2010 Tennessee Code
Title 62 - Professions, Businesses and Trades
Chapter 43 - Tennessee Employee Leasing Act
62-43-113 - Responsibilities of licensed staff leasing company or group.

62-43-113. Responsibilities of licensed staff leasing company or group.

(a)  A licensed staff leasing company or staff leasing group shall perform the following general responsibilities as a licensee:

     (1)  The staff leasing arrangement shall have a written contract between the client and the staff leasing company setting forth the responsibilities and duties of each party. The contract shall disclose to the client services to be rendered, including charges and fees, the respective rights and obligations of the parties and provide that the staff leasing company:

          (A)  Reserves a right of direction and control over leased employees assigned to the client's location; however, the client may retain sufficient direction and control over leased employees that is necessary to conduct the client's business and without which the client would be unable to conduct its business, discharge any fiduciary responsibility that it may have or comply with any applicable licensure, regulatory or statutory requirement of the client;

          (B)  Assumes responsibility for the payment of wages of its leased employees, its payroll-related taxes and its employee benefits from its own accounts without regard to payments by the client to the staff leasing company; and

          (C)  Retains authority to hire, terminate, discipline and reassign leased employees. However, the client may have the right to accept or cancel the assignment of any leased employee;

     (2)  The staff leasing company shall give written notice of the general nature of the relationship between the staff leasing company and the client to each leased employee assigned to perform services at the client's worksite;

     (3)  Submit to the commissioner, within ninety (90) days of the end of each calendar quarter, a certification by an independent certified public accountant or independent public accountant that for the quarter all applicable payroll taxes have been paid on a timely basis. Upon a showing of reasonable cause, one (1) thirty-day extension per quarter shall be granted;

     (4)  Maintain and make available for the commissioner's inspection any and all records concerning the licensee's conduct of business under its license, which records shall be maintained for a period of three (3) years after termination of the employment relationship or staff leasing arrangement;

     (5)  Notify the commissioner in writing of a change of business address within thirty (30) days of the change;

     (6)  Notify the commissioner in writing within thirty (30) days of any changes among partners, directors, officers, members and controlling persons designated in the license; and

     (7)  Post the license issued under this chapter in a conspicuous place in the principal place of business and display in clear public view in each licensee's office in this state a notice stating that the staff leasing company is licensed and regulated by the commissioner and that any questions or complaints should be directed to the commissioner.

(b)  A licensed staff leasing company shall be deemed an employer of its leased employees and shall have a right to and shall perform the following responsibilities:

     (1)  Pay wages and collect, report and pay employment taxes from its own accounts; and

     (2)  Pay state unemployment premiums as required by law.

          (A)  Method of Reporting and Payment.  A licensed staff leasing company or staff leasing group shall keep separate records and submit separate state unemployment insurance wage and premium reports with payments pursuant to title 50, chapter 7, part 4, to report the leased employees of each client by using the client's state employer account number as provided for in subdivision (b)(2)(A)(i) and using the premium rate based on the aggregate reserve ratio of the staff leasing company as provided in subdivision (b)(2)(A)(ii).

                (i)  Client Account Number.  Each staff leasing company having one (1) or more leased employees with a client in this state shall file an application for an account number for each client having one (1) or more leased employees in this state. The application shall include:

                     (a)  The aggregate state number assigned to the staff leasing company and the name and address and phone number of the staff leasing company;

                     (b)  The name, physical address and phone number of the client;

                     (c)  The name of the client's owner, partners, corporate officers, limited liability company members and managers, if board managed, or general partners;

                     (d)  The federal identification number of the client;

                     (e)  The signature of the client's principal or principals or attorney in fact;

                     (f)  A brief description of the client's major business activity, listing any products produced or sold, or service provided; and

                     (g)  Any other information which may be required by the commissioner of the department of labor and workforce development.

The staff leasing company must notify the department of labor and workforce development in writing of any additions or deletions of clients during the quarter in which such changes occur.

