## QBffice of tfie Bttornep @enerat Sgtateof 

## aexas September 6,199l
Mr.LarryE.Kosta Commissioner Opinion No. DM36 Texas Department ofLicensing 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 ServicesAct (RQ-62)
Dear Commissioner Kosta: You ask about the authority ofthe 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 ofarticle 5221a-7 sets out a number ofprohibitions applicable to a “person who acts as a personnel service in the capacity ofan owner, operator ofthe 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 inthe act, is a type ofpersonnel service. Ia! 3 1(11). Section 2(b) provides, “Section 7 ofthis 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 ofauthority requirement but are subject to all other provisions ofthe act. When article 5221a-7wasfirst adopted, it gave the commissioner oflicensing 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, at4179.

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requirement of section 7,rwhich 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) ofthe act. Acts 1987,7OthLeg, 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 “apersonnel setvice that isretained by, acts solely on behalf of, and is compensated onlyby an employer and that does not collect directly or indirectly any fee from an applicant on account ofany service performed bythe personnel service.” V.T.C.S. art. 5221a-7,s l( 11). Thus, apersonnel service that accepted afee 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 itselfto 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 ofTexas
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 regardto vioiathu of the act.

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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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