AB1056: Bill Text

AB1056,8,13 103.005 (10) Except as provided in ss. 103.275 (2) (bm) and (br), 103.91 (4) (b) and (c), 103.92 (6) and (7), 104.07 (5) and (6), 105.117 (7) (b) and (c), and 105.13 (2) and (3), orders of the department under chs. 103 to 106 shall be subject to review in the manner provided in ch. 227.

AB1056, s. 12 Section 12. 105.117 of the statutes is created to read:

AB1056,8,16 105.117 Registration of professional employer organizations. (1) Definitions. In this section:

AB1056,8,23 (a) "Administrative fee" means the fee that is charged to a client by a professional employer organization for professional employer services, except that "administrative fee" does not include any amount charged to a client by a professional employer organization for wages, salaries, employee benefits, worker's compensation coverage, payroll tax withholdings, unemployment insurance contributions, or other assessments paid to or on behalf of a covered employee by the professional employer organization.

AB1056,8,25 (b) "Applicant" means a professional employer organization that applies for registration under sub. (2).

AB1056,9,2 (c) "Client" means any person that enters into a professional employer agreement with a professional employer organization.

AB1056,9,3 (d) "Coemployer" means a professional employer organization or a client.

AB1056,9,11 (e) "Coemployment relationship" means a relationship between a professional employer organization and a client, a professional employer organization and a covered employee, and a client and a covered employee under a professional employer agreement that is intended to be an ongoing relationship and not a temporary or project-specific relationship and in which the rights, duties, and obligations of an employer that arise out of an employment relationship are allocated between the professional employer organization and the client as provided in the professional employer agreement and this section.

AB1056,9,12 (f) "Controlling person" means any of the following:

AB1056,9,15 1. A person who, individually or acting in concert with one or more other persons, owns or controls, directly or indirectly, 25 percent or more of the ownership interest of an applicant or registrant.

AB1056,9,18 2. A person who serves as president or chief executive officer of an applicant or registrant or who otherwise has the authority to act as the senior executive officer of an applicant or registrant.

AB1056,9,25 (g) "Covered employee" means an individual who has a coemployment relationship with a professional employer organization and a client under a professional employer agreement that complies with this section and who has received written notice of that coemployment relationship under sub. (4) (c). "Covered employee" includes an individual who is an officer, director, member, manager, or partner of a client if the professional employer agreement provides for the coemployment of the individual, the individual has received written notice of that coemployment relationship under sub. (4) (c), and the individual acts as an operational manager of or performs operational services for the client.

AB1056,10,5 (h) "Professional employer group" means 2 or more professional employer organizations that are controlled by the same person and that agree to guarantee each other's obligations under this section.

AB1056,10,7 (i) "Professional employer agreement" means a written contract between a professional employer organization and a client that provides for all of the following:

AB1056,10,9 1. The majority of the employees of the client or of the employees in a division or work unit of the client to be covered employees.

AB1056,10,12 2. The allocation between the professional employer organization and the client of the rights, duties, and obligations of an employer that arise out of an employment relationship.

AB1056,10,14 3. The professional employer organization and the client to assume their respective duties and obligations under this section.

AB1056,10,20 (j) "Professional employer organization" has the meaning given in s. 108.02 (21e), regardless of whether the person uses the term "professional employer organization," "PEO," "staff leasing company," "registered staff leasing company," "employee leasing company," or "administrative employer," or uses any other name, as part of the person's business name or to describe the person's business. "Professional employer organization" does not include any of the following:

AB1056,10,25 1. A person that shares employees with a controlled group of corporations, as defined in 26 USC 414 (b), or with other trades or businesses that are under common control, as defined in 26 USC 414 (c), if the person's principal business activity is not entering into professional employer agreements and if the person does not hold itself out as a professional employer organization.

AB1056,11,4 2. A person that performs services as an independent contractor under an arrangement in which the person assumes responsibility for the satisfactory completion of the work or services that the person has contracted to perform and controls the means of performing that work or those services.

AB1056,11,5 3. A temporary help company, as defined in s. 108.02 (24m).

AB1056,11,7 (k) "Professional employer services" means the service of entering into coemployment relationships.

AB1056,11,9 (L) "Registrant" means a professional employer organization that is registered under sub. (2).

AB1056,11,16 (2) Registration requirements. (a) Registration required. No person may offer or provide professional employer services, advertise that the person is a professional employer organization or that the person provides professional employer services, or otherwise hold itself out as a professional employer organization unless the person first registers with the department as provided in this subsection. To register under this subsection, a person shall file the registration form under par. (b) and pay the applicable registration fee specified in par. (h) 1. to 5.

AB1056,11,19 (b) Registration form. To apply for registration under this subsection, an applicant shall file with the department a registration form prescribed by the department that contains all of the following information:

AB1056,11,20 1. The name or names under which the applicant conducts business.

AB1056,11,22 2. The address of the principal place of business of the applicant and of each office that the applicant maintains in this state.

AB1056,11,24 3. The social security number or federal employer identification number of the applicant as provided in sub. (7) (a).

AB1056,12,4 4. A list by jurisdiction of each name under which the applicant has operated in the 5 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.

AB1056,12,6 5. A statement of ownership, which shall include the name and business experience of every controlling person, as defined in sub. (1) (f) 1., of the applicant.

AB1056,12,8 6. A statement of management, which shall include the name and business experience of every controlling person, as defined in sub. (1) (f) 2., of the applicant.

AB1056,12,18 7. A financial statement that sets forth the financial condition of the applicant as of a date that is not more than 180 days 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. A professional employer organization group may meet the requirements of this subdivision by submitting a combined or consolidated audited financial statement. A professional employer organization that does not have sufficient operating history to have an audited financial statement that is based on at least 12 months of operating history may meet the requirements of this subdivision by submitting pro form a financial statements that have been reviewed by an independent certified public accountant.

AB1056,12,25 (c) Initial registration. 1. Each professional employer organization that is operating in this state on the effective date of this subdivision .... [revisor inserts date], shall register with the department by no later than 180 days after that date. An initial registration under this subdivision is valid until 180 days after the end of the first fiscal year of the registrant that ends more than one year after the effective date of this subdivision .... [revisor inserts date], unless sooner suspended, restricted, or revoked under sub. (6).

AB1056,13,6 2. Any person that is not engaged in the business of providing professional employer services in this state on the effective date of this subdivision .... [revisor inserts date], shall register with the department before engaging in that business in this state. An initial registration under this subdivision is valid until 180 days after the end of the first fiscal year of the registrant that ends after the date of initial registration, unless sooner suspended, restricted, or revoked under sub. (6).

AB1056,13,13 (d) Renewal registration. A registrant that wishes to renew its registration shall, by no later than 180 days after the end of the registrant's fiscal year, renew that registration by notifying the department of any changes in the information specified in par. (b) 1. to 6., filing an updated financial statement as described in par. (b) 7., and paying the renewal fee specified in par. (h) 2. A renewal registration is valid for one year after the date of renewal, unless sooner suspended, restricted, or revoked under sub. (6).

AB1056,14,2 (e) Limited registration. 1. A professional employer organization that is domiciled outside this state, that is registered or licensed as a professional employer organization in another state that has registration or licensure requirements that are at least as strict as the registration requirements under this subsection, that does not maintain an office in this state or directly solicit clients that are located or domiciled in this state, and that has no more than 50 covered employees employed in this state on any given day may apply for limited registration under this subsection by filing with the department a limited registration form prescribed by the department and paying the limited registration fee specified in par. (h) 3. A professional employer organization that is seeking limited registration shall, in addition to the information provided under par. (b), provide the department with information and documentation showing that the professional employer organization meets the qualifications specified in this subdivision for limited registration.

AB1056,14,6 2. A professional employer organization seeking limited registration that has covered employees in this state on the effective date of this subdivision .... [revisor inserts date], shall register with the department as provided in par. (c) 1., and the initial limited registration shall be valid as provided in par. (c) 1.

AB1056,14,11 3. A professional employer organization seeking limited registration that does not have covered employees in this state on the effective date of this subdivision .... [revisor inserts date], shall register with the department as provided in par. (c) 2. before employing any covered employees in this state, and the initial limited registration shall be valid as provided in par. (c) 2.

AB1056,14,16 4. A registrant that wishes to renew its limited registration shall, in addition to complying with par. (d), provide the department with information and documentation showing that the registrant continues to meet the qualifications specified in subd. 1. for limited registration, and the limited registration shall be valid as provided in par. (d).

AB1056,14,18 5. A limited registrant is not required to comply with the financial capability requirement under sub. (3).

AB1056,14,22 (f) Professional employer group registration. A professional employer group may register under this subsection or renew a registration by providing the information required under par. (b), (d), or (e) on a combined or consolidated basis and paying the fee specified in par. (h) 4.

AB1056,15,4 (g) Alternative registration. The department may by rule provide for registration of a professional employer organization without compliance with par. (b), (d), (e), or (f) or sub. (3) on acceptance by the department of an affidavit or certification provided by a bonded, independent, and qualified assurance organization that has been approved by the department certifying that the professional employer organization is qualified to engage in the business of providing professional employer services in this state.

AB1056,15,6 (h) Fees. 1. An applicant for initial registration under par. (c) shall pay an initial registration fee of $500.

AB1056,15,8 2. An applicant for renewal registration under par. (d) shall pay a renewal registration fee of $250.

AB1056,15,10 3. An applicant for limited registration or for renewal of a limited registration under par. (e) shall pay a limited registration fee of $250.

AB1056,15,14 4. An applicant for group registration or for renewal of a group registration under par. (f) shall pay a reasonable fee determined by the department by rule that does not exceed an amount that is necessary to cover the cost of issuing or renewing the group registration.

AB1056,15,16 5. An applicant for alternative registration or for renewal of an alternative registration under par. (g) shall pay an alternative registration fee of $250.

AB1056,15,19 6. The department may promulgate rules to specify a reasonable fee for any other service provided under this section that does not exceed an amount that is necessary to cover the cost of providing that service.

AB1056,15,21 7. All fees collected under this paragraph shall be deposited into the general fund and credited to the appropriation account under s. 20.445 (1) (j).

AB1056,16,6 (i) Issuance of registration. On receipt of an application for registration or for renewal of a registration under par. (c) to (g) and of the applicable registration fee under par. (h) 1. to 5., the department shall investigate the applicant or registrant to determine whether the applicant or registrant is qualified for registration or for renewal registration. Subject to subs. (6) and (7) (b) and (c), the department shall issue a registration or renewal registration if, after completing the investigation, the department determines that the applicant or registrant meets the requirements under this subsection and rules promulgated under sub. (8) for issuance or renewal of a registration and is satisfied that the applicant or registrant will comply with this section and those rules.

AB1056,16,11 (j) List of registrants; confidentiality. The department shall maintain a list of all professional employer organizations registered under this section. All records maintained by the department that contain any information obtained from an applicant or registrant are confidential and not open to public inspection or copying under s. 19.35 (1) unless one of the following applies:

AB1056,16,12 1. Disclosure of the record is necessary for the administration of this section.

AB1056,16,14 2. A court of competent jurisdiction in this state orders the department to release the record.

AB1056,16,20 3. The requester is the subunit of the department that administers child and spousal support or a county child support agency under s. 59.53 (5), the request is made under s. 49.22 (2m), and the request is limited to the name, home address, and business address of the applicant or controlling person who is the subject of the request and any financial information about the applicant or controlling person contained in the record.

AB1056,16,24 4. The department of revenue requests the record for the purpose of locating a person, or the assets of a person, who has failed to file tax returns, who has underreported taxable income, or who is a delinquent taxpayer; identifying fraudulent tax returns; or providing information for tax-related prosecutions.

AB1056,17,2 (3) Financial capability. Except as provided in sub. (2) (e) 5. or (g), a professional employer organization shall maintain one of the following:

AB1056,17,6 (a) A net worth of not less than $100,000, as shown in the financial statement submitted to the department under sub. (2) (b) 7., (d), or (f), except that the value of any instrument specified in par. (b) may not be included in calculating the net worth required under this paragraph.

AB1056,17,21 (b) A bond, certificate of deposit, escrow account, or irrevocable letter of credit in an amount that is not less than $100,000. The commitment described in this paragraph shall be in a form approved by the department, shall be held in a depository designated by the department, and shall secure the payment by the professional employer organization of any wages, salaries, employee benefits, worker's compensation insurance premiums, payroll taxes, unemployment insurance contributions, or other amounts that are payable to or with respect to a covered employee if the professional employer organization does not make those payments when due. The commitment shall be established in favor of or be made payable to the department, for the benefit of the state and any covered employee to whom or with respect to whom the professional employer organization does not make a payment described in this paragraph when due. The professional employer organization shall file with the department any agreement, instrument, or other document that is necessary to enforce the commitment against the professional employer organization or any relevant 3rd party or both.

AB1056,18,2 (4) Professional employer agreements; requirements. (a) Allocation of rights, duties, and obligations. Except as specifically provided in this section, a coemployment relationship shall be governed by a professional employer agreement. A professional employer agreement shall allocate the rights, duties, and obligations of an employer that arise out of an employment relationship as follows:

AB1056,18,6 1. The professional employer organization shall be permitted to exercise and enforce only those rights, and shall be required to perform only those duties and obligations, that are specifically allocated to the professional employer organization under the professional employer agreement or this section.

AB1056,18,15 2. The client shall be permitted to exercise and enforce all those rights, and shall be required to perform all those duties and obligations, that are specifically allocated to the client under the professional employer agreement or this section or that are not specifically allocated under the professional employer agreement or this section and, unless otherwise agreed to in the professional employer agreement, to retain the exclusive right to direct, supervise, and control the activities of the covered employees as necessary to conduct the client's business, to discharge the client's fiduciary duties, or to comply with any federal, state, or local licensing, registration, or certification requirements that are applicable to the client or a covered employee.

AB1056,18,18 (b) Contents of agreement. In addition to allocating the rights, duties, and obligations specified in par. (a), a professional employer agreement shall specify all of the following:

AB1056,19,5 1. That the professional employer organization is responsible for paying wages or salary to a covered employee; for withholding, collecting, reporting, and remitting payroll taxes and unemployment insurance contributions on behalf of a covered employee; and, to the extent agreed to in the professional employer agreement, for making payments for employee benefits for a covered employee; except that the professional employer organization is not responsible for the payment of any remuneration payable by a client to a covered employee beyond the covered employee's regular rate of pay or overtime pay, such as bonuses, commissions, profit sharing, deferred compensation, severance or dismissal pay, or sick pay, holiday pay, vacation pay, or other paid time off, unless the professional employer organization specifically agrees in the professional employer agreement to assume responsibility for those payments.

AB1056,19,9 2. Whether the professional employer organization or the client assumes liability for worker's compensation under s. 102.03 and agrees to obtain a policy of worker's compensation insurance issued by an insurer authorized to do business in this state under s. 102.28 (2) (a) or self-insure in accordance with s. 102.28 (2) (b).

AB1056,19,13 3. That the client may hire, discipline, or discharge a covered employee, but that the professional employer organization may also hire, discipline, or discharge a covered employee as necessary to fulfill the professional employer organization's duties and obligations under the professional employer agreement and this section.

AB1056,19,18 (c) Notice to covered employees. A professional employer organization that enters into a professional employer agreement shall provide written notice to each covered employee who is affected by the professional employer agreement concerning the general nature of the coemployment relationship created by the professional employer agreement.

AB1056,19,22 (d) Responsibilities of professional employer organization and client. Except as specifically provided in a professional employer agreement, all of the following apply to a coemployment relationship that is created by the professional employer agreement:

AB1056,19,24 1. The client is solely responsible for the quality, adequacy, and safety of the goods or services produced, provided, or sold in the course of the client's business.

AB1056,20,4 2. The client is solely responsible for directing, supervising, and controlling the activities of the covered employees with respect to the client's business, for training the covered employees involved in that business, and for the acts, errors, or omissions of the covered employees in the performance of those activities.

AB1056,20,8 3. The client is not liable for the acts, errors, or omissions of the professional employer organization or of a covered employee when the covered employee is acting under the express direction, supervision, and control of the professional employer organization.

AB1056,20,11 4. The professional employer organization is not liable for the acts, errors, or omissions of a client or of a covered employee when the covered employee is acting under the express direction, supervision, and control of the client.

AB1056,20,20 5. For purposes of coverage under any policy of general liability insurance or employer's liability insurance, other than worker's compensation insurance, carried by the professional employer organization or under a fidelity or surety bond posted by the professional employer organization, a covered employee is not, solely by reason of being a covered employee, considered to be an employee of the professional employer organization, unless the covered employee is specified as an employee of the professional employer organization for those purposes in the professional employer agreement and in any applicable prearranged employment contract, insurance policy, or bond.

AB1056,20,24 (e) Professional employer services not insurance. A professional employer organization that offers, markets, sells, administers, or provides professional employer services is not engaged in the business of insurance or in the business of an employee benefit plan administrator under ch. 633.

AB1056,21,7 (5) Rights, duties, and obligations unaffected. (a) Labor relations. Nothing in this section or in any professional employer agreement may be construed to affect or impair any collective bargaining agreement or any right, duty, or obligation of any covered employee, representative of a covered employee, client, or professional employer organization under subch. I, III, IV, or V of ch. 111, the federal National Labor Relations Act, 29 USC 151 to 169, or the federal National Railway Labor Act, 45 USC 151 to 180.

AB1056,21,9 (b) Employment arrangements. Nothing in this section or in any professional employer agreement may be construed to do any of the following:

AB1056,21,12 1. Diminish, affect, or impair any rights of a covered employee as to a client or any duties or obligations of a client as to a covered employee that existed prior to the effective date of the professional employer agreement.

AB1056,21,19 2. Affect or impair any contractual relationship or restrictive covenant between a covered employee and a client, whether existing prior to the effective date of the professional employer agreement or entered into after that date. A professional employer organization shall have no liability or responsibility in connection with or arising out of any contractual relationship or restrictive covenant between a covered employee and a client unless the professional employer organization specifically agrees otherwise in writing.

AB1056,22,2 (c) Licensing. Nothing in this section or in a professional employer agreement may be construed to affect or impair any federal, state, or local licensing, registration, or certification requirement that is applicable to a client or covered employee. All of the following apply to a covered employee who is required to be licensed, registered, or certified under any federal, state, or local law, rule, or regulation and to the client and professional employer organization that are the coemployers of the covered employee:

AB1056,22,5 1. The covered employee is considered to be an employee solely of the client for purposes of engaging in any trade, occupation, profession, or other activity that is subject to the licensing, registration, or certification requirement.

AB1056,22,10 2. The professional employer organization is not considered to be engaging in any trade, occupation, profession, or other activity that is subject to the licensing, registration, or certification requirement solely because the professional employer organization has entered into and maintains a coemployment relationship with the covered employee.

AB1056,22,13 3. The client has the sole right to direct, supervise, and control the activities of the covered employee, and the business of the client, that are subject to the licensing, registration, or certification requirement.

AB1056,22,19 (d) Taxation, tax credits, and other economic development incentives. 1. Any covered employee whose services are taxable service under s. 77.52 or 77.53 is considered to be an employee of the client for purposes of liability for payment of sales or use taxes on those services. Nothing contained in this section shall release a client from any liability for payment of the full amount of sales or use taxes due on those services.

AB1056,22,22 2. The liability of a professional employer organization for any tax on professional employer services that is based on gross receipts is limited to a tax on the administrative fee charge by the professional employer organization.

AB1056,23,2 3. For purposes of any tax that is based on the payroll of an employer, a client is liable for the amount of that tax that is based on the compensation of a covered employee and a professional employer organization is liable for the amount of that tax that is based on the compensation of an employee who is not a covered employee.

AB1056,23,18 4. For purposes of determining tax credits, other economic development incentives provided by the state that are based on providing employment, or any other benefits that arises out of the employment of a covered employee, a covered employee is considered to be an employee solely of the client, and the client is entitled to the benefit of the tax credit, economic development incentive, or other benefit. If the amount of a tax credit, incentive, or benefit described in this paragraph is based on the number of employees employed by a client, only those covered employees who are coemployed by the client and the professional employer organization shall be treated as employees employed by the client, and covered employees who are coemployed by the professional employer organization and another client of the professional employer organization shall not be treated as employees employed by the client. On request of a client that is seeking a tax credit, incentive, or other benefit described in this paragraph or of an agency of this state that is responsible for administering such a tax credit, incentive, or benefit, a professional employer organization shall provide any employment information reasonably required by the agency that is necessary to support a claim, application, or other action by the client.

AB1056,23,24 (e) Contracts, grants, and loans. For purposes of contracting with, or obtaining a grant or loan from, the state or a local governmental unit, a client's status or certification as a minority business, minority financial adviser, minority investment firm, women's business, small business, native American or Indian business, veteran-owned business, or disadvantaged business is not affected because the client has entered into a professional employer agreement.

AB1056,24,6 (6) Violations; penalties. (a) Disciplinary action. The department may deny, suspend, revoke, restrict, refuse to renew, or otherwise withhold a registration; impose a period of probation under specified conditions; order a registrant to cease and desist from violating this section or a rule promulgated under sub. (8); or impose a forfeiture of not more than $1,000; if the department finds that an applicant, registrant, or controlling person has done any of the following:

AB1056,24,8 1. Conducted any of the activities specified in sub. (2) (a) without first registering with the department as provided in sub. (2).

AB1056,24,11 2. Knowingly made a material misrepresentation or false statement in an application for registration or for renewal of a registration under sub. (2) or in a report under s. 108.067.