H.B. 139

1

EMPLOYEE LEASING COMPANY LICENSING
2 ACT AMENDMENTS
3 1997 GENERAL SESSION
4 STATE OF UTAH
5 Sponsor: Brian R. Allen
6 AN ACT RELATING TO OCCUPATIONS AND PROFESSIONS; REQUIRING AN
7 EMPLOYEE LEASING COMPANY TO SUBMIT AN ANNUAL h [CERTIFIED AUDIT ]
7a FINANCIAL STATEMENT h AND
8 PROVIDE CERTAIN INFORMATION; ALLOWING THE DEPARTMENT OF
9 COMMERCE TO SEEK JUDICIAL INTERVENTION IF THE PUBLIC INTEREST IS
10 THREATENED; h [ MAKING EMPLOYEE LEASING COMPANIES LEGALLY
11 RESPONSIBLE FOR WORKERS' COMPENSATION; REQUIRING A CLIENT COMPANY
12 TO BE NAMED AS AN ADDITIONAL INSURED ON A WORKERS' COMPENSATION
13 POLICY; ] h REQUIRING CERTAIN STATE AGENCIES TO INFORM THE DEPARTMENT
14 OF COMMERCE IF AN EMPLOYEE LEASING COMPANY FAILS TO COMPLY WITH
15 CERTAIN LEGAL REQUIREMENTS; MAKING TECHNICAL AND CONFORMING
16 AMENDMENTS; AND PROVIDING AN EFFECTIVE DATE.
17 This act affects sections of Utah Code Annotated 1953 as follows:
18 AMENDS:
19 35A-3-103 (Effective 07/01/97), as last amended by Chapter 190 and renumbered and amended
20 by Chapter 240, Laws of Utah 1996
21 35A-4-104 (Effective 07/01/97), as renumbered and amended by Chapter 240, Laws of Utah
22 1996
23 58-59-102, as last amended by Chapters 12 and 247, Laws of Utah 1994
24 58-59-302 (Effective 07/01/97), as last amended by Chapter 240, Laws of Utah 1996
25 58-59-306, as repealed and reenacted by Chapter 247, Laws of Utah 1994
26 58-59-502, as enacted by Chapter 247, Laws of Utah 1994
27 ENACTS:

lilac-February 28, 1997

1 58-59-402, Utah Code Annotated 1953
2 Be it enacted by the Legislature of the state of Utah:
3 Section 1. Section 35A-3-103 (Effective 07/01/97) is amended to read:
4 35A-3-103 (Effective 07/01/97). Employers enumerated and defined -- Regularly
5 employed -- Statutory employers.
6 (1) (a) The state, and each county, city, town, and school district in the state are considered
7 employers under this chapter.
8 (b) For the purposes of the exclusive remedy in this chapter prescribed in Section
9 35A-3-105, the state is considered to be a single employer and includes any office, department,
10 agency, authority, commission, board, institution, hospital, college, university, or other
11 instrumentality of the state.
12 (2) Except as provided in Subsection (4), each person, including each public utility and
13 each independent contractor, who regularly employs one or more workers or operatives in the same
14 business, or in or about the same establishment, under any contract of hire, express or implied, oral
15 or written, is considered an employer under this chapter. As used in Subsection (2):
16 (a) "Regularly" includes all employments in the usual course of the trade, business,
17 profession, or occupation of the employer, whether continuous throughout the year or for only a
18 portion of the year.
19 (b) "Independent contractor" means any person engaged in the performance of any work
20 for another who, while so engaged, is independent of the employer in all that pertains to the
21 execution of the work, is not subject to the routine rule or control of the employer, is engaged only
22 in the performance of a definite job or piece of work, and is subordinate to the employer only in
23 effecting a result in accordance with the employer's design.
24 (3) (a) The h [ [ ] client [ ] ] [ employee leasing ] h company in an employee leasing
24a arrangement under
25 Title 58, Chapter 59, Employee Leasing Company Licensing Act, is considered the employer of
26 leased employees and shall secure workers' compensation benefits for them by complying with
27 Subsection 35A-3-201(1)(a) or (b) and department rules.
28 (b) Insurance carriers h [ [ ] may [ ] ] [ shall ] h underwrite such a risk showing the leasing
28a company as
29 the named insured and each client company as an additional insured by means of individual
30 endorsements.
31 (c) Endorsements shall be filed with the department as directed by rule.

lilac-February 28, 1997

- 2 -

1 (d) The department shall promptly inform the Division of Occupation and Professional
2 Licensing within the Department of Commerce if the department has reason to believe that an
3 employee leasing company is not in compliance with Subsection 35A-3-201(1)(a) or (b) and
4 department rules.
5 (4) (a) An agricultural employer is not considered an employer under this chapter if:
6 (i) the employer's employees are all members of the employer's immediate family and
7 the employer has a proprietary interest in the farm where they work; or
8 (ii) the employer employed five or fewer persons other than immediate family members
9 for 40 hours or more per week per employee for 13 consecutive weeks during any part of the
10 preceding 12 months.
11 (b) A domestic employer who does not employ one employee or more than one employee
12 at least 40 hours per week is not considered an employer under this chapter.
13 (5) An employer of agricultural laborers or domestic servants who is not under this chapter
14 has the right and option to come under it by complying with its provisions and the rules of the
15 department.
16 (6) (a) If any person who is an employer procures any work to be done wholly or in part
17 for the employer by a contractor over whose work the employer retains supervision or control, and
18 this work is a part or process in the trade or business of the employer, the contractor, all persons
19 employed by the contractor, all subcontractors under the contractor, and all persons employed by
20 any of these subcontractors, are considered employees of the original employer for the purposes
21 of this chapter and Chapter 3a.
22 (b) Any person who is engaged in constructing, improving, repairing, or remodelling a
23 residence that the person owns or is in the process of acquiring as the person's personal residence
24 may not be considered an employee or employer solely by operation of Subsection (6)(a).
25 (c) A partner in a partnership or an owner of a sole proprietorship may not be considered
26 an employee under Subsection (6)(a) if the employer who procures work to be done by the
27 partnership or sole proprietorship obtains and relies on either:
28 (i) a valid certification of the partnership's or sole proprietorship's compliance with Section
29 35A-3-201 indicating that the partnership or sole proprietorship secured the payment of workers'
30 compensation benefits pursuant to Section 35A-3-201; or
31 (ii) if a partnership or sole proprietorship with no employees other than a partner of the

- 3 -

1 partnership or owner of the sole proprietorship, a workers' compensation policy issued by an
2 insurer pursuant to Subsection 31A-21-104(8) stating that:
3 (A) the partnership or sole proprietorship is customarily engaged in an independently
4 established trade, occupation, profession, or business; and
5 (B) the partner or owner personally waives the partner's or owner's entitlement to the
6 benefits of Chapters 1 and 2 in the operation of the partnership or sole proprietorship.
7 (d) A director or officer of a corporation may not be considered an employee under
8 Subsection (6)(a) if the director or officer is excluded from coverage under Subsection
9 35A-3-104(4).
10 (e) A contractor or subcontractor is not an employee of the employer under Subsection
11 (6)(a), if the employer who procures work to be done by the contractor or subcontractor obtains
12 and relies on either:
13 (i) a valid certification of the contractor's or subcontractor's compliance with Section
14 35A-3-201; or
15 (ii) if a partnership, corporation, or sole proprietorship with no employees other than a
16 partner of the partnership, officer of the corporation, or owner of the sole proprietorship, a workers'
17 compensation policy issued by an insurer pursuant to Subsection 31A-21-104(8) stating that:
18 (A) the partnership, corporation, or sole proprietorship is customarily engaged in an
19 independently established trade, occupation, profession, or business; and
20 (B) the partner, corporate officer, or owner personally waives the partner's, corporate
21 officer's, or owner's entitlement to the benefits of this chapter and Chapter 3a in the operation of
22 the partnership's, corporation's, or sole proprietorship's enterprise under a contract of hire for
23 services.
24 Section 2. Section 35A-4-104 (Effective 07/01/97) is amended to read:
25 35A-4-104 (Effective 07/01/97). Violations of chapter -- Penalties.
26 (1) (a) Any person who makes a false statement or representation knowing it to be false
27 or knowingly fails to disclose a material fact, to obtain or increase any benefit or other payment
28 under this chapter or under the Unemployment Compensation Law of any state or of the Federal
29 Government, either for himself or for any other person, is guilty of a class A misdemeanor.
30 (b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection
31 (1) shall be not less than $50, and a penalty of imprisonment shall be for not longer than 60 days.

- 4 -

1 (c) Each false statement or representation or failure to disclose a material fact constitutes
2 a separate offense.
3 (2) (a) Any employing unit or any officer or agent of an employing unit or any other
4 person who makes a false statement or representation knowing it to be false, or who knowingly
5 fails to disclose a material fact, to prevent or reduce the payment of benefits to any individual
6 entitled thereto, or to avoid becoming or remaining a subject employer or to avoid or reduce any
7 contribution or other payment required from an employing unit under this chapter or under the
8 Unemployment Compensation Law of any state or of the federal government, or who willfully
9 fails or refuses to make any such contributions or other payment or to furnish any reports required
10 in this chapter or to produce or permit the inspection or copying of records as required hereunder
11 is guilty of a class A misdemeanor.
12 (b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection
13 (2) shall be not less than $50 and a penalty of imprisonment shall be for not longer than 60 days.
14 (c) Each false statement or representation or failure to disclose a material fact, and each
15 day of the failure or refusal constitutes a separate offense.
16 (d) The division shall promptly inform the Division of Occupation and Professional
17 Licensing within the Department of Commerce if it has reason to believe that an employee leasing
18 company has violated Subsection (2)(a).
19 (3) (a) Any person who willfully violates any provision of this chapter or any order, rule,
20 made under this chapter, the violation of which is made unlawful or the observance of which is
21 required under the terms of this chapter, and for which a penalty is neither prescribed in this
22 chapter nor provided by any other applicable statute is guilty of a class A misdemeanor.
23 (b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection
24 (3) shall be not less than $50, and a penalty of imprisonment shall be for not longer than 60 days.
25 (c) Each day a violation continues shall be a separate offense.
26 (4) (a) If any employee of the department, in violation of Subsection 35A-4-502(7), makes
27 any disclosure of information obtained from any employing unit or individual in the administration
28 of this chapter, or if any person who has obtained any list of applicants for work, or of claimants
29 or recipients of benefits, under this chapter shall use or permit the use of such list for any political
30 purpose, he is guilty of a class A misdemeanor.
31 (b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection

- 5 -

1 (4) shall be not less than $50, and a penalty of imprisonment shall be for not longer than 60 days.
2 Section 3. Section 58-59-102 is amended to read:
3 58-59-102. Definitions.
4 In addition to the definitions in Section 58-1-102, as used in this chapter:
5 (1) "Board" means the Employee Leasing Company [Licensing] Board created in Section
6 58-59-201.
7 (2) "Client company" means a person or entity that leases any or all of its permanent
8 employees from an employee leasing company.
9 (3) "Employee leasing company" or "leasing company" means an individual or business
10 that, under an agreement between the client company and the leasing company[,] and for a fee[,]:
11 (a) places all or substantially all of the regular, full-time employees of the client company
12 on the leasing company's payroll [and];
13 (b) leases [them] the employees to the client company on an ongoing basis with no
14 restriction or limitation on the duration of employment[.]; and
15 (c) receives funds from a client company or leasing company employees from which the
16 leasing company is obligated to pay taxes, insurance, or benefits on behalf of the employees.
17 (4) "Employment agreement" means the written agreement between an employee leasing
18 company and each of its employees who are employed for the purpose of being leased as
19 permanent employees to client companies.
20 (5) "Engage in practice as an employee leasing company" means to hold oneself out as an
21 employee leasing company, to lease an employee to another person, and to receive any
22 consideration for providing employee leasing services or to expect payment of any consideration
23 for providing employee leasing services.
24 (6) (a) "Financial responsibility" means a demonstration of a current and expected future
25 condition of financial solvency evidencing a reasonable expectation to the board that an applicant
26 or licensee can successfully engage in business as an employee leasing company without
27 jeopardizing:
28 (i) the interests of the employees of the leasing company who are leased to a client
29 company;
30 (ii) the interests of the client company; and
31 (iii) the interests of the public.

- 6 -

1 (b) Financial responsibility may be determined by an evaluation of the total history
2 concerning the licensee or applicant for licensure, including past, present, and expected condition
3 and record of financial solvency and business conduct.
4 (7) "Lease agreement" means the written agreement between an employee leasing
5 company and a client company in accordance with which the leasing company leases employees
6 to the client company and the client company leases individuals from the leasing company.
7 (8) "Regular employee" means an individual who is an employee of an employee leasing
8 company for the purpose of being placed by the employee leasing company as a regular full-time
9 or regular part-time employee of a client company.
10 (9) "Represent oneself as an employee leasing company" means to hold oneself out by any
11 means as an employee leasing company.
12 (10) "Temporary employee," as may be further defined by rule, means an individual who
13 is an employee of, registered for temporary assignment by, or otherwise associated with a
14 temporary help company that engages in the assignment of individuals as temporary full-time or
15 part-time personnel to fill assignments with a finite ending date to another independent entity.
16 (11) "Temporary help company," as may be further defined by rule, means a person or
17 entity that provides temporary employees to fill assignments with a finite ending date to another
18 independent entity in special, unusual, seasonal, or temporary skill shortage situations.
19 (12) "Unlawful conduct" is as defined in Sections 58-1-501 and 58-59-501.
20 (13) "Unprofessional conduct" is as defined in Sections 58-1-501 and 58-59-502.
21 Section 4. Section 58-59-302 (Effective 07/01/97) is amended to read:
22 58-59-302 (Effective 07/01/97). Qualifications for licensure.
23 Each applicant for licensure as an employee leasing company shall:
24 (1) submit an application in a form prescribed by the division;
25 (2) pay a fee as determined by the department under Section 63-38-3.2;
26 (3) provide documentation that the applicant is properly registered with:
27 (a) the Division of Corporations and Commercial Code;
28 (b) the Division of Employment Development;
29 (c) the State Tax Commission;
30 (d) the Internal Revenue Service; and
31 (e) any other agency identified by rule that is determined by the division and the board as

- 7 -

1 necessary for a person engaged in practice as an employee leasing company;
2 (4) provide documentation satisfactory to the division and the board that employees leased
3 by the employee leasing company to any client company are covered by workers' compensation
4 insurance pursuant to Section 35A-3-103;
5 (5) provide evidence to the division and the board of financial responsibility, as this
6 evidence is prescribed by rule;
7 (6) in the case of an employee leasing company that is commencing or reentering business
8 as an employee leasing company, [provide evidence] submit to the division and the board[, in
9 accordance with generally accepted accounting principals, of] a certified audit performed by an
10 independent certified public accountant showing at least $50,000 net worth as starting capital;
11 (7) provide evidence satisfactory to the division and the board of the financial
12 responsibility of any self-funded or partially self-funded insurance plan as defined by rule;
13 (8) provide, for a criminal background check by the division, the name of:
14 (a) any person who has control of or a controlling interest in, as defined in Section
15 16-10a-102, the leasing company;
16 (b) any officer or director of the leasing company; and
17 (c) any responsible manager of the leasing company h OR OTHER PERSON IF THE MANAGER
17a OR PERSON HAS SIGNATORY AUTHORITY OVER FIDUCIARY FUNDS h ;
18 [(8)] (9) provide evidence satisfactory to the division and the board that the responsible
19 managers of the leasing company have education and experience in the conduct of business that
20 demonstrate a reasonable expectation that the company will be managed with the skill and
21 expertise necessary to protect the interests of its employees, client companies, and the public; and
22 [(9)] (10) provide evidence that the applicant is of good moral character.
23 Section 5. Section 58-59-306 is amended to read:
24 58-59-306. Financial responsibility.
25 (1) [Each applicant for licensure as] To maintain a license in good standing, an employee
26 leasing company[, and each licensee applying for renewal of a license as an employee leasing
27 company,] shall demonstrate financial responsibility [as a condition precedent to licensure or
28 renewal of license. The burden to demonstrate financial responsibility is upon the applicant or
29 licensee].
30 [(2) If there is presented to the division and the board sufficient information to cause a
31 reasonable belief that the financial responsibility of a licensee is impaired to the extent that there

- 8 -

lilac-February 28, 1997

1 is a threat to the public interest, the division or the board may order the licensee to provide current
2 audited financial information prepared by an independent certified public accountant and other
3 supporting information upon which to make a competent evaluation of the licensee's financial
4 responsibility.]
5 [(3)] (2) Financial responsibility shall be demonstrated on:
6 (a) a quarterly basis by providing the division and the board with:
7 (i) evidence from an independent certified public [accounting firm] accountant h , IN A FORM
7a PRESCRIBED BY THE DIVISION, h that all
8 federal, state, and local withholding taxes, unemployment taxes, FICA taxes, workers'
9 compensation premium, and employee benefit plan premiums have been paid[,]; and
10 (ii) any other relevant information the [applicant, licensee,] division[,] or board considers
11 appropriate [for consideration by the division and board.]; and
12 [(4) Upon a showing of reasonable cause, the division and board may inquire into the
13 financial responsibility of the corporation's officers and directors as a factor in determining the
14 corporation's financial responsibility.]
15 (b) an annual basis by providing the division and the board with:
16 (i) a h [certified audit performed ] FINANCIAL STATEMENT PREPARED IN A FORM
16a PRESCRIBED BY THE DIVISION h by an independent certified accountant that h INCLUDES A
16b REVIEW OF THE PAYMENT OF h all federal, state,
17 and local withholding taxes, unemployment taxes, FICA taxes, workers' compensation premium,
18 and employee benefit plan premiums h [ have been paid ] h ; and
19 (ii) any other relevant information the division or board considers appropriate.
20 (3) (a) In addition to quarterly evidence or an annual h [audit ] FINANCIAL STATEMENT h
20a required under Subsection (2),
21 the division and board may request a licensee to submit a certified audit performed by an
22 independent certified public accountant if:
23 (i) a licensee fails to submit quarterly evidence or a h [certified audit ] FINANCIAL
23a STATEMENT h as required by
24 Subsection (2);
25 (ii) The division and board have reason to believe that the evidence or h [audit ] FINANCIAL
25a STATEMENT h submitted by
- 9 -

lilac-February 28, 1997

26 a licensee under Subsection (2):
27 (A) is incomplete or misleading; or
28 (B) contains evidence of:
29 (I) a material financial irregularity; or
30 (II) the failure of the licensee to fully and timely pay a tax or premium identified in
31 Subsection (2) for which it is obligated to pay; or






















- 9a -

lilac-February 28, 1997

1 (iii) the division or board receives information from a state or federal agency or other
2 person of:
3 (A) a material financial irregularity; or
4 (B) the failure of the licensee to fully and timely pay a tax or premium identified in
5 Subsection (2) for which it is obligated to pay.
6 (b) The division and the board may require that an audit requested under Subsection (3)(a)
7 not be performed by an independent certified public accountant who has previously prepared
8 quarterly evidence or an annual h [audit ] FINANCIAL STATEMENT h for the licensee.
8a h (4) AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT SHALL SUBMIT DOCUMENTATION
8b REQUIRED UNDER SUBSECTION (2) AND (3) DIRECTLY TO THE DIVISION BEFORE REVIEWING THE
8c DOCUMENTATION WITH THE LICENSEE. h
9 Section 6. Section 58-59-402 is enacted to read:
10 58-59-402. Court intervention.
11 If the financial condition of a licensee h OR UNLICENSED EMPLOYEE LEASING COMPANY h 11a is impaired to the extent of posing a significant
12 threat to the public, the division may file a complaint in district court asking for:
13 (1) injunctive relief;
14 (2) the appointment of a receiver;
15 (3) the sale of the licensee's company to a third party;
16 (4) the liquidation of the licensee's company; and
17 (5) any other appropriate remedy.
18 Section 7. Section 58-59-502 is amended to read:
19 58-59-502. Unprofessional conduct.
20 Unprofessional conduct includes:
21 (1) failing to establish, maintain, or demonstrate financial responsibility and management
22 competence while licensed as an employee leasing company;
23 (2) failing to maintain proper registration with any agency for which registration is
24 required as a condition of licensure under this chapter;
25 (3) failing to maintain current lease agreements and employment agreements in appropriate
26 form and content as required under this chapter; [and]

- 10 -

lilac-February 28, 1997

27 (4) failing to inform the division of a change in ownership, in the address of its owners or
28 officers, or in its principal business address within ten days after the change[.];
29 (5) failing to maintain and make available h , UPON REQUEST, h to the division and the
29a licensee's workers'
30 compensation insurance carrier:
31 (a) the name and federal identification number of each client company;























- 10a -

lilac-February 28, 1997

1 (b) h [ a list ] THE NUMBER AND, IF GOOD CAUSE IS SHOWN, THE NAMES h of all
1a covered employees provided to each client company; and
2 (c) the total eligible wages and workers' compensation premiums due to the carrier for the
3 employees provided to each client company; and
4 (6) failing within 30 days to notify the division and the licensee's workers' compensation
5 insurance carrier of the initiation or termination of a relationship with a client company.
6 Section 9. Effective date.
7 This act takes effect on July 1, 1997.




Legislative Review Note
as of 1-29-97 4:18 PM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

- 11 -

lilac-February 28, 1997