AB1056: Bill Text

2. 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 before the effective date of the professional employer agreement.

3. 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.

4. Affect or impair any federal, state, or local licensing, registration, or certification requirement that is applicable to a client or covered employee (licensing requirement). Under the bill: a) a covered employee who is subject to a licensing requirement 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 requirement; b) a PEO is not considered to be engaging in any trade, occupation, profession, or other activity that is subject to the licensing requirement solely because the PEO has entered into and maintains a coemployment relationship with the covered employee; and c) a 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 requirement.

In addition, the bill provides that, for purposes of taxation, tax credits, and other economic development incentives, all of the following apply:

1. A covered employee whose services are subject to sales or use taxes is considered to be an employee of the client for purposes of liability for payment of sales or use taxes on those services.

2. The liability of a PEO 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, which does not include any amount charged to a client by a PEO 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 PEO.

3. The liability of a client for any tax that is based on the payroll of an employer is limited to the amount of that tax that is based on the compensation of a covered employee and the liability of a PEO for such a tax is limited to the amount of that tax that is based on the compensation of an employee who is not a covered employee.

4. The client is entitled to the benefit of tax credits, economic development incentives provided by the state that are based on providing employment, or other benefits that arise out of the employment of a covered employee.

Finally, the bill provides that, 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.

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:

AB1056, s. 1 Section 1. 20.445 (1) (j) of the statutes is created to read:

AB1056,6,3 20.445 (1) (j) Professional employer organizations. All moneys received under s. 105.117 (2) (h) for the administration and enforcement of s. 105.117.

AB1056, s. 2 Section 2. 21.72 (1) (a) 9. of the statutes is created to read:

AB1056,7,2 21.72 (1) (a) 9. A registration issued under s. 105.117 (2).

AB1056, s. 3 Section 3. 49.857 (1) (d) 9. of the statutes is created to read:

AB1056,7,4 49.857 (1) (d) 9. A registration issued under s. 105.117 (2).

AB1056, s. 4 Section 4. 73.0301 (1) (d) 3m. of the statutes is amended to read:

AB1056,7,8 73.0301 (1) (d) 3m. A license or, certificate, or registration issued by the department of workforce development under s. 102.17 (1) (c), 103.275 (2) (b), 103.91 (1), 103.92 (3), 104.07 (1) or (2) or 105.13 (1), 105.05, or 105.117 (2).

AB1056, s. 5 Section 5. 102.01 (2) (a) of the statutes is renumbered 102.01 (2) (af).

AB1056, s. 6 Section 6. 102.01 (2) (ad) of the statutes is created to read:

AB1056,7,12 102.01 (2) (ad) "Coemployer" means a professional employer organization, as defined in s. 105.117 (1) (j), or a client, as defined in s. 105.117 (1) (c).

AB1056, s. 7 Section 7. 102.01 (2) (an) of the statutes is created to read:

AB1056,7,14 102.01 (2) (an) "Covered employee" has the meaning given in s. 105.117 (1) (g).

AB1056, s. 8 Section 8. 102.01 (2) (f) of the statutes is amended to read:

AB1056,7,19 102.01 (2) (f) "Temporary help agency" means an employer who on a temporary basis places its employee with or leases its employees to another employer who controls the employee's work activities and compensates the first employer for the employee's services, regardless of the duration of the services.

AB1056, s. 9 Section 9. 102.04 (2p) of the statutes is created to read:

AB1056,8,3 102.04 (2p) A coemployer that assumes liability under s. 105.117 (4) (b) 2. for compensation under this chapter is the employer of a covered employee for purposes of this chapter. The coemployer assuming that liability is liable under s. 102.03 for all compensation payable under this chapter to that covered employee, including any payments required under s. 102.16 (3), 102.18 (1) (b) or (bp), 102.22 (1), 102.35 (3), 102.57, or 102.60. Except as permitted under s. 102.29, a coemployer assuming that liability may not seek or receive reimbursement from another coemployer for any payments made as a result of that liability.

AB1056, s. 10 Section 10. 102.29 (6m) of the statutes is created to read:

AB1056,8,8 102.29 (6m) No covered employee who makes a claim for compensation against a coemployer that has assumed liability under s. 105.117 (4) (b) 2. for compensation under this chapter may make a claim or maintain an action in tort against any other coemployer of the covered employer.

AB1056, s. 11 Section 11. 103.005 (10) of the statutes is amended to read:

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: