Advisory Opinion No. 1999-14

Application Of Conn. Gen. Stat. §1-86e To The Hiring Of Relatives
By Independent Contractors And Their Staff

John Houchin, Director of the Eastern Region of the Department of Mental Retardation ("DMR"), has asked how the restrictions of Conn. Gen. Stat. §1-86e apply to private agencies which contract with DMR, and hire family members of the owners or staff as employees or subcontractors. Specifically, DMR wishes to know how the statute applies when such hiring will result in state payment or reimbursement for the services in question, particularly when there has been no competitive bidding process.

Under Conn. Gen. Stat. §1-86e(a)(1), no person hired by the State as a consultant or independent contractor shall "use the authority provided to the person under the contract, to obtain financial gain for the person, an employee of the person, or a member of the immediate family of any such person or employee." "Immediate family" is defined to include an individual’s spouse or child, and also includes a dependent relative residing in the individual’s household. Conn. Gen. Stat. §1-79(f). The State Ethics Commission has previously considered a similar issue, in Advisory Opinion No. 97-22, 59 Conn. L. J. 30, p.3D (1/20/98). In that opinion, the Commission held that when consultants or independent contractors are faced with decisions involving their financial interests or the financial interests of immediate family members, DMR must be notified in writing of the proposed actions and of the owners’ financial and familial connections with the matter. "DMR should then approve or disapprove the actions, in writing, before they are presented to the DMR client as a possibility."

The application of §1-86e to independent contractors and consultants is not intended to interfere with their business, but rather to prevent a private entity from using state money to, for example, hire immediate family members without appropriate oversight from DMR. A conflict of interest exists only if there is a nexus between the facts in question and the state money and authority granted to the independent contractor or consultant by contract. Under this rule, it would not be a conflict of interest for an immediate family member whose employment with the private agency pre-dates any state contract to continue in that employment once the agency does contract with the state. This is so primarily because DMR will have had an opportunity to review the private agency’s staff prior to entering into any contract with that agency.

Even if state money is used to hire the family member, a conflict of interest may be avoided if DMR approves the hiring after full consideration of the factors involved.

Therefore, if an independent contractor is considering hiring or subcontracting with a family member under circumstances which will result in state payment or reimbursement for the work in question, he or she should notify DMR in writing of the possibility, and demonstrate to DMR why this individual is appropriate. DMR must determine whether this person is qualified for the job, and also whether the compensation is market rate. If necessary, DMR may require the independent contractor to document a job search, analogous to the open and public process requirements of Conn. Gen. Stat. §1-84(i). That section requires a state employee or public official who wishes to contract with the state to go through an open and public process, including prior public offer of the contract opportunity and subsequent public disclosure of the responses received and the contract awarded.

Consistent with this ruling, DMR will administer its protocols to ensure compliance with §1-86e. If an independent contractor pursues an inappropriate hiring, or, for whatever reason, DMR fails to adhere to these protocols, the matter may become subject to an State Ethics Commission enforcement action, as a possible violation of Conn. Gen. Stat. §1-86e. Finally, it is important to note that the effect of this opinion is prospective.

By order of the Commission,

Stanely Burdick,
Chairperson