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Minutes for SB27 - Committee on Commerce
Short Title
Removing a restriction, for purposes of employment security law, on leasing of certain employees by client lessees of lessor employing units.
Minutes Content for Tue, Feb 5, 2019
Chairperson Lynn opened the hearing on SB 27 and requested Revisor Chuck Reimer to provide an overview of the bill.
Chairperson Lynn recognized Michael Kreiter, Director of State Government Affairs, National Association of Professional Employer Organizations (NAPEO), who provided testimony in support of the bill. NAPEO is the national trade association of the professional employer organization (PEO) industry and represents about 85 percent of the industry's estimated $136 to $152 billion in gross revenues. In Kansas, NAPEO's footprint includes approximately 80 companies who report doing business in the state and over $700 million dollars in worksite wages. PEOs provide comprehensive human resource solutions to small and mid-sized businesses that allow their clients to focus on their core competencies to maintain and grow their business. PEOs administer employee benefits and workers' compensation insurance, prepare payroll, remit employment taxes, and assist with state and federal compliance.
Mr. Kreiter indicated the bill would alleviate an administrative burden that creates a filing complexity for small businesses and PEOs operating in Kansas. Currently, the statute stipulates that individual proprietors, partners or corporate officers who are shareholders or members of the board of directors of a client company cannot be leased employees, consequently prohibiting those individuals from being a part of the PEO relationship. As a result, quarterly unemployment tax and wage reports for these individuals must be submitted separately by the client. This creates a burden for both the small business and the PEO by requiring the management of two separate unemployment insurance (UI) accounts for a single client. The suggested amendment in SB 27 would allow PEOs to submit a single report for each client, thus alleviating the encumbrance on small businesses in Kansas by allowing them to focus on their core functions. Additionally, removal of this constraint would bring Kansas current with the requirements found in most states. (Attachment 1)
There were no questions for Mr. Kreiter.
Chairperson Lynn recognized Bill Maness, President and CEO, Syndeo Outsourcing, who provided testimony in support of the bill. The bill will provide PEOs with Kansas employees a fix for filing unemployment returns in Kansas. Currently, there are two filings for every client: one for the employees and one for the officers and directors. From an administrative standpoint, this is cumbersome on systems and creates the need for unique software programming that is only needed for Kansas. This bill would bring Kansas more in line with the vast majority of states in the administration of unemployment filings and create consistency in tax administration across the country. (Attachment 2)
Senator Alley asked if the work performed by Syndeo Outsourcing for PEOs was only for private companies. Mr. Maness responded Syndeo Outsourcing only works with private companies, but there are no prohibitions about PEOs working with public companies or government agencies.
Senator Holland asked Mr. Maness if he knew why the law was written in its current form. Mr. Maness responded the statute dates to the 1990's and he did not know why it was enacted in this manner.
Chairperson Lynn asked if there was any additional liability using a PEO, either on the part of the company or the PEO itself, should there be a major mistake and there is an issue on the information reported. Mr. Maness responded the client services agreement with the client defines the responsibilities of the PEO and the client.
Senator Rucker asked Mr. Maness if his organization was bonded. Mr. Maness responded affirmatively and reviewed some of the certification requirements of PEOs.
Chairperson Lynn recognized Melissa Kelly, Senior Director of Governmental Relations, ADP TotalSource Inc, who provided testimony in support of the bill. SB 27 would provide operational and administrative efficiencies by allowing PEOs to provide UI services to all individuals at a client company. The technical corrections provided by the bill would be beneficial both for the PEO industry and small business clients. (Attachment 3)
Senator Holland requested Legislative Research to determine whether PEO employees could be included in applications for economic development incentive programs such as PEAK (Promoting Employment Across Kansas).
Chairperson Lynn recognized Brett Flachsbarth, Deputy Secretary, Kansas Department of Labor (KDOL), who addressed the question as to why SB 27 was written in its current form. He responded KDOL had its professional tax staff review the bill, and there were no objections to the legislation. He indicated the bill does appear to facilitate filing and would reduce the number of files needing to be processed by KDOL. No negative impacts resulting from the bill were identified.
Chairperson Lynn closed the hearing on SB 27.
