Advisory Opinion 09-03

Advisory Opinion No. 09-03 Neither the two-year bar nor the lifetime bar set forth in Public Officers Law §73(8)(a) prohibits a former Insurance Department employee from serving as the Insurance Superintendent’s appointee to the Board of Governors of the New York Compensation Insurance Rating Board, which is licensed by the Insurance Department as the rate service organization for workers’ compensation insurance.

INTRODUCTION

The New York State Insurance Department (“Department”) has asked the New York State Commission on Public Integrity (“Commission”) whether either the two-year bar or the lifetime bar, set forth in Public Officers Law §73(8)(a) prohibits a former Department employee, who left the Department less than two years ago, from accepting an appointment by the Superintendent of Insurance (“Superintendent”) as an uncompensated member of the Board of Governors (“Board”) of the New York Compensation Insurance Rating Board (“NYCIRB”).

Pursuant to the authority vested in it by Executive Law §94(15), the Commission renders its opinion that a former Department employee, who terminated employment within the previous two years and who is subject to the two-year and the lifetime bars, may serve as the Superintendent’s appointee to an uncompensated position on the NYCIRB Board. Moreover, in the course of performing her duties and responsibilities as a Board member, the former employee may appear before the Department, since any such appearance would be made at the request of and for the benefit of the State and, under the circumstances described hereafter, would not involve a transaction in which she was directly involved as a Department employee.

BACKGROUND

For certain listed types of insurance, including workers’ compensation insurance, insurers must file rates and supporting information with the Superintendent. Insurance Law §2305. “An insurer or group of insurers may discharge the rate filing obligation required by [§2305] by giving notice to the Superintendent that it uses rates and rate information prepared by a designated rate service organization.” Insurance Law §2306.

A “rate service organization” is defined, in pertinent part, as follows: “a person or any other entity which makes or files rates as permitted by this article, or which assists insurers in rate making or filing by collecting, compiling and furnishing loss or expense statistics, or by recommending rates or rate information, or which inspects risks, tests appliances, formulates rules or establishes standards, as such activities relate to rate making or to administration of rates.” Insurance Law §2313(a). With one inapplicable exception set forth in Insurance Law §2313(j), a rate service organization must be licensed by the Superintendent. Insurance Law §2313(b).

The governing body of a workers' compensation insurance rate service organization must be comprised of nine voting members, one of whom must be appointed by the Superintendent. Insurance Law §2313(t)(1). The Superintendent’s appointee and three other Board members whom the Superintendent must approve “[may] not be employed by, or serve as [an] officer[ ] or director[ ] of, an insurer[ ] authorized to write workers’ compensation insurance in this state, or any parent, subsidiary, or affiliate thereof.” Id.

NYCIRB is a duly licensed rate service organization for workers’ compensation insurance. Thus, under the above-referenced statutory provisions, NYCIRB’s governing body must be comprised of nine members, one of whom must be appointed by the Superintendent, and neither the Superintendent’s appointee nor the other three members of NYCIRB’s governing body whom the Superintendent must approve may be employed by, or serve as an officer or director of, an insurer authorized to write workers’ compensation insurance or any parent, subsidiary, or affiliate thereof.

NYCIRB’s Board controls “the general activities of the organization, including control and supervision over its finances and authority to establish budgets, approve assessments and impose fines on members of the rate service organization.” Insurance Law §2313(t)(2). Article VIII, Section 2 of the Constitution of NYCIRB also states that the governing board “. . . shall appoint committees as it may deem necessary and advisable, and shall have the power to assume jurisdiction over any of the activities of any committee.” Thus, as an NYCIRB Board member, the appointee would also be actively involved in the internal administration and organization of NYCIRB. These internal NYCIRB matters do not involve the Department and would not require an appearance before the Department.

The Department has experienced significant difficulty locating an appropriate candidate for appointment to the NYCIRB Board who is both willing to serve and free of conflicting relationships with an insurer, or parent, subsidiary or affiliate of an insurer, authorized to write workers’ compensation insurance in New York. As a result, the Superintendent wishes to appoint to the NYCIRB Board a former employee who left the Department in [date]. The Superintendent’s appointee to the NYCIRB Board will serve without compensation.

As a Department employee, the potential appointee worked on issues concerning workers’ compensation insurance reform and legislative recommendations. In particular, she helped prepare a report recommending changes in the method by which workers’ compensation insurance rates are set. The recommended changes were enacted into law by the recent legislation, pertinent aspects of which are reproduced and summarized above.1

The potential appointee was not involved as a Department employee in NYCIRB’s rate-making activities or the analysis of loss costs, a new, legislatively required element to be considered by the Department in setting workers’ compensation insurance rates. The development of loss costs by NYCIRB and the submission of them to the Department on an annual basis is expected to be one of the more significant matters addressed by the NYCIRB Board.

APPLICABLE STATUTE

Public Officers Law §73(8)(a)(i) and (ii) provide:

(i) No person who has served as a state officer or employee shall within a period of two years after the termination of such service or employment appear or practice before such state agency or receive compensation for any services rendered by such former officer or employee on behalf of any person, firm, corporation or association in relation to any case, proceeding or application or other matter before such agency.

(ii) No person who has served as a state officer or employee shall after the termination of such service or employment appear, practice, communicate or otherwise render services before any state agency or receive compensation for any such services rendered by such former officer or employee on behalf of any person, firm, corporation or other entity in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her service or employment, or which was under his or her active consideration.

DISCUSSION

Two-Year Bar

In determining whether the potential appointee would violate the two-year bar, set forth in Public Officers Law §73(8)(a)(i), by serving on the NYCIRB Board within two years after leaving State service the Commission must first determine whether service on the NYCIRB Board would constitute an appearance before the Department.2

The Commission has never addressed the question whether Public Officers Law §73(8)(a)(i) permits a former State employee to volunteer his or her service, within two years of leaving State employment, on the governing body of a private association when such volunteer service is done at the request of his or her former State agency. Following the principles that are the bases for the Ethics Commission’s decisions in Advisory Opinions Nos. 93-13 and 01-1, discussed below, the Commission concludes that the former Department employee, at the request of the Department, may serve as a volunteer member of the NYCIRB Board without violating the two-year bar, since the structure and functions of the NYCIRB Board are legislatively mandated and the NYCIRB serves a public purpose.

In Advisory Opinion No. 93-13, the Commission determined that uncompensated service by a former State employee on a State task force reporting to his former State agency within two years of his departure from State service did not violate Public Officers Law §73(8)(a)(i), stating, “Unpaid service performed at the request of the State and for the benefit of the State should not be construed as an appearance before a State agency.”

The Commission further noted that a finding that such service was a violation of the post-employment restrictions would be against the State’s interests, since it would result in the loss of “the valuable service of former State officers and employees with talents and willingness to continue in some aspect of State service.”

In endnotes 3 and 4, the Commission specifically stated, however, that the exception to the two-year bar recognized in the opinion did not apply to “private clients.” Unlike the circumstances presented in Advisory Opinion No. 93-13, the NYCIRB is a private association, not a State task force. However, the structure and functions of the NYCIRB and its Board are legislatively mandated. Because of the public purposes served by NYCIRB, the Legislature created and defined the relationship between the NYCIRB Board and the Department. To this end, the Legislature also required and authorized the Superintendent to appoint a qualified NYCIRB Board member. Under these circumstances, for purposes of applying the two-year bar, we see no substantive basis on which to distinguish volunteer service on the NYCIRB Board as the Superintendent’s appointee from the volunteer service on a State task force that the Ethics Commission determined in Advisory Opinion No. 93-13 did not violate the two-year bar.

The Ethics Commission also determined in Advisory Opinion 01-01 that unpaid service on a private, not-for-profit board, albeit by a current State employee, was permissible under the Public Officers Law. The Ethics Commission found that an MTA employee could serve as his agency’s appointee to a private, not-for-profit corporate board, stating:

State agencies should not be precluded from fulfilling their legislative mandates by allowing their employees to serve on the governing bodies of entities that help the agencies to achieve their public purposes provided that such service does not pose a substantial risk of an actual conflict of interest.

Here, as was the case in Advisory Opinion No. 01-01, and unlike representation of a “private client” before a former agency, the former employee, as a member of a Board of a private association, would be serving a public purpose for the benefit of the Department. Permitting a former State employee to serve in that capacity finds support in the Commission’s determination in Advisory Opinion No. 01-01, where the Commission permitted a State agency to appoint a present employee to the Board of a private, not-for-profit association. Similarly, the Department is fulfilling its legislative mandate by allowing the former employee to serve on the NYCIRB Board to help the Department achieve its public purposes. Since the potential appointee will “not be employed by, or serve as [an] officer[ ] or director[ ] of, an insurer[ ] authorized to write workers’ compensation insurance in this state, or any parent, subsidiary, or affiliate thereof,” her service will not pose a substantial risk of a conflict of interest.

Although Advisory Opinion No. 01-01 concerned a current State employee’s service on a not-for-profit entity’s board, the essential principles on which the Advisory Opinion is grounded apply with equal, if not greater, force here.3 The contemplated appointment is consistent with the Department’s legislative mandate and would serve a public purpose.

Lifetime Bar

Finally, the activities of the NYCIRB Board are not transactions upon which the potential appointee previously worked as a Department employee. Therefore, her service on the NYCIRB Board would not constitute a violation of the lifetime bar set forth in Public Officers Law §73(8)(a)(ii).

As a Department employee, the potential appointee to the NYBIRB Board was a policy advisor who was assigned to the Department’s Workers’ Compensation Task Force. In that position, she assisted in authoring legislative recommendations for improvement of workers’ compensation insurance. As a Department employee, the potential appointee also analyzed information and data collection methodologies used by the Board in providing information to the Department and made recommendations to improve the data and analyses and the Department’s utilization of them. However, as a Department employee, the potential appointee did not work on the formulation or creation of workers’ compensation insurance rates and did not interact in any manner with the NYCIRB.

As a member of the NYCIRB Board, the former employee will be a part of the data gathering and analysis process that presents information to the Department for its review and use, particularly “loss cost” data, a new element to be submitted to the Department for consideration in setting workers’ compensation insurance rates pursuant to recent legislation. These are different activities and functions from those in which she participated as a Department employee; they would not constitute a “case, proceeding or application or other transaction” in which the appointee was actively involved as Department employee. Further, every annual NYCIRB Board report to the Department would be a new transaction and not a transaction in which the potential appointee was directly involved when she was a Department employee. Consequently, her service on the NYCIRB Board would not constitute a violation of the lifetime bar set forth in Public Officers Law § 73(8)(a)(ii).

CONCLUSION

A former Department employee, who terminated Department employment within the previous two years and who is subject to the two-year and the lifetime bars, may serve as an uncompensated member of the NYCIRB Board appointed by the Superintendant. Such service does not pose a substantial risk of an actual conflict of interest. In the course of performing her duties and responsibilities as a member of the NYCIRB Board, the former employee may appear before the Department, since any such appearance would be made at the request of and for the benefit of the State, and would not involve a transaction in which she was directly involved as a Department employee.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding.

All concur:

Daniel R. Alonso
Virginia Apuzzo
John M. Brickman
Richard D. Emery
Daniel J. French
Robert J. Giuffra, Jr.
David L. Gruenberg
Hon. James P. King
Loretta E. Lynch
John T. Mitchell,
       Members


footnotes:

Date: April 28, 2009

1Before the legislation, NYCIRB filed fully developed workers’ compensation insurance rates on behalf of its insurance company members for review by the Department. Under the new rate-making process, NYCIRB will no longer be allowed to file fully developed rates on behalf of its members.

2Since the Superintendent’s potential appointee will serve without compensation, such service would not violate the so-called “backroom services” clause of §73(8)(a)(i), which bars a former State employee, within two years of leaving State service, from:

Receiv[ing] compensation for any services rendered by such former Officer or employee on behalf of any person, firm, corporation or Association in relation to any case, proceeding or application or other matter before such agency.

(Emphasis supplied)

3We are informed that the Superintendent has been unable to find a qualified person willing to serve without compensation who is not a current or former Department employee. The Superintendent has further determined that it would be impractical for any current Department employee to serve simultaneously as an unpaid member of the NYCIRB Board, since service on the NYCIRB Board involves a substantial commitment of time and energy.