BILL ANALYSIS

C.S.H.B. 3945

By: Bumgarner

Licensing & Administrative Procedures

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that while the presence of human trafficking at many massage establishments across Texas is concerning, law enforcement has struggled to shut down businesses suspected of human trafficking because the business can simply change ownership and reestablish itself under new management in the same location. Although the executive director of the Texas Department of Licensing and Regulation (TDLR) has the authority to issue an emergency order to halt the operation of a massage establishment believed to be participating in human trafficking, the bill author has further informed the committee that TDLR has expressed a need for additional tools to ensure that such establishments are unable to reopen at the same or another location. C.S.H.B. 3945 seeks to ensure that the owners and operators of massage establishments that receive an emergency order from TDLR for human trafficking are unable to reopen, renew their massage license, or receive a new massage license by revising language regarding the timeline of emergency orders, by setting out conditions under which an entity is ineligible for a license as a massage establishment or massage school, and by providing for a period of ineligibility following the revocation of a license.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill expressly does one or more of the following: creates a criminal offense, increases the punishment for an existing criminal offense or category of offenses, or changes the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 3945 amends the Occupations Code to set out and revise certain provisions relating to the licensing and regulation of massage therapy and other programs administered by the Texas Department of Licensing and Regulation (TDLR) and the Texas Commission of Licensing and Regulation (TCLR).

Definition of "Sanction"

C.S.H.B. 3945 revises the general definition of "sanction," as applicable to any action taken by the executive director of TDLR against an applicable license holder or another person regulated or licensed by TDLR, to also include in that general definition action taken by TCLR against any such license holder or another person.

Issuance of Emergency Orders in General

C.S.H.B. 3945, in the provision generally applicable to emergency orders issued by the executive director on a determination that an emergency exists requiring immediate action to protect the public health and safety, extends from not later than the 10th day after the date the order was issued to not later than the 17th day after that date the deadline by which the executive director must set the time and place for a hearing conducted by the State Office of Administrative Hearings (SOAH) to affirm, modify, or set aside an emergency order if the emergency order is issued under applicable state law without a hearing. This provision applies only to an emergency order issued on or after the bill's effective date. An emergency order issued before the bill's effective date is governed by the law in effect on the date the order was issued, and the former law is continued in effect for that purpose.

Ineligibility for Licensure as a Massage Establishment or Massage School With Respect to an Entity

C.S.H.B. 3945 sets out the following conditions under which an entity is ineligible for a license as a massage establishment or massage school:

· if an individual in relation to the entity, described as follows, has been convicted of, entered a plea of nolo contendere or guilty to, or received deferred adjudication for an applicable offense that, under current law, makes a person ineligible for licensure as an establishment or school, massage therapist, or massage therapy instructor:

o personally or constructively holds, including as the beneficiary of a trust at least 10 percent of the entity's outstanding stock or more than $25,000 of the fair market value of the entity;

o has the controlling interest in the entity;

o has a direct or indirect participating interest through shares, stock, or otherwise, regardless of whether voting rights are included, of more than 10 percent of the profits, proceeds, or capital gains of the entity;

o is a member of the board of directors or other governing body of the entity; or

o serves as an elected officer of the entity or a general manager of the entity;

· if the entity or an owner or operator of the entity is subject to an emergency order issued by the executive director on applicable grounds, as later described;

· if a massage therapy license issued to the entity or an owner or operator of the entity has been revoked on a determination by TCLR or the executive director that the school or establishment is a sexually oriented business;

· if the entity was a tenant of commercial rental property and the landlord prevailed in a forcible detainer suit filed against the entity based on termination of the entity's right of possession under applicable state law; or

· if the entity is applying for a license with respect to a location that is subject to such an emergency order so issued on the applicable grounds, as later described.

The bill accordingly updates the provision making a person other than the aforementioned individual in the first bulleted item ineligible for a license as a massage establishment, massage school, massage therapist, or massage therapy instructor.

Application by an Entity for License as Massage Establishment or Massage School

C.S.H.B. 3945, with respect to an entity that applies for a license as a massage establishment or massage school, requires the entity to include with the application the following:

· a list of each applicable individual, as described in the first bulleted item in the preceding paragraph, for which the applicant, under current law, must submit fingerprints; and

· an explanation of the relationship between each described individual and the applicant.

This provision applies only to an application submitted on or after the bill's effective date. An application submitted before that date is governed by the law in effect on the date the application was submitted, and the former law is continued in effect for that purpose.

Practice by Massage Establishment: Reporting Allegations of Sexual Contact

C.S.H.B. 3945 requires a massage establishment to report to TDLR any allegation made to the massage establishment of sexual contact between a massage therapist employed by or contracted by the massage establishment and a client not later than 24 hours after receiving notice of the allegation. This provision applies only to an allegation made to a massage establishment on or after the bill's effective date.

New License Required for Change of Location of Massage School

C.S.H.B. 3945 prohibits a massage school from changing the location of the school without obtaining a new massage school license. This provision applies only to an application submitted on or after the bill's effective date. An application submitted before that date is governed by the law in effect on the date the application was submitted, and the former law is continued in effect for that purpose.

Grounds for License Denial, Disciplinary Action, or Administrative Penalty

C.S.H.B. 3945 authorizes TCLR or the executive director to refuse to issue a license to a person, suspend, revoke, or refuse to renew the license of a person, or impose an administrative penalty on a person licensed under provisions governing massage therapy if the person engages in conduct constituting a trafficking of persons offense, in addition to the other grounds established for such actions under current law.

Ineligibility Period on License Revocation

C.S.H.B. 3945 authorizes TCLR or the executive director, on the revocation of a massage therapy license under the grounds established under applicable state law, as amended by the bill, in the order revoking the license, to impose a period not to exceed five years for which the former license holder is ineligible for a massage therapy license.

Emergency Order

C.S.H.B. 3945 revises the provision that authorizes the executive director to issue an emergency order halting the operation of a massage establishment if TDLR has reasonable cause to believe that a trafficking of persons offense is being committed at the establishment to make that authority also applicable to a massage school. The bill also authorizes the executive director to issue an emergency order suspending the license of a massage establishment or massage school. The bill caps at one year the period during which operations may be halted or during which the license may be suspended under the emergency order. The bill includes as a condition under which an emergency order may be issued, with regard to a massage school, that a law enforcement agency give notice to TDLR, or TDLR otherwise learns, that the law enforcement agency is investigating a massage school for a trafficking of persons offense.

C.S.H.B. 3945 establishes that a hearing on an emergency order issued under applicable state law whereby the executive director determines that an emergency exists requiring immediate action to protect the public health and safety on the grounds that TDLR has reasonable cause to believe that a trafficking of persons offense has been committed at the massage establishment or massage school is a contested case. Furthermore, the bill subjects such a contested case to a specified provision of the Administrative Procedure Act, which authorizes a state agency to provide by rule that the administrative law judge employed by SOAH renders the final decision in a contested case before the agency that concerns licensing in relation to an occupational license and that is not disposed of by stipulation, agreed settlement, or consent order, in the same manner as if a rule were adopted as required by that specified provision. The bill requires TDLR to provide to the property owner of the massage establishment's or massage school's location a copy of any emergency order so issued on the applicable grounds under these provisions. These provisions regarding emergency orders apply only to an emergency order issued on or after the bill's effective date. An emergency order issued before the bill's effective date is governed by the law in effect on the date the order was issued, and the former law is continued in effect for that purpose.

Temporary Prohibition on Issuance of Certain Establishment or School Licenses

Emergency Order: Prohibited Issuance of License

C.S.H.B. 3945 authorizes the executive director, if the executive director issues an emergency order against a massage establishment or massage school for a ground described under applicable state law regarding such emergency orders, as amended by the bill and previously described, for a trafficking of persons offense for which TDLR has reasonable cause to believe has been committed at the establishment or school, to prohibit in the emergency order the issuance of the applicable license for a period not to exceed one year with respect to the location where the establishment or school previously operated. The bill requires TDLR to provide to the property owner of the applicable location a copy of any such order issued.

Order Revoking License: Prohibited Issuance of License

C.S.H.B. 3945 authorizes TCLR or the executive director, if the applicable license is revoked under applicable state law, as amended by the bill and previously described, regarding the grounds for license denial, disciplinary action, or administrative penalty, to prohibit in the order revoking the license the issuance of a massage establishment or massage school license for a period not to exceed five years with respect to the location where the establishment or school previously operated. The bill requires TDLR to provide to the property owner of the applicable location a copy of any such order issued.

Request to Rescind Prohibitions

C.S.H.B. 3945 authorizes the property owner, not later than the 30th day after the date on which the copy of an applicable order is provided, to submit a request to TDLR to rescind the applicable temporary prohibitions provided under the bill's foregoing provisions. The bill requires the request to include documentation sufficient to demonstrate that the owner has undertaken or implemented procedures and controls to prevent the commission of the following offenses on the property subject to the prohibition:

· trafficking of persons;

· money laundering;

· prostitution;

· solicitation of prostitution;

· promotion of prostitution;

· aggravated promotion of prostitution;

· compelling prostitution; or

· engaging in organized criminal activity.

