Session of 2000
HOUSE BILL No. 2812
By Committee on Business, Commerce and Labor
2-2
9 AN ACT
relating to professional employer organizations; establishing
10 certain minimum
standards applicable to all professional employer or-
11 ganizations operating
in the state.
12
13 Be it enacted by the Legislature of the
State of Kansas:
14 Section
1. It is hereby declared that the professional employer
or-
15 ganization provides a valuable service to
commerce and the citizens of
16 this state. The rights and responsibilities
of the professional employer
17 organization must be clearly defined. Two
entities may both legitimately
18 be an employer of the same employee. The
recognition of this relationship
19 should be based on the nature of the
relationship as defined by a written
20 contract between a professional employer
organization and a work-site
21 employer rather than left to the common law
of the state. Professional
22 employer organizations shall be the
coemployer or the employing unit for
23 all employees covered by a professional
employer contract, and a profes-
24 sional employer organization may aggregate
all employees under the in-
25 dividual contracts to the extent allowed by
law.
26 Sec.
2. Unless the context clearly requires otherwise, these terms
are
27 defined as follows:
28
(a) "Administrative fee" means those amounts charged by the
pro-
29 fessional employer organization to the
client over and above amounts
30 applied to the mandatory state and federal
taxes, wages of assigned work-
31 ers and amounts applied to premiums or
contributions for benefits pro-
32 vided for assigned workers.
33 (b) "Assigned
worker" means a person having an employment rela-
34 tionship with both the professional
employer organization and the client.
35 (c) "Client"
means a person who contracts with a professional em-
36 ployer organization to obtain employer
services from another person
37 through a professional employer
arrangement.
38 (d) "Person"
means an individual, an association, a company, a firm,
39 a partnership, a corporation or any other
form of legally recognized entity.
40 (e) "Professional
employer arrangement" means an arrangement, un-
41 der contract or whereby:
42 (1) A
professional employer organization assigns workers to perform
43 services for a client;
2
1 (2) the
arrangement is intended to be, or is, ongoing rather than tem-
2 porary in nature;
3
(3) employer responsibilities for assigned workers are in fact
shared
4 by the professional employer
organization and the client; and
5 (4) for the
purposes of this act, a professional employer arrangement
6 shall not include:
7
(A) Arrangements wherein a person, whose principal business
activity
8 is not entering into professional
employer arrangements, shares employ-
9 ees with a commonly owned company
within the meaning of section
10 414(b) and (c) of the federal internal
revenue code of 1986, as amended,
11 and which does not hold itself out as a
professional employer organization.
12 (B) Arrangements
in which a person assumes full responsibility for
13 the product or service performed by such
person or such person's agents
14 and retains and exercises, both legally and
in fact, a right of direction and
15 control over the individuals whose services
are supplied under such con-
16 tractual arrangements, and such person and
such person's agents perform
17 a specified function for the client which
is separate and divisible from the
18 primary business or operations of the
client.
19 (C) A temporary
help arrangement whereby an organization hires its
20 own employees and deploys them to a client
to support or supplement
21 the client's employees.
22 (D) Any person
otherwise subject to this act if, during any fiscal year
23 of the person commencing after July 1,
2000, the person pays total gross
24 wages to employees employed by the person
in the state under one or
25 more professional employer arrangements
which do not exceed 5% of the
26 total gross wages paid to all employees
employed by the person in the
27 state during the same fiscal year under all
arrangements described in
28 paragraph (4) and that each person does not
advertise or hold itself out
29 to the public as providing services as a
professional employer organization.
30 (f) "Professional
employer organization" means any person engaged
31 in providing the services of employees
pursuant to one or more profes-
32 sional employer arrangements or any person
that represents itself to the
33 public as providing services pursuant to a
professional employer
34 arrangement.
35 (g) "Temporary
employee" means a worker employed by an organi-
36 zation which hires its own employees and
deploys them to a client to
37 support or supplement the client's
full-time workforce.
38 Sec.
3. This act shall not apply to labor organizations as defined
by
39 the national labor relations act or to any
political subdivision of the state,
40 the United States, and any programs or
agencies thereof, or to any entity
41 which meets the definitions contained in
paragraph (e)(4) of section 2
42 and amendments thereto. A professional
employer arrangement shall
43 have no effect on any existing collective
bargaining agreements. Notwith-
3
1 standing any statements in this
subsection to the contrary nothing in this
2 act shall prohibit a client which is
a party to a collective bargaining agree-
3 ment from contracting with a
professional employer organization pro-
4 vided that the labor organization
consents to such arrangement.
5 Sec.
4. (a) Each professional employer organization shall meet
the
6 following standards:
7 (1) Have a
written contract between the client and the professional
8 employer organization setting forth
the responsibilities and duties of each
9 party. The contract shall contain a
description of the type of services to
10 be rendered by the professional employer
organization and the respective
11 rights and obligations of the parties and
the contract shall also provide
12 that the professional employer
organization:
13 (A) Reserves a
right of direction and control over workers assigned
14 to the client's location. However, the
client shall maintain such direction
15 and control over the assigned workers as is
necessary to conduct the
16 client's business and without which the
client would be unable to conduct
17 its business, discharge any fiduciary
responsibility which it may have, or
18 comply with any applicable licensure;
19 (B) assumes
responsibility for the withholding and remittance of pay-
20 roll-related taxes and employee benefits
from its own accounts, as long
21 as the contract between the client and
professional employer organization
22 remains in force; and
23 (C) retains
authority to hire, terminate, discipline and reassign
24 workers.
