Professional Employer Organizations Penalties and Sanctions

Professional Employer Organizations (PEO)

Texas Labor Code, Chapter 91

16 Texas Administration Code, Chapter 72

Class A:

1^st Violation, Reprimand to $5,000

2^nd Violation, $2,500 to $5,000 and/or up to 6-month probated suspension

3^rd Violation, $5,000 per day not corrected plus 6 month probated suspension to 1-year full suspension.

• Failed to disclose to the Department within 45 days the addition of a new controlling person - 91.016(c)
• Failed to notify the Department in writing of any change in the location of the license holder's primary business office, the addition of more business offices, or a change in the location of business records - 91.018(c)
• Failed to clearly identify the license holder’s name on each proposal and contract - 91.018(f)
• Failed to cooperate with an investigation, examination or audit of the licensee’s records by the licensee’s insurance company - 91.020(5)
• Failed to notify the Department by the 31st day after the effective date of a change in ownership, principal business address, or the address of accounts and records - 91.020(6)
• Refused to meet health and safety requirements - 91.020(8)
• Used professional employer organizations to avert or avoid an existing collective bargaining agreement - 91.020(13)
• Failed to give each employee written notice of client/PEO agreement - 91.031(b), 91.031(c)
• Failed to post license in conspicuous place - 91.045(a)
• Failed to display notice with Department information - 91.045(b)
• Failed to maintain a registered agent in this state - 91.049
• Failed to update required information within 45 days of change - 72.70(b)
• Failed to allow the Executive Director or his designee to audit records - 72.71(a)
• Failed to maintain the required records for two years following the termination of a professional employer organizations contract - 72.71(b)

Class B:

1^st Violation, $2,500 to $5,000 and/or up to 6-month probated suspension

2^nd Violation, $5,000 plus 1-year probated suspension to 1-year full suspension

3^rd Violation, $5,000 per day not corrected plus 1-year full suspension to revocation

• Failed to notify the department in writing that a controlling person has been convicted of a felony - 91.020(4)
• Failed to correct any tax filing or payment deficiencies within a reasonable time - 91.020(7)
• Was delinquent in payment of license holder’s insurance premiums - 91.020(9)
• Was delinquent in employee benefit plan premiums - 91.020(10)
• Failed to establish terms of professional employer organization agreement by written contract - 91.031(a)
• The contract between the professional employer organization and the client company failed to include the minimum requirements, specifically:
• Failed to provide that the professional employer organization and the client company share the right of direction and control over employees assigned to the client’s worksites - 91.032(a)(1)
• Failed to provide that the professional employer organization assumes responsibility for payment of wages to assigned employees without regard to payments from the client company to the professional employer organization - 91.032(a)(2)
• Failed to provide that the professional employer organization assumes responsibility for payment of payroll taxes and collection of taxes from payroll for assigned employees - 91.032(a)(3)
• Failed to provide that the professional employer organization and the client company share the right to hire, fire, discipline and reassign employees - 91.032(a)(4)
• Failed to provide that the professional employer organization and the client company share the right of direction and control over the adoption of employment and safety policies and the management of workers’ compensation claims - 91.032(a)(5)
• Failed to report quarterly to the Texas Workforce Commission the required information for each client company - 91.044(a)
• Failed to maintain adequate books and records - 91.048(1)
• Failed to maintain client information, a copy of each client company contract, and the client’s listing by classification code - 91.048(2)
• Failed to notify Department or addition of deletion of controlling person - 91.048(3)
• Failed to notify employees and clients of Department information - 72.70(a)
• Failed to notify each assigned employee of circumstances in which the client company is solely obligated to pay wages - 72.70(a)(1), 72.70(a)(2)

Class C:

1^st Violation, $3,000 to $5,000 and/or 1-year probated suspension up to revocation

2^nd Violation, $5,000 per violation plus 1-year full suspension up to revocation

3^rd Violation, $5,000 per day not corrected plus revocation

• Engaged in or offering professional employer organization without a license - 91.011, 91.020(1), 91.061(1)
• Conducted business under a name not specified on the license - 91.018(a), 91.018(d)
• Advertised under a trade name, trademark, service mark, or parent company name which had not been added to the license - 91.018(e)
• Transferred or attempted to transfer a license - 91.020(2)
• Knowingly made a material misrepresentation to an insurance company, the Department, or another governmental agency - 91.020(11)
• Failed to maintain or demonstrate minimum net worth as specified in section 91.014 - 91.020(12)
• Failed to disclose insurance information - 91.041(b)
• Sponsored a self insurance plan not permitted by the Employee Retirement Income Security Act of 1974 - 91.043(a)
• Failed to be responsible for the license holder’s contractual duties and responsibilities concerning insurance and benefit plans; specifically, failing to manage, maintain, collect, and make timely payments for:;
• Insurance premiums - 91.046(1);
• Benefit and welfare plans - 91.046(2);
• Other employee withholding - 91.046(3);
• Any other expressed responsibility within the scope of the contract - 91.046(4)
• Failed to comply with all state and federal laws relating to reporting, filing and maintaining benefit and welfare plans - 91.047
• Used the name or title professional employer organizations, a derivative thereof, or representing that an entity is licensed without in fact having a license - 91.061(2)
• Represented as a person’s own the license of another - 91.061(3)

Class D:

1^st Violation, Revocation

2^nd Violation, Revocation

3^rd Violation, Revocation

• Giving materially false or forged evidence in connection with obtaining a license or during disciplinary proceedings - 91.061(4), 72.70(d)
• Failed to comply with previous order of Commission/Executive Director - 51.353(a), 72.90
• Obtaining a license by fraud or false representation - 60.63(b)
• Failed to pay the Department for a dishonored check - 60.82