As many of you are no doubt aware, Governor Scott McCallum recently signed the 2001-2003 biennial budget bill into law. The budget bill, now known as 2001 Wisconsin Act 16, contained the usual mix of fiscal and policy items. One of the policy items that generated the most attention from the media, the general public, politicians and the business community was a telephone solicitation control provision, popularly known as the "Do Not Call List."
The "Do Not Call List" provisions were the work of Senator Jon Erpenbach (D-Middleton). In general, the "Do Not Call List" provisions in the budget bill were drafted to allow residential phone customers to place themselves on a list of individuals who do not wish to receive telephone solicitations made on behalf of telephone solicitors. These lists would then be provided to registered telephone solicitors who would be prohibited from contacting individuals on the list.
The lists would be included in a nonsolicitation directory compiled and kept by the Department of Agriculture, Trade and Consumer Protection ("DATCP"). Residential phone customers who wished to be included in the directory would have to contact DATCP, and continue to do so on a biennial basis after the initial notification to keep their place in the directory. DATCP would then make the directory available to telephone solicitors who had registered with DATCP and paid a registration fee, which would allow the telephone solicitors to make telephone solicitations. The telephone solicitors in turn would be prohibited from making phone calls to residential customers who were listed in the directory, unless the recipient of the call requested the solicitation or is a current client of the entity whose products provide the basis for the telephone solicitation. Telephone solicitors would also be prohibited from making calls to nonresidential customers if they have received notice by mail that the nonresidential customer does not wish to receive telephone solicitations. Violators of the provisions could face fines up to $100 for each violation of the law. We note that the bill's express private cause of action was vetoed by the Governor.
Many of the specific details of the telemarketing provisions still need to be determined. The nuts and bolts of the operation of the "Do Not Call List" will be created in the administrative rule-making process. As you will see from the remainder of this newsletter, the rules will be key to determining who is subject to the telemarketing restrictions and to what extent their actions will be limited.
Do the "Do Not Call Provisions" Apply to You?
Members of the business community, including the insurance industry, who do telemarketing or telephone soliciting as part of their operations are concerned about the possible impact of the telemarketing provisions on them. The main question for most is whether the law applies to them. The short answer at this point is: Maybe. For organizations other than nonprofit organizations, the answer turns on the definition of "telephone solicitor" contained in the Act and on the definition of "telephone solicitation."
a) What is a telephone solicitor?
"Telephone solicitor" is defined to mean "a person, other than a nonprofit organization or an employee or contractor of a nonprofit organization, that employs or contracts with an individual to make a telephone solicitation." The definition is broad, and subject to various interpretations. The use of the term "a telephone solicitation" appears to eliminate any possibility of an exclusion for persons who make telephone solicitations as a di minimus part of their duties.
b) What is a telephone solicitation?"Telephone solicitation" means the "unsolicited initiation of a telephone conversation for the purpose of encouraging the recipient of the telephone call to purchase property, goods or services." The definition of "telephone solicitation" seems straightforward and would include many phone calls made by businesses to sell their products. However, what about instances where insurance companies make cold calls to inquire about an individual’s insurance coverage? What if the company does not try to sell any products but simply inquires about the expiration of particular types of policies and asks for permission to call back with competitive quotes near the time of expiration? Could it be argued that the initial call does not reach the level of a telephone solicitation? If permission were granted for the second call, the second call would not fall under the telemarketing provisions as well.
c) What does "employs or contracts with an individual to make a telephone solicitation mean"?
The definition of "telephone solicitor" applies to a person who "employs or contracts" with someone to make telephone solicitations. A literal reading of this definition leads to its inapplicability in those cases where the individual engaged, either through employment or contract, is not engaged to make telephone solicitations, whether or not they do so.
Following are several scenarios – complete with questions presumably to be answered by DATCP's rules – on insurer/agent operations:
- Insurers who hire employees (whether or not licensed as agents) to make telephone solicitations. In this case, the insurer would be a "telephone solicitor" and clearly subject to the registration under and the restrictions of the Act.
- Insurers who hire agents as employees to solicit insurance but not necessarily to make telephone solicitations. If the agents are not required to make telephone solicitations but do so on their own initiative, then it could be argued that the insurer is not required to register because it did not "employ . . . an individual to make a telephone solicitation." But what if a company typically expects the individual to make "telephone solicitations" even if the job description is silent? And what if it is industry practice that agents make telephone solicitations? This clearly is a gray area that may be clarified by DATCP rule.
- Insurers who contract with independent agents. Here application of the Act to the insurer should depend on the provisions of the insurer's contract with the independent agent. Does the contract require the agent to make telephone solicitations? If it does, the insurer is subject to the Act. If the contract does not require the agent to make telephone solicitations, and the agent does so on his/her own initiative, there is argument under a literal interpretation of the Act that the insurer would not be subject to the Act. As with employee agents, the line separating those subject to the Act from those not could be blurred in cases where contract requirements or expectations are not specifically delineated or communicated.
- Independent agents who have exclusive agency contracts with insurers. The analysis is the same as with independent agents . What does the contractual relationship require? What do the agents for the company typically do as part of their job, whether required in writing or not?
- Independent agents who hire individuals to make telephone solicitations. Independent agents also appear to be covered by the Act if they "employ or contract with an individual to make a telephone solicitation." Therefore, if an agent specifically hires support staff to make telephone solicitations on the agent's behalf, he/she would need to register as a telephone solicitor under the Act. The issue again becomes murky when you examine the job description of the agent’s employee. Is the employee specifically "employed or contracted with" to make telephone solicitations? Are telephone solicitations a required part of the employee’s job description? If the job description is silent on telephone solicitation but telephone solicitation is typically considered part of such a job within the industry, will agents need to register? If telephone solicitations are a small part of an employee’s job, will registration be required?
- Independent agents who make telephone solicitations. It appears that agents who make telephone solicitations on their own would not need to register. However, as discussed above, the companies they are associated with may have to register depending on the nature of their agents’ contracts.
This is an important question because "nonprofit organizations" are excluded from the Act. The budget bill that passed the Senate and Assembly excluded certain specified nonprofit organizations, including HMOs that are tax-exempt entities under §501(c)(4) of the Internal Revenue Code, from the telemarketing restrictions. Governor McCallum, however, vetoed the definition of "nonprofit organization" in the bill, leaving the Act without a definition and open to several interpretations of which organizations are excluded from the Act. Since we often look to § 501(c) of the Internal Revenue Code for the definition of a nonprofit entity, there is argument that all entities listed in §501(c) are now excluded from application of the Act. However, argument may be made, as well, for the more common usage of "nonprofit organization," i.e., a charitable entity that is tax-exempt under §502(c)(3) of the Internal Revenue Code. In any event, the definition of nonprofit organization is critical, because entities that fall within the definition are exempt from the restrictions of the Act.
d) What is a "Nonprofit organization"?
When Do These Questions Get Answered?
Even though the budget has been signed into law, the answers we seek may not be immediately forthcoming. There have been rumblings from Senate Majority Leader Chuck Chvala and other legislators that the legislature may attempt to override some of Governor McCallum’s vetoes, including some of the vetoes pertaining to the "Do Not Call List" provisions. Some in the Capitol say that scenario is unlikely because the legislature is split between the two parties and agreement on veto overrides could be difficult, since overrides require a two-thirds vote in both houses.
There has also been discussion of separate legislation passed in both houses that would counteract Governor’s McCallum’s vetoes. Again, both houses would have to pass legislation, and Governor McCallum could still use his veto pen to blunt any changes.
If the legislature does nothing on the veto front, the provisions of the "Do Not Call List" may not take effect for close to a year, if not more. Why? While the effective date of the "Do Not Call List" budget provisions was September 1, 2001, the legislation directs DATCP to promulgate rules that will actually implement various aspects of the legislation. The budget provisions require DATCP to promulgate rules:
- for establishing, maintaining, and updating the nonsolicitation directory;
- that establish requirements and procedures for a residential customer to request a listing in the directory; and
- that require registration by telephone solicitors who require employees or contractors to make telephone solicitations.
It is very likely that DATCP will include in its rule-making process other issues discussed above, including:
- A definition for "nonprofit organization";
- Detail on what "employs or contracts with an individual to make a telephone solicitation" means;
- A more clear explanation of what types of activities that constitute telephone solicitation for purposes of the Act.
The rule-making process can be quite lengthy. Noncontroversial rules can often take 7 to 10 months for promulgation. Rules with a lot of interest and questions can often take over a year. There is sure to be much involvement by many interested parties in the rule-making process, which will no doubt lengthen the time until ultimate approval and promulgation of the rules.
Therefore, it may be up to a year or longer before businesses and other interested parties have a more definite answer as to how this law impacts them and their business practices. Interested parties should be sure to follow the rule-making process, which will undoubtedly answer some or all of the difficult questions posed above.