Regular Session
Government Affairs & Regulatory Compliance Analysis
HB3700 is effective immediately, mandating the Texas Workforce Commission (TWC) to aggressively enforce protocols against fraud, waste, and abuse (FWA) across all agency programs. This law expands liability for TWC contractors, grantees, and vendors, subjecting them to heightened audit scrutiny regarding "wasteful" spending and establishing new public whistleblower reporting mechanisms.
Rep. Hubert Vo·House Bill·Regular Session
This legislation has regulatory implications for the following Texas businesses and organizations:
Notable regulatory updates (effective 2025-05-29). Consider how these changes may affect your operations.
Affected business types:
lowMinimal cost impact anticipated.
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JD Key Consulting provides strategic guidance on Texas regulatory compliance and legislative impact for your business.
Key implementation requirements and action items for compliance with this legislation
Review Master Service Agreements (MSAs) for "cooperation" and "audit access" clauses. You must flow down FWA compliance requirements to all subcontractors immediately; under this regime, you are strictly liable for "waste" or "abuse" committed by your downstream vendors.
Update employee handbooks to explicitly address "waste" (inefficiency) and "abuse" (misuse of position), not just fraud. Train finance and procurement staff that "inefficient" spending is now a compliance violation subject to clawback, even if the expenditure was technically legal.
Implement "Justification Logs" for all TWC-related grant or contract expenditures to prove *necessity*, not just receipt. Prepare IT systems for data interface requests; the law authorizes TWC to utilize technology to detect irregularities, which may result in demands for direct API access or bulk data dumps from your payroll or accounting systems.
No new statutory fees. However, organizations should budget for increased administrative costs related to audit defense and potential clawbacks for expenditures deemed "wasteful" by TWC auditors.
The statute fails to strictly define "waste" and "abuse," leaving TWC auditors subjective discretion to penalize inefficiencies (e.g., paying a premium for expedited service) as "waste." Additionally, the scope of "technology" TWC can use to access vendor data is undefined; businesses must monitor the Texas Register for rulemaking regarding whether TWC will demand direct access to internal private sector servers.
JD Key Consulting specializes in Texas regulatory compliance strategy. Work directly with James Dickey—former Chairman of the Republican Party of Texas—to understand this bill's impact on your operations and develop an actionable compliance plan.
Schedule a ConsultationInformation presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.
This bill's path through the Texas Legislature
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Common questions about HB3700
HB3700 is effective immediately, mandating the Texas Workforce Commission (TWC) to aggressively enforce protocols against fraud, waste, and abuse (FWA) across all agency programs. This law expands liability for TWC contractors, grantees, and vendors, subjecting them to heightened audit scrutiny regarding "wasteful" spending and establishing new public whistleblower reporting mechanisms.
HB3700 was authored by Texas Representative Hubert Vo during the Regular Session.
HB3700 was signed into law by Governor Greg Abbott on May 29, 2025.
HB3700 is enforced by Texas Workforce Commission.
The regulatory priority for HB3700 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.
The cost impact of HB3700 is estimated as "low". This may vary based on industry and implementation requirements.
HB3700 addresses topics including labor, labor--general, fraud and workforce commission, texas.
Key dates for HB3700: Effective date is 2025-05-29. Rulemaking: Submit initial report to the legislature regarding fraud reports received and investigations conducted. (2026-09-01); Develop procedures and systems to detect fraud, waste, and abuse in programs administered by the commission, its contractors, or grantees. (Immediate/Ongoing). Consult with legal counsel regarding applicability.
HB3700 primarily affects employers and workforce development organizations. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.
JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.
