PEOs with operations in Colorado are facing a looming deadline to make a one-time election whether to pay unemployment insurance taxes on their own account & rate, or to pay the UI taxes on the account/rate of their client companies.
2008 amendments to the Colorado PEO statute, had established that PEOs were to be treated as the sole employer for UI tax purposes. However, Colorado Senate Bill 09-258 effectively reverses that change, and instead imposes a "gotcha."
PEOs must file a written designation by 12/31/2009 electing to pay the UI taxes on their own account/rate. If a PEO fails to meet the 12/31 deadline to make a written election to pay on their own account, then the new statute states that the PEO has made an irrevocable election to pay on the client accounts/rates. In other words, if you miss the deadline there is no chance to make a change later.
If you do elect to pay on the PEO basis, SB 09-258 does allow a one-time later choice to report & pay on the client basis. However, once you elect to pay on a client basis, there is no going back.
Also, SB 09-258 makes the election binding on ALL of the PEO's entities under common ownership, managment or control. In other words, a PEO group cannot have two Colorado PEOs - one that pays UI taxes on the PEO account/rate and a second Colorado entity that pays UI taxes on the client account/rate.
Showing posts with label PEO professional employer organization staff leasing employee leasing. Show all posts
Showing posts with label PEO professional employer organization staff leasing employee leasing. Show all posts
Tuesday, December 01, 2009
Thursday, May 28, 2009
Amendements to PEO statute signed by Texas governor
Amendments to the Texas PEO licensing statute (HB 2249) passed both houses of the Texas legislature, and were signed into law by the Governor on 5/27/2009. Most of the law will go into effect on September 1, 2009. Changes in the financial statement requirement however will not be effective until December 31, 2011.
Authorization for TDLR to accept electronic filings via an authorized assurance organization as part of the licensing process. This is entirely optional on the part of PEOs, who will continue to have the option to satisfy all licensing requirements in the current fashion. ESAC is authorized as such an assurance organization in other states, and can be expected to seek authorization in Texas. For PEOs that participate in ESAC, this will make compliance with state licensing easier. This is particularly true for ESAC participating PEOs with operations in multiple states.
Change in the financial requirements. The new law will require audited financial statments, plus the financial requirments are now defined as a positive working capital requirement, rather than net worth. The numbers have not changed, $50,000, $75,000 or $100,000 - depending on the number of covered employees. The statute expressly delays the audit requirement to 12/31/2011. This means that PEOs operating in Texas will have to supply an audited financial statement with the first license application or first license renewal filed on or after 12/31/2011.
Clairification that a client company will continue to be eligible for state employment based tax credits, grants or other incentives based on the co-employees.
While some PEOs will oppose the change to working capital and required audits, these changes were essentially inevitable. The tide has been moving in these directions for some time. It just took a while to hit Texas.
Authorization for TDLR to accept electronic filings via an authorized assurance organization as part of the licensing process. This is entirely optional on the part of PEOs, who will continue to have the option to satisfy all licensing requirements in the current fashion. ESAC is authorized as such an assurance organization in other states, and can be expected to seek authorization in Texas. For PEOs that participate in ESAC, this will make compliance with state licensing easier. This is particularly true for ESAC participating PEOs with operations in multiple states.
Change in the financial requirements. The new law will require audited financial statments, plus the financial requirments are now defined as a positive working capital requirement, rather than net worth. The numbers have not changed, $50,000, $75,000 or $100,000 - depending on the number of covered employees. The statute expressly delays the audit requirement to 12/31/2011. This means that PEOs operating in Texas will have to supply an audited financial statement with the first license application or first license renewal filed on or after 12/31/2011.
Clairification that a client company will continue to be eligible for state employment based tax credits, grants or other incentives based on the co-employees.
While some PEOs will oppose the change to working capital and required audits, these changes were essentially inevitable. The tide has been moving in these directions for some time. It just took a while to hit Texas.
Friday, April 24, 2009
Amendements to PEO statute pass Texas House
HB2249, which would amend the existing Texas PEO licensing statute has been passed by the Texas House of Representatives, and will now head to the Senate for consideration. As reported earlier, this bill would change the nature of the financial requirements from net worth to working capital, would require audited financial statements, and would provide an option for somewhat streamlined reporting and filing via an approved assurance organization.
The changes here are positive for the industry, and in the case of audits probably inevitable.
The changes here are positive for the industry, and in the case of audits probably inevitable.
Tuesday, March 03, 2009
PEO arrangements with Texas Law Firms
PEOs have often wanted to do business with lawfirm clients. High wages, low workers' compensation risks, and fairly stable business operations tend to make lawyers attractive to PEOs. The stumbling block in Texas for many years was an old State Bar Ethics Committee opinion that appeared to prohibit Texas lawyers from entering into PEO arrangements.
That is no longer the case, and has not been for some time. In 2005, the State Bar Ethics Committee issued Opinion no. 560 which squarely allows Texas lawyers to enter into PEO arrangements for their firms, without running afoul of the ethics rules. Opinion 560 can be found here.
Here is the Committee's summary of their decision:
"Under the Texas Disciplinary Rules of Professional Conduct, a law firm may contract with an employee leasing company for the provision of limited employee compensation and benefit services for the law firm's employees so long as the law firm maintains exclusive control over the hiring and termination of its employees, there is no sharing of employees among various clients of the employee leasing company, the leasing company has no managerial or supervisory rights over the law firm's employees, and the leasing company has no access to client information."
Opinion 560 squarely supersedes the older opions on the subjcet, No. 508 and 515. Since the publication of this opinion in 2005, Texas has been consistent with the modern authorities in other states, which have also permitted lawyers to enter into PEO arrangements.
Because this is a state by state kind of issue, PEOs will need to look at this question for each state in which they propose to do business with a lawfirm. Unfortunately, there is no "one size fits all" answer here. While it is true that this issue is a problem of professional ethics for the lawfirm and not directly for the PEO, do you really want to sell a lawfirm on a PEO deal only to have them figure our somewhat later that they just put their law licenses at risk?
PEOs would be well served to provide a lawfirm specific addendum to their customer service agreement confirming that the lawfirm customer and the PEO have agreed to terms consistent with that state's ethics opinions. In addition, PEOs might want to consider whether to permit the lawfirm to easily cancel the contract in the future if the lawfirm believes that the arrangement would be ethcially improper. I can't imagine a worse situation than a PEO trying to hold an unhappy lawfirm client into the PEO arrangement.
That is no longer the case, and has not been for some time. In 2005, the State Bar Ethics Committee issued Opinion no. 560 which squarely allows Texas lawyers to enter into PEO arrangements for their firms, without running afoul of the ethics rules. Opinion 560 can be found here.
Here is the Committee's summary of their decision:
"Under the Texas Disciplinary Rules of Professional Conduct, a law firm may contract with an employee leasing company for the provision of limited employee compensation and benefit services for the law firm's employees so long as the law firm maintains exclusive control over the hiring and termination of its employees, there is no sharing of employees among various clients of the employee leasing company, the leasing company has no managerial or supervisory rights over the law firm's employees, and the leasing company has no access to client information."
Opinion 560 squarely supersedes the older opions on the subjcet, No. 508 and 515. Since the publication of this opinion in 2005, Texas has been consistent with the modern authorities in other states, which have also permitted lawyers to enter into PEO arrangements.
Because this is a state by state kind of issue, PEOs will need to look at this question for each state in which they propose to do business with a lawfirm. Unfortunately, there is no "one size fits all" answer here. While it is true that this issue is a problem of professional ethics for the lawfirm and not directly for the PEO, do you really want to sell a lawfirm on a PEO deal only to have them figure our somewhat later that they just put their law licenses at risk?
PEOs would be well served to provide a lawfirm specific addendum to their customer service agreement confirming that the lawfirm customer and the PEO have agreed to terms consistent with that state's ethics opinions. In addition, PEOs might want to consider whether to permit the lawfirm to easily cancel the contract in the future if the lawfirm believes that the arrangement would be ethcially improper. I can't imagine a worse situation than a PEO trying to hold an unhappy lawfirm client into the PEO arrangement.
Monday, February 02, 2009
New I-9 forms delayed
On February 2, the U.S. Citizenship and Immigration Services (USCIS) announced that it delayed by 60 days, until April 3, 2009, the effective date for using the revised Form I-9, originally scheduled to go into effect today.
Here comes the tricky bit - Employers who use the new form prior to the April 3, 2009 effective date are subject to civil monetary penalties.
Be careful, and don't jump the gun. ONLY use the form which is currently in effect, not the new one.
Here comes the tricky bit - Employers who use the new form prior to the April 3, 2009 effective date are subject to civil monetary penalties.
Be careful, and don't jump the gun. ONLY use the form which is currently in effect, not the new one.
Tuesday, February 12, 2008
Proposed FMLA Rules will affect PEOs
The DOL has published a NPRM - notice of proposed rule making - in preparation for adopting new regulations under the Family & Medical Leave Act. The proposed rules may modify a PEOs responsibilities under the FMLA. Unfortunately, the proposed rules leave more questioned UNanswered than answered.
Here are the most relevant sections of the proposed rules. I've bolded sections that seem particularly troublesome:
§825.106 Joint employer coverage.
(a) Where two or more businesses exercise some control over the work or working conditions of the employee, the businesses may be joint employers under FMLA. Joint employers may be separate and distinct entities with separate owners, managers and facilities. Where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, a joint employment relationship generally will be considered to exist in situations such as:
(1) Where there is an arrangement between employers to share an employee's services or to interchange employees;
(2) Where one employer acts directly or indirectly in the interest of the other employer in relation to the employee; or,
(3) Where the employers are not completely disassociated with respect to the employee's employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.
(b)(1) A determination of whether or not a joint employment relationship exists is not determined by the application of any single criterion, but rather the entire relationship is to be viewed in its totality. For example, joint employment will ordinarily be found to exist when a temporary or leasing agency supplies employees to a second employer.
(2) A type of company that is often called a "Professional Employment Organization" (PEO) or "HR Outsourcing Vendor" contracts with client employers merely to perform administrative functions--including payroll, benefits, regulatory paperwork, and updating employment policies. A PEO does not enter into a joint employment relationship with the employees of its client companies provided it merely performs these administrative functions. On the other hand, if in a particular fact situation, a PEO has the right to hire, fire, assign, or direct and control the client's employees, or benefits from the work that the employees perform, such a PEO would be a joint employer with the client employer.
(c) In joint employment relationships, only the primary employer is responsible for giving required notices to its employees, providing FMLA leave, and maintenance of health benefits. Factors considered in determining which is the "primary" employer include authority/responsibility to hire and fire, assign/place the employee, make payroll, and provide employment benefits. For employees of temporary help or leasing agencies, for example, the placement agency most commonly would be the primary employer.
(d) Employees jointly employed by two employers must be counted by both employers, whether or not maintained on one of the employer's payroll, in determining employer coverage and employee eligibility. For example, an employer who jointly employs 15 workers from a leasing or temporary help agency and 40 permanent workers is covered by FMLA. (A special rule applies to employees jointly employed who physically work at a facility of the secondary employer for a period of at least one year. See §825.111(a)(3).) An employee on leave who is working for a secondary employer is considered employed by the secondary employer, and must be counted for coverage and eligibility purposes, as long as the employer has a reasonable expectation that that employee will return to employment with that employer.
(e) Job restoration is the primary responsibility of the primary employer. The secondary employer is responsible for accepting the employee returning from FMLA leave in place of the replacement employee if the secondary employer continues to utilize an employee from the temporary or leasing agency, and the agency chooses to place the employee with the secondary employer. A secondary employer is also responsible for compliance with the prohibited acts provisions with respect to its temporary/leased employees, whether or not the secondary employer is covered by FMLA (see §825.220(a))The prohibited acts include prohibitions against interfering with an employee's attempt to exercise rights under the Act, or discharging or discriminating against an employee for opposing a practice which is unlawful under FMLA. A covered secondary employer will be responsible for compliance with all the provisions of the FMLA with respect to its regular, permanent workforce.
These bolded sentences are the result of some Really Big Lawfirms trying to explain a difference between staff leasing and PEO, and telling the DOL that PEOs are not really employers and do not really have much to do with the client company's employees. It also appears that in their comments to the DOL, these Really Big Lawfirms also lumped temp staffing in under the heading of "employee leasing." The end result is destined to be confusion.
Lets make the rather optimistic assumption that we can figure out whether or not a PEO is a joint employer and whether it is the primary or secondary employer, then the proposed rules may bring a small amount of clarity to the situation. A very small amount. The proposed rules largely mirror the existing rules, with additions that reflect the DOL's opinion letters on PEOs and FMLA.
Here are the most relevant sections of the proposed rules. I've bolded sections that seem particularly troublesome:
§825.106 Joint employer coverage.
(a) Where two or more businesses exercise some control over the work or working conditions of the employee, the businesses may be joint employers under FMLA. Joint employers may be separate and distinct entities with separate owners, managers and facilities. Where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, a joint employment relationship generally will be considered to exist in situations such as:
(1) Where there is an arrangement between employers to share an employee's services or to interchange employees;
(2) Where one employer acts directly or indirectly in the interest of the other employer in relation to the employee; or,
(3) Where the employers are not completely disassociated with respect to the employee's employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.
(b)(1) A determination of whether or not a joint employment relationship exists is not determined by the application of any single criterion, but rather the entire relationship is to be viewed in its totality. For example, joint employment will ordinarily be found to exist when a temporary or leasing agency supplies employees to a second employer.
