Case Information

*1 COPY

Eonorablr maodo A. Will&m8

Chairman and beatlta Dirootor

opbllon Ilo. 0-6088 Ior Are the rrntloned lmlltldualr th8 88@O~t in Ot th@ Liquidating Dlrislon of the ' Board of In8urM00, coEl.a- rionur wIthin th8 m@,caw of Article LlEitlb-17 (g)?

Your request for an~opinion a8 to whether the in-

diTidual8 tr8at.d in the 1ekt.r oi Hr. Wfll 0, %llOX, Liquida- tor, to b. I.08 0. William8 dr8 in thr 8mplOyment Of thm Llqtidating Diririen or tha Board o? In8uranor 0o1ml88ionerr rithia the nraning of Artlola 68Llb-17 (6) , Vernon’8 Ravimd Civil 8t6tUt.8 has been roooiy8d. IOU hare attaohul a oopy of letter born Er. Knox whioh reads in part a8 follows:

*The Liquidating Dlri8ion of the Board of Inrrur- ariO8 &mmi88iOn~8 lra8 orsated and 18 aLaitlthU3d PUr- ruent to House Bill 249 of the 40th Legislature, in- oorporoted in the Rerieed Stetutee as Article 5060-C. The writer Is the Liquidator desfgnzted by the Board OS Innsuranoe Commlrolonerrr end la the Receiver OF- pointed by the respective District Courts in oonneo- tion with the recelvershlps desaribed on the attached 113t. The Board of Xnsuranoe Commiaeioners employs all personnel of the Divi8lon, fix08 salaries snd has the right of termination of employment at will. It eprroves the salary expenditures along with other ex>enaes inoident to the reoeiverahlps.

bnorablr Olaudr A. lIlllam, Pago 8 with thloh the omplo~oo8 -ho fund8 uo paid

l OPU irOE the 88tfit.8 the r@celrrrrhfpr thee 8elv88. Th8 mplo~err work ruio~ly tm all re- 08iTU8hip8 U the OW881Oll let84 68Md8, NO 80~ UOUTW l OOWlt Of th. tiM 8mt ia 0-08 ? iOn with thi mrk of the refiqootive rr.rlrsrrkl~8 i8 in th8 o?fim but an approximation i8 maintained krpt a8 th. buia O? the proration oi thr ~Q10~008’ fra the V=iOI.l8 88lWiU rOO@iV8r8hi>8. tlfteoatho? thm%%%‘ i8 ub8M theiirrtaad kog$ im the offi Of OOW88 l M?atO 2OOOl48 ~0 with r.8 08% to the ori& of.'tho with whloh fb48 oaoh 08q ofre ha8 bean pal(. during th8 lib of the P rooolvor8hlp. Th. EOtti mr@tiOll Of fund8 OOMO- ropsoronU tho apportloa- fairly uour8to qlmatly in tho mspootivo moat of tlmo o? aoh ~liqoidatioa8,"

TOlAX r*qUO8t f\rzthor 8tat88 that %hOn Lh. ]caOX, a8 LIquidatori otor an la8ur~oo oorpny, ho ofton koopr taker on Its ayroll outaln 0r it8 amp1opoer who are famlllar with it8 bur % 088 and Who a88i8t him in liquidation proce88. On those eJ+OyeCI8' rage8 he pay8 booial eoourity taxes to the fodoral Bcvrrnmont. In nddltlon he pay8 8oolal seourlty tax On th8 8mOUllt8 Oi the W’4@8 Of hi8 Ofii08 for00 uhlah UO ohargoable e.@in8t the putioulu in8IUUOO oompany ln QUO8- Tha 8OrTiO.8 ~rformad by thue old 8m~loyOe8 Oi the tion. a8 wd.l 8UVioe8 thr 8Bi&31OyU18

oommy a8 of Of th8 llquldatlng ofiloe ere to be oon8ideredsm

10 uo further advi8ed that the llquidatlon divirion a8 oreated by rtatute 18 housed in a dlff8ront offloe from that of the Ineurance Department of the State of Texas; the: the employee8 of the Llquldatlng Divialon ~arrorm no duties in the offioes o? the Insuranoe Comii88ion; that the work o?

the perrons ~nplogod in the Liquidating Dlrlalon Is solely that of working on the various lneurance companies that are in llqulde~ion; that these pars,-ns are under the direct eupervlalon and oontrol of Mr. Will 0. Knox, Liquidator; that they are chosen or employed by Mr. Knox subject the approval of the Board of Insuranoe Comaissioners.

Article 5221b, Secdsn 17 (e) read3 :z part a3 follo:vs: *3 Eonorabla Claudm A. Wllllam8, Page 5

*(o) *Lmploylng unit' mean8 any lndlrldual or typo of organization, including any partnership, asrooiation, trust, estate, joint stook oompany, oompany, or corporation, whether domestlo ineuraaor or rorelgn, or the raoalvar trU8t.e in bankruptoy, trU8t80 or IUoOe88Or thorao # or the legal repro- 8ontatiVO O? a daOaa8ad p8rs:n whloh ha8 or aubse- quent to January 1, 1958 had in It8 employ ona or more individual8 performing rorrlcer for it within thil 3tRtO. . ."

Sootlon 11 (6) (1) provldrr: "(6) (1) '-lo-nt' the othar eubjeot rOvi8lOn8 Of this #ub8aotion, mean8 8uvic8,inolud- for 8utIoo in intorrtato 00mmo~00, prforrd wager or under any oontraot of hlro, writton or oral, Or im lied prorldod that any 8OrViO.8 par- 8xpr.88 tormod by M f ndlvfdual for waged rhall be deamsd to bo employment rubjoot to thl8 Aot ~11888 and until it 18 8hOWIi t0 ttl0 8di8faOtiOn Of thr &52&88iOIl

that ruoh IndlvIdual ha8 been and will continue to bo frar rrom control or direction over the perform- anoe of suoh servlaee both under his contract of 8arv1oe and in fact."

3eotion 17 (g) (6). roads:

"(6) The tarm 'aployment' shall not inolude: *(A) 3ervice performed in the employ of this State, or of any polltloal subdivieion thereof, or of any lnstrumentallty of this State or its polltloal aubdlvialons;n

The faots related in the letter of the Liquidator ae well as your letter show that there ere two cleases of per.xr?s to Je coxldered i: this or~inlor.: First, there ere t%ose Fersons timt were in ti-:e ex2lol.l;ent of the compmy prior to the eppolntment of the Liquidator. These l~dlvlduol; con- tinue their employment for e sufficient period of time to enable the Liquidator to close out the bujl?es3 in thet particular office of the company. They are paid by the Liquidator out of the essets cf fke >or;,~&ny; ‘?-e:r :1.5,-e of

lionorsblo Qlsudr A. WIllIams, Pago 4

employmsnt romlns the same; the only sss0ntlai dirr8rsnoe in thslr employment bring that ths Liquidator is their supervisor rathu than the former ottlou of the oompsny. Thry wsro In employment under thm Tsxu Unmmploymsnt Oorpensatlon hot prior to ths tlms thr Llquldator took oontrol of tho buslnosr. It oamot bo dirputsd that undu our statuts they nould haro boon in smployment If s reooltrr had boon sppolnted by the oourt.

8800~4, thsro arm other In4irI4uals omployo4 in thr Aurtin 0rri08 of the Llquldator.. ws uo inro~oa the80 that persons puforr fhoir ssrrioos In snothor and 4if’formt ottloo an4 bullally from that of tho 8tato Insur~o~~~sslon) that nono of ths ssrrloss perform04 by ths parsons in the liquida- tion 6ItlsIon l rtsln to tho goners1 dutlos of the Boar4 ot Insuruloo t3oiaui ssIonors. Thilr 4utios are oonilamd atriot to thr lIquI4atIons of the rsrious I~ursnos oompsnlos. Ths sals.rlos of sll of thsss parsons sro apportione4 upon time applied and are paid from ths ussts ot the rarlouo lnsuranoo 00mpflI*s. The Btato oi Tsxu pays no put of their sslsry.

At ths time ths Liquidator took po8sdsslon of the sssets of the various oompanles under a oourt ardor the equitable tit18 to the assets 414 not pass to ths State of Toxaa but remelnod for ultimate dlstrlbutlon to their oreditors an4 polloyholdors. The Leglslaturo placed the llqul4atlon of lnsursnos oomp~Iss in control of the Board c$ Inruranob &mmls8lonors an4 ths Liquidator, not for the benefit of tho State of Texas but to oonserve the assets of the ruIou8 8tstsS for the bonofit a? the oreditors an4 polloyholdors.

