Download Zipped Enrolled WP 9 SB0155.ZIP
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S.B. 155 Enrolled
This act modifies occupations and professions by providing for registration rather than
licensing of Professional Employer Organizations. The act modifies definitions related to
Professional Employer Organizations and eliminates the Professional Employer
Organization Board. The act provides qualifications for registration and establishes
requirements for filing specific information with an application for registration. The act
provides for conversion of licensing to registration and establishes and recognizes specific
financial requirements, contractual relations, and rights, duties, and obligations. The act
modifies provisions related to unlawful conduct regarding Professional Employer
This act affects sections of Utah Code Annotated 1953 as follows:
35A-4-202, as last amended by Chapter 265, Laws of Utah 2001
58-59-101, as last amended by Chapter 199, Laws of Utah 1999
58-59-102, as last amended by Chapter 261, Laws of Utah 2002
58-59-301, as last amended by Chapter 199, Laws of Utah 1999
58-59-302, as last amended by Chapter 261, Laws of Utah 2002
58-59-303, as last amended by Chapter 261, Laws of Utah 2002
58-59-308, as last amended by Chapter 261, Laws of Utah 2002
58-59-501, as last amended by Chapter 261, Laws of Utah 2002
58-59-503, as last amended by Chapter 199, Laws of Utah 1999
58-59-303.5, Utah Code Annotated 1953
REPEALS AND REENACTS:
58-59-305, as last amended by Chapter 199, Laws of Utah 1999
58-59-306, as repealed and reenacted by Chapter 261, Laws of Utah 2002
58-59-201, as last amended by Chapter 199, Laws of Utah 1999
58-59-307, as last amended by Chapter 199, Laws of Utah 1999
58-59-309, as enacted by Chapter 261, Laws of Utah 2002
58-59-310, as enacted by Chapter 261, Laws of Utah 2002
58-59-401, as last amended by Chapter 261, Laws of Utah 2002
58-59-402, as last amended by Chapter 261, Laws of Utah 2002
58-59-502, as last amended by Chapter 261, Laws of Utah 2002
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 35A-4-202 is amended to read:
35A-4-202. Employing units.
As used in this chapter:
(1) (a) "Employing unit" means:
(i) any individual or type of organization that has or subsequent to January 1, 1935, had
one or more individuals performing services for it within the state including any:
(E) joint stock company;
(F) insurance company;
(G) limited liability company;
(H) limited liability partnership;
(I) joint venture;
(J) corporation, whether domestic or foreign;
(K) the receiver, trustee in bankruptcy, trustee or successor of any entity listed in
Subsections (1)(a)(i)(A) through (J);
(L) the legal representative of a deceased person; or
(M) a tribal unit; or
(ii) any properly and legally [
by Section 58-59-102 .
(b) The department may adopt rules specific to employee leasing companies pursuant to
Title 63, Chapter 46a, Utah Administrative Rulemaking Act.
(c) All individuals performing services within this state for any employing unit that
maintains two or more separate establishments within this state are considered to be performing
services for a single employing unit for all the purposes of this chapter.
(d) Each individual employed to perform or to assist in performing the work of any
person in the service of an employing unit is considered to be engaged by the employing unit for
all the purposes of this chapter whether the individual was hired or paid directly by the
employing unit or by the person, provided the employing unit had actual or constructive
knowledge of the work.
(2) "Hospital" means an institution that is licensed, certified, or approved by the
Department of Health as a hospital.
(3) "Institution of higher education," for the purposes of this section, means an
educational institution that:
(a) (i) admits, as regular students only, individuals having a certificate of graduation from
a high school or the recognized equivalent of a certificate;
(ii) is legally authorized in this state to provide a program of education beyond high
(A) an educational program for which it awards a bachelor's or higher degree;
(B) a program that is acceptable for full credit toward a bachelor's or higher degree;
(C) a program of postgraduate or postdoctoral studies; or
(D) a program of training to prepare students for gainful employment in a recognized
(iv) is a public or other nonprofit institution.
(b) All colleges and universities in this state are institutions of higher education for
purposes of this section.
Section 2. Section 58-59-101 is amended to read:
58-59-101. Short title.
This chapter is known as the " Professional Employer Organization [
Section 3. Section 58-59-102 is amended to read:
In addition to the definitions in Section 58-1-102 , as used in this chapter:
professional employer organization.
a professional employer organization [
(3) "Coemployment relationship" means:
(a) as between coemployers, a relationship whereby the rights, duties, and obligations of
an employer which arise out of an employment relationship have been allocated between
coemployers under a professional employer agreement and this chapter, and which is intended to
be an ongoing relationship, rather than a temporary or project-specific relationship;
(b) as between each PEO and a covered employee as to which a professional employer
agreement applies, an employment relationship whereby the PEO is entitled to enforce those
rights, and obligated to perform those duties and obligations, allocated to the PEO by the
professional employer agreement and this chapter;
(c) as between each client and a covered employee to which a professional employer
agreement applies, an employment relationship whereby:
(i) the client is entitled to enforce those rights, and obligated to provide and perform
those employer obligations, allocated to the client by the professional employer agreement and
this chapter; and
(ii) the client is responsible for any employer right or obligation not otherwise allocated
by the professional employer agreement or this chapter; and
(d) as to those rights enforceable by an employee under state law, covered employees are
entitled to enforce against the PEO those rights:
(i) allocated to the PEO by the professional employer agreement and this chapter; or
(ii) shared by the PEO and the client under the professional employer agreement and this
chapter. All other rights, duties, and obligations enforceable by an employee under state law
shall continue to be enforceable against the client under state law.
(4) "Covered employee" means an individual having a coemployment relationship with a
PEO and a client who meets all of the following criteria:
(a) the individual has executed an employment agreement with the PEO;
(b) the individual is a party to a coemployment relationship with a PEO and a client; and
(c) the individual's coemployment relationship is pursuant to a professional employer
agreement subject to this chapter. Individuals who are officers, directors, shareholders, partners,
and managers of the client are covered employees to the extent the PEO and the client have
expressly agreed in the professional employer agreement that the individuals would be covered
employees and provided the individuals meet the criteria of this Subsection (4) and act as
operational managers or perform services for the client.
oneself out as a professional employer organization, to coemploy an employee with another
person, or to receive any consideration for providing professional employer services or to expect
payment of any consideration for providing professional employer services.
(6) "Organization" means any individual, partnership, corporation, limited liability
company, association, or any other form of legally recognized entity.
by and between [
(a) for the coemployment of covered employees;
(b) for the allocation and sharing between the client and the PEO of employer
responsibilities, including hiring, firing, and disciplining, with respect to the covered employees;
(c) that the PEO and the client assume the responsibilities required by this chapter.
engaged in the business of providing professional employer [
(b) An organization engaged in the business of providing professional employer services
is subject to registration under this chapter regardless of its use of the term "professional
employer organization," "PEO," "staff leasing company," "registered staff leasing company,"
"employee leasing company," or any other name.
(c) The following are not considered to be professional employer organizations or
professional employment services for purposes of this chapter:
(i) arrangements wherein an organization, whose principal business activity is not
entering into professional employer arrangements and which does not hold itself out as a PEO,
shares employees with a commonly owned company within the meaning of Sections 414(b) and
(c) of the Internal Revenue Code of 1986, as amended;
(ii) arrangements by which an organization assumes responsibility for the product
produced or service performed by the person or the person's agents and retains and exercises
primary direction and control over the work performed by the individuals whose services are
supplied under the arrangements; or
(iii) providing temporary help services.
(9) "Professional employer services" means the service of entering into coemployment
relationships under this chapter in which all or a majority of the employees providing services to
a client or to a division or work unit of a client are covered employees.
(10) "Temporary help services" means services consisting of an organization:
(a) recruiting and hiring its own employees;
(b) finding other organizations that need the services of those employees;
(c) assigning those employees to perform work at or services for the other organizations
to support or supplement the other organizations' workforces, or to provide assistance in special
work situations such as employee absences, skill shortages, seasonal workloads, or to perform
special assignments or projects with a definite ending date; and
(d) customarily attempting to reassign the employees to other organizations when they
finish each assignment by a definite ending date.
Section 4. Section 58-59-301 is amended to read:
58-59-301. Registration required.
organization, except as specifically provided in Section 58-1-307 [
Section 5. Section 58-59-302 is amended to read:
58-59-302. Qualifications for registration.
(1) Each [
(2) (a) Any two or more professional employer organizations held under the common
control of any other person or persons acting in concert may be registered as a professional
employer organization group.
(b) A professional employer organization group may satisfy any reporting and financial
requirements under this chapter on a consolidated basis.
Section 6. Section 58-59-303 is amended to read:
58-59-303. Term of registration -- Expiration -- Renewal.
(1) The division shall issue each [
with a one-year renewal cycle established by rule.
(2) The division may by rule, in accordance with Title 63, Chapter 46a, Utah
Administrative Rulemaking Act, extend or shorten a renewal period by as much as six months to
stagger the renewal cycles it administers.
Section 7. Section 58-59-303.5 is enacted to read:
58-59-303.5. Information to be filed by registrants.
(1) Each registrant shall file the following information with the division with its initial
application and with each renewal application:
(a) the name or names under which the PEO conducts business;
(b) the address of the principal place of business of the PEO and the address of each
office it maintains in the state;
(c) the PEO's taxpayer or employer identification number;
(d) a list by jurisdiction of each name under which the PEO has operated in the preceding
five years, including any alternative names, names of predecessors, and, if known, successor
(e) a statement of ownership, which shall include the name of all individuals that,
individually or acting in concert with one or more other persons, owns or controls, directly or
indirectly, 10% or more of the equity interests of the PEO; and
(f) a statement of management, which shall include the name of all officers and any
person who has the authority to act as a senior executive officer of the PEO.
(2) A professional employer organization which is domiciled outside of the state and
employs less than 50 employees who are employed or domiciled in the state is not required to file
the information required under Subsections (1)(e) and (f).
Section 8. Section 58-59-305 is repealed and reenacted to read:
58-59-305. Conversion from licensee to registrant.
The division shall convert the existing license of each professional employer
organization, which is licensed as of the effective date of this act, to a registration under this
Section 9. Section 58-59-306 is repealed and reenacted to read:
58-59-306. Financial requirements, contractual relations, and allocation of rights,
duties, and obligations.
(1) Nothing contained in this chapter or in any professional employer agreement shall
affect, modify, or amend any collective bargaining agreement, or the rights or obligations of any
client, PEO, or covered employee under the federal National Labor Relations Act, the federal
Railway Labor Act, or similar state law.
(2) Nothing contained in this chapter or any professional employer agreement shall
affect, modify, or amend any state, local, or federal licensing, registration, or certification
requirement applicable to any client or covered employee.
(a) A covered employee who must be licensed, registered, or certified according to law or
regulation is considered solely an employee of the client for purposes of license, registration, or
(b) A PEO may not be considered to engage in any occupation, trade, profession, or other
activity that is subject to licensing, registration, or certification requirements, or is otherwise
regulated by a governmental entity solely by entering into and maintaining a coemployment
relationship with a covered employee who is subject to the requirements or regulation.
(c) Unless otherwise expressly agreed to by the client in the professional employer
agreement, a client has the sole right to direct and control the professional or licensed activities
of covered employees and of the client's business.
(3) With respect to a bid, contract, purchase order, or agreement entered into with the
state or a political subdivision of the state, a client company's status or certification as a small,
minority-owned, disadvantaged, or woman-owned business enterprise or as a historically
underutilized business is not affected because the client company has entered into an agreement
with a registrant or uses the services of a registrant.
(4) (a) At least quarterly, a PEO shall have an independent certified public accountant,
licensed to practice in the jurisdiction in which the PEO is domiciled, review the PEO's records
and prepare a statement indicating whether all federal, state, and local withholding taxes,
unemployment taxes, FICA taxes, workers' compensation premiums, and employee benefit plan
premiums have been paid.
(b) The PEO must provide the statement to a client upon request from the client.
(5) (a) Except as specifically provided in this chapter, the coemployment relationship
between the client and the PEO, and between each coemployer and each covered employee, shall
be governed by the professional employer agreement.
(b) Nothing contained in any professional employer agreement or this chapter shall be
(i) diminish, abolish, or remove the rights of covered employees as to clients or
obligations of the client as to a covered employee, existing prior to the effective date of a
professional employer agreement;
(ii) terminate an employment relationship existing prior to the effective date of a
professional employer agreement; or
(iii) create any new or additional enforceable right of a covered employee against a PEO
not specifically allocated to the PEO in the professional employer agreement or this chapter.
(c) Each professional employer agreement shall include the following:
(i) (A) the PEO shall reserve a right of direction and control over the covered employees;
(B) the client may retain the right to exercise the direction and control over covered
employees as is necessary to conduct the client's business, to discharge any fiduciary
responsibility which it may have, or to comply with any applicable licensure requirements;
(ii) the PEO shall have responsibility to:
(A) pay agreed upon wages and salaries to covered employees;
(B) withhold, collect, report, and remit payroll-related and unemployment taxes; and
(C) the extent the PEO has assumed responsibility in the professional employer
agreement, to make payments for employee benefits for covered employees;
(iii) the PEO and the client shall both have a right to hire, terminate, and discipline the
covered employees; and
(iv) the responsibility to obtain workers' compensation coverage for covered employees,
from a carrier licensed to do business in Utah and otherwise in compliance with all applicable
requirements, shall be specifically allocated to the client in the professional employer agreement.
(d) Except as specifically provided in this chapter or in the professional employer
agreement, in each coemployment relationship:
(i) the client may exercise all rights and is obligated to perform all duties and
responsibilities otherwise applicable to an employer in an employment relationship;
(ii) (A) the PEO may exercise only those rights, and is obligated to perform only those
duties and responsibilities, specifically required by this chapter or set forth in the professional
employer agreement; and
(B) the rights, duties, and obligations of the PEO as coemployer with respect to any
covered employee is limited to those arising under the professional employer agreement and this
chapter during the term of coemployment by the PEO of the covered employee; and
(iii) unless otherwise expressly agreed by the PEO and the client in a professional
employer agreement, the client retains the exclusive right to direct and control the covered
employees as is necessary to conduct the client's business, to discharge any of the client's
fiduciary responsibilities, or to comply with any licensure requirements applicable to the client or
to the covered employees.
(e) With respect to each professional employer agreement entered into by a PEO, the
PEO shall provide written notice to each covered employee affected by the agreement of the
general nature of the coemployment relationship between and among the PEO, the client, and the
(f) (i) Except to the extent otherwise expressly provided by the applicable professional
(A) a client is solely responsible for the quality, adequacy, or safety of the goods or
services produced or sold in the client's business;
(B) a client is solely responsible for directing, supervising, training, and controlling the
work of the covered employees with respect to the business activities of the client and solely
responsible for the acts, errors, or omissions of the covered employees with regard to those
(C) a client is not liable for the acts, errors, or omissions of a PEO, or of any covered
employee of the client and a PEO when the covered employee is acting under the express
direction and control of the PEO.
(ii) Nothing in this Subsection (5)(f) shall serve to limit any contractual liability or
obligation specifically provided in a professional employer agreement, nor shall this Subsection
(5)(f) in any way limit the liabilities and obligations of any PEO or client as defined elsewhere in
(iii) A covered employee is not, solely as the result of being a covered employee of a
PEO, an employee of the PEO for purposes of general liability insurance, fidelity bonds, surety
bonds, employer's liability which is not covered by workers' compensation, or liquor liability
insurance carried by the PEO, unless the covered employee is included by specific reference in
the professional employer agreement and applicable prearranged employment contract, insurance
contract, or bond.
(g) A registrant under this chapter is not engaged in the sale of insurance by offering,
marketing, selling, administering, or providing PEO services or employee benefit plans for
(h) (i) (A) Covered employees whose services are subject to sales tax are considered the
employees of the client for purposes of collecting and levying sales tax on the services performed
by the covered employees.
(B) Nothing contained in this chapter shall relieve a client of any sales tax liability with
respect to its goods or services.
(ii) No portion of a PEO fee to a client that represents pass-through amounts to be paid
for covered employee wages, employment-related taxes, withholding, or benefits is subject to any
sales or excise tax.
(i) (i) A client and a PEO shall each be considered an employer for purposes of
sponsoring retirement and welfare benefit plans for its covered employees.
(ii) A fully insured welfare benefit plan offered to the covered employees of a single
PEO is considered a single employer welfare benefit plan and may not be considered a multiple
employer welfare arrangement, and is exempt from the licensing requirements contained in Title
31A, Insurance Code.
(iii) PEOs are exempt from Title 31A, Chapter 30, Individual, Small, and Group
Employer Health Insurance Act.
(iv) (A) Any PEO offering workers' compensation coverage, a health benefit plan, or any
other insurance plan, must comply with all federal and state laws applicable to these products.
(B) If the PEO chooses to use a third-party administrator for the receipt and payment of
health benefit claims, that third-party administrator must be licensed to do business in the state
under Title 31A, Insurance Code.
(C) Anything pertaining to the insurance products referred to in this section or the use of
an unlicensed third-party administrator is subject to administrative penalties and forfeitures under
Title 31A, Insurance Code.
(v) If a PEO offers to its covered employees any health benefit plan which is not fully
insured by an authorized insurer, the plan shall:
(A) utilize a third-party administrator licensed by the Utah State Insurance Department;
(B) hold all plan assets, including participant contributions, in a trust account.
(vi) If a PEO offers to its covered employees any health benefit plan which is not fully
insured by an authorized insurer, the PEO shall:
(A) represent that such plan is not fully insured; and
(B) deliver to each plan participant a summary plan description that accurately describes
the terms of the plan, including disclosure that the plan is self-funded or partially self-funded.
(vii) (A) The Department of Insurance may audit on a random basis, or upon finding a
reasonable need, any health benefit plan which is not fully insured by an authorized insurer.
(B) The cost of the audit shall be borne by the PEO if there is material noncompliance.
(j) (i) The client in a coemployment relationship shall secure workers' compensation
benefits for the covered employees by complying with Subsection 34A-2-201 (1) or (2) and
commission rules under Subsection 34A-2-103 (3)(a).
(ii) Every authorized insurer who offers or provides Workers' Compensation Insurance
coverage to a PEO, its client companies, or both shall comply with Title 31A, Chapter 19a, Utah
Rate Regulation Act, and Chapter 21, Insurance Contracts in General, prior to the issuance of an
(iii) The exclusive remedy provisions of Sections 34A-2-105 and 34A-3-102 apply to
both the client company and the PEO in a coemployer relationship under this section.
(k) (i) For purposes of Title 35A, Chapter 4, Employment Security Act, covered
employees of a registered PEO are considered the employees of the PEO, which shall be
responsible for the payment of contributions, penalties, and interest on wages paid by the PEO to
its covered employees during the term of the applicable professional employer agreement.
(ii) The PEO shall report and pay all required contributions to the unemployment
compensation fund using its state employer account number and the contribution rate of the PEO.
(iii) On the termination of a contract between a PEO and a client or the failure by a PEO
to submit reports or make tax payments as required by this chapter, the client shall be treated as a
new employer without a previous experience record unless that client is otherwise eligible for an
Section 10. Section 58-59-308 is amended to read:
58-59-308. No guarantee.
chapter, the state:
(1) does not guarantee any right, claim, or defense of any professional employer
organization, client company, coemployee, or other person;
(2) does not guarantee the financial responsibility or solvency of any professional
employer organization; and
(3) does not waive any right, claim, or defense of immunity that it may have under Title
63, Chapter 30, Utah Governmental Immunity Act, or other law.
Section 11. Section 58-59-501 is amended to read:
58-59-501. Unlawful conduct.
Unlawful conduct includes:
(1) engaging in practice as a professional employer organization without a [
(2) offering an employee a self-funded medical program, unless[
(3) misrepresenting that any self-funded medical program it offers is other than
(4) offering to its employees any self-funded or partially self-funded medical plan
without delivering to each plan participant a summary plan description that accurately describes
terms of the plan, including disclosure that the plan is self-funded or partially self-funded;
(5) diversion of funds paid by a client to the professional employer organization,
designated as payment for payroll or any related payroll taxes or employee benefits or insurance,
to any other purpose or use other than designated. In cases where a client has defaulted on the
professional employer agreement or otherwise failed to pay the PEO, the PEO may allocate the
deficient payment to the portions of the invoice it determines and not be in violation of this
condition that is not contained in a clearly written agreement between the professional employer
organization and client company;
company or coemployee of a client company;
(8) upon collecting cleared funds from the client, failing to pay in a timely manner any
federal or state income tax withholding, FICA, unemployment tax, employee insurance benefit
premium, workers' compensation premium, or other obligation due and payable directly as a
result of engaging in business as a professional employer organization; and
(9) failing to comply with federal law regarding any employee benefit offered to an
Section 12. Section 58-59-503 is amended to read:
58-59-503. Penalty for unlawful conduct.
(1) Any person who violates Subsections 58-59-501 (1) through [
third degree felony.
(2) Any person who violates Subsections 58-59-501 [
class A misdemeanor.
(3) Any person who has engaged in unlawful conduct may be assessed the costs
associated with the investigations, disciplinary proceedings, court proceedings, or other actions to
enforce the provisions of this [
Section 13. Repealer.
This act repeals:
Section 58-59-201, Board.
Section 58-59-307, Records and reports protected.
Section 58-59-309, State licensing provisions not exempted.
Section 58-59-310, Health benefit plans.
Section 58-59-401, Grounds for denial of license or renewal -- Disciplinary
Section 58-59-402, Court intervention.
Section 58-59-502, Unprofessional conduct.
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