H.B. 139 Enrolled

EMPLOYEE LEASING COMPANY LICENSING
ACT AMENDMENTS
1997 GENERAL SESSION
STATE OF UTAH
Sponsor: Brian R. Allen
AN ACT RELATING TO OCCUPATIONS AND PROFESSIONS; REQUIRING AN
EMPLOYEE LEASING COMPANY TO SUBMIT AN ANNUAL FINANCIAL
STATEMENT AND PROVIDE CERTAIN INFORMATION; ALLOWING THE
DEPARTMENT OF COMMERCE TO SEEK JUDICIAL INTERVENTION IF THE
PUBLIC INTEREST IS THREATENED; REQUIRING CERTAIN STATE AGENCIES
TO INFORM THE DEPARTMENT OF COMMERCE IF AN EMPLOYEE LEASING
COMPANY FAILS TO COMPLY WITH CERTAIN LEGAL REQUIREMENTS;
MAKING TECHNICAL AND CONFORMING AMENDMENTS; AND PROVIDING
AN EFFECTIVE DATE.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
35A-3-103 (Effective 07/01/97), as last amended by Chapter 190 and renumbered and
amended by Chapter 240, Laws of Utah 1996
35A-4-104 (Effective 07/01/97), as renumbered and amended by Chapter 240, Laws of
Utah 1996
58-59-102, as last amended by Chapters 12 and 247, Laws of Utah 1994
58-59-302 (Effective 07/01/97), as last amended by Chapter 240, Laws of Utah 1996
58-59-306, as repealed and reenacted by Chapter 247, Laws of Utah 1994
58-59-502, as enacted by Chapter 247, Laws of Utah 1994
ENACTS:
58-59-402, Utah Code Annotated 1953
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 35A-3-103 (Effective 07/01/97) is amended to read:
35A-3-103 (Effective 07/01/97). Employers enumerated and defined -- Regularly

employed -- Statutory employers.
(1) (a) The state, and each county, city, town, and school district in the state are considered
employers under this chapter.
(b) For the purposes of the exclusive remedy in this chapter prescribed in Section
35A-3-105, the state is considered to be a single employer and includes any office, department,
agency, authority, commission, board, institution, hospital, college, university, or other
instrumentality of the state.
(2) Except as provided in Subsection (4), each person, including each public utility and each
independent contractor, who regularly employs one or more workers or operatives in the same
business, or in or about the same establishment, under any contract of hire, express or implied, oral
or written, is considered an employer under this chapter. As used in Subsection (2):
(a) "Regularly" includes all employments in the usual course of the trade, business,
profession, or occupation of the employer, whether continuous throughout the year or for only a
portion of the year.
(b) "Independent contractor" means any person engaged in the performance of any work for
another who, while so engaged, is independent of the employer in all that pertains to the execution
of the work, is not subject to the routine rule or control of the employer, is engaged only in the
performance of a definite job or piece of work, and is subordinate to the employer only in effecting
a result in accordance with the employer's design.
(3) (a) The client company in an employee leasing arrangement under Title 58, Chapter 59,
Employee Leasing Company Licensing Act, is considered the employer of leased employees and
shall secure workers' compensation benefits for them by complying with Subsection
35A-3-201(1)(a) or (b) and department rules.
(b) Insurance carriers may underwrite such a risk showing the leasing company as the named
insured and each client company as an additional insured by means of individual endorsements.
(c) Endorsements shall be filed with the department as directed by rule.
(d) The department shall promptly inform the Division of Occupation and Professional
Licensing within the Department of Commerce if the department has reason to believe that an

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employee leasing company is not in compliance with Subsection 35A-3-201(1)(a) or (b) and
department rules.
(4) (a) An agricultural employer is not considered an employer under this chapter if:
(i) the employer's employees are all members of the employer's immediate family and the
employer has a proprietary interest in the farm where they work; or
(ii) the employer employed five or fewer persons other than immediate family members for
40 hours or more per week per employee for 13 consecutive weeks during any part of the preceding
12 months.
(b) A domestic employer who does not employ one employee or more than one employee
at least 40 hours per week is not considered an employer under this chapter.
(5) An employer of agricultural laborers or domestic servants who is not under this chapter
has the right and option to come under it by complying with its provisions and the rules of the
department.
(6) (a) If any person who is an employer procures any work to be done wholly or in part for
the employer by a contractor over whose work the employer retains supervision or control, and this
work is a part or process in the trade or business of the employer, the contractor, all persons
employed by the contractor, all subcontractors under the contractor, and all persons employed by any
of these subcontractors, are considered employees of the original employer for the purposes of this
chapter and Chapter 3a.
(b) Any person who is engaged in constructing, improving, repairing, or remodelling a
residence that the person owns or is in the process of acquiring as the person's personal residence
may not be considered an employee or employer solely by operation of Subsection (6)(a).
(c) A partner in a partnership or an owner of a sole proprietorship may not be considered an
employee under Subsection (6)(a) if the employer who procures work to be done by the partnership
or sole proprietorship obtains and relies on either:
(i) a valid certification of the partnership's or sole proprietorship's compliance with Section
35A-3-201 indicating that the partnership or sole proprietorship secured the payment of workers'
compensation benefits pursuant to Section 35A-3-201; or

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(ii) if a partnership or sole proprietorship with no employees other than a partner of the
partnership or owner of the sole proprietorship, a workers' compensation policy issued by an insurer
pursuant to Subsection 31A-21-104(8) stating that:
(A) the partnership or sole proprietorship is customarily engaged in an independently
established trade, occupation, profession, or business; and
(B) the partner or owner personally waives the partner's or owner's entitlement to the
benefits of Chapters 1 and 2 in the operation of the partnership or sole proprietorship.
(d) A director or officer of a corporation may not be considered an employee under
Subsection (6)(a) if the director or officer is excluded from coverage under Subsection
35A-3-104(4).
(e) A contractor or subcontractor is not an employee of the employer under Subsection
(6)(a), if the employer who procures work to be done by the contractor or subcontractor obtains and
relies on either:
(i) a valid certification of the contractor's or subcontractor's compliance with Section
35A-3-201; or
(ii) if a partnership, corporation, or sole proprietorship with no employees other than a
partner of the partnership, officer of the corporation, or owner of the sole proprietorship, a workers'
compensation policy issued by an insurer pursuant to Subsection 31A-21-104(8) stating that:
(A) the partnership, corporation, or sole proprietorship is customarily engaged in an
independently established trade, occupation, profession, or business; and
(B) the partner, corporate officer, or owner personally waives the partner's, corporate
officer's, or owner's entitlement to the benefits of this chapter and Chapter 3a in the operation of the
partnership's, corporation's, or sole proprietorship's enterprise under a contract of hire for services.
Section 2. Section 35A-4-104 (Effective 07/01/97) is amended to read:
35A-4-104 (Effective 07/01/97). Violations of chapter -- Penalties.
(1) (a) Any person who makes a false statement or representation knowing it to be false or
knowingly fails to disclose a material fact, to obtain or increase any benefit or other payment under
this chapter or under the Unemployment Compensation Law of any state or of the Federal

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Government, either for himself or for any other person, is guilty of a class A misdemeanor.
(b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection (1)
shall be not less than $50, and a penalty of imprisonment shall be for not longer than 60 days.
(c) Each false statement or representation or failure to disclose a material fact constitutes a
separate offense.
(2) (a) Any employing unit or any officer or agent of an employing unit or any other person
who makes a false statement or representation knowing it to be false, or who knowingly fails to
disclose a material fact, to prevent or reduce the payment of benefits to any individual entitled
thereto, or to avoid becoming or remaining a subject employer or to avoid or reduce any contribution
or other payment required from an employing unit under this chapter or under the Unemployment
Compensation Law of any state or of the federal government, or who willfully fails or refuses to
make any such contributions or other payment or to furnish any reports required in this chapter or
to produce or permit the inspection or copying of records as required hereunder is guilty of a class
A misdemeanor.
(b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection (2)
shall be not less than $50 and a penalty of imprisonment shall be for not longer than 60 days.
(c) Each false statement or representation or failure to disclose a material fact, and each day
of the failure or refusal constitutes a separate offense.
(d) The division shall promptly inform the Division of Occupation and Professional
Licensing within the Department of Commerce if it has reason to believe that an employee leasing
company has violated Subsection (2)(a).
(3) (a) Any person who willfully violates any provision of this chapter or any order, rule,
made under this chapter, the violation of which is made unlawful or the observance of which is
required under the terms of this chapter, and for which a penalty is neither prescribed in this chapter
nor provided by any other applicable statute is guilty of a class A misdemeanor.
(b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection (3)
shall be not less than $50, and a penalty of imprisonment shall be for not longer than 60 days.
(c) Each day a violation continues shall be a separate offense.

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(4) (a) If any employee of the department, in violation of Subsection 35A-4-502(7), makes
any disclosure of information obtained from any employing unit or individual in the administration
of this chapter, or if any person who has obtained any list of applicants for work, or of claimants or
recipients of benefits, under this chapter shall use or permit the use of such list for any political
purpose, he is guilty of a class A misdemeanor.
(b) Notwithstanding Sections 76-3-204 and 76-3-301, a fine imposed under Subsection (4)
shall be not less than $50, and a penalty of imprisonment shall be for not longer than 60 days.
Section 3. Section 58-59-102 is amended to read:
58-59-102. Definitions.
In addition to the definitions in Section 58-1-102, as used in this chapter:
(1) "Board" means the Employee Leasing Company [Licensing] Board created in Section
58-59-201.
(2) "Client company" means a person or entity that leases any or all of its permanent
employees from an employee leasing company.
(3) "Employee leasing company" or "leasing company" means an individual or business that,
under an agreement between the client company and the leasing company[,] and for a fee[,]:
(a) places all or substantially all of the regular, full-time employees of the client company
on the leasing company's payroll [and];
(b) leases [them] the employees to the client company on an ongoing basis with no
restriction or limitation on the duration of employment[.]; and
(c) receives funds from a client company or leasing company employees from which the
leasing company is obligated to pay taxes, insurance, or benefits on behalf of the employees.
(4) "Employment agreement" means the written agreement between an employee leasing
company and each of its employees who are employed for the purpose of being leased as permanent
employees to client companies.
(5) "Engage in practice as an employee leasing company" means to hold oneself out as an
employee leasing company, to lease an employee to another person, and to receive any consideration
for providing employee leasing services or to expect payment of any consideration for providing

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employee leasing services.
(6) (a) "Financial responsibility" means a demonstration of a current and expected future
condition of financial solvency evidencing a reasonable expectation to the board that an applicant
or licensee can successfully engage in business as an employee leasing company without
jeopardizing:
(i) the interests of the employees of the leasing company who are leased to a client company;
(ii) the interests of the client company; and
(iii) the interests of the public.
(b) Financial responsibility may be determined by an evaluation of the total history
concerning the licensee or applicant for licensure, including past, present, and expected condition
and record of financial solvency and business conduct.
(7) "Lease agreement" means the written agreement between an employee leasing company
and a client company in accordance with which the leasing company leases employees to the client
company and the client company leases individuals from the leasing company.
(8) "Regular employee" means an individual who is an employee of an employee leasing
company for the purpose of being placed by the employee leasing company as a regular full-time
or regular part-time employee of a client company.
(9) "Represent oneself as an employee leasing company" means to hold oneself out by any
means as an employee leasing company.
(10) "Temporary employee," as may be further defined by rule, means an individual who
is an employee of, registered for temporary assignment by, or otherwise associated with a temporary
help company that engages in the assignment of individuals as temporary full-time or part-time
personnel to fill assignments with a finite ending date to another independent entity.
(11) "Temporary help company," as may be further defined by rule, means a person or entity
that provides temporary employees to fill assignments with a finite ending date to another
independent entity in special, unusual, seasonal, or temporary skill shortage situations.
(12) "Unlawful conduct" is as defined in Sections 58-1-501 and 58-59-501.
(13) "Unprofessional conduct" is as defined in Sections 58-1-501 and 58-59-502.

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Section 4. Section 58-59-302 (Effective 07/01/97) is amended to read:
58-59-302 (Effective 07/01/97). Qualifications for licensure.
Each applicant for licensure as an employee leasing company shall:
(1) submit an application in a form prescribed by the division;
(2) pay a fee as determined by the department under Section 63-38-3.2;
(3) provide documentation that the applicant is properly registered with:
(a) the Division of Corporations and Commercial Code;
(b) the Division of Employment Development;
(c) the State Tax Commission;
(d) the Internal Revenue Service; and
(e) any other agency identified by rule that is determined by the division and the board as
necessary for a person engaged in practice as an employee leasing company;
(4) provide documentation satisfactory to the division and the board that employees leased
by the employee leasing company to any client company are covered by workers' compensation
insurance pursuant to Section 35A-3-103;
(5) provide evidence to the division and the board of financial responsibility, as this evidence
is prescribed by rule;
(6) in the case of an employee leasing company that is commencing or reentering business
as an employee leasing company, [provide evidence] submit to the division and the board[, in
accordance with generally accepted accounting principals, of] a certified audit performed by an
independent certified public accountant showing at least $50,000 net worth as starting capital;
(7) provide evidence satisfactory to the division and the board of the financial responsibility
of any self-funded or partially self-funded insurance plan as defined by rule;
(8) provide, for a criminal background check by the division, the name of:
(a) any person who has control of or a controlling interest in, as defined in Section
16-10a-102, the leasing company;
(b) any officer or director of the leasing company; and
(c) any responsible manager of the leasing company or other person if the manager or person

