License Requirement for Security Guard and Patrol Businesses

Subject:

License Requirement for Security Guard and Patrol Businesses – G.S. § 74C-3.

Requested By:

James F. Kirk, Administrator

N.C. Private Protective Services Board

Questions:

(1)

Is a temporary employment agency authorized to provide armed and/or unarmed security guards to a government agency or a civilian company, firm, association, etc., without being licensed in accordance with Chapter 74C of the General Statutes of North Carolina?

(2)

Where a temporary employment agency is under contract to a North Carolina Ports Authority to provide armed guards who are certified law-enforcement officers under Chapter 17C of the General Statutes of North Carolina, must the agency be licensed under Chapter 74C of the General Statutes of North Carolina where it allows the Chief of Security for the Ports Authority to interview and select the officers hired (agency placed the guards on its payroll, withheld taxes and social security and provided other fringe benefits) by the agency to provide armed security for the Ports Authority?

(3)

If the guards being provided by the temporary agency are not certified law-enforcement officers and the other facts, stated in Question two above existed, would the temporary employment agency be in violation of Chapter 74C of the General Statutes of North Carolina for providing unarmed security guards without a license?

Conclusions:

(1)

No.

(2)

Yes.

(3)

Yes.

Questions one, two, and three present similar considerations for analysis. For this reason, these questions are analyzed together. Initially, however, it is helpful to examine the purpose of the Private Protective Services Board (hereinafter Board) which was created by the Private Protective Services Act, Chapter 74C of the General Statutes of North Carolina.

An examination of the Act shows that the Board was created to "administer the licensing and set educational, and training requirements for persons, firms, associations, and corporations, engaged in the private protective services businesses within this State." G.S. § 74C-4(a). The Board is authorized to "deny, suspend, or revoke any license issued under this Chapter to any applicant or licensee who fails to satisfy the requirements of this Chapter and/or the rules established by the [B]oard." G.S. § 74C-5(6).

The licensure and training requirements prescribed by the Act and regulations promulgated thereunder are clearly designed to protect the citizens of North Carolina. The Board’s application process entails searching the criminal record of each applicant to insure that the applicant has not been convicted of any crime which would indicate bad moral character. 12 N.C.A.C. 7D .0703. Also, each armed guard must provide proof of the successful completion of a firearm’s training course. G.S. § 74C-13; 12 N.C.A.C. 7D .0807.

Unquestionably, the State may regulate security guard and patrol businesses by establishing licensing requirements. Shipman v. N.C. Private Protective Services Bd., 82 N.C. App. 441, 346 S.E.2d 295 (1986). In Shipman, the North Carolina Court of Appeals stated that:

[r]egulating an occupation which engages in many of the same activities as our public police officers is clearly a legitimate purpose of state government.

82 N.C. App. at 444.

Under N.C.G.S. § 74C-3(a)(6) a license is required for:

any person, firm, association or corporation engaging in the business of providing a private watchman, guard, or street patrol service on a contractual basis for another person, firm, association, or corporation for a fee or other valuable consideration and performing one or more of the following functions:

a.

prevention and/or detection of intrusion, entry, larceny, vandalism, abuse, fire, or trespass on private property;

b.

prevention, observation, or detection of any unauthorized activity on private property;

c.

protection of patrons and persons lawfully authorized to be on the premises of the person, firm, association, or corporation for whom he contractually obligated to provide security services; and

d.

control, regulation, or direction of the flow or movement of the public, whether by vehicle or otherwise, only to the extent and for the time directly and specifically required to assure the protection of properties.

This definition does not include a person employed regularly and exclusively as an employee by an employer in connection with the business affairs of such employer, except that if the employee is an armed private security officer and wears, carries, or possesses a firearm in the performance of his duties, the provisions of G.S. 74C-13 shall apply; provided, however, that nothing in this Chapter shall be construed to prohibit a law enforcement officer from being employed during his off-duty hours by a licensed security guard and patrol company on an employer-employee basis; provided further, that the police officer shall not wear his police officer’s uniform or use police equipment while working for a security guard and patrol company. This definition does not include a law enforcement officer who provides security guard and patrol services on an individual employer-employee basis to a person, firm, association, or corporation which is not engaged in a security guard and patrol business.

