By Counts H.B. No. 1552
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of employee leasing entities; creating
1-3 offenses and providing civil and criminal penalties; appropriating
1-4 fees.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. DEFINITIONS. In this Act:
1-7 (1) "Applicant" means a person who has filed a license
1-8 application under this Act.
1-9 (2) "Client company" means any business entity that
1-10 leases all or part of its employees from an employee leasing
1-11 entity.
1-12 (3) "Commission" means the Texas Commission of
1-13 Licensing and Regulation.
1-14 (4) "Commissioner" means the commissioner of licensing
1-15 and regulation.
1-16 (5) "Department" means the Texas Department of
1-17 Licensing and Regulation.
1-18 (6) "Employee leasing entity" means a business entity
1-19 which provides leased employees to a client company on an ongoing
1-20 basis as agreed to by the client and employee leasing company
1-21 pursuant to a written contract. The term does not include a person
1-22 that arranges to provide temporary employees to a client.
1-23 (7) "Employee leasing services" means the services
2-1 provided by an employee leasing entity.
2-2 (8) "Fiduciary" means a person in whom matters of
2-3 trust and confidence have been placed by another and who exercises
2-4 duties and responsibilities created by the person's agreement to
2-5 act for the other's benefit.
2-6 (9) "Independent contractor" means a person who
2-7 contracts to perform work or provide a service for the benefit of
2-8 another. The term has the meaning assigned by federal tax laws and
2-9 by federal and state labor laws, including the workers'
2-10 compensation laws of this state.
2-11 (10) "Leased employee" means an employee furnished to
2-12 a client company by an employee leasing entity. The term does not
2-13 include a person who is a temporary employee or an independent
2-14 contractor.
2-15 (11) "License" means a license issued under this Act.
2-16 (12) "License holder" means a person licensed under
2-17 this Act to operate as an employee leasing entity.
2-18 (13) "Officer" means a person affiliated with an
2-19 employee leasing entity who exercises decision-making authority
2-20 relating to the operations of that entity or who owns all or part
2-21 of that entity. The term includes a partner, a member of the board
2-22 of directors, the chief executive officer, the chief administrative
2-23 officer, the chief operating officer, the president, a
2-24 vice-president, the secretary of the board of directors, or the
2-25 treasurer of the entity.
3-1 (14) "Person" means an individual, association,
3-2 corporation, organization, government or governmental subdivision
3-3 or agency, business trust, estate trust, joint venture,
3-4 partnership, or any other legal entity.
3-5 (15) "Temporary employee" means an employee of a
3-6 temporary help services firm.
3-7 (16) "Temporary help services firm" means a person
3-8 that hires its own employees and assigns them to clients to support
3-9 or supplement the client's work force in special work situations
3-10 such as employee absences, variable production schedules, temporary
3-11 skill shortages, seasonal schedules and workloads, and special
3-12 assignments and projects.
3-13 SECTION 2. LICENSE REQUIRED. (a) A person may not engage
3-14 in the business of employee leasing or operate as an employee
3-15 leasing entity in this state unless the person holds a license
3-16 issued under this Act.
3-17 (b) Each license issued under this Act must be in the form
3-18 prescribed by the commissioner. The license must specify the name
3-19 under which the license holder operates, the address of the license
3-20 holder's principal place of business, the full names and titles of
3-21 the officers of the license holder, and the expiration date of the
3-22 license.
3-23 (c) The license holder must make the license available for
3-24 inspection in a conspicuous place in the principal place of
3-25 business in this state of the license holder.
4-1 (d) A license issued under this Act is not transferable. A
4-2 license holder that desires to change the name under which its
4-3 license is issued first must notify and obtain the approval of the
4-4 commissioner and pay an administrative fee in the amount of the
4-5 renewal fee.
4-6 (e) A person may not hold more than one license under this
4-7 Act.
4-8 (f) A license holder, or any officer of a license holder,
4-9 whose license is revoked or who fails to renew the license
4-10 according to Section 5 of this Act shall not be eligible for
4-11 another license for a period of two years.
4-12 SECTION 3. LICENSE APPLICATION AND ISSUANCE. (a) An
4-13 application for an original license under this Act must be made on
4-14 a form prescribed by the commissioner and must contain the
4-15 following:
4-16 (1) the address of this applicant's principal place of
4-17 business and of each other business office in this state at which
4-18 the applicant intends to conduct business as an employee leasing
4-19 entity;
4-20 (2) the name under which the applicant intends to
4-21 conduct business as an employee leasing entity;
4-22 (3) the name, address, and social security number of
4-23 each general partner, limited partner, officer, or director; and
4-24 (4) any other information required by the
4-25 commissioner.
5-1 (b) In addition to the information required under Subsection
5-2 (a) of this section, the application must include for each officer
5-3 listed a notarized, complete biographical history, as prescribed by
5-4 the commission.
