Request By:
Ms. Martha Belwood
State Agency for Social Security
Lewis & Broadway Streets
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Robert W. Riley, Acting General Counsel
This is in reply to your request for an opinion on the question of whether or not Social Security coverage must be afforded to the employees of five emergency medical service district corporations.
Since employees of political subdivisions are eligible for plan coverage under federal and state law (42 USC § 418(a)(1); KRS 61.460), and since "political subdivision" is defined broadly to include "instrumentalities" of the state or any political subdivision (s) thereof (42 USC § 418(b)(2); KRS 61.420(5)), the question therefore becomes whether the corporations mentioned are "instrumentalities" of "political subdivisions" of the state. Applicable case authority in regard to the general question of what constitutes an "instrumentality" of government indicates that the degree of control is the question, so we have based our determinations on the degree of control that the political subdivision would have over the private non-profit corporation in question.
Employees of those Emergency Medical Service (EMS) district corporations found to be "instrumentalities" of political subdivisions must of course be covered under the plan for social security coverage submitted by those political subdivisions, if any. However, it is to be noted that political subdivisions are merely authorized by statute to submit a plan for employee coverage, and are not required to do so (KRS 61.460(1)).
I. West Kentucky Allied Services, Inc. It is clear that this private non-profit corporation is an instrumentality of the eight county governments of the Jackson Purchase Area Development District (ADD). The corporation is subject to the complete control of the eight county governments, because its "Articles of Incorporation and By-Laws Committee", consisting of the eight county judges, has the "sole authority in amending, altering or repealing the Articles or By-Laws" of the corporation (Article IX of Articles of Incorporation). Thus, any action taken by the Board of Directors of which the committee disapproved could be effectively overruled by the committee even to the extent of altering the composition of the Board or the purposes of the corporation. It is also indicative that one of the purposes of the corporate activities is to "benefit the local units of government" in the eight counties.
II. Lake Cumberland Emergency Medical Service System, Inc. This private non-profit corporation is also an instrumentality of the county governments of the Lake Cumberland ADD which choose to contribute financial support to the corporation. The By-Laws of the corporation provide that two of the four members of the Board of Directors from each county are to be selected by the county fiscal court of each contributing county, or the city council of a contributing city of that county. The county medical society selects one of the two remaining directors, and the fourth is to be nominated from the community, but must be elected by the Board. The county fiscal courts (and city councils, if any) therefore have a potential of controlling three-fourths of the Board of Directors. Since the Board of Directors is to run the affairs of the corporation (KRS 273.207), control of the board constitutes control of the corporation.
III. Barren River Emergency Medical Service Board, Inc. Although this private non-profit corporation was established to serve the counties which comprise the Barren River ADD, there is no evidence that any political subdivision has retained control over the corporation. The sole qualification for membership on the Board of Directors is that each be a resident of, and represent, one of the counties (Article V of Articles of Incorporation). Contributing members from each county, including the local governments, are to nominate members of the Board, but the Board reserves the right to reject or accept their nominations (Article VI, Section II of By-Laws) . Thus, although the corporation's funding will be from various sources including political subdivisions, the corporation is independently controlled by its Board of Directors.
IV. Northern Kentucky Emergency Medical Services System, Inc. The Articles of Incorporation of this private non-profit corporation are very general, and no by-laws have been adopted. However, upon inquiry it appears that the System is an instrumentality of the Northern Kentucky ADD. The Board of Directors of the corporation is composed of the members of the executive committee of the Board of Directors of the ADD. Since it is an instrumentality of the ADD, and an ADD is deemed to be a public agency (KRS 147A.080), the corporation is therefore an instrumentality of a political subdivision within the meaning of KRS 61.420(5).
V. Boone Regional Emergency Medical Services System, Inc. It appears that no political subdivision of the state is in control of this corporation. The Board of Directors is to consist of fifteen people, three each chosen by five different entitites, two of which are ADDs and the remaining three of which are Emergency Medical Service (EMS) corporations. The ADDs are political subdivisions, as determined above, and control only two-fifths of the Board. There is no evidence that the named EMSs are political subdivisions.
We note in conclusion that the Department for Human Resources has contracts with four of the five corporations discussed in this opinion, but that the contracts do not give the Department the control which would make them an "instrumentality" of the Department. Rather, the contracts merely provide for funding to the corporation for stated purposes, and not for control of the operations of the corporation by the Department. The common law distinction made is that such a contract establishes an "independent contractor relationship" rather than a "master-servant relationship", because the party performing the service has control of the manner of performance of the work, and is responsible to the other party merely for the results.