Unfortunately, HB 1305 – Workers’ Compensation Insurance for Employee Leasing Companies passed through the House Insurance & Banking Subcommittee Tuesday, March 23’rd.  

The bill was amended, the entire bill was replaced with a new version.  Here’s the amendment which replaced the previous text of the bill so you can see how damaging that language could be to the PEO Industry.

It is important that we all reach out and thank those that voted for PEO and more choice for Florida businesses. Please send a message of THANK YOU to these lawmakers for standing up to support PEO’s in Florida: 

Representative Kamia L. Brown (Orlando)  Kamia.Brown@myfloridahouse.gov

Representative Fentrice Driskell (Tampa) Fentrice.Driskell@myfloridahouse.gov

Representative William Cloud ‘Will’ Robinson (Bradenton)  Will.Robinson@myfloridahouse.gov

This bill now moves to the House State Administration & Technology Appropriations Subcommittee. FAPEO, NAPEO and all interested stakeholders are working to prevent this bill from getting heard and killing this bill outright.  

We will alert you to the new committee members that will be our focus to educate on why this bill is bad for Florida.

As a reminder, here are some talking points to select from and adapt for this communication:  

• An employee leasing company covers 100 percent of their employees with workers compensation coverage.
• What bill proponents call a “gap in coverage” is simply workers compensation fraud in construction (paying under the table) and has been persistent in Florida in the traditional business model as well with subcontractors utilizing an employee leasing company.
• Rather than work to address the underlying problem of workers comp fraud, the bill only shifts liability from general contractors to employee leasing companies for workers comp fraud.
• This  bill would only increase workers compensation fraud in construction in Florida.
• It financially encourages general contractors to turn a blind eye to both the price of a subcontractors work and checking workers for subcontractors who are on their jobsite for workers compensation coverage. 
• And it reduces workers compensation coverage options for small to medium sized construction companies that already have limited options for coverage in the open market.

The formal agenda for today’s meeting starting at 9:30 am is below

Insurance & Banking Subcommittee

Start Date and Time: Tuesday, March 23, 2021 9:30 AM

End Date and Time: Tuesday, March 23, 2021 12:15 PM

Location:Webster Hall (212 Knott)

Duration:2.75

Consideration of the following bill(s):

• HB 1305 – Workers’ Compensation Insurance for Employee Leasing Companies
• HB 1593 – Seminole County

Consideration of the following proposed committee substitute(s):

• PCS for HB 305 – Insurance

Meeting Overview/Summary:This meeting will be live-streamed on https://thefloridachannel.org/. Persons who wish to attend must register at www.myfloridahouse.gov, and pick up a pass at the Legislative Welcome Center on the 4th Floor of the Capitol beginning one hour before the start of the meeting. Audience seating will be socially distanced and will be available on a first-come, first-served basis. Registration closes three hours before the meeting starts.

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At 4:45 pm yesterday, an amendment https://static-s3.lobbytools.com/bills/2021/pdf/1305923915.pdf to the already egregious House Bill 1305 as previously written was filed to be reviewed by the Insurance and Banking Subcommittee today. Key changes this amendment brings are as follows:

This amendment section 2, subsection (4), paragraph (g) – “Provides that during the term of the employee leasing arrangement, if the client company is a subcontractor engaged in the construction industry, all leased and nonleased employees of the subcontractor, including any such employees who are hired by the subcontractor, commence work for the subcontractor, or are hired directly by the employee leasing company during the term of the employee leasing arrangement, are deemed employees of the employee leasing company for purposes of workers’ compensation coverage”.

This amendment section 2, subsection (4), paragraph (h), “Provides at least 10 days’ notice to a client company who is a subcontractor engaged in the construction industry before terminating an employee leasing arrangement.If the termination is for cause, allows the client company to cure any contractual defaults or deficiencies within the time frame”.

Amendment section 4, “During the term of an employee leasing arrangement with a client company who is a subcontractor engaged in the construction industry, all leased and nonleased employees of the subcontractor, including any such employees who are hired by the subcontractor, commence work for the subcontractor, or are hired directly by the employee leasing company during the term of the employee leasing arrangement, are deemed employees of the employee leasing company for purposes of workers’ compensation coverage”.

Amendment section 7, “If an employee leasing arrangement between an employee leasing company and a client company who is a subcontractor engaged in the construction industry is terminated, the employee leasing company must send notice by first class mail to the last known address of each employee who was assigned to the client company. The notification must include the date the employee leasing arrangement was terminated. The notice must also be sent by first class mail to all contractors with whom the client company has contracted, if known.

Amendment section 8, “Workers’ compensation coverage must continue to be provided by the employee leasing company

for 20 days after the leasing company terminates the arrangement with a client company who is a subcontractor engaged in the construction industry.”

This language if added and passed will effectively prevent those in the construction industry from doing business with a PEO.

The original language of HB 1305 impacts PEO’s in Florida in the following ways:

• This bill https://flsenate.gov/Session/Bill/2021/1305/BillText/Filed/PDF, unlike SB 820, is focused only on the construction industry
• If passed, the PEO is on the hook for workers’ compensation for all employees of any subcontractor, whether reported or not – the PEO arrangement automatically covers the uninsured employees without the subcontractor having to pay a premium for the coverage
• If passed, it allows those that are fraudulently doing business without insurance to have a safety net to bail them out
• If passed, the workers’ compensation market for construction accounts will constrict rapidly, especially for General Contractors and those that rely heavily on sub-contracted work
• If passed, WC coverage (coemployment) starts now at hiring level of the subcontractor and employee, versus when employee is reported to PEO 
• The language of this bill keeps bringing up the “hiring the person directly by the employee leasing company”, which tells me there is confusion that a PEO would normally hire employees for a client company – I believe there is confusion with the staffing industry
• Section 3 (4) “During the term of an employee leasing arrangement with a subcontractor, if a subcontractor does not obtain workers’ compensation insurance for non-leased employees, a person is deemed an employee of the employee leasing company for purposes of workers’ compensation insurance” – read anyone on the job-site that cannot prove they have their own workers’ compensation coverage will fall back on GC and thus PEO
• It is anticipated that further argument is going to be made on a minimum amount of days (prob 30) to give a client company to get off their workers’ compensation policy

This is the summary of the bill’s impact on the State’s WC system according to the analysts https://www.flsenate.gov/Session/Bill/2021/1305/Analyses/h1305.IBS.PDF

What is especially remarkable to me is that there has been little analysis done on the economic and market impact these decisions will have on the constituents of Florida in terms of availability, conditions and price.

I hope the Florida JUA is ready for the waterfall of construction-related accounts it will be asked to take over in light of this huge reduction of workers’ compensation capacity for construction in Florida. As our State’s property market becomes the market of first resort, one has to wonder if the workers’ compensation residual market will be the next to overpopulate.

Late on Friday, it was announced that House Bill 1305 https://flsenate.gov/Session/Bill/2021/1305 …was added to the Florida Insurance & Banking Subcommittee agenda this coming Tuesday morning (3/23) at 9:30 am. If the bill stays in its current format, highlights are:

• This bill https://flsenate.gov/Session/Bill/2021/1305/BillText/Filed/PDF, unlike SB 820, is focused only on the construction industry
• If passed, the PEO is on the hook for workers’ compensation for all employees of any subcontractor, whether reported or not – the PEO arrangement automatically covers the uninsured employees without the subcontractor having to pay a premium for the coverage
• If passed, it allows those that are fraudulently doing business without insurance to have a safety net to bail them out
• If passed, the workers’ compensation market for construction accounts will constrict rapidly, especially for General Contractors and those that rely heavily on sub-contracted work
• If passed, WC coverage (coemployment) starts now at hiring level of the subcontractor and employee, versus when employee is reported to PEO
• The language of this bill keeps bringing up the “hiring the person directly by the employee leasing company”, which tells me there is confusion that a PEO would normally hire employees for a client company – I believe there is confusion with the staffing industry
• Section 3 (4) “During the term of an employee leasing arrangement with a subcontractor, if a subcontractor does not obtain workers’ compensation insurance for non-leased employees, a person is deemed an employee of the employee leasing company for purposes of workers’ compensation insurance” – read anyone on the job-site that cannot prove they have their own wc will fall back on GC and thus PEO
• It is anticipated that further argument is going to be made on a minimum amount of days (prob 30) to give a client company to get off their wc

This is the summary of the bill’s impact on the State’s WC system according to the analysts https://www.flsenate.gov/Session/Bill/2021/1305/Analyses/h1305.IBS.PDF

My commentary is that there is no “gap in coverage” for workers’ compensation. You pay and you are covered. It is a statutory line without limitations or exclusions.

It is a shame that something so simple is now being confused. If, like in 39 other States/DC we saw this as a global problem of uninsured workers which was neutralized with an Uninsured Employer Fund. The claimant is taken care of foremost and then the State goes after the proper offender who did not purchase wc.

As we understand further plans of action we will update accordingly.