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  S.B. No. 1286
 
 
 
 
AN ACT
  relating to the regulation of professional employer services;
  authorizing fees.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  The heading to Chapter 91, Labor Code, is amended
  to read as follows:
  CHAPTER 91.  PROFESSIONAL EMPLOYER ORGANIZATIONS [STAFF LEASING
  SERVICES]
         SECTION 2.  Section 91.001, Labor Code, is amended by
  amending Subdivisions (1), (2-a), (3), (7), (11), (14), (15), (16),
  and (17) and adding Subdivisions (3-a), (3-b), and (7-a) to read as
  follows:
               (1)  "Applicant" means a person [business entity]
  applying for a license or the renewal of a license under this
  chapter.
               (2-a)  "Assurance organization" means an independent
  entity approved by the commission that:
                     (A)  provides a national program of accreditation
  and financial assurance for professional employer organizations
  [staff leasing services companies];
                     (B)  has documented qualifications, standards,
  and procedures acceptable to the department; and
                     (C)  agrees to provide information, compliance
  monitoring services, and financial assurance useful to the
  department in accomplishing the provisions of this chapter.
               (3)  "Client [company]" means any [a] person who enters
  into a professional employer services agreement [that contracts]
  with a license holder [and is assigned employees by the license
  holder under that contract].
               (3-a)  "Coemployer" means a professional employer
  organization or a client that is a party to a coemployment
  relationship.
               (3-b)  "Coemployment relationship" means a contractual
  relationship between a client and a professional employer
  organization that involves the sharing of employment
  responsibilities with or allocation of employment responsibilities
  to covered employees in accordance with the professional employer
  services agreement and this chapter.
               (7)  "Controlling person" means an individual who:
                     (A)  possesses direct or indirect control of 25
  percent or more of the voting securities of a business entity
  [corporation] that offers or proposes to offer professional
  employer [staff leasing] services;
                     (B)  possesses the authority to set policy and
  direct management of a business entity [company] that offers or
  proposes to offer professional employer [staff leasing] services;
                     (C)  is employed, appointed, or authorized by a
  business entity [company] that offers or proposes to offer
  professional employer [staff leasing] services to enter into a
  professional employer services agreement [contract] with a client
  [company] on behalf of the business entity [company]; or
                     (D)  a person who is an officer or director of a
  corporation or a general partner of a partnership that offers or
  proposes to offer professional employer [staff leasing] services.
               (7-a)  "Covered employee" means an individual having a
  coemployment relationship with a professional employer
  organization and a client.
               (11)  "License holder" means a person licensed under
  this chapter to provide professional employer [staff leasing]
  services.
               (14)  "Professional employer services" means the
  services provided through coemployment relationships in which all
  or a majority of the employees providing services to a client or to
  a division or work unit of a client are covered employees.  ["Staff
  leasing services" means an arrangement by which employees of a
  license holder are assigned to work at a client company and in which
  employment responsibilities are in fact shared by the license
  holder and the client company, the employee's assignment is
  intended to be of a long-term or continuing nature, rather than
  temporary or seasonal in nature, and a majority of the work force at
  a client company worksite or a specialized group within that work
  force consists of assigned employees of the license holder. The
  term includes professional employer organization services.] The
  term does not include:
                     (A)  temporary help;
                     (B)  an independent contractor;
                     (C)  the provision of services that otherwise meet
  the definition of "professional employer ["staff leasing]
  services" by one person solely to other persons who are related to
  the service provider by common ownership; or
                     (D)  a temporary common worker employer as defined
  by Chapter 92.
               (15)  "Professional employer organization" ["Staff
  leasing services company"] means a business entity that offers
  professional employer [staff leasing] services. [The term includes
  a professional employer organization.]
               (16)  "Temporary help" means an arrangement by which an
  organization hires its own employees and assigns them to a company
  [client] to support or supplement the company's [client's] work
  force in a special work situation, including:
                     (A)  an employee absence;
                     (B)  a temporary skill shortage;
                     (C)  a seasonal workload; or
                     (D)  a special assignment or project.
               (17)  "Wages" means:
                     (A)  compensation for labor or services rendered
  by a covered [an assigned] employee, whether computed on a time,
  task, piece, or other basis; and
                     (B)  vacation pay, holiday pay, sick leave pay,
  parental leave pay, severance pay, bonuses, commissions, stock
  option grants, or deferred compensation owed to a covered [an
  assigned] employee under a written agreement.
         SECTION 3.  Chapter 91, Labor Code, is amended by adding
  Sections 91.0011 and 91.0012 to read as follows:
         Sec. 91.0011.  COEMPLOYMENT RELATIONSHIP.  (a)  A
  coemployment relationship is intended to be an ongoing relationship
  rather than a temporary or specific one, in which the rights,
  duties, and obligations of an employer that arise out of an
  employment relationship are allocated between coemployers under a
  professional employer services agreement.  Coemployment is not a
  joint employment arrangement.
         (b)  In a coemployment relationship:
               (1)  the professional employer organization may
  enforce only those employer rights and is subject to only those
  obligations specifically allocated to the professional employer
  organization by the professional employer services agreement or
  this chapter;
               (2)  the client may enforce any right and is obligated
  to perform those employer obligations allocated to the client by
  the professional employer services agreement or this chapter; and
               (3)  the client may enforce any right and is obligated
  to perform any obligation of an employer not specifically allocated
  to the professional employer organization by the professional
  employer services agreement or this chapter.
         Sec. 91.0012.  COVERED EMPLOYEE.  (a)  A covered employee
  must meet all the following criteria:
               (1)  the individual must receive written notice of the
  coemployment relationship with the professional employer
  organization; and
               (2)  the individual's coemployment relationship must be
  under a professional employer services agreement subject to this
  chapter.
         (b)  An individual who is an executive employee, as described
  by Section 406.097, of the client is a covered employee, except to
  the extent the professional employer organization and the client
  expressly agree in the professional employer services agreement
  that the individual is not a covered employee.
         SECTION 4.  Subsections (b) and (c), Section 91.002, Labor
  Code, are amended to read as follows:
         (b)  Each person who offers professional employer [staff
  leasing] services is subject to this chapter and the rules adopted
  by the commission.
         (c)  Notwithstanding any other provision of this chapter,
  nothing in this chapter preempts the existing statutory or
  rulemaking authority of any other state agency or entity to
  regulate professional employer [staff leasing] services in a manner
  consistent with the statutory authority of that state agency or
  entity.
         SECTION 5.  Susbection (a), Section 91.003, Labor Code, is
  amended to read as follows:
         (a)  Each state agency that in performing duties under other
  law affects the regulation of professional employer [staff leasing]
  services shall cooperate with the department and other state
  agencies as necessary to implement and enforce this chapter.
         SECTION 6.  Sections 91.004, 91.005, 91.006, 91.007, 91.011,
  and 91.012, Labor Code, are amended to read as follows:
         Sec. 91.004.  EFFECT OF OTHER LAW ON CLIENTS AND EMPLOYEES.
  (a)  This chapter does not exempt a client of a license holder, or
  any covered [assigned] employee, from any other license
  requirements imposed under local, state, or federal law.
         (b)  A covered [An] employee who is licensed, registered, or
  certified under law [and who is assigned to a client company] is
  considered to be an employee of the client [company] for the purpose
  of that license, registration, or certification.
         (c)  A license holder is not engaged in the unauthorized
  practice of an occupation, trade, or profession that is licensed,
  certified, or otherwise regulated by a governmental entity solely
  by entering into a professional employer services [staff leasing]
  agreement with a client [company] and covered [assigned] employees.
         Sec. 91.005.  APPLICATION OF CERTAIN PROCUREMENT LAWS. With
  respect to a bid, contract, purchase order, or agreement entered
  into with the state or a political subdivision of the state, a
  client's [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
  the client [company] has entered into a professional employer
  services [an] agreement with a license holder or uses the services
  of a license holder.
         Sec. 91.006.  WORKERS' COMPENSATION COVERAGE. (a)  A
  certificate of insurance coverage or other evidence of coverage 
  showing that either a license holder or a client maintains [a policy
  of] workers' compensation insurance coverage constitutes proof of
  workers' compensation insurance coverage for the license holder and
  the client [company] with respect to all covered employees of the
  license holder and [assigned to] the client [company]. The state
  and a political subdivision of the state shall accept a certificate
  of insurance coverage or other evidence of coverage described by
  this section as proof of workers' compensation coverage under
  Chapter 406.
         (b)  For a client [company] that has employees who are not
  covered [assigned] employees under a professional employer [staff
  leasing] services agreement, the state or a political subdivision
  of the state may require the client [company] to furnish separate
  proof of workers' compensation insurance coverage for those
  employees.
         Sec. 91.007.  APPLICATION OF LABOR RELATIONS LAWS. This
  chapter does not relieve a client [company] of a right, obligation,
  or duty under:
               (1)  Chapter 101;
               (2)  the federal National Labor Relations Act (29
  U.S.C. Section 151 et seq.);
               (3)  the federal Railway Labor Act (45 U.S.C. Section
  151 et seq.); or
               (4)  any other law governing labor relations.
         Sec. 91.011.  LICENSE REQUIRED. A person may not engage in
  or offer professional employer [staff leasing] services in this
  state unless the person holds a license issued under this chapter.
         Sec. 91.012.  GENERAL LICENSE REQUIREMENTS. To be qualified
  to serve as a controlling person of a license holder under this
  chapter, that person must be at least 18 years of age and have
  educational, managerial, or business experience relevant to:
               (1)  operation of a business entity offering
  professional employer [staff leasing] services; or
               (2)  service as a controlling person of a professional
  employer organization [staff leasing services company].
