By: Harris, O. H. "Ike" S.B. No. 592
73R3932 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 10 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 responsibilities are in fact shared by the
2-20 licensee and the client company, the employee's assignment is
2-21 intended to be of a long-term or continuing nature, rather than
2-22 temporary or seasonal in nature, and a majority of the work force
2-23 at a client company work site or a specialized group within that
2-24 work force consists of assigned employees of the licensee. The
2-25 term 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 Section 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 10 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 work force in special
3-16 work situations such as employee absences, temporary skill
3-17 shortages, seasonal work loads, or special assignments and
3-18 projects.
3-19 SECTION 2. STAFF LEASING SERVICES ADVISORY COMMITTEE. (a)
3-20 The Staff Leasing Services Advisory Committee is created within the
3-21 department. The advisory committee consists of five members
3-22 appointed by the commissioner.
3-23 (b) Three members shall be appointed to represent the staff
3-24 leasing services industry and shall be chosen from individuals who
3-25 are affiliated with persons eligible for a license under this Act.
3-26 An industry representative may not be associated with the same
3-27 staff leasing services company or staff leasing services group as
4-1 another industry representative.
4-2 (c) One member shall be appointed to represent the interest
4-3 of client companies and must be an owner, officer, director, or
4-4 management employee of a client company. The client company
4-5 representative may not be a client of a staff leasing services
4-6 company or staff leasing services group represented on the advisory
4-7 committee.
4-8 (d) One member shall be appointed to represent the public.
4-9 (e) Each member who is not representing the staff leasing
4-10 services industry must be a resident of this state.
4-11 (f) Appointments shall be made to the advisory committee
4-12 without regard to the race, color, disability, sex, religion, age,
4-13 or national origin of the appointee.
4-14 (g) A member of the advisory committee is not liable in a
4-15 civil action for any act performed in good faith in the execution
4-16 of duties as an advisory committee member.
4-17 (h) A member of the advisory committee serves a four-year
4-18 term or until a successor is appointed. If a vacancy occurs during
4-19 a term, the commissioner shall appoint a replacement to fill the
4-20 unexpired part of the term. Terms end on February 1 of the
4-21 calendar year.
4-22 (i) The advisory committee shall elect one of its members as
4-23 chairman, who shall serve in that capacity at the pleasure of the
4-24 membership of the advisory committee. The chairman may vote on all
4-25 matters before the advisory committee.
4-26 SECTION 3. RULES. (a) With the advice of the advisory
4-27 committee, the commissioner shall adopt rules as necessary to
5-1 administer this Act. The advisory committee may propose new rules
5-2 or amendments to existing rules and may submit those rules or
5-3 amendments to the commissioner for consideration and adoption.
5-4 (b) Rules shall be adopted in compliance with the
5-5 Administrative Procedure and Texas Register Act (Article 6252-13a,
5-6 Vernon's Texas Civil Statutes).
5-7 (c) Each licensee is governed and controlled by this Act and
5-8 the rules adopted by the commissioner.
5-9 SECTION 4. APPLICATION OF OTHER LAWS. The advisory
5-10 committee is subject to Chapter 271, Acts of the 60th Legislature,
5-11 Regular Session, 1967 (Article 6252-17, Vernon's Texas Civil
5-12 Statutes), and Chapter 424, Acts of the 63rd Legislature, Regular
5-13 Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes).
5-14 SECTION 5. LICENSE REQUIRED; APPLICATION. (a) A person may
5-15 not engage in or offer staff leasing services in this state without
5-16 holding a license issued under this Act.
5-17 (b) Each person that desires an original or renewal staff
5-18 leasing services company license shall file with the department a
5-19 written application accompanied by the application fee. The
5-20 commission shall set the application fee in an amount not to exceed
5-21 $250.
5-22 (c) The department may require an applicant for a license to
5-23 provide information and certifications necessary to determine that
5-24 the applicant meets the licensing requirements of this Act. The
5-25 department may also require the applicant to provide information
5-26 and certifications necessary to determine whether individuals
5-27 affiliated with the applicant are qualified to serve as controlling
6-1 persons.
6-2 (d) An application for a staff leasing services group
6-3 license under Section 10 of this Act must provide the information
6-4 required by this Act for each member of the group.
6-5 (e) An applicant or licensee is ineligible for a license for
6-6 one year after the date of final department action on the denial or
6-7 revocation of a license applied for or issued under this Act. This
6-8 restriction does not apply to a denial or revocation of a license
6-9 if the basis of the action was:
6-10 (1) an inadvertent error or omission in the
6-11 application if that error or omission is promptly corrected;
6-12 (2) that the experience documented to the department
6-13 was insufficient at the time of the previous application;
6-14 (3) that the department was unable to complete the
6-15 criminal background investigation required under Section 6 of this
6-16 Act because of insufficient information received from a local,
6-17 state, or federal law enforcement agency; or
6-18 (4) that one or more of the controlling persons
6-19 affiliated with the applicant or licensee was determined by the
6-20 department to be unsuitable, if that unsuitable controlling person
6-21 has in fact ceased to be a controlling person of the applicant or
6-22 licensee.
6-23 SECTION 6. LICENSE REQUIREMENTS. (a) To be qualified to
6-24 serve as a controlling person of a licensee under this Act, that
6-25 person must be at least 18 years of age, be of good moral
6-26 character, and have educational, managerial, or business experience
6-27 relevant to:
7-1 (1) operation of a business entity offering staff
7-2 leasing services; or
7-3 (2) service as a controlling person of a staff leasing
7-4 services company.
7-5 (b) For the purposes of this section, "good moral character"
7-6 means a personal history of honesty, trustworthiness, fairness, a
7-7 good reputation for fair dealing, and respect for the rights of
7-8 others and for the laws of this state and nation.
7-9 (c) The department shall conduct a thorough background
7-10 investigation of each individual applicant and of each controlling
7-11 person of each applicant to determine whether that applicant or
7-12 controlling person is qualified under this Act. The department may
7-13 deny an application for the issuance or renewal of a license if it
7-14 finds that a controlling person is not qualified under this Act.
7-15 The investigation must include:
7-16 (1) the submission of fingerprints for processing
7-17 through appropriate local, state, and federal law enforcement
7-18 agencies; and
7-19 (2) examination by the department of police or other
7-20 law enforcement records maintained by local, state, or federal law
7-21 enforcement agencies.
7-22 (d) Department background investigations are governed by
7-23 this Act and by Article 6252-13c and Article 6252-13d, Revised
7-24 Statutes. Conviction of a crime does not automatically disqualify
7-25 a controlling person, require the revocation of a license, or
7-26 require the denial of an application for a new or renewed license.
7-27 The department shall consider criminal convictions as provided by
8-1 Article 6252-13c and Article 6252-13d, Revised Statutes.
8-2 (e) Each licensee shall maintain a registered agent for the
8-3 service of process in this state.
8-4 (f) An applicant for an original or renewal license must
8-5 demonstrate a net worth of at least $50,000. The applicant shall
8-6 demonstrate the net worth to the department by providing the
8-7 department with the applicant's financial statement or a copy of
8-8 the applicant's most recent federal tax return. The net worth
8-9 requirement may also be satisfied through guarantees, letters of
8-10 credit, or other security acceptable to the department in a
8-11 combined total amount of at least $50,000. A guaranty is not
8-12 acceptable to satisfy this subsection unless the applicant submits
8-13 sufficient evidence to satisfy the department that the guarantor
8-14 has adequate resources to satisfy the obligations of the guaranty.
8-15 (g) A document submitted to establish net worth must reflect
8-16 the net worth as of a date not earlier than six months before the
8-17 date on which the application is submitted. A document submitted
8-18 to establish net worth must be prepared or certified by an
8-19 independent certified public accountant. Information supplied
8-20 regarding net worth, including copies of federal tax returns, is
8-21 proprietary and confidential and is exempt from disclosure to third
8-22 parties, other than to other governmental agencies with a
8-23 reasonable legitimate purpose for obtaining the information.
8-24 SECTION 7. FEES. (a) Each applicant for an original or
8-25 renewal license shall pay to the department on the issuance of the
8-26 license or license renewal a fee set by the commission by rule in
8-27 an amount not to exceed:
9-1 (1) $3,000 for a staff leasing services company
9-2 license; or
9-3 (2) $10,000 for a staff leasing services group license
9-4 issued under Section 10 of this Act.
9-5 (b) The commission by rule shall establish a sliding scale
9-6 for fees set under this Act, subject to the fee limits set by
9-7 Subsection (a) of this section. In establishing the scale, the
9-8 commission shall consider:
9-9 (1) the size of the applicant;
9-10 (2) the number of assigned employees employed by the
9-11 applicant within this state;
9-12 (3) the reasonable funding needs of the department;
9-13 and
9-14 (4) other factors considered appropriate by the
9-15 commission.
9-16 SECTION 8. STAFF LEASING SERVICES AGREEMENT. A licensee
9-17 shall establish the terms of a staff leasing services agreement by
9-18 a written contract between the licensee and the client company.
9-19 The licensee shall give written notice of the agreement as it
9-20 affects assigned employees to each employee assigned to a client
9-21 company work site.
9-22 SECTION 9. CONTRACT REQUIREMENTS; STATUS AS EMPLOYER. (a)
9-23 A contract between a licensee and a client company must provide
9-24 that the licensee:
9-25 (1) reserves the right of direction and control over
9-26 employees assigned to a client's work sites;
9-27 (2) assumes responsibility for the payment of wages to
10-1 the assigned employees without regard to payments by the client to
10-2 the licensee;
10-3 (3) assumes responsibility for the payment of payroll
10-4 taxes and collection of taxes from payroll on assigned employees;
10-5 (4) retains the right to hire, fire, discipline, and
10-6 reassign the assigned employees; and
10-7 (5) retains the right of direction and control over
10-8 the adoption of employment and safety policies and the management
10-9 of workers' compensation claims, claim filings, and related
10-10 procedures.
10-11 (b) For the purposes of the law of this state, a licensee is
10-12 the employer of the employees assigned to a client company. This
10-13 Act does not affect the rights, duties or liabilities of licensees,
10-14 client companies, or employees under federal law.
10-15 SECTION 10. GROUP LICENSE. A group of at least two but not
10-16 more than five staff leasing services companies that are
10-17 majority-owned by the same business entity may be licensed as a
10-18 staff leasing services group. A staff leasing services group may
10-19 satisfy the reporting and financial requirements of this Act on a
10-20 consolidated basis. As a condition of the issuance of a staff
10-21 leasing services group license, each person that is a member of the
10-22 group must guarantee payment of all financial obligations of each
10-23 other member of the group.
10-24 SECTION 11. LIMITED LICENSE; RECIPROCITY. (a) The
10-25 commissioner by rule shall provide for the issuance of a limited
10-26 license for a person that offers staff leasing services in this
10-27 state on a limited basis and that is primarily engaged in offering
11-1 staff leasing services in another state. The commissioner by rule
11-2 shall provide for reciprocity for a person offering staff leasing
11-3 services that is licensed in another state and primarily engaged in
11-4 business outside this state. The principal place of business of a
11-5 person offering staff leasing services that applies for a license
11-6 under this section must be located in a state other than this
11-7 state.
11-8 (b) For the purposes of this section, a person offers staff
11-9 leasing services on a limited basis if the person employs fewer
11-10 than 20 employees who are assigned to a client company.
11-11 SECTION 12. ISSUANCE AND TERM OF LICENSES. (a) The
11-12 department shall issue a license to an applicant determined to meet
11-13 the requirements of this Act. The department shall issue the
11-14 license not later than the 90th day after the date on which the
11-15 completed application is filed with the department.
11-16 (b) A license issued by the department under this Act is
11-17 valid for two years. The department shall renew a license on
11-18 receipt of a renewal application approved by the department and
11-19 payment of the required renewal fees.
11-20 SECTION 13. REQUIRED DISCLOSURE. (a) Each licensee shall
11-21 disclose to the department, each client company, and its assigned
11-22 employees information relating to any insurance or benefit plan
11-23 provided for the benefit of its assigned employees. The
11-24 information must include:
11-25 (1) the type of coverage;
11-26 (2) the identity of each insurer for each type of
11-27 coverage;
12-1 (3) the amount of benefits provided for each type of
12-2 coverage and to whom or on whose behalf benefits are to be paid;
12-3 (4) the policy limits on each insurance policy; and
12-4 (5) whether the coverage is fully insured, partially
12-5 insured, or fully self-funded.
12-6 (b) The commissioner by rule may require the filing by
12-7 licensees of other reports that are reasonably necessary to the
12-8 implementation of this Act.
12-9 SECTION 14. INSURANCE. (a) A licensee may elect to obtain
12-10 workers' compensation insurance coverage in the same manner as any
12-11 other employer. If coverage is obtained, that insurance must
12-12 comply with the applicable provisions of the Insurance Code. A
12-13 licensee is entitled to the same rights to obtain all types of
12-14 insurance coverage, including endorsements, as may be obtained by
12-15 other business entities doing business in this state.
12-16 (b) A licensee may sponsor and maintain employee benefit
12-17 plans for the benefit of assigned employees. A client company may
12-18 include assigned employees in any benefit plan sponsored by the
12-19 client company.
12-20 SECTION 15. POSTING OF LICENSE, NOTICE. (a) The
12-21 commissioner by rule shall determine the form and content of:
12-22 (1) the licenses issued under this Act; and
12-23 (2) notices required to be posted under this section.
12-24 (b) Each license issued under this Act must be posted in a
12-25 conspicuous place in the principal place of business in this state
12-26 of the licensee. Each licensee shall display, in a place that is
12-27 in clear and unobstructed public view, a notice stating that the
13-1 business operated at the location is licensed and regulated by the
13-2 department and that any questions or complaints should be directed
13-3 to the department.
13-4 SECTION 16. LICENSE NOT ASSIGNABLE; CHANGES OF NAME OR
13-5 LOCATION. (a) A licensee may not conduct business under any name
13-6 other than that specified in the license. A license issued under
13-7 this Act is not assignable. A licensee may not conduct business
13-8 under any fictitious or assumed name without prior written
13-9 authorization from the department. The department may not
13-10 authorize the use of a name that is so similar to that of a public
13-11 office or agency or to that of another licensee that the public may
13-12 be confused or misled by its use. A licensee may not conduct
13-13 business under more than one name unless it has obtained a separate
13-14 license for each name.
13-15 (b) A licensee may change its licensed name at any time by
13-16 notifying the department and paying a fee for each change of name.
13-17 The commission by rule shall set the fee for a name change in an
13-18 amount not to exceed $50. A licensee may change its name on
13-19 renewal of the license without the payment of the name change fee.
13-20 (c) A licensee must notify the department in writing of:
13-21 (1) any change in the location of its primary business
13-22 office;
13-23 (2) the addition of more business offices; or
13-24 (3) a change in the location of business records
13-25 maintained by the licensee.
13-26 SECTION 17. PROHIBITED ACTS; CRIMINAL PENALTY. (a) A
13-27 person may not:
14-1 (1) engage in staff leasing services without holding a
14-2 license under this Act as a staff leasing services company or a
14-3 staff leasing services group;
14-4 (2) use the name or title "staff leasing company,"
14-5 "employee leasing company," "licensed staff leasing company,"
14-6 "licensed staff leasing company group," or "staff leasing services
14-7 company," or otherwise represent that it is licensed under this
14-8 Act, unless the entity holds a license issued under this Act;
14-9 (3) represent as the person's own the license of
14-10 another person or represent that a person is licensed if the person
14-11 does not hold a license;
14-12 (4) give false or forged evidence to the department in
14-13 connection with obtaining or renewing a license or in connection
14-14 with disciplinary proceedings under this Act; or
14-15 (5) use or attempt to use a license which has expired
14-16 or been revoked.
14-17 (b) A person that violates Subsection (a) of this section
14-18 commits an offense. An offense under this subsection is a Class C
14-19 misdemeanor.
14-20 SECTION 18. DISCIPLINARY ACTIONS. (a) For the purposes of
14-21 this section, "conviction" includes a plea of nolo contendere or a
14-22 finding of guilt, regardless of adjudication.
14-23 (b) Disciplinary action may be taken against a licensee by
14-24 the department on any of the following grounds:
14-25 (1) the conviction of a licensee or any controlling
14-26 person of a licensee of bribery, fraud, or intentional or material
14-27 misrepresentation in obtaining, attempting to obtain, or renewing a
15-1 license;
15-2 (2) the conviction of a licensee or any controlling
15-3 person of a licensee of a crime that relates to the operation of a
15-4 staff leasing service or the ability of the licensee or any
15-5 controlling person of a licensee to operate a staff leasing
15-6 service;
15-7 (3) the conviction of a licensee or any controlling
15-8 person of a licensee of a crime that relates to the classification,
15-9 misclassification, or under-reporting of employees under the Texas
15-10 Workers' Compensation Act (Article 8308-1.01 et seq., Vernon's
15-11 Texas Civil Statutes);
15-12 (4) the conviction of a licensee or any controlling
15-13 person of a licensee of a crime that relates to the establishment
15-14 or maintenance of a self-insurance program, whether health
15-15 insurance, workers' compensation insurance, or other insurance;
15-16 (5) the conviction of a licensee or any controlling
15-17 person of a licensee of a crime that relates to fraud, deceit, or
15-18 misconduct in the operation of a staff leasing service;
15-19 (6) engaging in staff leasing services without a
15-20 license;
15-21 (7) transferring or attempting to transfer a license
15-22 issued under this Act;
15-23 (8) violating this Act or any order or rule issued by
15-24 the department or commissioner under this Act;
15-25 (9) failing to notify the department, in writing, of
15-26 the felony conviction of any controlling person not later than the
15-27 30th day after the date on which that conviction is final;
16-1 (10) failing to cooperate with an investigation,
16-2 examination, or audit of the licensee's records conducted by the
16-3 licensee's insurance company or the insurance company's designee,
16-4 as allowed by the insurance contract or as authorized by law by the
16-5 Texas Department of Insurance;
16-6 (11) failing to notify the department and the Texas
16-7 Department of Insurance not later than the 30th day after the
16-8 effective date of the change of any change in ownership, principal
16-9 business address, or the address of accounts and records;
16-10 (12) failing to correct any tax filings or payment
16-11 deficiencies within a reasonable time as determined by the
16-12 commissioner;
16-13 (13) refusing, after reasonable notice, to meet
16-14 reasonable health and safety requirements within the licensee's
16-15 control and made known to the licensee by a federal or state
16-16 agency;
16-17 (14) a delinquency in the payment of the licensee's
16-18 insurance premiums other than those subject to a legitimate
16-19 dispute;
16-20 (15) a delinquency in the payment of any employee
16-21 benefit plan premiums or contributions other than those subject to
16-22 a legitimate dispute; or
16-23 (16) knowingly making a material misrepresentation to
16-24 an insurance company or to the department or other governmental
16-25 agency.
16-26 (c) On a finding that a licensee has violated one or more
16-27 provisions of Subsection (b) of this section, the department may:
17-1 (1) deny an application for a license;
17-2 (2) revoke, restrict, or refuse to renew a license;
17-3 (3) impose an administrative penalty in an amount not
17-4 less than $1,000 per violation but not more than $50,000;
17-5 (4) issue a reprimand; or
17-6 (5) place the licensee on probation for the period and
17-7 subject to conditions that the department specifies.
17-8 (d) On revocation of a license, the licensee shall
17-9 immediately return the revoked license to the department.
17-10 (e) Disciplinary action may be taken, a denial of an
17-11 application for a new or renewal license or a revocation of a
17-12 license may be done, or a determination that a controlling person
17-13 is unqualified may be made by the department only subject to the
17-14 Administrative Procedure and Texas Register Act (Article 6252-13a,
17-15 Vernon's Texas Civil Statutes) with notice to, and an opportunity
17-16 for a hearing by, the affected applicant, licensee, or controlling
17-17 person.
17-18 (f) If a license is revoked or renewal is denied, the
17-19 affected licensee may request a reinstatement hearing after a
17-20 minimum of one year. The department may reinstate or renew the
17-21 license only if the cause of the nonrenewal or revocation has been
17-22 corrected.
17-23 SECTION 19. FEES USED FOR ADMINISTRATION. All fees
17-24 collected by the department under this Act shall be used to
17-25 implement this Act.
17-26 SECTION 20. EFFECT OF OTHER LAW. This Act does not exempt a
17-27 client of a licensee, or any assigned employee, from any other
18-1 license requirements imposed under local, state, or federal law.
18-2 An employee who is licensed, registered, or certified under law and
18-3 who is assigned to a client company is considered to be an employee
18-4 of the client company for the purpose of that license,
18-5 registration, or certification but otherwise remains the employee
18-6 of the licensee as provided in this Act.
18-7 SECTION 21. EFFECTIVE DATE; TRANSITION; INITIAL
18-8 APPOINTMENTS. (a) Except as provided by Subsection (b) of this
18-9 section, this Act takes effect September 1, 1993.
18-10 (b) A person is not required to hold a license under this
18-11 Act to provide staff leasing services until March 1, 1994.
18-12 (c) In making the initial appointments to the Staff Leasing
18-13 Services Advisory Committee, the commissioner shall appoint one
18-14 member for a term ending February 1, 1995, two members for terms
18-15 ending February 1, 1996, and two members for terms ending February
18-16 1, 1997.
18-17 SECTION 22. EMERGENCY. The importance of this legislation
18-18 and the crowded condition of the calendars in both houses create an
18-19 emergency and an imperative public necessity that the
18-20 constitutional rule requiring bills to be read on three several
18-21 days in each house be suspended, and this rule is hereby suspended.