Holiday Gifts vs. Holiday Bonuses
The question is often-asked this time of year: May a city give holiday gifts to its employees, such as a turkey, ham or gift basket?
The analysis is important because our Texas Constitution prohibits the grant of public money or things of value to any individual unless it is for a public purpose. Article III, section 52.
So, how does the city council determine whether an expenditure of funds for employee holiday gifts is for a public purpose? Zindia Thomas, Assistant General Counsel explains the three-step test as follows:
- “Ensure that the [expenditure’s] predominant purpose is to accomplish a
public purpose, not to benefit private parties;
- Retain public control over the funds to ensure that the public purpose is
accomplished and to protect the public investment; and
- Ensure that the political subdivision receives a return benefit. Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers’ Comp. Comm’n, 74
S.W.3d 377, 383 (Tex. 2002).”
You may also look to an attorney general opinion on the subject, Tex. Atty Gen LO-96-136 (1996). In that opinion, we are reminded that an expenditure that increases employee morale and productivity is an expenditure for a valid public purpose.
The final requirement is that the city must ensure that the value of the holiday gift is under fifty dollars per person, a de minimus amount. The gift must not be cash, a cash equivalent (gift card or gift certificate) or a negotiable instrument. See Tex. Penal Code 36.10(a)(6). Note that the IRS considers a check or money order to be a negotiable instrument.
While we are on the subject, does it make a difference if the city wants to give holiday bonuses rather than holiday gifts?
In this situation, we must look to a different provision in the Texas Constitution, at Article III, section 53. It states that the Legislature shall have no power to authorize a city to grant any extra compensation to a city employee after the service has been rendered. Zindia Thomas further explains that a city may give a holiday bonus only if, to keep from running afoul of the constitutional provision, it
- Provides for the holiday bonuses in its annual budget;
- Sets out in its personnel policies a procedure for granting bonuses; and
- Offers to give bonuses before the work is begun.
So, if you are asking the question in December, it is likely that the city’s only option for 2023 is to give employee holiday gifts that are not cash or cash-equivalent and valued at less than fifty dollars.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice.