By: Nixon S.B. No. 785
97S0561/1
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the regulation of certain staff leasing services;
1-2 providing penalties.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 91.001, Labor Code, is amended to read as
1-5 follows:
1-6 Sec. 91.001. DEFINITIONS. In this chapter:
1-7 (1) "Applicant" means a business entity applying for a
1-8 license or the renewal of a license under this chapter.
1-9 (2) "Assigned employee" means a full-time employee
1-10 whose normal work week is at least 25 hours and whose work is
1-11 performed in this state. The term does not include an employee
1-12 hired to support or supplement a client company's work force in a
1-13 special work situation, including:
1-14 (A) an employee absence;
1-15 (B) a temporary skill shortage;
1-16 (C) a seasonal workload; or
1-17 (D) a special assignment or project.
1-18 (3) "Client company" means a person that contracts
1-19 with a license holder and is assigned employees by the license
1-20 holder under that contract.
1-21 (4) "Commission" means the Texas Commission of
1-22 Licensing and Regulation.
1-23 (5) "Commissioner" means the commissioner of licensing
2-1 and regulation.
2-2 (6) "Common ownership" means a direct or indirect
2-3 ownership interest in excess of 33-1/3 percent, including ownership
2-4 through subsidiaries and affiliates.
2-5 (7)(A) "Controlling person" means:
2-6 (i) any [(A) an] officer or director of
2-7 the applicant or license holder if the applicant or license holder
2-8 is a corporation but not a public company [that offers or proposes
2-9 to offer staff leasing services, a shareholder holding 10 percent
2-10 or more of the voting stock of a corporation that offers or
2-11 proposes to offer staff leasing services, or a partner of a
2-12 partnership that offers or proposes to offer staff leasing
2-13 services];
2-14 (ii) those members, managers, or officers
2-15 of the applicant or license holder vested with authority to manage
2-16 the business of the company by the articles of organization or
2-17 company regulations if the applicant or license holder is a limited
2-18 liability company;
2-19 (iii) a general or limited partner of the
2-20 applicant or license holder vested with authority to manage the
2-21 business of the partnership by the partnership agreement if the
2-22 applicant or license holder is a partnership;
2-23 (iv) a person with an ownership interest
2-24 in the applicant or license holder if the applicant or license
2-25 holder is a proprietorship; or
3-1 (v) any officer of the applicant or
3-2 license holder who has direct management responsibility for the
3-3 staff leasing operations of the applicant or license holder in this
3-4 state if the applicant or license holder is a publicly-held
3-5 corporation.
3-6 (B) "Controlling person" does not include an
3-7 officer, director, stockholder, partner, member, manager, or owner
3-8 of a parent company, or any other person related to an applicant or
3-9 license holder through common ownership or common management [or]
3-10 [(B) an individual who directly or indirectly
3-11 has the power to direct or cause the direction of the management or
3-12 policies of a company that offers or proposes to offer staff
3-13 leasing services through:]
3-14 [(i) the ownership of voting securities;]
3-15 [(ii) contract; or]
3-16 [(iii) another means].
3-17 (8) [(7)] "Department" means the Texas Department of
3-18 Licensing and Regulation.
3-19 (9) [(8)] "Independent contractor" means a person who
3-20 contracts to perform work or provide a service for the benefit of
3-21 another and who:
3-22 (A) is paid by the job, not by the hour or some
3-23 other time-measured basis;
3-24 (B) is free to hire as many helpers as the
3-25 person desires and to determine what each helper will be paid; and
4-1 (C) is free to work for other contractors, or to
4-2 send helpers to work for other contractors, while under contract to
4-3 the hiring employer.
4-4 (10) [(9)] "License holder" means a person licensed
4-5 under this chapter to provide staff leasing services.
4-6 (11) "Net worth" means the assets minus the
4-7 liabilities as shown on either the applicant's financial statement
4-8 or the applicant's most recent federal tax return, plus the sum of
4-9 any other guarantees, letters of credit, or securities which may be
4-10 submitted to the department [(10) "Public company" means a
4-11 corporation whose shares are listed on the New York Stock Exchange
4-12 and that has total assets that exceed $1 billion].
4-13 (11) "Self-insurance" does not mean an arrangement
4-14 under which an applicant or license holder obtains an insurance
4-15 policy with a deductible and the insurer is liable to any claimant,
4-16 such as an assigned employee, for the full amount of each claim to
4-17 the extent of maximum policy benefits and subject to any deductible
4-18 required under the terms of the policy to be paid by the assigned
4-19 employee.
4-20 (12) "Staff leasing services" means an arrangement by
4-21 which employees of a license holder are assigned to work at a
4-22 client company and in which employment responsibilities are defined
4-23 between the employee leasing company [in fact shared by the license
4-24 holder] and the client company[, the employee's assignment is
4-25 intended to be of a long-term or continuing nature, rather than
5-1 temporary or seasonal in nature, and a majority of the work force
5-2 at a client company worksite or a specialized group within that
5-3 work force consists of assigned employees of the license holder].
5-4 The term does not include services provided by:
5-5 (A) a temporary help service;
5-6 (B) an independent contractor;
5-7 (C) one person solely to other persons related
5-8 by bona fide common ownership, provided that the ownership was not
5-9 acquired solely or primarily to meet the exception provided by this
5-10 paragraph [a public company or any other person in which that
5-11 public company has a direct or indirect ownership interest in
5-12 excess of 33-1/3 percent, including ownership through subsidiaries
5-13 and affiliates]; or
5-14 (D) a temporary common worker employer as
5-15 defined by Chapter 92.
5-16 (13) [(12)] "Staff leasing services company" means a
5-17 business entity that offers staff leasing services.
5-18 (14) [(13)] "Temporary employee" means an employee
5-19 hired for a temporary help service.
5-20 (15) [(14)] "Temporary help service" means an
5-21 arrangement by which an organization hires its own employees and
5-22 assigns them to a client to support or supplement the client's work
5-23 force in a special work situation, including:
5-24 (A) an employee absence;
5-25 (B) a temporary skill shortage;
6-1 (C) a seasonal workload; or
6-2 (D) a special assignment or project.
6-3 SECTION 2. Subsection (a), Section 91.013, Labor Code, is
6-4 amended to read as follows:
6-5 (a) The department shall conduct a thorough background
6-6 investigation, on receipt of an original application, of each
6-7 individual applicant and of each controlling person of each
6-8 applicant to determine whether that applicant or controlling person
6-9 is qualified under this chapter. The department may deny an
6-10 application for the issuance or renewal of a license if the
6-11 department finds that a controlling person is not qualified under
6-12 this chapter. The investigation may [must] include:
6-13 (1) for an original application, the submission of
6-14 fingerprints for processing through appropriate local, state, and
6-15 federal law enforcement agencies; and
6-16 (2) examination by the department of police or other
6-17 law enforcement records maintained by local, state, or federal law
6-18 enforcement agencies.
6-19 SECTION 3. Subsection (d), Section 91.014, Labor Code, is
6-20 amended to read as follows:
6-21 (d) A document submitted to establish net worth must show
6-22 the net worth on a date not earlier than six months before the date
6-23 on which the application is submitted. A document submitted to
6-24 establish net worth must be prepared or certified by an independent
6-25 certified public accountant.
7-1 (e) Information or records submitted to a governmental body,
7-2 as defined in Chapter 552, Government Code, regarding or concerning
7-3 the [supplied about] net worth or financial condition, including
7-4 copies of federal tax returns or financial statements, of an
7-5 applicant or license holder are [is] proprietary and confidential
7-6 records within the meaning of Chapter 552, Government Code. All
7-7 disclosures of information submitted to a governmental body
7-8 pursuant to this chapter are governed by Chapter 552, Government
7-9 Code, including disclosures to a governmental body [and is exempt
7-10 from disclosure to persons other than other governmental agencies
7-11 having a reasonable, legitimate purpose for obtaining the
7-12 information].
7-13 SECTION 4. Section 91.015, Labor Code, is amended by
7-14 amending Subsections (c) and (d) and adding Subsections (e) and (f)
7-15 to read as follows:
7-16 (c) If an application is denied, a license revoked, or a
7-17 license not renewed, the applicant or former license holder may
7-18 apply for a new license at any time. The department shall take
7-19 into consideration the extent to which the causes for the prior
7-20 denial, revocation, or nonrenewal have been corrected [An applicant
7-21 or license holder is ineligible for a license for two years after
7-22 the date of a final department action on the denial or revocation
7-23 of a license applied for or issued under this chapter. This
7-24 restriction does not apply to a denial or revocation of a license
7-25 because of:]
8-1 [(1) an inadvertent error or omission in the
8-2 application if that error or omission is promptly corrected;]
8-3 [(2) insufficient experience documented to the
8-4 department at the time of the previous application; or]
8-5 [(3) the inability of the department to complete the
8-6 criminal background investigation required under Section 91.013
8-7 because of insufficient information received from a local, state,
8-8 or federal law enforcement agency].
8-9 (d) Any order of the department denying, revoking, or not
8-10 renewing a license because of the alleged unsuitability of a
8-11 controlling person shall provide that the applicant or license
8-12 holder may avoid the action by removing such person as a
8-13 controlling person. Removal, demotion, or discharge of a
8-14 controlling person in response to an order of the department shall
8-15 be an affirmative defense to any claim by the controlling person
8-16 based on such removal, demotion, or discharge [An applicant or
8-17 license holder is ineligible for a license for one year after the
8-18 date of a final department action on the denial or revocation of a
8-19 license applied for or issued under this chapter if the reason for
8-20 the denial or revocation was that one or more of the controlling
8-21 persons affiliated with the applicant or license holder was
8-22 determined by the department to be unsuitable and each unsuitable
8-23 controlling person has in fact ceased to be a controlling person of
8-24 the applicant or license holder].
8-25 (e) The department shall by rule require applicants or
9-1 license holders to disclose to the department the identity of
9-2 persons affiliated with the applicant or license holder, or
9-3 affiliated with a parent or related company of the applicant or
9-4 license holder, who are officers, directors, or stockholders owning
9-5 10 percent or more of the stock, or partners with 10 percent or
9-6 more equity ownership but are not controlling persons within the
9-7 meaning of this chapter. The department shall by rule promulgate
9-8 standard forms for the disclosure of such persons. In specific
9-9 cases, the department may for good cause require one or more such
9-10 persons to submit to the background investigation required of
9-11 controlling persons under this chapter.
9-12 (f) An applicant or license holder shall disclose to the
9-13 department the addition of any new controlling person not later
9-14 than the 30th day after the person assumes the duties of a
9-15 controlling person. The person may serve as a controlling person
9-16 while the department is conducting any necessary investigations.
9-17 If the department proposes to disapprove of the new controlling
9-18 person, the department shall notify the applicant or license holder
9-19 and the controlling person prior to taking action against the
9-20 applicant or license holder.
9-21 SECTION 5. Section 91.016, Labor Code, is amended to read as
9-22 follows:
9-23 Sec. 91.016. LICENSE ISSUANCE; TERM. (a) The department
9-24 shall issue a license to any [an] applicant who meets [determined
9-25 to meet] the requirements of this chapter. The department shall
10-1 issue or renew the license not later than the 60th [90th] day after
10-2 the date on which substantially complete [the completed]
10-3 application forms are [is] filed with the department. The
10-4 department shall promptly notify an applicant of any deficiencies
10-5 in its application.
10-6 (b) An applicant or license holder who has submitted a new
10-7 or renewal application to the department shall be treated as a
10-8 license holder for the purposes of this chapter until the
10-9 department acts on the application.
