STATE OF MINNESOTAPRIVATE DETECTIVE AND PROTECTIVE SERVICES BOARD

In the matter of the proposedrule of the Private Detectiveand Protective Agents BoardGoverning Private Detectivesand Protective Agents

GENERAL STATEMENT

STATEMENT OF NEEDAND REASONABLENESS

The private security industry is one of the fastestgrowing service industries in today's economy. Annually therevenues of this industry amount to approximately 17 billiondollars and, nationwide, an estimated 900,000 people work inthe private security industry ("Watch Those Watchdogs", U.S.News and World Report, July 11, 1988, p. 36). By year 2000it is estimated that 1.3 million people will be working inthe private security industry ("security Guards Enter a NewEra of Job Status", Chicago Tribune, July 18, 1988).

People rely on the private security worker to protectthem therefore the pUblic is particularly vulnerable tocrimes or other misdeeds perpetrated by private securityworkers. The Minnesota Legislature has taken action toregulate the private security industry for the protection ofthe pUblic. One such act by the legislature is the passageof Minnesota Statutes, section 326.3331 which requires theBoard to adopt rules governing " ... the selection, training,conduct discipline, and licensing of private detectives andprotective agents ... ". These proposed rules are designed toaddress this legislative mandate.

STATUTORY AUTHORITY L.

Minnesota Statutes, section 326.3321 requires the Boardto promulgate rules to govern " ... the selection, training,conduct, discipline, and licensing of private detectives andprotective agents ... ". In addition to this specific grantof authority the Board has general rule making authorityunder Minnesota Statutes, section 14.06 which reads:

Each agency shall adopt rules, in the formprescribed by the revisor of statutes, settingforth the nature and requirements or all formaland informal procedures related to theadministration of official duties to the extentthat those procedures directly affect the rightsof or procedures available to the public.

This document is made available electronically by the Minnesota Legislative Reference Library as part of an ongoing digital archiving project. http://www.leg.state.mn.us/lrl/sonar/sonar.asp 

SMALL BUSINESS CONSIDERATIONS

These rules unavoidably impose an administrative burdenon private security business and throughout the draftingprocess the Board tried to reduce the administrative burdenas much as possible consistent with the policy behind thelegislative directive to promulgate rules. Particularattention was paid to minimizing the administrative burdenfor those private security businesses that are smallbusinesses as defined in Minnesota Statutes, section 14.115.

Part .0130, subparts 1 and 2 are designed to providesome flexibility in the reissuance process' for businessesthat might have trouble complying with all the technicalrequirements of the statute and these rules. The boardsubmits that these provisions benefit primarily smallbusinesses because small businesses more often lack thepersonnel and business systems necessary to comply with thestate requirements.

The rules contain a graduated application fee schedulebased on the size of the applicant's business. Thisprovision is a direct benefit to small businesses. It isjustified by the reasonable assumption that a large businesswill require more services from the Board than a smallbusiness.

The compliance and reporting requirements, schedules,and deadlines contained in the proposed rule are the leaststringent regulations possible, consistent with theobjectives of the underlying legislative mandate. Thecompliance and reporting requirements in the rule have beenconsolidated and simplified to the maximum extent feasible,consistent with the underlying legislative mandate. Theserules contain no operational or design standards. It isjust as necessary to protect the pUblic from abuses by theemployees of small pri~ate security businesses as it is toprotect the pUblic from abuses by the employees of largerprivate security businesses. The exemption of smallbusinesses from these rules is not feasible, consistent withthe underlying legislative mandate.

FEES IMPOSED BY THE RULES

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These rules contain a schedule of fees as required byMinnesota Statutes, section 326.3386. The CommissionerFinance has approved the fee schedule as required byMinnesota Statutes, section 16A.128, subd. la and copies ofthe notice and proposed rules were sent to the chairs of theHouse Appropriations and Senate Finance Committees asrequired by Minnesota statutes, section 16A.128, subd. 2a.

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FISCAL IMPACT

Adoption of these rules will not require theexpenditure of pUblic money by local bodies.

ENVIRONMENTAL EFFECTS

Adoption of these rules will have no effect on theenvironment.

