HBA-ATS H.B. 1184 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1184 By: Hilbert Licensing & Administrative Procedures 6/30/1999 Enrolled BACKGROUND AND PURPOSE A professional employer organization (PEO) may be generally defined as an organization that contracts with a business to handle employee- related matters such as personnel management, health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. The PEO's contractual obligation is to assume employer rights, responsibilities, and risk, in effect establishing and maintaining an employer relationship with the workers assigned to its clients. For example, typical duties undertaken and obligations incurred by a PEO include: assigning workers to client locations and assuming responsibility as an employer for specified purposes of the workers assigned to the client locations; reserving a right of direction and control of the employees; paying wages and employment taxes of the employee out of its accounts; reporting, collecting, and depositing employment taxes with state and federal authorities; and retaining a right to hire, reassign, and fire the employees. The contractual allocation and sharing of employer responsibilities between the PEO and the client means that they are co-employers. As co-employers the parties may share responsibility for some obligations, but, in general, the terms of the contract determine the responsibilities and obligation of each party. Typically, the PEO ensures that worksite employees are provided with a workplace that is safe, conducive to productivity, and operated in compliance with employment laws and regulations. In addition, the PEO may provide worksite employees with workers' compensation insurance, unemployment insurance, and a broad range of employee benefits programs. H.B. 1184 redefines "staff leasing services" to include professional employer organization services and "staff leasing services company" to include a professional employer organization. Under this bill, an insurance certificate for workers' compensation insurance held by a license holder constitutes proof of workers' compensation coverage for it and the client company for all employees of the license holder assigned to the client company. The state and its political subdivisions are required to accept the insurance certificate as proof of workers' compensation coverage under Chapter 406 (Workers' Compensation Insurance Coverage), Labor Code. However, the state or its political subdivision is authorized to require the client company, if it has employees who are not assigned employees under a staff leasing services agreement, to furnish separate proof of workers' compensation insurance coverage for those employees. In addition, this bill designates the responsibilities retained by a client company under a contract with a staff leasing services company. A client company is responsible for the direction and control over assigned employees to conduct its business, to discharge any applicable fiduciary duties, or to comply with any licensure, regulatory, or statutory requirements; the goods and services produced by it; and the acts, errors, or omissions of the assigned employees committed within the scope of its business. In addition, a contract between a license holder and a client company must provide that the license holder shares with the client company the right of direction and control over employees assigned to a client's worksite; the right to hire, fire, discipline, and reassign the assigned employees; and the right of direction and control over the adoption of employment and safety policies and the management of workers' compensation claims, claim filings, and related procedures. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Department of Licensing and Regulation in SECTION 6 (Section 91.021, Labor Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subdivisions (14) and (15), Section 91.001, Labor Code, as follows: (14) Redefines "staff leasing services" to include professional employer organization services. (15) Redefines "staff leasing services company" to include a professional employer organization. SECTION 2. Amends Section 91.002(b), Labor Code, to provide that each person who offers staff leasing services, rather than each license holder, is subject to Chapter 91 (Staff Leasing Services), Labor Code, and the rules adopted by the commissioner of licensing and regulation (commissioner). SECTION 3. Amends Subchapter A, Chapter 91, Labor Code, by adding Sections 91.005, 91.006, and 91.007, as follows: Sec. 91.005. APPLICATION OF CERTAIN PROCUREMENT LAWS. Provides that with respect to a bid, contract, purchase order, or agreement entered into with the state or a political subdivision of the state, a client company's status or certification as a small, minority-owned, disadvantaged, or woman-owned business enterprise or as a historically underutilized business, is not affected because it has entered into an agreement with, or uses the services, of, a license holder. Sec. 91.006. WORKERS' COMPENSATION COVERAGE. Provides that an insurance certificate for workers' compensation insurance held by a license holder constitutes proof of workers' compensation coverage for it and the client company for all employees of the license holder assigned to the client company. Requires the state and a political subdivision of this state to accept the insurance certificate described under this section as proof of workers' compensation coverage under Chapter 406 (Workers' Compensation Insurance Coverage), Labor Code. Authorizes the state or its political subdivision to require the client company, if it has employees who are not assigned employees under a staff leasing services agreement, to furnish separate proof of workers' compensation insurance coverage for those employees. Sec. 91.007. APPLICATION OF LABOR RELATIONS LAWS. Provides that Chapter 91 does not relieve a client company of a right, obligation, or duty under Chapter 101 (Labor Organizations), Labor Code, the federal National Labor Relations Act (29 U.S.C. Section 151 et seq.), the federal Railway Labor Act (45 U.S.C. Section 151 et seq.), and any other law governing labor relations. SECTION 4. Amends Sections 91.015(c) and (d), Labor Code, as follows: (c) Requires the Texas Department of Licensing and Regulation (department) to provide an applicant at least 30 days after the date of the notice to address the reasons for the denial of a license application. Authorizes the commissioner to grant an additional 30 days to remedy the reasons for the denial for good cause and on a showing of a good faith effort to remedy the reasons for the denial. (d) Provides that the removal, demotion, or discharge of a controlling person in response to a notice from the department, rather than a response to an order of the department, is an affirmative defense to a claim brought by that individual. SECTION 5. Amends Section 91.019(a), Labor Code, to expand the issuance of a limited license to a person who seeks to offer limited staff leasing services in this state. Deletes language describing the person as domiciled in another state and licensed or registered as a staff and leasing service company in that state. SECTION 6. Amends Section 91.021, Labor Code, by adding Subsection (d), as follows: (d) Requires the department, in assessing an administrative penalty (penalty), to consider the severity of the violation, whether the violation was willful or intentional, whether the license holder acted in good faith to avoid or mitigate the violation, whether the license holder has engaged in similar violations in the past, and the penalties previously assessed by the department against other license holders under this chapter. Requires the department, by rule, to establish a written enforcement plan that provides notice to license holders of the specific ranges of penalties that apply to specific alleged violations and the criteria by which the department determines the amount of a proposed penalty. SECTION 7. Amends Section 91.032, Labor Code, as follows: (a) Provides that a contract between a license holder and a client company must provide that the license holder shares, as provided by Subsection (b), with the client company, rather than reserves (for the license holder), the right of direction and control over employees assigned to a client's worksite. Provides that the license holder must share, as provided by Subsection (b), with the client company, rather than retain (for the license holder), the right to hire, fire, discipline, and reassign the assigned employees. Provides that the license holder must share, as provided by Subsection (b), with the client company, rather than retain (for the license holder), the right of direction and control over the adoption of employment and safety policies and the management of workers' compensation claims, claim filings, and related procedures. (b) Designates the responsibilities retained by a client company under a contract with a license holder, notwithstanding any other provision of Chapter 91. Provides that a client company is responsible for the direction and control over assigned employees to conduct its business, to discharge any applicable fiduciary duties, or to comply with any licensure, regulatory, or statutory requirements; the goods and services produced by it; and the acts, errors, or omissions of the assigned employees committed within the scope of its business. SECTION 8.Effective date: September 1, 1999. Makes application of Sections 91.015(c), 91.021(d), and 91.032, Labor Code, prospective. SECTION 9.Emergency clause.