10-10 (c) A license issued by the department under this chapter is
10-11 valid for two years [one year].
10-12 (d) The department shall renew a license on receipt of a
10-13 completed renewal application form [approved by the department] and
10-14 the payment of a license [the required] renewal fee [fees].
10-15 Background investigations for controlling persons shall not be
10-16 required for the renewal of a license. The department's evaluation
10-17 of a renewal application shall be limited to determining whether
10-18 there have been any material changes in the information supplied in
10-19 connection with the original license application. The license of a
10-20 license holder who applies for renewal more than 90 days prior to
10-21 the expiration date of the license shall be valid until the 90th
10-22 day after the department acts on the application for renewal.
10-23 (e) The department may exchange information concerning
10-24 applicants, license holders, or controlling persons with staff
10-25 leasing licensing authorities in other states for the purpose of
11-1 reciprocal licensing. Issuance of a license on a reciprocal basis
11-2 shall not require background investigations of persons or entities
11-3 previously evaluated for licensing in another state.
11-4 SECTION 6. Section 91.019, Labor Code, is amended to read as
11-5 follows:
11-6 Sec. 91.019. LIMITED LICENSE. (a) The department shall
11-7 [Commissioner] by rule [shall] provide for the issuance of a
11-8 limited license for a person who offers limited staff leasing
11-9 services in this state and is primarily engaged in offering staff
11-10 leasing services in another state. The principal place of business
11-11 of a person offering staff leasing services and who applies for a
11-12 license under this section must be located in a state other than
11-13 this state.
11-14 (b) For purposes of this section, a person offers limited
11-15 staff leasing services if the person employs fewer than 30 [20]
11-16 assigned employees at any time within this state.
11-17 (c) Applicants for a limited license shall complete
11-18 application forms provided by the department. Neither background
11-19 investigation nor fingerprints shall be routinely required for the
11-20 issuance or renewal of a limited license. Applicants for a limited
11-21 license and license holders holding a limited license are not
11-22 subject to Section 91.014(a). A limited license shall be valid for
11-23 a period of one year and may be renewed annually on submission of a
11-24 renewal application.
11-25 (d) Except as otherwise provided in this section, a [A]
12-1 person holding or applying for a limited license shall [offering
12-2 limited staff leasing services must] comply with all provisions of
12-3 this chapter with respect to [those] services performed within this
12-4 state.
12-5 SECTION 7. Section 91.021, Labor Code, is amended by
12-6 amending Subsections (a) and (d) and adding Subsections (e) and (f)
12-7 to read as follows:
12-8 Sec. 91.021. Disciplinary Procedures; Reinstatement.
12-9 (a) On a finding that an applicant or a license holder has
12-10 violated [a ground for disciplinary action exists under] one or
12-11 more provisions of Section 91.020(a), the department may:
12-12 (1) deny an application for a license;
12-13 (2) revoke, restrict, or refuse to renew a license;
12-14 (3) impose an administrative penalty in an amount not
12-15 less than $500 [$1,000 for each violation,] but not more than
12-16 $50,000;
12-17 (4) issue a reprimand; or
12-18 (5) place the license holder on probation for the
12-19 period and subject to conditions that the department specifies.
12-20 (d) If a license is revoked or renewal is denied, the
12-21 affected license holder may request a reinstatement hearing at any
12-22 time. The license holder shall bear the burden of proof to
12-23 establish that the cause for the revocation or denial of the
12-24 license has been corrected [after a minimum of one year]. The
12-25 department shall take into consideration the extent to which the
13-1 causes [may reinstate or renew the license only if the cause] of
13-2 the revocation or nonrenewal have [has] been corrected.
13-3 (e) Prior to taking disciplinary action against an
13-4 applicant, license holder, or controlling person, the department
13-5 shall notify the applicant or license holder and all affected
13-6 controlling persons in detail of the specific reasons for the
13-7 proposed action and provide an opportunity for the applicant or
13-8 license holder and all controlling persons to cure the alleged
13-9 violations.