25 (2) Provide
written notice of the general nature of the relationship
26 between the professional employer
organization and the client to the
27 assigned workers located at the client work
site.
28 (b) A
professional employer organization shall be considered an em-
29 ployer for the purposes of withholding
state income tax of the assigned
30 workers pursuant to the Kansas income tax
act.
31 (c) As long as
the professional employer organization's contract with
32 the client remains in force, the
professional employer organization shall
33 have a right to and shall assume the
following responsibilities:
34 (1) Pay wages and
collect, report and pay employment taxes of its
35 assigned workers from its own accounts;
36 (2) pay
unemployment taxes as required by the employment security
37 law;
38 (3) secure and
provide all required workers compensation coverage
39 for its assigned workers either in its own
name or in its clients name.
40 (d) Both client
and the professional employer organization shall be
41 considered the employer for the purpose of
coverage under the workers
42 compensation act.
43 (e) Both the
professional employer organization and its client shall
4
1 be entitled to protection of the
exclusive remedy provision of the workers
2 compensation act irrespective of
which entity secures and provides such
3 workers compensation coverage.
4 (f) A
recognized professional employer organization shall be deemed
5 the employer for the purposes of
sponsoring and maintaining benefit and
6 welfare plans for its assigned
workers.
7 (g) In the
absence of any contrary provisions contained in the contract
8 between the client and the
professional employer organization, the pro-
9 fessional employer organization
arrangement that exists between a pro-
10 fessional employer organization and its
clients shall be interpreted for the
11 purposes of insurance and bonding as
follows:
12 (1) A
professional employer organization shall not be liable for the
13 acts, errors or omissions of a client or of
any assigned worker when such
14 client or worker is acting under the
direction and control of a client. A
15 client shall not be liable for the acts,
errors or omissions of a professional
16 employer organization or of any assigned
worker of a professional em-
17 ployer organization when such professional
employer organization or
18 worker is acting under the direction and
control of the professional em-
19 ployer organization. This section shall not
limit any contractual liability,
20 as may be expressly agreed upon, between
the professional employer
21 organization and the client, nor shall this
section limit the liabilities of
22 any professional employer organization or
client as defined elsewhere in
23 this act; and
24 (2) assigned
workers shall not be deemed employees of the profes-
25 sional employer organization for purposes
of general liability insurance,
26 automobile insurance, fidelity bonds,
surety bonds or employer's liability
27 insurance other than workers compensation
insurance carried by the pro-
28 fessional employer organization unless the
assigned workers are included
29 by specific reference in the applicable
prearranged employment contract,
30 insurance contract or bond.
31 (h) The sale of
professional employer services in conformance with
32 the provisions of this chapter shall not
constitute the sale of insurance for
33 purposes of chapter 40 of the Kansas
Statutes Annotated.
34 (i) A
professional employer organization is not engaged in the unau-
35 thorized practice of an occupation, trade,
or profession that is licensed,
36 certified or otherwise regulated by a
governmental entity solely by en-
37 tering into a professional employer
arrangement with a client that is so
38 licensed, certified or regulated.
39 Sec. 5. (a)
Financing of unemployment insurance benefits for work-
40 ers assigned by a professional employer
organization to a nonprofit or-
41 ganization or a unit of government shall be
paid by the unit or organization
42 as provided by the employment security law.
Unemployment insurance
43 benefits for workers assigned by a
professional employer organization to
5
1 any client other than a nonprofit
organization or governmental unit shall
2 be made in accordance with the
provisions of this section.
3 (b) During
the term of a professional employer organization agree-
4 ment, a professional employer
organization is liable in accordance with
5 the provisions of employment security
law, for the payment of contribu-
6 tions, penalties and interest on
wages paid to employees assigned to a
7 client company. The professional
employer organization shall report and
8 pay all contributions under its state
employer account number, using the
9 applicable contribution rate. The
provisions of this section do not apply
10 to an entity that provides temporary
employees, as defined in this act, if
11 the entity is liable as an employer for the
payment of contributions on
12 wages paid to temporary employees.
13 (c) When a client
ceases to pay wages, such client shall be subject to
14 termination of its employer account and
experience rating records in the
15 same manner as any other employer, in
accordance with the provisions
16 of employment security law. If a client
which has ceased to pay wages
17 subsequently resumes paying wages, it will
be assigned the appropriate
18 experience rate in accordance with the
provisions of employment security
19 law.
20 Sec. 6. (a)
Nothing in this act exempts a client of a professional em-
21 ployer organization, nor an assigned
worker, from any other state, local
22 or federal license or registration
requirement.
23 (b) Any
individual who must be licensed, registered or certified ac-
24 cording to law and who is an assigned
worker is deemed an employee of
25 the client for purposes of the license,
registration or certification.
26 (c) A
professional employer organization does not engage in an oc-
27 cupation, trade or profession that is
licensed, certified or otherwise reg-
28 ulated by a governmental entity solely by
entering into a professional
29 employer arrangement with a client company
or an assigned worker.
30 Sec. 7. This act shall
take effect and be in force from and after its
31 publication in the statute book.