House File 791 - Introduced
HOUSE FILE
BY COMMITTEE ON STATE
GOVERNMENT
(SUCCESSOR TO HSB 21)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to the recognition and licensing of professional
2 employer organizations and providing for penalties.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
4 TLSB 1396HV 81
5 kk/gg/14
PAG LIN
1 1 Section 1. NEW SECTION. 95.1 PURPOSE AND INTENT.
1 2 The general assembly finds that professional employer
1 3 organizations provide a valuable service to commerce and the
1 4 citizens of this state by increasing the opportunities of
1 5 employers to develop cost=effective methods of satisfying
1 6 their personnel requirements and providing employees with
1 7 access to certain employment benefits which might otherwise
1 8 not be available to them.
1 9 The general assembly further finds that professional
1 10 employer organizations operating in this state should be
1 11 properly recognized and regulated by the department of
1 12 workforce development, as provided in this chapter, and that
1 13 any allocation of the employer duties and responsibilities
1 14 pursuant to this chapter will preserve all rights to which
1 15 covered employees would be entitled under a traditional
1 16 employment relationship.
1 17 Sec. 2. NEW SECTION. 95.2 DEFINITIONS.
1 18 As used in this chapter, unless the context otherwise
1 19 requires:
1 20 1. "Administrative fee" means the fee charged to a client
1 21 by a professional employer organization for professional
1 22 employer services. However, the administrative fee shall not
1 23 be deemed to include any amount of a fee by the professional
1 24 employer organization that is for wages and salaries,
1 25 benefits, workers' compensation, payroll taxes, withholding,
1 26 or other assessments paid by the professional employer
1 27 organization to or on behalf of covered employees under the
1 28 professional employer agreement.
1 29 2. "Client" means any person who enters into a
1 30 professional employer agreement with a professional employer
1 31 organization.
1 32 3. "Coemployer" means either a professional employer
1 33 organization or a client.
1 34 4. "Coemployment relationship" means all of the following:
1 35 a. As between coemployers, a relationship whereby the
2 1 rights, duties, and obligations of an employer which arise out
2 2 of an employment relationship have been allocated between
2 3 coemployers pursuant to a professional employer agreement and
2 4 this chapter, and which is intended to be an ongoing
2 5 relationship, rather than a temporary or project=specific
2 6 relationship.
2 7 b. As between each professional employer organization and
2 8 a covered employee as to whom a professional employer
2 9 agreement applies, an employment relationship whereby such
2 10 professional employer organization is entitled to enforce
2 11 those rights, and obligated to perform those duties and
2 12 obligations, allocated to such professional employer
2 13 organization by the professional employer agreement and this
2 14 chapter.
2 15 c. As between each client and a covered employee to whom a
2 16 professional employer agreement applies, an employment
2 17 relationship whereby such client is entitled to enforce those
2 18 rights, and obligated to provide and perform those employer
2 19 obligations allocated to such client by the professional
2 20 employer agreement and this chapter and whereby such client is
2 21 responsible for any employer right or obligation not otherwise
2 22 allocated by the professional employer agreement or this
2 23 chapter.
2 24 d. As to rights enforceable by an employee under state
2 25 law, covered employees shall be entitled to enforce against
2 26 the professional employer organization all of the following
2 27 rights:
2 28 (1) Those allocated to such professional employer
2 29 organization by the professional employer agreement and this
2 30 chapter.
2 31 (2) Those shared by the professional employer organization
2 32 and the client under the professional employer agreement and
2 33 this chapter.
2 34 (3) All other rights, duties, and obligations enforceable
2 35 by an employee against the client pursuant to state law.
3 1 5. "Covered employee" means an individual having a
3 2 coemployment relationship with a professional employer
3 3 organization and a client, who meets all of the following
3 4 criteria:
3 5 a. The individual is a party to a coemployment
3 6 relationship with a professional employer organization and a
3 7 client.
3 8 b. The individual's coemployment relationship is pursuant
3 9 to a professional employer agreement subject to this chapter.
3 10 c. The individual has received written notice of an
3 11 agreement between a professional employer organization and a
3 12 client. Such notice shall include the name of the client or
3 13 professional employer organization that has obtained workers'
3 14 compensation coverage for the covered employee.