Conditions for Approval of Request to Rescind Prohibitions

C.S.H.B. 3945 sets out the conditions under which, on receipt of a request to rescind such prohibitions against the issuance of a massage establishment or massage school license, TCLR or the executive director either may approve the request or must approve the request. Accordingly, the bill provides, as follows:

· TCLR or the executive director may approve the request if the ownership of the property subject to the prohibition changed less than two years before the date of the request and the current owner of the property is not a person against whom a sanction has been imposed for a violation of statutory provisions relating to massage therapy or injunctive relief has been obtained or a civil penalty has been imposed under applicable state law, as amended by the bill and later described; or

· TCLR or the executive director must approve the request to rescind the prohibition as soon as practicable after the date on which the request is received if:

o the ownership of the property subject to the prohibition changed two or more years before the date of the request;

o in that two-year period, an arrest has not occurred for, a citation in lieu of arrest has not been issued for, and a conviction has not resulted from an applicable offense listed under the bill's provisions committed on the property subject to the prohibition; and

o the current owner of the property is not a person against whom a sanction has been imposed for such a violation or injunctive relief has been obtained or a civil penalty has been imposed under applicable state law, as amended by the bill and later described.

Penalties and Enforcement Provisions

Injunctive Relief; Civil Penalty

C.S.H.B. 3945 authorizes the attorney general, a district or county attorney, a municipal attorney, or TDLR to institute an action for the following purposes:

· for injunctive relief to restrain a violation by a person who appears to be in violation of or threatening to violate an emergency order issued for a ground, as described by applicable state law, as amended by the bill, under which TDLR has reasonable cause to believe that an offense of trafficking of persons is being committed at a massage establishment or massage school; and

· to collect a civil penalty from a person who appears to be in violation of such an emergency order so issued under the applicable state law, as amended by the bill.

The bill sets the amount of the civil penalty at not less than $1,000 or more than $20,000 for each violation of such an emergency order. These provisions apply only to conduct that occurs on or after the bill's effective date. Conduct that occurs before the bill's effective date is governed by the law in effect on the date the conduct occurred, and the former law is continued in effect for that purpose.

Criminal Penalty: Violating Certain Emergency Orders

C.S.H.B. 3945 creates a state jail felony offense for a person who knowingly violates an emergency order issued under applicable state law generally governing such emergency orders, as amended by the bill, based on the ground described under applicable state law, as amended by the bill, that TDLR has reasonable cause to believe that an offense of trafficking of persons is being committed at a massage establishment or massage school.

Enforcement of Emergency Order by Peace Officers

C.S.H.B. 3945 authorizes a peace officer of the state, including a peace officer employed by a political subdivision of the state, to enforce an emergency order issued under applicable state law, as amended by the bill, based on the ground that TDLR had reasonable cause to believe that an offense of trafficking of persons is being committed at a massage establishment or massage school.

Repealed Provision

C.S.H.B. 3945 repeals Section 455.005(e), Occupations Code.

Procedural Provision

To the extent of any conflict, the bill's provisions prevail over another Act of the 89th Legislature, Regular Session, 2025, relating to nonsubstantive additions to and corrections in enacted codes.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 3945 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

While both the introduced and substitute set out conditions under which an entity is ineligible for a license as a massage establishment or massage school, the versions differ as follows:

· whereas the introduced made the entity ineligible if the applicant has previously been evicted on the basis of a violation of the Occupations Code, the substitute makes the entity ineligible if the entity was a tenant of commercial rental property and the landlord prevailed in a forcible detainer suit filed against the entity based on termination of the entity's right of possession under applicable Property Code provisions; and

· whereas the introduced made the entity ineligible if the location for which the application is submitted is currently subject to an emergency order on the applicable grounds, the substitute makes the entity ineligible if the entity is applying for a license with respect to a location that is subject to an emergency order so issued on the applicable grounds.

The introduced removed as a condition under which an applicable emergency order may be issued, with regard to a massage establishment, that a law enforcement agency give notice to TDLR, or TDLR otherwise learns, that the law enforcement agency is investigating the establishment for a trafficking of persons offense. The substitute does not remove this condition but instead includes as a condition under which an applicable emergency order may be issued, with regard to a massage school, that a law enforcement agency give notice to TDLR, or TDLR otherwise learns, that the law enforcement agency is investigating a massage school for a trafficking of persons offense.