MS 2020-11-J-Chiles-November-10-2020-Incentive-hazard-pay November 10, 2020

Can a Mississippi county pay 'hazard pay' to its employees for working through COVID?

Short answer: The AG concluded that a Mississippi county could pay COVID hazard pay only if the incentive was contracted for before the services were performed, set by objective standards, and earned by personal services. Retroactive bonus payments would violate Sections 66 and 96 of the Mississippi Constitution.

Disclaimer: This is an official Mississippi Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed Mississippi attorney for advice on your specific situation.

Plain-English summary

Leflore County's Board attorney asked whether the county could pay employees "hazard pay" during the COVID-19 emergency. The AG had repeatedly addressed the question of incentive pay before COVID, and the same rules applied: incentive pay (including hazard pay) is constitutional only when it is contracted for prospectively, measured by objective standards, and earned through actual personal services. Pay handed out after the fact for work already performed turns into a bonus or donation, both forbidden by the Mississippi Constitution.

Two constitutional provisions sit behind the rule:

Section 66 (donations). No donation or gratuity of public funds without two-thirds legislative concurrence (and never for sectarian purposes). A retrospective bonus has no consideration moving in the other direction; the work is already done and was already paid for at the contracted rate.

Section 96 (extra compensation). The Legislature shall never grant extra compensation to a public officer, agent, servant, or contractor "after service rendered or contract made." A post-hoc payment for past service is an extra compensation under Section 96.

The AG's three-part test for permissible incentive pay:

Contracted for between the parties or with the employee prior to the date when services are to be performed.
Determined in accordance with objective standards of measurement.
Earned by personal services performed by the employees.

If a county wants to pay hazard pay, it has to put the program in writing prospectively, attach objective measurement criteria, and reward services going forward.

The AG also reminded counties that performance-based incentive payments and similar extraordinary nonrecurring payments are excluded from "earned compensation" under Section 25-11-103(k). They should not be reported to the Public Employees' Retirement System (PERS) for retirement-credit purposes.

Currency note

This opinion was issued in 2020. 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.

Common questions

Why can't the county just give a bonus to thank essential workers?

Because Section 96 forbids extra compensation "after service rendered or contract made." A thank-you bonus is exactly that. Section 66 also blocks donations of public funds without two-thirds legislative concurrence. The combination forecloses post-hoc bonuses.

What does a compliant hazard-pay program look like?

A pre-existing, written program that says: "Employees in [defined category] who [defined service requirement] during [defined period] will receive [defined dollar amount or formula]." The standards must be objective. The payment must be earned by actual services. The employee must know about the program before performing the work.

Can the program be retroactive at all?

Not in the AG's view. The contracting must precede the service. If the Board adopts the program today, it can apply to services performed from today forward, not before.

Does this affect the employee's retirement credit?

Yes. Section 25-11-103(k) excludes performance-based incentive payments and similar extraordinary nonrecurring payments from "earned compensation." That means the hazard-pay amount does not count toward PERS retirement credit and should not be reported to PERS.

Are there earlier AG opinions saying the same thing?

A long line. Robertson (Sept. 30, 2011), Campbell (April 12, 2010), Eleuteris (Nov. 1, 2013), Treadway (April 1, 2013), Allen (June 11, 2004), Meredith and Jones (Dec. 22, 2006), Siler (July 18, 2003), Jackson (June 29, 1992), Bowman (Nov. 14, 2005), and Nettles (June 26, 2014) all sit on the same rule.

Background and statutory framework

Article IV, Section 66 of the Mississippi Constitution forbids legislative donations or gratuities of public funds without a two-thirds vote of each house and never for sectarian purposes. Section 96 forbids the Legislature from granting "extra compensation, fee, or allowance, to any public officer, agent, servant, or contractor, after service rendered or contract made."

The AG's three-part test for incentive pay was articulated most clearly in MS AG Op., Nettles (June 26, 2014):

[I]t is well established that public bodies may pay employees incentives, provided such incentives are contracted for prior to the date when services are to be performed, are determined in accordance with objective standards of measurement and are earned by personal services performed by the employees.

The reasoning behind that rule comes from Sections 66 and 96. Payments without pre-existing obligation (bonuses) or for future services not yet provided (donations) violate the constitution. Payments implemented prospectively and earned by services do not.