The North Carolina Courts have not construed the statutory definition of security guard and patrol businesses as it relates to temporary employment agencies. In fact, there are no cases which construe this definition as it applies to a temporary employment agency. However, there are some cases which have discussed whether the employee of a temporary employment service is also an employee of the business to which he has been assigned to work. Hoffman v. National Machine Co., 113 Mich. App. 66, 317 N.W.2d 289 (1982); Campbell v. Central Terminal Warehouse, 56 Ohio St.2d 173, 383 N.E.2d 135 (1978).

In Santa Cruz Poultry, Inc. v. Superior Court, Cal. App. 3d , 239 Cal. Rptr. 578 (1987), the Court of Appeals of California stated:

Where the general employer is a temporary employment agency . . . and the business to which the employee is assigned has the right of supervision and direction of the employment duties, the typical result is to find the existence of a special employment relationship.

Santa Cruz, 239 Cal. Rptr. at 580.

Applying Santa Cruz, it appears that a special employment relationship exists between the security guards furnished by the temporary employment agency and the client seeking security services. Assuming that unarmed guards are provided by the temporary employment agency, the question is whether they fall within the exemption under G.S. § 74C-3(a)(6) for proprietary security guards. Here, this question cannot be resolved in the affirmative because the exemption plainly applies only to a "person employed regularly and exclusively as an employee by an employer in connection with the business affairs of such employer."

In essence, for the unarmed guards to fall within the proprietary exemption, they must be employed solely by the client. However, inasmuch as Santa Cruz supports the proposition that the guards are employees of both the temporary employment agency and its client, the temporary employment agency is not entitled to rely upon the proprietary exemption. This appears to be buttressed by the fact that the agency carries the guards on its payroll, deducts taxes, social security, and makes various benefits available to the guards. Therefore, it is concluded that the temporary employment agency must first obtain a security guard and patrol license under Chapter 74C before providing unarmed guards to their clients. As explained more fully below, this conclusion applies irrespective of whether or not the guards have been certified as lawenforcement officers under Chapter 17C of the General Statutes of North Carolina.

With respect to armed guards, G.S. § 74C-3(a)(6) provides that although the definition of security guard and patrol business excludes those persons regularly and exclusively employed by an employer in connection with the employer’s business affairs, employees serving as armed private security officers and wearing, carrying, or possessing a firearm in the performance of their duties are subject to the provisions of G.S. § 74C-13. G.S. § 74C-13 reads, in pertinent part:

(a)

It shall be unlawful for any person performing the duties of an armed private security officer to carry a firearm in the performance of those duties without first having met the qualifications as set forth in this section and having been issued a firearm registration permit by the Board. For the purpose of this section, the following terms are defined:

(1)

"Armed private security officer" means an individual employed by a contract security company or a proprietary security organization whose principal duty is that of an armed security guard, patrol, or watchman; armed armored car service guard; alarm system company responder; private detective; or armed courier service guard who at any time wears, carries, or possesses a firearm in the performance of his or her duties.

(2)

"Contract security company" means any person, firm, association, or corporation engaging in a private protective services business as defined in this Chapter which provides said services on a contractual basis for a fee or other valuable consideration to any other person, firm, association, or corporation.

(3)

"Proprietary security organization" means any person, firm, association, or corporation or department thereof which employs watchmen, security guards or patrol personnel, alarm responders, armored car personnel, or couriers who are employed regularly and exclusively as an employee by an employer in connection with the business affairs of such employer.

Considering the above-quoted provisions, a temporary employment agency providing armed guards to its clients on a contractual basis falls within the definition of a contract security company. Moreover, to properly operate as a contract security company, it is concluded that the temporary employment agency must be licensed by the Board as a statutory prerequisite to engaging in the private protective services business as defined in G.S. § 74C-3. See G.S. §§ 74C2 and 74C-13(a)(2). This conclusion is not vitiated by the fact that the client interviews and selects the officers hired by the temporary employment agency to provide armed security for the client.

LACY H. THORNBURG ATTORNEY GENERAL

Teresa L. White Associate Attorney General