By Hilbert                                            H.B. No. 1184
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the regulation of staff leasing services
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Subsections (14) and (15), Section 91.001, Labor
 1-5     Code, are amended to read as follows:
 1-6                 (14)  "Staff leasing services" means an arrangement by
 1-7     which employees of a license holder are assigned to work at a
 1-8     client company and in which employment responsibilities are in fact
 1-9     shared by the license holder and the client company, the employee's
1-10     assignment is intended to be of a long-term or continuing nature,
1-11     rather than temporary or seasonal in nature, and a majority of the
1-12     work force consists of assigned employees of the license holder.
1-13     The term includes professional employer organization services and
1-14     PEO services.  The term does not include:
1-15                       (A)  temporary help;
1-16                       (B)  an independent contractor;
1-17                       (C)  the provision of services that otherwise
1-18     meet the definition of "staff leasing services" by one person
1-19     solely to other persons who are related to the service provider by
1-20     common ownership; or
1-21                       (D)  a temporary common worker employer as
 2-1     defined by Chapter 92.
 2-2                 (15)  "Staff leasing services company" means a business
 2-3     entity that offers staff leasing services.  The term also includes
 2-4     a professional employer organization or PEO.
 2-5           SECTION 2.  Section 91.002(b), Labor Code, is amended to read
 2-6     as follows:
 2-7           (b)  [Each license holder is] All entities offering staff
 2-8     leasing services are subject to this chapter and the rules adopted
 2-9     by the commissioner.
2-10           SECTION 3.  Section 91.004, Labor Code, is amended by adding
2-11     Subsections (d) and (e) to read as follows:
2-12           (d)  With respect to any bid, contract, purchase order, or
2-13     agreement entered into with this state or any political subdivision
2-14     of this state, a client company of a licensed staff leasing
2-15     services company does not affect its own status or certification as
2-16     a small, minority owned, disadvantaged or woman owned business
2-17     enterprise or a historically underutilized business if the client
2-18     company enters into an agreement with a licensed staff leasing
2-19     services company or utilizes the services of a licensed staff
2-20     leasing services company.
2-21           (e)  A certificate of insurance evidencing coverage under a
2-22     policy of workers' compensation insurance held by a licensed staff
2-23     leasing services company shall be proof of workers' compensation
2-24     coverage for the licensed staff leasing services company and its
2-25     client company for all assigned employees.  The state and all
 3-1     political subdivisions of this state shall accept a certificate of
 3-2     insurance evidencing coverage maintained by a licensed staff
 3-3     leasing services company as proof of workers' compensation coverage
 3-4     for the staff leasing services company and the client company under
 3-5     Chapter 406, Labor Code for all assigned employees.  If a client
 3-6     company has employees that are not assigned employees under a staff
 3-7     leasing services agreement, the state or political subdivision of
 3-8     the state may require the client company to furnish separate proof
 3-9     of workers' compensation coverage for the employees who are not
3-10     assigned employees.
3-11           SECTION 4.  Subsections (c) and (d), Section 91.015, Labor
3-12     Code, are amended to read as follows:
3-13           (c)  Before denying a license application, the department
3-14     shall provide written notice to an applicant specifying the reasons
3-15     for the denial and shall provide the applicant thirty (30) calendar
3-16     days in which to correct the reasons for the proposed denial.  For
3-17     good cause and on a showing of good faith efforts to correct the
3-18     reasons for the proposed denial, the executive director may grant
3-19     an additional thirty (30) days to correct the reasons for the
3-20     proposed denial.
3-21           (d)  Removal, demotion, or discharge of a controlling person
3-22     in response to [an order of] notice from the department of the
3-23     alleged unsuitability of that controlling person is an affirmative
3-24     defense to any claim by that individual based on the removal,
3-25     demotion, or discharge.
 4-1           SECTION 5.  Section 91.019(a), Labor Code, is amended to read
 4-2     as follows:
 4-3           (a)  The commissioner by rule shall provide for the issuance
 4-4     of a limited license to a person who seeks to offer limited staff
 4-5     leasing services in this state [and is domiciled in another state
 4-6     and licensed or registered as a staff leasing services company in
 4-7     the state in which the person is domiciled].
 4-8           SECTION 6.  Section 91.021, Labor Code, is amended by adding
 4-9     Subsections (d) and (e) to read as follows:
4-10           (d)  In assessing fines and penalties, the department shall
4-11     consider the severity of the offense, whether the violation was
4-12     willful or intentional, whether the staff leasing services company
4-13     acted in good faith to avoid or mitigate the violation, whether the
4-14     staff leasing services company has engaged in similar violations in
4-15     the past, and the fines and penalties previously assessed by the
4-16     department under this chapter against other staff leasing services
4-17     companies.  The department shall, by rule, establish a written
4-18     enforcement plan that provides notice to staff leasing services
4-19     companies of the specific ranges of penalties which apply to
4-20     specific alleged violations and the criteria by which the
4-21     department determines what penalty amount to seek.
4-22           (e)  All hearings conducted under the authority of this
4-23     chapter shall be conducted by the State Office of Administrative
4-24     Hearings.
4-25           SECTION 7.  Section 91.032, Labor Code, is amended to read as
 5-1     follows:
 5-2           (A)  A contract between a staff leasing services company
 5-3     [license holder] and a client company must provide that the staff
 5-4     leasing services company [license holder]:
 5-5                 (1)  reserves a [the] right of direction and control
 5-6     over employees assigned to a client's worksites;
 5-7                 (2)  assumes responsibility for the payment of wages to
 5-8     the assigned employees without regard to payments by the client to
 5-9     the staff leasing services company [license holder];
5-10                 (3)  assumes responsibility for the payment of payroll
5-11     taxes and collection of taxes from payroll on assigned employees;
5-12                 (4)  retains a [the] right to hire, fire, discipline,
5-13     and reassign the assigned employees; and
5-14                 (5)  retains a [the] right of direction and control
5-15     over the adoption of employment and safety policies and the
5-16     management of workers' compensation claims, claim filings, and
5-17     related procedures.
5-18           (b)  Notwithstanding any other provision of this chapter, a
5-19     client company retains responsibility for:
5-20                 (1)  exercise of the direction and control over
5-21     assigned employees as necessary to conduct the business of the
5-22     client company and without which the client company would be unable
5-23     to conduct its business, discharge any applicable fiduciary duties
5-24     of the client company, or comply with any licensure, regulatory, or
5-25     statutory requirements;
 6-1                 (2)  for the goods and services produced by the client
 6-2     company; and
 6-3                 (3)  the acts, errors, or omissions of the assigned
 6-4     employees committed within the course and scope of the client's
 6-5     business.
 6-6           SECTION 8.  Section 91.043(a), Labor Code, is amended to read
 6-7     as follows:
 6-8           (a)  A staff leasing services company [license holder] may
 6-9     not sponsor a plan of self-insurance for health benefits except as
6-10     permitted by the Employee Retirement Income Security Act of 1974
6-11     (29 U.S.C., Section 1001 et seq.)
6-12           SECTION 9.  This Act applies to all staff leasing services
6-13     companies and license holders in effect on or after the effective
6-14     date of this Act.
6-15           SECTION 10.  This Act takes effect September 1, 1999.
6-16           SECTION 11.  EMERGENCY.  The importance of this legislation
6-17     and the crowded condition of the calendars in both houses create an
6-18     emergency and an imperative public necessity that the
6-19     constitutional rule requiring bills to be read on three several
6-20     days in each house be suspended, and this rule is hereby suspended.