Under the original version of the bill, PEOs would be treated as a subcontractor under the existing mechanic's lien statute. PEOs that were not paid by their client, could file a lien against a construction project, provided that the client company was a contractor or subcontractor on that construction project. Because of the lien against the project, the project owner would then have an incentive to make certain the PEO got paid.
The Committe substitute fundamentally changes the bill, rendering it substantially less valuable.
Under the committee substitute, two crucial changes were made: First - the lien attaches only to the client company's prooperty, and second - the lien expires after one year.
Also, the substitute bill removes the language from the existing mechanic's lien statute, and makes it a stand alone lien. This is significant, since it means that any uncertainty in the langauge of the bill will have to be litigated to be cleared up. Also with no other lien to cross reference, it is doubtful in my mind that you can read this bill as providing a basis to attach a lien against the property of anyone other than the client company.
Here is what the Committee substitute says:
Sec. 64.003. PROPERTY SUBJECT TO LIEN. The lien attaches to
all products, papers, machinery, tools, fixtures, appurtenances,
goods, wares, merchandise, contracts, chattels, or other things of
value that are created wholly or partly with the staff leasing
services provided or that are necessarily connected with the
performance of the staff leasing services provided and that are
owned by or in possession of the client company or the agent of the
client company that entered into the contract with the staff
leasing services company.
This section unfortunately is not clear, given the number of "or's" in the sentence. There are two ways to parse this sentences.
Possible reading #1:
The lien attaches to: (A) all products, papers, machinery, tools, fixtures, appurtenances, goods, wares, merchandise, contracts, chattels, or other things of value that are created wholly or partly with the staff leasing services provided or that are necessarily connected with the performance of the staff leasing services provided; and (B) that are owned by or in possession of the client company or the agent of the client company that entered into the contract with the staff leasing services company.
If this is the correct reading, this means that the lien applies ONLY to property owned by the Client Company.
Possible Reading #2
The lien attaches to: (A) all products, papers, machinery, tools, fixtures, appurtenances, goods, wares, merchandise, contracts, chattels, or other things of value that are created wholly or partly with the staff leasing services provided or (B) that are necessarily connected with the performance of the staff leasing services provided and that are owned by or in possession of the client company or the agent of the client company that entered into the contract with the staff leasing services company.
If #2 is the correct way to read the Committee Substitute, then the lien could attach to any property "created wholly or partly" with the labor of the worksite employees, even if not owned by the client company.
I have to say, I think #1 is the more likely way to read the bill. Especially since there is no mention in the bill of the rights of third parties whose property would be subect to this lien. I think the courts would be very troubled by the idea of a lien attaching to the property of third parties, when there is not a clear basis in the langauge of this (stand alone) lien statute addressing the rights and obligations of third parties.
Also, the Committee substitute also provides that the lien is valid for only one year. This restriction did not exist in the original version of the bill, and is not part of the general mechanics lien statute. What happens at the end of the year? Possibly, the lien automatically "evaporates." Does the PEO have to explicitly release the lien if not paid? Suppose the PEO has not been paid, but has not yet filed suit?
On the whole, I no longer like HB2995 very much.
