Conflict of Interest and the Spouse

Consider this hypothetical situation: The governing body of a local government is considering approval of a contract that may involve an elected official’s spouse or domestic partner as defined in RCW 26.16.030. Can the agency contract with the elected official’s spouse or partner at all? If so, can that elected official avoid the conflict by recusing themselves from the vote?

Before considering this question, let’s get a refresher on the state’s conflict of interest law, RCW 42.23.030. This statute provides, in part:

No municipal officer shall be 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.

The statute specifically prohibits a municipal officer from directly or indirectly receiving a financial benefit from a contract if the contract is made by, through, or under the supervision of the municipal officer, in whole or in part. Any contract entered into by a municipality in violation of this prohibition is void.

This blog will review the considerations an agency (and its elected officials) should review if it considers contracting with the spouse or domestic partner of an elected official. There are some exceptions to the prohibition in RCW 42.23.030, and, if certain requirements are met, the elected official may vote on a contract involving their spouse or domestic partner.

To take a deeper dive into this topic, let’s look at what makes a contract a contract and who is able to make contracts on behalf of a local government.

What Is a Contract?

Some examples of a basic local government contract for goods or services are as follows:

• An agency purchases a piece of equipment from a local hardware store owned by the spouse (or partner) of an elected official.
• The spouse (or partner) of an elected official is hired to work in the parks department.

In the situations outlined above, whether for purchasing goods or for employment, the nature of the relationship with the local government is contractual, and, as a result, may fall under the prohibition outlined in RCW 42.23.030.

Who can approve the contract?

For local governments, the contracting authority is the governing body (city or county council, board of county commissioners, special purpose district board) unless that authority has been delegated. Thus, if members of a governing body vote to purchase equipment from the local hardware store owned by the spouse or partner of one of the members, the agency is contracting with the hardware store. Similarly, if the spouse or partner of an elected official is hired to work in an agency department, that person is contracting with the agency to perform services in return for compensation.

Contractual situations involving spouses or partners of local government officials can present complications that are not immediately apparent, but are due to the fact that Washington is a community property state.

Under community property laws, compensation earned during marriage by one spouse or a domestic partner is considered to go to both the spouse or partner and the elected official. Thus, if an elected official’s spouse or partner owns a hardware store, Washington law maintains that both the store owner and the elected official would benefit from any sale made by the store to the local government. Similarly, the earnings of a local government employee will also benefit their spouse or domestic partner. Therein lies the problem: even if an agency contracts with an elected official’s spouse or partner, the benefit of the contract is shared and the official is benefited, thus bringing the contract under the potential application of the RCW 42.23.030 prohibition.

Are There Any Exemptions?

There may be some exceptions to the prohibition in RCW 42.23.030.

In most instances, if the amount received by the spouse or partner under contract does not exceed $1,500 in any calendar month or $18,000 for a calendar year, and the contract is with a city, town, non-charter code city, or county fair board in a county without a purchasing department, the prohibition does not apply.

A similar exemption is applied for elected officials with rural public hospital districts: If the amount received by the spouse or partner under contract made by the rural public hospital district does not exceed $1,500 for a calendar month or $24,000 in a calendar year (with the limit subject to possible annual increases), the prohibition does not apply.

RCW 42.23.040 offers the ‘remote interests’ exemption which allows the official (or their spouse or partner) to have certain financial relationships with the contracting party without being considered a conflict. Under this exemption, the elected official must disclose a potential conflict of interest to the governing board before a contract is developed — and the meeting notes must reflect this disclosure. When the governing body votes on the contract, the vote of the elected official with the conflict is not included in the final tally.

A note of caution

For the municipalities listed below, the exemptions do not apply and there can be zero benefit to elected officials when voting on contracts:

• Counties with a population of 125,000 or more.
• Cities with a population of 10,000 or more.
• Irrigation districts that encompass more than 50,000 acres.

The exemptions also do not apply to sales or leases by a local government and contracts for legal services.

Specialized Exemptions for Special Purpose Districts

Port, hospital, and school districts have specialized exemptions in RCW 42.23.030.

Port districts

For a port district to lease property to an elected official, there must be three disinterested appraisals done and a superior court determination that the transaction was fair to the port district and in the public interest. These same requirements also likely apply if the port district wants to lease property to the spouse or partner of an elected official.

Hospital districts

There is an exception allowing the employment of the spouse of a hospital district commissioner, provided the following requirements are met:

• The contract for employment predates the commissioner’s initial election,
• The contract is consistent with the district’s pay plan or union contract for similar employees,
• The commissioner’s interest is disclosed, and
• The commissioner does not vote on the contract or its conditions.

School districts

Other exceptions apply in some instances to contracts involving a school district, such as a school director serving as clerk and purchasing agent, certain school bus drivers, certain substitute teachers, and certain other school employees. If one of these does apply, the elected official’s interest must nevertheless be disclosed to the governing body and reflected in the minutes, and the official may not vote on the contract’s authorization, approval, or ratification.

When Both Spouses Hold Public Office

RCW 42.23.030 only relates to interests in contracts. Public officers, however, are compensated by reason of their office, not because of a contract. Thus, if the spouse or partner of an elected official is also a public officer of the same agency, there is no conflict. As an example, the spouse of a fire district commissioner may be appointed to the position of board secretary (an office) since neither the commissioner nor the board secretary are compensated by reason of a contract (see AGO 1978 No. 22). There is also no prohibition on spouses or partners serving on the same local government body.

What Are the Penalties for Violating the Statute?

If the officer has a beneficial interest in a contract prohibited by the statute, the contract is void by operation of law. This could cause problems if the agency has already paid under the contract. Also, the penalty may be the potential forfeiture of office, a $500 fine and other civil or criminal liability or penalties (RCW 42.23.050).