Administrative Procedures Act; Rulemaking Requirements; Employee Insurance Committees

Subject:

Administrative Procedures Act; Rulemaking Requirements; Employee Insurance Committees

Requested By:

Elizabeth H. Drury Director, Office of Legislative and Legal Affairs Department of Human Resources

Questions:

(1)

Does the APA definition of a "rule" in N.C. Gen. Stat. 150B-2(8)a include procedures to be followed in fulfilling the statutory mandates of N.C. Gen. Stat. 58-194.3?

(2)

If the answer to question 1 is "yes", does the Department of Human Resources have the requisite rulemaking authority under N.C. Gen. Stat. 150B-9 to adopt rules pertaining to N.C. Gen. Stat. 58-194.3 for all twenty-four payroll units within the Department of Human Resources and would the adoption of such rules be consistent with the autonomy provisions in N.C. Gen. Stat. 58-194.3?

(3)

If the answers to questions 1 and 2 are yes, are the following functions prescribed by N.C. Gen. Stat. 58-194.3 proper subjects for rulemaking:

a.

The manner in which the Insurance Committee determines employees’ needs and desires;

b.

The manner in which the Insurance Committee publishes or otherwise requests proposals from insurance providers;

c.

The manner in which the Insurance Committee receives, considers and selects insurance proposals submitted to it; and

d.

Contractual provisions to be included in the contract with the provider selected by the Insurance Committee including contractual provisions pertaining to the term of the contract, whether the selected provider is the exclusive provider of a particular type of insurance, and the procedures for soliciting business from employees in the payroll unit?

Conclusion:

(1) Yes, if the Employee Insurance Committee establishes procedures to supplement those in

G.S. 58-194.3.

(2)

No, the rules would be adopted by the respective committees and organized within the Department’s chapter in the North Carolina Administrative Code. The Department would act within its authority if procedures were established for the selection of committee members.

(3)

Yes, if the committee establishes formal or informal procedures on any listed subject and

requires compliance therewith by its members or contract providers.

G.S.

58-194.3, enacted in the 1985 Session of the General Assembly, required the establishment of Employee Insurance Committees by the heads of payroll units. The duties and powers of the committees are set forth in the enabling legislation. The 1986 amendments to the statute are not pertinent to this inquiry.

G.S.

58-194.3(b) provides the method for appointment of committee members. That duty and power is vested in the head of the payroll unit. The head of the payroll unit is charged with duty of selecting a committee that is "fairly representative of the work force."

The queries raised require further refinement to provide better analytical clarity. Accordingly, new subsidiary questions are stated and addressed in the remainder of the opinion.

The predicate question to Question 1 is "Must Employee Insurance Committees adopt regulations that more specifically detail procedures to be used in the discharge of their duties as a prerequisite to exercising their statutorily conferred powers?" The answer to that query is "No." The enabling statutes are sufficiently specific to permit operation without further procedures and do not condition exercise of the authority on the prior adoption of regulations. The second issue raised by Question 1 is "When must a committee adopt regulations?" The answer to that issue derives from Chapter 150B. G.S. 150B-2(8a), the definition of "rule," must be read in conjunction with G.S. 150B-11(1) to comprehend the full breadth of the term "rule". When the two sections are read together, it is apparent that any procedures, whether formal or informal, that directly or substantially affect the rights or procedures of non-agency persons must be adopted as rules. As G.S. 150B-11(1) indicates, any forms developed by the committees for use in performance of their duties must be listed in duly adopted regulations. Thus, when the committees establish procedures that affect the rights or procedures of others, they must be codified as rules. Should the committees elect to operate by the procedural process established in the enabling statutes, no rule adoptions are necessary.

The second query likewise raises several issues. G.S. 58-194.3 does not include a specific grant of rulemaking authority. As the prefatory paragraphs indicate, it confers powers and duties on both the committee and the head of the payroll unit. Our appellate courts have recognized that state agencies inherently have the power to take actions necessary to the discharge of their duties when the statutory authority has not been specifically conferred. In re Community Association, 300 NC, 267, 280, 266 S.E.2d (1980); Charlotte Liberty Mutual Ins. Co. v. State ex. rel Lanier, 16 NC App 381, 192 SE2d 57 (1972). When that principle is read with the requirements of G.S. 150B-2(8a) and -11(1), it is apparent that every state agency has the inherent authority and duty to draft necessary regulations. Since the committees have rule making and limited quasi-judicial powers [see G.S. 58-194.3(b)], they are "agencies" within the meaning of G.S. 150B-2(1). n1

n1 The functions of the entity determine whether it is an "agency" rather than the ommission of the word "committee" from the definition of "agency" at G.S. 150B-2(1). Commissioner of Insurance v. Rate Bureau, 300 NC 381, 269 SE2d 547, (1980); State v. Matthews, 270 NC 35, 153 SE2d 791 (1967). Compare G.S. 150B-2(1) to the definition of "public body" in the Open Meetings Law at G.S. 143B-318.10 which includes the term "committee."

The Administrative Procedure Act contains a significant, and controlling, limit on the exercise of rulemaking authority by agencies.

Each agency shall adopt, amend, suspend or repeal its rules in accordance with the procedures specified in this Article and pursuant to authority delegated by law and in full compliance with its duties and delegations. No agency may adopt any rule that implements or interprets any statute or legislative enactment unless the power, duty, or authority to carry out the provisions of the statute or enactment is specifically conferred on the agency in the enactment, nor may any agency make any rule enlarging the scope of any trade or profession subject to licensing. G.S. 150B-9(b).

In the present matter, the Department’s rulemaking authority would be limited to oversight of its payroll unit heads in the exercise of their authority to select committee members. To the extent the Department’s financial division imposes budget policies and procedures on insurance providers, they are exempt from the definition of rule. See G.S. 150B-2(8a), b. and d. However, any forms used to implement this aspect of the payroll deduction program may need to be listed in rules to satisfy G.S. 150B-11(1). The Department’s rulemaking authority is further established by the general authority conferred on Department heads by G.S. 143B-10. Accordingly, items specified in Question 3 are within the scope of the rulemaking authority of the Employee Insurance Committee rather than the Department or the payroll unit heads.

LACY H. THORNBURG Attorney General

Daniel F. McLawhorn Special Deputy Attorney General