3 15 Individuals who are officers, directors, shareholders,
3 16 partners, and managers of the client will be covered employees
3 17 to the extent the professional employer organization and the
3 18 client have expressly agreed in the professional employer
3 19 agreement that such individuals would be covered employees and
3 20 provided such individuals meet the criteria of this subsection
3 21 and act as operational managers or perform services for the
3 22 client.
3 23 6. "Department" means the department of workforce
3 24 development.
3 25 7. "Director" means the director of the department of
3 26 workforce development.
3 27 8. "Licensee" means a professional employer organization
3 28 licensed under this chapter.
3 29 9. "Person" means a person as defined in section 4.1.
3 30 10. "Professional employer agreement" means a written
3 31 contract by and between a client and a professional employer
3 32 organization that provides all of the following:
3 33 a. For the coemployment of covered employees.
3 34 b. For the allocation and sharing between the client and
3 35 the professional employer organization employer
4 1 responsibilities, including hiring, firing, and disciplining,
4 2 with respect to the covered employees.
4 3 c. That the professional employer organization and the
4 4 client assume the responsibilities required by this chapter.
4 5 11. "Professional employer organization" means any person
4 6 engaged in the business of providing professional employer
4 7 services.
4 8 a. A person engaged in the business of providing
4 9 professional employer services shall be subject to
4 10 registration and regulation under this chapter regardless of
4 11 its use of the term "professional employer organization",
4 12 "PEO", "staff leasing company", "licensed staff leasing
4 13 company", "employee leasing company", or any other similar
4 14 name.
4 15 b. None of the following shall be deemed to be a
4 16 professional employer organization or professional employer
4 17 services for purposes of this chapter:
4 18 (1) Arrangements by which a person, whose principal
4 19 business activity is not entering into professional employer
4 20 arrangements and who does not hold itself out as a
4 21 professional employer organization, shares employees with a
4 22 commonly owned company within the meaning of section 414(b)
4 23 and (c) of the Internal Revenue Code of 1986, as amended.
4 24 (2) Arrangements by which a person assumes responsibility
4 25 for the product produced or service performed by such person
4 26 or the person's agents and retains and exercises primary
4 27 direction and control over the work performed by the
4 28 individuals whose services are supplied under such
4 29 arrangements.
4 30 (3) Providing temporary help services.
4 31 12. "Professional employer services" means the service of
4 32 entering into coemployment relationships under this chapter.
4 33 13. "Temporary help services" means services pursuant to
4 34 which a person does all of the following:
4 35 a. Recruits and hires employees.
5 1 b. Finds other organizations that need the services of
5 2 those employees.
5 3 c. Assigns those employees to perform work or services for
5 4 the other organizations to support or supplement the other
5 5 organizations' workforces, or to provide assistance in special
5 6 work situations such as, but not limited to, employee
5 7 absences, skill shortages, seasonal workloads, or to perform
5 8 special assignments or projects.
5 9 d. Customarily attempts to reassign the employees to other
5 10 organizations when they finish each assignment.
5 11 Sec. 3. NEW SECTION. 95.3 RIGHTS, DUTIES, AND
5 12 OBLIGATIONS.
5 13 1. COLLECTIVE BARGAINING AGREEMENTS. Nothing contained in
5 14 this chapter or in any professional employer agreement shall
5 15 affect, modify, or amend any collective bargaining agreement
5 16 or the rights or obligations of any client, professional
5 17 employer organization, or covered employee under the federal
5 18 National Labor Relations Act, the federal Railway Labor Act,
5 19 or the public employment relations Act in chapter 20. A
5 20 professional employer organization shall recognize and honor
5 21 any requirements or obligations of the client or a covered
5 22 employee under a collective bargaining agreement.
5 23 2. LICENSING.
5 24 a. Nothing contained in this chapter or any professional
5 25 employer agreement shall affect, modify, or amend any state,
5 26 local, or federal licensing, registration, or certification
5 27 requirement applicable to any client or covered employee. A
5 28 covered employee who must be licensed, registered, or
5 29 certified according to law or regulation is deemed solely an
5 30 employee of the client for purposes of any such license,
5 31 registration, or certification requirement.