If a reoelver had been appolntod by the oourt to

liquidate the assets of the vsrlous oompanies now in the hands of the Liquidator sue!, a receiver Would not have been an exempt employer under the terms of our Aot. Under the statute now in force relative to the liquidation of lnrursnce oompanios, it is the duty of the Dlstriot Court to appoint the statutory Liquidator as receiver of various companies. He is appointed receiver for each ccmiiyany and act3 as reoelver as well as Liquidator. Aa do other reoelvers he muat take the oath to qualify es receiver.

We do not believe nor intend to infer that persons in the e,“.yloyment cf the Board of Insurance Cowissioners in the performnnoe of the general duties of their office are In employment under the Unemployment Compensation Act. Clearly, they are not.

,

, .

Eonorablo Olaub A. Wllllsms, Pago 5

Tho Unsmploymrnt Oomponsatlon Law ot Toxas was l nastsd soourltiy to psrsons tsmporarily out or smploymnt; to prorido l mploysr oompsnIoa wsrs required to oontrlbuto to a fund 00 lnsuro some roller from unsmplomont thrir smployoos,

T h0 l ompanlss being lfquidats4 by our appoint06 orrioor are prlvatr sorporatlons the assets are those of prlvato lnelvl4uals and the Llqu dator i acts for private buslnsss and not for the Btato Texas. 9.0 Whlto rs:Boland, 5 I. Y sup. (84) 113.

Ile hare no doolslons of tho oour%s of Toxas upon this quostlon as tho problom uIses from ths applloatlon of a now17 l naate4 aohems of ssalsl loglslation; IO do havs a deolslon of Stata of.irr York sustalnlng our position. & Bar Klnnoy, (R6) pa 11, tho rourt hold tho St&o Iasurruoo 14 I. I. gu Liquidator P’ the payment of unmsplo~rnt tax08 u n for lablo doing ths iiquie4tLry work In I!&* 0rri08. T hr 8 ths puson. A peals of the Stats

queatloa was asrtiflsd to tho Court of of New York, an4 la that opinion, & 84 Mi R. (M) 494 the founo oourt ho14 that tho llquldator was not an xorpt rmpla~or udo~ the unemployment oompensatlon aot.

Tho Federal Government has epeolfioally provldod in SS VSCA lE4a that *any receiver, rsfarss, trustee, or other offloor or agent appoints4 by sny 0. 8. Court who Is author- i804 by said oourt to aoneuat any buslnssa or rho oonduots w buslnsss shall, from Md aftrr JWO 18, 1934, be NbJsot to all Stato ani looal tax.8 applloablo to suoh busInoss the same as If suoh bu?lnass was ccnduated by an individual or oorporatlon.w

'In the ease O? Mid-AmerlOa, 31 te4. Sup. 601, the trustee WBS held liable for unemployment taxes based upon wages paid to persons employed for the liquidation of e bankrupt estate.

The Le:*islature of Texas FrGVidOe in Yeotic;n 17 (e) OS Article 52Elb that en emrlcFlnG unit should include “insurance cornpan or corporation, whether domejtio or Foreign, or the reaeiver, trustee in benkruptcy, trustee or auooessor thereof ,.: . .* Is the llquld-.tor in this Instrnoe rerform- Ing sns- different functions than those of a receiver or trustee? We think net. The Legislature olearly lctended that the yersonq r;sed in the llquidaticz of these estate3 should benefit from the uneF,:loyment compensation act. *6 Honorable Claude A. Wllllams, Pare 6

The only direct authority on this point is found in tho opinion of tho 3uprams Court of 19. T. in In RI Xlnnsy, 14 N. Y. hp. (24) 11. The Hew York Court states that the psrsons in tho lnsurencr liquidating offloe are Wet smployoos or the Stat0 or an aganoy thorbof for tha purpose Of othu atatutss relating to other employees, e. g. thr Clvll Ser- vloe Law, Soolal Yecurlty Law of tho OnIts States, Federal Xnooao Tax Law from whloh employsea are normally exempt."

Ue, thubfors, advise you that all or the psrrons

aployod ln 1IquldatIon o't t&a various lnsuranoa oompanlas as mentlone4 in your request are in the aployment of the iiquieatlng eivIrlon 0r the Boar4 0r Insurance Commlsslonors wlthln the msanlng Article 5221b, 17 (g), Vernon's Revised Clrll statutss.

Tours very truly GlTNFlRAL CF TDLAS ATI!ORXEY m

S/ Norris HoeRen h3si~atRnt APPROVED MY 29, 1941

8/ llrorer Sellers

FXRST A93IsTANT

ATTOFiNZYOlSNFZAL

APFROVED - O?lnlon CoaTJttee Bp BiEl - Chairman 06 -GEL