| October 16, 1992
Barry Skokowski,
Sr.
Deputy Commissioner
Department of Community Affairs
CN 800
Trenton, New Jersey 08625
Re: 92-0072:
A Joint Insurance Fund as a "Local
Government Agency" pursuant to the Local
Government Ethics Law.
Dear Deputy Commissioner
Skokowski:
You have requested
advice as to whether a joint insurance
fund organized pursuant to N.J.S.A. 40A:10-36 et seq. is a "local
government agency" pursuant to the Local Government Ethics
Law,
N.J.S.A. 40A:9-22.1 et seq., and whether the commissioners of a
joint insurance fund are "local government officers" pursuant
to
the Law. For the reasons stated below, you are advised that a
joint insurance fund is a "local govern-ment agency" and
the
commissioners are "local government officers."
The purpose of
the Law is to provide a State-wide ethical
code applicable to persons who serve in local govern-ment and to
require "local government officers" to file annual financial
disclosure statements. N.J.S.A. 40A:9-22.1. General-ly, all local
government agencies, except purely advisory bodies and school
boards are within the scope of the Law. N.J.S.A. 40A:9-22.3(e).
In the absence of action by the county or municipal governing body
to establish a local ethics board, the Code of Ethics is enforced
by the Local Finance Board in the Department of Community Affairs.
N.J.S.A. 40A:9-22.4.
The governing
body of any local unit, including a
contracting unit, may agree to join together with any other local
unit to establish a joint insurance fund for the purpose of
insuring against liability, property damage, and workers'
compensation and the providing of group health insurance or group
term life insurance. N.J.S.A. 40A:10-36(a). The appointing
authority of each member shall appoint one member of the governing
body or employee to represent the local unit as an insurance fund
commissioner. N.J.S.A. 40A:10-37. Further, each member may also
appoint an alternate insurance fund commissioner who shall be a
member of the governing body or employee of the unit. Ibid. If
the total number of members exceeds seven, the commissioners are
annually required to select no more than seven commissioners, and
seven alternates, to serve as the executive committee. Ibid. The
commissioners may employ necessary clerical assistants, whose
compensation shall be fixed and paid by the member local unit,
invest funds in such securities as it deems appropriate, adopt
rules and regulations for the control and investment of the fund,
and fix reasonable rates of premium of all insurance carried by
the
insurance fund. N.J.S.A. 40A:10-38. Further, the commissioner or
the executive board, as appropriate, is subject to the requirements
of the Local Fiscal Affairs Law, N.J.S.A. 40A:5-1 et seq., the
Local Public Contracts Law, N.J.S.A. 40A:11-1 et seq. and any other
rules and regulations governing the custody, investment and
expenditure of public funds by local units. N.J.S.A. 40A:10-38(c).
The commissioners are required to adopt bylaws which shall include
providing procedures for the organization and administration of
the
joint insurance fund, for the maintenance of appropriate reserves,
for the purchase of commercial insurance or reinsurance, for the
withdrawal or expulsion of a member, and for the termination and
liquidation of the joint insurance fund. N.J.S.A. 40A:10-39. The
Department of Community Affairs is empowered to approve or
disapprove the bylaws and risk management plan of the commissioners
to determine whether there has been compliance with regulations
governing the custody, investment, or ex-penditure of public
moneys. N.J.S.A. 40A:10-41. Further, the Department of Insurance
is authorized to approve or disapprove the bylaws and the risk
management plan. Ibid. Additionally, the Department of Insurance
may suspend or terminate the authority of any joint insurance fund,
to assume control over any joint insurance fund, or to take any
necessary action to enable the fund to meet its obligations, cover
expected losses, to liquidate, rehabilitate, or modify its affairs.
N.J.S.A. 40A:10-44.
A "local
government agency" includes
[A]ny agency,
board governing body, including
the chief executive officer, bureau, division,
office, commission or other instrumentality
within a county or municipality, and any
independent local authority, including any
entirety created by more than one county or
municipality, which performs functions other
than of purely advisory nature, but shall not
include a school board. [N.J.S.A. 40A:9-22.3(e)].
