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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 5821

December 5, 1980

CIVIL SERVICE COMMISSION:

Authority over qualifications of candidates for positions in classified state service

CONSTITUTIONAL LAW:

Const 1963, art 11, Sec. 5

INSURANCE:

Appointment of independent hearing officers approved by a private organization to hold hearings for Commissioner of Insurance

Proposed rules to implement 1956 PA 218, Sec. 2030(3) for the selection of hearing officers recommended by a private organization upon request of the person who is the subject of the proceeding before the Commissioner of Insurance may not be approved because the statute violates the authority of the Civil Service Commission to determine the qualifications of all candidates for positions in the classified state service pursuant to Const 1963, art 11, Sec. 5.

Nancy Baerwaldt

Commissioner of Insurance

Michigan Insurance Bureau

Department of Commerce

1048 Pierpont Street

Lansing, Michigan

Pursuant to the Insurance Code of 1956, 1956 PA 218, Sec. 2030(3), as added by 1976 PA 273, MCLA 500.2030(3); MSA 24.12030(3), your predecessor has drafted proposed rules to provide for the qualifications, criteria and procedures to be utilized by the American Arbitration Association in preparing a list of independent hearing officers for hearings conducted pursuant to Chapter 20 of the Insurance Code of 1956, designated by the Legislature as the Uniform Trade Practices Act, MCLA 500.2001 et seq; MSA 24.12001 et seq. 1956 PA 218, Sec. 2030(3), supra, provides as follows:

'The commissioner or his designate shall preside over the hearing, except that an independent hearing officer shall be designated by the commissioner if requested by the person who is the subject of the proceedings. The independent hearing officer shall be selected by the commissioner from a list of individuals submitted by the American arbitration association qualified to conduct hearings on behalf of the commissioner. A list of the individuals shall be maintained by the commissioner and shall be compiled pursuant to rules promulgated by the commissioner. The rules shall set forth the qualifications, criteria, and procedures to be utilized in the compilation of the list of independent hearing officers. The person subject to the proceedings may exercise 1 peremptory dismissal of the hearing officer selected, if exercised within 20 days after notification.' MCLA 500.2030(3); MSA 24.12030(3)

Under the Administrative Procedures Act, 1969 PA 306, Sec. 45, MCLA 24.245; MSA 3.560(145), proposed rules must be approved by the Attorney General when deemed to be legal before the agency may transmit the proposed rules to the joint committee on administrative rules.

1956 PA 218, Sec. 2030(3) raises the following question of constitutionality:

May the Legislature enact a statute providing that a particular personal service be provided by an independent contractor rather than a classified civil servant even if there are qualified and capable civil servants who are available to perform the service?

Const 1963, art 11, Sec. 5, provides:

'The classified state civil service shall consist of all positions in the state service except those filled by popular election, heads of principal departments, members of boards and commissions, the principal executive officer of boards and commissions heading principal departments, employees of courts of record, employees of the legislature, employees of the state institutions of higher education, all persons in the armed forces of the state, eight exempt positions in the office of the governor, and within each principal department, when requested by the department head, two other exempt positions, one of which shall be policy-making. The civil service commission may exempt three additional positions of a policy-making nature within each principal department.

The commission shall classify all positions in the classified service according to their respective duties and responsibilities, fix rates of compensation for all classes of positions, approve or disapprove disbursements for all personal services, determine by competitive examination and performance exclusively on the basis of merit, efficiency and fitness the qualifications of all candidates for positions in the classified service, make rules and regulations covering all personnel transactions, and regulate all conditions of employment in the classified service.

'No person shall be appointed to or promoted in the classified service who has not been certified by the commission as qualified for such appointment or promotion. No appointments, promotions, demotions or removals in the classified service shall be made for religious, racial or partisan considerations.

The appointing authorities may create or abolish positions for reasons of administrative efficiency without the approval of the commission. Positions shall not be created nor abolished except for reasons of administrative efficiency. Any employee considering himself aggrieved by the abolition or creation of a position shall have a right of appeal to the commission through established grievance procedures.

No payment for personal services shall be made or authorized until the provisions of this constitution pertaining to civil service have been complied with in every particular. Violation of any of the provisions hereof may be restrained or observance compelled by injunctive or mandamus proceedings brought by any citizen of the state.' (Emphasis added.)

Since the '. . . classified state civil service shall consist of all positions in the state service . . .', it is necessary to consider whether the position of hearing officer is a position in the 'state service' and whether such services are 'personal services' within the meaning of Const 1963, art 11, Sec. 5.

The Civil Service Commission has established positions of hearing examiners and has established lists of qualified candidates for such positions, apparently concluding that such services constitute both personal services and positions in the state service. (1) It should be noted that the Civil Service Commission has promulgated Rule 16.6, which provides:

'An appointing authority may request the use of contractual personal services upon a satisfactory showing that it is not feasible or practical to establish a classified position to perform the required personal service. Approval or disapproval for the use of such contractual personal services shall be in accordance with regulations issued by the state personnel director.'

(Emphasis added.)

In State Compensation Insurance Fund v Riley, 9 Cal 2d 126, 135; 69 P2d 985; 989; 111 ALR 1503 (1937), the question of use of independent contractors under similar civil service provisions was at issue. The Court said:

'. . . There undoubtedly is a field in which state agencies may enter into contracts with independent contractors. But the true test is, not whether the person is an 'independent contractor' or an 'employee', but whether the services contracted for, whether temporary or permanent, are of such a nature that they could be performed by one selected under the provisions of civil service. If the services could be so performed, then in our opinion it is mandatory upon such appointing power to proceed in accordance with the provisions of the Constitution. . . .'

If the services of a hearing officer may be performed by one selected under the civil service system, then it is the Civil Service Commission which has the exclusive authority and duty to classify those positions, fix rates of compensation and determine the qualifications of all candidates.

The Civil Service Commission has classified positions for hearing officers and has certified persons qualified to occupy such positions. A register for such positions presently exists. (2)

In this case the statute itself acknowledges that any designate of the commissioner may preside over the hearing. An 'independent' hearing officer is to be designated by the commissioner only at the request of the person who is the subject of the proceeding. Thus, it appears that the services of a hearing officer were not contemplated to be so specialized as to effectively preclude the service being rendered by one selected in accordance with constitutional provisions of civil service.

It follows that 1956 PA 218, supra, Sec. 2030(3), is unconstitutional and, accordingly, I am declining to certify the rules which implement that section.

However, the introductory part of the section: 'The commissioner or his designate shall preside over the hearing . . .' is severable and constitutional.

'. . . If, when the unconstitutional portion is stricken out, that which remains is complete in itself, and capable of being executed in accordance with the apparent legislative intent, wholly independent of that which was rejected it must be sustained. . . .'

People v McMurchy, 249 Mich 147, 158; 228 NW 723, 727 (1930), quoting with approval from 1 Cooley, Constitutional Limitations (8th Ed), pp 359-363

The provisions of 1956 PA 218, supra, Sec. 2030(3), are not so dependent upon each other that it may be presumed that the legislature would not have passed the remaining portion of the section independently. It is my opinion that the portion of Section 2030(3) which reads 'The commissioner or his designate shall preside over the hearing . . .' is valid, constitutional and can be given effect.

In conclusion, it is my opinion that, except for the introductory part noted above, 1956 PA 218, supra, Sec. 2030(3) is unconstitutional under Const 1963, art 11, Sec. 5 and that the proposed rules may not thus be certified as legal.

Frank J. Kelley

Attorney General

(1) Positions for hearing examiners were established by the Michigan Civil Service beginning as early as 1946.

(2) It should be noted that where it is not feasible or practicable to establish and use such a list, a state agency may contract for such services subject to approval of the Civil Service Commission. Rule 16.6.

 


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