HomeMy WebLinkAbout05-510 LundyJeffrey Lundy, Esquire
Lukehart & Lundy
219 East Union Street
P.O. Box 74
Punxsutawney, PA 15767 -0074
ADVICE OF COUNSEL
February 15, 2005
05 -510
Re: Conflict; Public Official /Employee; Second Class; Township; Insurance; Supervisor;
Employee; Direct Payment; Group Plan.
Dear Mr. Lundy:
This responds to your letter of December 6, 2004, by which you requested advice
from the State Ethics Commission.
Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65
Pa. .S. § 1101 et seq., presents any prohibition or restrictions upon township supervisors
as to health insurance through the township whereby payments would be made directly
from the township to the supervisors or employees rather than to the insurance carrier.
Facts: As the solicitor for Perry Township, Jefferson County, and with the
au of the Perry Township Supervisors, you inquire as to whether the township
may make monetary payments directly to the supervisors /employees for health insurance
instead of the insurance carrier.
You state that the Supervisors are unable to obtain a group health insurance plan
due to the varying needs and current medical restrictions of the supervisors and employees.
No insurance company is able to adequately provide coverage for all the supervisors and
employees with reasonable premiums. As a consequence, a situation exists where the
supervisors and employees are forced to obtain their own insurance coverage.
You cite a judicial decision involving the South Union Township Board of Auditors,
wherein the judge stated: "... it is permissible for the township to pay all or part of
insurance of insurance premiums for hospitalization insurance for its employees." South
Union Township Board of Supervisors, 75 Pa. D. & C.2d 324, at 330, (Pa.Com.PI., 1976).
Because the township is unable to directly pay the insurance company, the supervisors
seek a partial payment in lieu of insurance coverage provided by the township. The
supervisors have encountered problems in attempting to make a partial payment directly to
the insurance company because there are several insurance companies insuring the
different supervisors and employees. Such insurance companies usually are obtained as
a result of other employment or through a spouse's employment. Logistical problems arise
Lundy, 00 -510
February 15, 2005
Page 2
as to partial payments directly to the insurance companies. This issue arises when the
supervisors make payment directly to the insurance company with an explanation to both
the insurance company and the supervisor /employee that such is only partial payment with
the remainder of the account payable by the insured.
Because of the problems associated with direct payment to the insurance carriers,
the Township Board is considering payment directly to the supervisors/ employees. In
South Union, supra., this issue is addressed: "However, in the court's opinion, it is illegal
to make payment directly to the employee for this purpose [to pay all or part of insurance
premiums] .. ". Id. at 330. You assert that the opinion appears to contradict itself because
of an earlier statement: "...the board has no authority to make a direct distribution of
money to the employee to invest it in whatever manner that the employee desires, without
any restriction or limitation." Id. at 328. "(W)ithout any restriction or limitation ", implies in
your view that if the Supervisors conceive of a way to place a restriction on the direct
payment to the employees and supervisors, then the direct payment is allowable.
If the Township Board is allowed to make payments directly to the supervisors/
employees in lieu of insurance coverage, you ask what restrictions must be placed on the
payments, as for example, a requirement that the supervisors /employees obtain payment
receipts from the insurance carriers, showing that they used the allotted funds for the
designated purpose.
Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of
the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requestor based
upon the facts which the requestor has submitted. In issuing the advisory based upon the
facts which the requestor has submitted, the Commission does not engage in an
independent investigation of the facts, nor does it speculate as to facts which have not been
submitted. It is the burden of the requestor to truthfully disclose all of the material facts
relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to
the extent the requestor has truthfully disclosed all of the material facts.
It is further noted that, pursuant to Sections 1107(10) and (11) of the Ethics Act, 65
Pa.C.S. §§ 1107(10), (11), an opinion /advice may be given only as to prospective (future)
conduct. If the activity in question has already occurred, the Commission may not issue an
opinion /advice, but any person may then submit a signed and sworn complaint which will
be investigated by the Commission if there are allegations of Ethics Act violations by a
person who is subject to the Ethics Act. To the extent you have inquired as to conduct
which has already occurred, such past conduct may not be addressed in the context of an
advisory opinion. However, to the extent you have inquired as to future conduct, your
inquiry may and shall be addressed.
