Request By:
Joseph W. Prather
Secretary
Finance and Administration Cabinet
383 Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: Chris Gorman, Attorney General; William B. Pettus, Assistant Attorney General
You recently submitted a written request for a formal opinion of this Office involving the appointment of an executive director by the Board of Directors for the Kentucky Housing Corporation (KHC). Your recent letter included a document entitled "Executive Employment Agreement" between the KHC and John G. Martinez, Executive Director, entered into on November 20, 1991. Your letter also enclosed a copy of OAG 88-40. Your specific questions are as follows:
1. Would a contract for employment of an executive director by KHC be a Personal Services Contract within the meaning of KRS 45A.690 to 45A.725?
2. May the KHC board of directors enter into a contract for the employment of an executive director for a term longer than one fiscal year?
3. Would a contract for the employment of an executive director for KHC be subject to review by the personal service contract review subcommittee of the legislative research commission? Cf. KRS 198A.040(22)
4. If a contract for employment of an executive director for KHC is a personal service contract within the meaning of KRS 45A.690 to 45A.725, and subject to review by the personal service contract review subcommittee of the legislative research commission, KRS 198A.040(22), wouldn't such contract have to authorize termination by the agency upon 30 days written notice to the contractor? KRS 45A.695(1).
5. If a contract for employment of an executive director for KHC is a personal services contract which must by statute provide for termination by the agency upon 30 days written notice, is a contract clause providing for 90 days, rather than 30 days, written notice of termination lawful?
6. Is the 'Golden Parachute' provision of the November 20, 1991, agreement between KHC and Mr. John Martinez, i.e., Part IV(E), requiring KHC to pay liquidated damages for "without cause" termination of the agreement, in an amount equal to his highest annual salary amount during the contract term, including 'fringe benefits and other compensation from' date of termination through date of expiration of initial contract term, June 30, 1993, plus 12 months more, July 1, 1993, through June 30, 1994, legally enforceable against KHC?
7. (a) Is the binding arbitration provision in Part V(B) enforceable against KHC?
(b) Does the non-disclosure provision in Part V(C) violate the Kentucky Open Records Law, KRS 61.870 et seq.?
In response to your first question, a contract for employment of an executive director by KHC does not necessarily constitute a "personal service contract" as defined by KRS 45A.690(1)(d). However, this Office is of the opinion that the specific employment contract you have attached to your letter does constitute a "personal service contract" as that phrase is defined by KRS 45A.690(1)(d). "Personal service contract" means:
an agreement whereby an individual, firm, partnership or corporation is to perform certain duties, professional or otherwise, for a specified period of time for a price agreed upon which is exempt from competitive bidding pursuant to KRS 45A.095. . . .
The six exemptions enumerated at KRS 45A.690(1)(d)1.-6. are not applicable to the "Executive Employment Agreement" attached to your letter.
Regardless of the label given to this agreement or contract it is clearly an agreement between a "contracting body" as defined by KRS 45A.690(1)(a), i.e., KHC, and an individual, i.e., John G. Martinez, in which Mr. Martinez has agreed to perform certain professional duties for a two year specified period of time for a specific salary or price agreed upon by the parties. This agreement is not subject to competitive bidding pursuant to KRS 45A.095.
This Office does not opine that every written "executive employment agreement" between KHC and its executive director constitutes a "personal service contract. " However, this Office is of the opinion that the specific "Executive Employment Agreement" attached to your letter does constitute a "personal service contract" because the agreement contains contractual terms which satisfy all elements of the statutory definition of "personal service contract. " Most importantly, the agreement provides for the performance of duties "for a specified period of time. . . ."
The other questions raised in your letter appear to assume that the Board of Directors for the KHC is authorized to enter into a "personal service contract" as a means of appointing an executive director. This Office is of the opinion that the Board of Directors for KHC is not statutorily authorized to elect or appoint an executive director by means of a "personal service contract. "
KRS 198A.030(8) provides as follows:
The board of directors shall annually elect one (1) of its members as vice chairman. The board of directors shall also elect or appoint , and prescribe the duties of, such other officers as the board of directors deems necessary or advisable, including an executive director and a secretary, and the board of directors shall fix the compensation of such officers.
