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.