13-10 (f) In any action to deny, revoke, or not renew a license or
13-11 to take other disciplinary action, the department shall bear the
13-12 burden of proof to establish that the applicant or license holder
13-13 does not meet the requirements of this chapter.
13-14 SECTION 8. Section 91.032, Labor Code, is amended to read as
13-15 follows:
13-16 Sec. 91.032. Contract Requirements. (a) A contract between
13-17 a license holder and a client company must provide that the license
13-18 holder:
13-19 (1) [reserves the right of direction and control over
13-20 employees assigned to a client's worksites;]
13-21 [(2)] assumes responsibility for the payment of wages
13-22 to the assigned employees [without regard to payments by the client
13-23 to the license holder];
13-24 (2) [(3)] assumes administrative responsibility for
13-25 the payment of payroll taxes and collection of taxes from payroll
14-1 on assigned employees;
14-2 (3) reserves a [(4) retains the] right to hire, fire,
14-3 discipline, and reassign the assigned employees; and
14-4 (4) reserves a contractual right [(5) retains the
14-5 right of direction and control] over the adoption of employment and
14-6 safety policies and the management of workers' compensation claims,
14-7 claim filings, and related procedures.
14-8 (b) Notwithstanding any other provision of this chapter, a
14-9 client company is responsible for the exercise of direction and
14-10 control over the assigned employees as is necessary to conduct the
14-11 business of the client and without which the client would be unable
14-12 to conduct its business, discharge any fiduciary responsibility
14-13 that it may have, or comply with any licensure, regulatory, or
14-14 statutory requirements applicable to the client. Notwithstanding
14-15 any other provision of this chapter, a client company is
14-16 responsible for the exercise of direction and control over the
14-17 details of the daily work performed by the assigned employees. A
14-18 client company is solely responsible for the goods and services
14-19 produced by the client and the acts or omissions of the assigned
14-20 employees.
14-21 SECTION 9. Subsections (b) and (c), Section 91.041, Labor
14-22 Code, are amended to read as follows:
14-23 (b) With respect to any insurance provided by a license
14-24 holder for the benefit of its assigned employees, a [Each] license
14-25 holder shall disclose the following information to the department,
15-1 to each client company, and to its assigned employees [information
15-2 relating to any insurance or benefit plan provided for the benefit
15-3 of its assigned employees. The information must include]:
15-4 (1) the type of coverage;
15-5 (2) the identity of each insurer for each type of
15-6 coverage;
15-7 (3) the amount of benefits provided for each type of
15-8 coverage and to whom or in whose behalf benefits are to be paid;
15-9 (4) the policy limits on each insurance policy; and
15-10 (5) whether the coverage is fully insured, partially
15-11 insured, or fully self-funded.
15-12 (c) The department [commissioner] by rule may require a
15-13 license holder to file other reports that are reasonably necessary
15-14 for the implementation of this chapter.
15-15 SECTION 10. Subsections (b), (c), (d), and (e), Section
15-16 91.042, Labor Code, are amended to read as follows:
15-17 (b) If a license holder maintains a policy of workers'
15-18 compensation insurance provided by the Texas Workers' Compensation
15-19 Insurance Fund, the license holder shall pay workers' compensation
15-20 insurance premiums based on the experience rating of the client
15-21 company for the first two years the client company has a contract
15-22 with the license holder and as further provided by rule by the
15-23 Texas Department of Insurance.
15-24 (c) [For workers' compensation insurance purposes, a license
15-25 holder and the license holder's client company shall be
16-1 coemployers.] If a license holder elects to obtain workers'
16-2 compensation insurance, the client company and the license holder
16-3 are subject to Sections 406.034 and 408.001. Accordingly, the
16-4 client company is afforded the same protection of exclusive remedy
16-5 as the license holder.
