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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 5731

July 1, 1980

CONSTITUTIONAL LAW:

Const 1963, art 11, Sec. 3

SCHOOLS AND SCHOOL DISTRICTS:

Increases in compensation for superintendent

Where a school district enters into a three-year contract with the superintendent of schools and specifies the annual compensation therefor subject to reopening for the second and third year, any increase in compensation agreed upon by the parties for the second year must be prospective only. Payment of an increase in compensation for that period between the beginning of the second year of the contract and the date of the agreement providing for increased compensation would violate Const 1963, art 11, Sec. 3.

The Honorable Edward C. Pierce

State Senator

The Capitol

Lansing, Michigan 48909

The materials accompanying your opinion request indicate that a board of education of a fourth class school district and its superintendent entered into a three-year contract in which the salary was specified for the first year, with a provision that the superintendent's salary for the second and third years of the contract would remain at the same level set for the first year unless a supplemental salary agreement was executed by the parties. Midway through the second year, a supplemental salary agreement was executed increasing the superintendent's salary for the whole of such year. The question posed is whether the supplemental salary agreement was a grant of extra compensation in violation of Const 1963, art 11, Sec. 3.

In Const 1963, art 11, Sec. 3, the people have provided:

'Neither the legislature nor any political subdivision of this state shall grant or authorize extra compensation to any public officer, agent or contractor after the service has been rendered or the contract entered into.'

Thus, the constitutional provision prohibits the granting or authorizing of extra compensation to any public officer after service has been rendered or a contractual agreement entered into.

1908 Const, art 16, Sec. 3, preceded Const 1963, art 11, Sec. 3, supra, and provided:

'Neither the legislature nor any municipal authority shall grant or authorize extra compensation to any public officer, agent, employee or contractor after the service has been rendered or the contract entered into. Salaries of public officers, except circuit judges, shall not be increased, nor shall the salary of any public officer be decreased, after election or appointment.'

Therefore, the similar language of Const 1963, art 11, Sec. 3, supra has reaffirmed the constitutional prohibition against the granting or authorizing of extra compensation to any public officer.

In Attorney General v Board of Education of the City of Detroit, 225 Mich 237; 196 NW 417 (1923), after the Board had entered into contracts with its teachers and during the school year, by mutual agreement, the existing contracts were cancelled and new contracts were entered providing for additional compensation for the remainder of the school year. The original contracts which were cancelled provided for termination, by either party, upon 30 days notice. The new contracts were challenged on the basis that they provided 'extra compensation', contrary to the first sentence of 1908 Const, art 16, Sec. 3, supra. The Court concluded that the Board could not lawfully grant or authorize extra compensation to any teacher after service had been rendered. However, as to services that had not been rendered, the Court stated:

'. . . There could be no additional compensation allowed for services performed under the original contracts, but there is no constitutional obstacle in the way of cancelling the contracts or changing them at any time, and allowing an increase in salary for the balance of the term. The only thing the board may not do is to grant additional compensation after the services have been rendered. . . . As the additional compensation was for services to be performed under new contracts for the balance of the school year, we think it does not violate the provision of the Constitution. . . .' 225 Mich 237, 242. (Emphasis supplied.)

OAG, 1928-1930, p 321, 325-326 (April 12, 1929) held invalid a legislative resolution purporting to grant retroactive pay increases to certain state employees. In support of the conclusion that any pay increase must take effect on the effective date of the act fixing such compensation, and that the legislature may not, by concurrent resolution, or otherwise, provide for retroactive compensation contrary to 1908 Const, art 16, Sec. 3, supra, the Attorney General stated:

'Cases in point are not plentiful, but the few cases which have turned on analogous situations seems (sic) to indicate that, as long as changes in compensation by way of increase are made to operate prospectively and not retrospectively, they are valid and not in conflict with Constitutional inhibitions against the granting of extra compensation after the services have been performed. . . .'

See OAG, 1952-1954, No 1609, p 79 (December 2, 1952); OAG, 1973-1974, No 4772, p 50 (June 12, 1973); OAG, 1979-1980, No 5655, p ___ (February 15, 1980).

In 2 OAG, 1956, No 2822, p 726 (December 7, 1956), the issue addressed was whether 1908 Const, art 16, Sec. 3, supra, was violated by the fixing of the salary of a public official in the amount of $3,000 during the first year, $4,000 during the second year, $5,000 during the third year, and $7,000 payable in the final year, of a four year term. This opinion cited and relied upon the following language from OAG, 1951-1952, No 1269, p 38, 41 (August 10, 1950):

". . . [s]o long as a salary dependent in amount upon a fluctuating factor such as population is provided for . . . prior to election or appointment of any public officer such officer may receive salary increases due to changes of the salary factor . . ."

Accordingly, OAG, No 2822, supra, held that a public body may fix a public official's salary on an incremental basis by contractual agreement prior to the commencement of the official's term, without contravening 1908 Const, art 16, Sec. 3, supra, and stated:

'. . . [S]ince the amount of the salary is fixed prior to his election or appointment, there is no increasing of salary within the term. Although the amount of salary actually to be received is subject to successive annual raises, the increases are fixed by the proper body before election or appointment, rather than during the period in which the office is held.'

See Taylor v Auditor General, 367 Mich 256, 276-277; 116 NW2d 848 (1962), (Black J. dissenting) cert den 372 US 909; 83 SCt 722; 9 LEd2d 718 (1963).

Under the reasoning of Attorney General v Board of Education of the City of Detroit, supra, and the respective Attorney General opinions discussed above construing the similar provisions of predecessor 1908 Const, art 16, Sec. 3, supra, it may be concluded that there is no prohibited 'extra compensation' within the meaning of Const 1963, art 11, Sec. 3, supra, where (1) an increase in compensation is paid prospectively, and not retroactively, pursuant to agreement and (2) an incremental salary contract for a public official, entered into prior to the performance of services, and providing for additional compensation at set intervals during the contractual period, is valid.

Superintendents of fourth class school districts are public officers. OAG, 1963-1964, No 4309, p 459 (September 11, 1964), and subject to the terms of Const 1963, art 11, Sec. 3, supra, with respect to 'extra compensation'. See Vigelius v Houghton County Clerk, 317 Mich 138, 144; 26 NW2d 737 (1947).

The legislature has expressly authorized a board of education of a fourth class school district to enter into a contract for professional services with its superintendent for a term not to exceed 3 years. The School Code of 1976, 1976 PA 451, Sec. 132; MCLA 380.132; MSA 15.4132. Thus, a three year contract with the superintendent which establishes the salary for the first year and authorizes the subsequent negotiation of salary for the second and third years is within the statutory authority of a board of education of a fourth class school district. Cf Senghas, v L'anse Creuse Public Schools, 368 Mich 557; 118 NW2d 975 (1962). Unless otherwise controlled by 1963 Const or statute, the making, requisites for, and the validity of, a contract of employment for educational services by a public school district are controlled by the laws governing contracts generally. See Spence v. School District No 3 of Arthur County, 236 NW 145 (Neb 1931). In Nelson v Witte, 347 Mich 411; 79 NW2d 906 (1956), the Court held the parties to a contract for hire have the right to make a new contract, or to modify the existing agreement with reference to the compensation that the party hired was to receive. In the public service, such right is subject to constitutional and statutory constraint.

Appellate courts in other jurisdictions have addressed whether retroactive 'extra compensation' is permissible under restrictive constitutional clauses similar to Michigan's in the context of public sector employment where a retroactive wage adjustment is negotiated pursuant to collective bargaining and is applied only to the period of time when the employees have worked without a contract. In State of Wisconsin, Department of Administration v Wisconsin Employment Relations Comm, 90 Wis 2d 426; 280 NW2d 150, 155 (1979), the Supreme Court of Wisconsin unanimously held that the provisions of Wis Const, art 4, Sec. 26, prohibiting 'extra compensation', was not contravened where state employees were provided through collective bargaining negotiations a retroactive wage adjustment which applied solely to that period of time when the employees continued to perform services without a contract, where the wage rates due and owing were indefinite due to the expiration of the old contract. The Court also stated that no impermissible 'extra compensation' was at issue where public sector employees continued to work without a contract since, under state policy as set forth in the Wisconsin State Employer Labor Relations Act,

". . . the-public safety and interest and . . . effective conduct of public business' . . . can only be accomplished by maintaining the continuity of the employment relationship during the period of time when employees are working without a contract.' 280 NW2d 150, 155.

The Wisconsin Supreme Court cited, with approval, similar decisions of California courts of appeal (1) which had considered the issue of 'extra compensation' under the California Constitution, and which held that retroactive salary adjustments based on public sector collective bargaining, to a date when salary rates were not definite (due to expiration of a prior contract) and subject to future determination did not constitute 'extra compensation'. These public sector employment decisions from other states involve cases where continued services are rendered by employees where no contract for services exists due to expiration of a prior agreement, thus making wage rates indefinite and subject to good faith negotiation through collective bargaining.

In the instant case, pursuant to contractual agreement, the rate of compensation for the whole of the second year of the three year contract was not determined to be increased above the amount established in the contract until midway through the second year, pursuant to a supplemental salary agreement. The rate of compensation for the second year, therefore, was expressly reserved by the parties as being subject to negotiation, and the rate of additional compensation to be paid was determined, pursuant to agreement, during the second year. The compensation established for the first year was to remain operational for the second and third year, in the absence of a supplemental agreement. The increased compensation, although agreed upon midway through the second year, was payable for the whole of such year. To the extent the supplemental salary agreement provided prospective compensation, for services to be rendered, such agreement is permissible and does not constitute extra compensation under Const 1963, art 11, Sec. 3, supra. However, to the extent that the supplemental agreement operates retroactively, it must be viewed as attributable to services previously rendered, thus constituting extra compensation prohibited by the constitutional mandate. OAG, 1928-1930, supra. Once a rate of compensation has been determined for a contractual period, and the public officer subsequently performs services during such period, he or she may not, thereafter, be granted extra compensation for such services on a retroactive basis, regardless of contractual language to the contrary, since any payment of extra compensation for services previously rendered is constitutionally impermissible. Attorney General v Board of Education of the City of Detroit, supra.

Public bodies which contract with public officers for services cannot accomplish by indirection that which cannot be done directly. Kearney v Board of State Auditors, 189 Mich 666, 674; 155 NW 510 (1915).

Therefore, it is my opinion, that the supplemental salary agreement in question, entered into pursuant to precedent contractual agreement, constitutes 'extra compensation' to the extent any increased compensation is attributable, on a retroactive basis, to services previously rendered, and, accordingly, to that extent, such compensation is impermissible under Const 1963, art 11, Sec. 3, supra.

Frank J. Kelley

Attorney General

(1) San Joaquin City Employees Ass'n v County of San Joaquin, 39 Cal App 3d 83; 113 Cal Rptr 912 (1974); Gai v Fresno City Council, 63 Cal App 3d 381; 133 Cal Rptr 753 (1976); Goleta Educators Ass'n v Dall' Armi, 68 Cal App 3d 830; 137 Cal Rptr 324 (1977).

 


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