Can a Texas state agency hire the relative of a board member who oversees the agency, or does the nepotism law block it?

Texas AG Opinion JM-1175: Could the Banking Department Hire a Finance Commission Member's Son?

Plain-English summary

The Commissioner of the Texas Department of Banking asked whether the department could hire the son of a Finance Commission member as a hearings officer, a classified position, without running afoul of the nepotism statute, article 5996a, V.T.C.S. Whether that statute applies turns on whether the relative's governing body, here the Finance Commission, controls the hiring decision in question. Article 342-201 describes the Banking Commissioner as an "employee of the Finance Commission and subject to its orders and directions," language that on its face suggested the Finance Commission could review all of the Banking Commissioner's decisions, including hiring.

The Attorney General concluded otherwise, relying on the Texas Supreme Court's decision in Chemical Bank & Trust Co. v. Falkner, which held the Banking Commissioner is a state officer, not merely an employee, for certain statutory purposes, because the commissioner holds many powers and duties granted directly by the legislature that are not subject to Finance Commission control, even though the Supreme Court did not spell out which specific powers those were. Reviewing article 342-213, which gives the Banking Commissioner independent authority over the department's career-ladder program, performance evaluations, and equal employment opportunity plans, the opinion concluded that personnel matters, including hiring decisions, are among the powers not subject to Finance Commission control, except where a statute specifically gives the Finance Commission a role (such as setting exempt-position salaries). Because hiring decisions were not subject to Finance Commission control, the nepotism statute did not prohibit the Banking Department from hiring the son of a Finance Commission member.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Who this opinion affected (as of 1990)

The Texas Department of Banking: The opinion cleared the department to hire the son of a Finance Commission member as a hearings officer, concluding the nepotism statute's restriction did not reach hiring decisions the Banking Commissioner made independently of Finance Commission control.

Finance Commission members and their relatives: The opinion meant that a Finance Commission member's relatives were not automatically barred from Banking Department employment simply because the commissioner is described by statute as the Finance Commission's "employee," so long as the specific hiring decision was one the Banking Commissioner controlled rather than the commission itself.

Common questions

Why would a statute describing the Banking Commissioner as an "employee" of the Finance Commission not trigger the nepotism law?
Because the Texas Supreme Court in Chemical Bank & Trust Co. v. Falkner had already held the Banking Commissioner is more than an ordinary employee, holding powers and duties granted directly by the legislature that are outside Finance Commission control, and the opinion found personnel and hiring decisions fell within that independent authority based on article 342-213's grant of authority over career-ladder programs, evaluations, and equal employment plans to the commissioner.

Does this mean the Finance Commission has no role at all in Banking Department personnel matters?
No. The opinion limited the Finance Commission's role to the specific powers and duties statutes expressly give it, such as setting the number and salaries of employees in exempt positions under article 342-201 and certain salary-setting provisions in articles 342-202 through 342-204, distinct from day-to-day hiring decisions.

Background and statutory framework

Article 5996a, V.T.C.S., the nepotism statute, applies only where the relative's governing body may exercise control over the hiring decision in question, citing Pena v. Rio Grande City Consol. Indep. School Dist. Article 342-201, V.T.C.S., provides that the Finance Commission elects the Banking Commissioner, who serves at the commission's pleasure and is described as "an employee of the Finance Commission and subject to its orders and directions," with the commission setting the commissioner's compensation and the number and salaries of Banking Department employees in exempt positions (subject to a statutory salary cap tied to the commissioner's own salary).

The opinion found this "employee" language alone would suggest all Banking Commissioner decisions, including hiring, were subject to Finance Commission review, which would trigger the nepotism statute under Pena. But the Texas Supreme Court in Chemical Bank & Trust Co. v. Falkner held that, for purposes of article 1733, V.T.C.S., the Banking Commissioner is a state officer, not simply an employee, because of the many powers and duties the legislature gave the commissioner directly that are not subject to Finance Commission control, without the court identifying those powers specifically. Looking to article 342-213, which independently charges the Banking Commissioner with developing an intraagency career-ladder program, an annual performance-evaluation system tied to merit pay, and a written equal-employment-opportunity plan (covering work-force analysis, recruitment and promotion policies, and goals for overcoming underutilization of minorities and women), the opinion concluded that personnel matters, including hiring, are conferred on the Banking Commissioner independently of Finance Commission control, except where another statute (such as the exempt-position salary provisions of articles 342-201 through 342-204) expressly assigns a role to the Finance Commission. The opinion also cited Attorney General Opinion JM-254, involving a similar nepotism question about a county attorney hiring a commissioner's relative, for the proposition that a body's role in authorizing positions or approving salaries does not by itself give that body control over who fills those positions.

Citations

Statutes:

• V.T.C.S. art. 5996a (nepotism statute)
• V.T.C.S. art. 342-201
• V.T.C.S. art. 342-202, 342-203, 342-204
• V.T.C.S. art. 342-213
• V.T.C.S. art. 1733

Cases:

• Pena v. Rio Grande City Consol. Indep. School Dist., 616 S.W.2d 658 (Tex. Civ. App.-Eastland 1981)
• Chemical Bank & Trust Co. v. Falkner, 369 S.W.2d 427 (Tex. 1963)

Prior Attorney General opinion cited: JM-254.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1175
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1175.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

May 17, 1990

Mr. Kenneth W. Littlefield
Commissioner
Texas Department of Banking
2601 N. Lamar Boulevard
Austin, Texas 78705-4294

Opinion No. JM-1175

Re: Whether the Department of Banking may hire the son of a member of the Finance Commission (RQ-1999)

Dear Mr. Littlefield:

You ask whether the Banking Department may hire the son of a member of the Finance Commission as a hearings officer. We assume from your letter that the position in question is a classified position.

