By: Seidlits H.B. No. 456
73R118 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of certain staff leasing services;
1-3 providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. DEFINITIONS. In this Act:
1-6 (1) "Advisory committee" means the Staff Leasing
1-7 Services Advisory Committee.
1-8 (2) "Applicant" means a business seeking to be
1-9 licensed under this Act or seeking the renewal of a license under
1-10 this Act.
1-11 (3) "Client company" means a person that contracts
1-12 with a licensee and is assigned employees by the licensee under
1-13 that contract.
1-14 (4) "Commission" means the Texas Commission of
1-15 Licensing and Regulation.
1-16 (5) "Commissioner" means the commissioner of licensing
1-17 and regulation.
1-18 (6) "Controlling person" means:
1-19 (A) an officer or director of a corporation
1-20 seeking to offer staff leasing services, a shareholder holding 10
1-21 percent or more of the voting stock of a corporation seeking to
1-22 offer staff leasing services, or a partner of a partnership seeking
1-23 to offer staff leasing services;
1-24 (B) an individual who possesses, directly or
2-1 indirectly, the power to direct or cause the direction of the
2-2 management or policies of a company seeking to offer staff leasing
2-3 services through the ownership of voting securities, by contract or
2-4 otherwise, and who is actively involved in the day-to-day
2-5 management of the company; or
2-6 (C) an individual employed, appointed, or
2-7 authorized by a business seeking to offer staff leasing services to
2-8 enter into a contractual relationship with a client company on
2-9 behalf of the business.
2-10 (7) "Department" means the Texas Department of
2-11 Licensing and Regulation.
2-12 (8) "Licensee" means a person licensed under this Act
2-13 to provide staff leasing services. The term includes a staff
2-14 leasing services group licensed under Section 8 of this Act.
2-15 (9) "Person" means an individual, association,
2-16 corporation, partnership, or other private legal entity.
2-17 (10) "Staff leasing services" means an arrangement by
2-18 which employees of a licensee are assigned to work at a client
2-19 company and in which employment responsibilities are in fact shared
2-20 by the licensee and the client company, the employee's assignment
2-21 is intended to be of a long-term or continuing nature, rather than
2-22 temporary or seasonal in nature, and a majority of the workforce at
2-23 a client company worksite or a specialized group within that
2-24 workforce consists of assigned employees of the licensee. The term
2-25 does not include temporary help services or arrangements under
2-26 which a business entity not classifiable under the Standard
2-27 Industrial Classification manual as prepared by the office of
3-1 management and budget, office of the President of the United
3-2 States, as Number 7363 shares employees with a commonly-owned
3-3 company subject to Section 414, Internal Revenue Code (26 U.S.C.
3-4 Sec. 414), and that does not hold itself out to the public as
3-5 offering staff leasing services.
3-6 (11) "Staff leasing services company" means an
3-7 individual business entity that offers staff leasing services.
3-8 (12) "Staff leasing services group" means a
3-9 combination of staff leasing services companies that operates under
3-10 a group license issued under Section 8 of this Act.
3-11 (13) "Temporary employee" means an employee hired for
3-12 a temporary help service.
3-13 (14) "Temporary help service" means an arrangement by
3-14 which an organization hires its own employees and assigns them to
3-15 clients to support or supplement the client's workforce in special
3-16 work situations such as employee absences, temporary skill
3-17 shortages, seasonal workloads, or special assignments and projects.
3-18 SECTION 2. STAFF LEASING SERVICES ADVISORY COMMITTEE. (a)
3-19 The Staff Leasing Services Advisory Committee is created within the
3-20 department. The advisory committee consists of five members
3-21 appointed by the commissioner.
3-22 (b) Three members shall be appointed to represent the staff
3-23 leasing services industry and shall be chosen from individuals who
3-24 are affiliated with persons eligible for a license under this Act.
3-25 An industry representative may not be associated with the same
3-26 staff leasing services company or staff leasing services group as
3-27 another industry representative.
4-1 (c) One member shall be appointed to represent the interest
4-2 of client companies, and must be an owner, officer, director, or
4-3 management employee of a client company. The client company
4-4 representative may not be a client of a staff leasing services
4-5 company or staff leasing services group represented on the advisory
4-6 committee.
4-7 (d) One member shall be appointed to represent the public.
4-8 (e) Each member who is not representing the staff leasing
4-9 services industry must be a resident of this state.
4-10 (f) Appointments shall be made to the advisory committee
4-11 without regard to the race, color, disability, sex, religion, age,
4-12 or national origin of the appointee.
4-13 (g) A member of the advisory committee is not liable in a
4-14 civil action for any act performed in good faith in the execution
4-15 of duties as an advisory committee member.
4-16 (h) A member of the advisory committee serves a four-year
4-17 term, or until a successor is appointed. If a vacancy occurs
4-18 during a term, the commissioner shall appoint a replacement to fill
4-19 the unexpired part of the term. Terms end on February 1 of the
4-20 calendar year.
4-21 (i) The advisory committee shall elect one of its members as
4-22 chairman, who shall serve in that capacity at the pleasure of the
4-23 membership of the advisory committee. The chairman may vote on all
4-24 matters before the advisory committee.
4-25 SECTION 3. RULES. (a) With the advice of the advisory
4-26 committee the commissioner shall adopt rules as necessary to
4-27 administer this Act. The advisory committee may propose new rules
5-1 or amendments to existing rules and submit those rules or
5-2 amendments to the commissioner for consideration and adoption.
5-3 (b) Rules shall be adopted in compliance with the
5-4 Administrative Procedure and Texas Register Act (Article 6252-13a,
5-5 Vernon's Texas Civil Statutes).
5-6 (c) Each licensee is governed and controlled by this Act and
5-7 the rules adopted by the commissioner.
5-8 SECTION 4. APPLICATION OF OTHER LAWS. The advisory
5-9 committee is subject to Chapter 271, Acts of the 60th Legislature,
5-10 Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil
5-11 Statutes), and Chapter 424, Acts of the 63rd Legislature, Regular
5-12 Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes).
5-13 SECTION 5. LICENSE REQUIRED; APPLICATION. (a) A person may
5-14 not engage in or offer staff leasing services in this state without
5-15 holding a license issued under this Act.
5-16 (b) Each person that desires an original or renewal staff
5-17 leasing services company license shall file with the department a
5-18 written application accompanied by the application fee. The
5-19 commission shall set the application fee in an amount not to exceed
5-20 $250.
5-21 (c) The department may require an applicant for a license to
5-22 provide information and certifications necessary to determine that
5-23 the applicant meets the licensing requirements of this Act. The
5-24 department may also require the applicant to provide information
5-25 and certifications necessary to determine whether individuals
5-26 affiliated with the applicant are qualified to serve as controlling
5-27 persons.
6-1 (d) An application for a staff leasing services group
6-2 license under Section 8 of this Act must provide the information
6-3 required by this Act for each member of the group.
6-4 (e) An applicant or licensee is ineligible for a license for
6-5 one year after the date of final department action on the denial or
6-6 revocation of a license applied for or issued under this Act. This
6-7 restriction does not apply to a denial or revocation of a license
6-8 if the basis of the action was:
6-9 (1) an inadvertent error or omission in the
6-10 application if that error or omission is promptly corrected;
6-11 (2) the experience documented to the department was
6-12 insufficient at the time of the previous application;
6-13 (3) the department was unable to complete the criminal
6-14 background investigation required under Section 6 of this Act
6-15 because of insufficient information received from a local, state,
6-16 or federal law enforcement agency; or
6-17 (4) that one or more of the controlling persons
6-18 affiliated with the applicant or licensee was determined by the
6-19 department to be unsuitable, if that unsuitable controlling person
6-20 has in fact ceased to be a controlling person of the applicant or
6-21 licensee.
6-22 SECTION 6. LICENSE REQUIREMENTS. (a) To be qualified to
6-23 serve as a controlling person of a licensee under this Act, that
6-24 person must be at least 18 years of age, be of good moral
6-25 character, and have educational, managerial, or business experience
6-26 relevant to:
6-27 (1) operation of a business entity offering staff
7-1 leasing services; or
7-2 (2) service as a controlling person of a staff leasing
7-3 services company.
7-4 (b) For the purposes of this section, "good moral character"
7-5 means a personal history of honesty, trustworthiness, fairness, a
7-6 good reputation for fair dealing, and respect for the rights of
7-7 others and for the laws of this state and nation.
7-8 (c) The department shall conduct a thorough background
7-9 investigation of each individual applicant and of each controlling
7-10 person of each applicant to determine whether that applicant or
7-11 controlling person is qualified under this Act. The department may
7-12 deny an application for the issuance or renewal of a license if it
7-13 finds that a controlling person is not qualified under this Act.
7-14 The investigation must include:
7-15 (1) the submission of fingerprints for processing
7-16 through appropriate local, state, and federal law enforcement
7-17 agencies; and
7-18 (2) examination by the department of police or other
7-19 law enforcement records maintained by local, state, or federal law
7-20 enforcement agencies.
7-21 (d) Department background investigations are governed by
7-22 this Act and by Article 6252-13c and Article 6252-13d, Revised
7-23 Statutes. Conviction of a crime does not automatically disqualify
7-24 a controlling person, require the revocation of a license, or
7-25 require the denial of an application for a new or renewed license.
7-26 The department shall consider criminal convictions as provided by
7-27 Article 6252-13c and Article 6252-13d, Revised Statutes.
8-1 (e) Each licensee shall maintain a registered agent for the
8-2 service of process in this state.
8-3 (f) An applicant for an original or renewal license must
8-4 demonstrate a net worth of at least $50,000. The applicant shall
8-5 demonstrate the net worth to the department by providing the
8-6 department with the applicant's financial statement or a copy of
8-7 the applicant's most recent federal tax return. The net worth
8-8 requirement may also be satisfied through guarantees, letters of
8-9 credit, or other security acceptable to the department in a
8-10 combined total amount of at least $50,000. A guaranty is not
8-11 acceptable to satisfy this subsection unless the applicant submits
8-12 sufficient evidence to satisfy the department that the guarantor
8-13 has adequate resources to satisfy the obligations of the guaranty.
8-14 (g) A document submitted to establish net worth must reflect
8-15 the net worth as of a date not earlier than six months before the
8-16 date on which the application is submitted. A document submitted
8-17 to establish net worth must be prepared or certified by an
8-18 independent certified public accountant. Information supplied
8-19 regarding net worth, including copies of federal tax returns, is
8-20 proprietary and confidential and is exempt from disclosure to third
8-21 parties, other than to other governmental agencies with a
8-22 reasonable legitimate purpose for obtaining the information.
8-23 SECTION 7. FEES. (a) Each applicant for an original or
8-24 renewal license shall pay to the department on the issuance of the
8-25 license or license renewal a fee set by the commission by rule, in
8-26 an amount not to exceed:
8-27 (1) $3,000 for a staff leasing services company
9-1 license; or
9-2 (2) $10,000 for a staff leasing services group license
9-3 issued under Section 10 of this Act.
9-4 (b) The commission by rule shall establish a sliding scale
9-5 for fees set under this Act, subject to the fee limits set by
9-6 Subsection (a) of this section. In establishing the scale, the
9-7 commission shall consider:
9-8 (1) the size of the applicant;
9-9 (2) the number of assigned employees employed by the
9-10 applicant within this state;
9-11 (3) the reasonable funding needs of the department;
9-12 and
9-13 (4) other factors considered appropriate by the
9-14 commission.
9-15 SECTION 8. STAFF LEASING SERVICES AGREEMENT. A licensee
9-16 shall establish the terms of a staff leasing services agreement by
9-17 a written contract between the licensee and the client company.
9-18 The licensee shall give written notice of the agreement as it
9-19 affects assigned employees to each employee assigned to a client
9-20 company worksite.
9-21 SECTION 9. CONTRACT REQUIREMENTS; STATUS AS EMPLOYER. (a)
9-22 A contract between a licensee and a client company must provide
9-23 that the licensee:
9-24 (1) reserves the right of direction and control over
9-25 employees assigned to a client's worksites;
9-26 (2) assumes responsibility for the payment of wages to
9-27 the assigned employees without regard to payments by the client to
10-1 the licensee;
10-2 (3) assumes responsibility for the payment of payroll
10-3 taxes and collection of taxes from payroll on assigned employees;
10-4 (4) retains the right to hire, fire, discipline, and
10-5 reassign the assigned employees; and
10-6 (5) retains the right of direction and control over
10-7 the adoption of employment and safety policies and the management
10-8 of workers' compensation claims, claim filings, and related
10-9 procedures.
10-10 (b) For the purposes of the law of this state, a licensee is
10-11 the employer of the employees assigned to a client company. This
10-12 Act does not affect the rights, duties or liabilities of licensees,
10-13 client companies, or employees under federal law.
10-14 SECTION 10. GROUP LICENSE. A group of at least two but not
10-15 more than five staff leasing services companies that are
10-16 majority-owned by the same business entity may be licensed as a
10-17 staff leasing services group. A staff leasing services group may
10-18 satisfy the reporting and financial requirements of this Act on a
10-19 consolidated basis. As a condition of the issuance of a staff
10-20 leasing services group license, each person that is a member of the
10-21 group must guarantee payment of all financial obligations of each
10-22 other member of the group.
10-23 SECTION 11. LIMITED LICENSE; RECIPROCITY. (a) The
10-24 commissioner by rule shall provide for the issuance of a limited
10-25 license for a person that offers staff leasing services in this
10-26 state on a limited basis and that is primarily engaged in offering
10-27 staff leasing services in another state. The commissioner by rule
11-1 shall provide for reciprocity for a person offering staff leasing
11-2 services that is licensed in another state and primarily engaged in
11-3 business outside this state. The principal place of business of a
11-4 person offering staff leasing services that applies for a license
11-5 under this section must be located in a state other than this
11-6 state.
11-7 (b) For the purposes of this section, a person offers staff
11-8 leasing services on a limited basis if the person employs fewer
11-9 than 20 employees who are assigned to a client company.
11-10 SECTION 12. ISSUANCE AND TERM OF LICENSES. (a) The
11-11 department shall issue a license to an applicant determined to meet
11-12 the requirements of this Act. The department shall issue the
11-13 license not later than the 90th day after the date on which the
11-14 completed application is filed with the department.
11-15 (b) A license issued by the department under this Act is
11-16 valid for two years. The department shall renew a license on
11-17 receipt of a renewal application approved by the department and
11-18 payment of the required renewal fees.
11-19 SECTION 13. REQUIRED DISCLOSURE. (a) Each licensee shall
11-20 disclose to the department, each client company, and its assigned
11-21 employees information relating to any insurance or benefit plan
11-22 provided for the benefit of its assigned employees. The
11-23 information must include:
11-24 (1) the type of coverage;
11-25 (2) the identity of each insurer for each type of
11-26 coverage;
11-27 (3) the amount of benefits provided for each type of
12-1 coverage and to whom or on whose behalf benefits are to be paid;
12-2 (4) the policy limits on each insurance policy; and
12-3 (5) whether the coverage is fully insured, partially
12-4 insured, or fully self-funded.
12-5 (b) The commissioner by rule may require the filing by
12-6 licensees of other reports that are reasonably necessary to the
12-7 implementation of this Act.
12-8 SECTION 14. INSURANCE. (a) A licensee may elect to obtain
12-9 workers' compensation insurance coverage in the same manner as any
12-10 other employer. If coverage is obtained, that insurance must
12-11 comply with the applicable provisions of the Insurance Code. A
12-12 licensee is entitled to the same rights to obtain all types of
12-13 insurance coverage, including endorsements, as may be obtained by
12-14 other business entities doing business in this state.
12-15 (b) A licensee may sponsor and maintain employee benefit
12-16 plans for the benefit of assigned employees. A client company may
12-17 include assigned employees in any benefit plan sponsored by the
12-18 client company.
12-19 SECTION 15. POSTING OF LICENSES. (a) The commissioner by
12-20 rule shall determine the form and content of:
12-21 (1) the licenses issued under this Act; and
12-22 (2) notices required to be posted under this section.
12-23 (b) Each license issued under this Act must be posted in a
12-24 conspicuous place in the principal place of business in this state
12-25 of the licensee. Each licensee shall display, in a place that is
12-26 in clear and unobstructed public view, a notice stating that the
12-27 business operated at the location is licensed and regulated by the
13-1 department and that any questions or complaints should be directed
13-2 to the department.
13-3 SECTION 16. LICENSE NOT ASSIGNABLE; CHANGES OF NAME OR
13-4 LOCATION. (a) A licensee may not conduct business under any name
13-5 other than that specified in the license. A license issued under
13-6 this Act is not assignable. A licensee may not conduct business
13-7 under any fictitious or assumed name without prior written
13-8 authorization from the department. The department may not
13-9 authorize the use of a name that is so similar to that of a public
13-10 office or agency or to that of another licensee that the public may
13-11 be confused or misled by its use. A licensee may not conduct
13-12 business under more than one name unless it has obtained a separate
13-13 license for each name.
13-14 (b) A licensee may change its licensed name at any time by
13-15 notifying the department and paying a fee for each change of name.
13-16 The commission by rule shall set the fee for a name change in an
13-17 amount not to exceed $50. A licensee may change its name on
13-18 renewal of the license without the payment of the name change fee.
13-19 (c) A licensee must notify the department in writing of:
13-20 (1) any change in the location of its primary business
13-21 office;
13-22 (2) the addition of more business offices; or
13-23 (3) a change in the location of business records
13-24 maintained by the licensee.
13-25 SECTION 17. PROHIBITED ACTS; CRIMINAL PENALTY. (a) A
13-26 person may not:
13-27 (1) engage in staff leasing services without holding a
14-1 license under this Act as a staff leasing services company or a
14-2 staff leasing services group;
14-3 (2) use the name or title "staff leasing company,"
14-4 "employee leasing company," "licensed staff leasing company,"
14-5 "licensed staff leasing company group," or "staff leasing services
14-6 company," or otherwise represent that it is licensed under this
14-7 Act, unless the entity holds a license issued under this Act;
14-8 (3) represent as the person's own the license of
14-9 another person or represent that a person is licensed if the person
14-10 does not hold a license;
14-11 (4) give false or forged evidence to the department in
14-12 connection with obtaining or renewing a license or in connection
14-13 with disciplinary proceedings under this Act; or
14-14 (5) use or attempt to use a license which has expired
14-15 or been revoked.
14-16 (b) A person that violates Subsection (a) of this section
14-17 commits an offense. An offense under this subsection is a Class C
14-18 misdemeanor.
14-19 SECTION 18. DISCIPLINARY ACTIONS. (a) For the purposes of
14-20 this section, "conviction" includes a plea of nolo contendere or a
14-21 finding of guilt, regardless of adjudication.
14-22 (b) Disciplinary action may be taken against a licensee by
14-23 the department on any of the following grounds:
14-24 (1) the conviction of a licensee or any controlling
14-25 person of a licensee of bribery, fraud, or intentional or material
14-26 misrepresentation in obtaining, attempting to obtain, or renewing a
14-27 license;
15-1 (2) the conviction of a licensee or any controlling
15-2 person of a licensee of a crime that relates to the operation of a
15-3 staff leasing service or the ability of the licensee or any
15-4 controlling person of a licensee to operate a staff leasing
15-5 service;
15-6 (3) the conviction of a licensee or any controlling
15-7 person of a licensee of a crime that relates to the classification,
15-8 misclassification, or under-reporting of employees under the Texas
15-9 Workers' Compensation Act (Article 8308-1.01 et seq., Vernon's
15-10 Texas Civil Statutes);
15-11 (4) the conviction of a licensee or any controlling
15-12 person of a licensee of a crime that relates to the establishment
15-13 or maintenance of a self-insurance program, whether health
15-14 insurance, workers' compensation insurance, or other insurance;
15-15 (5) the conviction of a licensee or any controlling
15-16 person of a licensee of a crime that relates to fraud, deceit, or
15-17 misconduct in the operation of a staff leasing service;
15-18 (6) engaging in staff leasing services without a
15-19 license;
15-20 (7) transferring or attempting to transfer a license
15-21 issued under this Act;
15-22 (8) violating this Act or any order or rule issued by
15-23 the department or commissioner under this Act;
15-24 (9) failing to notify the department, in writing, of
15-25 the felony conviction of any controlling person not later than the
15-26 30th day after the date on which that conviction is final;
15-27 (10) failing to cooperate with an investigation,
16-1 examination, or audit of the licensee's records conducted by the
16-2 licensee's insurance company or the insurance company's designee,
16-3 as allowed by the insurance contract or as authorized by law by the
16-4 Texas Department of Insurance;
16-5 (11) failing to notify the department and the Texas
16-6 Department of Insurance not later than the 30th day after the
16-7 effective date of the change of any change in ownership, principal
16-8 business address, or the address of accounts and records;
16-9 (12) failing to correct any tax filings or payment
16-10 deficiencies within a reasonable time as determined by the
16-11 commissioner;
16-12 (13) refusing, after reasonable notice, to meet
16-13 reasonable health and safety requirements within the licensee's
16-14 control and made known to the licensee by a federal or state
16-15 agency;
16-16 (14) a delinquency in the payment of the licensee's
16-17 insurance premiums other than those subject to a legitimate
16-18 dispute;
16-19 (15) a delinquency in the payment of any employee
16-20 benefit plan premiums or contributions other than those subject to
16-21 a legitimate dispute; or
16-22 (16) knowingly making a material misrepresentation to
16-23 an insurance company, or to the department or other governmental
16-24 agency.
16-25 (c) On a finding that a licensee has violated one or more
16-26 provisions of Subsection (b) of this section, the department may:
16-27 (1) deny an application for a license;
17-1 (2) revoke, restrict, or refuse to renew a license;
17-2 (3) impose an administrative penalty in an amount not
17-3 less than $1,000 per violation, but not more than $50,000;
17-4 (4) issue a reprimand; or
17-5 (5) place the licensee on probation for the period and
17-6 subject to conditions that the department specifies.
17-7 (d) On revocation of a license, the licensee shall
17-8 immediately return the revoked license to the department.
17-9 (e) Disciplinary action may be taken, a denial of an
17-10 application for a new or renewal license or a revocation of a
17-11 license may be done, or a determination that a controlling person
17-12 is unqualified may be made by the department only subject to the
17-13 Administrative Procedure and Texas Register Act (Article 6252-13a,
17-14 Vernon's Texas Civil Statutes), with notice to, and an opportunity
17-15 for a hearing by, the affected applicant, licensee, or controlling
17-16 person.
17-17 (f) If a license is revoked or renewal is denied, the
17-18 affected licensee may request a reinstatement hearing after a
17-19 minimum of one year. The department may reinstate or renew the
17-20 license only if the cause of the nonrenewal or revocation has been
17-21 corrected.
17-22 SECTION 19. FEES USED FOR ADMINISTRATION. All fees
17-23 collected by the department under this Act shall be used to
17-24 implement this Act.
17-25 SECTION 20. EFFECT OF OTHER LAW. This Act does not exempt a
17-26 client of a licensee, or any assigned employee, from any other
17-27 license requirements imposed under local, state, or federal law.
18-1 An employee who is licensed, registered, or certified under law and
18-2 who is assigned to a client company is considered to be an employee
18-3 of the client company for the purpose of that license,
18-4 registration, or certification, but otherwise remains the employee
18-5 of the licensee as provided in this Act.
18-6 SECTION 21. EFFECTIVE DATE; TRANSITION; INITIAL
18-7 APPOINTMENTS. (a) Except as provided by Subsection (b) of this
18-8 section, this Act takes effect September 1, 1993.
18-9 (b) A person is not required to hold a license under this
18-10 Act to provide staff leasing services until March 1, 1994.
18-11 (c) In making the initial appointments to the Staff Leasing
18-12 Services Advisory Committee, the commissioner shall appoint one
18-13 member for a term ending February 1, 1995, two members for terms
18-14 ending February 1, 1996, and two members for terms ending February
18-15 1, 1997.
18-16 SECTION 22. EMERGENCY. The importance of this legislation
18-17 and the crowded condition of the calendars in both houses create an
18-18 emergency and an imperative public necessity that the
18-19 constitutional rule requiring bills to be read on three several
18-20 days in each house be suspended, and this rule is hereby suspended.