         SECTION 7.  Subsections (a) and (c), Section 91.014, Labor
  Code, are amended to read as follows:
         (a)  An applicant for an original or renewal license must
  demonstrate positive working capital in the following amounts:
               (1)  $50,000 if the applicant employs fewer than 250
  covered [assigned] employees;
               (2)  $75,000 if the applicant employs at least 250 but
  not more than 750 covered [assigned] employees; and
               (3)  $100,000 if the applicant employs more than 750
  covered [assigned] employees.
         (c)  Information submitted to or maintained by the
  department is subject to Chapter 552, Government Code, other than
  information related to:
               (1)  identification of clients [client companies];
               (2)  working capital;
               (3)  financial statements; or
               (4)  federal tax returns.
         SECTION 8.  Subsection (a), Section 91.015, Labor Code, is
  amended to read as follows:
         (a)  To receive a professional employer organization [staff
  leasing services company] original license, a person shall file
  with the department a written application accompanied by the
  application fee.
         SECTION 9.  Subsections (a) and (c), Section 91.017, Labor
  Code, are amended to read as follows:
         (a)  Each applicant for an original or renewal professional
  employer organization [staff leasing services company] license
  shall pay to the department before the issuance of the license or
  license renewal a fee set by the commission by rule.
         (c)  Fees collected by the department under this chapter may
  [shall] be used only to implement this chapter.
         SECTION 10.  Subsections (e) and (f), Section 91.018, Labor
  Code, are amended to read as follows:
         (e)  A license holder offering professional employer [staff
  leasing] services in more than one state may advertise in this state
  using the name of its parent company or under a trade name,
  trademark, or service mark. The trade name, trademark, service
  mark, or parent company name must be listed on the license in
  addition to the licensed name used by the license holder in this
  state.
         (f)  Each written proposal provided to a prospective client
  [company] and each contract between a license holder and a client
  [company] or covered [assigned] employee shall clearly identify the
  name of the license holder. A proposal or contract may also
  identify the trade name, trademark, service mark, or parent company
  name of the license holder. A license holder may use written
  materials including forms, benefit information, letterhead, and
  business cards that bear only the trade name, trademark, service
  mark, or parent company name of the license holder.
         SECTION 11.  Subsections (a), (b), and (c), Section 91.019,
  Labor Code, are amended to read as follows:
         (a)  The commission by rule shall provide for the issuance of
  a limited license to a person who seeks to offer limited
  professional employer [staff leasing] services in this state.
         (b)  For purposes of this section, a professional employer
  organization [staff leasing services company] is considered to be
  offering limited professional employer [staff leasing] services if
  the professional employer organization [staff leasing services
  company]:
               (1)  employs fewer than 50 covered [assigned] employees
  in this state at any one time;
               (2)  does not provide covered [assigned] employees to a
  client [company] based or domiciled in this state; and
               (3)  does not maintain an office in this state or
  solicit clients [client companies] located or domiciled in this
  state.
         (c)  A professional employer organization [staff leasing
  services company] that offers limited professional employer [staff
  leasing] services shall complete the application forms and pay the
  fees for a limited license as prescribed by the department. A
  limited license is valid for one year from the date of issuance and
  may be renewed annually on submission of a renewal application and
  payment of the required fees.
         SECTION 12.  Section 91.020, Labor Code, is amended to read
  as follows:
         Sec. 91.020.  GROUNDS FOR DISCIPLINARY ACTION. The
  department may take disciplinary action against a license holder on
  any of the following grounds:
               (1)  engaging in professional employer [staff leasing]
  services or offering to engage in the provision of professional
  employer [staff leasing] services without a license;
               (2)  transferring or attempting to transfer a license
  issued under this chapter;
               (3)  violating this chapter or any order or rule issued
  by the executive director or commission under this chapter;
               (4)  failing after the 31st day after the date on which
  a felony conviction of a controlling person is final to notify the
  department in writing of the conviction;
               (5)  failing to cooperate with an investigation,
  examination, or audit of the license holder's records conducted by
  the license holder's insurance company or the insurance company's
  designee, as allowed by the insurance contract or as authorized by
  law by the Texas Department of Insurance;
               (6)  failing after the 31st day after the effective
  date of a change in ownership, principal business address, or the
  address of accounts and records to notify the department and the
  Texas Department of Insurance of the change;
               (7)  failing to correct any tax filings or payment
  deficiencies within a reasonable time as determined by the
  executive director;
               (8)  refusing, after reasonable notice, to meet
  reasonable health and safety requirements within the license
  holder's control and made known to the license holder by a federal
  or state agency;
               (9)  being delinquent in the payment of the license
  holder's insurance premiums other than those subject to a
  legitimate dispute;
               (10)  being delinquent in the payment of any employee
  benefit plan premiums or contributions other than those subject to
  a legitimate dispute;
               (11)  knowingly making a material misrepresentation to
  an insurance company or to the department or other governmental
  agency;
               (12)  failing to maintain the working capital required
  under Section 91.014; or
               (13)  using professional employer [staff leasing]
  services to avert or avoid an existing collective bargaining
  agreement.
