                                     May 6. 1987




Eouorable Lloyd Criss                                   Opinion No. JM-689
Chairman
Committee on Labor and                                  Re:   Authority of the State
    Employment Relations                                Fire Marshal to promulgate
Texas House of Representatives                          rules regarding fire protec-
P. 0. Box 2910                                          tion sprinkler contractors
Austin,  Texas   70769

Dear Representative         CriSS:


        As Chairman of the House Committee on Labor and Employment
 Relations,    you ask several questions about article             5.43-3 of the Texas
 Insurance Code.        The purpose of article          5.43-3     is to protect          the
 public    from the installation         of unsafe fire         protection        sprinkler
 systems.     The act has three main requirements:                    first.     each fire
 protection     sprinkler    system contractor      must register         vith the State
 Board of Insurance;          second,   each fire     protection       sprinkler      system
 contractor     must employ at least         one full-time      licensed       responsible
 managing employee; and finally,           each managing employee must obtain a
 license by complying vich requirements Imposed by the State Board of
 Insurance.      see 554. 0.       You ask whether article          5.43-3 prohibits         a
 registered     &&actor        or licensed    individual     from subcontracting           an
 entire project      or part of a project       to an unregistered           subcontractor.
 or unlicensed      individual.       You also ask vhether,          if article       5.43-3
 does not prohibit        this subcontracting.       the State Board of Insurance
.may promulgate rules to prohibit          such conduct.

      Article    5.43-3 requires all contractors,     whether they are primary
contractors      or subcontractors.   for    the plan,     sale,    installation,
maintenance,      or servicing    of all   or part     of a fire        protection
sprinkler     system to obtain a certificate        of registration       from    the
board and to employ at least one full-time,            licensed,     responsible,
managing employee.      Section 4 of article    5.43-3 requires,      in part:

                  (a)   A    fire
                                protection   sprinkler   system con-
              tractor    must       to the board for a certificate
                                 apply
              of registration   on a form prescribed   by the board.
              If   the contractor     is   a partnership    or joint
              venture,   it need not register    in its own name if
              each partner or joint venturer 1s registered.     . . .




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Honorable Lloyd Crlss               - Page 2         (JM-689)




                (b)   Each   fire  protection     sprinkler   system
            contractor     must employ at     least    oue licensed
            responsible   managing employee ou a full-time    basis.

                (c)   Each responsible       managing employee must
            obtain a license      issued by the board and condi-
            tioned     on   the   successful     completion    of   the
            examination     requirement     and other     requirements
            prescribed     by   the    rules    adopted    under   this
            article.    . . . (Emphasis added).

See also 58.._    Section           l(g)   defines     a "fire   protection   sprinkler   system
contractor"    as

            a person or organization      that offers to undertake,
            represents    itself  as being able to undertake,         or
            does    undertake    the   plan.   sale,   installation,
            maintenance,     or servicing    of a fire     protection
            sprinkler    system or any part of such a system.
            (Emphasis added).

This definition           clearly     reaches    subcontractors.

      Section 2(b) of article    5.43-3 contains several narrow exceptions
vhich may apply to some subcontractors.         Subsection (b) of section  2
provides,   in part, that article    5.43-3 does not apply to:

                (4)  a person or organization     that sells   or
            supplies   products   or materials  to a registered
            fire protection   sprinkler system contractor;

                (5)  an installation,    maintenance,   or service
            project   for which the total     contract   price   for
            labor,  materials,    and all other services    is less
            than $100, if:

                      (A)    the project    is not a part of a complete
                  or more costly       project,     whether the complete
                  project    is to be undertaken by one or more fire
                  protection    sprinkler     system contractors; or

                      (B) the project   is not divided into con-
                  tracts  of less   than $lCO for the purpose of
                  evading this article;

                  .   .    .   .

                (7)    a regular    employee of a registered                    fire
            protection    sprinkler   system contractor.




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Eouorable    Lloyd Criss     - Page 3      (m-689)




These exceptions,     however, particularly      subsections    Z(b)(5)(A)               and
2(b)(5)(B).     emphasize  that article     5.43-3   was   intended     to             reach
subcontractors.

       Because you ask whether article              5.43-3 prohibits         a registered
contractor      or a licensed         individual     from subcontractiug            with an
uuregisteredyontractor           or ao unlicensed         individual,      a preliminary
clarification       of article      5.43-3's     requirements     is necessary.           The
registration       and    licensing      provisions      of   article       5.43-3      serve
different     purposes.      Subsection 2(b)(7)       provides    that article        5.43-3
does not apply to "a regular employee of a registered                    fire protection
sprinkler      system contractor."           This exception,       however,       logically
applies     only while the employee acts as au employee of a registered
contractor.       If a licensed       employee acts independently,            i.e..    apart
from his registered         contractor     employer, and offers         to undertake or
undertakes "the plan, sale, installation,              malatenance. or servicing            of
a fire protection       sprinkler     system or any part of such a system,"               the
licensed     employee must also obtain a certificate             of registration         from
the board.       The act’s    requirement that a contractor           employ a licensed
managing employee is one of the requirements for obtaining                          a certi-
ficate     of registration;       it is not a substitute             for registration.
Cousequently,      this opinion addresses your questions in the context of
registered     and unregistered      contractors.

       As indicated,       subcontractors     fall   within  the definition       of
persons or organizations         that must obtain certificates       of registra-
tion.    The more difficult      question is whether article    5.43-3 prohibits
the actual act of subcontracting           as well.     You ask whether article
5.43-3    prohibits    registered    contractors    from subcontracting    with a
person or organization       who has oat complied with the act.         If it does
not prohibit       such subcontracting,       you ask 'whether the board may
promulgate rules prohibiting        such conduct.

       Section   8 provides     that a person or organization           may not:

                 (1)    plan, sell,    install,      maintain. or service
             a fire protection      sprinkler      system without a valid
             certificate     of registration;

                 (2)   act as a fire protection    sprinkler   system
             contractor     under a certificate     of registration
             without having at least oae full-time      employee who
             holds    a valid     responsible   sianaging    employee
             license    . . . ;

                 (3)    act as a responsible    managing employee for
             a fire      protection   sprinkler    system contractor
             without    a valid license:




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Eonorable    Lloyd Criss    - Page 4     (JM-689)




                  (4)  obtain   or attempt    co obtain a certificate
              of registration    or license    by fraudulent represen-
              tation;   or

                   (5)    plan. sell.    install.   maintain,  or service
              a fire protection       sprinkler   systesl in violation  Of
              this     article   or the rules        adopted under this
              article.

Although this section applies          to subcontractors,     it   does not expressly
make the act of subcontracting          a prohibited   act.

      Section      10 of article      5.43-3 provides     that a person commits a
criminal      offense   if the person knowingly or intentionally          violates
section     0 of article     5.43-3.    Although section 8. in conjunction     with
section      10, does not directly          make the act of subcontracting         a
criminal     offense,   general provisions      of the Texas Penal Code may apply
to the      act of subcontracting          with a person or organization       that
violates      section   0 of article      5.43-3.   Chapter 7 of the Penal Code
imposes      criminal    responsibility      for the conduct of another under
certain       circumstances.       For example,      section   7.02  of  the code
provides,      in part:

                  (a)   A person is criminally  responsible for          an
              offense   committed by the conduct of another if:

                     (1)  acting  with the kind of culpability
                 required for the offense,  he causes or aids an
                 innocent or nonresponsible  person to engage in
                 conduct prohibited   by the definition   of the
                 offense;

                     (2)  acting with intent to promote or assist
                 the commission of the offense,      he solicits,
                 encourages,   directs, aids, or attempts to aid
                 the other person to commit the offense;   or

                     (3) having a legal duty to prevent commis-
                 sion of the offense     and acting with intent to
                 promote or assist   its commission. he fails     to
                 make a rrasonable   effort   to prevent commission
                 of the offense.   (Emphasis added).

 See also 57.01.    General provisions    of the Penal Code, such as section
.7.02,   apply to offenses   defined outside      the code unless the statute
 defining    the offense   provides    otherwise.     See Penal Code 91.03;
 Roneycutt v. State, 627 S.W.2d 417 (Tex. Crim.Fp.          1981).

      Consequently,    sections   8 and 10 of article         5.43-3 could          be
applied     in conjunction    with section     7.02    of the Penal Code            to
contractors     who knowingly      or    intentionally      contract  with           a



                                           p. 3193
.

    Bonorable    Lloyd Criss     - Page 5      (JM-689)




    subcontractor      who violates    section  8 of article    5.43-3.    Of course,
    section     7.02,   which makes an accused vicariously           responsible    for
    assisting     another to commit an offense,        requires    proof of conduct
    constituting      an offense    plus an intentional     act by the accused to
    oromote or assist        such conduct.     See general*     Ho~neEutt v. State.
    &;        Herring v. State,      633 S.W.: !d 905 (Tex. App. - Dallas 1982).
    aff'd,    659 S.W.2d 391 (Tex. Grim. App. 1983).         Proof of the elements
    ofcriminal        offense depends 011 the facts in each individual        case.

           Pou also ask whether the State Board of Insurance may promulgate
    rules pursuant to section 3 of article              5.43-3 to prohibit      registered
    coutractors     from subcontracting        with persons or organizations          which
    are themselves         in violation     of article      5.43-3.     Section    3(a)    of
    article     5.43-3     provides    that "[tlhe     board shall       administer     this
    article    and may issue rules necessary           to its administration        through
    the State Fire Marshal."            Administrative     agencies may exercise        only
    those powers granted by law, together with those powers necessarily
    implied from an authority conferred or duty imposed by statute.                     City
    of Sherman v. Public Utility          Commission of Texas. 643 S.W.2d 681, 686
    (Tex. 1983).       A licensing     agency for a lawful business or profession
    cannot enforce        standards which are inconsistent           with those of rhe
    controlling      statute.      Bloom v. Texas State Board of Examiners of
    Psychologists,       492 S.W.2d 460 (Tex. 1973).             As indicated,      article
    5.43-3    does not expressly          prohibit    a registered       contractor     from
    subcontracting      with a subcontractor        that is in violation        of article
    5.43-3.     Consequently,       the dispositive    issues are whether such rule-
    making authority may be "necessarily             implied" from article       5.43-3 or
    whether such rulemaking authority Is inconsistent               with article    5.43-3.

           Section 4 of article            5.43-3 contains        three basic requirements:
    first,    each fire protection           sprinkler    system contractor       must register
    with the board;           second,     each contractor        must employ at least          one
    full-time      licensed     responsible       managing employee: and finally,             each
    managing employee must obtain a license                  through the board.         Section a
    prohibits      acts which violate            these basic       requirements.       Section    3
    grants the board rulemaking authority                    to administer       these require-
    ments.     Additionally,         section    7(a) authorizes        the board to delegate
    certain     of its       functions,       powers,     and duties      to the State Fire
    Harshal.       If the board can prohibit               a person or organization           from
    planning,       selling,      installing,       maintaining.       or servicing       a fire
    protection       sprinkler     system without complying with certain                 require-
    ments , it would be anomalous to determine that the board cannot
    prohibit    a registered        contractor     from knowingly assisting         or promoting
    a violation       of the act's requiremenrs by another person or organiza-
    tion.      Article       5.43-3     requires      registered      contractors     to assume
    certain    responsibilities          for safe fire protection           sprinkler    systems.
    See 15 (bond and insurance are requisites                  for certificate      of registra-
    tion) ,     The act also requires              contractors      to employ at least          one
    full-time     licensed responsible          managing employee.         The obvious purpose
    for this requirement is co have a licensed                      employee responsible        for
    actually     managing or supervising             the work performed.           Additionally,



                                                p. 3194
Honorable Lloyd Criss     - Page 6      (JM-689)




section 4(h) provides that "[a] certificate     of registration   or license
issued    under this   article   is not   transferable."       If registered
contractors   were free to subcontract   all or part of a project        to a
person or organization     that did not comply with these requirements.
the requirements would be meaningless.

       Consequently,   article    5.43-3 contains the nscessary authority for
the board to promulgate rules forbidding            registered    contractors  from
subcontracting    with persons or organizations         that are in violation     of
article   5.43-3.    This does not, however, mean the board may designate
the act of subcontracting           as a prohibited    act under section      0 for
purposes    of criminal      liability   under section       10.    Although rules
validly   adopted pursuant to a statute may in some instances designate
certain    conduct as a criminal         offense,    see Penal Code Sl.O3(a).
article   5.43-3 does not authorize         the boardto       create new criminal
offenses.     Oo the other hand, this does not leave the board without
enforcement power.      Subsection (a) of section 9 provides:

           [Vliolation    of this    article   or a rule     adopted
           under this article      is a ground for the denial,
           suspension,     or revocation     of a certificate      of
           registration      or a license      issued  under this
           article.     (Emphasis added).

Rules of the board say only be adopted according    to legally                    applic-
able procedural  requirements.  See generally  V.T.C.S.  art.                    6252-13s
(Administrative Procedure and Texas Register Act).

                                    SUMMARY

                  Article     5.43-3    of the Texas Insurance Code
           requires     contractors,      whether primary contractors
           or subcontractors,         for the plan,       sale,   installa-
           tion, maintenance, or servicing            of all or part of a
           fire     protection      sprinkler      system to obtain          a
           certificate     of registration       from the State Board of
           Insurance.      Additionally,      article   5.43-3 authorizes
           the board to promulgate rules forbidding              registered
           contractors       from subcontracting         with persons       or
           organizations        that are in violation           of article
           5.43-3.




                                              J-/h
                                                 Very truly    yours,
                                                         a


                                                 JIM     MATTOX
                                                 Attorney General of Texas

JACK MGRTOWRR
First Assistant Attorney      General



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Honorable Lloyd Criss   - Page 7     (JU-689)




MARYKELLER
Executive Assistant   Attorney   General

JUDGEZOLLIE STEAKLEY
Special Assistant Attorney    General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jennifer Riggs
Assistant Attorney General




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