RECENT CALIFORNIA SUPREME COURT DECISION CHANGES THE STANDARD FOR WHEN A CONSULTANT OR INDEPENDENT CONTRACTOR CAN BE CONSIDERED AN "EMPLOYEE" SUBJECT TO GOVERNMENT CODE 1090

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I:iCk BEST BEST & KRIEGER ATTORNEYS AT LAW "The general purpose of GC 1090 is to prevent a situation where a public official [or employee] would stand to gain or lose something with respect to the making of a contract over which in his official capacity he would exercise some influence." (People v. Gnass (2002) 101 Cal. App. 4th 1271, 1297.) "'Participation in the making or forming of a contract,' is also defined broadly in the context of GC 1090, and includes involvement in preliminary discussions, negotiations, compromises, reasoning, planning, drawing of plans and specifications, and solicitation for bids. (Millbrae Assn. for Residential Survival v. City of Millbrae (1968) 262 Cal.App.2d 222, 237.) Thus, GC 1090 applies to consultants if they act in an advisory role on the preliminary discussions, fashioning RFPs, or planning in connection with a contract, and possess the ability to exert considerable influence over the contracting decisions of the public agency. Clearly, this prohibition would apply to "additional work' beyond the existing consultant contract or agreement for the consultant or his or her company." The Sahlolbei decision, while not explicitly rejecting the "considerable influence" test for this factor, did say that to determine if a consultant is involved in "making" a contract in their official capacity under the statute, one looks to whether "their position afforded them 'the opportunity to influence execution [of the contracts] directly or indirectly to promote [their] personal interests' and they exploit those opportunities."' Again, this test looks more to the function and actual actions of the consultant and not the quantum of influence wielded in that process. It is important to note that, as the Court took pains to point out, not all consultants, in all instances, will be considered an "employee" under section 1090, nor will a consultant be considered to have been involved in the "making of a contract in their official capacity" in all instances. "That said, we do not hold that all independent contractors are covered by section 1090. As the case law makes clear, section 1090 liability extends only to independent contractors who can be said to have been entrusted with ""transact[ing] on behalf of the Government"' (Stigall, supra, 58 Cal.2d at p. 570). (See Hub City, supra, 186 Cal.AppAth at p. 1125 ['An individual's status as an official under [section 10901 turns on the extent to which the person influences an agency's contracting decisions or otherwise acts in a capacity that demands the public trust.']; Schaefer, ' We caution against reading a requirement of an evil or improper intent in the word "exploit," as used here by the Court. The Court explained that "exploit" simply refers to using the "official position" in any fashion. -2- 93939.0000M29964650.1