Staffing agency license in Tennessee: no license since 1996, what applies now

Tennessee does not license employment agencies, staffing firms or search firms. Until 1996 it did: a personnel services law registered personnel services, temporary help firms, contract labor firms and employee leasing organizations, and a separate board licensed personnel recruiting services and their consultants. Public Chapter 731 of 1996 repealed that regime and replaced it with the Tennessee Employment Agency Act, a consumer protection statute that sets fee and refund rules for agencies paid by candidates and requires no license at all.

What a Tennessee staffing firm actually files today is a PEO registration if it co-employs a client's workforce, plus the usual employer accounts. This page covers the repeal, the Employment Agency Act, PEO registration and the employer side. For states that still license agencies, see employment agency license requirements.

What was repealed in 1996

Tennessee had two overlapping regimes before 1996:

• Personnel services registration. Under the 1990 Personnel Services Act, a personnel service, temporary help services firm, contract labor firm or employee leasing organization registered for $300 a year. The implementing rules, chapter 0780-05-05, now carry the note "Repealed by Chapter 731 of the 1996 Public Acts, effective July 1, 1996," and the rules index lists the chapter as repealed.
• Personnel recruiting services licensing. A board licensed the services, their managers and consultants under Title 62, Chapter 31. Its old rules, with fees, a 28-day refund rule and civil penalties, are still posted by the Secretary of State, but the statute they implemented was repealed by the same 1996 act. Do not rely on those rules or pay those fees.

The board's name still appears in a list of regulatory boards in Tenn. Code Ann. § 4-3-1304 in the 2021 Code, apparently a leftover. It does not revive the license. I could not retrieve the 1996 public chapter itself; the repeal is documented in the official rule histories.

The Tennessee Employment Agency Act

The replacement statute is Tenn. Code Ann. §§ 47-18-1701 to 47-18-1708, enacted by the same 1996 act. It sits in the consumer protection title, not the occupational licensing title, and contains no license, registration, bond or fee schedule filing.

Who it covers

Under § 47-18-1702, an employment agency is one paid "a fee paid by a candidate or other compensation provided by a candidate," where "the fee is not paid by the employer." On that wording, the Act reaches only agencies that charge job seekers. Employer-paid contingency and retained search, and temporary staffing firms that employ their workers and bill clients, fall outside it. Section 47-18-1705 also exempts teacher and nurse trade associations, government employment services, labor unions, musician booking agencies, licensed health care providers and colleges, provided no recruiting fee is taken from the employee's wages.

What a candidate-paid agency may not do

Under § 47-18-1703, an agency may not:

• charge a fee except for actually furnishing employment, or before the candidate has secured a job;
• split fees with an employer;
• charge a fee for training someone as a personnel consultant;
• make misrepresentations;
• induce a placed employee to leave a job unless the employee asks;
• refer a candidate without a bona fide job order; or
• require a candidate to use a particular lender to pay agency charges.

The four-week refund

Under § 47-18-1704, if a candidate who paid a fee is terminated by the employer through no fault of their own within four weeks, the agency must refund the fee within 30 days and, if the candidate asks, try to place them in similar work. There is no fee cap and no rule on conversion fees or no-hire clauses in the Act.

Enforcement

A violation is treated as an unfair or deceptive act under the Tennessee Consumer Protection Act (§ 47-18-1708), enforced by the Attorney General. In the 2021 Code, that means civil penalties of up to $1,000 per violation and treble damages for willful or knowing violations. I did not confirm any later amendments to those amounts.

What applies, by business model

Conversion fees and no-hire terms with clients are governed by your contracts; see temp-to-perm conversion fee for typical structures.

PEO registration

The Tennessee Professional Employer Organization Act, Tenn. Code Ann. §§ 62-43-101 to 62-43-114, replaced the Employee Leasing Act in 2012 and is administered by the Department of Commerce and Insurance. Under § 62-43-106, no one may "provide, advertise or otherwise hold itself out as providing professional employer services" unless registered. Temporary help services are not PEOs (§ 62-43-105).

• Term. Two years.
• Financials. An audited GAAP statement no older than 13 months; applicants with under $50 million in annualized wages may file compiled statements. The PEO must keep positive working capital or post a bond, letter of credit or securities equal to the deficiency plus $100,000.
• Quarterly reporting. A CPA statement that payroll taxes were paid on time, within 90 days after each quarter.
• Limited registration. For out-of-state PEOs with no Tennessee office or direct solicitation and 50 or fewer Tennessee covered employees.
• Fees. Set by rule. The posted rule, 0780-05-08, still uses the old Employee Leasing Act terms and lists a $250 application fee and a $2,000 license and renewal fee for a single company. I could not confirm the current amounts on a department page, so check before you file.
• Penalties. Up to $1,000 per violation, plus suspension, revocation and injunctions (§ 62-43-112).

For unemployment purposes, a PEO may post an optional $100,000 surety bond with the labor department to relieve its clients of joint liability for premiums, reducible after three clean years (§ 62-43-109).

Employer accounts

• Workers' compensation. Required for employers with five or more employees (§ 50-6-102), and construction service providers must carry coverage regardless of headcount. Penalties for going uninsured start at 1.5 times the average yearly premium (§ 50-6-412). A temp firm crosses five employees quickly. See staffing agency insurance requirements.
• Unemployment insurance. Through the Department of Labor and Workforce Development, once you pay $1,500 in wages in a quarter or employ someone in 20 weeks (§ 50-7-205). I found no Tennessee statute requiring temps to contact the agency for reassignment.
• E-Verify. Tennessee's Lawful Employment Act applies at 35 or more employees; see E-Verify requirements in Tennessee.
• Drug-free workplace. Temporary employment agencies are exempt from the department's drug-free workplace program requirements under § 50-9-112.
• Entity and tax registration. Register with the Secretary of State and the Department of Revenue, including local business tax where it applies. The setup order is in how to start a staffing agency.

I could not confirm whether Tennessee enacted a health care staffing agency registration after 2021, and I found no farm labor contractor, talent agency or day labor statute in the Code I reviewed. If you also staff in Georgia, see Georgia's rules, which were also repealed.

A Tennessee checklist

TENNESSEE CHECK — [date] — owner: [name]

Model:
  [ ] Employer-paid direct hire or search: no license; outside 47-18-1702
  [ ] Candidate-paid fees: no license; follow 47-18-1703 and -1704
  [ ] Temp/contract, we employ: employer accounts below
  [ ] Co-employment of client workforce: PEO registration (62-43-106)

If candidate-paid:
  No fee before the candidate has secured a job        [ ]
  Four-week refund process (30-day payment)            [ ]

Employer accounts:
  Workers' comp (5+ employees)                         [ ]
  UI account; withholding; E-Verify if 35+             [ ]
  Health care staffing law checked for post-2021 change [ ]
Next review: [date]