STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6247

September 10, 1984

LABOR, DEPARTMENT OF:

Authority of Director over Board of Trustees of Second Injury Fund, Self-Insurers' Security Fund, and Silicosis, Dust Disease and Logging Industry Compensation Fund

WORKERS' DISABILITY COMPENSATION:

Authority of Board of Trustees over funds

The Board of Trustees of the Second Injury Fund, the Self-Insurers' Security Fund, and the Silicosis, Dust Disease and Logging Industry Compensation Fund is a state agency within the Department of Labor.

The Board of Trustees of the Second Injury Fund, the Self-Insurers' Security Fund, and the Silicosis, Dust Disease and Logging Industry Compensation Fund is authorized by law to perform its statutory functions and responsibilities of administration of such funds independently of the Director of the Department of Labor and the Director of the Bureau of Workmen's Disability Compensation within that department.

The Director of the Department of Labor and the Director of the Bureau of Workmen's Disability Compensation possess no authority to supervise the work of the funds administrator appointed by the Board of Trustees of the Second Injury Fund, the Self-Insurers' Security Fund, and the Silicosis, Dust Disease and Logging Industry Compensation Fund.

Mr. S. Martin Taylor

Director

Michigan Department of Labor

309 North Washington

Lansing, Michigan

You have requested my opinion on several questions regarding the administration of certain trust funds created by the Legislature under the Workers' Disability Compensation Act of 1969, 1969 PA 317, as amended; MCLA 418.101 et seq; MSA 17.237(101) et seq. Your questions will be separately stated and answered.

Your first question is:

The Second Injury Fund was created by 1912 1st Ex Sess PA 10, Pt 2, Sec. 8a, as added by 1943 PA 245. The purpose of the fund was to encourage the employment of certain handicapped persons by providing that, when an employee with a permanent disability in the form of the loss of a hand, arm, foot, leg or eye subsequently has an injury arising out and in the course of employment which results in another permanent loss, the employer's liability is limited to the statutory specific loss period with the fund paying all further weekly benefits remaining for total and permanent disability. By 1955 PA 250 and 1956 PA 195, section 8a was amended to provide for the fund's payment of supplemental compensation to seven defined categories of totally and permanently disabled employees.

As indicated in Criss v Taylor Produce Co, 313 Mich 457, 463; 21 NW2d 815, 817 (1946), and 1951 PA 220, the Second Injury Fund was administered by the State Treasurer until May 18, 1965, the effective date of 1965 PA 32. Thereafter, the fund was administered by the Workmen's Compensation Department and its director until July 1, 1968.

The Legislature created the Silicosis and Dust Disease Fund pursuant to 1965 PA 44, Pt 7, Sec. 5, managed by a board of three trustees:

While the designations of the representative interests of the Trustees remained the same, a review of subsequent legislation demonstrates that there has been a continuing evolution in the Trustees' duties and responsibilities. Part 8 was added to 1912 1st Ex Sess PA 10, supra, by 1968 PA 227 to transfer the responsibility for the Second Injury Fund to the Board of Trustees and increased the authority of the Trustees over the Second Injury Fund and the Silicosis and Dust Disease Fund.

The Legislature revised and consolidated the laws relating to workmen's compensation through enactment of 1969 PA 317; MCLA 418.101 et seq; MSA 17.237(101) et seq, and repealed 1912 1st Ex Sess PA 10. The Second Injury Fund and the Silicosis and Dust Disease Fund were retained under the continued jurisdiction of the Board of Trustees in 1969 PA 317, supra, Secs. 501 and 502.

The Legislature enacted 1971 PA 149, to amend 1969 PA 317, c 5, Sec. 501, supra, to create the Self-Insurers' Security Fund and placed that fund under the Board of Trustees. It also enacted 1971 PA 183 to add chapter 9 to 1969 PA 317, supra, to encourage the employment of certain persons with medically certified physical conditions. The enforcement of this chapter was entrusted in the Board of Trustees. 1980 PA 357 amended 1969 PA 317, c 5, Sec. 501 et seq, supra, expanding the liability of the Silicosis and Dust Disease Fund and renamed it the Silicosis, Dust Disease, and Logging Industry Compensation Fund. Amendatory 1980 PA Act 357 also increased the Trustees' responsibilities for administering the Second Injury Fund by adding section 356 to provide for an increase in compensation for an injured employee after two years or more of continuous disability and by adding section 372 to impose certain liability upon the Second Injury Fund arising in cases where an injured employee was engaged in more than one employment at the time of injury.

The purpose of the Silicosis and Dust Disease Fund was considered by the Michigan Supreme Court in Stottlemeyer v General Motors Corp, 399 Mich 605, 611; 250 NW2d 486, 488 (1977), wherein the court stated:

The Michigan Supreme Court referred to the Second Injury Fund as a state insurance fund when it discussed the purpose of the fund in McAvoy v H B Sherman Co, 401 Mich 419, 450; 258 NW2d 414, 429 (1977):

Historically, the business of insurance has been held to be a business affected with the public interest. OAG, 1975-1976, No 4934, pp 442, 444 (May 5, 1976), concluded that the Brown-McNeely Insurance Fund created by 1956 PA 218, Sec. 2500, et seq, as added by 1975 PA 443; MCLA 500.2500 et seq; MSA 24.12500 et seq, for the purpose of providing malpractice insurance to eligible providers, was a state agency. The board which managed that fund consisted of members appointed by the Governor with the advice and consent of the Senate. Similarly, OAG, 1975-1976, No 5147, pp 695, 698 (December 7, 1976), concluded that the Michigan State Accident Fund, which provides workers' disability compensation insurance to qualified employers, was a state agency under the supervisory control of the Insurance Commissioner. The purposes of the subject funds, which are administered by the aforesaid Board of Trustees, are vested with a public purpose. Therefore, the Board of Trustees which administers the funds is a state agency.

As noted above, the administration of the Second Injury Fund was transferred from the State Treasurer to the Director of the Workmen's Compensation Department by means of the amendment to 1912 1st Ex Sess PA 10, Pt 2, Sec. 8a by 1965 PA 32. The same Legislature enacted 1965 PA 44 to amend 1912 1st Ex Sess PA 10, Pt 7, Sec. 5 to create a Silicosis and Dust Disease Fund and to establish a Board of Trustees to manage the fund. The Workmen's Compensation Department was ordered to provide the fund and its trustees with suitable office space, clerical services and to pay all of the expenses of the fund. However, the creation of the fund was not effective until May 1, 1966.

In the Executive Organization Act, 1965 PA 380, Sec. 382; MCLA 16.482; MSA 3.29(382), the Workmen's Compensation Department and the director of such department were transferred by a Type I transfer to the Department of Labor. Thus, the administration of the Second Injury Fund was placed in the Department of Labor by a Type I transfer. 1965 PA 380, supra, contains no express reference to the soon to be created Board of Trustees or the Silicosis and Dust Disease Fund. However, imposing an obligation upon the Workmen's Compensation Department to provide suitable office space, clerical assistance and the duty to pay the expenses of the Silicosis and Dust Disease Fund in the Workmen's Compensation Department evidences legislative intent that the Board of the Trustees be within that department and, thus, upon coming into existence, to be a part of the Department of Labor as a Type I transfer.

It is significant, however, that when the Legislature enacted 1968 PA 227, supra, it provided for the transfer of the Second Injury Fund to the Board of Trustees, it re-established the Board of Trustees to administer the Second Injury Fund and the Silicosis and Dust Disease Fund and, with the exception of a provision authorizing the furnishing of office space and clerical assistance to the trustees by the Workmen's Compensation Department, broadened the Board of Trustees' powers, including the authority to appoint the funds' administrator, without making any express provision for supervision by the Director of the Department of Labor. The legislative mandate is clear that the Board of Trustees may exercise its powers without supervision by the Director of the Department of Labor. The Legislature recodified the laws on workmen's disability compensation in 1969 PA 317, supra, and in c 5, Sec. 501, et seq, provided for the establishment of the Board of Trustees with its broad power. If there is any conflict with 1965 PA 380, Sec. 382, supra, that statute has been amended by implication. Since 1969 PA 317, supra, is a complete statute, Const 1963, art 4, Sec. 25, which requires re-enactment and republication of a statute in order to amend it, is not violated. Advisory Opinion re Constitutionality of 1972 PA 294, 389 Mich 441, 476; 208 NW2d 469 (1973).