16-6 (d) If a license holder does not elect to obtain workers'
16-7 compensation insurance, both the license holder and the client
16-8 company are subject to Sections 406.004 and 406.033 except when a
16-9 client company elects to obtain a workers' compensation policy on
16-10 its own employees not assigned by the license holder. Any policy
16-11 of workers' compensation issued to the client company for its own
16-12 employees shall cover only those unassigned employees and shall not
16-13 extend to those employees assigned to the client company by the
16-14 license holder.
16-15 (e) After the expiration of the two-year period under
16-16 Subsection (b), if the client company obtains a new workers'
16-17 compensation insurance policy provided by the Texas Workers'
16-18 Compensation Insurance Fund in the company's own name or adds the
16-19 company's former assigned workers to an existing policy, the
16-20 premium for the workers' compensation insurance policy of the
16-21 company shall be based on the lower of:
16-22 (1) the experience modifier of the company before
16-23 entering into the staff leasing arrangement; or
16-24 (2) the experience modifier of the license holder at
16-25 the time the staff leasing arrangement terminated.
17-1 SECTION 11. Subsection (a), Section 91.043, Labor Code, is
17-2 amended to read as follows:
17-3 (a) An applicant or a [A] license holder may [not] sponsor a
17-4 plan of self-insurance for health benefits except as permitted by
17-5 the Employee Retirement Income Security Act of 1974 (29 U.S.C.
17-6 Section 1001 et seq.).
17-7 SECTION 12. Subsection (a), Section 91.044, Labor Code, is
17-8 amended to read as follows:
17-9 (a) An applicant or [A] license holder is the employer of an
17-10 assigned employee for purposes of Subtitle A, Title 4, and Chapter
17-11 61. In addition to any other reports required to be filed by law,
17-12 a license holder shall report quarterly to the Texas Employment
17-13 Commission on a form prescribed by the Texas Employment Commission
17-14 the name, address, telephone number, federal income tax
17-15 identification number, and classification code as described in the
17-16 "Standard Industrial Classification Manual" published by the United
17-17 States Office of Management and Budget of each client company.
17-18 SECTION 13. Section 91.048, Labor Code, is amended to read
17-19 as follows:
17-20 Sec. 91.048. Required Information. Each license holder
17-21 shall:
17-22 (1) maintain adequate books and records regarding the
17-23 license holder's duties and responsibilities;
17-24 (2) maintain and make available at all times to the
17-25 commissioner the following information, which shall be treated as
18-1 proprietary and confidential and is exempt from disclosure to
18-2 persons other than other governmental agencies having a reasonable,
18-3 legitimate purpose for obtaining the information:
18-4 (A) the correct name, address, and telephone
18-5 number of each client company;
18-6 (B) each client company contract; and
18-7 (C) a listing by classification code as
18-8 described in the "Standard Industrial Classification Manual"
18-9 published by the United States Office of Management and Budget of
18-10 each client company;
18-11 (3) notify the department of any addition or deletion
18-12 of a controlling person as listed on the license application or
18-13 renewal form by providing the name of the person not later than the
18-14 30th day after the date on which the person is added or deleted as
18-15 a controlling person; and
18-16 (4) provide a notarized biographical history to the
18-17 department in connection with the proposed addition of a new
18-18 controlling person.
18-19 SECTION 14. Any staff leasing services license issued prior
18-20 to the effective date of this Act shall expire two years from the
18-21 original issue date. The Texas Department of Licensing and
18-22 Regulation shall issue replacement licenses with the correct
18-23 expiration date.
18-24 SECTION 15. This Act takes effect September 1, 1997.
18-25 SECTION 16. The importance of this legislation and the
19-1 crowded condition of the calendars in both houses create an
19-2 emergency and an imperative public necessity that the
19-3 constitutional rule requiring bills to be read on three several
19-4 days in each house be suspended, and this rule is hereby suspended.