5-5 (c) The application must be accompanied by:
5-6 (1) the application fee not to exceed $10,000 set by
5-7 the commission under Subsection (c) of Section 7 of this Act; and
5-8 (2) an audited financial statement, issued by an
5-9 independent certified public accountant, that states that the
5-10 applicant, at the time the application is filed, has a net worth of
5-11 at least:
5-12 (A) $50,000 of attachable assets, as prescribed
5-13 by the commissioner, if the applicant leases fewer than 50
5-14 employees;
5-15 (B) $75,000 of attachable assets, as prescribed
5-16 by the commissioner, if the applicant leases at least 50 but not
5-17 more than 250 employees; or
5-18 (C) $100,000 of attachable assets, as prescribed
5-19 by the commissioner, if the applicant leases more than 250
5-20 employees.
5-21 (d) The applicant shall provide proof of security in the
5-22 form of a $50,000 surety bond issued by an insurance company
5-23 authorized to do business in this state. The surety bond must be
5-24 maintained during the term of the license.
5-25 (e) The application must be signed by the applicant under
6-1 oath and must be notarized. If the applicant is a partnership, the
6-2 application must be accompanied by an affidavit signed under oath
6-3 by each partner. If the applicant is a corporation, the
6-4 application must be accompanied by an affidavit signed under oath
6-5 by an officer and must include a corporate resolution signed by
6-6 each officer authorizing the application.
6-7 (f) The commissioner may issue a license to an applicant who
6-8 complies with the requirements of this section.
6-9 SECTION 4. ACCESS TO CERTAIN CRIMINAL HISTORY RECORD
6-10 INFORMATION. (a) The commissioner is entitled to obtain criminal
6-11 history record information maintained by the Department of Public
6-12 Safety, the Federal Bureau of Investigation identification
6-13 division, or another law enforcement agency to investigate:
6-14 (1) an applicant for a license as an employee leasing
6-15 entity; and
6-16 (2) each person whose affidavit accompanies a license
6-17 application under this Act.
6-18 (b) The commissioner shall adopt rules governing the custody
6-19 and use of information obtained under this section.
6-20 (c) The commissioner may use information obtained under this
6-21 section only to ascertain the eligibility of an investigated person
6-22 to operate as an employee leasing entity in this state.
6-23 (d) The commissioner shall adopt a uniform method of
6-24 obtaining criminal history record information. The uniform method
6-25 must require the commissioner to submit to the Department of Public
7-1 Safety or to another law enforcement agency a complete set of
7-2 fingerprints of the person being investigated. If the commissioner
7-3 submits the fingerprints of a person being investigated and
7-4 relevant information is not obtained at the state or local law
7-5 enforcement agency level, the commissioner may submit the
7-6 fingerprints to the Federal Bureau of Investigation identification
7-7 division.
7-8 (e) The commissioner may deny a license to an applicant for
7-9 a license as an employee leasing entity if the applicant fails to
7-10 provide on request a complete set of fingerprints for each person
7-11 whose affidavit accompanies the license application.
7-12 (f) All information received by the commissioner under this
7-13 section is privileged and confidential and is for the exclusive use
7-14 of the commissioner. Except on court order or with the written
7-15 consent of the person being investigated, the information may not
7-16 be released or otherwise disclosed to any other person or agency.
7-17 (g) After the commissioner issues the license, the
7-18 commissioner shall seal the criminal history record information
7-19 regarding the person. The commissioner shall destroy the criminal
7-20 history record information of a license applicant who is not
7-21 granted a license.
7-22 (h) A person commits an offense if the person releases or
7-23 discloses any information received under this section except as
7-24 provided by Subsection (f) of this section. An offense under this
7-25 subsection is a Class A misdemeanor.
8-1 SECTION 5. LICENSE RENEWAL. (a) Each application for a
8-2 license renewal must be made on a form prescribed by the
8-3 commissioner and must update the information supplied under Section
8-4 3 of this Act. The renewal fee shall be prescribed by the
8-5 commission as provided by Subsection (c) of Section 7 of this Act.
8-6 (b) The commissioner shall renew the license of a qualified
8-7 applicant on receipt of the completed renewal application and the
8-8 renewal fee.
8-9 (c) The commissioner shall adopt rules establishing a
8-10 procedure for the renewal of licenses. Not later than the 60th day
8-11 before the expiration of the license, the department shall mail a
8-12 renewal notice to the address of the principal place of business of
8-13 the license holder.
8-14 (d) Failure to renew the license at the expiration of the
8-15 license term results in the delinquency of the license. A license
8-16 that is not more than 30 days delinquent may be renewed on payment
8-17 of a delinquency fee equal to 10 percent of the amount originally
8-18 due plus the renewal fee. If payment is not received within the
8-19 30-day period, the existing license may not be renewed and the
8-20 person must apply for a new license.
8-21 SECTION 6. DISCLOSURE OF INSURANCE COVERAGE. (a) Each
8-22 license holder shall disclose to the commissioner, to each of its
8-23 client companies, and to its leased employees information on the
8-24 insurance provided for the benefit of its leased employees. Such
8-25 information shall include:
9-1 (1) the type of coverage;
9-2 (2) the insurer for each type of coverage;
9-3 (3) the amount of benefits provided for each type of
9-4 coverage and to whom or on whose behalf the benefits will be paid;
9-5 (4) the policy limits on each insurance policy; and
9-6 (5) whether such coverage is fully insured, partially
9-7 insured, or fully self-funded.
9-8 (9) A license holder shall notify each of its client
9-9 companies and its leased employees in writing at least 30 days
9-10 before any change in any of the information described in Subsection
9-11 (a) of this section as provided by rules adopted by the
9-12 commissioner.
9-13 (c) A license holder that does not provide workers'
9-14 compensation insurance must maintain a new client company's
9-15 existing workers' compensation insurance coverage until the
9-16 expiration of the policy.
9-17 (d) If a license holder maintains workers' compensation
9-18 insurance coverage or alternative insurance for its leased
9-19 employees, such insurance shall be issued by an insurer authorized
9-20 to do business in Texas or a surplus lines insurer as defined in
9-21 Article 1.14-2, Insurance Code.
9-22 (e) A license holder that does not provide workers'
9-23 compensation insurance coverage must provide notice as required by
9-24 Section 3.24, Texas Workers' Compensation Act (Article 8308-3.24,
9-25 Vernon's Texas Civil Statutes), and provide notice to the
10-1 commissioner, its client companies, and its leased employees on a
10-2 form to be approved by the commissioner.
10-3 SECTION 7. POWERS AND DUTIES OF COMMISSIONER, DEPARTMENT,
10-4 AND COMMISSION; COOPERATION AMONG AFFECTED STATE AGENCIES;
10-5 INDEPENDENT AUDIT. (a) The commissioner may adopt rules to
10-6 implement this Act.
10-7 (b) The department may conduct an on-site investigation or
10-8 examination into the activities of an employee leasing entity
10-9 during regular business hours. The costs associated with those
10-10 investigations or examinations, including travel costs and per diem
10-11 expenses, shall be set by the commission and shall be paid by the
10-12 license holder. The refusal to allow an on-site investigation may
10-13 result in the assessment of an administrative sanction or civil
10-14 penalty under Section 12 of this Act.
10-15 (c) The commission by rule shall adopt fees in amounts
10-16 sufficient to recover the costs of administering this Act, for
10-17 license applications, renewals, investigations, and other costs
10-18 incurred. Fees collected under this subsection shall be
10-19 appropriated to the department.
10-20 (d) The commissioner by rule shall prescribe the duration of
10-21 the license which shall be no less than one year.
10-22 (e) An insurance company that issues a surety bond under
10-23 Subsection (d) of Section 3 of this Act shall notify the
10-24 commissioner in writing of its intent to cancel the surety bond not
10-25 later than the 90th day before the date on which the cancellation
11-1 takes effect. The commissioner at any time may require proof of a
11-2 license holder's appropriate net worth.
11-3 (f) This Act does not preclude other agencies from taking
11-4 appropriate action under other laws. The department immediately
11-5 shall refer potential or known criminal violations to the
11-6 appropriate authority for investigation.
11-7 (g) Each state agency that, in performing duties under other
11-8 law, affects the regulation of an employee leasing entity shall
11-9 cooperate with the department, the commissioner, and each other as
11-10 necessary to fully implement and enforce this Act. In particular,
11-11 the Texas Employment Commission, the State Board of Insurance, the
11-12 Texas Workers' Compensation Commission, and the attorney general's
11-13 office shall assist in the implementation of this Act and shall
11-14 provide information to the department on request.
11-15 (h) This Act does not preclude a person who is entitled to
11-16 conduct an audit on the books and records of a client company from
11-17 conducting such an audit.
11-18 SECTION 8. RIGHTS AND DUTIES OF LICENSE HOLDER AND CLIENT
11-19 COMPANY. (a) A license holder is a fiduciary with respect to the
11-20 license holder's contractual duties and responsibilities to manage,
11-21 maintain, and make timely payments of:
11-22 (1) insurance premiums;
11-23 (2) unemployment taxes;
11-24 (3) benefit and welfare plans;
11-25 (4) wages;
12-1 (5) employee withholding taxes;
12-2 (6) other employee withholding;
12-3 (7) social security taxes; and
12-4 (8) any other expressed or implied responsibilities
12-5 within the scope of the contract between the client company and the
12-6 employee leasing entity.
12-7 (b) For the first two years a client company has a contract
12-8 with a license holder, the license holder shall pay workers'
12-9 compensation insurance premiums based on the experience of the
12-10 client company. The requirement of this subsection does not apply
12-11 to a license holder who is experience rated for workers'
12-12 compensation insurance on the date of application for licensure.
12-13 The State Board of Insurance shall adopt rules to implement this
12-14 subsection.
12-15 (c) A license holder shall:
12-16 (1) comply with all appropriate state and federal laws
12-17 relating to reporting, sponsoring, filing, and maintaining benefit
12-18 and welfare plans;
12-19 (2) report and make timely payments of unemployment
12-20 taxes, payroll taxes, and any other amounts the employee leasing
12-21 entity has contractual duties to administer;
12-22 (3) maintain adequate books and records regarding its
12-23 duties and responsibilities; and
12-24 (4) maintain and make available at all times to the
12-25 commissioner, the Texas Employment Commission, the State Board of
13-1 Insurance, the Texas Workers' Compensation Commission, and the
13-2 attorney general's office:
13-3 (A) the correct name, address, telephone number,
13-4 and federal income tax identification number of each client
13-5 company;
13-6 (B) each contract between a client company and
13-7 the license holder;
13-8 (C) a listing by classification code as
13-9 described in the "Standard Industrial Classification Manual,"
13-10 published by the United States Office of Management and Budget, of
13-11 each employee employed solely at the license holder's workplace;
13-12 (D) a listing by classification code as
13-13 described in the "Standard Industrial Classification Manual,"
13-14 published by the United States Office of Management and Budget, of
13-15 all leased employees provided to each client company;
13-16 (E) the total wages by classification code and
13-17 the premiums due the insurance carrier for workers' compensation
13-18 insurance coverage for the leased employees provided to each client
13-19 company listed by client company;
13-20 (F) the personnel file of any leased employee
13-21 paid by the employee leasing entity;
13-22 (G) all unemployment payroll tax reports;
13-23 (H) all payroll ledgers and associated records;
13-24 (I) all annual W-2 forms for leased employees;
13-25 (J) all quarterly 941 forms;
14-1 (K) all materials supporting interim wage
14-2 reports submitted to the insurance carrier;
14-3 (L) each job order and other records concerning
14-4 a job performed by a leased employee;
14-5 (M) each workers' compensation claim file of a
14-6 leased employee by client company;
14-7 (N) all books and records evidencing, by client
14-8 company, payments made for workers' compensation insurance; such
14-9 records shall be made on a company-by-company basis;
14-10 (O) all amounts paid to the employee leasing
14-11 entity by each client company for leased employees; and
14-12 (P) any other information required by rule.
14-13 (d) A license holder who elects not to renew the license
14-14 must notify each of its client companies of the decision not to
14-15 renew not later than the 60th day before the date on which the
14-16 license expires. All benefits covered by the employee leasing
14-17 contract must remain in effect during the 60-day notice period.
14-18 The license holder shall notify each of its client companies of the
14-19 cancellation of the license as provided by rules adopted by the
14-20 commissioner.
14-21 (e) A license holder shall maintain and make available to
14-22 its client companies during regular business hours all books and
14-23 records evidencing payments received from its client companies and
14-24 payments made on behalf of its leased employees, including payroll
14-25 taxes, social security taxes, employee withholding taxes, other
15-1 miscellaneous employee withholding, health and welfare benefits,
15-2 and any other payment provisions required under the employee
15-3 leasing contract. A client company of a license holder has the
15-4 right to inspect only the records of the license holder evidencing
15-5 payments received from that client company and payments made on
15-6 behalf of leased employees assigned to that client company.
15-7 (f) A license holder shall maintain and make available
15-8 immediately to the department and any other appropriate agency all
15-9 books and records related to the statutory responsibility of the
15-10 requesting state agency. This Act does not preclude a state agency
15-11 from obtaining information from client companies.
15-12 (g) A license holder's billing statements for a client
15-13 company must specify the amount of payroll and the license holder's
15-14 employee leasing service fees.
15-15 (h) A license holder shall disclose in writing to each
15-16 affected client company any potential conflict of interest,
15-17 including any commissions, fees, or other remuneration earned by
15-18 the license holder, an officer, director, or employee of the
15-19 license holder or any other affiliated or related party that are
15-20 earned as a result of the client company contract.
15-21 (i) A license holder shall maintain a current record of all
15-22 written complaints made by a client company, an employee of a
15-23 client company, or any other person for whom the license holder has
15-24 responsibilities under contract. This record must be available to
15-25 the client companies and the department during regular business
16-1 hours.
16-2 (j) In the person's capacity as fiduciary, each license
16-3 holder shall establish and maintain separate accounts for each
16-4 separate employee leasing service provided by the license holder.
16-5 The license holder must maintain the accounts separately and may
16-6 not commingle the accounts.
16-7 (k) The license holder shall provide the department, not
16-8 later than April 1 of each year, with an annual audited financial
16-9 statement issued by an independent certified public accountant for
16-10 its latest fiscal year.
16-11 (l) The license holder shall comply with the rules of any
16-12 state or federal agency that governs the license holder's
16-13 activities under this Act.
16-14 (m) Not later than the 30th day after the date of
16-15 establishment of a new location, the license holder shall provide
16-16 the commissioner with a listing of all locations maintained by the
16-17 license holder where any books or records are kept.
16-18 (n) The license holder shall make available to the
16-19 department copies of each contract, treaty, insurance contract and
16-20 endorsements, or any other agreement which provides employee
16-21 benefits.
16-22 (o) The license holder shall maintain attachable assets as
16-23 provided in Subdivision (2) of Subsection (c) of Section 3 of this
16-24 Act.
16-25 (p) The license holder shall provide to the department and
17-1 the Texas Employment Commission on January 31, April 30, July 31,
17-2 and October 31 of each year a list of all client companies,
17-3 including the name and address of each client company, all leased
17-4 employees assigned to each client company, each leased employee's
17-5 social security number, and the amount of wages paid to each leased
17-6 employee during the preceding calendar quarter.
17-7 (q) Each time a corporate officer listed on the license
17-8 application changes, the license holder shall file with the
17-9 commissioner a new listing and a notarized biographical history for
17-10 the new officer not later than the 30th day after the date on which
17-11 the change takes effect.
17-12 (r) A license holder or any officer of a license holder may
17-13 not have an ownership interest of any nature in any of its client
17-14 companies.
17-15 (s) Information provided by a license holder under
17-16 Subdivision (4) of Subsection (c) of this section, except
17-17 information provided under Paragraph (A) or (C) of that
17-18 subdivision, is confidential.
17-19 SECTION 9. GROUNDS FOR DISCIPLINARY ACTION; REVOCATION
17-20 NOTICE. (a) The commissioner may deny a license application or
17-21 suspend or revoke a license if the commissioner finds that an
17-22 officer, director, or employee of the license holder or the license
17-23 holder itself acting through an authorized person has:
17-24 (1) violated any law or rule applicable to the license
17-25 holder;
18-1 (2) failed to comply with any law or rule applicable
18-2 to the license holder;
18-3 (3) made a material misstatement in the application
18-4 for the license;
18-5 (4) obtained or attempted to obtain the license by
18-6 bribery, fraud, or misrepresentation;
18-7 (5) committed any fraudulent act in the conduct of the
18-8 license holder's business;
18-9 (6) failed to submit to examination under oath;
18-10 (7) failed to comply with Article 7, Texas Workers'
18-11 Compensation Act (Article 8308-7.01 et seq., Vernon's Texas Civil
18-12 Statutes), and rules adopted by the Texas Workers' Compensation
18-13 Commission under that article;
18-14 (8) failed to comply with Section 14, Article 1.14-1,
18-15 Insurance Code;
18-16 (9) failed to pay examination costs or fines;
18-17 (10) been convicted of a crime that relates to the
18-18 practice of employee leasing or the ability to engage in employee
18-19 leasing;
18-20 (11) made a material misrepresentation on an
18-21 application for workers' compensation insurance coverage by
18-22 omission or otherwise, including a misrepresentation relating to
18-23 the:
18-24 (A) estimated annual premium;
18-25 (B) estimated payroll;
19-1 (C) nature of the business;
19-2 (D) name or ownership of the business;
19-3 (E) previous insurance history; or
19-4 (F) outstanding premium obligation of the
19-5 applicant or other enterprise with a common managing interest;
19-6 (12) failed to respond to written complaints and
19-7 concerns raised by the department in the time and manner prescribed
19-8 by the commissioner;
19-9 (13) made a false filing to the department;
19-10 (14) failed to allow an audit by a workers'
19-11 compensation insurance carrier or the department or other
19-12 regulatory agency;
19-13 (15) failed to maintain adequate books and records in
19-14 accordance with generally accepted accounting principles or as
19-15 prescribed by department rules;
19-16 (16) failed to pay fees, assessments, or taxes when
19-17 due;
19-18 (17) conducted business when the person's license has
19-19 been revoked or suspended;
19-20 (18) failed to report to the department any person who
19-21 the license holder knows or should have known is in violation of
19-22 this Act or applicable rules;
19-23 (19) failed to notify the department in writing of any
19-24 change of name, address, or telephone number as required by this
19-25 Act not later than the 30th day after the date on which the change
20-1 took effect;
20-2 (20) failed to notify properly the State Board of
20-3 Insurance of a change in ownership; or
20-4 (21) violated this Act or other state or federal laws
20-5 in the person's capacity as an officer, agent, director, or
20-6 employee of an employee leasing entity or in any other activity
20-7 involving the handling, as a fiduciary, of funds, employee
20-8 benefits, or insurance.
