THE Li-lTORNEY GENERAL 

OF TEXAS 

AUS-ITN~LTEXAR 

November 24, 1959 

Honorable William A. Harrison 

Commissioner of Insurance 

State Board of Insurance 

Austin, Texas 

Opinion No. WW-746 

Re: ,Articie 21.28 Texas Insurance 

Code and the payment of contributions under the Texas Unemployment Compensation Act 

on employees of the State 

Liquidator. 

Bear Mr. Harrison: 

Your request for an opinion has been received and we quote 

from your request as follows: 

A4 

. . .the Liquidator named and appointed under 

the authority of Article 21.28, Texas Insurance Code, 

has been making contributions to the Texas Employment CommiasIoiras prescribed by the Texas Unemployment Compensation Act on the attorneys, clerks, 

and other assistants, including the accounting and 

secretarial personne1, employed by the Liquidator 

under the authority of the State Board of Insurance. 

Ail of these employees are named and appointed by 

the Commissioner of Insurance in accordance with 

Section 12(b), Article 21.28, Texas Insurance Code. 

“We respectfully request your opinion as to 

whether the employees in the office of the Liquidator, 

who are appointed in accordance with Section 12(b), 

Article 21.,28, Texas Insurance Code, are subject to 

the terms of the Texas Unemployment Compensation 

Act? In other words, must contributions be paid on 

such employees? ” 

Article 21.28, Section 12(b) provides In part as follows: 

“The Board shall have the power to appoint 

and fix the compensation of the Liquidator and of 

such special deputy liquidators, counsel, clerks, or 

assistants, as it may deem necessary. . .” 

Attorney General Opinion No. S-141 held that the Liquidator 

and his employees appointed under Article 21.28, Texas Insurance Code, 

were State employees within the terms of the State Employees Retirement Act and were eligible for membership in the Employees Retirement 
Hon. WiIIiam A. Harrison, page 2 (ww-746) 

System of Texas. However, the opinion declined to pass on the 

question of their coverage under the Texas Unemployment Compensation Act because of a prior federal ruling requiring such 

employees to make contributions under the Federal Unemployment Tax Act. Since the writing of this opinion, the Supreme Court 

of Texas has had before it questions concerning the status of certain 

employees of the State Liquidator. 

In the State Board of Insurance v. Betts, 315 S.W.2d 286 

(1958) on an orininal action of mandamus brst by the State Board 

of Insurance an; the Insurance Commissioner,~prayIng that a district judge be instructed to expunge an order entered by him purporting to increase the monthly compensation allowed to attorneys 

for the liquidator-receiver in insurance company receivership cases 

pending in his district court, the Supreme Court held that, the provisions of the statute, giving the State Board of Insurance power to 

appoint and fix compensation of the Liquidator and his counsel is mandatory and the judge’s order increasing the compensation in disregard 

of the statute was void. This decision, and two earlier ones by the 

Texas Supreme Court (State Board of Insurance v. Betts, 308 S.W.Zd 

846 and State Board of &.urance v. Betts, 315 S.W.2d 279) have confirmed the constitutionaiity of Article 21.28, Sec. 12(b), and affirmed 

that the full-time employees of the liquidator-receiver appointed in 

accordance with this section of the Texas Insurance Code are subject 

to the supervision and control of the Commissioner of Insurance, 

Attorney General Opinion No. WW-432 also sets out this same conclusion. 

The Texas Unemployment Compensation Act by Section (5)(g) 

of Article 5221(b)-17 exempts state employees from making contributions under this Act, such section reading in part as follows: 

“(g) Service performed in the employ of 

this State or of any other state or of any political 

subdivision thereof, or any instrumentality of any 

one or more of the foregoing which is wholly-owned 

by this State or by one or more states or political 

subdivisions; and any service performed in the 

employ of any instrumentality of this State or of 

one or more states or political subdivisions to the 

extent that the instrumentality is with respect to 

such service, exempt under the Constitution of the 

United States from the tax imposed by Section 1600 

of the Federal Internal Revenue Code;. . .” 

In addition, the federal government has reversed its prior 

ruling and by letter under date of September 1, 1959 from the Director 

of Tax Rulings, Division of the Secretary of the Treasury of the United 

States, held that: 
Hon. William A. Harrison, page 3 (WW-746) 

“We conclude that the Liquidation division 

is an integral part of the Board of Insurance Commissioners, an agency of the State of Texas. 

Individuals who act in a representative capacity and 

who are appointed or employed pursuant to Section 

12(b) of Article 21.28 of the Texas Insurance Code 

by the Board of Insurance, are employees of the 

Board. Their services in such capacity are excepted 

‘employment under the Federal Insurance Contributions Act and the Federal Unem loyment Tax Act 

by Sections 3 132(d)(?) and 3306(c) P 7), respectively, 

of the Internal Revenue Code.” 

And further, by a letter dated October 9, 1959, to C. H. 

Langdeau. State Liquidator, the group supervisor of the United States 

Treasury Department, Internal Revenue Service, District Director’s 

Offlce, Austin, Texas, stated that: 

“It is our opinion that you are correct in your 

Interpretation that the 70 some-odd people employed 

by the Liquidation Division on a continuing basis are 

not employees of the estates of insurance companies 

being liquidated.” 

Based on the reasoning of Attorney General Opinion No. 

WW-432, the above cited Betts case and the new rulings from the 

Internal Revenue Service,xonciude that the full-time employees 

of the State Liquidator’s Office insofar as Article 5221(b)-17, Sec. 

(5)(g) is concerned are performing service in the employ of the 

State and, therefore, are not required to make contributions under the 

Texas Unemployment Compensation Act. 

SUMMARY 

The full-time employees of the 

~~~~2~,~~~~~~;~~~~~;loyU~~~n”tcontinuing basis are performing service in the employ of the State insofar 

as Article 5221(b)-17 Sec. (5)(g) is concerned and are exempt from the Texas 

Unemployment Compensation Act. 
- - 

Hon. Wiliiam A. Harrison, page 4 (WW-746) 

Very truly yours, 

WILL WILSON 

Attorney General Of Texas 

BY -dwe 

Richard A. Wells 

Assistant 

RAW:lmc 

APPROVED: 

OPINION COMMITTEE: 

W. V. Geppert, Chairman 

Iola Wilcox 

Gordon Cass 

Fred B. Werkenthin 

=VIEWED FOR THG ATTORNEY GENERAL 

BY: 

Leonard Passmore