RULE BY RULE ANALYSIS

7506.0100 Definitions. This part contains four subparts. Onesubpart defines the scope of the definitions. The otherthree subparts define terms used in the statute andthroughout the rules. Two of those terms are defined instatute, and their definitions are taken directly fromstatute for added clarification to the rule. The other termis not defined in statute ..

SUbpart 1. limits the scope of the definitions listed inthis part to the chapter itself. This subpart is necessaryso only the rules pertaining to the private detective andprotective agent services will carry these definitions, andno other rule definitions will affect these rules.

SUbpart 2. sets forth the definition of "Board". Thisprovision is taken directly from Minnesota statute, section326.32, SUbdivision 2, and is expanded by citing the statutethat created the Board. It is necessary in this provisionto specify to which board this rule refers.

SUbpart 3. sets out the definition of "Director". Thisprovision is necessary to inform the reader of the meaningof this word in the rule.

SUbpart 4. sets out the definition of "Minnesota manager".This definition is taken directly from Minnesota statutes,section 326.32, subdivision lOa. It is reasonable toinclude this reference to the definition in the rule so thereader is clear of the meaning of the term .

•0110 Internal Procedures. This part describes the duties of theexecutive director as appointed under Minnesota statutes,section 326.3321 and the procedures the board will followwhen licensing applicants under Minnesota statutes section326.3311.

Subpart 1. This provisions details the duties of theexecutive director of the board. The board is authorized byMinnesota statutes, section 326.3321~ subdivision 1, toemploy an executive director and prescribe the duties to beperformed. It is necessary to set out the duties of the

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director so both the board itself and the director are awareof the working\ relationship of the two. The dutiesspecified are reasonable as they are all related to thebusiness, management, and oversight of the Board. Inaddition, as the board members are not involved with theBoard on a full-time basis, the director must perform thetasks set out in items A through E to assure that the dutiesof the Board are carried out. Item F is reasonable andnecessary because a task may arise that is Board related yetdoes not fit neatly into one of the specified tasks.

SUbpart 2. Licensing procedure. This provision sets outthe procedure that the board will follow when reviewinglicense applications It is necessary to describe the reviewprocess so that each application is examined in the samemanner and given identical consideration for licensing. Itis reasonable for the board to review each application (Item1.) and any findings submitted to them by the director (Item2.) to assure that the applicant is qualified for and meetsthe statutory requirements of licensure. Item 3 is areasonable provision that requires the board to conductface-to-face meetings with all new applicants. A face-to­face meeting will give the Board the opportunity to questionthe applicant and explain the Board's role in the industry.In addition, such a meeting can be used to clarify items onthe application or answer questions that have arisen as aresult of the application or investigation. Therefore, ifthe Board feels a face-to-face meeting would be informative,it may be requested of an applicant for reissuance as well.Items 1, 2, and 3, assist the board in making informed andfair decisions whether the application is for the initiallicensure under paragraph A. or reissuance under paragraphB.

Paragraph C is necessary to address a potentialsituation: What should the board do with an applicationwhich is not reviewed within a reasonable amount of time?Four months was chosen as "a potential limit to the reviewtime because it is reas·onable to expect the Board to be ableto review an application within that period. That shouldalsq allow ample time for the director to complete theinvestigation and for the gathering of additional materialsfrom the applicant if necessary. Once four months haveelapsed, it is reasonable for the Board to evaluate why aparticular application is not moving forward. Two factorsshall be considered before the board requires the applicantto repeat the application process. (1) Requiring anapplicant to reapply would only be allowed if it is evidentthat the passage of time has worked to make the contents ofthe application outdated. (2) The cause of the delay mustbe evaluated. If it is due to the Board's extensiveworkload, the applicant should not be penalized and theapplication process should continue. However, if the delayis caused by the applicant's failure to provide the required

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materials, it would be reasonable to make the applicantwithdraw the application and reapply when he or she has therequired information in order .

• 0120 Test. Minnesota statutes, section 326.3331, gives theBoard authority to determine by rule the ·appropriatetraining to require of private detectives and protectiveagents. This provision is necessary since all applicantsfor licenses have a responsibility to know how Minnesotastatutes, sections 326.32 through 326.339, and MinnesotaRules, Chapter 7506, governing private detectives andprotective agents, affect their industry. It is alsoreasonable for the Board to require such a test, becausethose license holders who are familiar with the Minnesotalaw are most likely to act within that law in the scope oftheir jobs. A test written and administered by the Board isreasonable, because the Board is in the best position toevaluate the relevant law and keep informed of any lawchanges .

• 0130 Licensing and qualification. Minnesota statutes, section326.3382 1 specifically lists the contents of the applicationform. This part expounds on those contents and potentialproblems with the contents of the application which theBoard must be prepared to address fairly and consistently.

SUbpart 1. contingent license. This subpart is necessaryto deal with the submission of a reissuance applicationprior to expiration that, due to applicant omission orerror, processing is incomplete at the time of expiration.since the application was timely, it is reasonable that thelicense holder be allowed to continue to operate under alicense. However, a new license cannot be reissued becausethe Board cannot be assured that the applicant continues tomeet the statutory requirements for licensure. A contingentlicense allows the license holder to continue operationswhile finishing the application process. A sixty day limitis given to the contingent license because that should beample time to correct any problem. If the application is insuc~ a state that sixty days is not adequate, the Board willbest serve the public and the industry by not allowing theapplicant to continue operating. The fine is reasonablesince the applicant who is receiving a contingent licenseshould pay for that privilege and the extra time that theboard will be spending on the application.

SUbpart 2. Lapsed license. This subpart is nec~ssary toaddress the potential of a reissuance application being madeafter expiration or being submitted in an incomplete stateand the applicant does not respond Board inquiries tocorrect omissions. This provision is reasonable becausesince the application was not able to be reviewed beforeexpiration, the Board cannot be assured that the applicantcontinues to be meet statutory requirements. Yet' instead of

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denying the license, the applicant shall cease operationsfor the sixty day period, apply for reissuance, and resumeoperations only upon reissuance of the license. The fine isreasonable because the Board will have spent valuable timereviewing a late or incomplete application and correspondingwith the applicant. In addition, the fine is meant to deterapplicants from disregarding the expiration date orsubmitting negligent applications.

SUbpart 3. Financial responsibility. Minnesota statutes,section 326.3382, subdivision 3, paragraph (c), gives anapplicant a choice of three ways to furnish proof offinancial responsibility. This subpart is necessary toelaborate on those three choices so it is clear to anapplicant what documents must accompany the application.

Item A. This provision is reasonable so if the applicantchooses to submit a certificate of insurance, the Board willreceive the original certificate and a photocopy of theinsurance policy so both can be reviewed to confirm that thecoverage complies with the requirements of the statute.

Item B. This provision is reasonable so if the applicantchooses to submit a net worth statement, the Board willreceive the original statement signed by the applicant so itcan be reviewed to confirm the business' net worth meets thestatutory minimums.

Item C. This provision is necessary because Minnesotastatutes, section 326.3382, subdivision 3, paragraph (f)allows the submission of an irrevocable letter of credit asproof as financial responsibility .

• 0140 Schedule of fees. This part is necessary to specify the feeswhich Minnesota statutes, section 326.3386, authorizes theBoard to assess. All the fees have been approved by theCommissioner of Finance and sent to the chairs of the HouseAppropriations and Senate Finance Committees as required.Charging fees for licenses is necessary to cover the costsof issuing licenses anq to fund the board which is self­sustaining.

-. SUbpart 1. New applicant fees. This sUbpart sets out theapplicable fees for new applicants. There are twocategories of fees, one for private detectives and one forprotective agents. The provision stating the fees for theprivate detectives is slightly higher than the fees forprotective agents because the holder of °a private detectiveis also licensed as a protective agent, thus is receiving adual license. This is not the case with the protectiveagent lice~se. Such a license holder is not licensed as aprivate detective.

The fees increase if the applicant is a partnership ora corporation. This gradation is reasonable because it isdesigned to take the small business entity intoconsideration. A business that is in a position to be apartnership or corporation is usually a larger business and

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can better afford the higher fee. Also considered insetting this fee, was the complexity involved with reviewingthe paperwork and forms which are received from partnershipsand corporations in comparison to the more simple individualapplication.

There is an additional administrative fee charged to anew applicant to cover the costs of processing theapplication. Because the materials submitted would be moreextensive, it is reasonable that this fee be higher for anew applicant as opposed to the similar business/divisionfee for a license holder described in sUbpart 5.

SUbpart 2. License reissuance fees. This subpart sets outthe applicable fees for the reissuance of a license. Aswith the new applicant fees discussed above, the schedulediffers for the broader private detective license (A) ascompared with the protective agent license (B). Inaddition, the fees increase depending on number ofemployees. This gradation is reasonable because the greaterthe number of employees covered by a license, the morecomplex the license review becomes. In addition, the fewerthe employees the smaller the business, and small businessesmust be considered when setting fees.

Due to the nature of many private detective andprotective agent businesses; part-time, short term, andseasonal employees are often utilized. This situation couldlead to various interpretations of sUbpart 2 resulting insimilarly-sized businesses paying different fees.Therefore, paragraph C is necessary to define employee forthe limited use of determining the applicable fee forlicense reissuance. Subitem (1) counts as one employee eachperson who regularly works 30 or more hours a week. The 30hour -figure was taken from Minnesota statutes, section62E.02, subdivision 8. That section limits the definitionof employ~e under the Minnesota Comprehensive HealthInsurance Act by excluding " •.. one who is employed less than30 hours per week by t~at person's present employer ... ". Alogical assumption to draw from that limitation is that onewho is employed for less than 30 hours a week is thereforenot-.an employee.

However, the license holder who employs a large numberof part-time, short term, or seasonal employees is notalways a small business. Therefore that license holdershould not benefit by the lower fee unless his or her use ofpart-time employees is minimal. Subitem (2) is designed toallow the calculation of the part-time hours as a whole andcompare them with the "employee" hours in subitem (1). Thisis done by requiring the license holder to total the shortterm hours and" divide by 1500. The 1500 figure is arrivedat by mUltiplying 30 hours per week times 50 weeks, or anestimate of the minimum total hours per year that an"employee" under subitem (1) would commonly work.

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Finally, the license holder will add the number of"employees" with the figure arrived at in subitem (2) tod~termine which category of license fee he or she will pay.This provision is reasonable because it requires all licenseholders, no matter their hiring practices, to pay anapplication fee based on the number of hours they havepersons serving the pUblic.

SUbpart 3. Designation fee. This provlslon is takendirectly from Minnesota statutes, section 326.3386,sUbdivision 3.

SUbpart 4. status fee. This provision is taken directlyfrom Minnesota statutes, section 326.3386, subdivision 4.

SUbpart. 5. Business/division fee. This provision isnecessary to set out the fee to be paid to the Board for thecost of processing any additional or change of informationto an existing license. The fee is reasonable because it isan estimated average cost of copying, mailing, packaging,and time expended to make a minor change or addition .

•0150 Conduct and Etnics. This part sets out standards of conductto which a license holder must comply. This provision isnecessary to put license holders on notice of the standardsto which they are held and is reasonable because it statesstandards that are com~on practice in the serviceindustries.

SUbpart 1. Conflict of interest. This subpart isnecessary to assure that license holders will best serve theclients who are hiring them. It is reasonable to put a dutyon a license holder tq place the service of current clientsbefore the acquisition of additional clients. If serving aprospective client will conflict with the service of acurrent client, the license holder must forego serving theprospective cl ient. .-

When the license holder's interest conflicts with theint~rest of the client, there is a greater potential thatthe-license holder will be unable to provide the bestservice possible for that particular client. As stated inthe general statement above, protection of the clients is amajor impetus behind tQese rules. Putting a duty on alicense holder to avoid conflicts of interests will work toprotect the client and the reputation of the industry.

SUbpart 2. Cli~nt responses. This subpart is necessaryto inform license holQers that the Board will evaluate themanner in which they respond to their clients. The rule hasleft the time for a re~ponse open so cases can be reviewedindividually. This inQividual eval~ation is reasonable,because what constitute~ a reasonable time will varydepending on the circ~mstance$. specifying a reasonable

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time in the rule could result in harsh treatment of licenseholder or insensitive reply to clients under somecircumstances. Instead the Board, which is made up ofpersons with knowledge of the industry, can determine whatis reasonable by looking at the details of each case.

Subpart 3. Board responses. This provision is necessaryto inform the license holders that they are under a duty torespond to the Board. Since the Board has the oversight oflicense holders as one of their responsibilities it isreasonable to require the license holders to respond withina reasonable time. Again a reasonable time is left for theBoard to decide on an individual basis where all applicabledetails can be considered.

SUbpart 4. Unlicensed activiti~s. This provision isnecessary to assure that license holders who hire unlicensedpersons do so by complying with the requirements of section326.336 for employment of unlicensed persons. It isreasonable to require license holders to comply with the lawthat governs an industry that the legislature chose toregulate .

• 0160 Complaint Procedures.

This part is necessary as a reference to Minnesota statutes,section 214.10, which governs the complaint procedures forexamining and licensing boards such as the Private Detectiveand Protective Agents Board. It is reasonable to includethis citation in the rule so that everyone is informed ofthe complaint procedures, including investigation andhearing processes, that the Board will use .

. 0170 Penalties.

SUbpart 1. Categories of violations. This subpart isnecessary to distinguish the seriousness of violations whendetermining which type of license sanction or administrativepenalty to impose on the violator. setting out categoriesof violations allows the Board to be consistent and fairwhen taking disciplinary action against violators.

Item A. This provision defines "serious violation" asit will be used when determining any penalty which may beimposed on violators. It is necessary to define seriousviolation as the penalty for such a violation differs fromthose which are deemed not serious. The criteria does notmerely include· a negative effect but a "substantial adverseeffect," therefore requiring the Board to identify a strongand material effect on at least one of the areas inclUdingpublic health, public safety or the integrity of theindustry. This criteria is reasonable because the purposeof these rules is to protect those three areas. The greater

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the effect violations have on those areas, the more criticalit is that such violations are stopped and deterred.Additionally, subpart 2 below specifically sets outguidelines for assigning the category to each violation.

Item B. This provision defines "violation" as it willbe used to impose penalties on violators. This definitionis necessary to distinguish a violation from a seriousviolation as defined in sUbpart 1. It is reasonable thatthis violation also results from a failure to comply withstatute or rule, but whose effect is not as negative norsubstantial as a serious violation. The guidelines insubpart 2 will be used to weigh the effect of the violation.

"SUbpart 2. Assignment of categories. This subpart is

necessary to set out the guidelines that the Board must usein determining whether a serious violation or minorviolation has been .committed.

Item. A. This item allows the Board to measure thepotential severity of harm that could have resulted from theviolation. It is reasonable to allow the Board to w~igh

potential harm and its severity for a number of reasons.First, the Board is a group knowledgeable in the industrythat it is regulating and the purpose of the regulation.Secondly, a violation should be deemed serious if only byprovidence it did not result in actual harm. If thepotential was present to cause substantial harm, thatpotential must be considered. Only in that way will thepenalties truly work to protect the pUblic and the industry.

Item B. It is reasonable and the objective of the rulesto consider resulting harm when determining the penalty toimpose.

Item C. The cUlpability of the violator cannot beignored when imposing penalties and Minnesota statutes,section 326.3388 requires the Board to consider cUlpabilitywhen imposing a penalty. It is reasonable to impose asevere penalty only if the violator is truly responsible forthe violation that occurred.

Item D. Minnesota-statutes, section 326.3388 requiresthe Board to consider the number of times the violator hasfailed to comply with law or rule when imposing a penalty.A violator who repeatedly commits minor violations can do asmuch harm to the pUblic and industry as the violator whocommits one serious violation. Additionally, a repeatviolator shows little respect for the law or the body whichis regulating the industry. The Board needs to treat suchviolators similarly and this provision will assure that itdoes.

The final paragraph is necessary to explain how theguidelines ·will be utilized by the Board when imposingpenalties. It is reasonable for the Board to consider thenumber of factors which apply to the violation becauselogically the more factors that apply the more serious the

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violation. Conversely if only one factor applies, yet thatfactor is a grievous violation, that f~ctor must be givenmore weight in determining the category of violation.

SUbpart 3. Revocation. Minnesota statutes, section326.3387, authorizes the Board to revoke licenses andrequires a contested case hearing before revoking. Thissubpart is necessary to specify that the Board shall revokefor a two year period. This period is reasonable because arevocation is not imposed unless the violation is determinedto be serious. A serious violation requires a severepenalty to act as a deterrent. The pUblic and thereputation of the industry is best protected by deterringviolations and preventing those who do violate fromperforming as protective agents or private detectives fortwo years.

SUbpart 4. Suspension. Minnesota statutes, section326.3387, authorizes the Board to suspend licenses andrequires a contested case hearing before suspending. Thisprovision is necessary to give the Board the ability todetermine whether to suspend after determining the severityof the violation by using the factors set out in subpart 2above. In addition the Board shall determine the suspensionperiod for each violation. Limiting suspensions to amaximum of one year is reasonable. If a violation is soserious that the Board determines that the violator shouldnot practice for more than one year, the violation must beserious and revocation should be imposed. However,suspensions can be less than one year. This is reasonablebecause violations will differ as to seriousness and theless serious the violation the shorter the suspension periodshould be. The Board however is not given completediscretion to determine suspension periods, for the factorsin subpart 2 above must be considered when determining thedegree of seriousness. In addition, because a suspensioncannot be imposed unt~l there is a contested case hearing,the administrative law-judge acts as a secondary check toassure that the suspension period is reasonable.

SUbpart 5. Imposition of fines. Minnesota Statutes,section 326.3388 allows the Board to impose civil fines forviolation of law or rules. This provision reasonablyrequires the Board to determine the seriousness of theviolation using the factors set out in subpart 2 so the fineimposed will be appropriate. This part has laid out thescheme to give the Board criteria to rely on whendetermining severity.

Subpart 6. Amount of fines. Minnesota Statutes, section326.3387, subdivision 2 (b) permits the Board to imposeadministrative penalties in excess of $500. This provisionlimits such penalties to $2500 and allows the levying ofsuch a fine.only if the violation is serious as defined in

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Subpart 1, item A. As per statute, fines between $500 and$2500 can be imposed only after a'contested case hearing.All serious violations are not necessarily of the samedegree, so the schedule of fines allows the Board to levygreater fines against the more serious violations.A violation which is not serious may be fined underMinnesota Statutes, section 326.3388. Logically, the Boardwill impose fines not to exceed $499 the amount of whichwill be determined by the seriousness of the violation.Before any fine is imposed, the factors of subpart 2 will beconsidered to determine the seriousness of the violation andthe appropriate fine.

SUbpart 7. Deadline for paying fines. This subpart isnecessary to the effectiveness of the imposition of fines.It is reasonable to set a specific deadline for fines to bepaid so that all violators are held to the same standard.In addition, a ten day period is .sufficient time for aviolator to do what ever is necessary to obtain thenecessary funds and submit it to the Board. Authorizing theBoard to suspend for nonpayment of fines is reasonablebecause Minnesota Statutes, section 326.3387, allows theBoard to suspend for violations of a rule. This also putsthe violator on notice that fines must be paid.

SUbpart 8. This subpart is to clarify and emphasize thereach of these rules and the Board's penalty authority asnoted in Minnesota statutes, section 326.3388 •

• 0180 License reinstatement. This part sets out the Board'sprocedure for reinstating a license that has been revoked orsuspended. This part is necessary because licensereinstatement is not specified in statute. Additionally,this will assure that all violators are treated similarly.

SUbpart 1. Reinstatement following suspension. Thissubpart sets out the requirements for reinstating a licensewhich has been suspended pursuant to statute and to theserules.

_. Item A requires that the suspension period imposedunder Minnesota statutes, section 326.3387 and part .0170 becompleted before the license can be reinstated. Thisprovision is necessary to support the sanctions imposedunder part .0170.

In addition, any other requirement that the Board setsunder part .0170 must be satisfied before reinstatement.This provision is necessary to support the Board authorityset out in .0170. .

Item B is'necessary to support the Board authority toimpose fines set out in Minnesota statutes, section326.3388, and part .0170.

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SUbpart 2. Reinstatement following revocation. Thissubpart sets out the requirements for reinstating a licensewhich has been revoked pursuant to Minnesota statutes.section 326.3387 and to part .0170.

Item A requires that the revocation period imposedunder Minnesota statutes, section 326.3387 and part .0170 becompleted before the license can be reinstated. Thisprovision is necessary to support the sanctions imposedunder part .0170.

Item B is necessary to support the Board authority toimpose fines set out in Minnesota statutes, section326.3388, and part .0170.

Item C lists a requirement that is unique to revocationas opposed to suspension due to the definition of revoke.If a licensed is revoked it is annulled or made void,therefore the violator no longer has any license. It isreasonable to require the violator to apply, again meet allrequirements and qualifications, and pay the appropriate.feebecause in reality he or she is applying for a new license.