(Emphasis added.) The word "elect" is not defined by KRS Chapter 198A OR KRS Chapter 446. "Elect" is not a technical word and does not have a peculiar or specific legal definition and therefore must be construed according to "the common and approved usage of language. . . . KRS 446.080(4). The word "elect" or "elected"
in its ordinary signification, carries with it the idea of vote, generally popular, sometimes more restricted, and cannot be held the synonym of any other mode of filling a position.
Black's Law Dictionary , (6th ed. 1991). It is the opinion of this Office that the word "elect" within the meaning of KRS 198A.030(8) refers to selection of one of the members of the Board of Directors to serve as an executive director or other officer of KHC.
The word "appoint, " as used in KRS 198A.030(8), is not defined by KRS Chapter 198A or KRS Chapter 446. "Appoint" is defined in part by Black's Law Dictionary as follows:
To designate, choose, select, assign, ordain, prescribe, constitute, or nominate. To allot or set apart. To assign authority to a particular use, task, position, or office.
Term is used where exclusive power and authority is given to one person, officer, or body to name persons to hold certain offices. It is usually distinguished from 'elect, ' meaning to choose by a vote of the qualified voters of the city; though this distinction is not invariably observed.
This Office is of the opinion that the word "appoint" as used in KRS 198A.030(8) refers to the employment of an individual other than a member of the Board of Directors of KHC. The Board of Directors for KHC has the discretion to elect one of its own members as an executive director or may appoint an individual who is not a member of the Board of Directors. However, the Board of Directors has no statutory authority to make this election or appointment by means of a "personal service contract" as defined by KRS 45A.690(1)(d).
The Kentucky General Assembly has granted some entities the statutory authority to appoint or employ a chief executive officer or executive director by means of a personal service contract. For example, "The State Fair Board may employ or contract with a president who shall not be one of their number." KRS 247.130(1). The Board of Trustees of the Kentucky Retirement Systems is authorized to "appoint or contract for the service of a general manager and fix his compensation without limitation by the provisions of KRS Chapter 18A and KRS 64.640." The Kentucky General Assembly has not granted the Board of Directors for KHC the statutory authority to elect or appoint an executive director for KHC through the method of a "personal service contract. " Therefore, the Board of Directors for KHC is not authorized to use this means of electing or appointing an executive director.
Having resolved this issue, it is not necessary to answer the remaining questions you have raised concerning the employment of an executive director by KHC through a "personal service contract. " These questions are moot and hypothetical in view of our opinion that an executive director may not be employed or appointed by means of a "personal service contract. " KHC does have statutory authority to employ "fiscal consultants, engineers, attorneys, real estate counselors, appraisers, and such other consultants and employees as may be required in the judgment of the corporation . . ., provided that any personal service contracts entered into shall be subject to review by the personal service contract review subcommittee of the legislative research commission." KRS 198A.040(22). However, by omission of the term "officers" from KRS 198A.040(22), the legislature has not authorized the Board of Directors of KHC to employ officers, such as an executive director and secretary, to be employed for a specified period of time by means of a "personal service contract. "
This Office opines that the non-disclosure provision of Part V(C) of the "Executive Employment Agreement, " which provides that no provisions of the agreement may be disclosed to any third party without the prior approval of the Board of Directors of the agency and the executive director violates the Kentucky Open Records Law to the extent that it purports to make this document exempt from the Open Records Law. KHC is a "public agency" as defined by KRS 61.870(1) and thus subject to the provisions of the Open Records Law. OAG 80-207. The public's right of access to a written settlement or contractual agreement between a public agency and an employee outweighs any privacy interests of the individual. OAG 91-20. Also see , OAG 79-413.