Untitled Texas Attorney General Opinion

A~~JSTIN 11. TCUAS September29, 1954 Hon. c. H. CavnePe ~opini0n 190. a-141 State Auditor Anntin, Texae Re: IU~lbillty'of the llqni- dator appointeduwlor Arti- cle 21.28,Tcxaa InBuMnoe Code, and hl8 eraployeee for membershipin the State Em- plRyeestbtlrcmtentsy8te& Dear Mr. Cavllesrt Your requertror UI opinion rem in pm u f0umt "Ara the liquidator (appointedby the Board of InsuranceCommissionersunder the provisionsof Article 21.28, Imuranos Code of;Texas) and those operatingunder him Stata employeesto the extent that they are eligiblefor membershipand partioipa- tion in the Texas EmployeesRetirementSystem? "This questionarises in view of the fact that those personsare members of the EmployeesRetirement System and making contributionsto it, while at the same time they are also participatingin the Federal Social Security,Act(makingcontributions) and the Un- employmentCompensationcoverage(Stateand Federal). "If those personsare State employeeswe do not believe they shouldbe under the Sooial Securityand UnemploymentCompensationprovisions. If they are not State employees,then we do not believethey should be coveredby the EmployeesRetirementSystem." Eligibilityfor membershipin the EmployeesRetirementSystem of Texas Is determinedby the definitionsof "department" aud "ea@.oyee" found in Section 1 of Article 62289, Vernon'sCivil Statutes. These de- finitionsare *s follows: "'Dcpartmant'shall mean any department,commission, institution, or agency of the State Government. "'Employee'shall mean any regularlyappointedofficer or employeein a hepar'tment o? '2netitate tin0'isemployahon z C.H. Cavness,pa@ 2 ,(iS-141) a basis or in a positionnormallyreq~fringnot iqa thau nine hundred (900) hours per year, but shall ~4~ includemembere of U$State Legislatureor any inoumbantof an office normallyfilledby vote of the people; nor peraonson pieceworkbasis; nor operatorsof equipmentor dPiYel'Rof 3mm whom wages are Ineludedin.rentalrate Raid the ownersof &aid equipmentor team; nor any personwho is coveredby the TeacherRetirementSystemof the State of Texas or,any retirementsystemslrPport.4 with State funds other than the Texas EmployeesHn,tirement System." Funds from which retirementbenef::sare paid are made up of contributions from the employees@oompenoatiojnand a matchingoontribu- tion by the State of Texas, which in chargedto the fund "appropriated, allooated,and providedto pay the salaryor compensationof the em- is made." Art. 6228a, sea. 8. ployee for whose benefit the oontrib'ation The questionfor determinationis uix%her Article21.28 of the InsuranceCode createsa "department,?omraission,Institution,or agencyof the State Govemmanf." Section2 of Article21.28 provides: "Wheneverunder the law of this S-);ete a court of competentjurisdiction fiuds that a reooivershould take chargeof the assetsof an insurerdomiciledin this State, the liquidatordasignakedb:-,theBoard of InsuranceCommisaiouerees "heriqafterprtivided for shall be such receiver. ,ilbe l!.<~~~ir’*a’b~~ iles:~i~~ a;'the assetsof such 1ns~~~e.r and dea? w.,&+ .-the oaue %n his own nom as receiveror -Inthe imme of the Umrer a8 ,t. of b~::h. ~mgmsa%ion and all expensesof liquidstionshall be made by the liquidatorout of funds or assets of the insureron approvalof the Board. An itemizedreport of such expenees,sworn to by the liquidatorand approvedby the Board, shall be preflentedto the court from time to time,which accountnhkl.1 be approvedby the Court unlessobJectionis filed theretowithin ten (10) days after the presentationof the aoaount . . . ." E&l. c. 'H.crYnass,pago 3 (.(&141) sootion 4 or Artiole 21.28 rerd~ in parts "The l.iquidatorherein;named ehallbe appplnte6by a majorityor orid Boerd or lhame commi~sionera,enA ehallbe rubjeotto removalby a majorityof said Roard, and b;eforaentering upon the duties of said offioe,shall file withtheBoardof IneuranoeCommi~eioners abond ln theeum of Ten Thousand($lO,OOO.OO) Rollare,payableto the Roud of IneatranceCom1eslonere,and oond1tlonedupon the faith- ful perfomanoe of his duties and the proper aocountlngfor a11 moneys and propertiesreceivedor admlnlsterodby him." The statutegives the Board of Imurame Coamniselonersoertaln, duties in the liquidationof receivershipestatesand lnveetsit with certainpower and authorityover the liquidatoralong with