Professional Employer Organization (PEO) Client Service Agreement
(TX)

Summary

This template is a professional employer organization (PEO) client service agreement for use in Texas that governs the relationship between a client company and a professional employer organization. It is intended for private employers and contains practical guidance, drafting notes, and alternate and optional clauses. It is based on federal and Texas law and does not address all potential state law distinctions; thus, you should check any relevant state and local laws. In Texas, the PEO must apply for and obtain a license from the Texas Department of Licensing and Regulation to provide professional employer services. Tex. Lab. Code §§ 91.011, 91.015, 91.016; 34 Tex. Admin. Code § 3.364(a)(9), (10). The terms of the relationship between the PEO and client company must be set forth in a written contract that allocates the rights, obligations, and responsibilities between the PEO and client company. Tex. Lab. Code §§ 91.031(a), 91.032; 34 Tex. Admin. Code § 3.364(a)(3). Specifically, under Tex. Lab. Code § 91.032(a), the PEO Client Services Agreement must provide that the license holder/PEO: (1) Shares with the client company the right of direction and control over covered employees (2) Assumes responsibility for the payment of wages to the covered employees without regard to payments by the client to the license holder; unless, the client company is obligated to pay such wages through an agreement, contract, plan or policy between the client company and the covered employee and the PEO has not contracted to pay (3) Assumes responsibility for the payment of payroll taxes and collection of taxes from payroll on covered employees (4) Shares with the client company the right to hire, fire, discipline, and reassign the covered employees –and– (5) Shares with the client company the right of direction and control over the adoption of employment and safety policies and the management of workers' compensation claims, claim filings, and related procedures For information on state laws regarding PEOs, see Labor & Employment Law – Employment Relationships: Professional Employer Organizations.