The applicability of the nepotism statute, article 5996a, V.T.C.S., depends on whether the Finance Commission may exercise control over the hiring decision in question. Pena v. Rio Grande City Consol. Indep. School Dist., 616 S.W.2d 658 (Tex. Civ. App.-Eastland, 1981). The relationship between the Finance Commission, the Banking Commissioner, and the Banking Department is described in part in article 342-201, V.T.C.S., which provides:

By and with the advice and consent of the Senate, the Finance Commission, by at least five (5) affirmative votes, shall elect a Banking Commissioner who shall serve at the pleasure of the Finance Commission, provided that the Banking Commissioner first elected shall take office at the expiration of the term of office of the present Banking Commissioner. Said Banking Commissioner shall be an employee of the Finance Commission and subject to its orders and directions. The Banking Commissioner shall receive such compensation as is fixed by the Finance Commission. The salary of an employee of the Banking Department in any other exempt position may not exceed the amount that is $2,000 less than the salary of the Commissioner. The Position Classification Act of 1961 (Article 6252-11, Vernon's Texas Civil Statutes) applies to a position of the Banking Department only if it is classified in groups 1-10 under the position classification plan in effect on January 1, 1989, or comparable positions under any successor plan. The legislature in the General Appropriations Act may determine the total amount appropriated to the Banking Department but may not determine the number or salaries of employees of the Banking Department in exempt positions. The Finance Commission, subject to the limits provided by this article, shall determine the number of employees of the Banking Department in exempt positions and the salaries of those employees. The Banking Department may use funds appropriated to it for any purpose to pay the salaries determined by the Finance Commission. (Emphasis added.)

The statement that the Banking Commissioner is subject to the orders of the Finance Commission would seem to indicate that all decisions, including hiring decisions, by the Banking Commissioner or subordinate Banking Department employees are subject to review by the Finance Commission. If that were so, the nepotism statute would prohibit the Banking Department from hiring the son of a member of the Finance Commission. See Pena, supra. The Texas Supreme Court, however, has rejected such a broad interpretation of the Finance Commission's authority over the Banking Commissioner. In Chemical Bank & Trust Co. v. Falkner, 369 S.W.2d 427 (Tex. 1963), the court determined that the Banking Commissioner was a state officer, rather than an employee, for purposes of article 1733, V.T.C.S. In reaching that decision the court wrote:

While the statute does say the Banking Commissioner is an 'employee of the Finance Commission and subject to its orders and directions', he is far more than an employee of the Finance Commission because of the many powers and duties given him directly by the Legislature which are not subject to the control of the Finance Commission.

Id. at 430. The court gave no examples of powers and duties of the Banking Commissioner not subject to control of the Finance Commission. Because we find no instance in which the legislature stated explicitly that a power or duty of the Banking Commissioner was not subject to the control of the Finance Commission, we must conclude that the Supreme Court found that limitation on the power of the Finance Commission to be implicit in certain statutes granting specific powers to or imposing specific duties on the Banking Commissioner. To answer your question, then, it is necessary to determine whether hiring decisions of the Banking Commissioner or his subordinate Banking Department employees are subject to the control of the Finance Commission.

The only statute other than article 342-201 that deals in any detail with employees of the Banking Department is article 342-213, V.T.C.S., which provides:

1. The Banking Commissioner or his designee shall develop an intraagency career ladder program, one part of which shall be the intraagency posting of all nonentry level positions for at least 10 days before any public posting.

2. The Banking Commissioner or his designee shall develop a system of annual performance evaluations based on measurable job tasks. All merit pay for Banking Department employees must be based on the system established under this section.

3. The Banking Commissioner shall prepare and maintain a written plan to assure implementation of a program of equal employment opportunity whereby all personnel transactions are made without regard to race, color, disability, sex, religion, age, or national origin. The plans shall include:

(1) a comprehensive analysis of all the agency's work force by race, sex, ethnic origin, class of position, and salary or wage;

(2) plans for recruitment, evaluation, selection, appointment, training, promotion, and other personnel policies;

(3) steps reasonably designed to overcome any identified underutilization of minorities and women in the agency's work force; and

(4) objectives and goals, timetables for the achievement of the objectives and goals, and assignments of responsibility for their achievement.

The plans shall be filed with the Governor's office within 60 days of the effective date of this Act, cover an annual period, and be updated at least annually. Progress reports shall be submitted to the Governor's office within 30 days of November 1 and April 1 of each year and shall include the steps the agency has taken within the reporting period to comply with these requirements.

Reading those provisions with Chemical Bank in mind, we conclude that the conferral of such authority on the Banking Commissioner with respect to personnel matters indicates that the Finance Commission's role in regard to Banking Department personnel matters is limited to those powers and duties that are specifically imposed on the Finance Commission. See generally V.T.C.S. art. 342-201 (Finance Commission shall determine number and salaries of Banking Department employees in exempt positions); see also arts. 342-202, 342-203, 342-204 (Finance Commission to set salaries for certain Banking Department positions); Attorney General Opinion JM-254 (fact that commissioners court authorizes positions and approves salaries of employees of county attorney does not prohibit county attorney from hiring relative of county commissioner, since commissioner's court has no control over persons appointed to fill positions).

Because we conclude that hiring decisions of the Banking Commissioner are not subject to the control of the Finance Commission, we conclude that the nepotism statute does not prohibit the Banking Department from hiring the son of a member of the Finance Commission.

SUMMARY

The nepotism statute, article 5996a, V.T.C.S., does not prevent the Banking Department from hiring the son of a member of the Finance Commission.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General