LRB-3598/1
GMM:lxk&kf:rs
2007 - 2008 LEGISLATURE
February 4, 2008 - Introduced by Representatives Newcomer, Albers, Ballweg,
Berceau, Davis, Hebl, Hintz, Hixson, Hilgenberg, Hraychuck, Jorgensen,
Kaufert, Kerkman, Kleefisch, Kreuser, LeMahieu, Mason, Montgomery,
Mursau, Nelson, Nygren, A. Ott, Parisi, Pope-Roberts, Sheridan, Shilling,
Smith, Soletski, Townsend, Turner, Van Roy and Vukmir, cosponsored by
Senators Wirch, Breske, Hansen, Kapanke, Kreitlow, Lassa, Plale, Olsen,
Schultz and Taylor. Referred to Committee on Small Business.
AB760,1,4
1An Act to amend 440.08 (2) (a) (intro.); and
to create 440.03 (13) (b) 57m.,
2chapter 461 and 635.02 (7) (b) 3. and 4. of the statutes;
relating to: registration
3of professional employer organizations, requiring the exercise of rule-making
4authority, and providing a penalty.
Analysis by the Legislative Reference Bureau
current law
Professional employer organizations
Under current law, for purposes of liability for unemployment insurance, a
professional employer organization (PEO) is considered to be the employer of the
employees whom the PEO engages to perform services for its clients. Current law
defines a PEO as any person who contracts to provide the nontemporary, ongoing
employee workforce of more than one client under a written leasing contract, the
majority of whose clients are not under the same ownership, management, or control
as the person other than through the terms of the contract, and who meets all of the
following qualifications:
1. The person has the right to hire and terminate the employees who perform
services for the client and to reassign the employees to other clients.
2. The person sets the rate of pay of the employees and pays the employees from
its own accounts.
3. The person has a general right of direction and control over the employees,
which right may be shared with the client to the degree necessary to allow the client
to conduct its business, meet any fiduciary responsibility, or comply with any
applicable regulatory or statutory requirements.
4. The person assumes responsibility for the unemployment insurance
coverage of the employees.
5. The person has the obligation to establish, fund, and administer employee
benefit plans for the employees.
6. The person provides notice of the employee leasing arrangement to the
employees.
the bill
Registration of professional employer organizations
Introduction
This bill provides for the registration and regulation of PEOs. Specifically,
under the bill:
1. No person may offer or provide professional employer services, advertise that
the person is a PEO or that the person provides professional employer services, or
otherwise hold itself out as a PEO, unless the person first registers with the
Department of Regulation and Licensing (DORL).
2. Subject to certain exceptions, a PEO must maintain working capital of not
less than $100,000 or a bond or other commitment in an amount that is not less than
$100,000 to secure the payment of wages and other amounts that are payable by the
PEO.
3. Certain rights, duties, and obligations under current law relating to
insurance, licensing, and tax credits and other economic development incentives are
unaffected by the bill.
Registration
Initial registration. The bill requires a PEO that is operating in this state
on the effective date of the bill to register with DORL by no later than 180 days after
that date. The bill provides that such an initial registration is valid until 180 days
after the end of the first fiscal year of the PEO that ends more than one year after
the effective date of the bill. Similarly, the bill requires a PEO that is not engaged
in the business of providing professional employer services in this state on that date
to register with DORL before engaging in that business in this state and provides
that such an initial registration is valid until 180 days after the end of the first fiscal
year of the PEO that ends after the date of initial registration.
Under the bill, a person may apply for registration by paying the initial
credential fee determined by DORL and filing a registration form that includes all
of the following information:
1. The name or names under which the applicant conducts business.
2. The address of the principal place of business of the applicant and of each
office that the applicant maintains in this state.
3. A list by jurisdiction of each name under which the applicant has operated
in the five years preceding the date of the application, including any alternate names
of the applicant, the names of any predecessor business entities of the applicant, and,
if known, the names of any successor business entities of the applicant.
4. A statement of ownership, which must include the name and business
experience of every person who owns or controls 25 percent or more of the ownership
interest of the applicant.
5. A statement of management, which must include the name and business
experience of every person who serves as president or chief executive officer of the
applicant or who otherwise has the authority to act as the senior executive officer of
the applicant.
6. A financial statement that sets forth the financial condition of the applicant
as of a date that is not more than 13 months preceding the date of the application,
that is prepared in accordance with generally accepted accounting principles, and
that has been audited by an independent certified public accountant. The bill
specifies that the financial statement shall be without qualification as to the going
concern status of the applicant.
Renewal registration. Under the bill, a PEO that wishes to renew its
registration must, by no later than 180 days after the end of the PEO's fiscal year,
renew that registration by notifying DORL of any changes in the information
specified in the previous registration form, filing an updated financial statement,
and paying the renewal fee determined by DORL. A renewal registration is valid for
one year after the date of renewal.
Limited registration. The bill permits a PEO that is domiciled outside this
state, that is registered or licensed as a PEO in another state, that does not maintain
an office in this state or directly solicit clients in this state, and that has no more than
50 employees performing services for clients in this state on any given day to apply
for limited registration. A limited registrant is not required to comply with the
financial capability requirements under the bill.
Electronic or alternative registration. In addition, the bill permits DORL
to promulgate rules providing for registration of a PEO on acceptance by DORL of
a registration form, financial statement, or any other information or documentation
required under the bill or rules promulgated by DORL in the form of an electronic
record and, if a signature is required, on acceptance of an electronic signature. The
bill also permits DORL to promulgate rules providing for registration of a PEO,
without compliance with the registration and financial capability requirements of
the bill, on acceptance of assurance provided by a bonded, independent, and qualified
assurance organization that has been approved by DORL that provides assurance
satisfactory to DORL that the PEO is qualified to engage in the business of providing
professional employer services in this state (alternative registrant).
Financial capability
The bill requires a PEO, other than a limited registrant or an alternative
registrant, to maintain one of the following:
1. Working capital of not less than $100,000, except that DORL may issue a
registration or renewal registration to a PEO that has less than $100,000 in working
capital contingent on the PEO meeting the minimum working capital requirement
no later than 180 days after the issuance of the registration or renewal registration.
During the period of contingent registration, the PEO must submit quarterly
financial statements to DORL accompanied by an attestation that all wages,
salaries, employee benefits, worker's compensation insurance premiums, payroll
taxes, unemployment insurance contributions, or other amounts that are payable by
the PEO to or with respect to an employee of the PEO who is performing services for
a client were paid when due.
2. A bond, certificate of deposit, escrow account, or irrevocable letter of credit
in an amount that is not less than $100,000, or, if the PEO's financial statement
submitted to DORL indicates a deficit in working capital, a bond, certificate of
deposit, escrow account, or irrevocable letter of credit in an amount that is not less
than $100,000 plus an amount that is sufficient to cover that deficit, to secure the
payment of wages, salaries, employee benefits, worker's compensation insurance
premiums, payroll taxes, unemployment insurance contributions, or other amounts
that are payable by the PEO to or with respect to an employee of the PEO who is
performing services for a client if the PEO does not make those payments when due.
Rights, duties, and obligations unaffected
The bill provides that a PEO that offers, markets, sells, administers, or provides
professional employer services that include the provision of employee benefit plans
for the employees of the PEO performing services for a client is not engaged in the
business or sale of insurance or in the business of an employee benefit plan
administrator. The bill requires this provision to be liberally construed to permit
PEO's to provide employee benefit plans without being considered to be engaged in
the business or sale of insurance or in the business of an employee benefit plan
administrator.
Also, for purposes of the insurance laws governing small employer health
insurance, the bill provides that an insurer that contracts with a PEO that has more
than 50 employees performing services for one or more clients is not a small employer
insurer with respect to the contract between the insurer and the PEO, that a PEO
that provides health care benefits for more than 50 employees performing services
for one or more clients is not a small employer, and that a client of such a PEO is not
a small employer if the employees of the PEO performing services for the client are
offered health care benefits under a health benefit plan sponsored by the PEO.
In addition, the bill provides that nothing in the bill or in a contract for the
provision of the nontemporary, ongoing workforce of a client may be construed to
affect or impair any federal, state, or local licensing, registration, or certification
requirement that is applicable to a client or to an employee of the PEO who is
performing services for a client.
Finally, the bill provides that, for purposes of tax credits, economic development
incentives, and other benefits that arise out of the employment of employees, the
client is entitled to those credits, incentives, and other benefits that arise out of the
employment of an employee of a PEO who is performing services for the client.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB760, s. 1
1Section
1. 440.03 (13) (b) 57m. of the statutes is created to read:
AB760,5,32
440.03
(13) (b) 57m. Professional employer organization or professional
3employer group.
AB760,5,86
440.08
(2) (a) (intro.) Except as provided in par. (b) and in ss. 440.51, 442.04,
7444.03, 444.11, 448.065, 447.04 (2) (c) 2., 449.17 (1m) (d),
and 449.18 (2) (d),
and
8461.02 (3) (a) and (b) and (4), the renewal dates for credentials are as follows:
AB760, s. 3
9Section
3. Chapter 461 of the statutes is created to read:
AB760,5,1110
chapter 461
11
Professional employer organizations
AB760,5,12
12461.01 Definitions. In this chapter:
AB760,5,14
13(1) "Applicant" means a professional employer organization or a professional
14employer group that applies for registration under s. 461.02.
AB760,5,17
15(2) "Client" means any person that enters into a written leasing contract with
16a professional employer organization or a professional employer group for the
17provision of the nontemporary, ongoing workforce of the person.
AB760,5,18
18(3) "Controlling person" means any of the following:
AB760,5,2119
(a) A person who, individually or acting in concert with one or more other
20persons, owns or controls, directly or indirectly, 25 percent or more of the ownership
21interest of an applicant or registrant.
AB760,6,3
1(b) A person who serves as president or chief executive officer of an applicant
2or registrant or who otherwise has the authority to act as the senior executive officer
3of an applicant or registrant.
AB760,6,5
4(4) "Professional employer group" means 2 or more professional employer
5organizations that are controlled by the same person.
AB760,6,10
6(5) "Professional employer organization" has the meaning given in s. 108.02
7(21e), regardless of whether the person uses the term "professional employer
8organization," "PEO," "staff leasing company," "registered staff leasing company,"
9"employee leasing company," or "administrative employer," or uses any other name,
10as part of the person's business name or to describe the person's business.
AB760,6,12
11(6) "Registrant" means a professional employer organization or a professional
12employer group that is registered under s. 461.02.
AB760,6,20
13461.02 Registration requirements. (1) Registration required. No person
14may offer or provide professional employer services, advertise that the person is a
15professional employer organization or that the person provides professional
16employer services, or otherwise hold itself out as a professional employer
17organization unless the person first registers with the department as provided in this
18section. To register under this section, a person shall file the registration form under
19sub. (2) and pay the initial credential fee determined by the department under s.
20440.03 (9) (a).
AB760,6,23
21(2) Registration form. To apply for registration under this section, an
22applicant shall file with the department a registration form prescribed by the
23department that contains all of the following information:
AB760,6,2424
(a) The name or names under which the applicant conducts business.
AB760,7,2
1(b) The address of the principal place of business of the applicant and of each
2office that the applicant maintains in this state.
AB760,7,63
(c) A list by jurisdiction of each name under which the applicant has operated
4in the 5 years preceding the date of the application, including any alternate names
5of the applicant, the names of any predecessor business entities of the applicant, and,
6if known, the names of any successor business entities of the applicant.
AB760,7,87
(d) A statement of ownership, which shall include the name and business
8experience of every controlling person, as defined in s. 460.01 (3) (a), of the applicant.
AB760,7,109
(e) A statement of management, which shall include the name and business
10experience of every controlling person, as defined in s. 460.01 (3) (b), of the applicant.
AB760,7,2111
(f) A financial statement that sets forth the financial condition of the applicant
12as of a date that is not more than 13 months preceding the date of the application,
13that is prepared in accordance with generally accepted accounting principles, and
14that has been audited by an independent certified public accountant. The financial
15statement shall be without qualification as to the going concern status of the
16applicant. A professional employer group may meet the requirements of this
17paragraph by submitting a combined or consolidated audited financial statement.
18An applicant that does not have sufficient operating history to have an audited
19financial statement that is based on at least 12 months of operating history may meet
20the requirements of this paragraph by submitting financial statements that have
21been reviewed by an independent certified public accountant.
AB760,8,2
22(3) Initial registration. (a) Each professional employer organization or
23professional employer group that is operating in this state on the effective date of this
24paragraph .... [revisor inserts date], shall register with the department by no later
25than 180 days after that date. An initial registration under this paragraph is valid
1until 180 days after the end of the first fiscal year of the registrant that ends more
2than one year after the effective date of this paragraph .... [revisor inserts date].
AB760,8,83
(b) Any person that is not engaged in the business of providing professional
4employer services in this state on the effective date of this paragraph .... [revisor
5inserts date], shall register with the department before engaging in that business in
6this state. An initial registration under this paragraph is valid until 180 days after
7the end of the first fiscal year of the registrant that ends after the date of initial
8registration.
AB760,8,18
9(4) Renewal registration. A registrant that wishes to renew its registration
10shall, by no later than 180 days after the end of the registrant's fiscal year, renew that
11registration by notifying the department of any changes in the information specified
12in sub. (2) (a) to (e), filing an updated financial statement as described in sub. (2) (f),
13and paying the renewal credential fee determined by the department under s. 440.03
14(9) (a). A registrant may apply to the department for an extension of the time within
15which to renew a registration by providing with the application a letter from the
16certified public accountant who is auditing the registrant's financial statement
17stating the reasons for the delay and the anticipated completion date of the audit.
18A renewal registration is valid for one year after the date of renewal.
AB760,9,5
19(5) Limited registration. (a) A professional employer organization or
20professional employer group that is domiciled outside this state, that is registered
21or licensed as a professional employer organization or professional employer group
22in another state, that does not maintain an office in this state or directly solicit clients
23that are located or domiciled in this state, and that has no more than 50 employees
24performing services for clients in this state on any given day may apply for limited
25registration under this section by filing with the department a limited registration
1form prescribed by the department and paying the initial credential fee determined
2by the department under s. 440.03 (9) (a). An applicant that is seeking limited
3registration shall, in addition to the information provided under sub. (2), provide the
4department with information and documentation showing that the applicant meets
5the qualifications specified in this paragraph for limited registration.
AB760,9,106
(b) A professional employer organization or professional employer group
7seeking limited registration that has employees performing services for clients in
8this state on the effective date of this paragraph .... [revisor inserts date], shall
9register with the department as provided in sub. (3) (a), and the initial limited
10registration shall be valid as provided in sub. (3) (a).
AB760,9,1611
(c) A professional employer organization or professional employer group
12seeking limited registration that does not have employees performing services for
13clients in this state on the effective date of this paragraph .... [revisor inserts date],
14shall register with the department as provided in sub. (3) (b), before employing any
15employees to perform services for clients in this state, and the initial limited
16registration shall be valid as provided in sub. (3) (b).
AB760,9,2117
(d) A registrant that wishes to renew its limited registration shall, in addition
18to complying with sub. (4), provide the department with information and
19documentation showing that the registrant continues to meet the qualifications
20specified in par. (a) for limited registration, and the limited registration shall be valid
21as provided in sub. (4).
AB760,9,2322
(e) A limited registrant is not required to comply with the financial capability
23requirement under s. 461.03.
AB760,9,25
24(6) Professional employer group registration. Two or more professional
25employer organizations that are part of a professional employer group may register
1under this section or renew a registration by providing the information required
2under sub. (2), (4), or (5) on a combined or consolidated basis, paying the initial
3credential or renewal fee determined by the department under s. 440.03 (9) (a), and
4guaranteeing each other's obligations. If a professional employer group provides a
5combined or consolidated financial statement under sub. (2) (f) that includes the
6financial condition of entities that are not part of the professional employer group,
7the person controlling the professional employer group shall guarantee the
8obligations of the professional employer organizations in the professional employer
9group.