(2) A type of company that is often called a "Professional Employment Organization" (PEO) or "HR Outsourcing Vendor" contracts with client employers merely to perform administrative functions--including payroll, benefits, regulatory paperwork, and updating employment policies. A PEO does not enter into a joint employment relationship with the employees of its client companies provided it merely performs these administrative functions. On the other hand, if in a particular fact situation, a PEO has the right to hire, fire, assign, or direct and control the client's employees, or benefits from the work that the employees perform, such a PEO would be a joint employer with the client employer.
(c) In joint employment relationships, only the primary employer is responsible for giving required notices to its employees, providing FMLA leave, and maintenance of health benefits. Factors considered in determining which is the "primary" employer include authority/responsibility to hire and fire, assign/place the employee, make payroll, and provide employment benefits. For employees of temporary help or leasing agencies, for example, the placement agency most commonly would be the primary employer.
(d) Employees jointly employed by two employers must be counted by both employers, whether or not maintained on one of the employer's payroll, in determining employer coverage and employee eligibility. For example, an employer who jointly employs 15 workers from a leasing or temporary help agency and 40 permanent workers is covered by FMLA. (A special rule applies to employees jointly employed who physically work at a facility of the secondary employer for a period of at least one year. See §825.111(a)(3).) An employee on leave who is working for a secondary employer is considered employed by the secondary employer, and must be counted for coverage and eligibility purposes, as long as the employer has a reasonable expectation that that employee will return to employment with that employer.
(e) Job restoration is the primary responsibility of the primary employer. The secondary employer is responsible for accepting the employee returning from FMLA leave in place of the replacement employee if the secondary employer continues to utilize an employee from the temporary or leasing agency, and the agency chooses to place the employee with the secondary employer. A secondary employer is also responsible for compliance with the prohibited acts provisions with respect to its temporary/leased employees, whether or not the secondary employer is covered by FMLA (see §825.220(a))The prohibited acts include prohibitions against interfering with an employee's attempt to exercise rights under the Act, or discharging or discriminating against an employee for opposing a practice which is unlawful under FMLA. A covered secondary employer will be responsible for compliance with all the provisions of the FMLA with respect to its regular, permanent workforce.
These bolded sentences are the result of some Really Big Lawfirms trying to explain a difference between staff leasing and PEO, and telling the DOL that PEOs are not really employers and do not really have much to do with the client company's employees. It also appears that in their comments to the DOL, these Really Big Lawfirms also lumped temp staffing in under the heading of "employee leasing." The end result is destined to be confusion.
Lets make the rather optimistic assumption that we can figure out whether or not a PEO is a joint employer and whether it is the primary or secondary employer, then the proposed rules may bring a small amount of clarity to the situation. A very small amount. The proposed rules largely mirror the existing rules, with additions that reflect the DOL's opinion letters on PEOs and FMLA.
Tuesday, July 10, 2007
Client Insurance & Certificates of Insurance
Most PEOs include in their customer service agreement a clause requiring the client company to maintain GL insurance and to provide the PEO with a certificate of insurance. In addition, many PEOs also require the client to name the PEO as an additional insured. These are basic steps towards safeguarding the PEO against the risk of litigation arising out of the client's business operations.
But - PEOs cannot become complacent. It is absolutely essential that PEOs have in place a process to monitor and verify that the customer has actually provided the certificate of insurance, that the customer has renewed coverage with no lapses and that any required additional insured endorsement is in place. Too many PEOs treat this as a one-time task, to be worried about only at the time the client is signed on.
If you want to sleep at night, you must establish a smooth, well functioning business process that provides for verification and monitoring. Once the lawsuit is filed, it is too late.
In addition, PEOs must evaluate the insurance requirements for each client individually based on the nature of the client's business operations and their risk posture. For some clients, $500,000 in GL will be adequate. For others, ten times that much will not be enough. PEO management must set the insurance requirements for each client based on a review of that client.
But - PEOs cannot become complacent. It is absolutely essential that PEOs have in place a process to monitor and verify that the customer has actually provided the certificate of insurance, that the customer has renewed coverage with no lapses and that any required additional insured endorsement is in place. Too many PEOs treat this as a one-time task, to be worried about only at the time the client is signed on.
If you want to sleep at night, you must establish a smooth, well functioning business process that provides for verification and monitoring. Once the lawsuit is filed, it is too late.
In addition, PEOs must evaluate the insurance requirements for each client individually based on the nature of the client's business operations and their risk posture. For some clients, $500,000 in GL will be adequate. For others, ten times that much will not be enough. PEO management must set the insurance requirements for each client based on a review of that client.
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