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.