The term "local
government agency" encompasses a myriad of local
government bodies. The definition is very broad and specifically
excludes only purely advisory bodies and school boards. A joint
insurance fund is created by two or more units of local government
for the purpose of providing insurance to the members. Further,
a
joint insurance fund performs a sig-nificant governmental role in
the specialized area of insurance and it exercises its discretion
independent of the members. This includes investment decisions,
determination of premium amounts, the purchasing of commercial
insurance, and the ex-pulsion of members. The joint insurance fund
is subject to the requirements of the Local Fiscal Affairs Law,
N.J.S.A. 40A:5-1 et seq., and the Local Public Contracts Law,
N.J.S.A. 40A:11-1 et seq. Accordingly, a joint insurance fund is
a "local government agency" within the meaning of the
Local
Government Ethics Law. To conclude otherwise is to ignore the
legislative intent to provide a State-wide ethics code which
governs the conduct of persons engaged in the performance of public
duties. Clearly a joint insurance board is an entity which
exercises significant and wide ranging public responsibilities in
the specialized area of insurance on behalf of, but independent
of,
units of local government.
Having concluded
that a joint insurance fund is a "local
government agency" subject to the Local Government Ethics Law,
the
next inquiry is whether the commissioners are "local government
officers." Included as "local government officers"
are 1) elected
officials; 2) members of local bodies that have authority to enact
ordinances, approve development applications, or grant zoning
variances; 3) members of inde-pendent local authorities; and 4)
persons who are "managerial executives" or "confidential
employees." N.J.S.A. 40A:9-22.3(g). The commissioners of a
joint
insurance fund are not within the first three classes of local
government officers.
The fourth and
last category of "local government
officer" is a person "who is a managerial executive or
con-fidential employee of a local government agency, as defined
in
section 3 of the 'New Jersey Employer-Employee Relations Act.' ...,
but shall not mean any employee of a school district or member of
a school board." N.J.S.A. 40A:9-22.3(g)(4). As the Local
Government Ethics Law makes specific reference to the definitions
contained in the Employer-Employee Relations Act, it is necessary
to examine the latter Act. The Employer-Employee Relations Act,
N.J.S.A. 34:13A-1 et seq., provides a mechanism for the resolution
of labor disputes in the private and public sectors. N.J.S.A.
34:13A-2. The Act is admin-istered by the State's Public
Employment Relations Commission (PERC). N.J.S.A. 34:13A-5.2.
The Act defines
"managerial executives" of a public
employer as
persons who
formulate management policies and
practices, and persons who are charged with
the responsibility of directing the
effectuation of such management policies and
practices.... [N.J.S.A. 34:13A-3(f)]
"Confidential
employees" of a public employer are defined as
employees
whose functional responsibilities or
knowledge in connection with the issues
involved in the collective negotiations
process would make their membership in any
appropriate negotiating unit incompatible with
their official duties. [N.J.S.A. 34:13A-3(g)]
The significance
of "managerial executives" and "confidential
employees" under the Employer-Employee Relations Act is that
these
individuals are excluded from membership in the local collective
bargaining unit comprising of local public em-ployees. N.J.S.A.
34:13A-5.3.
PERC has established
guidelines for determining whether
a person formulates management policy and direct its effectuation
and is accordingly a "managerial executive."
A person
formulates policies when he develops
a particular set of objectives designed to
further the mission of the governmental unit
and when he selects a course of action from
among available alternatives. A person
directs the effectuation of policy when he is
charged with developing the methods, means,
and extent of reaching a policy objective and
thus oversees or coordinates policy
implementation by line supervisors. Simply
put, a managerial executive must possess and
exercise a level of authority and independent
judgment sufficient to affect broadly the
organization's purposes or its means of
effectuation of these purposes. Whether or
not an employee possesses this level of
authority may generally be deter-mined by
focusing on the interplay of three factors:
(1) the relative position of that employee in
his employer's hierarchy; (2) his functions
and responsibilities; and (3) the extent of
discretion he exercises. [Boro. of Montvale,
6 NJPER 507, 508-09 (1980)]
Thus, the determination
as to whether a person is a
"managerial executive" requires an examination of the
person's
position in the local agency's hierarchy, his job function and
responsibilities, and the amount of individual discretion exer-cised
by the individual. The analysis of these three factors is
very often a position-by-position determination.
