NDT C.S.H.B. 1465 75(R) BILL ANALYSIS LICENSING & ADMINISTRATIVE PROCEDURES C.S.H.B. 1465 By: Haggerty 4-1-97 Committee Report (Substituted) BACKGROUND The staff leasing industry became a regulated industry in Texas in 1993. Licensing of staff leasing services companies is administered by the Department of Licensing and Regulation. PURPOSE C.S.H.B. 1465 amends the original legislation to clarify certain provisions and update the law to coincide with changes in the industry since 1993. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 91.001, Labor Code (Definitions) by amending definitions of "assigned employee", "controlling person", "staff leasing services", and "temporary help service". Adds definitions of "common ownership", "governmental entity", "offer", and "net worth". Deletes definitions of "public company" and "temporary employee". SECTION 2. Amends Sections 91.002(a) and (c), Labor Code (Rules) by deletes requirement that Department adopt specific rules Provides that, notwithstanding any other provision of Chapter 91, Chapter 91 does not preempt the authority of any other state agency to regulate staff leasing services. SECTION 3. Amends Section 91.003(b), Labor Code (Interagency Cooperation) by changing the reference to Texas Employment Commission to Texas Workforce Commission. SECTION 4. Adds Section 91.004(c), Labor Code (Effect of Other Law on Clients and Employees) by providing that a license holder is not engaged in the unauthorized practice of a regulated profession when entering into an agreement with a client company and its assigned employees. SECTION 5. Amends Section 91.012, Labor Code (General License Requirements) by deleting the reference to and definition of the vague standard of "good moral character" as it relates to the qualification of a controlling person. SECTION 6. Amends Section 91.013(a), Labor Code (Background Investigations) by requiring background investigations for original license applications only. SECTION 7. Amends Sections 91.014(b) and (d), Labor Code (Net Worth Requirements) by permitting the use of a bond, in addition to guarantees, letters of credit or other securities, to satisfy net worth requirements. Requires documents submitted to establish net worth to be prepared no earlier than nine, rather than six, months prior to submission to the Department. Provides that information submitted to the Department is subject to the open records act, except information relating to client company identities, net worth, financial statements and federal tax returns. SECTION 8. Amends Section 91.015, Labor Code (License Application) by requiring the Department to require an applicant for a license to provide information necessary to determine if the applicant meets the licensing requirements. Requires the Department to provide written notice to an applicant detailing the basis for denying a license prior to denial of a license. Deletes specific language relating to denial or revocation of licenses since those Department actions will be governed by the Department's general administrative penalty authority. Allows an applicant or license holder the opportunity to remove an unsuitable controlling person in order to avoid a negative Department ruling regarding the unsuitability of that person. Provides that the Department is not required to reevaluate a controlling person if that person changes employment from one license holder to another. SECTION 9. Amends Section 91.016, Labor Code (License Issuance; Term) by requiring the Department to notify an applicant within 30 days of any deficiencies in their application. Allows for a two-year, instead of one year, license and doubles the maximum license fee. Requires an applicant or licenser holder to disclose to the Department the addition of a new controlling person no later than 45 days after that person assumes that position. Requires the Department to notify the applicant or license holder within 20 days if the Department intends not to approve that person. SECTION 10. Amends Section 91.017(a), Labor Code (Fees) by changing the one-year license term to a two-year license term and doubles the maximum license fee from $3000 to $6000. SECTION 11. Adds Sections 91.018(d), (e) and (f), Labor Code (License Not Assignable; Change of Name or Location) to allow use of trade names, trade marks, service marks or parent company names in advertising, proposals, contracts and other written materials. SECTION 12. Amends Section 91.019, Labor Code (Limited License) by revising the basis for issuance of limited licenses. SECTION 13. Amends Section 91.020(a), Labor Code (Grounds for Disciplinary Action) by adding the ground of offering staff leasing services without a license. SECTION 14. Amends Section 91.021, Labor Code (Disciplinary Procedures, Reinstatement) by requiring the use of administrative sanctions by the Department authorized under Article 9100. V.T.C.S. and deleting the specific sanctions currently in Chapter 91. SECTION 15. Adds Section 91.031(c), Labor Code (Agreement; Notice) by requiring that the written notice required to be given to assigned employees informing them of the staff leasing services agreement be given to them no later than the first pay day after those individual become assigned employees. SECTION 16. Amends Section 91.032, Labor Code (Contract Requirements) by revising contract requirements to state that the staff leasing services company retains a, not the, right of direction and control and right to hire, fire, discipline and reassign employees. Provides that a client company is responsible for direction and control over an assigned employee to the extent necessary to conduct the business of the client company. Provides that a client company is solely responsible for the goods and services produced by the client company. SECTION 17. Amends Section 91.041(b), Labor Code (Employee Benefit Plans; Required Disclosure; Other Reports) by clarifying the wording as it relates to disclosures of benefit plans to assigned employees. SECTION 18. Amends Section 91.044, Labor Code (Unemployment Taxes; Payroll) by changing the reference to the Texas Employment Commission to the Texas Workforce Commission. Deletes a redundant notification requirement. SECTION 19. Amends Section 91.048, Labor Code (Require Information) by deleting the requirement that controlling person biographies be notarized. SECTION 20. Amends Section 91.061, Labor Code (Prohibited Acts) by creating an offense for offering staff leasing services without a license and using the terms "professional employer organization" or "administrative employer" without a license. SECTION 21. Adds Section 201.030, Labor Code, (Staff Leasing Services Company) by defining a staff leasing services company as defined by Section 91.001, Labor Code. SECTION 22. Adds Section 207.045(i), Labor Code to treat staff leasing services companies in the same manner as temporary help services company for the purposes of unemployment compensation. SECTION 23. Provides that Chapter 91, Labor Code, applies only to licenses issued or renewed after the effective date of the Act. SECTION 24. Provides that Section 207.045(i) as amended applies only to a claim for unemployment benefits filed on or after the effective date of the Act. SECTION 25. Creates September 1, 1997 effective date. SECTION 26. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE H.B. 1465 lowered the level of regulation from licensure to registration. In doing so, H.B. 1465 also deleted the requirement for background investigations for controlling persons; deleted net worth requirements; reduced the maximum fee to from $3000 to $1000; deleted the limited license provision; changed the ground of "engaging" in staff leasing services without a license to "performing" staff leasing services without a certificate of registration; reduced the minimum administrative penalty from $1000 to $500; revised contract requirements by removing the requirements that a staff leasing services company retain the right of direction and control over assigned employees and that a staff leasing services company be required to pay wages to assigned employees regardless of payment to the staff leasing services company by the client company; provided that a staff leasing services company assume administrative, not general responsibility for payment and collection of payroll; provided that a staff leasing services company reserves, rather than retains, a contractual right, rather than the right of direction and control, over employment policies; provided that if a staff leasing services company maintained a policy provided by the Texas Worker's Compensation Insurance Fund, that the staff leasing services company pay premium based on the experience rating of the client company for the first two years; deleted the provision that a staff leasing services company and client company be coemployers for the purposes of workers' compensation; provided that a client company be protected by exclusive remedy if the staff leasing company maintain workers' compensation insurance coverage only for its non-assigned employees; and deleted language that allowed plans for self-insurance if permitted under ERISA.