the control exercisedby the variouscourts ln whlah reoeivershlpsare pending. It is our opinionthat the liquidatorand the employeeewho are lppointedbythe Board of InsuranceCommlssionerato serve nnder him 0~~4 within the definitionof "employee"ln the Trras RmployeasRetmnt Act. The liquidatorfunotlonsas a receiverunder appointmentof a cot&~, but hln appolntmentresultefrom his designationae liquidatorby the Roan3 of Itwme Ctmmierionerf~. while Article21.28 of the liwvrauce Code doen not expreeelyrefer to the liquidatoras a subordinateof the Roud of In- ouranoeCcaomisdonerra, the lmportof the etatnteis that tbs Board 1s given a gemeraleupervlaoryresponsiblllty over the llquldatlonof ineuremoeoa- paniesvhlch iv oarrledout throughits agent, the liquidator,who Is ee- lectcdby the Board, is responsibleto it for themanner in whloh he par- forms his duties,and ls subject to dlsahargeby the ~oerd.1 The liqui- dator is also responsibleto the court, but we are elfthe opinionthat he ifdaotlng 88 the agent or repreaentatlve of the Board of Insuranoe&I&S- sionersin dischrrglnghis duties. The legislaturehaa in effeot oreated a state agency to handle the liquidationof lnsuranaeoompaniesend has placed the agency under the supervisionof the Board of InsuranceCon&s- sioner6e The motivationback of the statuteundoubtedlywas the belief that the establishment of a state agency to admlnlsterall lnsurauoe receiverships, with a permanentstaff experiencedin such matters,would result ln greaterefficiencyand more satisfactoryhandlingof the affairs of the companleeln receivership.The fact that the lnsuranoebusinessin one aacted with the public interestwcararhts the establishmentof a go- ~ermwntrlagency to handle the receivershipsvhloh the courts plaoe ln its hands. 1 The title of the originallot providingfor the appointment of a liquidatorreads: "An Aot ~0110endng the liquidation, rebabilltation, reorganizationor conservationof insurers and placlng mme under the Board of InsursnoeCommissioners; . . ." (Euphasla supplied)Acte. 46th Leg. R.S. 1939, p. 389. Hon. C. H. Cavness,page 4 \&S-1$1) The oreaticmof the ollfice of liquiaotorthroughlegislative enaotment,the method or hi61byopOtihmt,the ail?~ervlsions of hia duties by an exeoutivedepmtment of the State Government,and the pezmanenoy of the offle all point to the oonolueionthat this Is a state agency ad that ite employessoome within the definitionof "employee"in tha Bmployei~RetirementAat. The one faotorwhlah might cast doubt on thie oonclusionis the rw2 the liquidatorand the employeesunder him are paid out of ths assets of the oompanleswhich are ln receivership. Aesumhg that the SUDIBneceeaeryto meet those expensescould not be lookedupon as assessmczlts' which becomestate funds (See Att'y.Cm. Op. V. lgl), does the fact that their compensationis paid from a source other than state fund&!prevent thesepersonsfrom being olasslfledas state employees4 The employer-e.m@oyoe relationshipmay exist even thoughthe employeeis comPensateaout of funds of a third person. Jones v. Goodson, l21F. 2d 176 (C.X.A. lOth, 191) and cases cited at page 179. In our opinion,the faot th.%t these persons~8 oompensatedfrom funds of the companiesin liquidationdoes not negativetheir status aa state employees.Cf, Gagne v. Brush, 30 F. Supp. 714 (D.C.N. Hemp. 1940); In re Park Brewing Co,, 48 F. Supp. 750 (W.D.Mioh,,1942).In 80 fw na the State Employees RetirementAct IS concorned,tha statute does not requirethat members of the Re=lrcme2tSystem be paid out of state funds. It requiresthat the contrlbuttonby hhe State shall be chargedto the fund "sppro?riated, allocc.td, ma p2-0viaaa” to pay the 1 $Uary:i.orcompensationof ti employee,eArticle21.28 of the Ineuwe Code makes provisionfor paper12of the compensationof tha employees ma all expensesof iiqdaats02 out of ma8 or asseta of the insurer. The State'smatch- con+zlhutionis a proper epense of liquidationand 1s payableout 0r the funaRthus allocated2nd p-0VidOd. The holdlagof ,thlsopinion 1~ .Xir%teP to employeeswho per- form servicesfor the IlqMdator fnol;?ont to hit:z*ocelvershipduties in windingup the affairs of .thr:oomp~~&oaor in s!?.pervisingtheir continuedoperation,es the case my be, 3.2oontrad.lstl~~otlon t0 em- ployeesof a oompanywho are rotnined. to o:>ntlnuet3e lmsinaasopera- tlone of the company. Personswho peti'nrfi scrv:.cmsfor the company ln carryingon the regularoperationsfor Mioh it.