All information furnished to the department of labor and workforce development under this section shall be treated as confidential information as provided in § 50-7-701.

                (ii)  Determination of the Aggregate Reserve Ratio of a Staff Leasing Company.  There shall be two (2) methods used in determining the aggregate reserve ratio of a staff leasing company:

                     (a)  The aggregate reserve ratio of a staff leasing company shall be determined by: totaling all the state unemployment premiums paid on both the state taxable wages of a staff leasing company and on the state taxable wages of all the clients of such staff leasing company for all years during which the staff leasing company has been subject to title 50, chapter 7, and all the years each individual client has been a client of the staff leasing company as of the computation date, as provided in § 50-7-403(k)(1), and subtracting therefrom the total of all benefits charged to the aggregate reserve account of the staff leasing company for all years, including the benefits charged resulting from benefits paid to leased employees of each individual client for all the years each client has been a client of the staff leasing company as of the computation date. The difference shall be divided by the average taxable payroll for the three (3) most recently completed calendar years, ending on the computation date, of the staff leasing company, plus the average taxable payroll of each client for that portion of the three-year period during which such client was a client of the staff leasing company. The resulting quotient will be the aggregate reserve ratio of the staff leasing company beginning the July 1 following the computation date. The employer premium rate for the staff leasing company shall be determined by matching its aggregate reserve ratio to the appropriate premium rate table pursuant to title 50, chapter 7; or

                     (b)  In cases where the aggregate reserve account of a staff leasing company has not been chargeable with benefits for thirty-six (36) consecutive months ending on the computation date, the staff leasing company will be assigned the new employer premium rate based upon the reserve ratio of the staff leasing company's industrial classification as determined pursuant to § 50-7-403(b)(1)(B).

A staff leasing company shall not be considered a successor employer, within the meaning of title 50, chapter 7, to any client and shall not acquire the experience history of any client with whom there is not any common ownership, management or control. The client, upon terminating its relationship with the staff leasing company, shall not be considered a successor employer, within the meaning of title 50, chapter 7, to the staff leasing company and shall not acquire any portion of the experience history of the aggregate reserve account of the staff leasing company with whom there is not any common ownership, management or control. For purposes of this subdivision (b)(2)(A)(ii)(b) , the existence of an employee leasing agreement itself, without other evidence of common control, shall not constitute common ownership, management or control.

          (B)  Joint and Several Liability.  A client shall be jointly and severally liable with a staff leasing company for state unemployment premiums for each of the client's leased employees; provided, however, that a client shall be relieved of joint and several liability for state unemployment premiums if the staff leasing company has posted a corporate surety bond, as described in this subdivision (b)(2)(B), with the administrator of the division of employment security of the Tennessee department of labor and workforce development in the amount of one hundred thousand dollars ($100,000) for so long as the bond remains in force. The corporate surety bond must be in form and content approved by the commissioner of labor and workforce development as evidenced by the commissioner's written consent thereto, and must be issued by an organization currently licensed and authorized to issue the bond in this state. The bond shall be conditioned for the benefit of the commissioner of labor and workforce development, who may enforce the bond to collect unpaid unemployment insurance premiums, interest and penalties owed by the staff leasing company pursuant to title 50, chapter 7, part 4. Any surety is required to provide the administrator of the division of employment security of the department of labor and workforce development sixty (60) days' notice of cancellation of the bond. If after three (3) full calendar years, throughout which a staff leasing company has paid all unemployment insurance premiums due in a timely manner and has a positive unemployment insurance reserve account, the bond may be reduced to an amount no less than thirty-five thousand dollars ($35,000) as determined and approved by the administrator conditioned upon the total taxable payroll for the previous calendar year and other factors deemed relevant by the administrator. Any reduced bond shall be subject to review on no less than an annual basis by the administrator, who may adjust the required amount of the bond as is deemed appropriate.