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has signatory authority over fiduciary funds;
[(8)] (9) provide evidence satisfactory to the division and the board that the responsible
managers of the leasing company have education and experience in the conduct of business that
demonstrate a reasonable expectation that the company will be managed with the skill and expertise
necessary to protect the interests of its employees, client companies, and the public; and
[(9)] (10) provide evidence that the applicant is of good moral character.
Section 5. Section 58-59-306 is amended to read:
58-59-306. Financial responsibility.
(1) [Each applicant for licensure as] To maintain a license in good standing, an employee
leasing company[, and each licensee applying for renewal of a license as an employee leasing
company,] shall demonstrate financial responsibility [as a condition precedent to licensure or
renewal of license. The burden to demonstrate financial responsibility is upon the applicant or
licensee].
[(2) If there is presented to the division and the board sufficient information to cause a
reasonable belief that the financial responsibility of a licensee is impaired to the extent that there is
a threat to the public interest, the division or the board may order the licensee to provide current
audited financial information prepared by an independent certified public accountant and other
supporting information upon which to make a competent evaluation of the licensee's financial
responsibility.]
[(3)] (2) Financial responsibility shall be demonstrated on:
(a) a quarterly basis by providing the division and the board with:
(i) evidence from an independent certified public [accounting firm] accountant, in a form
prescribed by the division, that all federal, state, and local withholding taxes, unemployment taxes,
FICA taxes, workers' compensation [premium] premiums, and employee benefit plan premiums have
been paid[,]; and
(ii) any other relevant information the [applicant, licensee,] division[,] or board considers
appropriate [for consideration by the division and board.]; and
[(4) Upon a showing of reasonable cause, the division and board may inquire into the

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financial responsibility of the corporation's officers and directors as a factor in determining the
corporation's financial responsibility.]
(b) an annual basis by providing the division and the board with:
(i) a financial statement prepared in a form prescribed by the division by an independent
certified accountant that includes a review of the payment of all federal, state, and local withholding
taxes, unemployment taxes, FICA taxes, workers' compensation premiums, and employee benefit
plan premiums; and
(ii) any other relevant information the division or board considers appropriate.
(3) (a) In addition to quarterly evidence or an annual financial statement required under
Subsection (2), the division and board may request a licensee to submit a certified audit performed
by an independent certified public accountant if:
(i) a licensee fails to submit quarterly evidence or a financial statement as required by
Subsection (2);
(ii) The division and board have reason to believe that the evidence or financial statement
submitted by a licensee under Subsection (2):
(A) is incomplete or misleading; or
(B) contains evidence of:
(I) a material financial irregularity; or
(II) the failure of the licensee to fully and timely pay a tax or premium identified in
Subsection (2) for which it is obligated to pay; or
(iii) the division or board receives information from a state or federal agency or other person
of:
(A) a material financial irregularity; or
(B) the failure of the licensee to fully and timely pay a tax or premium identified in
Subsection (2) for which it is obligated to pay.
(b) The division and the board may require that an audit requested under Subsection (3)(a)
not be performed by an independent certified public accountant who has previously prepared
quarterly evidence or an annual financial statement for the licensee.

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(4) An independent certified public accountant shall submit documentation required under
Subsections (2) and (3) directly to the division before reviewing the documentation with the licensee.
Section 6. Section 58-59-402 is enacted to read:
58-59-402. Court intervention.
If the financial condition of a licensee or unlicensed employee leasing company is impaired
to the extent of posing a significant threat to the public, the division may file a complaint in district
court asking for:
(1) injunctive relief;
(2) the appointment of a receiver;
(3) the sale of the licensee's company to a third party;
(4) the liquidation of the licensee's company; and
(5) any other appropriate remedy.
Section 7. Section 58-59-502 is amended to read:
58-59-502. Unprofessional conduct.
Unprofessional conduct includes:
(1) failing to establish, maintain, or demonstrate financial responsibility and management
competence while licensed as an employee leasing company;
(2) failing to maintain proper registration with any agency for which registration is required
as a condition of licensure under this chapter;
(3) failing to maintain current lease agreements and employment agreements in appropriate
form and content as required under this chapter; [and]
(4) failing to inform the division of a change in ownership, in the address of its owners or
officers, or in its principal business address within ten days after the change[.];
(5) failing to maintain and make available, upon request, to the division and the licensee's
workers' compensation insurance carrier:
(a) the name and federal identification number of each client company;
(b) the number and, if good cause is shown, the names of all covered employees provided
to each client company; and

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(c) the total eligible wages and workers' compensation premiums due to the carrier for the
employees provided to each client company; and
(6) failing within 30 days to notify the division and the licensee's workers' compensation
insurance carrier of the initiation or termination of a relationship with a client company.
Section 9. Effective date.
This act takes effect on July 1, 1997.

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