         SECTION 13.  Subsection (b), Section 91.021, Labor Code, is
  amended to read as follows:
         (b)  A professional employer organization [staff leasing
  services company] may authorize an assurance organization that is
  qualified and approved by the commission to act on its behalf in
  complying with the licensing requirements of this chapter,
  including the electronic filing of information and the payment of
  application and licensing fees.  Use of an assurance organization
  is optional and is not mandatory for a professional employer
  organization [staff leasing services company].
         SECTION 14.  Subchapter C, Chapter 91, Labor Code, is
  amended to read as follows:
  SUBCHAPTER C.  PROFESSIONAL EMPLOYER SERVICES [STAFF LEASING
  SERVICES] AGREEMENT
         Sec. 91.031.  AGREEMENT; NOTICE. (a)  A license holder
  shall establish the terms of a professional employer [staff
  leasing] services agreement by a written contract between the
  license holder and the client [company].
         (b)  The license holder shall give written notice of the
  agreement as it affects covered [assigned] employees to each
  covered employee [assigned to a client company worksite].
         (c)  The written notice required by Subsection (b) must be
  given to each covered [assigned] employee not later than the first
  payday after the date on which that individual becomes a covered [an
  assigned] employee.
         Sec. 91.032.  CONTRACT REQUIREMENTS. (a)  A professional
  employer services agreement [contract] between a license holder and
  a client [company] must provide that the license holder:
               (1)  shares, as provided by Subsection (b), with the
  client [company] the right of direction and control over covered
  employees [assigned to a client's worksites];
               (2)  assumes responsibility for the payment of wages to
  the covered [assigned] employees without regard to payments by the
  client to the license holder;
               (3)  assumes responsibility for the payment of payroll
  taxes and collection of taxes from payroll on covered [assigned]
  employees;
               (4)  shares, as provided by Subsection (b), with the
  client [company] the right to hire, fire, discipline, and reassign
  the covered [assigned] employees; and
               (5)  shares, as provided by Subsection (b), with the
  client [company] 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)  Notwithstanding any other provision of this chapter, a
  client [company] retains sole responsibility for:
               (1)  the direction and control of covered [assigned]
  employees as necessary to conduct the client's [client company's]
  business, discharge any applicable fiduciary duty, or comply with
  any licensure, regulatory, or statutory requirement;
               (2)  goods and services produced by the client
  [company]; and
               (3)  the acts, errors, and omissions of covered
  [assigned] employees committed within the scope of the client's
  [client company's] business.
         (c)  Notwithstanding Subsection (a)(2), a client [company]
  is solely obligated to pay any wages for which:
               (1)  obligation to pay is created by an agreement,
  contract, plan, or policy between the client [company] and the
  covered [assigned] employee; and
               (2)  the professional employer organization [staff
  leasing services company] has not contracted to pay.
         (d)  Each professional employer organization [staff leasing
  services company] shall disclose the requirements of Subsection (c)
  in writing to each covered [assigned] employee.
         SECTION 15.  Section 91.041, Labor Code, is amended by
  amending Subsections (a) and (b) and adding Subsections (a-1) and
  (a-2) to read as follows:
         (a)  A client and license holder are each considered an
  employer under the laws of this state for purposes of sponsoring
  retirement and welfare benefit plans for covered employees.  [A
  license holder may sponsor and maintain employee benefit plans for
  the benefit of assigned employees. A client company may include
  assigned employees in any benefit plan sponsored by the client
  company.]
         (a-1)  A license holder may sponsor a single welfare benefit
  plan under which eligible covered employees of one or more clients
  may elect to participate.
         (a-2)  A fully insured welfare benefit plan offered to the
  covered employees of a license holder and provided by an insurance
  company authorized to provide that insurance in this state or a
  self-funded health benefit plan sponsored by a license holder as
  provided by Section 91.0411 shall be treated for purposes of state
  law as a single employer welfare benefit plan.
         (b)  With respect to any insurance or benefit plan provided
  by a license holder for the benefit of its assigned employees, a
  license holder shall disclose the following information to the
  department, each client [company], and its covered [assigned]
  employees:
               (1)  the type of coverage;
               (2)  the identity of each insurer for each type of
  coverage;
               (3)  the amount of benefits provided for each type of
  coverage and to whom or in whose behalf benefits are to be paid;
               (4)  the policy limits on each insurance policy; and
               (5)  whether the coverage is fully insured, partially
  insured, or fully self-funded.
         SECTION 16.  Subchapter D, Chapter 91, Labor Code, is
  amended by adding Section 91.0411 to read as follows:
         Sec. 91.0411.  SELF-FUNDED HEALTH BENEFIT PLAN. (a)  In
  this section, "commissioner" means the commissioner of insurance.
         (b)  A license holder may sponsor a benefit plan that is not
  fully insured if the license holder meets the requirements of this
  section and is approved to sponsor the plan by the commissioner.
         (c)  The commissioner may, on notice and opportunity for all
  interested persons to be heard, adopt rules and issue orders
  reasonably necessary to augment and implement the regulation of
  benefit plans sponsored by a license holder that are not fully
  insured. The commissioner may not adopt a rule that requires
  clients or covered employees to be members of an association or
  group in the same trade or industry in order to be covered by a
  license holder-sponsored benefit plan that is not fully insured.  
  The rules must include all requirements that must be met by the
  license holder and the plan, including:
               (1)  initial and final approval requirements;
               (2)  authority to prescribe forms and items to be
  submitted to the commissioner by the license holder;
               (3)  a fidelity bond;
               (4)  use of an independent actuary;
               (5)  use of a third-party administrator;
               (6)  authority for the commissioner to examine an
  application or a plan;
               (7)  the minimum number of clients and covered
  employees covered by the plan;
               (8)  standards for those natural persons managing the
  plan;
               (9)  the minimum amount of gross contributions;
               (10)  the minimum amount of written commitment, binder,
  or policy for stop-loss insurance;
               (11)  the minimum amount of reserves; and
               (12)  a fee in an amount reasonable and necessary to
  defray the costs of administering this section to be deposited to
  the credit of the operating fund of the Texas Department of
  Insurance.
         (d)  Information submitted under this section is
  confidential and not subject to disclosure under Chapter 552,
  Government Code.
         (e)  Each license holder under this section shall appoint the
  commissioner as its resident agent for purposes of service of
  process.  The fee for that service is $50, payable at the time of
  appointment.
         (f)  The commissioner may examine the affairs of any plan and
  shall have access to the records of the plan. The commissioner may
  examine under oath a manager or employee of the license holder in
  connection with the plan.
         (g)  In addition to any requirement or remedy under a law,
  the commissioner may suspend, revoke, or limit the authorization of
  a plan if the commissioner determines, after notice and hearing,
  that the plan does not comply with this section. The commissioner
  may notify the attorney general of a violation of this section, and
  the attorney general may apply to a district court in Travis County
  for leave to file suit in the nature of quo warranto or for
  injunctive relief or both.
         (h)  A plan under this section is subject to Chapters 401,
  404, 441, and 443, Insurance Code.
         SECTION 17.  Section 91.042, Labor Code, is amended by
  amending Subsections (a) through (h) and adding Subsections (a-1),
  (a-2), and (c-1) to read as follows:
         (a)  A license holder or client may elect to obtain workers'
  compensation insurance coverage for covered [the license holder's
  assigned] employees through an insurance company as defined under
  Section 401.011(28) or through self-insurance as provided under
  Chapter 407.
         (a-1)  The client and the professional employer organization
  shall specify in the professional employer services agreement
  whether the parties have elected to obtain workers' compensation
  insurance coverage for the covered employees and shall specify
  which party must maintain coverage.  If the license holder
  maintains workers' compensation insurance coverage for the client,
  an individual who is an executive employee, as described by Section
  406.097, of the client is eligible to be treated as an executive
  employee for premium calculation and classification purposes.  A
  copy of the professional employer services agreement must be
  provided to the Texas Department of Insurance on request.  
  Information obtained by the Texas Department of Insurance under
  this section is confidential and not subject to disclosure under
  Chapter 552, Government Code.
         (a-2)  If the client elects to maintain workers'
  compensation insurance coverage for the covered employees under the
  client's policy or other coverage, the client shall pay workers'
  compensation insurance premiums for the covered employees based on
  the experience rating of the client.
         (b)  If a license holder maintains workers' compensation
  insurance coverage for covered employees, the license holder shall
  pay workers' compensation insurance premiums for the covered
  employees based on the experience rating of the client [company]
  for the first two years the covered employees are covered under the
  professional employer organization's policy [client company has a
  contract with the license holder] and as further provided by rule by
  the Texas Department of Insurance.
         (c)  For workers' compensation insurance purposes, a license
  holder and the license holder's client [company] shall be
  coemployers. If either a license holder or a client elects to
  obtain workers' compensation insurance coverage for covered
  employees, the client [company] and the license holder are subject
  to Sections 406.005, 406.034, [and] 408.001, and 411.032.
         (c-1)  Notwithstanding Subsection (c), for purposes of
  Section 462.308(a)(2), Insurance Code, the client is considered to
  be the insured employer.
         (d)  If a license holder or a client does not elect to obtain
  workers' compensation insurance coverage for covered employees,
  both the license holder and the client [company] are subject to
  Sections 406.004, 406.005, [and] 406.033, and 411.032.
         (e)  After the expiration of the two-year period under
  Subsection (b), if the client elects to obtain [company obtains a
  new] workers' compensation insurance coverage for covered
  employees through coverage maintained by the client, or if the
  professional employer services agreement is terminated and the
  client elects to maintain, through coverage maintained by the
  client or through coverage maintained by a successor professional
  employer organization, workers' compensation insurance coverage
  for employees previously covered by the former professional
  employer organization's policy [policy in the company's own name or
  adds the company's former assigned workers to an existing policy],
  the premium for the workers' compensation insurance coverage for
  the client [policy of the company] shall be based on the lower of:
               (1)  the experience modifier of the client [company]
  before being covered under the professional employer
  organization's coverage [entering into the staff leasing
  arrangement]; or
               (2)  the experience modifier of the license holder at
  the time the client's coverage under the professional employer
  organization's coverage is [staff leasing arrangement] terminated.