(c)  A licensed staff leasing company shall:

     (1)  Ensure that its Tennessee employees are covered by workers' compensation insurance provided in accordance with title 50 and the applicable Tennessee insurance laws and regulations;

     (2)  Provide to the commissioner, before issuance of any license pursuant to this chapter, evidence of workers' compensation coverage for all leased employees in this state who are subject to the Tennessee Workers' Compensation Law, compiled in title 50, chapter 6;

     (3)  Notify the commissioner and its clients within ten (10) days of any notice of cancellation of its workers' compensation coverage; and

     (4)  Notify the commissioner and its workers' compensation carrier, if applicable, of the termination of the staff leasing company's relationship with any client to which employees within this state are assigned.

(d)  (1)  A staff leasing company may sponsor and maintain employee benefit and welfare plans for the benefit of its leased employees. Any of those plans that are plans of insurance must comply with the applicable provisions of the insurance laws of this state.

     (2)  An applicant or licensee shall disclose to the commissioner, to each client company and to all eligible leased employees the following information relating to any benefit plan of insurance provided for the benefit of its leased employees:

          (A)  The type of coverage and a copy of the insurance policy or certificate or summary plan description;

          (B)  The identity of each insurer for each type of coverage;

          (C)  The amount of benefits for each type of coverage and to whom or on whose behalf benefits will be paid; and

          (D)  The policy limits on each insurance policy.

     (3)  (A)  There is established a committee to adopt a plan establishing the criteria for a staff leasing company sponsoring and maintaining a plan of self-insurance for health benefits. The committee, appointed by the commissioner, shall be composed of six (6) persons, at least two (2) of whom shall be from the staff leasing business. The department of commerce and insurance shall provide personnel, services, information and other assistance to the committee as needed to make its recommendations.

          (B)  The plan adopted by the study committee shall be filed with the commissioner on or before January 1, 1998.

          (C)  Within thirty (30) days, the commissioner shall approve the plan for self-insurance, unless the commissioner, after due notice and hearing, determines that the plan is not in the public interest.

          (D)  Any licensed staff leasing companies that have established self-insured health benefit programs prior to January 1, 1998, shall have until July 1, 1998, to either come into compliance with any approved plan criteria or obtain insurance coverage for their leased employees.

     (4)  Nothing in this subsection (d) shall require a staff leasing company to provide comparable benefits to leased employees located at different worksites.

(e)  Subject to any contrary provisions of the contract between the client and the staff leasing company, the staff leasing arrangement that exists between a staff leasing company and its clients shall be interpreted for purposes of insurance, bonding and employer's liability as follows:

     (1)  The staff leasing company shall be entitled along with the client to the exclusivity of the remedy under both the workers' compensation and employer's liability provisions of a workers' compensation policy or plan that either party has secured;

     (2)  A staff leasing company shall not be liable for the acts, errors or omissions of a client or of any leased employee acting under the direction and control of a client. A client shall not be liable for the acts, errors or omissions of a staff leasing company or of any employee of a staff leasing company acting under the direction and control of the staff leasing company. Nothing in this subdivision (e)(2) shall limit any contractual liability between the staff leasing company and the client, nor shall this subsection (e) in any way limit the liabilities of a staff leasing company or client as defined elsewhere in this chapter; and

     (3)  Employees leased to a client by a staff leasing company shall be considered as the employees of the client for the purposes of general liability insurance, automobile insurance, fidelity bonds, surety bonds and liquor liability insurance carried by the client. Employees leased to a client by a staff leasing company are not deemed employees of the staff leasing company for purposes of general liability insurance, automobile insurance, fidelity bonds, surety bonds or liquor liability insurance carried by the staff leasing company unless the employees are included by specific reference in the applicable employment arrangement contract, insurance contract or bond.

(f)  The sale of staff leasing arrangements in conformance with this chapter shall not constitute the sale of insurance within the meaning of applicable state law.

[Acts 1994, ch. 950, § 14; 1996, ch. 887, §§ 20, 21; 2002, ch. 845, § 1; 2004, ch. 510, § 5; 2006, ch. 754, §§ 1, 2.]