Do You Provide Food & Beverages During Meetings?  You May Need to Stop Doing So.

It is a common practice in Oregon for local governments to provide meals to members of their governing bodies during meetings that occur over the lunch or dinner hour.  Many other local governments hold annual volunteer appreciation lunches or dinners for members of their appointed boards and commissions.  Some local governments sponsor team building events that include food or beverages or provide food and beverages for a holiday potluck or retirement party.  But according to a recent letter opinion issued by the Oregon Government Ethics Commission (OGEC), all of these actions may be prohibited by the state’s ethics laws.

In its letter, the OGEC concluded that ORS 244.040 prohibits a public body (such as a city, county or special district) from providing food or beverages to its employees and elected or appointed officials unless such food or beverages are made a part of the official or employee’s compensation package.  Thus, unless and until your local government has adopted a policy to make food or beverages provided by your entity a part of the official compensation package, you should immediately stop providing such food or beverages.

ORS 244.040(1) prohibits public officials from using or attempting to use their office or position to obtain a financial gain or avoid a financial detriment, for themselves or for their relatives, household members, or any businesses with which they are associated, if that financial gain or avoidance of detriment would not otherwise be available but for the fact they hold their office or position.  OGEC interpreted this prohibition to apply to any food or beverages provided by a public body to its employees and officials.  OGEC reasoned that:

"When a public body offers its elected officials and employees something of value, the financial gain or avoidance of detriment is being made available to the officials and employees because they hold their positions as public officials with that public body. Under ORS 244.040, the default is that any acceptance of free food or beverage by virtue of one’s position as a public official is a violation of ORS 244.040(1)."

OGEC did recognize, however, that ORS 244.040(2)(a) exempts from this prohibition any part of an official compensation package as determined by the public body.  Thus, if a local government adopts a policy that makes such food or beverages a part of the official or employee’s compensation package, the local government may continue to provide such food or beverages.

There are a few issues to consider, however, regarding whether and how to adopt such a policy. 

• First, such policies must be “determined by the public body,” meaning that there must be a policy or contract formally adopted by the local government, that expressly makes such food or beverage a part of the official or employee’s compensation. This can come in the form of employment or personnel policies, collective bargaining agreements, employment contracts or some other provision authorizing compensation.  Such a provision must be approved by the local government’s governing body (such as a city council) or an official delegated authority to make such decisions on behalf of the public body (such as a city manager).

• Second, public officials need to remain cognizant of and act in compliance with the state’s ethics laws when adopting such policies. In addition to ORS 244.040, the state’s ethics laws also require disclosure of conflicts of interest and preclude public officials from participating in matters in which they have an actual conflict.  Accordingly, public officials need to be careful about how and if they adopt such policies that could impact themselves, their relatives or members of their household.

• Finally, local governments need to understand the consequences of adopting such policies as it relates to other laws, such as state and federal tax laws.  For example, under federal law, food and beverages provided to employees and volunteers may be deemed taxable income, which require reporting and other obligations.  Depending on how the policy is drafted and what types and how often such food or beverages are provided, they might be deemed de minimis fringe benefits, which are not taxable. Understanding the tax consequences of adding food and beverages as official compensation before doing so is important for both the local government and its employees and officials. 

We here at BEH understand that this OGEC opinion could result in major changes for numerous local governments in the state, which is why we wanted to make sure you were aware that it was issued.  As always, please do not hesitate to contact any of the lawyers at BEH if you have questions about the opinion or if you want or need assistance in adopting policies to permit your local government to continue to provide food and beverages to your officials and/or employees.