November 21, 1980
Subject:
State Departments, Institutions and Agencies; Personnel; Sick Pay; Social Security.
Requested By:
Harold H. Webb State Personnel Director
Questions:
- Do the currently established State Personnel Commission rules and regulations on sick leave for state employees qualify as a plan for exclusion from "wages" under Section 209 of the Social Security Act?
- If the answer to question 1 above is "no", do N.C.G.S. § 126-4(5) and § 126-8 give authorization to the State Personnel Commission (subject to the approval of the Governor) to establish a plan for sick pay that qualifies for exclusion from wages as defined by Section 209 of the Social Security Act?
Conclusions:
- No.
- Yes.
On April 6, 1978, an opinion was issued to Mr. W. H. Hambleton, Director of the Retirement and Health Benefits Division of the Department of the Treasurer, ruling that sick leave pay for teachers and state employees in the Teachers’ and State Employees’ Retirement System does not qualify for exclusion from "wages" under Section 209 of the Social Security Act. The opinion was based largely on the nature of the sick leave provisions for teachers and state employees and on the interpretation of the relevant provisions of the Social Security Act by the Social Security Administration, as found in § 413(b) of the Handbook for State Social Security Administrators at that time, and on a Tenth Circuit Opinion upholding the interpretation of the Social Security Administration. Since that time, the Social Security Admimnistration has revised its regulations concerning the exclusion of wages paid on account of sickness. "Payments by a State or local governmental employer can be excluded under those subsections only if there is a legal authority to pay "on account of sickness’ and evidence that the payments were made under this authority." Handbook for State Social Security Administrators, Section 415(a). The Handbook goes further and requires either express statutory authorization to make such payments or the absence of a restriction on the employer’s ability to make such payments. If neither the State Constitution or state statutes restrict and employer’s ability to pay on account of sickness, then certain factors are examined to determine whether the money paid when an employee is ill are in fact "wages" included within social security or payments excluded from the definition of "wages" for social security purposes. The Handbook also emphasizes the desirability of an opinion from the State Attorney General. Handbook for State Social Security Administrators, Section 415(b). The evidence that payments are made under appropriate authority to make payments on account of sickness rather than simply continuing wages despite sickness may include (1) an ordinance, regulations, or resolution by the appropriate governmental body specifically providing for sick payments; or (2) a separate appropriation solely for sick payment; or (3) a separate sick-pay account either for direct payment to the employee or for reimbursement of the regular salary account. Handbook for State Social Security Administrators, Section 415(c). In view of these changes in interpretation by the Social Security Administration, the first question is whether the current sick leave provisions constitute payments on account of sickness or wages continued despite sickness for social security purposes.
For a number of reasons, payments made under the current sick leave provisions cannot be viewed as payments on account of sickness rather than wages continued despite sickness even with the changes in the regulations of the Social Security Administration. The current policy and regulations of the State Personnel Commission provide for sick leave which is to be earned at a rate of six hours and forty minutes per month for each month in which the employee works or is paid for one-half or more of the regularly scheduled work days. That sick leave may be used for illness or injury, death in the employee’s immediate family, medical appointments, quarantine due to a contagious disease in the employee’s immediate family, or the actual period of temporary disability connected with child bearing. Payments because of death in the immediate family, medical appointments, or quarantine cannot be excluded from wages for social security purposes. A plan which does not separate such payments from payments for periods of sickness or disability will have all payments reported as wages. Handbook for State Social Security Administrators, Section 415(d). The structure of the sick leave provisions essentially is one of continuing the employee’s salary while allowing him to be absent from his job for designated purposes up to a maximum amount computed according to the formula for accumulation of sick leave and subtracting previously-used sick leave. There is neither a separate appropriation nor a separate accounting procedure for funds used for sick leave purposes. It is all part of a single salary account. The Personnel Commission’s policy and regulations do not provide specifically for sick leave payments within the meaning of the social security regulations. For all these reasons, the current sick leave provisions, even when utilized for periods of actual illness or disability, cannot be viewed as excludable from the definition of wages for social security purposes.
The second question is whether, under current statutory provisions, the State Personnel Commission could establish a plan for sick pay qualifying payments made when an employee is ill or disabled for exclusion from wages under the Social Security Act. No constitutional or statutory provision expressly or implicitly prohibits such a plan. The State Personnel Commission, subject to the approval of the Governor, is required by statute to establish policies and rules governing "(hours) and days of work, holidays, vacation, sick leave and other matters pertaining to the conditions of employment." G.S. § 126-4(5). "Sick leave allowed as needed to such State employees shall be at a rate not less than 10 days for each calendar year, cumulative from year to year." G.S. § 126-8. Nothing in the statutory provisions suggests any intent by the General Assembly to define sick leave payment as wages continued despite sickness in contrast to payments made on account of sickness. The apparent intent of the General Assembly was simply to authorize the State Personnel Commission to devise a plan for payment to state employees for illness and other circumstances for which some sort of sick leave or sick pay might be appropriate, with the conditions that at least 10 days per year be granted to each employee and that sick leave be cumulative from year to year. The fact that the legislative authorization refers to "sick leave" rather than to sick pay is not a barrier to the payments made under it being excluded from wages for social security purposes. In more than one place in the regulations, the Social Security Administration has referred to "sick leave" plans or payments under the assumption that they may qualify as payments on account of sickness excludable from wages. Therefore, the State Personnel Commission may establish a plan for sick pay qualifying for exclusion from wages as defined by Section 209 of the Social Security Act, at least if the plan is established in conjunction with appropriate budget procedures and/or appropriation measures.
Rufus L. Edmisten Attorney General
Norma S. Harrell Assistant Attorney General