~~7sorganizedare not state employeea,alt,:mugh they zre ~7nderXre sup3nision 0r the liquida- tor during the time the receivernhlpcon".inuas. The holdingthat XAe Iiquldo;torend.his sti&f C.o?WtitM3a state agenoy Is lnconaistentwith some of the statementamade in AttorneyGem- ar8a's opinionv-191 (1947). This opln!.on overrulesOpinionV-191 to the extent of such lnoonais.tency. you hrvs etated that it 1s your belief that these employees ohouldnot be under the Texas UnemploymentCompensationAot (Art1010 522lb-1et seq., V.C.S.) and the old-age and survivorsinauranoeprovi- rlom of the Sooirl geourityAot if they we aoaeredby the Texae Bn- ployeerRetirementAot. Artiale 522Ib-17(g)(T)(0) provldeettit employ; . Hon. C. E, Cavness,page'i5 (S-141) mOnt shall not inolude'"'eervioepel-fOrMedin the employ of this State or any other state,or of any politicrl0ubdivisionthereof,or any lnatrumentality 0r any one or moreor the foregOingwhloh is who14 owned by this State or by one or more statesor politicalrubdivislons." The FederelUnemploymentTax Act containsa similarprovision(26 U.S. C.A. Seo. 1607(o)(7)).Llkewioe,the Sooial SeourityAot (42 U.S.O.A. Sec. 410 (a) (8)) and the Fedaral InsuranoeContributionsAot (26 U.S. C.A. Seo 1426(b)(8))exoludeserviceperformedln the employof a State rmm coverageunder th0se laws. It shouldbe noted that the Texas EmployeesRetirementAct does not excludefrom membershippersonswho are coveredby other re- tirementsystems,exceptsystemssupportedwith state funds. SiELUl- taneouscoverageof these personsunder the RetirementAct and the Social SecurityAct would not Plolatethe RetirementAot. Any result- ing violationwould be against the Soolal Security Act for having in- cludedetate employeesin coverageunder that law. The questionof ooverageunder the federalstatutesie a matter for federal Interpretation, and a oonsLWdctionby e state exe- outiveofficer is not bindingupon federalauthorities.We must conclude that the federaladministrative agenciesare free to place their own interpretation upon the meaning of "serviceperformedln the employof a State"as used ln the federal statutes. NationalCampaignCommittee v. Rogan, 69 F: Supp. 679, 686 (S. D. Cal. 1945). With reapeotto the meeniq of thie provisionin the Texan UnemploymentCompensa%ionAOt, it ha61been held that unless a state unemploymentoomgensationaot dear4 differsfrom the federal law, it must be assumedthat the Legislatureintendedthat they be inter- preted rlike. Arnold collegefor Rygleneand PhysicalRaucationV. Denaher, 3.31Corm. 503, 41 Atl. 26 89 (1945). It is our oonolusion that in snaotingthe Texas UnemploymentC0mpensatlonAct the Texas L glslat~ureintendedto adop, + the oonstrootlouwhioh the federal a6tithorities plaoedupon the oomparableprovisiouin the federaleta- tutes. This oonclusion1s strengthenedby the faot that the tax would still aOorueunder the federal etatuteeven thoughthe state statute exemptedthe employment,lf the federallaw was construednot to ex- empt it, Federaladmlniatrative auth0rltieshave alreadyruled on the questionof unemploymentcompensationouveragefor these employees. While this offioemight disagreewith the federal lnterpretrtion, neverthelessve oondidbrit beyond our authorityto assume the role Of interpreterof this provisionin the Terra UnemploymentC0mpensrtiOn Act when federalauthoritieshave alreadyconstruedthe similarPmVi- alon in the federal law. This opiniongoes no further than to hold that the liquidatorand his employeesare ooveredby the Texas EmplOy- ees RetirementAot. A rsoonaideration of the proprietyof their alsO being coveredby the Social SeourltyAct and the state and federalunem- ploymentocmpensatianlaw61 will have to emanatefmm the appropriate federaltuth0rities. Eon; 0. H. Cavness,page 6 (S-141) The insuranceliquidatorappointedby the Board of Insurance Commiseionere under Article21.28, Texas IaeuranceCode, anb the employeem workingunder hkn are state employeeswithin the tam of the State l5n- ployeeeRetirementAot (Art. 6228a,v.0.s))an&are eligiblefor mamber- ship in the mployeee RetirementSystem of Texas, Yours very truly, JOBN BEN SHEPPERD AttorneyGeneral APPRovm: JOlw DAVBtQORT Reviewer BY Mary K. Wall W. V. GEPPERT Aseistant Reviewer ROBERl,S.TRO'LTI First Aeelatant JOBNBENSKEPF'ERD Attorney General