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SECTION III - The Role of Commissioners

Compiled from the PHD Legal Manual, Chapter Two

The activities of organizations, including hospitals and hospital districts, are generally directed by a group of individuals who serve to represent the membership of the controlling entity as a whole. For not-for-profit hospitals, these groups are generally described as boards of directors or trustees. For public hospital districts, these are referred to as boards of commissioners, indicating that the individuals serving in these positions are elected officials, chosen by the voters to govern the hospital district. This section identifies some of the key issues relating to commissioners, including the elections process, commissioner duties, the role of the board, and commissioner compensation.

A. The Election Process

Because a hospital district is a local government, its governing body consists of publicly elected officials. These commissioners must run for office, and the qualifications for office, campaigns, and elections are regulated explicitly by Washington law.

Qualification for Office
The basic qualifications for a PHD commissioner are that he or she be a citizen of the United States and the State of Washington, and be an “elector” within the district boundaries. The State Constitution defines an “elector” as a person at least 18 years of age, who is a citizen of the United States, and who has lived in the precinct at least 30 days preceding the election. [See, PHD Legal Manual, Chapter 2 for further background.]

Running for Office
In general, elections of PHD commissioners are governed by the general Washington election laws found in RCW Title 29. Before 1991, hospital district elections were governed by the election laws pertaining to public utility districts found in Title 54. However, a general revision of election laws for all local governments was adopted by the state legislature during the 1991 session. While the differences between the two laws are fairly minor, there are occasional uncertainties created by elimination of the Title 54 language.

Election Law Requirements
Because Title 29 applies to virtually all elections in Washington, it should not be surprising that it is a fairly lengthy section of the Washington Code. Topics covered by this section of the code include registration of voters, times for holding elections, ballots, voting machines, absentee voting, polling place regulations, voters’ pamphlets, and crimes and penalties. Rather than provide an overview of all election law, this section merely identifies some of the major issues affecting interested candidates for PHD commissioner posts.

When are Elections Held?
Hospital district commissioner elections are held in odd-numbered years on the first Tuesday following the first Monday in November. [RCW 29.13.020]

When and How Must a Candidate File?
A candidate must announce his or her intention to run within a uniform five day period of not earlier than the 4th Monday of July and no later than the next succeeding Friday in the year of the election [RCW 29.15.020]. This is done by filing a declaration of candidacy with the county auditor(s) in person, by mail, or facsimile (fax) transmission [see chapter 29.15 RCW generally]. A sample declaration is included in the PHD Legal Manual.

A reopening of filing is permitted in nonpartisan elections - including hospital district commissioners - if a void in candidacy or a vacancy in office occurs. [RCW Sections 29.15.170 and .180] If a candidate for non-partisan office dies before the primary or general election, the candidate’s name should remain on the ballot. If the deceased candidate gains the most votes, the result is a vacancy in the office to be filled as provided by RCW 42.12.070. The person with the second highest number of votes is not entitled to a certificate of election. [AGO 1999 No. 5]

What Must Candidates Financially Disclose?
Candidates for PHD commissioner must also file forms with the Public Disclosure Commission within two weeks of announcing candidacy. The period covered is the previous twelve months. [RCW 42.17.240] The required contents of the report are set out in RCW 42.17.241.

Campaign Limitations
In general, PHDs, like other local governments, are prohibited from using public resources to assist in any election campaign. These public resources include its buildings, equipment, employees, and mailing lists. Based on this prohibition, a PHD may not act to support or oppose any candidate for commissioner in any way (see also PHD Legal Manual, “Special Issues”, Chapter Six). [RCW 42.17.130]

It is permissible for the district to make its facilities available on a non-discriminatory basis for purposes of making an objective and fair presentation of facts relevant to a ballot proposition, if this is part of the normal and regular conduct of the PHD. Thus, it may be possible for the hospital district to hold an open candidate session for those running for post of PHD commissioner.

