                             QBfficeof tfie Bttornep @enerat
                                     Sgtate of aexas

                                         September 6,199l



Mr.LarryE.Kosta                                 Opinion No. DM36
Commissioner
Texas Department of Licensing and               Re: Whether management search consult
   Regulation                                   tants are subject to regulation by the
P. 0. Box 12157                                 Texas Department of Licensing &d
Austin, Texas 78711                             Regulation given that such consultants
                                                are exempt from registration and bonding
                                                requirements of the Personnel Employ-
                                                ment Services Act (RQ-62)


Dear Commissioner Kosta:

       You ask about the authority of the commissioner of licensing and regulation
under article S&Zla-7, V.T.C.S.. which regulates personnel employment services.
Specifically, you ask about the commissioner’s authority in regard to management
search consultants.

        Section 3 of article 5221a-7 sets out a number of prohibitions applicable to a
“person who acts as a personnel service in the capacity of an owner, operator of the
service, counselor, or agent or employee.” The statute defines “personnel service”
broadly. V.T.C.S. art. 5221a-7, $ l(5). A management search consultant, as defined
in the act, is a type of personnel service. Ia! 3 1( 11). Section 2(b) provides, “Section
7 of this Act does not apply to a management search consultant.” Under section 7
the owner of a personnel service operating in Texas must have a certificate of
authority from the commissioner of licensing and regulation. Thus, management
search consultants are exempt from the cert.&ate of authority requirement but are
subject to all other provisions of the act.

      When article 5221a-7 was first adopted, it gave the commissioner of licensing
and regulation’ affirmative duties only in regard to the certificate of authority

        ‘As origi&y adopted, article 5221~7 referred to the commissioner of labor and standards.
Those references he changed in 1989 to reflect a change in the name of the agency. Acts 1989,71st
Leg, eh. la39,O 2.01, at 4179.




                                            p. 178
Mr.LarryE.Kosta        - Page2             (DM-36)




requirement of section 7,r which is inapplicable to management search consultants.
Acts 1979, 66th Leg., ch. 263, at 570. In 1987, the legislature amended article
5221a-7 to add sections 6A and 6B, which gave the commissioner of licensing and
regulation authority to impose penalties for violations of section 3(a)(l) of the act.
Acts 1987,7Oth Leg, ch. 839,s 5, at 28%. In essence, your question is whether the
commissioner’s enforcement authority in regard to section 3(a)(l) extends to
management search consultants.

        Section 3(a)(l) provides that a person who acts as a personnel service in
various capacities may not “impose any fee on an applicant for employment until the
applicant has accepted an offer of empkyment resulting from an employment
referral made by the persome service.” The act defines “management search
consultant” as “a personnel setvice that is retained by, acts solely on behalf of, and is
compensated only by an employer and that does not collect directly or indirectly any
fee from an applicant on account of any service performed by the personnel service.”
V.T.C.S. art. 5221a-7,s l( 11). Thus, a personnel service that accepted a fee from an
applicant for employment in contravention of section 3(a)(l) would remove itself
from the act’s definition of “management search consuhant” since management
search consultants, as defined, do not accept fees from applicants for employment.
At the same time, if it did engage in the conduct described in section 3(a)(l), it
would subject itself to the department’s enforcement authority.




                Article 522la-7, V.T.C.S., which regulates personnel
           services, exempts “management search consultants” from its
           registration and bonding requirements. “Management search
           corm&ants” are not exempted from other requirements of the




                                                    DAN      MORALES
                                                    Attorney General of Texas


        hhhougb    the act provided for Gil rem&       and bminal   penalties for vioktio~   of the act,
A& 1979, 66th Leg., ch. ‘263, 03 5, 6 (cod&d as V.T.C.S. art. 5221a-7, 55 5, 6), it did not give the
eommissloacr authority to take action in regard to vioiathu of the act.




                                               P-    179
Mr. Larry E. Kosta - Page 3          (DM-36)




WIIL PRYOR
First Assistant Attorney General

MARYKELLER
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY (Ret)
Special Assistant Attorney General

RENEAHxcKs
Special Assistant Attorney General

MiDELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General




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