Is a Texas day-labor agency that supplies common workers the legal employer who owes them workers' comp and unemployment insurance?

Plain-English summary

Texas has a law for the businesses that supply day laborers, the agencies that round up workers for unskilled jobs and send them out to other companies for the day. A state senator asked the Attorney General a basic but important question: is the agency the workers' real employer, the one on the hook for workers' compensation and unemployment insurance? And does the answer change depending on the exact months in 1991 and 1992 the law was phasing in?

The Attorney General's answer was yes, the agency is the employer. The statute spells it out: "a license holder is the employer of the common worker." So a temporary common worker employer carries the usual employer duties, including providing workers' compensation or unemployment insurance where other law requires it.

The timing wrinkle did not change anything. The law took effect September 1, 1991, but the parts requiring a license and imposing criminal penalties were pushed to January 1, 1992. The Attorney General pointed out that the section making the agency the employer was not delayed. So even in those first few months when an agency was not yet required to be licensed, it was still the employer of the workers it supplied. The bottom line: from September 1, 1991 onward, a business that provided common workers to other companies was the employer responsible for workers' compensation and unemployment insurance, licensed or not, to the extent other law required.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The temporary common worker statute (then V.T.C.S. article 5221a-10) and the workers' compensation and unemployment compensation statutes have since been recodified into the Labor Code; confirm current law before relying on anything described here.

Background and statutory framework

Article 5221a-10, V.T.C.S., adopted in 1991 (Acts 1991, 72d Leg., ch. 480), imposes licensing and other requirements on persons who provide "common workers" to "third party users." Section 2 defines a "common worker" as an individual who performs unskilled physical labor, a "temporary common worker employer" as a person who provides common worker employees to a third-party user, and a "third party user" as a person who uses those services. Section 4 requires a license to operate as a temporary common worker employer; section 5 provides for licensing by the Department of Licensing and Regulation; and section 6 imposes duties on license holders, limiting charges and wage deductions, setting conditions for waiting premises, requiring recordkeeping, and, in subsection (f), providing that "a license holder is the employer of the common worker."

Sections 11 and 12 govern effective dates. Section 12 provides that the act took effect September 1, 1991, except that sections 4 and 10 took effect January 1, 1992. Section 11 provides that a person was not required to obtain a license until January 1, 1992.

For the period from January 1, 1992 forward, the Attorney General concluded that a temporary common worker employer is the employer of the common workers under section 6(f) and bears the responsibilities of the employer-employee relationship, including providing workers' compensation or unemployment insurance to the extent imposed on employers by other law (citing V.T.C.S. art. 8308-3.23 on workers' compensation and the unemployment-insurance contribution statute). For September 1 to December 31, 1991, the result was the same: section 11 delayed only section 4 (the license requirement) and section 10 (criminal penalties), not section 6. Because section 6's requirements were obviously intended to apply to all persons operating as temporary common worker employers, not just licensed ones, and consistent with the act's stated purpose of protecting worker health, safety, and welfare, the AG concluded that since September 1, 1991, such a person has been the employer responsible for workers' compensation and unemployment insurance to the extent required of employers by other law, regardless of whether licensed.

Citations

• V.T.C.S. article 5221a-10 (Texas temporary common worker statute; § 2 definitions of "common worker," "temporary common worker employer," "third party user"; § 4 license requirement; § 5 licensing; § 6 duties of license holders, including § 6(f) "a license holder is the employer of the common worker"; §§ 11, 12 effective dates)
• V.T.C.S. art. 8308-3.23 (employer's obligation to obtain workers' compensation coverage for employees)

Common questions

Is a day-labor agency the employer of the workers it supplies?
Under this opinion, yes. The Attorney General concluded that a temporary common worker employer is the employer of the common workers under section 6(f) of article 5221a-10 and bears the employer's obligations, including workers' compensation and unemployment insurance to the extent other law requires.

Did the agency owe coverage before it was licensed?
Yes. The Attorney General concluded that the employer status in section 6 applied from the act's September 1, 1991 effective date, even though the license requirement and criminal penalties were delayed to January 1, 1992. Being unlicensed did not relieve the agency of employer duties.

What does the agency have to provide?
Workers' compensation and unemployment insurance, to the extent other law imposes those obligations on employers. The opinion tied the duty to the general employer obligations under the workers' compensation and unemployment-insurance statutes.

Who is the "third party user"?
The company that uses the services of a common worker supplied by the agency. Under the opinion, the user is not the employer for these purposes; the agency that provides the worker is.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0243
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0243.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

August 12, 1993

Honorable O. H. "Ike" Harris
Chair
Committee on State Affairs
Texas State Senate
P.O. Box 12068
Austin, Texas 78711

Opinion No. DM-243

Re: Whether a person who provides "common workers" to "third party users" under V.T.C.S. article 5221a-10 is an employer for purposes of providing workers' compensation and unemployment insurance (RQ-540)

Dear Senator Harris:

Article 5221a-10, V.T.C.S. (the "act"), adopted in 1991, imposes licensing and other requirements on persons who provide "common workers" to "third party users." Acts 1991, 72d Leg., ch. 480, at 1708. You ask whether such a person is the "employer" of a common worker for purposes of providing workers' compensation and unemployment insurance. You ask this question with respect to two time periods: September 1, 1991 to December 31, 1991, and January 1, 1992 to the present. We conclude that a person who provides "common workers" to "third party users" is an employer of such common workers under the act and is responsible for providing workers' compensation and unemployment insurance during both time periods, to the extent required of employers by other law.

Before answering your question we briefly examine the act's provisions. Section 2 of the act provides in pertinent part:

DEFINITIONS. In this Act:

. . .

(2) "Common worker" means an individual who performs labor involving physical tasks that do not require a particular skill, training in a particular occupation, craft, or trade, or practical knowledge of the principles or processes of an art, science, craft, or trade.

. . .

(8) "Temporary common worker agent" or "temporary common worker agency" means a temporary common worker employer.

(9) "Temporary common worker employer" means a person that provides common worker employees to a third party user.

(10) "Third party user" means a person who uses the services of a common worker provided by a temporary common worker employer.

[Emphasis added.]

Section 4 provides that a person must have a license to operate as a "temporary common worker employer" in the state. Section 5 provides for the issuance of licenses by the Department of Licensing and Regulation. Section 6 places various duties and restrictions on "license holders." It limits the charges that may be imposed on common workers and the deductions that may be made from their wages; establishes conditions for the premises on which common workers wait for assignments; provides that the license holder is an "employer"; and establishes record keeping requirements.

Section 7 exempts certain entities from the requirements of the act, including "temporary skilled labor agencies," "employee leasing entities," "labor union hiring halls," and governmental programs. Section 8 governs concurrent regulation of license holders by municipalities or other governmental subdivisions. Section 9 provides for annual license renewal. Section 10 provides penalties for violations of the act and administrative rules or orders adopted thereunder.

Sections 11 and 12, which appear to have prompted your request, govern the effective dates of different parts of the act. Section 11 provides that "a person is not required to obtain a license" until January 1, 1992, except that the department must adopt rules for administering the act by that date. Section 12 provides that the act takes effect September 1, 1991, "except that sections 4 and 10 take effect January 1, 1992."

With respect to your questions, we first address the time period January 1, 1992 to the present. We conclude that a person who operates as a "temporary common worker employer," i.e., a person who provides common worker employees to a third party user, is the employer of the common worker employees for this period. This is the clear import of subsection (f) of section 6, which provides:

A license holder is the employer of the common worker. A license holder may hire, reassign, control, direct, and discharge the license holder's employees.

Section 4 of the act prohibits a person who operates as a temporary common worker employer from doing so without a license. Thus, we conclude that a temporary common worker employer has all of the responsibilities to his employees attendant with the employer-employee relationship, including the obligation to provide workers' compensation or unemployment insurance to the extent imposed on employers by other law. See, e.g., V.T.C.S. art. 8308-3.23 ("employer" election to obtain workers' compensation coverage for employees); art. 5221b-5 ("employer" unemployment insurance contributions).

Our conclusion is no different for the time period from September 1, 1991 to December 31, 1991. Section 11 delays the effective date of section 4, the provision which requires a person who operates as a "temporary common worker employer" to obtain a license, and section 10, the provision which provides criminal penalties for violations of the act. It does not delay the effective date of any other provision, including the various requirements set forth in section 6. As noted above, under section 6, subsection (f), a license holder, a person who operates as a "temporary common worker employer," is the employer of the common worker employees which he or she provides to third party users. We believe that such a person was an employer during this time period even though he or she was not required to obtain a license until January 1, 1992, and therefore may not have had a license and been a license holder until that date. The requirements of section 6 are obviously intended to apply to all persons who operate as "temporary common worker employers," not just those who have obtained licenses. This reading is consistent with section 1 of the act which declares that it is "the purpose of this Act to provide for the health, safety and welfare of workers throughout the state" and that the act "shall be carried out in accordance with this purpose."

Accordingly, we conclude that since September 1, 1991, a person who has provided common workers to third party users has been the "employer" of those common workers under article 5221a-10, V.T.C.S., regardless whether he or she obtained a license as required by the act. Therefore, such a person has been responsible for providing workers' compensation and unemployment insurance from September 1, 1991 to the present, to the extent required of employers by other law.

SUMMARY

Since September 1, 1991, a person who has provided common workers to third party users has been the "employer" of those common workers under V.T.C.S. article 5221a-10, regardless whether he or she obtained a license as required by the act. Such a person has been responsible for providing workers' compensation and unemployment insurance from September 1, 1991 to the present, to the extent required of employers by other law.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Attorney General for Litigation

RENEA HICKS
State Solicitor

MADELEINE B. JOHNSON
Chair, Opinion Committee