HBA-ATS H.B. 1184 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1184
By: Hilbert
Business & Industry
4/13/1999
Introduced



BACKGROUND AND PURPOSE 

A professional employer organization (PEO) may be generally defined as an
organization that contracts with a business to handle employee- related
matters such as personnel management, health benefits, workers'
compensation claims, payroll, payroll tax compliance, and unemployment
insurance claims.  The PEO's contractual obligation is to assume employer
rights, responsibilities, and risk, in effect establishing and maintaining
an employer relationship with the workers assigned to its clients.  For
example, typical duties undertaken and obligations incurred by a PEO
include: assigning workers to client locations and assuming responsibility
as an employer for specified purposes of the workers assigned to the client
locations; reserving a right of direction and control of the employees;
paying wages and employment taxes of the employee out of its accounts;
reporting, collecting, and depositing employment taxes with state and
federal authorities; and retaining a right to hire, reassign, and fire the
employees. 

The contractual allocation and sharing of employer responsibilities between
the PEO and the client means that they are co-employers.  As co-employers
the parties may share responsibility for some obligations, but, in general,
the terms of the contract determine the responsibilities and obligation of
each party.  Typically, the PEO ensures that worksite employees are
provided with a workplace that is safe, conducive to productivity, and
operated in compliance with employment laws and regulations. In addition,
the PEO may provide worksite employees with workers' compensation
insurance, unemployment insurance, and a broad range of employee benefits
programs. 

H.B. 1184 redefines "staff leasing services" to include professional
employer organization services and PEO services and "staff leasing services
company" to include a professional employer organization or PEO.  Under
this bill, an insurance certificate for workers' compensation insurance
held by a licensed staff leasing services company (licensed company) is
proof of workers' compensation coverage for it and the client company for
all assigned employees.  The state and all political subdivisions of this
state must accept the insurance certificate as proof of workers'
compensation coverage for the staff leasing services company and the client
company under Chapter 406 (Workers' Compensation Insurance Coverage), Labor
Code, for all assigned employees. However, the state or its political
subdivision is authorized to require the client company, if it has
employees that are not assigned employees under a staff leasing services
agreement, to furnish separate proof of workers' compensation coverage for
the unassigned employees. 

In addition, this bill designates the responsibilities retained by a client
company under a contract with a staff leasing services company.  A client
company is responsible: for the exercise of the direction and control over
assigned employees to conduct its business, to discharge any applicable
fiduciary duties, or to comply with any licensure, regulatory, or statutory
requirements; the goods and services produced by it; and the acts, errors,
or omissions of the assigned employees committed within the course and
scope of its business. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Texas Department of Licensing and
Regulation in SECTION 6 (Section 91.021, Labor Code) of this bill. 


 SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subsections (14) and (15), Section 91.001, Labor Code,
as follows: 

(14) Redefines "staff leasing services" to include professional employer
organization services and PEO services. 

(15) Redefines "staff leasing services company" to include a professional
employer organization or PEO.  

SECTION 2.  Amends Section 91.002(b), Labor Code, to provide that all
entities offering leasing services, rather than license holders, are
subject to Chapter 91 (Staff Leasing Services) and the rules adopted by the
commissioner of licensing and regulation (commissioner). 

SECTION 3.  Amends Section 91.004, Labor Code, by adding Subsections (d)
and (e), as follows: 

(d) Provides that with respect to any bid, contract, purchase order, or
agreement entered with this state or any political subdivision of this
state, a client company of a licensed staff leasing services company does
not affect its own status or certification as a small, minority-owned,
disadvantaged or woman-owned business enterprise or a historically
underutilized business. 

(e) Requires that an insurance certificate for workers' compensation
insurance held by a licensed staff leasing services company (licensed
company) be proof of workers' compensation coverage for it and the client
company for all assigned employees.  Requires the state and all political
subdivisions of this state to accept the insurance certificate as proof of
workers' compensation coverage for the staff leasing services company and
the client company under Chapter 406 (Workers' Compensation Insurance
Coverage), Labor Code, for all assigned employees.  Authorizes the state or
its political subdivision to require the client company, if it has
employees that are not assigned employees under a staff leasing services
agreement, to furnish separate proof of workers' compensation coverage for
the unassigned employees. 

SECTION 4.  Amends Subsections (c) and (d), Section 91.015, Labor Code, as
follows: 

(c) Requires the Texas Department of Licensing and Regulation (department)
to provide an applicant for a license 30 calendar days in which to correct
the reasons why the department proposes denying the application.
Authorizes the executive director to grant an additional 30 days to correct
the reasons for the proposed denial for good cause and on a showing of good
faith effort to correct the application. 

(d) Provides that the removal, demotion, or discharge of a controlling
person in response to a notice from the department, rather than a response
to an order of the department, is an affirmative defense to a claim brought
by that individual. 

SECTION 5.  Amends Section 91.019(a), Labor Code, to expand the issuance of
a limited license to a person who seeks to offer limited staff leasing
services in this state.  Deletes language describing the person as
domiciled in another state and licensed or registered as a staff and
leasing service company in that state.  

SECTION 6.  Amends Section 91.021, Labor Code, by adding Subsections (d)
and (e), as follows: 

(d) Requires the department, in assessing fines and penalties, to consider
the severity of the offense, whether the violation was willful or
intentional, whether the staff leasing services company acted in good faith
to avoid or mitigate the violation, whether the staff leasing services
company has engaged in similar violations in the past, and the fines and
penalties previously assessed by the department under this chapter against
other staff leasing services companies.  Requires the department, by rule,
to establish a written enforcement plan that provides notice to staff
leasing services companies of the specific ranges of penalties which apply
to specific alleged violations and the criteria by which the department
determines what  penalty amount to seek. 

(e) Requires all hearings conducted under the authority of this chapter to
be conducted by the State Office of Administrative Hearings. 

SECTION 7.  Amends Section 91.032, Labor Code, as follows:

(A) Creates this paragraph from existing text and makes conforming changes.
Makes nonsubstantive and conforming changes. 

(B) Designates the responsibilities retained by a client company under a
contract with a staff leasing services company, notwithstanding any other
provision of Chapter 91.  A client company is responsible for the exercise
of the direction and control over assigned employees to conduct its
business, to discharge any applicable fiduciary duties, or to comply with
any licensure, regulatory, or statutory requirements; the goods and
services produced by it; and the acts, errors, or omissions of the assigned
employees committed within the course and scope of its business. 

SECTION 8.  Amends Section 91.043(a), Labor Code, to make a conforming
change. 

SECTION 9.  Provides that this Act applies to all staff leasing services
companies and license holders in effect on or after the effective date of
this Act. 

SECTION 10.  Effective date: September 1, 1999.

SECTION 11.  Emergency clause.