The Perry Township Supervisors are public officials as that term is defined in the
Ethics Act, and hence they are subject to the provisions of that Act. It is assumed for
purposes of this advice that the Supervisors are also the collective employer of the
employees in the township vis -a -vis the health insurance issue.
Section 1103(a) of the Ethics Act provides:
§ 1103. Restricted activities
(a) Conflict of interest. - -No public official or public
employee shall engage in conduct that constitutes a conflict of
interest.
65 Pa.C.S. § 1103(a).
The following terms are defined in the Ethics Act as follows:
§ 1102. Definitions
Lundy, 00 -510
February 15, 2005
Page 3
65 Pa.C.S. § 1102.
In addition, Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no
person shall offer to a public official /employee anything of monetary value and no public
official /employee shall solicit or accept anything of monetary value based upon the
understanding that the vote, official action, or judgment of the public official /employee
would be influenced thereby. Reference is made to these provisions of the law not to
imply that there has been or will be any transgression thereof but merely to provide a
complete response to the question presented.
Section 1103(j) of the Ethics Act provides as follows:
§ 1103. Restricted activities
(j) Voting conflict. - -Where voting conflicts are not
otherwise addressed by the Constitution of Pennsylvania or by
any law, rule, regulation, order or ordinance, the following
procedure shall be employed. Any public official or public
employee who in the discharge of his official duties would be
required to vote on a matter that would result in a conflict of
interest shall abstain from voting and, prior to the vote being
taken, publicly announce and disclose the nature of his interest
as a public record in a written memorandum filed with the
person responsible for recording the minutes of the meeting at
which the vote is taken, provided that whenever a governing
body would be unable to take any action on a matter before it
because the number of members of the body required to
abstain from voting under the provisions of this section makes
the majority or other legally required vote of approval
unattainable, then such members shall be permitted to vote if
disclosures are made as otherwise provided herein. In the case
of a three - member governing body of a political subdivision,
where one member has abstained from voting as a result of a
conflict of interest and the remaining two members of the
governing body have cast opposing votes, the member who
has abstained shall be permitted to vote to break the tie vote if
disclosure is made as otherwise provided herein.
65 Pa.C.S. § 1103(j).
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate family
or a business with which he or a member of his immediate
family is associated. The term does not include an action
having a de minimis economic impact or which affects to the
same degree a class consisting of the general public or a
subclass consisting of an industry, occupation or other group
which includes the public official or public employee, a member
of his immediate family or a business with which he or a
member of his immediate family is associated
"Authority of office or employment." The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
Lundy, 00 -510
February 15, 2005
Page 4
In each instance of a conflict, Section 1103(j) requires the public official/ employee
to abstain and to publicly disclose the abstention and reasons for same, both orally and by
filing a written memorandum to that effect with the person recording the minutes or
supervisor.
In the event that the required abstention results in the inability of the governmental
body to take action because a majority is unattainable due to the abstention(s) from
conflict under the Ethics Act, then voting is permissible provided the disclosure
requirements noted above are followed. See, Pavlovic, Opinion 02 -005.
In applying the above provisions of the Ethics Act to the instant matter, pursuant to
Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from using
the authority of public office /employment or confidential information received by holding
such a public position for the private pecuniary benefit of the public official/ public
employee himself, any member of his immediate family, or a business with which he or a
member of his immediate family is associated.
As to the question of whether the Township Board may make payments directly to
the supervisors /employees instead of the insurance carrier, the resolution of this issue
turns upon an interpretation of the Second Class Township Code (Code). Generally, the
Jurisdiction of the Commission is limited to interpreting, applying, and administering the
Ethics Act. Conversely, the Commission does not have the jurisdiction to interpret or apply
laws other than the Ethics Act. There are occasions when an issue of conflict under the
Ethics Act arises in the context of another law, other than the Ethics Act. For example, in
instances where it must be determined if a public official /employee has used the authority
of office to obtain a private pecuniary benefit under the Ethics Act, the focus of the inquiry
relates to whether a given pecuniary benefit that the public official /employee received was
private. The full Commission has determined that if a given financial gain is authorized in
law, then the public official's /employee's receipt of that financial gain through the use of
office is not private and thereby not a conflict under the Ethics Act. However, if the public
official /employee through the use of office obtains a financial gain which is not authorized
in law, the Commission has determined that receipt of such financial gain is a private
pecuniary benefit, contrary to the Ethics Act. See, Thompson, Opinion No. 99 -005. A
specific example of the foregoing would be instances where township supervisors exceed
the maximum compensation to which they are entitled under the Code, 53 P.S. §65606(a).
The difficulty in many cases is that the determination under the Ethics Act as to
whether a private pecuniary benefit exists is dependent upon an interpretation of the other
law. If the other law has a provision which is straight forward so that no interpretation is
necessary, the Commission reviews that law to determine whether a financial gain is
authorized. See, Hessinq r, Order 931; Wasiela, Order 932, affirmed in part H &W vs.
SEC, 673 A.2d 1004 (Pa. Commw. 1996). However, when in the other law the applicable
provision is subject to interpretation, the Commission has noted that a judicial
interpretation is necessary: if the court decides that the financial gain is authorized, then
the Commission concludes there would be no unauthorized financial gain under the Ethics
Act; however, if the court of final jurisdiction determines that the financial gain is
unauthorized, then the Commission concludes that the pecuniary benefit is private in
contravention to the Ethics Act.
In this case, a review of the relevant provisions the Code indicates without
exception that health insurance must be provided in a group plan paid in whole or part by
the township. In particular, Section 65606(c)(1) provides in part: "Supervisors, whether or
not they are employed by the township, and their dependents are eligible for inclusion in
group life, health, hospitalization, medical services, and accident plans paid in whole or
part by the township." Similarly, Subsection 3 provides in part: All payments made by the
township on any group life, health, hospitalization, medical services, or accident insurance
coverage... ." 53 P.S. §65606(c)(1) and (3).
Lundy, 00 -510
February 15, 2005
Page 5
Likewise, the Code in the insurance section, states in part: The board of supervisors
may contract with an insurance company, non - profit hospitalization corporation, or non - profit
medical service corporation to insure its supervisors under Section 606, employees and their
dependents under a policy or policies of group insurance covering life, health,
hospitalization, medical services, or accident insurance." 53 P.S. §66512(d).
The Code explicitly requires that although health coverage is allowable for township
supervisors and employees, it must be made through a group plan. A group plan by
definition excludes individual payments made directly to the supervisors/ employees. The
court in the South Union Township case has so held. Accordingly, since there is no
authorization in law for the township supervisors /employees to receive direct insurance
payments, Section 1103(a) of the Ethics Act prohibits supervisors or employees from
receiving any direct payments in contravention to the statutory requirement that such
insurance plans by the township must be group plans. See also, Schnur, Advice 03 -614
which held that a township supervisor could not receive a direct payment from the township
general fund for certain medical expenses not covered by the township's insurance plan.
The propriety of the proposed conduct has only been addressed under the Ethics
Act; the applicability of any other statute, code, ordinance, regulation or other code of
conduct other than the Ethics Act has not been considered in that they do not involve an
interpretation of the Ethics Act.
Conclusion: The Perry Township Supervisors are public officials subject to the
provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101
et seq. Section 1103(a) of the Ethics Act prohibits the township supervisors and
employees from receiving direct payments for health insurance in derogation of the
statutory requirement of the Second Class Township Code that such insurance is
allowable only through a group plan. Lastly, the propriety of the proposed conduct has
only been addressed under the Ethics Act.
Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement
proceeding initiated by the Commission, and evidence of good faith conduct in any other
civil or criminal proceeding, provided the requestor has disclosed truthfully all the material
facts and committed the acts complained of in reliance on the Advice given.
This letter is a public record and will be made available as such.
Finally, if you disagree with this Advice or if you have any reason
to challenge same, you may appeal the Advice to the full Commission.
A personal appearance before the Commission will be scheduled and a
formal Opinion will be issued by the Commission.
Any such appeal must be in writing and must be actually received
at the Commission within thirty (30) clays of the date of this Advice
pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the
Commission by hand delivery, United States mail, delivery service, or by
FAX transmission (717 -787 - 0806). Failure to file such an appeal at the
Commission within thirty (30) days may result in the dismissal of the
appeal.
Sincerely,
Vincent J. Dopko
Chief Counsel