20-9 (b) For the purposes of Subdivision (10) of Subsection (a)
20-10 of this section, a plea of nolo contendere creates a rebuttable
20-11 presumption of guilt to the underlying criminal charge.
20-12 (c) If the commissioner determines that a violation of this
20-13 Act has occurred or is threatened, the commissioner shall follow
20-14 the procedure established under Sections 17 and 18, Article 9100,
20-15 Revised Statutes, relating to administrative sanctions, penalties,
20-16 and injunctions, and may:
20-17 (1) deny an application for a license;
20-18 (2) revoke, suspend, or refuse to renew a license;
20-19 (3) impose an administrative penalty not to exceed
20-20 $10,000 for each violation;
20-21 (4) issue a cease and desist order; or
20-22 (5) place the license holder on probation for a period
20-23 and subject to conditions as specified by the department.
20-24 (d) On revocation or suspension of a license, the license
20-25 holder shall return immediately the license that was revoked or
21-1 suspended.
21-2 (e) The commissioner may notify the attorney general of a
21-3 violation, and the attorney general may apply to a district court
21-4 in Travis County for leave to file suit in the nature of quo
21-5 warranto or for injunctive relief, or both. The attorney general
21-6 shall not be required to post a bond for injunction. The attorney
21-7 general may seek and the court may order restitution for victims of
21-8 an act declared to be unlawful under this Act, a fine to be
21-9 deposited in the employee leasing recovery fund under Section 11 of
21-10 this Act, and a recovery for reasonable attorney fees.
21-11 (f) In addition to the other remedies imposed under this
21-12 section, the commissioner may request the attorney general to bring
21-13 a civil action in a district court in Travis County to place the
21-14 license holder's or licensee's operations under the control of an
21-15 independent receiver.
21-16 (g) On revocation or suspension of a license by the
21-17 commissioner, the commissioner shall notify:
21-18 (1) each leased employee and client company of that
21-19 license holder;
21-20 (2) the State Board of Insurance;
21-21 (3) the Texas Employment Commission;
21-22 (4) the Office of the Attorney General;
21-23 (5) the Texas Workers' Compensation Commission;
21-24 (6) the Texas workers' compensation insurance
21-25 facility; and
22-1 (7) the secretary of state.
22-2 SECTION 10. EFFECT OF CERTAIN OMISSIONS OR VIOLATIONS ON
22-3 UNEMPLOYMENT TAX STATUS. For purposes of the Texas Unemployment
22-4 Compensation Act (Article 5221b-1 et seq., Vernon's Texas Civil
22-5 Statutes), in the event of the termination of a contract for
22-6 employee leasing services or failure by an employee leasing entity
22-7 to submit reports or make tax payments as required by the Texas
22-8 Employment Commission, the contracting client company shall be
22-9 treated as a new employer without a previous experience record,
22-10 unless the client company is otherwise eligible for an experience
22-11 rating.
22-12 SECTION 11. RECOVERY FUND. (a) The commission shall
22-13 establish the employee leasing recovery fund outside the state
22-14 treasury to be maintained by the commission as provided by this
22-15 section. The fund shall be used to reimburse an employee or the
22-16 beneficiary of an employee who suffers actual damages because of
22-17 acts committed by a licensed employee leasing entity, if the entity
22-18 was licensed by this state at the time the act was committed and if
22-19 recovery is ordered by a court of competent jurisdiction against
22-20 the employee leasing entity. The principal of and the interest
22-21 generated by the fund may be used exclusively for administrative
22-22 expenses and reimbursement of a claim that constitutes grounds for
22-23 a disciplinary action under Section 9 of this Act.
22-24 (b) In addition to any other fees required under this Act, a
22-25 person who receives a license under this Act shall pay a fee of
23-1 $1,000 before the license is issued. The commissioner shall
23-2 deposit the fee received under this subsection in the employee
23-3 leasing recovery fund.
23-4 (c) If, as of December 31 of any year, the balance remaining
23-5 in the employee leasing recovery fund is less than $1 million, each
23-6 license holder shall pay at the next license renewal, in addition
23-7 to the renewal fee, a fee determined by the commission in an amount
23-8 not to exceed $1,000. Amounts received under this subsection shall
23-9 be deposited in the fund.
23-10 (d) An action for a judgment that subsequently results in an
23-11 order for collection from the employee leasing recovery fund must
23-12 be brought not later than the second anniversary of the date of the
23-13 act that constitutes grounds for a disciplinary action under
23-14 Section 9 of this Act. If a person brings an action against a
23-15 license holder for a judgment that may result in collection from
23-16 the fund, the person and the license holder shall notify the
23-17 commission in writing of the action.
