                          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~~
                                                il<j ap~oiuted
    receiver&all forthtrith t%l;u;*~~>es:~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
    <he court may direch.



         "The Board shall have poowerto appointand fix
    the compensationof th* 1~rl';idstore,ndof such special
    deputy liquidators,couns?~l, cLerka,or eseistans,as
    it may deem ueceasary. 3~3 psyrna>,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