Section 25-11-103(k) defines "earned compensation" for PERS purposes and explicitly excludes performance-based incentive payments and similar extraordinary nonrecurring payments.

The opinion is signed by Special Assistant Attorney General Phil Carter on behalf of Attorney General Lynn Fitch.

Citations

Mississippi Constitution Article IV, Section 66 (no donations)
Mississippi Constitution Article IV, Section 96 (no extra compensation after service rendered)
Miss. Code Ann. Section 25-11-103(k) (definition of earned compensation, PERS)
MS AG Op., Nettles at *2 (June 26, 2014)
MS AG Op., Robertson (Sept. 30, 2011)
MS AG Op., Campbell (April 12, 2010)
MS AG Op., Eleuteris (Nov. 1, 2013)
MS AG Op., Treadway (April 1, 2013)
MS AG Op., Allen (June 11, 2004)
MS AG Op., Meredith and Jones (Dec. 22, 2006)
MS AG Op., Siler (July 18, 2003)
MS AG Op., Jackson (June 29, 1992)
MS AG Op., Bowman (Nov. 14, 2005)

Source

Original opinion text

November 10, 2020

Joyce I. Chiles, Esq.
Board Attorney, Leflore County Board of Supervisors
Post Office Box 250
Greenwood, Mississippi 38935-0250

Re: Incentive (hazard) pay

Dear Ms. Chiles:

The Office of the Attorney General has received your request for an official opinion.

Issue Presented

Can the County expend county funds to give its employee "hazard pay" during the proclamation of an emergency for the COVID-19 pandemic?

Brief Response

A county may only expend county funds for incentive pay, including "hazard pay," when such incentives are contracted for prior to the date when services are to be performed.

Applicable Law and Discussion

This office has previously had the occasion to opine on the legality of incentive payments made by public employers:

We find no applicable law that would prohibit a duly-adopted, constitutional incentive policy. Further, it is well established that public bodies may pay employees incentives, provided such incentives are contracted for prior to the date when services are to be performed, are determined in accordance with objective standards of measurement and are earned by personal services performed by the employees. MS AG Op., Robertson (September 30, 2011); MS AG Op., Campbell (April 12, 2010); MS AG Op., Eleuteris (November 1, 2013); MS AG Op., Treadway (April 1, 2013). Compliance with this criteria is essential to ensure incentive payments do not constitute prohibited payments such as bonuses or donations under Mississippi Constitution Art. IV, Sections 66 and 96.

MS AG Op., Nettles at *2 (June 26, 2014).

"Payments to employees in which there is no pre-existing obligation to make the payments, as in the case of bonuses, or in which payments are made for future services that have not been provided at the time the payments are made, as in the case of donations, are considered unlawful, in accordance with Mississippi Constitution Article IV, Sections 66 and 96." MS AG Op., Campbell at 1 (Apr. 12, 2010) (citing MS AG Op., Allen (June 11, 2004). "To the contrary, we have previously opined that employee incentive payments which are implemented prospectively and for which payment is made pursuant to conditions met in the future do not run afoul of these constitutional provisions." MS AG Op., Campbell at 1 (Apr. 12, 2010) (citing MS AG Op., Meredith and Jones (Dec. 22, 2006)); see also MS AG Op., Siler at 1-2 (July 18, 2003); MS AG Op., Jackson at 1-2 (June 29, 1992); MS AG Op., Bowman at *2 (Nov. 14, 2005).

We are of the opinion that a county may only expend county funds for the payment of "hazard pay" where the criteria for incentive pay are met. Accordingly, such pay must be (1) contracted for between the parties or with the employee prior to the date when services are to be performed; (2) determined in accordance with objective standards of measurement; and (3) earned by personal services performed by the employees. See MS AG Op., Nettles at *2 (June 26, 2014).

However, please note that "performance-based incentive payments" and "other similar extraordinary nonrecurring payments" are excluded from "earned compensation" under Section 25-11-103(k) and should not be reported to the Mississippi Employees' Retirement System ("PERS") for retirement purposes. MS AG Op., Nettles at *2 (June 26, 2014).

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,
LYNN FITCH, ATTORNEY GENERAL

By: /s/ Phil Carter
Phil Carter
Special Assistant Attorney General