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.