5 32 b. A professional employer organization shall not be
5 33 deemed to engage in any occupation, trade, profession, or
5 34 other activity that is subject to licensing, registration, or
5 35 certification requirements, or is otherwise regulated by a
6 1 governmental entity solely by entering into and maintaining a
6 2 coemployment relationship with a covered employee who is
6 3 subject to such requirements or regulation.
6 4 c. Unless otherwise expressly agreed to by the client in
6 5 the professional employer agreement, a client shall have the
6 6 sole right to direct and control the professional or licensed
6 7 activities of covered employees and of the client's business.
6 8 3. TAX CREDITS AND OTHER INCENTIVES. For purposes of
6 9 determination of tax credits and other economic incentives
6 10 provided by this state and based on employment, covered
6 11 employees shall be deemed employees solely of the client. A
6 12 client shall be entitled to the benefit of any tax credit,
6 13 economic incentive, or other benefit arising as the result of
6 14 the employment of covered employees of such client. If the
6 15 grant or amount of any such incentives is based on the number
6 16 of employees, then each client shall be treated as employing
6 17 only those covered employees actually working in the client's
6 18 business operations and covered employees working for other
6 19 clients of the professional employer organization shall not be
6 20 counted. Each professional employer organization shall
6 21 provide, upon request by a client or an agency or department
6 22 of this state, employment information reasonably required by
6 23 any agency or department of this state responsible for
6 24 administration of any such tax credit or economic incentive
6 25 and necessary to support any request, claim, application, or
6 26 other action by a client seeking any such tax credit or
6 27 economic incentive.
6 28 4. DISADVANTAGED BUSINESS. With respect to a bid,
6 29 contract, purchase order, or agreement entered into with the
6 30 state or a political subdivision of the state, a client
6 31 company's status or certification as a small, minority=owned,
6 32 disadvantaged, or woman=owned business enterprise or as a
6 33 historically underutilized business is not affected because
6 34 the client company has entered into an agreement with a
6 35 professional employer organization or uses the services of a
7 1 professional employer organization.
7 2 Sec. 4. NEW SECTION. 95.4 LICENSING REQUIREMENTS.
7 3 1. LICENSE REQUIRED. Except as otherwise provided in this
7 4 chapter, a person shall not provide, advertise, or otherwise
7 5 hold itself out as providing professional employer services in
7 6 this state, unless such person is licensed under this chapter.
7 7 2. LICENSING INFORMATION. Each applicant for licensure
7 8 under this chapter shall provide the department with all of
7 9 the following information:
7 10 a. The name or names under which the professional employer
7 11 organization conducts business.
7 12 b. The address of the principal place of business of the
7 13 professional employer organization and the address of each
7 14 office it maintains in this state.
7 15 c. The professional employer organization's taxpayer or
7 16 employer identification number.
7 17 d. A list by jurisdiction of each name under which the
7 18 professional employer organization has operated in the
7 19 preceding five years, including any alternative names, names
7 20 of predecessors, and if known, successor business entities.
7 21 e. A statement of ownership, which shall include the name
7 22 and evidence of the business experience of any person that,
7 23 individually or acting in concert with one or more other
7 24 persons, owns or controls, directly or indirectly, twenty=five
7 25 percent or more of the equity interests of the professional
7 26 employer organization.
7 27 f. A statement of management, which shall include the name
7 28 and evidence of the business experience of any person who
7 29 serves as president, chief executive officer, or otherwise has
7 30 the authority to act as senior executive officer of the
7 31 professional employer organization.
7 32 g. A financial statement setting forth the financial
7 33 condition of the professional employer organization, as of a
7 34 date not earlier than three hundred sixty=five days prior to
7 35 the date submitted to the department, prepared in accordance
8 1 with generally accepted accounting principles, and audited by
8 2 an independent certified public accountant licensed to
8 3 practice in the jurisdiction in which such accountant is
8 4 located. A professional employer organization group may
8 5 submit combined or consolidated audited financial statements
8 6 to meet the requirements of this section. A professional
8 7 employer organization that has not had sufficient operating
8 8 history for an audited financial statement based on at least
8 9 twelve months of operating history must meet the financial
8 10 capability requirements of section 95.6 and present pro forma
8 11 financial statements reviewed by a certified public
8 12 accountant.
8 13 3. INITIAL LICENSING. Each professional employer
8 14 organization operating within this state as of July 1, 2005,
8 15 shall complete its initial licensing not later than one
8 16 hundred eighty days after July 1, 2005. Such initial license
8 17 shall be valid until the end of the professional employer
8 18 organization's first fiscal year that is more than one year
8 19 after July 1, 2005. Each professional employer organization
8 20 not operating within this state as of July 1, 2005, shall
8 21 complete its initial licensing prior to commencement of
8 22 operations within this state.
8 23 4. RENEWAL. Within one hundred eighty days after the end
8 24 of a licensee's fiscal year, such licensee shall renew its
8 25 license by notifying the department of any changes in the
8 26 information provided in such licensee's most recent license or
8 27 renewal.
8 28 5. GROUP LICENSING. Any two or more professional employer
8 29 organizations held under common control of any other person or
8 30 persons acting in concert may be licensed as a professional
8 31 employer organization group. A professional employer
8 32 organization group may satisfy any reporting and financial
8 33 requirements of this chapter on a consolidated basis.
8 34 6. LIMITED LICENSE. A professional employer organization
8 35 is eligible for a limited license under this chapter if all of
9 1 the following apply:
9 2 a. The professional employer organization submits a
9 3 properly executed request for limited licensure on a form
9 4 provided by the department.
9 5 b. The professional employer organization is domiciled
9 6 outside this state and is licensed or registered as a
9 7 professional employer organization in another state that has
9 8 substantially the same or greater requirements as this
9 9 chapter.
9 10 c. The professional employer organization does not
9 11 maintain an office in this state or directly solicit clients
9 12 located or domiciled within this state.
9 13 d. The professional employer organization does not have
9 14 more than fifty covered employees employed or domiciled in
9 15 this state on any given day.
9 16 A limited license is valid for one year and may be renewed.
9 17 A professional employer organization seeking limited licensure
9 18 under this subsection shall provide the department with
9 19 information and documentation necessary to show that the
9 20 professional employer organization qualifies for a limited
9 21 license. Section 95.6, subsection 1, shall not apply to
9 22 applicants for limited licensure.
9 23 7. ALTERNATIVE LICENSURE. The department may by rule and
9 24 regulation provide for the acceptance of an affidavit or
9 25 certification of a bonded, independent, and qualified
9 26 assurance organization that has been approved by the director
9 27 certifying qualifications of a professional employer
9 28 organization in lieu of the requirements of this section and
9 29 section 95.6.
9 30 8. LIST. The department shall maintain a list of
9 31 professional employer organizations licensed under this
9 32 chapter.
9 33 9. FORMS. The department may prescribe forms necessary to
9 34 promote the efficient administration of this section.
9 35 10. RECORD CONFIDENTIALITY.
10 1 a. Except as provided in paragraph "b", all records,
10 2 reports, and other information obtained from a professional
10 3 employer organization under this chapter, except to the extent
10 4 necessary for the proper administration of this chapter by the
10 5 department, shall be confidential and shall not be published
10 6 or open to public inspection other than to public employees in
10 7 the performance of their public duties.
10 8 b. Any agreement between a professional employer
10 9 organization and a public employer, and any records, reports,
10 10 or other information concerning a covered employee whose
10 11 coemployer is a public employer shall be open to public
10 12 inspection pursuant to chapter 22 to the same extent such
10 13 agreements, records, reports, and information are open to
10 14 public inspection for a government body under chapter 22.
10 15 Sec. 5. NEW SECTION. 95.5 FEES.
10 16 1. INITIAL LICENSURE. Upon filing an initial license
10 17 application under this chapter, a professional employer
10 18 organization shall pay an initial license fee not to exceed
10 19 five hundred dollars.
10 20 2. RENEWAL. Upon each annual renewal of a license under
10 21 this chapter, a professional employer organization shall pay a
10 22 renewal fee not to exceed five hundred dollars.
10 23 3. LIMITED LICENSURE. Each professional employer
10 24 organization seeking limited licensure under the terms of this
10 25 chapter shall pay a fee in an amount not to exceed five
10 26 hundred dollars upon initial application for limited licensure
10 27 and upon each annual renewal of such limited license.
10 28 4. ALTERNATIVE LICENSURE. A professional employer
10 29 organization seeking alternative licensure shall pay an
10 30 initial and annual fee not to exceed five hundred dollars.
10 31 5. OTHER FEES. The department shall adopt by rule any
10 32 other fee to be charged under this chapter. Such fees shall
10 33 not exceed those reasonably necessary for the administration
10 34 of the duties of the department under this chapter.
10 35 Sec. 6. NEW SECTION. 95.6 FINANCIAL CAPABILITY.
11 1 Each professional employer organization shall maintain
11 2 either of the following:
11 3 1. A minimum net worth of one hundred thousand dollars as
11 4 reflected in the financial statements submitted to the
11 5 department with the initial license application and each
11 6 annual renewal.
11 7 2. A bond, securities, or bank letter of credit with a
11 8 minimum value of one hundred thousand dollars held by a
11 9 depository designated by the department, securing payment by
11 10 the professional employer organization of all taxes, wages,
11 11 benefits, or other entitlement due to or with respect to
11 12 covered employees, if the professional employer organization
11 13 does not make such payments when due. Any bond or securities
11 14 deposited under this subsection shall not be included for the
11 15 purpose of calculation of the minimum net worth required by
11 16 this section.
11 17 Sec. 7. NEW SECTION. 95.7 GENERAL REQUIREMENTS AND
11 18 PROVISIONS.
11 19 1. CONTRACTUAL RELATIONSHIP. Except as specifically
11 20 provided in this chapter, the coemployment relationship
11 21 between the client and the professional employer organization,
11 22 and between each coemployer and each covered employee, shall
11 23 be governed by the professional employer agreement.
11 24 a. Nothing contained in any professional employer
11 25 agreement or this chapter shall be deemed to do any of the
11 26 following:
11 27 (1) Diminish, abolish, or remove rights of covered
11 28 employees as to clients or obligations of such client as to a
11 29 covered employee existing prior to the effective date of a
11 30 professional employer agreement.
11 31 (2) Terminate an employment relationship existing prior to
11 32 the effective date of a professional employer agreement.
11 33 (3) Create any new or additional enforceable right of a
11 34 covered employee against a professional employer organization
11 35 not specifically allocated to such professional employer
12 1 organization in the professional employer agreement or this
12 2 chapter.
12 3 b. Each professional employer agreement shall include all
12 4 of the following:
12 5 (1) The professional employer organization shall reserve a
12 6 right of direction and control over the covered employees,
12 7 provided that the client may retain the right to exercise such
12 8 direction and control over covered employees as is necessary
12 9 to conduct the client's business, to discharge any fiduciary
12 10 responsibility which it may have, or to comply with any
12 11 applicable licensure requirements.
12 12 (2) The professional employer organization shall have the
12 13 responsibility to pay agreed=upon wages to covered employees;
12 14 to withhold, collect, report, and remit payroll=related and
12 15 unemployment taxes; and, to the extent the professional
12 16 employer organization has assumed responsibility in the
12 17 professional employer agreement, to make payments for employee
12 18 benefits for covered employees. As used in this subparagraph,
12 19 "wages" does not include any obligation between a client and a
12 20 covered employee for payments beyond or in addition to the
12 21 covered employee's salary, draw, or regular rate of pay, such
12 22 as bonuses, commissions, severance pay, deferred compensation,
12 23 profit sharing or vacation, sick or other paid time=off pay,
12 24 unless the professional employer organization has expressly
12 25 agreed to assume liability for such payments in the
12 26 professional employer agreement.
12 27 (3) The professional employer organization and the client
12 28 shall both have a right to hire, terminate, and discipline the
12 29 covered employees. Such right shall not limit the rights and
12 30 remedies of covered employees under a collective bargaining
12 31 agreement.
12 32 (4) The responsibility to obtain workers' compensation
12 33 coverage for covered employees, from a carrier licensed to do
12 34 business in this state and otherwise in compliance with all
12 35 applicable requirements, shall be specifically allocated to
13 1 either the client or the professional employer organization.
13 2 If such responsibility is allocated to the professional
13 3 employer organization under the agreement, the agreement shall
13 4 require that the professional employer organization maintain
13 5 and provide to the client at the termination of the agreement,
13 6 if requested by the client, records regarding the loss
13 7 experience related to workers' compensation insurance provided
13 8 to covered employees pursuant to such agreement.
13 9 2. ALLOCATION OF RIGHTS, DUTIES, AND OBLIGATIONS. Except
13 10 as specifically provided in this chapter or in the
13 11 professional employer agreement, in each coemployment
13 12 relationship, all of the following shall apply:
13 13 a. The client shall be entitled to exercise all rights and
13 14 shall be obligated to perform all duties and responsibilities
13 15 otherwise applicable to an employer in an employment
13 16 relationship.
13 17 b. The professional employer organization shall be
13 18 entitled to exercise only those rights, and obligated to
13 19 perform only those duties and responsibilities, specifically
13 20 required by this chapter or set forth in the professional
13 21 employer agreement. The rights, duties, and obligations of
13 22 the professional employer organization as coemployer with
13 23 respect to any covered employee shall be limited to those
13 24 arising pursuant to the professional employer agreement and
13 25 this chapter during the term of coemployment by the
13 26 professional employer organization of such covered employee.
13 27 c. Unless otherwise expressly agreed by the professional
13 28 employer organization and the client in a professional
13 29 employer agreement, the client retains the exclusive right to
13 30 direct and control the covered employees as is necessary to
13 31 conduct the client's business, to discharge any of the
13 32 client's fiduciary responsibilities, or to comply with any
13 33 licensure requirements applicable to the client or to the
13 34 covered employees.
13 35 3. NOTICE TO COVERED EMPLOYEES. With respect to each
14 1 professional employer agreement entered into by a professional
14 2 employer organization, such professional employer organization
14 3 shall provide written notice to each covered employee affected
14 4 by such agreement of the general nature of the coemployment
14 5 relationship between and among the professional employer
14 6 organization, the client, and such covered employee. Such
14 7 notice shall include notice to the employees of the client's
14 8 and the professional employer organization's obligations under
14 9 this section including but not limited to the party
14 10 responsible for the provision of employee benefits, if any.
14 11 4. LIMITATIONS ON LIABILITY. Except to the extent
14 12 otherwise expressly provided by a professional employer
14 13 agreement, all of the following shall apply:
14 14 a. A client shall be solely responsible for the quality,
14 15 adequacy, or safety of the goods or services produced or sold
14 16 in the client's business.
14 17 b. A client shall be solely responsible for directing,
14 18 supervising, training, and controlling the work of the covered
14 19 employees with respect to the business activities of the
14 20 client and solely responsible for the acts, errors, or
14 21 omissions of the covered employees with regard to such
14 22 activities.
14 23 c. A client shall not be liable for the acts, errors, or
14 24 omissions of a professional employer organization, or of any
14 25 covered employee of the client and a professional employer
14 26 organization when such covered employee is acting under the
14 27 express direction and control of the professional employer
14 28 organization.
14 29 d. Nothing in this subsection shall serve to limit any
14 30 contractual liability or obligation specifically provided in a
14 31 professional employer agreement, nor shall this subsection in
14 32 any way limit the liabilities and obligations of any
14 33 professional employer organization or client as defined
14 34 elsewhere in this chapter.
14 35 e. A covered employee is not, solely as the result of
15 1 being a covered employee of a professional employer
15 2 organization, an employee of the professional employer
15 3 organization for purposes of general liability insurance,
15 4 fidelity bonds, surety bonds, employer's liability which is
15 5 not covered by workers' compensation, or liquor liability
15 6 insurance carried by the professional employer organization
15 7 unless the covered employee is included by specific reference
15 8 in the professional employer agreement and applicable
15 9 prearranged employment contract, insurance contract, or bond.
15 10 5. JOINT AND SEVERAL LIABILITY. Notwithstanding the terms
15 11 of the professional employer agreement or any other provision
15 12 of this chapter, the professional employer organization and
15 13 the client are jointly and severally liable for any claims by
15 14 a covered employee for unpaid or improperly paid wages,
15 15 benefits, or other compensation for services, and for any
15 16 claims of unlawful or improper discharge, discipline, or
15 17 failure to hire.
15 18 6. SALE OF INSURANCE. A professional employer
15 19 organization or its representative shall not sell, solicit, or
15 20 negotiate insurance unless licensed as an insurance producer
15 21 pursuant to chapter 522B.
15 22 7. TAXATION. Covered employees whose services are subject
15 23 to sales tax shall be deemed the employees of the client for
15 24 purposes of collecting and levying sales tax on the services
15 25 performed by the covered employee. Nothing contained in this
15 26 chapter shall relieve a client of any sales tax liability with
15 27 respect to its goods or services. Any tax upon professional
15 28 employer services shall be limited to the administrative fee.
15 29 Sec. 8. NEW SECTION. 95.8 BENEFIT PLANS.
15 30 1. A client and a professional employer organization shall
15 31 each be deemed an employer for purposes of sponsoring
15 32 retirement and welfare benefit plans for its covered
15 33 employees.
15 34 2. A fully insured welfare benefit plan offered to the
15 35 covered employees of a single professional employer
16 1 organization shall be considered a single employer welfare
16 2 benefit plan and shall not be considered a multiple employer
16 3 welfare arrangement as defined in section 3 of the federal
16 4 Employee Retirement Income Security Act of 1974, 29 U.S.C. }
16 5 1002, paragraph 40, and referred to in section 507A.4.
16 6 3. If a professional employer organization offers to its
16 7 covered employees any health benefit plan which is not fully
16 8 insured by an authorized insurer, the plan shall do all of the
16 9 following:
16 10 a. Utilize a third=party administrator licensed to do
16 11 business in this state.
16 12 b. Hold all plan assets, including participant
16 13 contributions, in a trust account.
16 14 c. Provide sound reserves for such plan as determined
16 15 using generally accepted actuarial standards.
16 16 Sec. 9. NEW SECTION. 95.9 WORKERS' COMPENSATION.
16 17 1. The professional employer organization and the client
16 18 are jointly and severally liable for providing a workers'
16 19 compensation insurance policy and benefits for covered
16 20 employees from a carrier licensed to do business in this state
16 21 and for compliance with all statutory and regulatory
16 22 requirements concerning workers' compensation. Workers'
16 23 compensation insurance coverage or benefits that are provided
16 24 by either coemployer satisfy the liability of both
16 25 coemployers. The allocation of responsibility between the
16 26 coemployers in the professional employer agreement is an
16 27 agreement between the coemployers and does not limit the
16 28 rights of a covered employee, government agency, or third
16 29 party.
16 30 2. Both the client and the professional employer
16 31 organization shall be considered the employer for the purpose
16 32 of coverage under the workers' compensation laws provided in
16 33 chapters 85, 85A, and 85B, and both the professional employer
16 34 organization and its client shall be entitled to protection of
16 35 the exclusive remedy provision in section 85.20, irrespective
17 1 of which coemployer obtains such workers' compensation
17 2 coverage.
17 3 3. A workers' compensation insurance policy provided to a
17 4 professional employer organization shall comply with the
17 5 requirements provided in chapter 87.
17 6 4. Nothing in this section shall limit the rights and
17 7 remedies of covered employees under a collective bargaining
17 8 agreement.
17 9 Sec. 10. NEW SECTION. 95.10 UNEMPLOYMENT COMPENSATION
17 10 INSURANCE.
17 11 For purposes of the Iowa employment security law in chapter
17 12 96, covered employees of a licensed professional employer
17 13 organization are considered the employees of the client. The
17 14 professional employer organization shall be responsible for
17 15 the payment of contributions, penalties, and interest on wages
17 16 paid by the professional employer organization to its covered
17 17 employees during the term of the applicable professional
17 18 employer agreement.
17 19 Sec. 11. NEW SECTION. 95.11 VIOLATIONS == PENALTIES.
17 20 1. a. A person shall not offer or provide professional
17 21 employer services or use the title "professional employer
17 22 organization", "PEO", "staff leasing company", "employee
17 23 leasing company", "registered staff leasing company",
17 24 "administrative employer", or other title representing the
17 25 provision of professional employer services unless registered
17 26 pursuant to this chapter.
17 27 b. A person shall not knowingly provide false or
17 28 fraudulent information to the department in conjunction with a
17 29 registration, renewal, or any other requirement of this
17 30 chapter.
17 31 2. A person who willfully violates subsection 1 is guilty
17 32 of an aggravated misdemeanor.
17 33 3. An agent, officer, director, manager, or other person
17 34 who exercises control over the actions of a client who falsely
17 35 or fraudulently procures or attempts to procure services or
18 1 benefits from a professional employer organization registered
18 2 under this chapter without having adequate funds to compensate
18 3 the professional is guilty of a fraudulent practice and is
18 4 subject to the penalties provided for commission of a
18 5 fraudulent practice under chapter 714.
18 6 Sec. 12. NEW SECTION. 95.12 REGISTRATION DENIAL,
18 7 RESTRICTION, OR REVOCATION == CIVIL PENALTY.
18 8 The department may deny an application for a registration
18 9 or restrict or revoke a registration issued pursuant to this
18 10 chapter, if the department finds any of the following after
18 11 notice and opportunity for a hearing:
18 12 1. That the applicant or professional employer
18 13 organization violated section 95.11, subsection 1.
18 14 2. That the applicant or professional employer
18 15 organization knowingly made a material misrepresentation to
18 16 the department or any other governmental agency.
18 17 3. That the applicant or professional employer
18 18 organization willfully violated any provision of this chapter
18 19 or rule adopted pursuant to this chapter, or an order issued
18 20 by the department.
18 21 Sec. 13. NEW SECTION. 95.13 SEVERABILITY.
18 22 The provisions of this chapter are severable. If any
18 23 provision of this chapter, or application thereof to any
18 24 person or circumstance, is held invalid, such invalidity shall
18 25 not affect other provisions or applications of this chapter
18 26 which can be given effect without the invalid provision or
18 27 application.
18 28 Sec. 14. NEW SECTION. 95.14 RULES == INJUNCTIONS.
18 29 1. The department shall adopt rules necessary to
18 30 administer this chapter.
18 31 2. The director may seek injunctive relief to enforce this
18 32 chapter in the manner provided in section 96.14, subsection
18 33 16.
18 34 EXPLANATION
18 35 This bill creates the professional employer organization
19 1 recognition and licensing Act in new Code chapter 95. A
19 2 professional employer organization is required to be licensed
19 3 annually with the department of workforce development as
19 4 provided in the bill. The bill provides requirements for the
19 5 application, renewal, confidentiality, applicable fees, and
19 6 proof of financial capability regarding the licensing of
19 7 professional employer organizations.
19 8 The bill provides for the rights, duties, and obligations
19 9 of professional employer organizations doing business in this
19 10 state. The bill provides that the relationship between a
19 11 professional employer organization and its client must be
19 12 governed by a professional employer agreement which must
19 13 contain information regarding the rights of the professional
19 14 employer organization and the client, allocate certain
19 15 obligations of the professional employer organization and the
19 16 client, and may not affect rights under collective bargaining
19 17 agreements, licensing requirements, tax credits, or other
19 18 government incentives. The professional employer organization
19 19 must provide notice to each of its employees covered by a
19 20 professional employer agreement of the obligations of the
19 21 professional employer organization and the client under the
19 22 agreement. The bill allocates liability and limits of
19 23 liability for certain actions and responsibilities of the
19 24 client and the professional employer organization.
19 25 The bill specifies when either the client or professional
19 26 employer organization or both are considered the employer
19 27 under laws governing taxation, retirement and health benefit
19 28 plans, workers' compensation, and unemployment insurance. The
19 29 bill provides that a person who offers or provides
19 30 professional employment services without a license, uses
19 31 certain titles without a license, or knowingly provides false
19 32 or fraudulent information to the department is guilty of an
19 33 aggravated misdemeanor. An aggravated misdemeanor is
19 34 punishable by confinement for no more than two years and a
19 35 fine of at least $500 but not more than $5,000. A person who
20 1 exercises control over a client who falsely or fraudulently
20 2 procures services from a professional employer organization
20 3 without adequate funds to pay the professional employer
20 4 organization commits a fraudulent practice under Code chapter
20 5 714. The bill provides that the department may deny,
20 6 restrict, or revoke a license under certain circumstances.
20 7 The bill provides definitions of terms used in the chapter and
20 8 that the provisions of the chapter are to be considered
20 9 severable if any portion is held invalid.
20 10 LSB 1396HV 81
20 11 kk:nh/gg/14