Senate Bill 1286, passed in the 83rd Legislative Session, is effective September 1, 2013. This bill made changes to the program formerly known as Staff Leasing. The program is now called Professional Employer Organizations (PEO). All of our forms, Frequently Asked Questions (FAQs), and rules will be updated to reflect this change. Additionally, changes were made in the new law regarding who can sponsor insurance programs and workers' compensation insurance for covered employees. We will be periodically updating our FAQs so please check our web site and sign up for email notifications.
1. What is a Professional Employer Organization (PEO)?
A Professional Employer Organization (PEO) is the new term for “staff leasing company” and is regulated by the department through Chapter 91 of the Texas Labor Code. The department issues licenses, regulates compliance with the law, and has authority to sanction a licensee for proven violations. A PEO is defined as a business entity that offers professional employer services. Professional employer services are 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. The new definition is similar to the “staff leasing” definition. The exemptions are essentially the same for temporary workers, independent contractors, and for a client and PEO that have more than 33 % common ownership.
2. I already have a PEO license, do I need to reapply for a PEO license?
No. The licensing and renewal process will be the same with TDLR with some slight modifications to the forms.
3. Did the financial qualifications change to keep and maintain a PEO license?
No, the requirement for audited financial statements and positive working capital remain the same.
4. What is a coemployment relationship?
A coemployment relationship is a contractual relationship between a PEO and a client that involves the sharing of employment responsibilities to covered employees in accordance with a professional employer services agreement and Chapter 91, Texas Labor Code.
5. What is a 'covered employee'
A covered employee is the new term for the 'assigned employee,' and is a person having a coemployment relationship with a PEO and a client.
6. Are there any changes to a PEO's or client's ability to obtain retirement and welfare benefit plans?
Yes, a client and a license holder are each considered an employer under the laws of Texas for purposes of sponsoring retirement and welfare benefit plans for covered employees. 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 welfare benefit plan may include health, life, and disability insurance. For more information on retirement and health benefit plans available, contact the Texas Department of Insurance at www.tdi.texas.gov or (800) 578-4677.
7. May a PEO offer a self-funded health benefit plan?
Yes, a license holder may sponsor a benefit plan that is not fully insured if the license holder meets the requirements of the new law, and is approved to sponsor the plan by the Commissioner of Insurance at the Texas Department of Insurance (TDI). The new law authorizes the Commissioner of Insurance to adopt new rules that must be met by the license holder and the plan, including a fidelity bond, use of an independent actuary, and other requirements. For more information on self-funded health benefit plans and requirements, please contact TDI at www.tdi.texas.gov or (800) 578-4677.
8. May a client company also purchase a workers' compensation policy for its covered employees?
Yes, under the new law, the client or the PEO may offer workers’ compensation insurance. If workers’ compensation coverage is offered, the professional employer services agreement must state which party must maintain the coverage, and a copy of the agreement must be given to the Texas Department of Insurance (TDI) on request. The information obtained by TDI is confidential and not subject to disclosure under the Texas Open Records Act, Chapter 552, Texas Government Code. For more information regarding workers’ compensation insurance, contact TDI’s Workers’ Compensation Division at www.tdi.texas.gov/wc/index.html or (800) 372-7713.
1. What are the current financial requirements for PEO companies in Texas?
PEO companies applying for a new license, or renewing their current license, must submit audited financial statement that show positive working capital for that company. The statement must show the company's working capital on a date not more than 15 months prior to the date the original or renewal application is received by our department.
2. How do I determine my company’s working capital?
Working capital is determined by subtracting your company’s current liabilities from your company’s current assets as determined by generally accepted accounting principles.
3. How much working capital is my company required to demonstrate to comply with Section 91.014?
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 assigned employees;
(2) $75,000 if the applicant employs at least 250 but not more than 750 assigned employees; and
(3) $100,000 if the applicant employs more than 750 assigned employees.
4. If my company has negative working capital, how can I comply with Section 91.014?
If your company has negative working capital (i.e. current liabilities exceed current assets) then you may use a bond, letter of credit, or guarantee equal to the amount of the negative working capital PLUS the amount of positive working capital required by Section 91.014.
5. How do I determine the amount of the bond, letter of credit, or guaranty that is required, if my company has negative working capital?
If your company’s most current audited financial statement indicates negative working capital, use the following calculation to determine the minimum amount of the bond, letter of credit, or guaranty that is required.
positive working capital as required by Section 91.014
+ amount of negative working capital (i.e. current liabilities exceed current assets)
= total amount of bond, letter of credit, or guaranty form
Please note, if you use a:
6. How is my audited financial statement required to be prepared?
The audited financial statement must be prepared in accordance with generally accepted accounting principles, be audited by an independent certified public accountant, and be without qualification as to the going concern status of the applicant.
7. Can the audited financial statement reflect an opinion on the balance sheet only, or must it express an opinion on all of the information in the statement?
The audited financial statement must be "without qualification"; the opinion expressed must include the entire statement, not just the balance sheet.
8. I'm starting a new company and we don't have enough history to have an audited financial statement completed. What do we do?
If you don't have sufficient operating history to have an audited financial statement based on at least 12 months of operations, you may meet the working capital requirements by providing us with financial statements that have been reviewed (not audited) by a certified public accountant (CPA). Please enclose a cover letter from the CPA with the financial statement.
9. Can I continue to use my surety bond or letter of credit alone to meet the financial requirements to renew my license?
No. All companies are required to submit an audited financial statement. If you have negative working capital you may use a surety bond, letter of credit or guaranty to make up the deficiency.
10. Our audited financial statement is more than nine months old. Is this okay?
Yes. Effective December 31, 2011, the audited financial statement should show the company's working capital on a date not earlier than fifteen months before the date on which the application is submitted. For example, if we receive your renewal application on March 1, 2012, you may still use your audited financial statement for the period ending December 31, 2010. After March 31, 2012, however, this statement could no longer be used.
11. Can we use a consolidated audited financial statement as proof of working capital?
Yes, provided that the individual company's assets and liabilities are clearly illustrated in the audited financial statement. Each subsidiary in a consolidated financial statement must be listed separately, including total assets and liabilities. A parent company financial statement, with no illustration of the working capital for each subsidiary, is not acceptable as proof of working capital.
12. Can we use a company tax return prepared by a CPA as proof of working capital?
No, company tax returns are not accepted to document working capital.
1. What are the key services and functions of this program?
TDLR processes applications, issues licenses, and investigates complaints against law violations and can take disciplinary action.
There are two types of licenses: A full license and a limited license. Both licenses entitle a person to assign or lease their permanent employees to another employer.
The full license is an annual license requiring an extensive background check through the Federal Bureau of Investigations and the Texas Department of Public Safety.
The limited license is an annual license and does not require a background check. Eligibility for a limited license is restricted to out-of-state companies who assign 50 or fewer employees in Texas.
2. What is an “assurance organization?”
“Assurance organization” means an independent entity approved by the commission that:
3. Do I need a license to assign employees to a small office domiciled in another state?
Yes, any person who performs or offers to perform PEO as defined by The Texas Labor Code, Chapter 91 must be licensed with the department. You may be eligible for a limited PEO license. See §72.22 License Requirements-Limited License.
4. Is there a possibility that Limited license holders will not be required to produce audited financials given that limited license holders can only have up to 50 employees?
5. Will there be a mechanism by which we can apply for a waiver for the audited financials provision, considering our particular situation?
1. How do I obtain a “full” PEO license?
To apply as a PEO company in this state, you must submit:
The necessary forms are available on our website. The application and fees will need to be mailed to the Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711.
2. How do I renew a “full” PEO license?
To continue operating as a PEO company in this state, a license must be renewed annually by :
Non-receipt of a license renewal notice from the department does not exempt a person from any requirements of this chapter.
