TITLE 5
Businesses and Professions

CHAPTER 5-75
Professional Employer Organizations Act of 2004

SECTION 5-75-2


§ 5-75-2 Definitions.

As used in this chapter:

(a) "Administrative fee" means the fee charged to a client by a professional employer organization for professional employer services. The administrative fee shall not be deemed to include any amount of a fee by the professional employer organization that is for wages and salaries, benefits, workers' compensation, payroll taxes, withholding, or other assessments paid by the professional employer organization to or on behalf of covered employees under the professional employer agreement.

(b) "Client" means any person who enters into a professional employer agreement with a PEO.

(c) "Co-employer" means either a PEO or a client.

(d) "Co-employment relationship" shall mean:

(1) As between co-employers, a relationship whereby the rights, duties, and obligations of an employer which arise out of an employment relationship have been allocated between co- employers pursuant to a professional employer agreement and this chapter and which is intended to be an ongoing relationship, rather than a temporary or project specific relationship;

(2) As between each PEO and a covered employee as to which a professional employer agreement applies, an employment relationship whereby such PEO is entitled to enforce those rights, and obligated to perform those duties and obligations, allocated to such PEO by the professional employer agreement and this chapter;

(3) As between each client and a covered employee to which a professional employer agreement applies an employment relationship whereby such client is entitled to enforce those rights, and obligated to provide and perform those employer obligations allocated to such client by the professional employer agreement and this chapter and whereby such client is responsible for any employer right or obligation not otherwise allocated by the professional employer agreement or this chapter;

(4) As to rights enforceable by an employee under state law, covered employees shall be entitled to enforce against the PEO those rights: (i) allocated to such PEO by the professional employer agreement and this chapter; or (ii) shared by the PEO and the client and the PEO under the professional employer agreement and this chapter. All other rights, duties and obligations enforceable by an employee under the state shall continue to be enforceable against the client pursuant to state law.

(e) "Covered employee" means an individual having a co-employment relationship with a PEO and a client who meets all of the following criteria: (1) the individual has executed an employment agreement with the PEO; (2) the individual is a party to a co-employment relationship with a PEO and a client; and (3) the individual's co-employment relationship is pursuant to a professional employer agreement subject to this chapter. Individuals who are officers, directors, shareholders, partners, and managers of the client will be covered employees to the extent the PEO and the client have expressly agreed in the professional employer agreement that such individuals would be covered employees and provided such individuals meet the criteria of this paragraph and act as operational managers or perform services for the client.

(f) "Department" means the department of administration, division of taxation.

(g) "Director" means the tax administrator.

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

(i) "Professional employer agreement" means a written contract by and between a client and a PEO that provides:

(1) For the co-employment of covered employees;

(2) For the allocation and sharing between the client and the PEO employer responsibilities (including hiring, firing and disciplining) with respect to the covered employees; and

(3) That the PEO and the client assume the responsibilities required by this chapter.

(j) "Professional employer organization" or "PEO" means any person engaged in the business of providing professional employer services. A person engaged in the business of providing professional employer services shall be subject to registration under this chapter regardless of its use of the term "professional employer organization," "PEO," "staff leasing company," "registered staff leasing company," "employee leasing company," or any other name.

The following shall not be deemed to be professional employer organizations or professional employment services for purposes of this chapter:

(1) Arrangements wherein a person, whose principal business activity is not entering into professional employer arrangements and which does not hold itself out as a PEO, shares employees with a commonly owned company within the meaning of sections 414(b) and (c) of the Internal Revenue Code of 1986, as amended;

(2) Arrangements by which a person assumes responsibility for the product produced or service performed by such person or his/her agents and retains and exercises primary direction and control over the work performed by the individuals whose services are supplied under such arrangements; or

(3) Providing temporary help services.

(k) "Professional Employer Services" shall mean the service of entering into co- employment relationships under this chapter in which all or a majority of the employees providing services to a client or to a division or work unit of client are covered employees.

(l) "Registrant" means a PEO registered under this chapter.

(m) "Temporary help services" means a service consisting of a person:

(1) Recruiting and hiring its own employees;

(2) Finding other organizations that need the services of those employees;

(3) Assigning those employees to perform work at or services for the other organizations to support or supplement the other organizations' workforces, or to provide assistance in special work situations such as, but not limited to, employee absences, skill shortages, seasonal workloads, or to perform special assignments or projects, and

(4) Customarily attempting to reassign the employees to other organizations when they finish each assignment.

History of Section.
(P.L. 2004, ch. 87, § 1; P.L. 2004, ch. 124, § 1.)