PEO Bill 1305 Amendment #1 Entered Yesterday, Reviewed Today

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.

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