New York State
Ethics Commission


Advisory Opinion No. 96-5: Whether members of a not-for-profit corporation appointed by the Board of Regents are subject to Public Officers Law §74.

INTRODUCTION

The following advisory opinion is issued in response to a request submitted by [ ], a member of the New York State Independent Living Council ("Council"). He is seeking, on behalf of the Council, a definitive determination as to whether its members are public officers. However, the Commission is empowered to render an opinion only as to whether such members are covered by Public Officers Law §§73, 73-a and 74.

Pursuant to its authority under Executive Law §94(15), the New York State Ethics Commission ("Commission") hereby renders its opinion that the members of the Council are not subject to Public Officers Law §§73, 73-a and 74 for the reasons set forth herein.

BACKGROUND

The federal Rehabilitation Act ("Act"), 29 U.S.C. §796d, provides that to be eligible to receive federal assistance to establish independent living centers for individuals with severe disabilities, a State must establish a Statewide Independent Living Council. Under the Act, such a Council "shall not be established as an entity within a State agency."

The Act requires that the Council include at least one director of a center for independent living chosen by the directors of such centers within the State and, as ex officio, non-voting members, representatives of the State Education Department ("SED") and State agencies that provide services for individuals with disabilities. The Council may also include other representatives from centers for independent living, parents and guardians of individuals with disabilities, advocates of and for those with disabilities, representatives from private businesses, representatives from organizations that provide services for individuals with disabilities and other appropriate persons. 29 U.S.C.A. §796d(b)(2) and (3). The Act provides that a majority of the members must not be State employees or employees of centers of independent living.

In New York, the Council was incorporated in 1995 as a not-for-profit corporation, organized under Not-for-Profit Corporation Law §402, to meet the requirements of federal law. It is organized exclusively for charitable and educational purposes, and recently received certification from the Internal Revenue Service that it qualifies as a tax exempt organization under §501(c)(3) of the Internal Revenue Code.

The by-laws provide that the Board of Regents appoints the Council's 18 members. Its Certificate of Incorporation provides that the Council's purposes are to advise SED's Office of Vocational and Educational Services for Individuals with Disabilities ("VESID") with regard to the establishment and operation of service centers for independent living; to jointly develop, sign and submit, in conjunction with VESID and the New York State Department of Social Services, the State's independent living plan as required by federal law; and to monitor, review and evaluate the State plan.

The by-laws of the Council include the following:

Section 5.1. An Executive Director shall be appointed by the Board of Directors to serve at its discretion as the chief administrative officer of the corporation. The rate of compensation of the Executive Director shall be determined from time to time by the Board of Directors. The Executive Director may be removed by the Board of Directors in their discretion with or without cause.

. . .

Section 5.3. The Executive Director shall be responsible for recruiting, hiring, supervising and the terminating of all Council employees.

. . .

Section 7.1. Contracts. The Board of Directors may, by resolution duly adopted, authorize any officer or officers, agent or agents of the corporation, in addition to the officers so authorized by these By-Laws, to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation. Such authority may be general, or confined to specific instances.

The Council receives federal funds through a contract with SED. Once funds are provided, the Council does not need authorization from the agency to hire employees or enter into contracts. According to [the requesting individual], the Council may hire employees without regard to civil service requirements and may enter into contracts without State approval.

After the corporation was formed, its members sought a determination as to whether they are public officers under State law. On [date], [a senior official at] the State Education Department, advised the Council, by memorandum, that it was her opinion that they are public officers because the Council exercises the State's sovereign power to develop and submit the State plan required by the federal Act. This, she said, brings its members within the definition of "public officer" contained in §2 of the Public Officers Law. She further opined that the Council was subject to Public Officers Law, Article 7 -- the Open Meetings law. The Council disagrees with the conclusions reached by [the senior official], and it is seeking a definitive determination as to whether its members are public officers.

APPLICABLE STATUTES

Public Officers Law §§73(1)(g) and 73-a(1)(b) contain the identical definition of the term "state agency":

The term "state agency" shall mean any state department, or division, board, commission or bureau of any state department, any public benefit corporation, public authority or commission at least one of whose members is appointed by the governor, or the state university of New York or the city university of New York, including all their constitute units except community colleges and the independent institutions operating statutory or contract colleges on behalf of the state.

Public Officers Law §73(1)(i) provides:

The term "state officer or employee" shall mean:

. . . .

(iii) officers and employees of state departments, boards, bureaus, divisions, commissions, councils or other state agencies other than officers of such boards, commissions or councils who receive no compensation on a per diem basis.

Public Officers Law §73-a(1)(c)(ii) provides:

The term "state officer or employee" shall mean:

. . . .

officers and employees of statewide elected officials, officers and employees of state departments, boards, bureaus, divisions, commissions, councils or other state agencies, who receive annual compensation in excess of the filing rate established by paragraph (1) of the subdivision or who hold policy-making positions, as annually determined by the appointing authority and set forth in a written instrument which shall be filed with the state ethics commission established by section ninety-four of the executive law during the month of February, provided, however, that the appointing authority shall amend such written instrument after such date within thirty days after the undertaking of policy-making responsibilities by a new employee or any other employee whose name did not appear on the most recent written instrument. . . . .

Public Officers Law §74(1) provides:

The term "state agency" shall mean any state department, or division, board, commission, or bureau of any state department or any public benefit corporation or public authority at least one of whose members is appointed by the governor.

DISCUSSION

Although the Council is seeking a definitive determination as to whether its members are public officers, the Commission is not in a position to issue a ruling on this question, or to even give advice. Its powers are limited to interpreting and enforcing §§73, 73-a and 74 of the Public Officers Law. Thus, the Commission issues this opinion solely as to the question of whether officers and employees of the Council are covered by these sections.(1)

In answering this question, the issue is not whether the officers and employees of the Council are public officers; rather, it is whether the Council is a State agency, as defined in §§73, 73-a and 74, and whether its members are State officers or employees, as defined in §§73 and 73-a, and as applied to §74.

In considering these questions, the Commission examines what it has said with regard to other entities. In Advisory Opinion No. 90-2, which was addressed to the members of the board of trustees of the Interest on Lawyer Account Fund ("IOLA"), the Commission determined that IOLA was a covered State agency because its members are appointed by the Governor and the function of the Board -- dispensing funds to appropriate legal service organizations in the State -- is a public function. In contrast, the Commission held, in Advisory Opinion No. 93-1, that county alcoholic beverage control ("ABC") boards are not State agencies covered by Public Officers Law §74 because the boards have no gubernatorial appointees and perform a local rather than a State function.

In the instant case, the [senior official at] SED has determined that the Council, like IOLA, performs a State function, but, unlike IOLA, it has no gubernatorial appointees.

An entity with many similarities to the Council was considered in Advisory Opinion No. 93-3. There, the Commission discussed Health Research, Inc. ("HRI"), a not-for-profit corporation that was formed by officials of the New York State Department of Health and was closely affiliated with the Department. HRI was held not to be a State agency. While the Commission recognized that a number of State agencies had formed similar closely affiliated not-for-profit corporations, it said that such corporations, "remain separate and distinct independent entities whose employees are not State employees and are not subject to the provisions of the Public Officers Law." That opinion suggests that the Council, although performing State functions, should not be considered a State agency.

Other factors tend to support this result. The federal Act requiring the establishment of a State council specifically provides that, "the Council shall not be established as an entity within a State agency." It also provides that a majority of its members may not be State employees. This strongly suggests that Congress intended that the councils created under the Act be independent from, and not part of, State government.

Finally, the Council's by-laws make it clear that it is not subject to the type of requirements imposed on State agencies in hiring employees or entering into contracts. The Council's Board of Directors may hire an Executive Director, and, without limitation, set his or her compensation. They may also fire the Executive Director "in their discretion with or without cause." The Executive Director, in turn, has the authority to hire employees without State oversight or approval. All of these powers are inconsistent with customary State employment practices.

In addition, the by-laws provide that the Board of Directors is empowered to authorize officers and agents of the Council to "enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation." This power is inconsistent with the usual contracting powers of State agencies, which are subject to many restrictions. For example, most agencies must have their contracts approved by the State Comptroller pursuant to the State Finance Law. Thus, again, the Council is more like an entity independent of the State.

The operations of the Council can be contrasted with those of the Council of Vocational Education ("COVE"), the employees of which were found to be covered by Public Officers Law §73-a. The Commission's conclusion, which was upheld by the United States District Court for the Northern District of New York in Council of Vocational Education v. State of New York, et al., (91-CV-1145), was based upon its findings as to the nature of COVE. While the members of COVE, like the members of the Council, were appointed by the Regents, COVE was not established as a not-for-profit corporation. In addition, in accordance with federal law, SED acted as COVE's fiscal agent. In the memorandum of understanding between them, SED specifically required that COVE employees comply with all appropriate laws, regulations, and policies contained in SED's Administrative Policy Handbook, which included the Public Officers Law. With regard to COVE employees, SED appointed them, placed them on the SED payroll and set their compensation in accordance with the standards and procedures applicable to State employees. They received State benefits. None of these circumstances are found with respect to Council employees.

In sum, the Commission concludes that, given the nature of the Council, it is not a State agency, and neither its members nor its employees are subject to §§73, 73-a or 74 of the Public Officers Law.

CONCLUSION

The Commission concludes that, for the reasons set forth herein, the members of the Council are not subject to Public Officers Law §§73, 73-a and 74.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.

All Concur:

Joseph M. Bress, Chair

Evans V. Brewster,
Angelo A. Costanza,
Robert E. Eggenschiller,
Donald A. Odell, Members

Dated: April 15, 1996


Endnote

1. For an opinion dealing with the wider issues not considered here, [the requesting individual] may contact the office of the New York State Attorney General.



URL: http://www.nysl.nysed.gov/edocs/ethics/96-05.htm