoid existing contracts with public entities which could be contracts of specific terms. In other words, application of Section 25-1-113 would, under certain circumstances, have to be read to require public entities to breach otherwise valid contracts. Article I, Section 10 of the United States Constitution states that "[n]o State shall . . . pass any . . . law impairing the obligations of contracts . . . ." Furthermore, Section 16 of the Mississippi Constitution states that a "law impairing the obligation of contracts, shall not be passed." These prohibitions are not absolute, and a state's ability to pass a law that does impair a contract is at its strongest when the legislation is an exercise of police power and when the contracts at issue do not involve a governmental entity. These circumstances are inapplicable to the application of Section 25-1-113.

Hines at 1. Moreover, this office has previously opined that with respect to Section 25-1-113, "the term 'employ' contemplates an employer/employee relationship wherein the employee's compensation is reported for tax purposes on a W-2." MS AG Op., Austin at 2 (Oct. 10, 2014). Accordingly, it is the opinion of this office that Section 25-1-113 does not prohibit a county from contracting with a corporation or limited liability company that is controlled or wholly owned by a person who would otherwise be prohibited under Section 25-1-113 from being employed by the county.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General