23-18 (e) If a person recovers a valid final judgment against a
23-19 license holder on the grounds described in Subsection (a) of this
23-20 section and if there is insufficient property to satisfy the
23-21 judgment, the person may file a sworn claim directly with the
23-22 commissioner. Not later than the 20th day after the date on which
23-23 the claim is received, the commissioner shall present the judgment
23-24 to the commission for immediate payment from the fund if the
23-25 commissioner is satisfied that all requirements of law have been
24-1 met and it appears that the judgment is regular on its face, valid,
24-2 just, and unpaid. The claiming party is not entitled to attorney
24-3 fees other than those awarded by the court.
24-4 (f) If the commissioner is not satisfied with the judgment
24-5 itself or the manner in which the judgment was obtained, the
24-6 commissioner shall deny the claim and return the claim to the
24-7 claiming party. If the commissioner denies the claim, the claiming
24-8 party may file a sworn claim in district court in Travis County
24-9 and, on 20 days' written notice to the commission and to the
24-10 judgment debtor, may apply to the court for an order directing
24-11 payment from the employee leasing recovery fund of the amount
24-12 unpaid on the judgment, subject to the limitations stated in
24-13 Subsection (o) of this section.
24-14 (g) The court shall proceed on the application promptly. At
24-15 the hearing on the application, the claiming party must show:
24-16 (1) that the judgment is based on facts allowing
24-17 recovery under Subsection (a) of this section;
24-18 (2) that the claiming party is not the spouse of the
24-19 license holder, related to the license holder within the third
24-20 degree of affinity or consanguinity, or the personal representative
24-21 of the license holder;
24-22 (3) that the claiming party is not a license holder
24-23 under this Act;
24-24 (4) that the claiming party has obtained a judgment
24-25 under Subsection (e) of this section stating the amount of the
25-1 judgment and the amount owed on the judgment at the date of
25-2 application;
25-3 (5) that, based on the best available information, the
25-4 judgment debtor lacks sufficient attachable assets in this state or
25-5 any other state to satisfy the judgment; and
25-6 (6) the amount that may be realized from the sale of
25-7 real or personal property or other assets liable to be sold or
25-8 applied in satisfaction of the judgment and the balance remaining
25-9 due on the judgment after application of the amount that may be
25-10 realized.
25-11 (h) The court shall issue an order directed to the
25-12 commission requiring payment from the employee leasing recovery
25-13 fund of the amount the court finds payable on the claim,
25-14 considering the limitations contained in this subsection, if the
25-15 court is satisfied of the truth of all matters required to be shown
25-16 by the claiming party by Subsection (g) of this section and that
25-17 the claiming party has satisfied all the requirements of
25-18 Subsections (e), (f), and (g) of this section. The commission may
25-19 relitigate any material and relevant issue in the hearing on the
25-20 application that was determined in the underlying action on which
25-21 the judgment in favor of the claiming party was based. If the
25-22 court finds that the total of all claims against a license holder
25-23 exceeds the limitations of this section, the court shall reduce
25-24 proportionately the amount it finds payable on the claim.
25-25 (i) A partial recovery on the judgment against a license
26-1 holder made before payment from the employee leasing recovery fund
26-2 must be applied by the creditor first to actual damages and not to
26-3 attorney fees, court costs, or any other damages.
26-4 (j) A license granted under this Act may be revoked by the
26-5 commissioner on proof that the commission has made a payment from
26-6 the employee leasing recovery fund toward satisfaction of a
26-7 judgment against the license holder. The commissioner may probate
26-8 an order revoking a license. A license holder is not eligible to
26-9 receive a new license until the license holder has repaid in full
26-10 the amount paid from the fund, plus interest at the current legal
26-11 rate, unless, after a hearing, the commissioner issues a new
26-12 probated license.
26-13 (k) The amounts received by the commission for deposit in
26-14 the employee leasing recovery fund shall be held by the commission
26-15 in trust to implement the purpose of the fund. These funds may be
26-16 invested and reinvested in the same manner as funds of the
26-17 Employees Retirement System of Texas. The interest from those
26-18 investments shall be deposited to the credit of the fund.
26-19 Investments that may impair the ability of the fund to satisfy
26-20 payments awarded under this section may not be made.
26-21 (l) If the commission receives notice of entry of a final
26-22 judgment and a hearing is conducted under this section, the
26-23 commission may notify the attorney general of its desire to take
26-24 necessary action to protect the fund from spurious or unjust claims
26-25 or to ensure compliance with the requirements for recovery under
27-1 this section.
27-2 (m) If the commission pays from the employee leasing
27-3 recovery fund any amount to a judgment creditor, the commission is
27-4 subrogated to all of the rights of the judgment creditor to the
27-5 extent of the amount paid. The judgment creditor shall assign all
27-6 rights, title, and interest in the judgment up to the amount paid
27-7 by the commission, which shall have priority for repayment in the
27-8 event of any subsequent recovery on the judgment. Any amount
27-9 recovered by the commission on the judgment shall be deposited in
27-10 the fund.
27-11 (n) The failure of a person to comply with the provisions of
27-12 this section relating to the employee leasing recovery fund
27-13 constitutes a waiver of any rights under this section.
27-14 (o) Notwithstanding any other provision of this section,
27-15 payments from the employee leasing recovery fund are subject to the
27-16 following conditions and limitations:
27-17 (1) a payment may be made only as provided by
27-18 Subsections (e) and (f) of this section and in the manner
27-19 prescribed by this section;
27-20 (2) payments for claims, including attorney fees,
27-21 interest, and court costs, that arise out of the same transaction
27-22 are limited in the aggregate to $10,000 regardless of the number of
27-23 claimants; and
27-24 (3) payments for claims based on judgments against any
27-25 one licensee may not exceed an aggregate of $20,000 until the fund
28-1 has been reimbursed by the license holder for all amounts paid.
28-2 (p) This section does not limit the authority of the
28-3 commissioner to take disciplinary action against a license holder
28-4 for a violation of this section or the rules of the commissioner.
28-5 The repayment in full of all obligations to the employee leasing
28-6 recovery fund by a license holder does not nullify or modify the
28-7 effect of any other disciplinary proceeding brought under this
28-8 section.
28-9 (q) A person who receives a payment from the employee
28-10 leasing recovery fund under Subsection (g) or (h) of this section
28-11 under an order of a court of competent jurisdiction is entitled to
28-12 receive reasonable attorney fees as determined by the court,
28-13 subject to the limits provided by Subsection (o) of this section.
28-14 (r) The commission may attempt to recover from the license
28-15 holder any sums paid to claimants from the employee leasing
28-16 recovery fund. Any sums recovered by the commission shall be
28-17 deposited to the credit of the fund.
28-18 (s) The department shall act as manager of the employee
28-19 leasing recovery fund. The department shall handle the
28-20 administrative duties of the fund, keep the books and records
28-21 required by the commission, cause appearances to be entered in
28-22 hearings or judicial proceedings as necessary to protect the fund
28-23 from spurious or unjust claims and to assure compliance with the
28-24 requirements for recovery under this section, pay claims, and
28-25 invest and reinvest the fund's assets as directed by the
29-1 commission. The department may recover its reasonable and
29-2 necessary costs and expenses for the management of the fund;
29-3 however, those costs may only be paid from the interest earnings of
29-4 the fund.
29-5 (t) Neither the employee leasing recovery fund nor the
29-6 commission is liable to any person for recovery if the fund does
29-7 not contain the assets necessary to pay the amounts awarded by an
29-8 order of the court. If the fund does not have sufficient assets to
29-9 pay the person, the department shall record the time and date of
29-10 receipt of the order by a court for payment. As funds become
29-11 available, the commission shall pay persons with unpaid orders by
29-12 time and date of the court order.
29-13 SECTION 12. CIVIL PENALTY. (a) A person who engages in the
29-14 business of an employee leasing entity without having a license
29-15 under this Act is liable for a civil penalty not to exceed $10,000
29-16 for each day that the unlicensed activities continue. A civil
29-17 penalty under this subsection is in addition to those sanctions and
29-18 penalties imposed under Article 9100, Revised Statutes. The
29-19 attorney general shall bring an action in a court of competent
29-20 jurisdiction to collect a civil penalty assessed under this
29-21 section.
29-22 (b) One-half of a civil penalty collected under this section
29-23 shall be deposited in the employee leasing recovery fund under
29-24 Section 11 of this Act.
29-25 SECTION 13. CRIMINAL PENALTY. (a) A person commits an
30-1 offense if the person knowingly violates any provision of this Act.
30-2 (b) An offense under this section is a Class A misdemeanor.
30-3 SECTION 14. EFFECTIVE DATE; TRANSITION. (a) Except as
30-4 provided by Subsections (b) and (c) of this section, this Act takes
30-5 effect September 1, 1993.
30-6 (b) A person is not required to hold a license under Section
30-7 2 of this Act until March 1, 1994.
30-8 (c) The commissioner of licensing and regulation and the
30-9 Texas Employment Commission shall adopt rules as necessary to
30-10 implement this Act not later than December 31, 1993.
30-11 (d) Section 11 of this Act does not apply to and a person
30-12 may not recover against the employee leasing recovery fund as a
30-13 result of any claim against a license holder resulting from a cause
30-14 of action arising before March 1, 1994.
30-15 SECTION 15. EMERGENCY. The importance of this legislation
30-16 and the crowded condition of the calendars in both houses create an
30-17 emergency and an imperative public necessity that the
30-18 constitutional rule requiring bills to be read on three several
30-19 days in each house be suspended, and this rule is hereby suspended.