QBffice of tfie Bttornep @enerat 

Sgtate of aexas 

September 6,199l 

Mr.LarryE.Kosta 

Commissioner 

Opinion No. DM36 

Texas Department of Licensing and 

Regulation 

P. 0. Box 12157 

Austin, Texas 78711 

Re: Whether management search consult 

tants are subject to regulation by the 

Texas Department of Licensing &d 

Regulation given that such consultants 

are exempt from registration and bonding 

requirements of the Personnel Employment 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 

P. 180