Professional Employer Organizations

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Chapter 72. Professional Employer Organization program 
(effective March 15, 2017)

The Texas Department of Licensing and Regulation (Department) filed a Notice of Intent to Review and consider for re-adoption, revision, or repeal, Title 16, Texas Administrative Code (TAC), Chapter 72, relating to the Professional Employer Organization program. The Notice of Intent to Review was published in the November 18, 2016, issue of the Texas Register (41 TexReg 9165). The public comment period closed on December 19, 2016.

Texas Government Code, §2001.039 requires state agencies to review their rules every four years to determine if the reasons for initially adopting the rules continue to exist. The rules implementing Professional Employer Organizations under Texas Labor Code, Chapter 91 and Occupations Code, Chapter 51 are scheduled for this four-year review.

The Department has reviewed these rules and has determined that the rules are still essential in implementing the statutory provisions of Texas Labor Code, Chapter 91, Regulation of Professional Employer Organization and Texas Occupations Code, Chapter 51. The rules provide details that are not found in the program statute but are necessary for implementation and operation of this program. For example, the rules detail the licensing requirements, responsibilities of licensees, and the fees that are specific to this program.

The Department received one individual comment and one comment from the National Association of Professional Employer Organizations (NAPEO). The individual commenter sought information regarding how to subscribe to web notices. The NAPEO stated that the program is still needed and recommended that the Department readopt the rules in their entirety.

At its meeting on March 1, 2017, the Texas Commission of Licensing and Regulation (Commission), the Department’s governing body, readopted the rules at 16 TAC, Chapter 72 Professional Employer Organization program, in their current form. As a result of this review process, the Department may propose amendments in the future that may further clarify or supplement the existing rules. Any future proposed changes to the rules will be published in the Proposed Rules section of the Texas Register and will be open for public comment prior to final adoption by the Commission in accordance with the requirements of the Administrative Procedure Act, Texas Government Code, Chapter 2001.

The rules are re-adopted by the Commission in accordance with Texas Government Code §2001.039. This concludes the review of 16 TAC, Chapter 72, Professional Employer Organization.

Issued in Austin, Texas, on March 15, 2017.

Brian E. Francis 
Executive Director 
Texas Department of Licensing and Regulation

Changes to the Professional Employer Organization law - House Bill 3150 passed by the 84th Texas Legislature, amended Labor Code, Chapter 91, relating to the calculation of taxable wages paid by a professional employer organization for purposes of the Texas Unemployment Compensation Act. House Bill 3150 and the changes to Chapter 91 became effective September 1, 2015. TDLR encourages all persons interested in the Professional Employer Organization program to review the updated Labor Code, Chapter 91.

TDLR amended the Professional Employer Organization (PEO) administrative rules on November 21, 2013, to implement changes in the PEO law created by Senate Bill 1286, authored by Senator Tommy Williams and enacted in 2013 by the 83rd Texas Legislature. The amended PEO rules took effect January 1, 2014.

Because the statute regulating PEO’s (formerly known as Staff Leasing Services) was more than 15 years old, the language no longer accurately reflected current business models. S.B. 1286 modernized the statute to bring business terms and language in line with the state of the industry. S.B. 1286 also clarified health benefit plan and worker’s compensation insurance options for PEO’s and their clients.

The amendments to the law include:

  • replacing the outdated term “staff leasing services company” with “professional employer organization”;
  • replacing related terms, such as “assigned employee” with “covered employee”;
  • adding new terms “coemployer” and “coemployer relationship”;
  • authorizing a client company to purchase workers’ compensation insurance for covered employees;
  • authorizing a professional employer organization to offer a self-funded health insurance plan, provided the plan is approved by the Texas Department of Insurance;
  • clarifying new notice requirements in S.B. 1286 relating to providing notice to covered employees of the coemployment relationship between a PEO and a client;
  • clarifying that a PEO is responsible for providing to TDLR which party in the coemployment relationship (if any) carries workers’ compensation insurance;
  • adding definitions that clarify some new terms used in S.B. 1286, and define ‘offer to perform’ consistent with other programs regulated by TDLR;

For more information about the TDLR PEO program,contact TDLR at or 800-803-9202. Also, you can sign up to receive TDLR Email Updates to be notified about any further changes or updates to the PEO program.