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Staff Leasing - Professional Employment Organizations

The Texas Staff Leasing Services Act was adopted in 1995 by the Texas Legislature and is found in Chapter 91 of the Texas Labor Code. The Staff Leasing Services Act sets forth the legal requirements that must be followed in a staff leasing arrangement. The Texas Department of Licensing & Regulation also enforces the Staff Leasing Services Administrative Rules contained in Chapter 72 of the Texas Administrative Code.

Staff leasing statutes create a co-employment relationship between the staff leasing company and the client. The relationship involves a contractual allocation and sharing of employer responsibilities between the staff leasing company (the PEO) and its client. The PEO becomes the administrative employer and the client becomes the job-site employer. The client retains supervision for the day-to-day activities and responsibilities of running its business while the PEO assumes many of the responsibilities for human resources. The workers become employees of the staff leasing company and are assigned to work at the client’s location. The PEO establishes and maintains an employee relationship with leased employees that are intended to be long term and continuing in nature. Seasonal and temporary employees do not satisfy the legal definition of leased employees contained in the Texas Labor Code. Staff leasing companies do not recruit employees and assign them to support the client’s workforce.

The Texas Department of Licensing and Regulation (TDLR) regulates Texas staff leasing companies. Staff leasing companies generally provide the following services: payroll administration and payment of employment taxes; reporting, collecting and depositing employment taxes with state and federal authorities; and providing workers’ compensation insurance coverage for the workers that are leased by the staff leasing company to the client.

A written employee leasing agreement must document the terms of a staff leasing arrangement. The employee leasing agreement must also restate specific statutory language contained in the Texas Labor Code. An employee leasing agreement should clearly define the responsibilities and assumption of risk of each co-employer. The staff leasing company and the client are solely responsible for certain obligations of employment, while both parties share responsibilities for other obligations.

Reid & Dennis attorneys have extensive experience with staff leasing arrangements and resolving disputes that arise out of staff leasing relationships. We also assist staff leasing companies with regulatory matters before a variety of state regulatory agencies including the Texas Department of Licensing and Regulation, the Texas Workforce Commission and the Texas Department of Insurance. We also monitor legislative developments in order to advise our clients of recent developments and discuss important issues with state agencies in an effort to improve the staff leasing industry.

Our experience provides us with the ability to prepare employee leasing agreements that satisfy the statutory requirements, clearly defines each party’s responsibilities and establishes the framework for a long-term relationship. We also have the expertise to advise our clients of potential problems and solutions to keep our clients out of protracted litigation.