In answer to your first question, it is my opinion that the Board of Trustees of the Second Injury Fund, the Self-Insurers' Security Fund, and the Silicosis, Dust Disease and Logging Industry Compensation Fund, is a state agency within the Department of Labor.

Your second question is:

Chapter 5 of 1969 PA 317, supra, relates solely and exclusively to the creation and administration of the funds. A review of the pertinent provisions thereof discloses the functions and responsibilities of the Board of Trustees in its administration of the funds. The Legislature, in section 515(1) of 1969 PA 317, supra, provides a broad delegation of power to the Trustees, as follows:

Section 515(2) of 1969 PA 317, supra, specifically authorizes the Trustees to appoint an administrative officer of the funds and to account for disbursed funds:

The Board of Trustees is authorized by section 515(3) of 1969 PA 317, supra, to pay the expenses for the administration of the funds, specifically including, but not limited to, the investigation, determination, and defense of claims against the funds:

Section 541(1) of 1969 PA 317, supra, mandates that all payments from the funds be determined by the Board of Trustees:

Section 551 of 1969 PA 317, supra, is a comprehensive provision setting forth the duties and obligations of the Trustees relative to the assessment process. The Board of Trustees has the ultimate responsibility pursuant to section 551(7) of 1969 PA 317, supra, to assure that all assessments are collected.

1969 PA 317, c 5, supra, Sec. 522, vests the Board of Trustees with extraordinary power to insure the fiscal integrity of funds. If the board determines that the assets of a fund are insufficient to meet its known obligations, the Trustees may borrow from another fund within its control with repayment to occur at the time of the next assessment. Further, if borrowing would impair the ability of the fund to meet its known obligations, the Trustees may, instead, order the director of the Bureau to levy a special assessment on each carrier in a sum sufficient to permit the fund to meet its obligations. Actually, the Trustees have resorted to such borrowing in the past to meet the respective obligations of the funds.

In McAvoy v H B Sherman Co, 401 Mich 419; 258 NW2d 414 (1977), the Court observed that the assessments paid to the Trustees by the employers there involved were public monies held by the Trustees for disbursement by the Trustees pursuant to traditional insurance concepts, saying, at page 450:

These observations being equally applicable to each of the funds administered by the Trustees, it is readily apparent that as Trustees of public funds for specific statutory purposes, their trust duties and responsibilities are theirs alone. In keeping with such placement of responsibilities, the Legislature has seen fit to vest in the Trustees as a collegial body the total administrative responsibility for the carrying-out of such trust duties.

Where, as here, the Legislature has clearly delegated very broad powers to the Board of Trustees in order to enable it to effectively administer, such delegation of authority must be liberally construed so as to include those powers which are necessarily implied in light of the purposes of the funds. In Coffman v State Bd of Examiners in Optometry, 331 Mich 582, 590; 50 NW2d 322, 326 (1951), the court reiterated this axiom:

It is my opinion, in answer to your second question, that the Board of Trustees has the authority to perform the statutory functions and responsibilities expressly delegated to it by the Legislature in chapter 5 of 1969 PA 317, supra, together with such additional authority as may be necessary, which may arise by implication in the course of its administration of the Second Injury Fund, the Self-Insurers' Security Fund, and the Silicosis, Dust Disease and Logging Industry Compensation Fund.

Your third question is rephrased as follows:

As noted in response to your first question, 1965 PA 380, supra, provided for the transfer of certain existing boards to departments by designated type transfer. No reliance need be placed upon that Act for the purpose of determining the nature of the relationship between the Department of Labor and the Bureau of Workers' Disability Compensation with the Board of Trustees and the funds. In those situations where 1965 PA 380, supra, does not provide for supervisory control, it is essential to examine the statutes which established the agency and defined its role. OAG, 1979-1980, No 5604, p 477 (November 21, 1979.)

A review of prior legislation relating to the administration of the Second Injury Fund demonstrates the successive legislative changes from control by the State Treasurer to total Bureau control to creation of the Board of Trustees. Originally, the Legislature contemplated significant involvement by the Workmen's Compensation Department when it created the Silicosis and Dust Disease Fund under the Board of Trustees in 1965 PA 44 and provided:

The Legislature, through the enactment of 1969 PA 317, Sec. 515, supra, initiated a significant change in the relationship between the Board of Trustees and the Bureau by providing:

In ascertaining what powers and responsibilities the Board of Trustees has in its administration of the funds, reference to OAG, 1979-1980, No 5604, pp 477-478 (November 21, 1979) is helpful. It considered the relationship between the Crime Victims' Compensation Board and the Department of Management and Budget. The Legislature delegated very broad powers to the board while failing to indicate what functions the Department of Management and Budget may exercise on behalf of the board. OAG, 1979-1980, No 5604, supra. The opinion concluded, at page 479, that the Legislature may establish an agency which exercises statutory powers independently:

The establishment of funds administered by trustees is not unique to Michigan. In Senske v Fairmont & Waseca Canning Co, 232 Minn 350; 45 NW2d 640, 646 (1951), the Minnesota Supreme Court discussed the nature of similar funds and their relationship to the public welfare:

A review of chapter 5 of 1969 PA 317, supra, discloses that the Legislature vested no authority in either the Department of Labor, or in its director, in connection with the Trustees of the Second Injury Fund, the Self-Insurers' Security Fund, and the Silicosis, Dust Disease and Logging Industry Compensation Fund. However, the Legislature did provide in section 515(3) of 1969 PA 317, supra, as follows:

This provision defines the limits of involvement that the Bureau may have with the Trustees of the Funds.

A letter opinion addressed to Mr. John G. Thodis, Acting Director of the Department of Labor, dated March 7, 1969, referred to the limited role of the bureau:

OAG, 1973-1974, No 4844, p 205, 211-212 (November 20, 1974), reiterated the principle that the enumeration of powers implies the exclusion of all others:

Thus the provision of 1969 PA 317, Sec. 515(3), supra, relating to office space and clerical support limits the Department and the Bureau from any further involvement in the administration of the Funds.

In answer to your third question, it is my opinion that the administrative responsibility with respect to budget, equipment expenditures, personnel, reports, travel authorization and expenses, and other operational needs affecting the Second Injury Fund, the Self-Insurers' Security Fund, and the Silicosis, Dust Disease, and Logging Industry Compensation Fund, are within the clear authority delegated to the Board of Trustees by the Legislature and that such authority is to be exercised independently of not only the Director of the Department of Labor, but also independently of the Director of the Bureau of Workers' Disability Compensation.

Your fourth question is:

Section 515(2) of 1969 PA 317, supra, authorizes the Board of Trustees to appoint an administrative officer to perform duties designated or delegated by the Trustees:

This authority is collegial and must be exercised by majority vote of the Board of Trustees. OAG, 1975-1976, No 4840, p 52, 57-58 (March 18, 1975), concluded that the authority of the Public Service Commission may be exercised by the majority of its members, but not by a single member:

Thus, although the Bureau director is a member of the Board of Trustees, the Bureau director alone may not exercise authority over the funds administrator.

Inasmuch as section 515(2) is the only reference to the funds administrator in 1969 PA 317, supra, it follows that the reasons recited herein and in answer to your third question are controlling of your fourth question.

It is my opinion, in answer to your fourth question, that in view of the board grant of authority to the Board of Trustees and its specific authority to appoint a funds administrator and to designate and delegate to such administrator the duties to be performed, neither the Director of the Department of Labor, nor the Director of the Bureau of Workers' Disability Compensation, acting independently of the other two Trustees, may exercise any supervisory authority over the funds administrator.

Your fifth question is:

With respect to this question, it presumes a fact situation which, in any and all events, could arise only through the interaction of the Civil Service Commission, which has plenary power within its sphere of authority as to all of the employees of the Board of Trustees and the Board of Trustees itself. Such employees have always been, and are, in the state classified civil service. Council No 11, AFSCME v Civil Service Comm'n, 408 Mich 385, 408; 292 NW2d 442, 451 (1980), Viculin v Dep't of Civil Service, 386 Mich 375, 393; 192 NW2d 449, 459 (1971), Plec v Liquor Control Comm'n, 322 Mich 691, 694; 34 NW2d 524, 525 (1948), and OAG, 1981-1982, No 6045, pp 592, 593 (March 1, 1982).

Since it is not the policy of this office to render an opinion on anticipated future agency action, I am constrained to decline responding to your fifth question.

Frank J. Kelley

Attorney General