Could a Louisiana city pay severance promised in a union employment contract without violating the ban on gifts of public money?

Plain-English summary

A city and its employees' union had a contract promising severance when an employee left for reasons other than discipline. A state representative asked whether the city was bound to pay it. In Opinion 03-0254, the AG said yes: the contract created a legal obligation, and the severance was an earned employment benefit rather than a gratuitous payment.

The opinion applied Louisiana Constitution Article 7, Section 14(A)'s restriction on donations of public money. It distinguished a prior AG opinion about a terminated employee who had no contract and had not earned severance. Here, the benefit had been contemplated at the time of employment, so paying it discharged the city's contractual duty.

Currency note

The full issue date is not legible in the available official extract. 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, deadline, or remedy mentioned here.

What the opinion meant at issuance

City employees covered by the contract

The AG said qualifying employees could receive the severance promised in the city-union contract when they left for reasons other than discipline.

City officials and union representatives

The opinion treated the contract as creating a legal obligation to pay the earned benefit. It did not approve an unearned bonus or severance without a contractual basis.

Common questions

Q: Was contracted severance an unconstitutional gift of city money?
A: No. The AG said payment discharged an existing contractual obligation for an earned benefit.

Q: Did the answer cover employees fired for disciplinary reasons?
A: The contract described in the opinion promised severance to employees who left for reasons other than discipline; the opinion addressed that benefit.

Q: Why was this different from the AG's earlier severance opinion?
A: The AG said the earlier employee had no contract and severance was not an earned benefit, while the city-union contract here created the obligation.

Background and statutory framework

The opinion read the Louisiana Constitution's public-funds restriction as barring a gratuitous transfer when a public body had no legal duty to pay. It concluded that the city-union contract supplied that duty. The source also cited prior AG opinions and a Louisiana public-funds decision in footnotes.

Citations and references

Constitutional provision discussed: Article 7, Section 14(A) of the Louisiana Constitution.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0254

Original opinion text

DEPARTMENT OF JUSTICE
One American Place
301 Main Street, Suite 600
CIVIL DIVISION
P.O. Box 94005
BATON ROUGE
TEL.: (225) 342-7013
RICHARD P. IEYOUB
FAX: (225) 342-2090
70804-9005
ATTORNEY GENERAL

JUL 0 2003 o pinionNumber 03-0254

90-A-2 Public Funds - Loan, Pledge or Grants
Honorable Elcie J. Guillory
Article 7, Section 14 (A)
State Representative, District No. 34
2320 Dewey Street
City/employer and union are bound by contract
that provides for severance pay.
Lake Charles, LA 70601

Dear Representative Guillory:

An employment contract between a city/employer and the union provides that the employer pay an employee who leaves his job for reasons other than disciplinary severance pay at termination. You question if the parties are legally bound to do so.

In short, we believe that the contract creates a legal obligation and therefore the parties are bound by it. An expenditure of public funds must be addressed in light of Article 7, Section 14 (A) of the Louisiana Constitution. This article prohibits the state or any of its political subdivisions from loaning, pledging or donating its funds or things of value to or for any person and is violated whenever the state or one of its political subdivisions seeks to give up something of value when it is under no obligation to do so.1 Our office has interpreted legal obligation to mean that the ex2Penditure of funds be sanctioned, authorized by law, or in the discharge of a legal duty.

Although we have consistently opined that the payment of a bonus or any other gratuitous, unearned payment to public employees is prohibited by Article 7, Section 14 (A) of the Louisiana Constitution, that is not to say that a public employee is not entitled to be paid for all labor provided during his course of employment as well as all earned benefits, including annual leave, sick leave, retirement, etc.

It is our opinion that the severance pay outlined in the contract is not a bonus or gratuitous, unearned payment. Rather, it is an earned benefit contemplated at the time of employment. The provision for severance pay in the contract is a legal obligation of the city/employer and accordingly the payment of such is in the discharge of a legal duty. It is not a prohibited donation. We distinguish this opinion from our prior opinion regarding severance pay to a public employee upon her termination.3 In that opinion, there was no contract and severance pay was not an earned benefit. Here, we have a contract that creates the obligation to pay it.

City of Port Allen v. Louisiana Municipal Risk Agency, 439 So.2d 399 (La. 1983) Attorney General Opinion Nos. 02-0162 and 00-14 Attorney General Opinion No. 00-123

Page 2

Opinion Number 03-
Honorable Elcie J. Guillory
State Representative, District No. 34
Page -2-

We trust that this opinion adequately responds to your request. If you have any
questions or comments, please contact our office.

Yours very truly,

RICHARD P. IEYOUB
Attorney General

BY:
TINA VICARI GRANT
Assistant Attorney General

RPI/TVG/dam