3. How do I obtain a “limited” PEO license?
For a limited PEO company to operate in this state, a limited licensee must:
4. How do I renew a “limited” PEO license?
To continue qualification for a limited license, a person at all times while licensed must:
And to continue operating as a PEO company in this state, a limited licensee must renew annually by submitting:
Non-receipt of a license renewal notice from the department does not exempt a person from any requirements of this chapter.
5. If we only have one assigned employee working in Texas, do I have to be licensed in Texas?
Yes, you must be licensed if you have any assigned employees in Texas.
6. Is there a temporary PEO license that I can obtain until I get my permanent license?
There are no provisions in the statue to allow for a temporary license.
7. Can I start my business after I've made application with the Department or do I have to wait until my license is issued to operate in Texas?
You must wait until you receive the license issued to you.
8. How long does it take to issue a PEO license?
The processing time is approximately 90 days from the date the Department receives a completed application and other required documentation.
9. How do I change address on my PEO license?
You will need to submit the request in writing to the Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711 along with a $25.00 fee for each amended license; OR, you may now change your contact information online at https://www.tdlr.texas.gov/ContactInfoUpdate/LicenseProgram.aspx.
10. How much does a PEO license cost?
The fees are as follows:
11. My license has expired. How do I get it back?
If your license has expired, see the fee schedule below and the New License Application Instructions (Form #001 PEO) for the list of the required documents.
| License Type | 1 to 90 days late | 91 days to 18 months late |
|---|---|---|
| 0 - 249 assigned employees | $375 | $450 |
| 250 - 749 assigned employees | $600 | $750 |
| 751 or more assigned employees | $975 | $1250 |
| Limited License | $375 | $450 |
NOTE: all renewal fees are non-refundable.
If your license has been expired for more than 18 months but less than 3 years, you may submit for approval a written request stating the reason your license should be renewed or 'Request to Executive Director for Expired License Renewal' form with a fee in the amount equal to two times the normal renewal fee.
If your license has been expired for three (3) years or more, you may not renew your license. You must re-apply for a new license.
You may be subject to enforcement actions, including administrative penalties and sanctions for operating with an expired license (expired less than 18 months) or operating without a license (expired 18 months or more).
If your renewal application is post marked before your expiration date, it is considered a timely renewal.
12. Is workers’ compensation required to obtain a PEO License?
No; however, if you decide to obtain workers’ compensation after the license has issued, submit a copy of the Certificate of Insurance to the department.
13. How do I add or delete a controlling person from a “full” or “limited” PEO license?
If the change is performed while in the renewal process, the $25 amended fee is not required.
14. Do I need a PEO license for each location or each name?
A PEO license is required for each name you are performing services under. A license holder may not conduct business under more than one name unless the license holder has obtained a separate license for each name. The number of locations is not a factor.
15. Am I allowed to transfer my PEO license?
No, transferring or attempting to transfer a license issued under this chapter is against the rules. See Section 91.020 Grounds for Disciplinary Action.
16. What is the time frame for notifying the department of any change to my initial or renewal license application?
A licensee must update the information provided to the department within 45 days after any change to the information.
17. How long must proof of net worth/working capital be kept?
18. How do I get an original copy of my license if I lose it?
Send a check or money order in the amount of $25 and a written request for each duplicate license to:
TDLR
P. O. Box 12157
Austin, TX 78711-2157
19. I’m currently licensed and now wish to cease operations, what do I need to do?
You must notify TDLR no later than 60 days prior to either ceasing operations in this state or not renewing your license in this state. If you are filing for bankruptcy or being placed in receivership, you must notify TDLR as soon as possible, and you must provide the contact information for the bankruptcy trustee or receiver and the court handling these proceedings.
20. How long do I have to maintain the financial security?
Financial security must be maintained for the entire time the PEO company continues to do business in this state or is registered to do business in this state. In addition, the PEO company must keep the financial security in effect until the latter of:
When a PEO applies, it must submit proof of financial security to TDLR that will cover the one-year license period plus two years after the license expiration date.
21. What are the responsibilities of the licensee and the licensee records?
22. Are Designated Agents for Service of Process required? May it be a person?
Yes, designated agents are required for initial and/or renewal applications. Yes, a person may be a designated agent if they have they have a physical address in Texas. A P.O. Box is not acceptable.
23. How do I obtain a copy of my renewal form?
Contact Customer Service by phone at (800) 803-9202 (within Texas) or (512) 463-6599 or by email to request a copy. Please include your license number.
24. Does the department send out expiration notices?
As of April 2009 the department no longer sends expiration notices. It is the license holder’s responsibility to renew their license before expiration. Non-receipt of a license renewal notice from the department does not exempt a person from any requirements of this chapter.
25. My federal id number is changing, what do I need to do?
You must apply as a new applicant and meet all the requirements of a new application.
1. If an entity is providing payroll only, would they be considered a PEO? How about if they are providing payroll and benefits with no leasing or staffing of people?
No license is required if an organization that provides payroll services only to one or more entities not considered to be providing PEO. A company providing PEO must be licensed if the company’s employees are assigned to work for the company’s client companies and employment responsibilities are in fact shared by the company and its client companies. See Labor Code, Section 91.001 (14).
2. How do I know if a new license is required if I sell the company?
We apply a fairly simple rule to the sale of PEOs and determining when a new license is needed: If the Federal ID number of the license holder changes, a new license is needed. The license number is tied to the Federal ID number.
If a new license(s) will be needed for these license holders, then yes, the license(s) must be issued before the sale happens, otherwise they will be operating without a license. The new controlling persons will need to be disclosed, but not until AFTER the sale. In fact, they have 45 days after the sale is complete to inform us of the new controlling persons.
3. May a PEO offer partially funded health plans?
A license holder may not sponsor a plan of self insurance for health benefits except as permitted by the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.).
(b) For purposes of this section, a "plan of self insurance" includes any arrangement except an arrangement under which an insurance carrier authorized to do business in this state has issued an insurance policy that covers all of the obligations of the health benefits plan.
The Department is the primary enforcement authority for complaints against PEO companies. The most common complaints involve unlicensed activity and failure to pay wages to leased employees. The Department investigates and resolves complaints, conducts hearings, and may impose administrative penalties and sanctions if a violation has occurred.
1. How do I file a complaint?
There are several ways:
2. What are the administrative Sanctions/Penalties?
If a person violates Texas Labor Code, Chapter 91, an administrative rule, order of the Executive Director or commission proceedings may be instituted to impose administrative sanctions including license revocation, administrative penalties or both in accordance with Texas Labor Code, Chapter 91, Texas Occupations Code, Chapter 51, and any associated rules.
1. How do I obtain copies of applications, certificates, complaints, and other types of documents from the department?
Please submit an open records request through the TDLR Records Center.
2. What is TDLR’s contact and mailing information?
Mailing address:
TDLR
P. O. Box 12157
Austin, TX 78711
Physical address:
TDLR
920 Colorado
Austin, TX 78701
Telephone: (512) 463-6599
Toll-Free (in Texas): (800) 803-9202
Fax: (512) 475-2871
Relay Texas-TDD: (800) 735-2989
Email
3. Who do I contact if I need interpretation of a law/rule/provision?
Please contact your private legal counsel for assistance.
55. Where may I obtain a list of active PEO companies?
Select “Professional Employer Organizations” as the license type.
You may also call TDLR at (800) 803-9202 (Texas only) or (512) 463-6599, and speak with a customer service representative.
56. How may I receive notification of new and changing information with your department?
You may sign up on the TDLR E-mail Subscriber Notification Lists. These lists were established to allow subscribers to receive automated notification of new and changing information.