Board of Employee Leasing Companies Rule Workshop Report

On Tuesday, June 17, 2008, the Department of Business and Professional Regulation’s Board of Employee Leasing Companies (“Board”) held a Rule Development Workshop on Rule 61G7-10.0014: Requirements for Evidence of Workers’ Compensation Coverage to discuss specific parameters associated with the requirement that employee leasing companies maintain workers’ compensation coverage.  To view the complete text of the Proposed Rule, click here.

Proposed changes to this Rule include incorporation of a Form (D8PREL-4522 Quarterly Compliance Form) that would serve as proof of coverage for companies applying for a license to do business in the State of Florida.  To view a copy of the Form, click here. 

The meeting was called to order by Board Chairperson Kelly Lanza, with Vice-Chair Marjorie Seltzer, Executive Director Rick Morrison, Abram Finkelstein, Warren Schoenfisch, Deborah Segal, Krista Woodard, and Board Counsel in attendance.  Also in attendance were concerned parties from the workers’ compensation industry.

Chapters 440 and 468, Florida Statutes, govern the Board in its ability to grant a license to a Professional Employer Organization (“PEO”) in the State of Florida.  At a previous Board meeting, inconsistencies between the statutes and rules and actual Board practices were revealed.  These inconsistencies occurred because the statutory language is ambiguous. 

Chapter 440 is a general licensure statute providing for any non-construction company with more than three employees to carry workers’ compensation coverage for all employees, but it does not specify which type of employees—leased or internal—must have coverage. 

Referring specifically to employee leasing organizations, Chapter 468 is more restrictive, but does not clarify which type of employee must have coverage.  Some Board members interpret the statutes to mean that all employees must have coverage at the time of initial license application, while other Board members interpret that only leased employees must have coverage at that time.  Board members are also in disagreement about whether potential leased employees should have coverage at the time of license application. 

According to Florida law, the Board cannot grant a license to an employee leasing company until that company can demonstrate that it has sufficient workers’ compensation coverage.  An employee leasing company cannot hire any leased employees in the State of Florida until it has a license to do business in Florida. 

This ambiguity is causing difficulties with companies applying for a first-time license in the State.  Some companies are running into a “Catch-22” situation: they cannot obtain workers’ compensation insurance coverage unless they have leased employees, but they cannot hire leased employees until they obtain coverage. 

Currently, the Board requires evidence of workers’ compensation coverage for all employees, including potential leased employees, at the time of application for licensure, and does not accept client-based or self-insurance as the sole coverage type, as dictated by Florida law.  

Board members expressed concern regarding the following issues:

• Interpreting Chapter 468 to mean that the requirement that all employees must have coverage at the time of licensure might overstep the Board’s authority
• That the potential for abuse would be created if coverage is not required as a condition of licensure until the first leased employee is hired
• That if the Board starts accepting client-based and other coverages as allowed by law, there might not be sufficient mechanisms in place to verify coverage

After lengthy discussion regarding the Board’s authority and options to solve the statutory ambiguities, the Board voted on whether to continue requiring companies to provide evidence of workers’ compensation coverage for potential leased employees upon initial application for licensure.  The Board voted against continuing the current practice.

Board Counsel stated that many other questions now need to be answered, since the Board voted to reject the current practice.  As a result, the Board decided that the current practice will continue during the time between this meeting and when the Rules implementing the statutes that govern the Board are formally changed. 

The Board also determined that, until the Rules are changed, complaints will continue to be asserted against companies that state that they have client-based coverage only (traditionally, these statements have come in the form of a handwritten note on the license application).  Those cases will be referred to Board Prosecuting Attorney Eric Hurst, who will refer the case back to the investigators for supplemental investigation.

If those companies can demonstrate sufficient evidence of client-based coverage by providing the signed and notarized form listed in Rule 61G7-10.0014, the prosecution then will then be dropped and the license will be granted.

Board Counsel will examine the relevant rules to ensure the language is consistent in each and that there is no ambiguity, and will provide a list of recommended changes for the Board to review at its next meeting in August, 2008.  In order to aid in the decision of what changes need to be made, Counsel will accept public comment.

The Workshop was then adjourned.

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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