James Dyer - Administrator Agreement - Attorney Work Product
Hi Jim –
I have reviewed the current Administrator Employment Agreement in response to the question of whether being elected to the Cherryland Electric Co-op Board of Directors would fall under Section 6. Outside Employment. The contract states as follows:
Section 6. Outside Employment. The Employee shall not engage in any employment or business outside this Agreement except as specifically approved in writing by the Board and under the following circumstances:
A. In the event the Employee is approved by the Board to engage in outside or supplemental employment, he shall:
(1) Not engage in such activity during the Employee’s regularly scheduled working hours.
(2) Not use the name of the Board of Commissioners or Leelanau County as a credential in advertising or soliciting customers or clients.
(3) Not use Leelanau County supplies, facilities, staff, or equipment in conjunction with any outside or supplemental employment or private practice.
(4) Maintain a clear separation of outside or supplemental employment from activities performed for the Board of Commissioners.
(5) Not cause any incompatibility, conflict of interest, or any possible appearance of conflict of interest, or any impairment of the independent and impartial performance of the Employee’s duties.
B. The Board shall not be liable, either directly or indirectly, for any activities performed in conjunction with supplemental employment. (emphasis added)
As a general matter, a seat on an electric utility cooperative board is generally not considered employment in the traditional legal or tax sense. Instead, it's treated as a governance or fiduciary role.
Board members of the cooperatives here are elected and serve in a governance capacity. It is my understanding that they are not on the payroll like staff or executives. Board members may receive stipends or per diem payments for attending meetings or performing board duties and this compensation is typically reported on IRS Form 1099 (independent contractor), not a W-2 (employee).
Under Michigan’s Employment Security Act, “employment” is defined as service performed for remuneration or under any contract of hire.” MCL 421.42 If board service involves only a stipend or per-meeting payment, without a contract of hire, it generally does not meet this statutory definition. Also, is does not appear that the board seat would meet the worker classification test used in Michigan (i.e. IRS 20-Factor Test).
Although the board of director seat does not meet the strict legal definition of “outside employment” requiring BOC approval, as a practical matter I would recommend the provisions in A. (1) –(5) be used as a guide to the extent these issues may come up. Further, to avoid potential questions regarding the relationship between the roles I would recommend providing the Board of Commissioners with an update on this topic to be consistent with the spirit of the provision.
Regards,
Matt