The determination
as to whether a person is a
"confidential employee" also requires an individualized
deter-mination. PERC has narrowly construed the term "confidential
employee." County of Essex, 17 NJPER 256, 257 (1991). The "key"
to status as a confidential employee "is an employee's access
to,
and knowledge of, material used in labor relations processes
including contract negotiations, contract admin-istration,
grievance handling and preparation of these pro-cesses." Ibid.
Specifically, PERC makes this case-by-case analysis as follows:
We (PERC)
scrutinize the facts of each case to
find for whom each employee works, what he
does, and what he knows about collective
negotiations issues. Finally, we determine
whether the responsibilities or knowledge of
each employee would compromise the em-ployer's
right to confidentiality concern-ing the
collective negotiations process if the
employee was included in a negotiating unit.
[State of New Jersey, 11 NJPER 507, 510
(1985)]
Thus, a "confidential
employee" has access to confidential
information of the employer which is relevant to the labor
relations of the local government agency.
We examined in
detail in Attorney General Opinion No. 91-0093 (September 20, 1991)
the terms "managerial executives" and
"confidential employees" in the context of the Local Government
Ethics Law. We noted in the Opinion that the Legislature in using
these terms to define "local government officer" was attempting
to
adopt an approach that would identify persons of a high level with
policy-making responsi-bilities. We determined in Opinion No. 91-0093
and in other related Opinions that certain persons serving in
government were necessarily "managerial executives" or
"confidential employee" and therefore "local government
officers",
because their statutory duties mandated that they exercise
significant policy-making responsibilities. In examining the
statutory duties of the Commissioners of a joint insurance fund
discussed above, the commissioners exercise significant policy
making responsibilities in the specialized area of insurance, inde-pendent
of the member units. They make important decisions
regarding the investment of public monies, the purchase of
commercial insurance, and decide premium rates. Accordingly, the
commissioners are necessarily "managerial executives"
and therefore
"local government officers." While the commissioners may
not be
involved in labor relations matters and therefore not "confidential
employees," a "local government officer" is a "managerial
executive" or "confidential employee." N.J.S.A. 40A:22.3(g)(4).
A related question
is whether the clerical staff and
professional staff of a joint insurance fund are governed by the
Local Government Ethics Law as "local government employees"
or
"local government officers." As previously noted, a joint
insurance fund is authorized to employ clerical staff, whose
compensation is fixed and paid by the member units. N.J.S.A.
40A:10-38. The joint insurance fund's clerical staff is within the
definition of "local government employee." N.J.S.A. 40A:9-22.3(e),
and these individuals are subject to the Code of Ethics.
Moreover, the issue whether these individuals are "local government
officers" requires an individualized fact/ legal analysis
as suggested in Attorney General Opinion No. 91-0093 (September
20,
1991). Concerning professional staff, the Joint Insurance Fund Law
provides no guidance as to the re-lationship of these individuals
to the joint insurance fund. We have previously noted that
professionals retained by a local government agency for a special
limited purpose are not, in our view, subject to the Law. Attorney
General Opinion No. 91-0093 (September 20, 1991). However, this
would be in contrast to a professional who has an ongoing and
continuing relationship with a local government agency as its
principal advisor. These individuals may be deemed "local
government officers." Attorney General Opinion No. 91-0134
(November 1, 1991). This determination requires an individual
analysis and it is not within the scope of this opinion to examine
each pro-fessional serving each joint insurance fund in the State.
For the foregoing
reasons you are advised that a joint
insurance fund, established pursuant to N.J.S.A. 40A:10-36 et seq.,
is a "local government agency" for purposes of the Local
Government
Ethics Law, N.J.S.A. 40A:9-22.1 et seq., that commissioners of the
joint insurance fund are "local government officers" for
purposes
of the Law and, therefore, must file a financial disclosure
statement.
Very
truly yours,
ROBERT
J. DEL TUFO
ATTORNEY GENERAL
By:_______________________________
John J. Chernoski
Senior Deputy Attorney General
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