BILL ANALYSIS H.B. 427 By: Bosse March 7, 1995 Committee Report (Unamended) BACKGROUND Securities representatives have traditionally been viewed as independent contractors. These representatives receive their compensation from such transactions in the form of a commission. The stock brokerage firms do not currently withhold Federal taxes or pay social security taxes on the commissions. There have been instances in other states, however, in which the Internal Revenue Service has attempted to impose harsh penalties and require withholding. It is felt that excluding these securities representatives from coverage under the Texas Unemployment Compensation Act will strengthen their status as independent contractors. PURPOSE The purpose of this bill is to exclude from coverage under the Texas Unemployment Compensation Act services provided by securities representatives who are compensated for their service exclusively on a commission basis. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, department, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1: Amends Subchapter E, Chapter 201, Labor Code, by adding Section 201.0725 which removes securities dealers from coverage under the Texas Unemployment Compensation Act if: (1) the individual is engaged in performing an act or transaction subject to the definitions under Section 4 of the Securities Act; (2) the individual is registered by the securities commissioner under the Securities Act; (3) almost all the remuneration for services are directly related to the performance of services rather than the number of hours worked; and (4) the services are performed under a written contract between the individual and the person for whom the services are performed, and the contract states that the individual is not an employee with respect to those services for federal tax purposes. SECTION 2: Effective date September 1, 1995. SECTION 3: Emergency clause. SUMMARY OF COMMITTEE ACTION H.B. 427 was considered by the committee in a public hearing on March 6, 1995. Testifying on the bill was Mike Sheridan, representing the Texas Employment Commission. Testifying against the bill was Walter Hinojosa, representing the Texas AFL-CIO. H.B. 427 was reported favorably without amendment, with the recommendation that it do pass and be printed, by a record vote of 8 ayes, 0 nays, 0 pnv, 1 absent.