         (f)  On request, an insurer [the Texas Department of
  Insurance] shall provide the necessary computations to the
  prospective workers' compensation insurer of the client [company]
  to comply with Subsection (e).
         (g)  On the written request of a client [company], a license
  holder that elects to provide workers' compensation insurance for
  covered [assigned] employees shall provide to the client [company]
  a list of:
               (1)  claims associated with that client [company] made
  against the license holder's workers' compensation policy; and
               (2)  payments made and reserves established on each
  claim.
         (h)  The license holder shall provide the information
  described by Subsection (g) in writing from the license holder's
  own records, if the license holder is a qualified self-insurer, or
  from information the license holder received from the license
  holder's workers' compensation insurance provider following the
  license holder's request under Section 2051.151, Insurance Code,
  not later than the 60th day after the date the license holder
  receives the client's [client company's] written request.  For
  purposes of this subsection, information is considered to be
  provided to the client [company] on the date the information is:
               (1)  received by the United States Postal Service; or
               (2)  personally delivered to the client [company].
         SECTION 18.  Sections 91.044, 91.046, 91.048, 91.050,
  91.061, 92.012, and 201.030, Labor Code, are amended to read as
  follows:
         Sec. 91.044.  UNEMPLOYMENT TAXES; PAYROLL. (a)  A license
  holder is the employer of a covered [an assigned] employee for
  purposes of Subtitle A, Title 4, and, except for wages subject to
  Section 91.032(c), for purposes of Chapter 61. In addition to any
  other reports required to be filed by law, a license holder shall
  report quarterly to the Texas Workforce Commission on a form
  prescribed by the Texas Workforce Commission the name, address,
  telephone number, federal income tax identification number, and
  classification code as described in the "Standard Industrial
  Classification Manual" published by the United States Office of
  Management and Budget of each client [company].
         (b)  For purposes of Subtitle A, Title 4, in the event of the
  termination of a contract between a license holder and a client
  [company] or the failure by a professional employer organization
  [staff leasing entity] to submit reports or make tax payments as
  required by that subtitle, the contracting client [company] shall
  be treated as a new employer without a previous experience record
  unless that client [company] is otherwise eligible for an
  experience rating.
         Sec. 91.046.  CONTRACTUAL DUTIES. Each license holder is
  responsible for the license holder's contractual duties and
  responsibilities to manage, maintain, collect, and make timely
  payments for:
               (1)  insurance premiums;
               (2)  benefit and welfare plans;
               (3)  other employee withholding; and
               (4)  any other expressed responsibility within the
  scope of the professional employer services agreement [contract]
  for fulfilling the duties imposed under this section and Sections
  91.032, 91.047, and 91.048.
         Sec. 91.048.  REQUIRED INFORMATION. Each license holder
  shall:
               (1)  maintain adequate books and records regarding the
  license holder's duties and responsibilities;
               (2)  maintain and make available at all times to the
  executive director the following information, which shall be
  treated as proprietary and confidential and is exempt from
  disclosure to persons other than other governmental agencies having
  a reasonable, legitimate purpose for obtaining the information:
                     (A)  the correct name, address, and telephone
  number of each client [company];
                     (B)  each professional employer services
  agreement with a client [company contract]; and
                     (C)  a listing by classification code as described
  in the "Standard Industrial Classification Manual" published by the
  United States Office of Management and Budget, of each client
  [company];
               (3)  notify the department of any addition or deletion
  of a controlling person as listed on the license application or
  renewal form by providing the name of the person not later than the
  45th day after the date on which the person is added or deleted as a
  controlling person; and
               (4)  provide a biographical history to the department
  in connection with the addition of a new controlling person.
         Sec. 91.050.  TAX CREDITS AND OTHER INCENTIVES. (a)  For
  the purpose of determining tax credits, grants, and other economic
  incentives provided by this state or other governmental entities
  that are based on employment, covered [assigned] employees are
  considered employees of the client and the client is solely
  entitled to the benefit of any tax credit, economic incentive, or
  other benefit arising from the employment of covered [assigned]
  employees of the client.  This subsection applies even if the
  professional employer organization [staff leasing services
  company] is the reporting employer for federal income tax purposes.
         (b)  If a grant or the amount of any incentive described by
  Subsection (a) is based on the number of employees, each client
  shall be treated as employing only those [assigned] employees
  coemployed [co-employed] by the client.  Covered [Assigned]
  employees working for other clients of the professional employer
  organization [staff leasing services company] may not be included
  in the computation.
         (c)  Each professional employer organization [staff leasing
  services company] shall provide, on the request of a client or an
  agency of this state, employment information reasonably required by
  the state agency responsible for the administration of any tax
  credit or economic incentive described by Subsection (a) and
  necessary to support a request, claim, application, or other action
  by a client seeking the tax credit or economic incentive.
