June 23, 2005
Re: Payments in lieu of insurance premiums
Dear City Attorney:
You asked what the City should do in light of the Chancellor’s recent ruling that
payments made by the City to officials and employees in lieu of health insurance premiums and
increases in the Mayor’s salary during the term were illegal. You also asked if such payments for
employees could be made legal by private act. For a discussion of the first and second issues
relative to recovering the money, I refer you to my memo dated April 7, 2003, to your MTAS
management consultant.
I shall base my recommendations on amending your Charter upon the Chancellor’s ruling
that the payments in lieu of insurance for officials and employees were illegal. As I have told you
in our phone conversations, I think there are good arguments that they were not illegal. Article
XI, ' 9 of the state constitution prohibits the General Assembly from passing a private act having
the effect of altering the salary of a local official during a term. This constitutional provision is a
constraint on the General Assembly, not on the actions of local governing bodies. Its purpose is
to prevent “ripper bills” in which the General Assembly would remove local officials from office
or alter their salary, most often for vindictive political reasons. This constitutional provision
protects local governments from this type of arbitrary state action.
I doubt that a private act that simply authorizes a local government to set salaries and
terms of office would run afoul of this provision. Authorizing something to be done does not
have the “effect” of actually doing it. The thing authorized can either be done or not. To effect
the change requires local discretion and action. And it is not the purpose of the constitutional
provision to impede local action.
Even if the constitutional provision is applicable here, however, it does not apply to the
salaries of the city’s employees. Therefore, normally the city could increase the salary and
benefits of an employee at any time deemed desirable and feasible by the governing body.
Mysteriously, however, your City has chosen to include language in its Charter that makes the
constitutional restrictions apply to the salaries of employees as well as officers, assuming the
provision does apply to the salaries of the city’s officers. This language is in Section 3.02:
The salaries and compensation of all elected and appointed officers and employees of the
city shall be fixed by ordinance under a pay plan applying uniformly to all such officers
and employees.
Since the pay plan must apply uniformly to all officers and employees, and assuming the pay plan
constitutionally must prohibit an increase in salary for officers for the term, it must also prohibit
an increase in salary of employees for the term. I think this is an absurd result and that the pay
plans for officials and employees should be considered separately, but apparently (I do not have a
copy of the ruling) the Chancellor applied the Charter language literally to the question of
increasing the salaries of employees who chose not to take the insurance.
In my opinion these problems can be dealt with by private act charter amendment.
Tennessee Code Annotated, ' 8-27-607 provides that the authority to provide insurance under
that Part is supplemental to other authority:
The authority conferred by this part is in addition and supplemental to, and not in
substitution for, the power or authority conferred by any other general or special law, or
any other implied power or authority of municipal corporations and special school
districts, and does not affect insurance plans heretofore adopted.
A charter amendment clarifying the City’s authority to provide health insurance to employees and
officers and providing that employees who choose not to take the insurance may at the City’s
option have their salaries increased by the amount of the premium the City would otherwise have
paid should not run afoul of the general law.
Assuming the constitutional provision applies, however, the story is a little different for
officers. Since the salary cannot be increased during the term, the private act would have to
provided that any increase in salary would take effect for the next term following the effective
date of the private act and subsequent terms. Also, since the salary cannot increase during the
term, the amount of the salary increase caused by the refusal of insurance for the first year of the
term will have to be the same for each subsequent year of the term even if the premiums increase
in those years.
Finally, the language quoted above from the City’s Charter should be changed to separate
the officers’ pay plan from the employees’ pay plan and to eliminate the requirement that the pay
plans be uniform for the two (2) different groups. The pay plan for employees should apply
uniformly to employees and the pay plan for officers should apply uniformly to officers, but they
should not be required to apply uniformly to each other.
I hope this is helpful. If you have more questions, please ask.
Sincerely,
Dennis Huffer
Legal Consultant