Who Pays for the Costs of Elections?
Washington law requires that local election costs be prorated among the various districts with issues on the ballot at any election. Thus, in a general election a PHD must pay its share of costs. If a special election is held for only a PHD issue, the hospital district must pay all of the election costs. [RCW 29.13.045]

B. Commissioner Duties and Limitations

Oath of Commissioners
Prospective commissioners must take an oath of office before commencing their term. This oath should be administered and certified by any officer or notary public authorized to administer oaths, and should state that he or she will faithfully and impartially discharge the duties of office to the best of his or her ability. A commissioner is not technically qualified to hold office until the oath is administered. [RCW 29.01.135]

Terms of Office
Hospital district commissioners serve six-year terms of office. The only exceptions are those commissioners serving upon the creation of the district, those taking office as a result in the increase in number of commissioners where it is necessary that the initial terms be staggered, and those elected or appointed to serve the remainder of vacant terms. Upon creation of a district, Washington statutes spell out a number of requirements limiting the original commissioners’ terms. These are designed to ensure that commissioner vacancies will be staggered as evenly as possible. [RCW 70.44.040 and RCW 70.44.053]

Public Disclosure of Finances
Hospital district commissioners, like all elected and appointed public officials in Washington, must file a statement of financial affairs with the Public Disclosure Commission each year. The filing must be done between January 1 and April 15 for the preceding calendar year. The forms include information on personal and business financial relationships and property holding for the previous year, including specific information on occupation, investments, creditors, business directorships compensation, and real estate holdings. [RCW 42.17.240] Any commissioner who fails to file a report is subject to a $10 per day fine. Also, the Attorney General or private party can initiate an enforcement proceeding. Finally, if the violation affected the outcome of an election, the result may be held void. [RCW 42.17.390 and 42.17.400]

Commissioner Education
There is no specific requirement that hospital district commissioners pursue educational activities which will support their service as commissioners. However, prudence and the potential protections in liability situations suggest that each district support these educational activities and perhaps adopt a general board action recommending participation by each commissioner.

Commissioner Liability
Most PHD commissioner duties and liabilities are created by the same common law principles which create duties and responsibilities for private hospital trustees. These are generally referred to as “fiduciary” duties. For example, the duty of due diligence and care requires commissioners to use reasonable skill and diligence in the performance of their official duties. Specific liabilities and penalties are also created by the conflict of interest laws which are discussed in the PHD Legal Manual, Chapter 2, and later in this manual.

Public officials are immune from civil liability for damages for any discretionary decision or failure to make a discretionary decision within his or her official capacity. Commissioners, as public officials can request indemnification from the public hospital district under such circumstances. [RCW 4.96.041] At the same time, the liability does apply to the public agency. [RCW 4.24.470]

C. Board of Commissioners

Duties
The hospital district’s board of commissioners is legally responsible for establishing hospital district policy with respect to the powers of a PHD spelled out in RCW 70.44.060. For example, “to construct, condemn and purchase, purchase, acquire, lease, add to, maintain, and operate hospitals and other facilities as required to meet community health needs.”

More generally speaking, the board and individual commissioners are responsible for overseeing the hospital district’s policies and organization with respect to the operation of the district, including the delivery of quality patient care. In fulfilling its obligation, the board’s role is to adopt the necessary general policies to achieve these ends and to delegate the day-to-day operational responsibility with respect to these policies to the district administrator.

Increasing the Number of Commissioners
If a hospital district resolves to increase its number of, the board may elect to submit such a proposal to the voters at either a general or special election. The board is required to submit such a proposal if it receives a petition signed by 10% or more of the district’s voters. [RCW 70.44.053]

The statutes spell out a number of requirements relating to the increase in commissioners, including redistricting (if commissioners are elected from independent commissioner districts) and the need to stagger commissioner terms. Initially, however, the additional commissioner positions shall be deemed vacant and the board must appoint qualified people to serve in the position until the next general election. [RCW 70.44.056. 42.12.070]

Vacancies and Replacements of Commissioners
Vacancies on the board may occur through resignation, death, removal, conviction of a felony, unexcused nonattendance at meetings, statutory disqualification (e.g., he or she moves out of a district or is determined to hold an incompatible office as described under “Conflicts of Interest,” below), or permanent disability preventing the proper discharge of his or her duty. [RCWs 70.44.045 and 42.12.010]

Commissioners may be removed by a “recall” process which is spelled out in Article I, Section 33 of the State Constitution. Basically, a petition must be filed noting the inappropriate acts, be supported by a certain number of electors, and be voted on at a special election. Chapter 29.82 RCW sets out the specific requirements of the “recall” process.

Vacancies are filled on a temporary basis. The commissioners remaining on the board name a replacement. [RCW 42.12.070] This appointment is effective only until the next regular election for PHD commissioners at which time a commissioner must be elected to fill the balance of the vacant term. A contingency process addresses situations where there is only one or no commissioners left on the board to make appointments or the remaining commissioners fail to fill the vacancy within 90 days. RCW 42.12.070 also specifies guidelines for filling nonpartisan vacancies.

D. Commissioner Compensation

Setting Salaries and Wages
The compensation of commissioners is specifically outlined by statute. The district must establish the compensation of commissioners at a rate of $70 for each day or partial day devoted to the business of the district, including days during which he or she attends meetings with commissioners from his or her district or other hospital districts. The two major limitations to the rule are, 1) total compensation paid to each commissioner during any one year may not exceed $6,720, and 2) commissioners may not be compensated for services performed of a ministerial or professional nature. [RCW 70.44.050]

A commissioner may waive any or all of his or her compensation by written waiver filed with the district. Commissioners’ compensation should be reported on a Form W-2 for federal income tax purposes as would be the case with any other employee. Commissioners also are entitled to be covered under a group policy of insurance maintained for the district’s employees and this may include their immediate family and dependents. As the statute does not limit the type of insurance, presumably this could include any type of group insurance maintained by the district for its employees, such as health, life, dental or disability insurance. The statute also provides that commissioners may be reimbursed for reasonable expenses incurred in connection with business and meetings of the district while away from his or her place of residence. Such expenses may include travel, lodging and sustenance.

Practical Considerations
The State Auditor’s Office has been known to be very scrupulous in its review of commissioners’ compensation. Hospital districts and commissioners should follow the statutory requirements closely, including the record-keeping of the commissioners’ days for which they are entitled to compensation.

E. Conflicts of Interest

Public hospital district commissioners are often faced with situations that create confusion as to whether conflicts of interest laws are being violated. Washington law governing conflicts of interest in municipal governments is principally statutory. Chapter 42.23 RCW is the main source of law in this area. Chapter 42.23 RCW specifically addresses public contracts, expressly prohibiting municipal officers from being beneficially interested, directly or indirectly, in any contract which may be made by, through or under the supervision of such officer, in whole or in part, or which may be made for the benefit of his or her office, or accept, directly or indirectly, any compensation, gratuity or reward in connection with such contract from any other person beneficially interested therein. [RCW 42.23.030]

Under RCW 42.23.020, the terms “municipal officer” and “officer” include all elected and appointed officials of a municipality, together with all deputies and assistants of such an officer, and all persons exercising or undertaking to exercise any of the powers or functions of a municipal officer. The term “municipality” includes public hospital districts. Unfortunately chapter 42.23 RCW does not define the term “beneficial interest,” an omission which has created some confusion.

Limited to Financial Interest
One recent court of appeals decision limited the statute’s application to municipal officers with a financial interest in a contract. In Barry v. Johns, 82 Wash. App. 865 (1996), two members of the Mountlake Terrace city council were allowed to vote on a measure approving a contract between the city and a non-profit organization, even though both council members served as unpaid members of the board of directors of the non-profit organization. The court limited the scope of RCW 42.23.030 to include only financial benefits because: a) all the exceptions listed under 42.23.030 involved financial interests, indicating that the legislature only contemplated these types of interests when enacting the law, and b) the declared purpose of chapter 42.23 RCW, consistent with the general policy goals of the state, was to enlarge the pool of citizens eligible to serve on the board of municipal corporations, while uniformly governing “the transaction of business” by municipal officers.

The court also ruled that a clause in the contract limiting the council members’ personal liability in the event a lawsuit was brought against the non-profit organization did not constitute a financial interest since it merely duplicated protection already granted under state law. Since the council members were receiving no financial benefits from the contract, the court held that it would not be in the best interests of the community to force them to resign from their positions on the non-profit organization, and requiring them to abstain from voting on the approval of the contract would compromise their ability to influence an important community issue. The court went on to state that any prejudices or “predilections” the council members may have held as a result of their association with the charity organization was an acceptable part of their “political agenda.” If the voters disagree with the council members voting decisions, they can vote them out of office.

This case highlights some of the difficulties associated with compliance under the state’s conflicts of interest laws. Chapter 42.23 RCW is sufficiently complex that its provisions can often be interpreted in more than one way, causing confusion amongst municipal officers in cases that fall within the law’s “gray areas”. Further complicating matters are fundamental common law doctrines that also must be factored into a conflicts of interest analysis. While this section is intended to address some of the more common questions regarding these concerns, specific facts of individual situations should be discussed with legal counsel.

Exempt Contracts
Under RCW 42.23.030, a number of specific contracts are expressly exempted from the application of the statute. They generally are contracts of an unavoidable nature where the municipal officer receives no benefit distinguishable from that shared by the public generally and contracts entered into by rural municipalities (with a small population base from which to garner officers) for relatively small sums of money. These exceptions include:

• The furnishing of electrical, water or other utility services by a municipality engaged in the business of furnishing such services, at the same rates and on the same terms as are available to the public generally;
  
• The designation of public depositaries for PHD funds;
  
• The publication of legal notices required by law to be published by the PHD, upon competitive bidding or at rates not higher than prescribed by law for members of the general public;
  
• The employment of any person by a PHD or unskilled day labor at wages not exceeding $200 in any calendar month;
  
• The letting of any other contract (except a sale or lease as seller or lessor) by a PHD if the total amount received under the contract or contracts by the municipal officer or the municipal officer’s business does not exceed $1,500 in any calendar month. In order to fall within this exemption, the PHD is required to maintain a list, which must be publicly available, of each contract to which the exemption applies. In addition, the officer who has the beneficial interest in the contract may not vote on the authorization of the contract;
  
• The approval of any employment contract made with the spouse of a district commissioner if: (a) the spouse’s employment preceded the commissioner’s election to office; (b) the contract is commensurate with the pay plan or collective bargaining agreement of the local government; (c) the commissioner discloses the contract, and (d) the commissioner excuses him or herself from voting on any measures regarding the contract.

It is worth noting that in a 1996 opinion, the state’s Attorney General’s office stated that under Chapter 42.23 RCW it was permissible for a spouse of a county commissioner to serve as the administrative officer of the county health district, because the appointed position was a public office rather than a contract of employment. This followed a similar 1978 opinion. However, it is also important to remember that an Attorney General’s opinion has somewhat limited legal value. It is not law, and can be overruled by later court decisions.

Remote Contract Interest
In addition to the types of contracts expressly exempted from the statute , certain other types of contracts result only in “remote” contract interests which are not deemed to result in a conflict of interest. Under RCW 42.23.040, the types of contract interests that are deemed to be remote interests are limited to the following:

• that of a nonsalaried officer of a nonprofit corporation,
  
• that of an employee or agent of a contracting party where the compensation of such employee or agent consists entirely of fixed wages or salary,
  
• that of a landlord or tenant of a contracting party, or
  
• that of a holder of a less than one percent of the shares of a corporation or cooperative which is the contracting party.

The statute provides that a municipal officer will not be deemed to be interested in a contract in violation of the statute if his or her interest falls into one of these categories, and: a) the interest is disclosed to the board prior to contract formation and noted in its official minutes, and b) thereafter the commission approves or ratifies the contract in good faith by a vote of its membership sufficient in number to act for this purpose without counting the vote or votes of the remotely interested official(s). Additionally, none of these exemptions will apply if the officer having the remote interest influences or attempts to influence any other officer to enter into the contract. Therefore, the officer who has such a remote interest probably should not participate, or even appear to participate in any manner in the governing body’s action on the contract.

Gray Areas
When caught in a situation that falls within the “gray areas” of the conflict of interest law, it is often helpful to keep these fundamental principles in mind:

1. Public officers hold a public trust. They generally are held to a standard of behavior that does not (a) undermine, (b) provide an opportunity to undermine, or (c) appear to undermine that trust.

2. Public office is not to be used for the private financial gain of the officer or to secure special privileges for the officer or others.

Although not every activity calling into question one of these principals will amount to a prohibited conflict, they serve as a sound screening device. (Taken from “Conflicts of Interest Regulation in Municipal Government,” Legal Notes: Proceedings of the Washington State Association of Municipal Attorneys Annual Fall Conference., by Maureen Hart, Senior Assistant Attorney General, 1989).

Finally, an individual district may believe that some types of relationships are problematic, and that stricter standards are necessary. Local governments have the authority to adopt their own policies regarding the employment of the spouse of a commissioner, so long as it does not directly conflict with state law.

Physicians as Commissioners
Many public hospital districts have physicians on the board of commissioners. Over the years, the Attorney General’s Office has issued contradictory opinions on the question of whether this constitutes a conflict of interest. One Assistant Attorney General stated in no uncertain terms that the role of physician as commissioner may directly or indirectly benefit the physician as a member of the medical staff, because of a financial benefit to the physician (AGLO July 20, 1989). However, two earlier letters delivered by that office indicated that a conflict would not arise if the member of the medical staff did not have other underlying contractual arrangements (AGLO Nov. 15, 1978 and AGLO July 11, 1983). Again, it is important to recall that these opinions do not constitute the law. The issue will probably depend on the facts and circumstances of each individual situation. The nature of the physician’s privileges, the size of the medical staff, and the extent of the physician’s practice at the hospital district all are factors that should be considered when determining whether a conflict exists.

Incompatible Offices
In addition to conflicts of interest defined by statute, it is well established in the common law of Washington that an individual may not hold multiple offices if those offices are incompatible. In one case, the Washington State Supreme Court held that a Seattle Transit Commission member’s private work, that of a trial lawyer with a firm that occasionally represented plaintiffs suing the Transit System, was an “incompatible office.” In Kennett v. Levine, 50 Wn.2d 212 (1957) the State Supreme Court recognized that offices are incompatible where the functions of the two are inconsistent or where the occupation of both offices is detrimental to the public interest. The most obvious examples of incompatibility are where one office is subordinate to another in some aspect of its functions and duties. However in this case, the doctrine was extended to apply to between a private business and an appointive public office.

The application of Kennet v. Levine to PHD commissioners gives rise to hard questions. A rigid interpretation could potentially bar physicians on the hospital staff or who are based at the hospital from serving as a commissioner (see previous discussion). How about an opthamologist who is not connected with the hospital but who might oppose the opening of an eye clinic because it could compete with his or her business? Unfortunately, there are no clear answers to these questions, despite the attempt made in RCW 42.23.070 (dealing with prohibited acts) to provide guidance. The specific facts and circumstances of each particular case should be considered in consultation with legal counsel before proceeding with actions that could raise conflicts of interest.

Penalty for Violation
Any contract made in violation of Chapter 42.23 RCW may be held void, and the PHD may avoid payment under the current contract, even though it may have been fully performed by another party. RCW 42.23.050.

A public officer who violates this statute may be held liable for a $500 civil penalty, and may have to forfeit his or her office. RCW 42.23.050. Additionally, chapter 42.20 RCW makes certain conflicts of interests a crime.