### THE Li-lTORNEY GENERAL OF TEXAS AUS-ITN~LTEXAR

November 24, 1959 Honorable William A. Harrison Commissioner ofInsurance State Board ofInsurance Austin, Texas Opinion 

### No. WW-746 Re: ,Articie 21.28 Texas Insurance Code and the payment ofcontributions under the Texas Unemployment Compensation Act on employees ofthe 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 ofArticle 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 ofInsurance. Ail ofthese employees are named and appointed by the Commissioner ofInsurance inaccordance with Section 12(b), Article 21.28, Texas Insurance Code.

“We respectfully request your opinion as to whether the employees in the office ofthe Liquidator, who **are** appointed inaccordance 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 Inpart as follows:

“The Board shall have the power toappoint 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 andhis 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 RetirementHon. WiIIiam A. Harrison, page 2 (ww-746)

System ofTexas. However, the opinion declined topass on the question of their coverage under the Texas Unemployment Compensation Act because ofaprior federal ruling requiring such employees tomake contributions under the Federal Unemployment Tax Act. Since the writing of this opinion, the Supreme Court ofTexas has had before itquestions concerning the status ofcertain employees ofthe State Liquidator.

In the State Board ofInsurance v. Betts, 315 S.W.2d 286 (1958) onan orininal action ofmandamus brst by the State Board ofInsurance an; the Insurance Commissioner,~prayIng that adistrict judge be instructed toexpunge an order entered byhim purporting to increase the monthly compensation allowed to attorneys for the liquidator-receiver in insurance company receivership cases pending inhis district court, the Supreme Court held that, the provisions ofthe statute, giving the State Board ofInsurance power to appoint and fix compensation of the Liquidator and his counsel is mandatory and thejudge’s order increasing the compensation indisregard of the statute was void. This decision, and two earlier ones by the Texas Supreme Court (State Board ofInsurance v. Betts, 308 S.W.Zd 846 and State Board of&.urance v. Betts, 315 S.W.2d 279) have confirmed the constitutionaiity ofArticle 21.28, Sec. 12(b), and affirmed that the full-time employees ofthe liquidator-receiver appointed in accordance with this section of the Texas Insurance Code are subject to the supervision and control of the Commissioner ofInsurance, Attorney General Opinion No. WW-432 also sets out this same conclusion. The Texas Unemployment Compensation Act by Section (5)(g) ofArticle 5221(b)-17 exempts state employees from making contributions under this Act, such section reading inpart as follows:

“(g) Service performed in the employ of this State or ofany other state or ofany political subdivision thereof, or any instrumentality ofany one or more ofthe foregoing which is wholly-owned by this State or by one or more states or political subdivisions; and any service performed in the employ ofany 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 ofthe 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 ofSeptember 1, 1959from the Director ofTax Rulings, Division ofthe 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 ofInsurance Commissioners, an agency ofthe State ofTexas. Individuals who act ina representative capacity and who are appointed or employed pursuant toSection 12(b) ofArticle 21.28 ofthe Texas Insurance Code by the Board ofInsurance, are employees of the Board. Their services insuch capacity are excepted

‘employment under the Federal Insurance Contributions Act and the Federal Unem loyment Tax Act by Sections 3132(d)(?) and 3306(c) 7), respectively, P ofthe Internal Revenue Code.” And further, by aletter dated October 9, 1959, to C. H. Langdeau. State Liquidator, the group supervisor ofthe United States Treasury Department, Internal Revenue Service, District Director’s Offlce, Austin, Texas, stated that:

“It is our opinion thatyou are correct inyour Interpretation that the 70some-odd people employed by the Liquidation Division on acontinuing basis are not employees of the estates of insurance companies being liquidated.” Based on the reasoning ofAttorney 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 ofthe State and, therefore, are **not** required tomake 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 OfTexas

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