A~~JSTIN 11. TCUAS 

September 29, 1954 

Hon. c. H. CavnePe 

State Auditor 

Anntin, Texae 

~opini0n 190. a-141 

Re: IU~lbillty'of the llqnidator appointed uwlor Article 21.28, Tcxaa InBuMnoe 

Code, and hl8 eraployeee for 

membership in the State EmplRyees tbtlrcmtent sy8te& 

Dear Mr. Cavllesrt 

Your requert ror UI opinion rem in pm u f0umt 

"Ara the liquidator (appointed by the Board 

of Insurance Commissioners under the provisions of 

Article 21.28, Imuranos Code of;Texas) and those 

operating under him Stata employees to the extent 

that they are eligible for membership and partioipation in the Texas Employees Retirement System? 

"This question arises in view of the fact that 

those persons are members of the Employees Retirement 

System and making contributions to it, while at the 

same time they are also participating in the Federal 

Social Security,Act (making contributions) and the Unemployment Compensation coverage (State and Federal). 

"If those persons are State employees we do not 

believe they should be under the Sooial Security and 

Unemployment Compensation provisions. If they are not 

State employees, then we do not believe they should 

be covered by the Employees Retirement System." 

Eligibility for membership in the Employees Retirement System 

of Texas Is determined by the definitions of "department" aud "ea@.oyee" 

found in Section 1 of Article 62289, Vernon's Civil Statutes. These definitions are *s follows: 

"'Dcpartmant' shall mean any department, commission, 

institution, or agency of the State Government. 

"'Employee' shall mean any regularly appointed officer 

or employee in a hepar'tment o? '2netitate tin0 'is employah on 

z 
C.H. Cavness, pa@ 2 ,(iS-141) 

a basis or in a position normally req~fring not iqa 

thau nine hundred (900) hours per year, but shall 

~4~ include membere of U$State Legislature or any 

inoumbant of an office normally filled by vote of 

the people; nor peraons on piecework basis; nor 

operators of equipment or dPiYel'R of 3mm whom 

wages are Ineluded in. rental rate Raid the owners of 

&aid equipment or team; nor any person who is 

covered by the Teacher RetirementSystem of the State 

of Texas or,any retirement system slrPport.4 with State 

funds other than the Texas Employees Hn,tirement System." 

Funds from which retirement benef::s are paid are made up of 

contributions from the employees@ oompenoatiojn and a matching oontribution by the State of Texas, which in charged to the fund "appropriated, 

allooated, and provided to pay the salary or compensation of the employee for whose benefit the oontrib'ation is made." Art. 6228a, sea. 8. 

The question for determination is uix%her Article 21.28 of 

the Insurance Code creates a "department, ?omraission, Institution, or 

agency of the State Govemmanf." Section 2 of Article 21.28 provides: 

"Whenever under the law of this S-);ete a court of 

competent jurisdiction fiuds that a reooiver should 

take charge of the assets of an insurer domiciled in 

this State, the liquidator dasignaked b:- ,the Board 

of Insurance Commisaiouere es "heriqafter prtivided for 

shall be such receiver. ,ilbe l!.<~~~ir’*a’b~~ il<jap~oiuted 

receiver &all forthtrith t%l;u ;*~~>es:~i~~ a;' the 

assets of such 1ns~~~e.r and dea? w.,& + .- the oaue %n his 

own nom as receiver or -In the imme of the Umrer a8 

<he court may direch. 

"The Board shall have poower to appoint and fix 

the compensation of th* 1~rl';idstor e,nd of such special 

deputy liquidators, couns?~l, cLerka, or eseistans, as 

it may deem ueceasary. 3~3 psyrna>,t. of b~::h. ~mgmsa%ion 

and all expenses of liquidstion shall be made by the 

liquidator out of funds or assets of the insurer on 

approval of the Board. An itemized report of such 

expenees, sworn to by the liquidator and approved by 

the Board, shall be preflented to the court from time 

to time, which account nhkl.1 be approved by the Court 

unless obJection is filed thereto within ten (10) days 

after the presentation of the aoaount . . . ." 
E&l. c. 'H. crYnass, pago 3 (.(&141) 

sootion 4 or Artiole 21.28 rerd~ in parts 

"The l.iquidatorherein;named ehallbe appplnte6by 

a majority or orid Boerd or lhame commi~sionera, enA 

ehallbe rubjeot to removal by a majority of said Roard, and 

b;efora entering upon the duties of said offioe, shall file 

withtheBoardof Ineuranoe Commi~eioners abond ln theeum 

of Ten Thousand ($lO,OOO.OO) Rollare, payable to the Roud 

of Ineatrance Com1eslonere, and oond1tloned upon the faithful perfomanoe of his duties and the proper aocountlng for 

a11 moneys and properties received or admlnlsterod by him." 

The statute gives the Board of Imurame Coamniseloners oertaln , 

duties in the liquidation of receivership estates and lnveets it with 

certain power and authority over the liquidator along with the control 

exercised by the various courts ln whlah reoeivershlps are pending. 

It is our opinion that the liquidator and the employeee who are 

l ppointedbythe Board of Insurance Commlssionera to serve nnder him 0~~4 

within the definition of "employee" ln the Trras Rmployeas Retmnt 

Act. The liquidator funotlons as a receiver under appointment of a cot&~, 

but hln appolntmentresulte from his designation ae liquidator by the Roan3 

of Itwme Ctmmierionerf~. while Article 21.28 of the liwvrauce Code doen 

not expreeely refer to the liquidator as a subordinate of the Roud of Inouranoe Ccaomisdonerra, the lmport of the etatnte is that tbs Board 1s given 

a gemeral eupervlaory responsiblllty over the llquldatlon of ineuremoe oapanies vhlch iv oarrled out through its agent, the liquidator, who Is eelectcd by the Board, is responsible to it for the manner in whloh he parforms his duties, and ls subject to dlsaharge by the ~oerd.1 The liquidator is also responsible to the court, but we are elf the opinion that he 

ifd aotlng 88 the agent or repreaentatlve of the Board of Insuranoe &I&Ssioners in dischrrglng his duties. The legislature haa in effeot oreated 

a state agency to handle the liquidation of lnsuranae oompanies end has 

placed the agency under the supervision of the Board of Insurance Con&ssioner6 e The motivation back of the statute undoubtedly was the belief 

that the establishment of a state agency to admlnlster all lnsurauoe 

receiverships, with a permanent staff experienced in such matters, would 

result ln greater efficiency and more satisfactory handling of the affairs 

of the companlee ln receivership. The fact that the lnsuranoe business in 

one aacted with the public interest wcararhts the establishment of a go- 

~ermwntrl agency to handle the receiverships vhloh the courts plaoe ln 

its hands. 

1 

The title of the original lot providing for the appointment 

of a liquidator reads: "An Aot ~0110endng the liquidation, 

rebabilltation, reorganization or conservation of insurers 

and placlng mme under the Board of Insursnoe Commissioners; 

" . . . (Euphasla supplied) Acte. 46th Leg. R.S. 1939, p. 

389. 
Hon. C. H. Cavness, page 4 \&S-1$1) 

The oreaticm of the ollfice of liquiaotor through legislative 

enaotment, the method or hi61 byopOtihmt, the ail?~ervlsions of hia duties 

by an exeoutive depmtment of the State Government, and the pezmanenoy 

of the offle all point to the oonolueion that this Is a state agency 

ad that ite employess oome within the definition of "employee" in tha 

Bmployei~ Retirement Aat. The one faotor whlah might cast doubt on thie 

oonclusion is the rw2 the liquidator and the employees under him are 

paid out of ths assets of the oompanles which are ln receivership. 

Aesumhg that the SUDIB neceeaery to meet those expenses could not be 

looked upon as assessmczlts' which become state funds (See Att'y. Cm. 

Op. V. lgl), does the fact that their compensation is paid from a source 

other than state fund&! prevent these persons from being olasslfled as 

state employees4 The employer-e.m@oyoe relationship may exist even 

though the employee is comPensatea out of funds of a third person. Jones 

v. Goodson, l21F. 2d 176 (C.X.A. lOth, 191) and cases cited at page 

179. In our opinion, the faot th.%t these persons ~8 oompensated from 

funds of the companies in liquidation does not negative their status 

aa state employees. Cf, Gagne v. Brush, 30 F. Supp. 714 (D.C. N. Hemp. 

1940); In re Park Brewing Co,, 48 F. Supp. 750 (W.D.Mioh, ,1942). In 

80 fw na the State Employees Retirement Act IS concorned, tha statute 

does not require that members of the Re=lrcme2t System be paid out of 

state funds. It requires that the contrlbutton by hhe State shall be 

charged to the fund "sppro?riated, allocc.td, ma p2-0viaaa” to pay the 1 

$Uary:i.or compensation of ti employee,e Article 21.28 of the Ineuwe 

Code makes provision for paper12 of the compensation of tha employees 

ma all expenses of iiqdaats02 out of ma8 or asseta of the insurer. 

The State's match- con+zlhution is a proper epense of liquidation and 

1s payable out 0r the funaR thus allocated 2nd p-0VidOd. 

The holdlag of ,thls opinion 1~ .Xir%teP to employees who perform services for the IlqMdator fnol;?ont to hit: z*ocelvership duties 

in winding up the affairs of .thr: oomp~~&oa or in s!?.pervising their 

continued operation, es the case my be , 3.2 oontrad.lstl~~otlon t0 employees of a oompany who are rotnined. to o:>ntlnue t3e lmsinaas operatlone of the company. Persons who peti'nrfi scrv:.cms for the company ln 

carrying on the regular operations for Mioh it. ~~7s organized are not 

state employeea, alt,:mugh they zre ~7nder Xre sup3nision 0r the liquidator during the time the receivernhlp con".inuas. 

The holding that XAe Iiquldo;tor end. his sti&f C.o?WtitM3 a state 

agenoy Is lnconaistent with some of the statementa made in Attorney Gemar8a's opinion v-191 (1947). This opln!.on overrules Opinion V-191 to 

the extent of such lnoonais.tency. 

you hrvs etated that it 1s your belief that these employees 

ohould not be under the Texas Unemployment Compensation Aot (Art1010 

522lb-1 et seq., V.C.S.) and the old-age and survivors inauranoe provirlom of the Sooirl geourity Aot if they we aoaered by the Texae Bnployeer Retirement Aot. Artiale 522Ib-17(g)(T)(0) provldee ttit employ; 
. 

Hon. C. E, Cavness, page'i5 (S-141) 

mOnt shall not inolude'"'eervioe pel-fOrMed in the employ of this State 

or any other state, or of any politicrl 0ubdivision thereof, or any 

lnatrumentality 0r any one or more or the foregOing whloh is who14 

owned by this State or by one or more states or political rubdivislons." 

The Federel Unemployment Tax Act contains a similar provision (26 U.S. 

C.A. Seo. 1607(o)(7)). Llkewioe, the Sooial Seourity Aot (42 U.S.O.A. 

Sec. 410 (a) (8)) and the Fedaral Insuranoe Contributions Aot (26 U.S. 

C.A. Seo 1426(b)(8)) exolude service performed ln the employ of a State 

rmm coverage under th0se laws. 

It should be noted that the Texas Employees Retirement Act 

does not exclude from membership persons who are covered by other retirement systems, except systems supported with state funds. SiELUltaneous coverage of these persons under the Retirement Act and the 

Social Security Act would not Plolate the Retirement Aot. Any resulting violation would be against the Soolal Security Act for having included etate employees in coverage under that law. 

The question of ooverage under the federal statutes ie a 

matter for federal Interpretation, and a oonsLWdction by e state exeoutive officer is not binding upon federal authorities. We must conclude 

that the federal administrative agencies are free to place their own 

interpretation upon the meaning of "service performed ln the employ of 

a State" as used ln the federal statutes. National Campaign Committee 

v. Rogan, 69 F: Supp. 679, 686 (S. D. Cal. 1945). 

With reapeot to the meeniq of thie provision in the Texan 

Unemployment Compensa%ion AOt, it ha61 been held that unless a state 

unemployment oomgensation aot dear4 differs from the federal law, 

it must be assumed that the Legislature intended that they be interpreted rlike. Arnold college for Ryglene and Physical Raucation V. 

Denaher, 3.31 Corm. 503, 41 Atl. 26 89 (1945). It is our oonolusion 

that in snaoting the Texas Unemployment C0mpensatlon Act the Texas 

L glslat~ure intended to adop, + the oonstrootlou whioh the federal 

a6tithorities plaoed upon the oomparable provisiouin the federal etatutes. This oonclusion 1s strengthened by the faot that the tax would 

still aOorue under the federal etatute even though the state statute 

exempted the employment, lf the federal law was construed not to exempt it, Federal admlniatrative auth0rlties have already ruled on the 

question of unemployment compensation ouverage for these employees. 

While this offioe might disagree with the federal lnterpretrtion, 

nevertheless ve oondidbr it beyond our authority to assume the role Of 

interpreter of this provision in the Terra Unemployment C0mpensrtiOn 

Act when federal authorities have already construed the similar PmVialon in the federal law. This opinion goes no further than to hold 

that the liquidator and his employees are oovered by the Texas EmplOyees Retirement Aot. A rsoonaideration of the propriety of their alsO 

being covered by the Social Seourlty Act and the state and federal unemployment ocmpensatian law61 will have to emanate fmm the appropriate 

federal tuth0rities. 
Eon; 0. H. Cavness, page 6 (S-141) 

The insurance liquidator appointed by the Board of Insurance 

Commiseionere under Article 21.28, Texas Iaeurance Code, anb the employeem 

working under hkn are state employees within the tam of the State l5nployeee Retirement Aot (Art. 6228a, v.0.s)) an&are eligible for mambership in the mployeee Retirement System of Texas, 

Yours very truly, 

APPRovm: 

JOBN BEN SHEPPERD 

Attorney General 

JOlw DAVBtQORT 

Reviewer 

W. V. GEPPERT 

Reviewer 

ROBERl,S. TRO'LTI 

First Aeelatant 

JOBNBENSKEPF'ERD 

Attorney General 

BY 

Mary K. Wall 

Aseistant