LRBs0317/1
GMM:lxk&kf:rs
2007 - 2008 LEGISLATURE
ASSEMBLY SUBSTITUTE AMENDMENT 1,
TO 2007 ASSEMBLY BILL 760
February 28, 2008 - Offered by Representative Newcomer.
AB760-ASA1,1,4
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 substitute amendment
Registration of professional employer organizations
Introduction
This substitute amendment provides for the registration and regulation of
PEOs, which the substitute amendment defines as a person that is engaged in the
business of entering into written contracts for the provision of the nontemporary,
ongoing employee workforce of a client and providing services under those contracts
and that under those contracts has the obligation to pay the employees providing
services for those clients from its own accounts. Specifically, under the substitute
amendment:
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 substitute amendment.
Registration
Initial registration. The substitute amendment requires a PEO that is
operating in this state on the effective date of the substitute amendment to register
with DORL by no later than 180 days after that date. The substitute amendment
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 substitute amendment. Similarly, the substitute amendment 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 substitute amendment, a person may apply for registration by 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 substitute
amendment specifies that the financial statement shall be without qualification as
to the going concern status of the applicant.
Renewal registration. Under the substitute amendment, 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 and filing an updated
financial statement. A renewal registration is valid for one year after the date of
renewal.
Limited registration. The substitute amendment 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 substitute
amendment.
Electronic or alternative registration. In addition, the substitute
amendment 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 substitute amendment 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 substitute amendment also
permits DORL to promulgate rules providing for registration of a PEO, without
compliance with the registration and financial capability requirements of the
substitute amendment, 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 substitute amendment 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 substitute amendment 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 substitute amendment 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. Under the substitute amendment, if a PEO
provides life insurance, health care, or disability income benefits for its employees
performing services for a client, the PEO must fully insure payment of those benefits
by having in force a plan or policy of insurance issued by an insurer authorized to do
business in this state and the insurer, subject to any eligibility requirements imposed
by the plan or policy, must accept and insure all employees of the PEO performing
services for a client and all beneficiaries of those employees.
Also, for purposes of the insurance laws governing small employer health
insurance, the substitute amendment 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 substitute amendment provides that nothing in the substitute
amendment 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 substitute amendment 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.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB760-ASA1, s. 1
1Section
1. 440.03 (13) (b) 57m. of the statutes is created to read:
AB760-ASA1,5,32
440.03
(13) (b) 57m. Professional employer organization or professional
3employer group.
AB760-ASA1,5,86
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:
