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