July 20, 1993
BY HAND Honorable George W. Miller, Jr. Co-Chairman House Finance Committee House of Representatives Raleigh, N.C.
Re: Advisory Opinion; House DHR1162, Employee Insurance Committees, G.S. §58-31-60
Dear Chairman Miller:
The bill referenced above (copy attached) proposes certain amendments to G.S. §58-31-60 concerning employee insurance committees. That section provides for the appointment of an employee insurance committee for State employee payroll units, the competitive selection of insurance products, and the award of a payroll deduction slot to an insurance company. Page two, lines 43 and 44 of the bill provides, in part, as follows: "Any current agreement shall be null and void at the discretion of the Department Committee." You have asked whether this provision is constitutional.
The United States Constitution expressly prohibits the states from passing laws impairing the obligation of contracts. U.S. Const. Art. I, Sec. 10. The North Carolina courts recognize this prohibition, Hood, Comm’r of Banks v. Richardson Realty, Inc., 211 N.C. 582, 191 S.E. 410 (1937), and have applied it to contracts of the State as well as contracts between individuals. Oglesby v. Adams, 268 N.C. 272, 150 S.E.2d 383 (1966); Smith v. Board of Road Comm’rs, 182
N.C. 149, 108 S.E. 443 (1922). The court will normally attempt to interpret a statute so as not to impair a contract and will give legislative enactments a presumption of constitutionality. See generally, 16A C.J.S. § 278. However, where a statute impairs vested contractual rights lawfully entered into with the State, a court will normally invalidate the statute or require just compensation. Oglesby vc. Adams, supra.
Under G.S. §58-31-60, employee committees are state agencies authorized to select insurance products and award payroll deduction slots. Although we have not been provided with any existing agreements, assuming that current agreements have been properly entered into under this section, they would involve vested rights of private parties under which the private party provides insurance products and is entitled to a payroll deduction slot. The language at issue in the proposed bill authorizes employee committees to void existing agreements in their discretion. Assuming those contracts were lawfully entered into, the attempt to void the contracts would appear to violate Article I, Section 10 of the U. S. Constitution.
This office has not been provided with facts concerning whether the current payroll insurance agreements entered into by existing employee committees under G.S. §58-31-60 followed lawful procedure or otherwise provide vested, enforceable rights to those parties contracting with the employee committees. If the General Assembly wishes to insure that such contracts followed lawful procedure, inclusion of language to that effect in the bill would be appropriate. We suggest that the following language would accomplish this purpose:
"Any current agreement shall be voidable at the discretion of the Committee upon a determination by the Committee that the agreement was not lawfully entered into as provided by this section."
I trust this answers your inquiry. Should you have additonal questons, please let me know.
John R. McArthur Chief Counsel