         Sec. 91.061.  PROHIBITED ACTS. A person may not:
               (1)  engage in or offer professional employer [staff
  leasing] services without holding a license under this chapter as a
  professional employer organization [staff leasing services
  company];
               (2)  use the name, [or] title, or designation
  "professional employer organization," "PEO," "staff leasing
  company," "employee leasing company," "licensed professional
  employer organization," "professional employer organization
  services company," "professional employer organization company,"
  ["licensed staff leasing company," "staff leasing services
  company," "professional employer organization,"] or
  "administrative employer" or otherwise represent that the entity is
  licensed under this chapter unless the entity holds a license
  issued under this chapter;
               (3)  represent as the person's own the license of
  another person or represent that a person is licensed if the person
  does not hold a license;
               (4)  give materially false or forged evidence to the
  department in connection with obtaining or renewing a license or in
  connection with disciplinary proceedings under this chapter; or
               (5)  use or attempt to use a license that has expired or
  been revoked.
         Sec. 92.012.  EXEMPTIONS FROM LICENSING REQUIREMENT. This
  chapter does not apply to:
               (1)  a temporary skilled labor agency;
               (2)  a professional employer organization [staff
  leasing services company];
               (3)  an employment counselor;
               (4)  a talent agency;
               (5)  a labor union hiring hall;
               (6)  a temporary common worker employer that does not
  operate a labor hall;
               (7)  a labor bureau or employment office operated by a
  person for the sole purpose of employing an individual for the
  person's own use; or
               (8)  an employment service or labor training program
  provided by a governmental entity.
         Sec. 201.030.  PROFESSIONAL EMPLOYER ORGANIZATION [STAFF
  LEASING SERVICES COMPANY]. For the purposes of this subtitle,
  "professional employer organization" ["staff leasing services
  company"] has the meaning assigned by Section 91.001.
         SECTION 19.  Subsection (i), Section 207.045, Labor Code, is
  amended to read as follows:
         (i)  A covered [An assigned] employee of a professional
  employer organization [staff leasing services company] is
  considered to have left the covered [assigned] employee's last work
  without good cause if the professional employer organization [staff
  leasing services company] demonstrates that:
               (1)  at the time the employee's assignment to a client
  [company] concluded, the professional employer organization [staff
  leasing services company], or the client [company] acting on the
  professional employer organization's [staff leasing services
  company's] behalf, gave written notice and written instructions to
  the covered [assigned] employee to contact the professional
  employer organization [staff leasing services company] for a new
  assignment; and
               (2)  the covered [assigned] employee did not contact
  the professional employer organization [staff leasing services
  company] regarding reassignment or continued employment; provided
  that the covered [assigned] employee may show that good cause
  existed for the covered [assigned] employee's failure to contact
  the professional employer organization [staff leasing services
  company].
         SECTION 20.  The heading to Section 415.011, Labor Code, is
  amended to read as follows:
         Sec. 415.011.  NOTICE OF PROFESSIONAL EMPLOYER ORGANIZATION 
  [STAFF LEASING SERVICES COMPANY] WORKERS' COMPENSATION CLAIM AND
  PAYMENT INFORMATION; ADMINISTRATIVE VIOLATION.
         SECTION 21.  Section 415.011, Labor Code, is amended by
  amending Subsections (a) and (c) and adding Subsection (a-1) to
  read as follows:
         (a)  In this section, "license holder" has the meaning
  assigned by Section 91.001.
         (a-1)  Except as provided by Subsection (c), a [staff leasing
  services company] license holder commits a violation if the license
  holder fails to provide the information required by Sections
  91.042(g) and (h).
         (c)  A [staff leasing services company] license holder does
  not commit an administrative violation under this section if the
  license holder requested the information required by Sections
  91.042(g) and (h) from the license holder's workers' compensation
  insurance provider and the provider does not provide the
  information to the license holder within the required time.  A
  license holder shall notify the Texas Department of Insurance of a
  provider's failure to comply with the requirements of Section
  2051.151, Insurance Code.
         SECTION 22.  Section 151.057, Tax Code, is amended to read as
  follows:
         Sec. 151.057.  SERVICES BY EMPLOYEES. The following
  services are not taxable under this chapter:
               (1)  a service performed by an employee for his
  employer in the regular course of business, within the scope of the
  employee's duties, and for which the employee is paid his regular
  wages or salary;
               (2)  a service performed by an employee of a temporary
  employment service as defined by Section 93.001, Labor Code, for an
  employer to supplement the employer's existing work force on a
  temporary basis, when the service is normally performed by the
  employer's own employees, the employer provides all supplies and
  equipment necessary, and the help is under the direct or general
  supervision of the employer to whom the help is furnished; or
               (3)  a service performed by covered [assigned]
  employees of a professional employer organization [staff leasing
  company], either licensed under Chapter 91, Labor Code, or exempt
  from the licensing requirements of that chapter, for a client
  [company] under a written contract that provides for shared
  employment responsibilities between the professional employer
  organization [staff leasing company] and the client [company] for
  the covered [assigned] employees, most of whom must have been
  previously employed by the client [company]. The comptroller shall
  prescribe by rule the minimum percentage of covered [assigned]
  employees that must have been previously employed by the client
  [company], the minimum time period the covered [assigned] employees
  must have been employed by the client [company] prior to the
  commencement of its contract, and such other criteria as the
  comptroller may deem necessary to properly implement this section.
