No. 29678 (Repeal and Reenact): R994-202. Employing Units

DAR File No.: 29678
Filed: 03/15/2007, 11:36
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

This proposed repeal and reenactment is to make sure the rule complies with current practices and law.

Summary of the rule or change:

These changes are being made as part of the Department's effort to rewrite all of its rules. Most changes are to bring the rule into compliance with changes in the law and Department procedure. Some of the language in the current rule is archaic and did not reflect the way the Department currently does business in the age of computers. The definitions of business entities were changed to mirror definitions found in the rules and laws for the Department of Commerce and federal regulations. The current rule and this proposed new rule are essentially equivalent in substance.

State statutory or constitutional authorization for this rule:

Section 35A-1-104 and Subsections 35A-1-104(4) and 35A-4-502(1)(b)

Anticipated cost or savings to:

the state budget:

This is a federally-funded program and there are no costs or savings to the state budget.

local governments:

This is a federally-funded program so there are no costs of savings to local government.

other persons:

There are no costs or savings to any other persons as there are no fees associated with this program as it is federally funded. These changes will not impact any employer's contribution rate.

Compliance costs for affected persons:

There are no costs or savings to any affected persons as there are no fees associated with this program and it is federally funded. These changes will not impact any employer's contribution rate.

Comments by the department head on the fiscal impact the rule may have on businesses:

There are no compliance costs associated with this change. There are no fees associated with this change. There will be no cost to anyone to comply with these changes. There will be no fiscal impact on any business. These changes will have no impact on any employer's contribution tax rate. Tani Downing, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Workforce Services
Unemployment Insurance
140 E 300 S
SALT LAKE CITY UT 84111-2333

Direct questions regarding this rule to:

Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/01/2007

This rule may become effective on:

05/09/2007

Authorized by:

Tani Downing, Executive Director

RULE TEXT

R994. Workforce Services, Unemployment Insurance.

R994-202. Employing Units.

[R994-202-101. General Definition.

The objective of this rule is to define when a legal entity is the employing unit and define wages specific to the employing unit. When the legal status of an employing unit is in question, the Department may use various sources to determine the status of the employing unit based upon Section 35A-4-313. These sources may include, but are not limited to income tax returns, financial and business records, regulatory licenses, legal documents, and information from the parties involved.

(1) Proprietorship.

A business which is owned by a person who has either the legal right and exclusive title, or dominion, or the ownership of that business is a proprietorship. The individual proprietor is the employing unit. The proprietor's services and the services of the proprietor's spouse, minor children under age 21, and parents are exempt from coverage and they are not entitled to receive unemployment benefits based upon proprietorship compensation (see also rule on wages 35A-4-208).

(2) Partnership.

The partners are the employing unit. The partners' services are exempt from unemployment coverage and they are not entitled to receive unemployment benefits based upon partnership compensation. If the partnership changes because partners are added or one or more of the partners leaves the partnership, that legal entity ceases to exist at the point the change occurs, and any remaining entity becomes a different employing unit. (For rule on limited partnerships, see 35A-4-208(11). For rule on family employment, see 35A-4-205(1)(h).)

(3) Corporation.

The corporation is the employing unit. Corporations must be registered with the Utah Division of Corporations or similar agency in another state. In the absence of such registration or a dissolution, the department will determine the employing unit based upon the best available information. A change of ownership occurs when substantially all of the corporate assets are sold or transferred. The sale, transfer, or exchange of corporate stock is not a change of ownership. All individuals employed by the corporation, including officers, are employees. Compensation to officers who perform services necessary to the corporation is deemed to be wages. Payments to corporate employees such as dividends, loans and expenses in lieu of compensation for services may be reclassified as wages by the department. Reclassification will be based upon the extent and significance of the work performed and the documentation supporting such payments. This applies to all corporations regardless of income tax reporting status. The following payments to officers are generally not wages:

(a) directors fees which are uniform and reasonable;

(b) reimbursement for expenses which are reasonable and/or documented by receipts;

(c) loans supported by notes and reasonable repayment schedules. Non-interest bearing notes which are payable upon demand, no payment schedule, are considered wages if the officer is performing necessary services for the corporation;

(d) documented returns of investment where the officer has loaned or invested money in the corporation.

(4) Limited Liability Company (LLC).

A LLC is the employing unit if it is registered and in good standing with the Utah Department of Commerce. The department will consider a LLC that is not registered or in a canceled status to be a proprietorship or partnership, based upon the best information available.

(a) Members of a LLC are not employees of the LLC and their remuneration is exempt from coverage provided both of the following criteria are met:

(i) the Limited Liability Company is registered and in good standing with the Department of Commerce as a LLC and,

(ii) the member has a bona fide ownership interest in the LLC and is listed in the articles of organization or the operating agreement.

(b) The department may look beyond the articles of organization or the operating agreement to the actual working relationship to determine the employment status of individuals in the LLC.

(c) A nonmember manager is an employee of the LLC.

(d) Legal actions, subpoenas, and court orders will be issued to the ownership of record.

(e) Assessments and liens will be issued in the name of the LLC, and not against the ownership of record.

(5) Trust.

The trust is the employing unit. A trust instrument or document must exist in order for the entity to be recognized. In the absence of such document, the department will determine the employing unit based upon the best available information. A trustee is generally not an employee of the trust unless there is sufficient evidence to demonstrate that the trustee does not control the trust with respect to fiduciary and management responsibilities. A trustee controlled and directed by another party is an employee of the trust. A bankruptcy trustee is not an employee of the bankrupt entity. The trustee is an independent contractor selected by the creditors and approved by the court. Corporate trustees are employees of the corporation. Their compensation, as that of corporate officers, is subject to unemployment contributions.

(6) Association.

An association is a collection or organization of persons or other legal entities who have joined together for a certain common objective.

(7) Joint Venture.

A joint venture is a one-time grouping of two or more persons or corporations in a business undertaking. Unlike a partnership, a joint venture does not entail a continuing relationship among the parties. The exempt or employment status of proprietors, partners or corporate officers is not lost in the formation of the joint venture. Services of proprietors or partners are exempt. The services of a corporation's officers are subject.

(8) Estate.

An estate established to manage the business activities of a deceased proprietor or partner is the employing unit. The services of the executor or administrator of the estate are not subject to unemployment contributions.

(9) Temporary Help Company.

(a)(i) A temporary help company is the employing unit for those workers placed with a client company to fill assignments with a finite ending date in special, unusual, seasonal, or temporary skill shortage situations.

(ii) A company that provides all or substantially all of the regular, full-time workers of a client company, with no restrictions or limitation on the duration of employment, is not the employing unit for those workers and, therefore, the client company may be considered the employing unit subject to all of the provisions of the Employment Security Act as an employer, unless the company is licensed pursuant to the Employee Leasing Company Licensing Act, Section 58-59-101 et seq.

(b) If the temporary help company implements an action taken by the client to remove a worker from employment, the temporary help company is responsible for that action, whether or not the action is authorized by a written contract, unless the worker continues to be paid by the temporary help company;

(c) Rule R994-202-103, paragraphs 5(d), Exempt Employment, and 5(e), Benefit Charges, pertaining to employee leasing companies also apply to temporary help companies.

(10) Common Paymaster.

(a) A common paymaster situation exists when two or more related corporations concurrently employ the same individual and one of the corporations compensates the individual for the concurrent employment. Internal Revenue Service rules and determinations related to a common paymaster situation are not controlling but serve as guidelines in the department's determination as to which entity is the employing unit.

(b) The department will recognize a common paymaster if the closely related corporations satisfy all of the following criteria:

(i) each related company is a corporation;

(ii) there must be at least 50 percent common ownership of stock or interest, or there must be at least 50 percent common officers in the related companies, or 30 percent of the employees work for all of the related companies;

(iii) the reporting for any calendar year must be consistent with FUTA annual 940 reporting; and

(iv) the employee(s) must be performing concurrent service for some or all of the related companies.

(c) Employers who wish to report under a common paymaster will need to petition the department in writing for authorization. That authorization will stipulate to the requirements for reporting under a common paymaster, indicating that if at any time, the above criteria are not met, the department authorization is void.

(d) Employers who have not received department authorization to report as a common paymaster and are reporting as such, may be granted such status for past and future application if the four criteria noted above are satisfied.

(11) Payrolling.

(a) Payrolling is defined as the practice of an employing unit paying wages to the employees of another employer or reporting those wages on its payroll tax reports. Generally an employee is reportable by the employer:

(i) who has the right to hire and fire the employee;

(ii) who has the responsibility to control and direct the employee;

(iii) for whom the employee performs the service.

(b) For unemployment contributions purposes, payrolling is not allowed. Exceptions to this provision are noted in the rules pertaining to leasing and temporary service companies and common paymasters.

 

R994-202-102. Constructive Knowledge of Work Performed.

(1) General Definition.

The purpose of Subsection 35A-4-202(1)(d) is to establish who is liable for the employment of an individual hired to assist in performing the work of an employee. In a situation where an individual is employed to perform or assist in performing the work of an employee, the individual is deemed to be employed by the employer provided the employer had actual or constructive knowledge of the work performed by the individual. This is the case even when the individual who is hired to assist the employee is hired or paid by that employee.

(2) Constructive Knowledge.

An employer is deemed to have constructive knowledge if he should have reasonably known or expected that his employee would engage another individual to assist in performing the work.

(3) Examples of Actual or Constructive Knowledge.

(a) The employer who operates a trucking business, employs A to drive a truck to a certain location, unload the truck and return. A hires B to help unload the truck. The following examples show whether the employer is considered to have actual or constructive knowledge of the work performed by B.

(i) If the employer knows that B is helping A, the employer has actual knowledge of the work performed by B and therefore, B is considered to be employed by the employer.

(ii) If the employer does not know about B but knows that the unloading A is engaged to perform requires more than one person, the employer has constructive knowledge of the work performed by B and therefore, B is considered to be employed by the employer.

(iii) The employer tells A to do the work himself, however, A still hires B and the employer finds out but takes no action to prevent B from helping A in the future. In this case the employer has actual knowledge of the work performed by B and therefore, B is considered to be employed by the employer both for past and future work performed. However, if the employer takes action to prevent A from hiring help in the future, then B would not be considered to be employed by the employer even for the work already performed.

(iv) The employer tells A that he may do the work himself or hire someone to help him. A hires B but the employer is not told and does not know about B. The employer is considered to have constructive knowledge because he knows A might hire B.

(4) Reporting Requirement.

The employer has a responsibility to report all employment for which he is liable, therefore, the employer in the examples above should require that A report B's employment to him in those situations where the employer had actual or constructive knowledge of B's employment. However, A's failure to report B to the employer does not relieve the employer of the liability for the employment.

 

R994-202-103. Employee Leasing Companies.

(1) General Definition.

Subsection 35A-4-202(1) outlines the procedures for determining when an employee leasing company will be an employer for purposes of the unemployment compensation program. Since all employee leasing companies provide workers to client companies, the following rules establish the criteria set forth for determining an employee leasing company's status as an employer. The rules also establish standards for assessment and collection of unemployment compensation contributions, security bonds to insure payment of contributions, and issues of liability for benefit charges.

(2) Criteria for Determination of Status as an Employer.

(a) Before the employer may be defined by the Employment Security Act as a leasing employer, it must comply with the requirements of Sections 58-59-101 through 58-59-503 of the Utah Code. In the absence of such compliance, the department may choose to hold the "client employer" as the employing unit.

(3) Those workers who are not covered by a contract between the client company and leasing company remain the employees of the client company.

(4) If the employee leasing company implements an action taken by the client to remove a worker from employment, the leasing company is responsible for that action, whether or not the action is authorized by a written contract, unless the worker continues to be paid by the leasing company.

(5) Effect of Determination that Leasing Company is an Employer.

(a) When an employee leasing company qualifies as an employer under Subsection 35A-4-202(1), it will be subject to all provisions of the Act.

(b) Individuals excluded from coverage under Sections 35A-4-204 through 35A-4-206 of the Act will continue to be excluded from coverage even though they become "employees" of an employee leasing company. The following are some examples of those who are excluded:

(i) the proprietor, spouse, minor children, or parents of the proprietor;

(ii) partners in a business;

(iii) a patient of a hospital;

(iv) a student or student spouse at a school, college or university;

(v) a student as part of a school, college, or university certified training program; and

(vi) those participating in rehabilitation programs for governmental and non-profit organizations.

(c) If an employee leasing company does not otherwise qualify for treatment as a reimbursable employer or exempt employer, because it is not a governmental entity, nonprofit entity, or religious entity, it will be considered to be a contributing employer even if the client company could independently qualify for reimbursable or exempt status.

(d) Services otherwise exempt under the Act based on the nature of service or due to a specific exemption under Section 35A-4-204 through 35A-4-305 would continue to be exempt if such service is rendered by an employee leasing company. The following are examples of such services:

(i) real estate agents, insurance agents and securities brokers but only if they are paid solely by way of commission;

(ii) certain outside sales people paid solely by way of commission;

(iii) news carriers;

(iv) domestic services until $1000 in cash wages in a calendar quarter are paid to domestic employees supplied to any and all clients;

(v) agricultural services until $20,000 in cash wages in a calendar quarter are paid to agricultural employees supplied to any and all clients or 10 or more agricultural employees are supplied in 20 weeks to any and all clients.

(e) Liability for benefit ratio charges:

(i) When a client company contracts with a leasing company and the leasing company becomes the employer pursuant to Sections 58-59-101 through 58-59-503 of the Utah Code, the separation of employees from the client company is considered a reduction of force. The client company is not eligible for relief of charges.

(ii) For purposes of the Utah Employment Security Act, when the contract between a leasing company and a client company ends, a separation occurs. Regardless of the circumstances or which entity is the moving party, the affected employees are considered separated due to a reduction of force, and the leasing company is not eligible for relief of charges. Any offers of work extended to affected employees subsequent to the termination of the contract shall be considered offers of new work and shall be adjudicated in accordance with 35A-4-405(3) and R994-405-301 et seq.

(6) An employee leasing company which fails to qualify as an employer under Sections 58-59-101 through 58-59-501 and Subsection 35A-4-202(1) will be considered to be the AGENT of the client company. The client company remains the employer of its workers for all purposes of the Employment Security Act.

(7) Reporting Requirements.

(a) Any entity which begins to conduct a business as an employee leasing company must register with the department. For general requirements for reporting, see Section R994-312-304. Licensing penalties for failure to file the following forms timely or in the manner prescribed are outlined in Section 58-59-501 et. seq. of the Employee Leasing Company Licensing Act:

(i) Form 1, Status Report;

(ii) Form 3, Employer's Contribution Report;

(iii) Form 3H, Employer's Quarterly Wage List;

(iv) Form BLS 3020, Multiple Worksite Report.

(b) Employee leasing companies must, within 30 days of the effective date of a contract with a client, advise the Department of the following information:

(i) the effective date of the contract; and

(ii) the client's name, address and employer registration number, if the client is registered with this Department;

(iii) the client's type of business activity.

(c) An employee leasing company must, within 30 days following the termination of a contract with a client, advise the Department of the following information:

(i) the effective date of contract termination;

(ii) the legal name, address and, if available, the prior employer registration number of the client.

(d) Each client of an employee leasing company will be assigned a work site account number which is part of the employee leasing company's account number. The employee leasing company is required to file an addendum with each quarterly "Employer's Contribution Report." The addendum must include:

(i) the client's name, site location address and work site account numbers;

(ii) the total amount of payroll paid during the quarter for each site location; and

(iii) the total number of employees working at each site location during the quarter.

(8) The Department may directly contact employee leasing companies or their clients in order to conduct investigations, audits and otherwise obtain information necessary for the administration of the Employment Security Act as permitted by Section 35A-4-312.

(9) Bonding/Contribution Payment Requirements.

(a) A licensed leasing company may be required to post a bond or make monthly contribution payments pursuant to R994-308-103.

(b) A leasing company which is not properly licensed under Section 58-59-101 through 58-59-501 of the Employee Leasing Company Licensing Act but continues to operate as such will be required to post a bond or make monthly contribution payments until the Utah Department of Commerce issues a cease and desist order, at which time the leasing company will no longer be considered an employer.

(c) The bond amount will be as prescribed by R994-308-104.

(d) Monthly contribution payments will be due by the 6th day of the following month.

(e) If an employer fails to post a bond or make monthly contribution payments, the department will petition the court to enjoin the leasing company from hiring employees.

(10) The rules pertaining to "common paymaster," Section R994-202-101(10) and "payrolling," R994-202-101(11) do not apply to leasing companies who are in compliance with the Employee Leasing Company Licensing Act, Sections 58-59-101 through 58-59-501.]

R994-202-101. Legal Status of Employing Unit.

The Department may, on its own motion or if requested by an employer, determine the legal status of an employing unit according to Section 35A-4-313. The determination will be based on the best available information including, registration forms, income tax returns, financial and business records, regulatory licenses, legal documents, and information from the involved parties. The Department's determination is subject to review and may be appealed according to rule R994-508, Appeal Procedures.

(1) Sole Proprietorship.

A sole proprietorship is a legal entity that is owned by one person. The sole proprietor is the employing unit. The sole proprietor's services are exempt from coverage pursuant to rule R994-208-103(1)(j). The services of the sole proprietor's spouse, children under age 21, and parents are also exempt from coverage and those individuals are not entitled to unemployment benefits based on the compensation received from the sole proprietorship.

(2)(a) Partnership.

A partnership is a legal entity composed of two or more persons or business entities that agree to contribute money, assets, labor, or skills to the business. Each partner shares the profits, losses, and management of the business and each partner is personally and wholly liable for debts of the partnership. The partners are the employing unit. The partners' services are exempt from unemployment coverage and the partners are not entitled to unemployment benefits based on compensation received from the partnership pursuant to rule R994-208-103(1)(k). The services of individuals working for partners who are also employing units, such as corporations and limited liability companies, are subject or exempt as provided under this section. If partners are added or one or more of the partners leaves the partnership, the partnership ceases to exist at the point the change occurs, and any remaining entity becomes a different employing unit. Rule R994-205-102(2) explains partnership family employment that is exempt from coverage.

(b) Limited Partnership (LP) and Limited Liability Partnership (LLP).

LPs and LLPs are partnerships composed of one or more general partners and one or more limited partners. The general partners manage the business and share fully in its profits and losses. Limited partners share in the profits of the business, but their losses are limited to the extent of their investment. The general partner's services are exempt from unemployment insurance coverage, but any payments to limited partners for services are wages subject to unemployment insurance contributions pursuant to rule R994-208-103(1)(k).

(3) Corporation.

A corporation is a legal entity granted a state charter legally recognizing it as a separate entity having its own rights, privileges, and liabilities distinct from those of its owners. The corporation is the employing unit. Corporations must be registered and in good standing with the Utah Department of Commerce. If a corporation is not registered or is in an expired status, it is treated as a proprietorship or partnership, based upon the best available information.

(a) A change of ownership occurs when the corporate assets are sold or transferred according to successorship rule R994-303-106. The sale, transfer, or exchange of corporate stock is not a change of ownership except as specified in rule R994-304-101.

(b) All individuals employed by the corporation, including officers, are employees of the corporation. Compensation to officers who perform services for the corporation is considered wages. Payments to corporate employees of dividends, loans, property distributions, and expenses in lieu of compensation for services may be reclassified as wages by the Department based on the extent and significance of the work performed and the documentation supporting the payments. This applies to all corporations regardless of income tax reporting status. The following payments to officers are generally not wages:

(i) directors fees that are uniform and reasonable;

(ii) reimbursement for expenses that are reasonable and documented. The Department may require receipts to document questionable expenses. Section R994-208-103, Payments Not Considered to be Wages, contains additional information on expense reimbursements;

(iii) loans supported by notes and reasonable repayment schedules. Non-interest bearing notes that are payable upon demand with no payment schedule are considered wages if the officer is performing services for the corporation; or

(iv) documented return of an investment where the officer has loaned money to, or invested money in, the corporation.

(4) Limited Liability Company (LLC).

A LLC is a legal entity that combines the limited liability protection of a corporation and the pass through taxation of a sole proprietorship or partnership. The LLC is the employing unit and must be registered and in good standing with the Utah Department of Commerce. A LLC that is not registered or is in an expired status is treated as a proprietorship or partnership, based upon the best available information.

(a) Members of a LLC are not employees of the LLC and payments to them are exempt from coverage provided all of the following criteria are met;

(i) the LLC is registered and in good standing with the Utah Department of Commerce,

(ii) the member has a bona fide ownership interest in the LLC and is listed in the articles of organization, the operating agreement, or federal income tax return, and

(iii) the LLC has not been approved by the IRS as an "eligible entity" which allows the LLC to file with the IRS as a corporation. Approval may be obtained by the IRS accepting a written application or form, or the IRS accepting the filing of a U.S. Corporation Income Tax Return or U.S. Income Tax Return for an S Corporation.

(b) A nonmember manager is an employee of the LLC.

(c) Legal actions, subpoenas, and court orders will be issued to a member or manager of record.

(d) Assessments and liens will be issued in the name of the LLC, and not against the members of record.

(5) Trust.

A trust is a legal entity created to transfer property to a trustee to hold and manage for the benefit and profit of designated persons. The trust is the employing unit. A trust instrument or document must exist in order for the entity to be recognized. If the trustee does not independently perform fiduciary and management responsibilities, the trustee is an employee of the trust.

(6) Association.

An association is an entity consisting of a collection or organization of persons or other legal entities that have joined together for a certain common objective. Payments to association members for business services such as accounting and maintenance are considered wages unless the member is exempt as an independent contractor as defined in Section R994-204-301, Independent Contractor. Documented expense reimbursements paid to members are not wages.

(7) Joint Venture.

A joint venture is a legal entity consisting of a one-time grouping of two or more persons or legal entities in a business undertaking. Unlike a partnership, a joint venture does not entail a continuing relationship among the parties. The exempt or employment status of proprietors, partners, LLC members, or corporate officers is not lost in the formation of the joint venture.

(8) Estate.

An estate is a legal entity consisting of the property of a living, deceased, or bankrupt person. An estate established to manage a person's business is the employing unit. The executor or administrator of the estate is not considered to be an employee of the estate.

 

R994-202-102. Temporary Help Company.

(1) "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;

(d) providing 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

(e) customarily attempting to reassign the employees to other organizations when they finish each assignment by a definite ending date.

(2) A company that provides all or substantially all of the client company's regular workers with no restrictions or limitation on the duration of employment, is not the employing unit for those workers and, therefore, the client company is considered the employing unit subject to all of the provisions of the Employment Security Act as an employer, unless the company is registered as a Professional Employer Organization (PEO) pursuant to the provisions of Section 58-59-101 et seq.

(3) Individuals and services exempt under the Act based on the nature of service or due to a specific exemption continue to be exempt if the individual is an employee of the temporary help services company or the services are rendered by an employee of the temporary help services company.

 

R994-202-103. Common Paymaster.

(1) A common paymaster relationship exists when two or more related corporations concurrently employ the same individual and one of the corporations compensates the individual for the concurrent employment. The Internal Revenue Service will recognize a common paymaster if the closely related corporations satisfy all of the following criteria:

(a) each related company is a corporation;

(b) there must be at least 50 percent common ownership of stock or interest, or there must be at least 50 percent common officers in the related companies, or 30 percent of the employees work for all of the related companies;

(c) the reporting for any calendar year must be consistent with FUTA annual 940 reporting; and

(d) the employee(s) must be performing concurrent service for some or all of the related companies.

(2) The Department does not allow or recognize common paymaster reporting as of March 1, 2005, even if the relationship is approved by the Internal Revenue Service. Each corporation is required to register with the Department and obtain a Utah Employer Registration Number.

 

R994-202-104. Payrolling.

(1) Payrolling is defined as the practice of an employing unit paying wages to the employees of another employer or reporting those wages on its payroll tax reports. Generally an employee is reportable by the employer:

(a) who has the right to hire and fire the employee;

(b) who has the responsibility to control and direct the employee; and

(c) for whom the employee performs the service.

(2) Payrolling is not allowed. Exceptions to this provision are contained in the Professional Employer rule R994-202-106 and the Temporary Help Services rule R994-202-102.

 

R994-202-105. Constructive Knowledge of Work Performed.

(1) If an individual is hired to perform or assist in performing the work of an employee, the individual is deemed to be employed by the employer provided the employer had actual or constructive knowledge of the work performed by the individual. This is the case even when the individual who is hired to assist the employee is hired or paid by that employee.

(2) The employer must report and pay contributions for all actual and constructive employment.

(3) An employer has actual or constructive knowledge if:

(a) The employer knows or should have known the employee hires an assistant;

(b) The employer knows or should have known that the employee's duties require an assistant;

(c) The employer instructs the employee to perform duties without an assistant, but the employee disregards the instructions and hires an assistant. If the employer becomes aware of the situation and takes no action to discontinue the current or future working relationship between the employee and the assistant, the assistant is considered to be employed by the employer for both the past and future work performed. However, if the employer takes action to prevent the employee from hiring an assistant in the future, then the assistant is not considered employed by the employer for the work already performed; or

(d) The employer gives the employee the option of hiring an assistant. The employee hires an assistant but does not inform the employer of the hire.

 

R994-202-106. Professional Employer Organizations (PEO).

(1) Definitions.

(a) "Agent" means an individual or organization authorized to act on behalf of an employer.

(b) "Client" or "client company" means a person or entity that enters into a professional employer agreement with a PEO.

(c) "Employment agreement" means a written contract between the PEO and each individual hired to provide services to a client.

(d) "Organization" means any individual, partnership, corporation, limited liability company, association, or any other form of legally recognized entity.

(e) "Professional employer agreement" means a written contract by and between a client and a PEO.

(f) "Professional employer organization" or "PEO" means any organization engaged in the business of providing professional employer services. "Employee leasing company" is a term also used to describe a PEO.

(g) "Professional employer services" means the service of entering into a relationship with a client as defined in the PEO Registration Act, Section 58-59-101 et seq.

(2) Before the employer is considered to be a PEO, it must comply with the requirements of Sections 58-59-101 through 58-59-503 of the Utah Code. In the absence of such compliance, the Department may choose to hold each "client company" as the employing unit.

(3) A PEO that fails to qualify as an employer under Sections 58-59-101 through 58-59-501 of the PEO Registration Act and as an employing unit under 35A-4-202(1), is considered to be the agent of the client company. The client's workers are not the employees of the agent. The client company remains the employer of its workers for all purposes of the Employment Security Act. An employee not covered by a professional employment agreement or employment agreement remains the employee of the client company.

(4) Individuals and services exempt under the Act based on the nature of service or due to a specific exemption continue to be exempt if the individual is an employee of a PEO or the services are rendered by an employee of a PEO. The exemptions for domestic and agricultural services contained in Section 35A-4-205 are taken into consideration for the PEO's clients in the aggregate, and not on an individual client basis.

(5) A PEO cannot elect reimbursable coverage even if the client company could independently qualify as a reimbursable employer.

(6) Reporting Requirements.

(a) Any entity conducting business as a PEO must register with the Department and complete all forms and reports required by the Department. Licensing penalties for failure to file reports or pay contributions are outlined in Section 58-59-501 et. seq. of the PEO Registration Act:

(b) Within 30 days of the effective date of a contract with a client, a PEO must submit to the Department the following information:

(i) the effective date of the contract;

(ii) the client's name and address;

(iii) the client's Federal Employer Identification Number (FEIN) if registered with the IRS, and the client's Employer's Utah Registration Number if previously registered with this Department; and

(iv) the client's principal business activity.

(c) Within 30 days of the termination of a contract with a client, a PEO must submit to the Department the following information:

(i) the effective date of contract termination;

(ii) the client's name and address; and

(iii) the client's FEIN if registered with the IRS, and the client's Employer's Utah Registration Number if previously registered with this Department.

(7) The Department may directly contact a PEO or its clients in order to conduct investigations, audits and otherwise obtain information necessary for the administration of the Employment Security Act as permitted by Section 35A-4-312.

(8) The rules pertaining to "payrolling" in R994-202-104 do not apply to a PEO that is in compliance with the PEO Registration Act, Sections 58-59-101 through 58-59-501.

 

KEY: unemployment compensation, employment

Date of Enactment or Last Substantive Amendment: [February 2, 2000]2007

Notice of Continuation: May 23, 2003

Authorizing, and Implemented or Interpreted Law: 35A-4-102