How to tell if a public authority is a “political subdivision” of the state
The New York State Labor Law requires certain kinds of employers to provide overtime pay, but it exempts “political subdivisions,” and in a case decided a few months ago, the New York City Health and Hospitals Corporation successfully argued that it’s a “political subdivision.” As the federal district court explained:
the fact that an entity is a public benefit corporation does not automatically render it a political subdivision. Instead, New York Courts engage in a ‘particularized inquiry into the nature of the [organization] and the statute claimed to be applicable to it… to determine whether—for the specific purpose at issue—the public benefic corporation… perform[s] an essential government function… [and therefore] should be treated like the State.
Applying this test to the Health and Hospitals Corporation, the court noted that its enabling legislation expressly states that it was created to perform an “essential public and governmental function” and that a substantial amount of its funding comes from public sources. The court continued:
More broadly, the overwhelming thrust of New York and federal case law establishes that HHC is considered a governmental entity and political subdivision in a wide variety of contexts. For example, HHC is not covered by the National Labor Relations Act, because it has been deemed a political subdivision of the State of New York for purposes of that statute. Rather, HHC employees enjoy the protections and obligations of New York’s Civil Service Law, §§ 200 et seq., which was enacted by the State legislature to “promote harmonious and cooperative relationships between government and its employees.” Similarly, HHC is subject to the New York City Collective Bargaining Law, which only applies to public sector New York City employees, and section 50 of the New York Workers’ Compensation Law, which applies to certain municipalities and “political subdivision[s].” In another example, the New York Court of Appeals has refused to allow HHC to sublease a hospital under its administration to a private entity because “the [HHC Act] clearly indicates that the municipal hospitals would remain a governmental responsibility and would be operated by HHC,” and so to sublease the hospital would therefore impermissibly transfer “the performance of an essential public and governmental function to the private sector.”
Accordingly, while there is no squarely controlling New York judicial decision, the Court concludes that New York courts are overwhelmingly likely to hold that HHC is a political subdivision for purposes of New York Labor Law. Indeed, given the innumerable situations under federal and New York law in which HHC has been deemed a governmental entity, to hold otherwise would be to incongruously carve out an isolated area of the law in which HHC is not considered a governmental entity.
The court also found that a subsidiary of the Health and Hospitals Corporation, MetroPlus, was also a “political subdivision” exempt from the state’s labor law overtime requirements.
Drayton v. Metroplus Health Plan, Inc., 791 F. Supp. 2d 343 (S.D.N.Y. May 16, 2011).