         SECTION 23.  Section 171.0001, Tax Code, is amended by
  amending Subdivisions (6) and (15) and adding Subdivision (8-a) to
  read as follows:
               (6)  "Client [company]" means:
                     (A)  a client as that term is defined by Section
  91.001 [person that contracts with a license holder under Chapter
  91], Labor Code[, and is assigned employees by the license holder
  under that contract]; or
                     (B)  a client of a temporary employment service,
  as that term is defined by Section 93.001(2), Labor Code, to whom
  individuals are assigned for a purpose described by that
  subdivision.
               (8-a)  "Covered employee" has the meaning assigned by
  Section 91.001, Labor Code.
               (15)  "Professional employer organization" ["Staff
  leasing services company"] means:
                     (A)  a business entity that offers professional
  employer [staff leasing] services, as that term is defined by
  Section 91.001, Labor Code; or
                     (B)  a temporary employment service, as that term
  is defined by Section 93.001, Labor Code.
         SECTION 24.  Subsection (b), Section 171.101, Tax Code, is
  amended to read as follows:
         (b)  Notwithstanding Subsection (a)(1)(B)(ii), a
  professional employer organization [staff leasing services
  company] may subtract only compensation as determined under Section
  171.1013.
         SECTION 25.  Subsection (k), Section 171.1011, Tax Code, is
  amended to read as follows:
         (k)  A taxable entity that is a professional employer
  organization [staff leasing services company] shall exclude from
  its total revenue payments received from a client [company] for
  wages, payroll taxes on those wages, employee benefits, and
  workers' compensation benefits for the covered [assigned]
  employees of the client [company].
         SECTION 26.  Subsections (d) and (e), Section 171.1013, Tax
  Code, are amended to read as follows:
         (d)  A taxable entity that is a professional employer
  organization [staff leasing services company]:
               (1)  may not include as wages or cash compensation
  payments described by Section 171.1011(k); and
               (2)  shall determine compensation as provided by this
  section only for the taxable entity's own employees that are not
  covered [assigned] employees.
         (e)  Subject to the other provisions of this section, in
  determining compensation, a taxable entity that is a client
  [company] that contracts with a professional employer organization 
  [staff leasing services company] for covered [assigned] employees:
               (1)  shall include payments made to the professional
  employer organization [staff leasing services company] for wages
  and benefits for the covered [assigned] employees as if the covered 
  [assigned] employees were actual employees of the entity;
               (2)  may not include an administrative fee charged by
  the professional employer organization [staff leasing services
  company] for the provision of the covered [assigned] employees; and
               (3)  may not include any other amount in relation to the
  covered [assigned] employees, including payroll taxes.
         SECTION 27.  Section 171.2125, Tax Code, is amended to read
  as follows:
         Sec. 171.2125.  CALCULATING COST OF GOODS OR COMPENSATION IN
  PROFESSIONAL EMPLOYER SERVICES [STAFF LEASING] ARRANGEMENTS. In
  calculating cost of goods sold or compensation, a taxable entity
  that is a client [company] of a professional employer organization 
  [staff leasing services company] shall rely on information provided
  by the professional employer organization [staff leasing services
  company] on a form promulgated by the comptroller or an invoice.
         SECTION 28.  The following laws are repealed:
               (1)  Subdivision (2), Section 91.001, Labor Code;
               (2)  Section 91.043, Labor Code; and
               (3)  Subdivision (2), Section 171.0001, Tax Code.
         SECTION 29.  (a)  Not later than January 1, 2014, the Texas
  Commission of Licensing and Regulation shall adopt any rules
  necessary to administer Chapter 91, Labor Code, as amended by this
  Act.
         (b)  The changes in law made by this Act apply only to a
  professional employer services agreement entered into on or after
  the effective date of this Act.  An agreement entered into before
  the effective date of this Act is governed by the law in effect on
  the date the agreement is entered into, and the former law is
  continued in effect for that purpose.
         (c)  Subsection (c-1), Section 91.042, Labor Code, as added
  by this Act, is not intended to change the interpretation of Section
  462.308, Insurance Code, but is intended to clarify the application
  of that section.
         (d)  In adopting rules to implement Section 91.0411, Labor
  Code, as added by this Act, the commissioner of insurance shall
  consider rules adopted with respect to similar benefit plans.
         SECTION 30.  This Act takes effect September 1, 2013.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 1286 passed the Senate on
  April 4, 2013, by the following vote: Yeas 30, Nays 0; and that the
  Senate concurred in House amendment on May 7, 2013, by the following
  vote: Yeas 30, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 1286 passed the House, with
  amendment, on April 26, 2013, by the following vote: Yeas 138,
  Nays 0, one present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor