No. 32535 (Amendment): R994-202. Employing Units.

DAR File No.: 32535
Filed: 04/15/2009, 11:49
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

These basically nonsubstantive changes are being made to reflect legislative changes.

Summary of the rule or change:

H.B. 159 from the 2008 General Session changed the provisions regarding Professional Employer Organizations (PEO). These proposed amendments are being made to reflect those legislative changes. The previous PEO Act required PEOs to register with the state; now a PEO is required to be licensed. This proposed amendment changes the word "registered" to "licensed". H.B 159 also changed the code numbering from Chapter 58 to Chapter 31A. This proposed amendment changes the numbering as well. Some definitions were changed to more closely match the PEO Licensing Act. The Department also clarified how a client company will be treated if the PEO fails to obtain licensing or pay contributions to the Department. The Department previously filed similar changes to this rule. Based on comments received, the Department let that filing lapse and made some minor changes in response to those comments to clarify the rule. (DAR NOTE: H.B. 159 is found at Chapter 318, Laws of Utah 2008, and was effective 05/05/2008.)

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 will be no costs or savings to the state budget. There are no changes in this proposed amendment except those that reflect the legislation.

local governments:

This is a federally-funded program and there will be no costs or savings to any local government. There are no changes in this proposed amendment except those that reflect the legislation.

small businesses and persons other than businesses:

This is a federally-funded program and there will be no costs or savings to any small business or other persons. There are no changes in this proposed amendment except those that reflect the legislation.

Compliance costs for affected persons:

This is a federally-funded program and there will be no compliance costs associated with this change. There are no changes in this proposed amendment except those that reflect the legislation.

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. Kristen Cox, 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:

06/01/2009

This rule may become effective on:

06/08/2009

Authorized by:

Kristen Cox, Executive Director

RULE TEXT

R994. Workforce Services, Unemployment Insurance.

R994-202. Employing Units.

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]licensed as a Professional Employer Organization (PEO) pursuant to the provisions of Section [58-59-101]31A-40-101 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.

 

R994-202-106. 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.]"Co-employment relationship" means a relationship that is intended to be ongoing rather than temporary or project specific and whose rights, obligations and responsibilities of an employer are allocated pursuant to the professional employer agreement or Chapter 40 of the PEO Licensing Act.

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

]([e]d) "Professional employer agreement" means a written contract by and between a client and a PEO that provides for the co-employment of a covered employee as defined in Section 31A-40-102.

([f]e) "Professional employer organization" or "PEO" means any organization engaged in the business of providing professional employer services. "Employee leasing company" and "Employee staffing company" are[is a] terms also used to describe a PEO.

([g]f) "Professional employer services" means the service of entering into a co-employment relationship under which all or a majority of the employees who provide a service to a client, or division or work unit of a client, are considered employees[with a client] as defined in the PEO [Registration]Licensing Act, Section [58-59-101]31A-40-101 et seq.

(g) "Covered employee" means an individual is a covered employee of a PEO if the individual is co-employed pursuant to a professional employer agreement subject to Section 31A-40-203.

(2) Before the employer is considered to be a PEO, it must comply with the requirements of [Sections 58-59-101]the PEO Licensing Act, Sections 31A-40-101 through [58-59-503]31A-40-402 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]31A-40-101 through [58-59-501]31A-40-402 of the PEO [Registration]Licensing 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 Employment Security 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 f]Failure to file reports or pay contributions timely will result in the Department treating the client as a new employer without experience rating, unless the client is otherwise eligible for experience rating, beginning on the day the PEO failure occurred, [are]as outlined in Section [58-59-501]31A-40-210 [et. seq. ]of the PEO [Registration]Licensing 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]Licensing Act, Sections [58-59-101]31A-40-101 through [58-59-501]31A-40-402.

 

KEY: unemployment compensation, employment

Date of Enactment or Last Substantive Amendment: [July 1, 2007]2009

Notice of Continuation: May 20, 2008

Authorizing, and Implemented or Interpreted Law: 35A-4-202(1)