                             AUSTIN.      TEXAS


                                 April   6, 1950


Hon. M. B. Morgan,  Commissioner
Bureau of Labor Statistics
Austin, Texas                    Opinion No. v-1035

                                         Re: .Validity of proposed con-
                                              tract between National
                                               Sales Pe.rsonnel System
                                              .qd licensed private em-
                                               ployment agencies   in Texas.
Dear   Sir:

          Your request for.~.~~opinio~,present~s  the qu?stion of
whether the National S$ee. PersonneJ :Syste~‘s     mode ,of ‘opera-
tion in ,Texas wasevidenced ay their contract to beg.+x+cuted ‘with
license&priyate,~pJoyment       agencie.6 amounts to-a viplation of
the YTexas .Private ,JZmpl*e&       Ageqcy Law,? (A@       53st Leg.,
1949, cb. 245, up. 453, and codified as Art. 522la~6..V..C.S.).

           The copy of this proposed contract which you have sub:
mitted is called an “Operating Agreement.”               It provides that the
National Sales Personnel.Gystem           will do advertising      and promo-
,tional work fn securing.bus@ess          of ~employers~who desire to hire
 sales employees      fn a_par&lar.,area.       .,Whe$ such business       is.
acqu,ied.   the National Sales Persopnel          System .w.ill refer it to
fhe member office $u tae particular,Jocaljtywho               will in turn lo-
 cate a prospective     employee for the employer.           The National
 Sales Personnel,System,.is      to be compensated-for         its services
by sharing ia..the ,fee -charged the applicant employee            for whom
employment     his,.secured.   ~The agreement       states that ~the National
Sales Personnel       System will, have PO ~c.wMct with applicants for
employment     and that tbe member         offices are to charge their -
local contract rates to the applicant.

          -We are of the ~opiniqn that~ such plan of operation as evi-
denced by this agreezneatydoes      not amount to a violation. of the
“Texas Private Employment        Agency Law.” ,We, of course, are
cot at this time. confronted;withlactil     practicee,oi. conduct of
operation under this contract.

              We do not believe that National Sales Personnel System’s
proposed       activities under this agreement are such as would require
Hon. M. B. Morgan,     page 2 (V-1035)




a license within the contemplation      of this Act.    This Act pro-
vides for criminal prosecutions      (Art. 522la-6,     Sec. 13, V.C.S.)
and the rule of strict construction     applies in the sense that a
statute of a penal nature will not be extended by construction
beyond the necessities    of the case.    39 TexJur.     276, Statutes,
Sec. 146. The provisions     of this law do not reveal any specific
intent on the part of the Legislature     to regulate out-of-state
agencies as was done in the “Labor Agency Law”.passed                at the
same session of the Legislature      (Acts 51st Leg., 1949, ch. 234,
p. 434, and codified as Art. 5221a-5,      Sec. 6. V.C.S.).     It is there-
fore necessary   to determine the legislative       intent from the terms
used and the object in view in enacting such law. 27 TexJur.
870, Licenses,   Sec. 20. The conclusion       is inescapable     that the
law is intended for the protection     of persons seeking employment.
Ribnik v. McBride,    277 U.S. 375 (1928).     (See annotations in 56
A.L.R.   1327 and 133 A.L.R.   1500 concerning this type of legisla-
tion.)  The law seeks to place responsibility        on the person or
agency in actual contact with these persons by requiring a license.
Such licensees   are the ones regulated and, so long as actual pro-
curement of and contact with applicant employees            is conducted
through such licensed agencies,      sufficient control may be exer-
cised to effect the purpose of the law., .We do not think the ‘Op-
erating Agreement”     of the National Sales Personnel         System with
licensed Texas private employment         agencies on its face can violate
this purpose.

          We are further of the opinion that the agreement to divide
fees collected from applicant employees    who have secured employ-
ment through the promotion efforts of the National Sales Personnel
System does not violate Article  522la-6,  Sec. 10 (h). This section
provides that no private employment    agent shall:

          “(h) Divide or offer to divide. directly or
     indirectly, any fee charged or received with any
     person who secures workers’through      such~ agent,
     or to whom workers are referred, by such agent.“’

This prohibition against dividing fees was intended to prevent em-
ployment agents from dividing fees with employers        or persons in
a hiring capacity for the employer,     and not intended to apply to the
situation here questioned.    This was an abuse incident to the sys-
tem of private employment      agencies which led to theii regulation.
This abuse is described    in the United States Bureau of Labor Bul-
letin No. 109, p. 36, published in October, ~1912; which states in part
as follows:
Hon. M. B. Morgan,     page 3 (V-1035)




          “A most pernicious    practice is the collusion
     with foremen or superintendents     by which the em-
     ployment agent ‘splits fees’ with them.    That is,
     the foreman agrees to hire men of a certain em-
     ployment agent on condition that one fourth or one
     half of every fee collected from mea whom he hires
     be given to him.   This leads the foreman to dis-
     charge men constantly in order to have more men
     hired through the agent and more fees collected,       it
     develops the ‘three-gang’   method so universally
     complained   of by railroad and construction    labor-
     ers, namely, one gang working, another coming to
     work from the employment      agent, and a third going
     back to the city.”

         This opinion is limited    to the question       presented and
other provisions of the contract    are not passed        upon or consid-
ered herein.

                            SUMMARY

          Under the facts submitted, an out-of-state    or-
    ganization which does not deal directlywith      persons
    in Texas seeking employment,       but which forwards    all
    inquiries for employees    to a licensed Texas Private
    Employment     Agency is not required to have a license
    as a Private Employment      Agency in Texas.    A licensed
    Texas Private Employment       Agency may divide fees
    with an out-of-state   organization   through which em-
    ployment inquiries are referred to the Texas agency,
    so long as no fees are divided with the employers.       Ar-
    ticle 52Zla-6,  V.C.S.

                                    Yours      very   truly,

                                     PRICE      DANIEL


APPROVED:

Ned McDaniel
State Affairs
                                    i5-&zA-,
Charles D. Mathews
Executive Assistant                 Walter F. Woodul,          Jr.
                                    Assistants


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