The opinion finds that a PEO arrangement is impermissible becuase of potential conflict of interest problems. Here is what the opinion states:
To avoid conflicts of interest, a law firm should be able to determine internally, from its own records and by consultation between members of that firm, whether a conflict of interest exists. Under the arrangement described above, a law firm leasing lawyers from the employee leasing company necessarily would have to consult and exchange information with each other law firm leasing lawyers from the same company to insure that no conflict exists.
The disclosure of confidential and privileged information about a client (even the fact that a person is a client of a law firm may be confidential and privileged) likely would be necessary to eliminate any conflict or potential conflict of interest.
CONCLUSION
Because of the potential for conflicts of interest between clients of different law firms to whom lawyer employees are leased by the employee leasing company, the employee leasing arrangement described above is not permissible.
In effect, the opinion finds that there is a potential conflict of interest that the law firm could never avoid.
In Texas, the effect of this holding may be mitigated (at least somewhat) by the subsequent amendements to the Texas PEO licensing statute. The relevant part of the licensing statute is::
Sec. 91.004. Effect of Other Law on Clients and Employees.(a) This chapter does not exempt a client of a license holder, or any assigned employee, from any other license requirements imposed under local, state, or federal law.
(b) An employee who is licensed, registered, or certified under law and who is assigned to a client company is considered to be an employee of the client company for the purpose of that license, registration, or certification.
(c) A license holder is not engaged in the unauthorized practice of an occupation, trade, or profession that is licensed, certified, or otherwise regulated by a governmental entity solely by entering into a staff leasing agreement with a client company and assigned employees.
This question is really one for the lawfirm client company, rather than a problem for the PEO. Only the law firm and its lawyers are responsible for compliance with the ethical rules governing lawyers. For the PEO, the wisest course of action is to point out this issue to the potential law firm client and allow them to make up their own mind. For many law firms, the subsequent statutory amendements provides enough assurance that the law firm will still engage a PEO's services.
