SENATE AMENDED
PRIOR PRINTER'S NOS. 1508, 2624, 2685 PRINTER'S NO. 3750
No. 1314 Session of 1999
INTRODUCED BY GLADECK, BELFANTI, FICHTER, DEMPSEY, E. Z. TAYLOR,
CHADWICK, CLARK, FAIRCHILD, FLEAGLE, GEIST, HESS, LEDERER,
MASLAND, McNAUGHTON, ROHRER, ROSS, SCHRODER, STEELMAN,
THOMAS, YOUNGBLOOD, RAMOS AND LESCOVITZ, APRIL 15, 1999
SENATOR ARMSTRONG, LABOR AND INDUSTRY, IN SENATE, AS AMENDED,
JUNE 13, 2000
AN ACT
1 Regulating the leasing of employees; providing for licensing <--
2 REGISTRATION of professional employer organizations, for <--
3 unemployment and workers' compensation for leased employees,
4 for responsibilities of professional employer organizations
5 and for criminal penalties and remedies; and imposing powers
6 and duties upon the Department of Labor and Industry.
7 TABLE OF CONTENTS
8 Section 1. Short title.
9 Section 2. Legislative intent.
10 Section 3. Definitions.
11 Section 4. License REGISTRATION required. <--
12 Section 5. Application for license REGISTRATION. <--
13 Section 6. Tax clearance.
14 Section 7. Fees; issuance, denial and revocation of license <--
15 REGISTRATION. <--
16 Section 8. Determinations and appeals.
17 Section 9. Unemployment compensation.
18 Section 10. Workers' compensation.
1 Section 11. Other responsibilities.
2 Section 12. Criminal and civil penalties; injunctions.
3 Section 13. Wages.
4 Section 14. Department.
5 Section 15. Other laws.
6 Section 16. Collective bargaining protections.
7 Section 17. Applicability.
8 Section 18. Effective date.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. Short title.
12 This act shall be known and may be cited as the Professional
13 Employer Organization Act.
14 Section 2. Legislative intent.
15 The General Assembly finds and declares that it is necessary
16 to do all of the following:
17 (1) Safeguard the rights of employees participating in a
18 professional employer arrangement.
19 (2) Preserve the rights of employees with regard to
20 unemployment compensation and workers' compensation.
21 (3) Protect the interest of the Commonwealth in the
22 financial security of the unemployment compensation and
23 workers' compensation systems.
24 (4) Recognize the professional employer organization as
25 an employer.
26 (5) Preserve the integrity of the collective bargaining
27 process by prohibiting the use of professional employer
28 arrangements to interfere with the right of any employee or
29 worker to organize and/or freely choose unions or
30 associations which may represent them for the purpose of
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1 collective bargaining.
2 Section 3. Definitions.
3 The following words and phrases when used in this act shall
4 have the meanings given to them in this section unless the
5 context clearly indicates otherwise:
6 "Application." An application for a license REGISTRATION <--
7 under this act.
8 "Client." A person that enters into a professional employer
9 arrangement with a professional employer organization.
10 "Department." The Department of Labor and Industry of the
11 Commonwealth.
12 "Gross payroll." Remuneration paid by a professional
13 employer organization, during the four completed calendar
14 quarters immediately preceding the filing of an application for
15 a license REGISTRATION, to employees assigned to clients to <--
16 perform services covered by section 4(a).
17 "Inside director." For a professional employer organization
18 organized as a corporation, an individual who is both a director
19 of the corporation and any of the following:
20 (1) An employee or agent of or consultant to the
21 corporation.
22 (2) An individual who is involved in the daily
23 management of the corporation.
24 (3) A spouse, parent or child of an individual listed in
25 paragraph (1) or (2).
26 "License." A new license or renewal license. A new license <--
27 shall include a license for which a renewal application is filed <--
28 late.
29 "Person." An individual, partnership, corporation, company,
30 firm, association, organization, joint venture, limited
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1 liability company or any type of business entity.
2 "Professional employer arrangement." An arrangement between <--
3 a professional employer organization and a client under which
4 the professional employer organization agrees to hire one or
5 more members of the client's work force and agrees to assign one
6 or more of those individuals to that client to perform services
7 for the client on a long-term, ongoing basis. The term includes,
8 but is not limited to: subsequent long-term, ongoing assignments
9 to a client by a professional employer organization of
10 individuals not previously employed by the client; long-term,
11 ongoing assignments to a client, that is a newly formed
12 business, by a professional employer organization of individuals
13 to constitute that client's work force, or distinct portion of
14 that client's work force; and long-term, ongoing assignments to
15 a client by the professional employer organization of
16 individuals to constitute that client's work force, or distinct
17 portion of that work force, at a newly instituted facility. The
18 term does not include any of the following:
19 (1) An arrangement in which a person that does not make
20 its services as a professional employer organization
21 available to the public and whose principal business activity
22 is not entering into professional employer arrangements
23 shares employees with a commonly owned company within the
24 meaning of section 414(b) and (c) of the Internal Revenue
25 Code of 1986 (Public Law 99-514, 26 U.S.C. § 414(b) and (c)).
26 (2) A temporary help arrangement in which a person
27 assigns one or more employees to another person, to support
28 or supplement the other person's work force in special,
29 temporary work situations, such as employee absences, skill
30 shortages, seasonal workloads and special assignments.
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1 (3) A vendor arrangement in which:
2 (i) a person provides a product or service to
3 another person;
4 (ii) the person providing the product or service is
5 fully responsible for it; and
6 (iii) providing the product or service to the other
7 person, rather than assigning one or more employees to
8 the other person to constitute some or all of the other
9 person's work force, is the purpose of the arrangement.
10 "PROFESSIONAL EMPLOYER ARRANGEMENT." AN ARRANGEMENT BETWEEN <--
11 A PROFESSIONAL EMPLOYER ORGANIZATION AND A CLIENT UNDER WHICH
12 THE PROFESSIONAL EMPLOYER ORGANIZATION AGREES TO EMPLOY
13 INDIVIDUALS WHO PERFORM SERVICES FOR THE CLIENT ON A LONG-TERM,
14 CONTINUING BASIS AND WHERE SUCH INDIVIDUALS CONSTITUTE 25% OR
15 MORE OF THE EMPLOYEES AT A CLIENT'S WORKSITE. IN DETERMINING
16 WHETHER A PROFESSIONAL EMPLOYER ORGANIZATION EMPLOYS 25% OR MORE
17 OF THE EMPLOYEES AT THE CLIENT'S WORKSITE, ANY INDIVIDUALS
18 EMPLOYED UNDER THE ARRANGEMENT AFTER THE INITIAL TRANSFER OF
19 EMPLOYEES OF THE CLIENT TO THE PROFESSIONAL EMPLOYER
20 ORGANIZATION SHALL BE COUNTED.
21 "Professional employer organization." A person that enters
22 into a professional employer arrangement with a client. The term
23 includes an applicant for a license REGISTRATION. <--
24 "REGISTRATION." A NEW REGISTRATION OR RENEWAL REGISTRATION. <--
25 A NEW REGISTRATION SHALL INCLUDE REGISTRATION FOR WHICH A
26 RENEWAL APPLICATION IS FILED LATE.
27 "Responsible person." An individual who:
28 (1) is the proprietor of a sole proprietorship;
29 (2) is a general partner in a partnership;
30 (3) is a shareholder who owns at least 15% of the voting
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1 shares of a corporation or who is an inside director or <--
2 officer; or SHARES OF A CORPORATION; <--
3 (4) IS AN INSIDE DIRECTOR OR OFFICER OF A CORPORATION;
4 OR
5 (4) (5) has the authority to establish and direct the <--
6 policies or management of the organization.
7 "Secretary." The Secretary of Labor and Industry of the
8 Commonwealth.
9 "Study period." The period from January 1, 2001, through
10 December 31, 2003.
11 "Tax Reform Code." The act of March 4, 1971 (P.L.6, No.2),
12 known as the Tax Reform Code of 1971.
13 "Unemployment Compensation Law." The act of December 5, 1936
14 (2nd Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment
15 Compensation Law.
16 "Workers' Compensation Act." The act of June 2, 1915
17 (P.L.736, No.338), known as the Workers' Compensation Act.
18 Section 4. License REGISTRATION required. <--
19 (a) Unlicensed UNREGISTERED operation prohibited.--A <--
20 professional employer organization may not engage in a
21 professional employer arrangement without a license BEING <--
22 REGISTERED if an employee is assigned to the client to do any of
23 the following:
24 (1) Perform services in this Commonwealth for the
25 client. This paragraph does not include services which are
26 isolated, transitory or incidental to services performed
27 outside this Commonwealth.
28 (2) Perform services for which the client's base of
29 operations is located in this Commonwealth.
30 (b) Term of license REGISTRATION.--Except as otherwise <--
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1 prescribed by the department, a license THE REGISTRATION shall <--
2 be valid for two years unless revoked.
3 (c) Transfer or assignment prohibited.-- A license <--
4 REGISTRATION is a privilege that is not transferable or <--
5 assignable.
6 Section 5. Application for license REGISTRATION. <--
7 An application for a license REGISTRATION must include all <--
8 information and documentation required by the department,
9 including information on the professional employer
10 organization's ownership, operations in other states, and past
11 and present compliance with applicable laws. The application
12 must be made in the manner prescribed by the department.
13 Section 6. Tax clearance.
14 (a) Waiver of confidentiality.--An application constitutes a
15 waiver of confidentiality with respect to the department for tax
16 information in the possession of the Department of Revenue or
17 the Office of Attorney General, regardless of the source and a
18 consent to the providing of the information to the department.
19 (b) Review.--Upon receipt of an application, the Department
20 of Revenue and the Office of Attorney General shall provide
21 information regarding the professional employer organization's
22 tax status to the department.
23 Section 7. Fees; issuance, denial and revocation of license <--
24 REGISTRATION. <--
25 (a) Issuance.--The department may issue a license THE <--
26 REGISTRATION to a professional employer organization only if
27 there is compliance with all of the following:
28 (1) The professional employer organization must pay to
29 the department a nonrefundable fee in accordance with the
30 following:
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1 (i) If the professional employer organization has a
2 gross payroll of less than $250,000, a new license <--
3 REGISTRATION fee of $125 or a renewal license <--
4 REGISTRATION fee of $62.50. <--
5 (ii) If the professional employer organization has a
6 gross payroll of not less than $250,000 and not more than
7 $500,000, a new license REGISTRATION fee of $225 or a <--
8 renewal license REGISTRATION fee of $112.50. <--
9 (iii) If the professional employer organization has
10 a gross payroll of more than $500,000 but not more than
11 $1,000,000, a new license REGISTRATION fee of $337.50 or <--
12 a renewal license REGISTRATION fee of $168.75. <--
13 (iv) If the professional employer organization has a
14 gross payroll of more than $1,000,000 but not more than
15 $2,500,000, a new license REGISTRATION fee of $475 or a <--
16 renewal license REGISTRATION fee of $237.50. <--
17 (v) If the professional employer organization has a
18 gross payroll of more than $2,500,000 but not more than
19 $5,000,000, a new license REGISTRATION fee of $612.50 or <--
20 a renewal license REGISTRATION fee of $306.25. <--
21 (vi) If the professional employer organization has a
22 gross payroll of more than $5,000,000 but not more than
23 $7,500,000, a new license REGISTRATION fee of $750 or a <--
24 renewal license REGISTRATION fee of $375. <--
25 (vii) If the professional employer organization has
26 a gross payroll of more than $7,500,000 but not more than
27 $10,000,000, a new license REGISTRATION fee of $887.50 or <--
28 a renewal license REGISTRATION fee of $443.75. <--
29 (viii) If the professional employer organization has
30 a gross payroll of more than $10,000,000, a new license <--
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1 REGISTRATION fee of $1,000 or a renewal license <--
2 REGISTRATION fee of $500. <--
3 (2) The professional employer organization must provide
4 proof, in a manner satisfactory to the department, of
5 workers' compensation insurance coverage for existing clients
6 under section 10.
7 (3) The application and all required documents must be
8 complete and accurate and meet the requirements of this act.
9 (4) The professional employer organization must meet all
10 requirements of sections 5 and 6 and this subsection.
11 (5) All fees must be paid, all reports filed and all
12 penalties paid or subject to a deferred payment plan approved
13 by the department.
14 (6) All tax returns due to the Commonwealth must be
15 filed.
16 (7) All taxes, interest and penalties owed to the
17 Commonwealth must be:
18 (i) paid;
19 (ii) subject to a deferred payment plan approved by
20 the department COMMONWEALTH; or <--
21 (iii) under appeal unless the applicable statute
22 requires the payment of taxes while an appeal is pending.
23 (b) Denial or revocation.--The department may deny an
24 application for a license or revoke a license REGISTRATION for <--
25 good cause associated with the legislative intent of this act or
26 if the professional employer organization or a responsible
27 person does any of the following:
28 (1) Violates this act or a regulation or order under
29 this act.
30 (2) Fails to provide a written response to a written
19990H1314B3750 - 9 -
1 inquiry from the department within 30 days from the date of
2 receipt of the inquiry.
3 (3) Makes a misrepresentation of material fact or fails
4 to disclose a material fact in any application, document or
5 communication under this act.
6 (4) Obtains or attempts to obtain a license REGISTRATION <--
7 by fraud or bribery.
8 (5) Was sentenced for a Federal or State offense
9 involving dishonesty or fraud or for an offense under the Tax
10 Reform Code, the Unemployment Compensation Law, section 305
11 of the Workers' Compensation Act or this act.
12 (6) Defaults on a deferred payment plan under subsection
13 (a)(5) or (7).
14 (c) Additional criteria for denial of license REGISTRATION <--
15 application.--
16 (1) In addition to criteria delineated in subsection
17 (b), the department may deny an application for a license if: <--
18 (i) The professional employer organization owes
19 taxes, interest or penalties to any state.
20 (ii) A responsible person is or was a responsible
21 person in another professional employer organization and
22 the other professional employer organization owes taxes,
23 interest or penalties to any state.
24 (2) Paragraph (1) shall not apply to taxes that are:
25 (i) subject to a deferred payment plan approved by
26 the taxing agency; or
27 (ii) subject to a timely administrative or judicial
28 appeal, unless the applicable statute requires the
29 payment of taxes while an appeal is pending.
30 (d) Subsequent information.--The department may revoke a
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1 license REGISTRATION based on information which would have been <--
2 a basis to deny the application if the department had known the
3 information at the time the license REGISTRATION was issued. <--
4 (e) Termination of professional employer arrangements.--
5 (1) A professional employer organization that ceases to
6 be licensed REGISTERED shall do all of the following: <--
7 (i) Terminate professional employer arrangements
8 within 45 days.
9 (ii) Provide written notice to clients within five
10 business days that it is no longer licensed REGISTERED. <--
11 (2) The professional employer organization shall
12 immediately provide proof to the department of the notice to
13 clients required by paragraph (1)(ii). Absent such proof, the
14 department may notify the clients that the professional
15 employer organization is no longer licensed REGISTERED. <--
16 (3) During the 45 days specified in paragraph (1), the
17 professional employer organization:
18 (i) shall notify clients of the requirements of
19 section 305(a)(1) of the Workers'Compensation Act and
20 assist clients in obtaining replacement workers'
21 compensation insurance coverage;
22 (ii) shall assist clients in obtaining replacement
23 benefit plans, if any;
24 (iii) shall notify each employee that the employee
25 is being terminated from employment with the professional
26 employer organization; and
27 (iv) may not commence professional employer
28 arrangements with new clients.
29 (4) The 45 days and five business days specified in
30 paragraph (1) shall be calculated as prescribed by the
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1 department.
2 (f) Limitation.--If the department denies an application or
3 revokes a license REGISTRATION under subsection (b), the <--
4 organization may not reapply for a license REGISTRATION for one <--
5 year. The one-year period shall be calculated as prescribed by
6 the department.
7 Section 8. Determinations and appeals.
8 (a) Determinations.--
9 (1) A determination denying an application, revoking a
10 license REGISTRATION or charging a penalty, and any decision <--
11 on an appeal, must be sent by certified mail to the
12 professional employer organization at the address designated
13 in the application and must designate the effective date of
14 the determination.
15 (2) The department shall grant or deny a completed
16 application for a new license REGISTRATION within 90 days <--
17 after it is filed, except that the department may withhold a
18 determination until the requirements of section 7(a)(1) and
19 (2) are met.
20 (b) Appeals.--If a professional employer organization has an
21 application for a license denied or a license REGISTRATION <--
22 revoked, or is charged a penalty, the organization may appeal
23 the determination to the secretary. The appeal must specifically
24 set forth its factual and legal arguments on which it is based.
25 Arguments not contained in the appeal shall be waived. The
26 appeal must be filed within 30 days after the date of the
27 determination or the department's action shall be final.
28 (c) Supersedeas.--An appeal of a determination by the
29 department denying an application for a renewal license <--
30 REGISTRATION under section 7(b) or (c), revoking a license <--
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1 REGISTRATION, or charging a penalty shall operate as a <--
2 supersedeas while the appeal under subsection (b) is pending.
3 The effective date of a denial, revocation or penalty subject to
4 this subsection shall not be prior to the expiration of the
5 appeal period under subsection (b).
6 (d) Burden of proof.--
7 (1) Except as set forth in paragraph (2), in an appeal
8 of a license REGISTRATION denial or revocation, the burden of <--
9 proof shall be on the professional employer organization.
10 (2) In an appeal of a license REGISTRATION denial or <--
11 revocation under section 7(b), the burden of proof shall be
12 on the department.
13 (3) In an appeal of a determination by the department
14 charging a penalty under section 12(c), the burden of proof
15 shall be on the department.
16 (e) Administrative agency law.--Proceedings under this
17 section are subject to 2 Pa.C.S. Ch. 5 Subch. A (relating to
18 practice and procedure of Commonwealth agencies) and Ch. 7
19 Subch. A (relating to judicial review of Commonwealth agency
20 action).
21 Section 9. Unemployment compensation.
22 (a) Employer.--For purposes of the Unemployment Compensation
23 Law.--
24 (1) Except as otherwise provided in this section, the
25 professional employer organization shall be the employer of
26 employees assigned to the client.
27 (2) The client shall be the employer of employees
28 assigned to it by the professional employer organization if
29 any of the following conditions exist:
30 (i) The professional employer organization is not
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1 licensed REGISTERED as required by this act. <--
2 (ii) All of the following apply:
3 (A) The professional employer organization is
4 owned or controlled by or owns or controls the
5 client, either directly or indirectly, by legally
6 enforceable means or otherwise, or the professional
7 employer organization and the client are owned or
8 controlled, either directly or indirectly, by legally
9 enforceable means or otherwise, by the same person or
10 persons.
11 (B) All of the professional employer
12 organization's clients are covered by clause (A) or
13 the professional employer organization does not make
14 its services as a professional employer organization
15 available to the public.
16 (iii) The professional employer organization fails
17 to comply with the requirements of subsection (b) with
18 respect to a client.
19 (b) Quarterly reports.--
20 (1) If a professional employer organization is the
21 employer of employees assigned to the client for purposes of
22 the Unemployment Compensation Law, the Employer's Quarterly
23 Report of Wages Paid to Each Employee, Form UC-2A, filed
24 under the Unemployment Compensation Law shall include, in
25 addition to information normally required, the following
26 information and other information required by the department:
27 (i) For each client, the report shall contain all of
28 the following information:
29 (A) Name.
30 (B) Federal employer identification number.
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1 (C) Pennsylvania unemployment compensation
2 account number.
3 (ii) The names, Social Security account numbers,
4 wages, credit weeks and other data of employees assigned
5 to clients shall be listed separately for each client.
6 (iii) For calendar quarters in the study period, the
7 report shall indicate, for each client, whether the
8 client is covered by subsection (g)(9) and whether the
9 client paid wages prior to the study period. If this
10 information is unknown to the professional employer
11 organization, the client shall provide this information
12 at the request of the professional employer organization;
13 and the professional employer organization shall include
14 in the report the information provided by the client.
15 (2) Except as set forth in paragraph (3), information
16 provided to the department by a professional employer
17 organization under this subsection shall be confidential to
18 the same extent as other unemployment compensation
19 information.
20 (3) The information in a quarterly report shall be made
21 available to an approved workers' compensation insurance
22 rating organization upon request, for use as authorized by
23 law, under confidentiality restrictions established by the
24 department.
25 (c) Limitations.--
26 (1) Notwithstanding section 4(l)(6) of the Unemployment
27 Compensation Law, services performed by an employee assigned
28 to a client by a professional employer organization shall not
29 constitute employment for purposes of the Unemployment
30 Compensation Law if:
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1 (i) the employee is the client;
2 (ii) the employee is a general partner in the
3 client; or
4 (iii) the services would not constitute employment
5 if performed in the employ of the client.
6 (2) Notwithstanding section 4(x)(6) of the Unemployment
7 Compensation Law, remuneration paid by a professional
8 employer organization to an employee assigned to a client
9 shall not constitute wages for purposes of the Unemployment
10 Compensation Law if:
11 (i) the employee is the client;
12 (ii) the employee is a general partner in the
13 client; or
14 (iii) the remuneration would not constitute wages if
15 the client was the employer of the employee for purposes
16 of the Unemployment Compensation Law and paid the
17 remuneration.
18 (3) If an employee assigned to a client is a corporate
19 officer of the client, the employee's eligibility for
20 benefits under section 402(h) of the Unemployment
21 Compensation Law shall be determined by the employee's
22 relationship to the client.
23 (d) Client liability.--If the professional employer
24 organization is the employer of employees assigned to a client
25 for purposes of the Unemployment Compensation Law and does not
26 pay unemployment compensation contributions, interest or
27 penalties in full and when due on wages paid to employees
28 assigned to the client, the client shall also be liable for the
29 unpaid, past due contributions, interest and penalties and be
30 subject to all enforcement and collection provisions of the
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1 Unemployment Compensation Law. This subsection shall not apply
2 to liability under subsection (e)(4).
3 (e) Determinations and liability.--
4 (1) For each client of a professional employer
5 organization, the department shall determine all of the
6 following:
7 (i) The amount of contributions payable by the
8 professional employer organization on wages paid by it
9 during the study period to employees assigned to the
10 client. For purposes of this subparagraph, the
11 professional employer organization's contribution rate
12 shall be established without regard to section 301(a)(2)
13 of the Unemployment Compensation Law.
14 (ii) The amount of contributions that would have
15 been payable by the client on wages paid by the
16 professional employer organization during the study
17 period to employees assigned to the client if the client
18 had been the employer of the employees for purposes of
19 the Unemployment Compensation Law and paid the wages. A
20 determination under this subparagraph shall be made in
21 the following manner:
22 (A) The department shall establish a
23 contribution rate for the client in accordance with
24 paragraph (2) for each year in the study period
25 during which the professional employer organization
26 paid wages to employees assigned to the client.
27 (B) The contribution rates established under
28 clause (A) shall be multiplied by the amount of wages
29 paid by the professional employer organization during
30 each year of the study period, respectively, to
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1 employees assigned to the client, to the extent the
2 wages would be taxable under section 4(x)(1) of the
3 Unemployment Compensation Law if the client had been
4 the employer of the employees for purposes of the
5 Unemployment Compensation Law and paid the wages.
6 (C) The sum of the calculations for each year
7 under clause (B) shall constitute the amount
8 determined for the client under this subparagraph.
9 (2) The department shall establish a contribution rate
10 for a client for purposes of paragraph (1)(ii) in accordance
11 with the following:
12 (i) The contribution rate shall be determined
13 pursuant to the provisions of the Unemployment
14 Compensation Law applicable to the client.
15 (ii) The client's record of unemployment
16 compensation experience shall be modified as follows:
17 (A) Contributions paid by the client shall
18 include contributions which would have been payable
19 by the client on wages paid by the professional
20 employer organization during the study period to
21 employees assigned to the client if the client had
22 been the employer of the employees for purposes of
23 the Unemployment Compensation Law and paid the wages.
24 (B) Wages paid by the client shall include wages
25 paid by the professional employer organization during
26 the study period to employees assigned to the client.
27 The wages paid by the professional employer
28 organization shall be considered taxable wages paid
29 by the client to the extent they would be taxable
30 under section 4(x)(1) of the Unemployment
19990H1314B3750 - 18 -
1 Compensation Law if the client had been the employer
2 of the employees for purposes of the Unemployment
3 Compensation Law and paid the wages.
4 (C) The client's benefit charges shall include
5 benefit charges based on wages paid by the
6 professional employer organization during the study
7 period to employees assigned to the client.
8 (3) The determinations required under paragraphs (1) and
9 (2) shall be made after the study period has ended.
10 (4) For each professional employer organization, the
11 department shall calculate the sum of the amounts determined
12 under paragraph (1)(i) and the sum of the amounts determined
13 under paragraph (1)(ii). If the sum of the amounts determined
14 under paragraph (1)(ii) exceeds the sum of the amounts
15 determined under paragraph (1)(i), the professional employer
16 organization shall be liable to pay into the Unemployment
17 Compensation Fund the difference between the sums to the
18 extent the difference exceeds $1,500. The professional
19 employer organization's liability under this paragraph shall
20 be a liability for contributions for purposes of the
21 Unemployment Compensation Law in accordance with all of the
22 following:
23 (i) It shall be a liability in addition to any other
24 liability under the Unemployment Compensation Law.
25 (ii) It shall be assessed, subject to reassessment,
26 and due as provided in section 304 of the Unemployment
27 Compensation Law.
28 (iii) It shall be subject to all enforcement and
29 collection provisions of the Unemployment Compensation
30 Law.
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1 (iv) For purposes of sections 301.1(c)(1) and 309.2
2 of the Unemployment Compensation Law, it shall be a
3 liability for contributions with respect to wages paid in
4 the last calendar quarter of the study period.
5 (v) It shall not be a liability for contributions
6 for purposes of section 301.1(b) of the Unemployment
7 Compensation Law.
8 (f) Financial impact study.--
9 (1) The department shall study the following to evaluate
10 the financial impact of professional employer arrangements on
11 the Unemployment Compensation Fund for the study period:
12 (i) Employers that cease to pay wages, in whole or
13 in part, and enter into professional employer
14 arrangements under which the professional employer
15 organization pays wages during the study period to
16 employees assigned to them as clients, including the
17 reserve account balances of such employers and the
18 diversion of benefit charges to the State adjustment
19 factor.
20 (ii) The effect of professional employer
21 arrangements on contributions payable by former clients,
22 and clients who become the employer of employees assigned
23 to them by professional employer organizations for
24 purposes of the Unemployment Compensation Law, on wages
25 paid during the study period, including the effect of the
26 arrangement on such a client's eligibility for a
27 calculated contribution rate and the effect of excluding
28 the employment experience attributable to the period of
29 the arrangement, or attributable to the period for which
30 the professional employer organization was the employer
19990H1314B3750 - 20 -
1 for purposes of the Unemployment Compensation Law, from
2 the calculation of such a client's contribution rate.
3 (iii) Professional employer organizations that cease
4 to pay wages during the study period, including the
5 reserve account balances of such organizations, the
6 diversion of benefit charges to the State adjustment
7 factor and unpaid unemployment compensation liabilities.
8 (iv) Situations where a professional employer
9 organization ceases to pay wages during the study period
10 to employees assigned to a client because the
11 professional employer arrangement is terminated, but
12 continues to pay wages to employees assigned to other
13 clients; where the client does not enter into a new
14 professional employer arrangement; and where the client
15 does not pay wages after the arrangement is terminated.
16 Data to be studied under this subparagraph includes that
17 portion of the professional employer organization's
18 reserve account balance attributable to the client,
19 calculated as though the client had been the employer of
20 employees assigned to it by the professional employer
21 organization for purposes of the Unemployment
22 Compensation Law and benefit charges attributable to the
23 client.
24 (2) After the study period has ended, the department
25 shall submit a final report on the findings of the study to
26 the Governor and the General Assembly, including information
27 about the determinations made under subsection (e). A report
28 under this paragraph shall not contain information identified
29 with a named client or professional employer organization.
30 (g) Applicability.--
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1 (1) Subsection (a) shall apply to services for which
2 wages are paid from January 1, 2001, through December 31,
3 2004.
4 (2) Subject to paragraph (1), subsection (a)(2)(iii)
5 shall apply to wages paid and services for which wages are
6 paid during the earliest calendar quarter for which the
7 professional employer organization fails to comply with
8 subsection (b) and subsequent calendar quarters.
9 (3) Subsection (b) shall apply to calendar quarters
10 after December 31, 2000.
11 (4) Subsection (c)(1) shall apply to services performed
12 after the effective date of subsection (c).
13 (5) Subsection (c)(2) shall apply to remuneration for
14 services performed after the effective date of subsection
15 (c).
16 (6) Subsection (c)(3) shall apply to weeks of
17 unemployment commencing after the effective date of
18 subsection (c).
19 (7) Subsection (d) shall apply to contributions,
20 interest and penalties on wages paid after December 31, 2000.
21 (8) Subsections (e) and (f) shall not apply to a
22 professional employer organization to the extent the
23 organization is not the employer of employees assigned to
24 clients for purposes of the Unemployment Compensation Law.
25 (9) Subsections (e) and (f)(1)(i), (ii) and (iv) shall
26 not apply to a client if any of the following exist:
27 (i) A professional employer organization paid wages
28 prior to the study period to employees assigned to the
29 client.
30 (ii) In the first calendar year in which the
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1 professional employer organization paid wages to
2 employees assigned to the client, the client paid wages
3 prior to payment of wages by the professional employer
4 organization and the client has not filed unemployment
5 compensation reports with respect to the wages it paid.
6 (h) Definitions.--Subject to section 3 and unless the
7 context clearly indicates otherwise, words and phrases used in
8 this section shall have the meanings given to them in the
9 Unemployment Compensation Law.
10 Section 10. Workers' compensation.
11 (a) Rights and duties.--Except as otherwise provided in this
12 section, for purposes of the Workers' Compensation Act, the
13 professional employer organization shall be an employer of
14 employees assigned to the client; and all of the following
15 provisions shall be applicable:
16 (1) The professional employer organization shall
17 maintain workers' compensation insurance coverage for
18 employees assigned to the client, and if coverage is so
19 provided, the client shall be deemed to have met its
20 obligation under section 305 of the Workers' Compensation Act
21 for those employees. The professional employer organization
22 shall provide the client with a certificate of insurance
23 evidencing workers' compensation coverage annually and name
24 the client as a certificate holder.
25 (2) The professional employer organization shall pay
26 workers' compensation benefits in full and when due to
27 employees assigned to the client.
28 (3) Workers' compensation premiums for a professional
29 employer organization shall be based upon rules filed by an
30 approved rating organization under the Workers' Compensation
19990H1314B3750 - 23 -
1 Act and rates approved by the Insurance Department.
2 (4) Workers' compensation insurance shall be obtained
3 from an insurance carrier licensed to write workers'
4 compensation insurance policies in this Commonwealth.
5 (5) The professional employer organization and the
6 client shall be jointly entitled to the exclusive remedy
7 provisions of section 303 of the Workers' Compensation Act.
8 (6) If the professional employer organization does not
9 meet its obligations and duties as an employer under the
10 Workers' Compensation Act, the client shall also be liable
11 for all the obligations and duties of an employer under the
12 Workers' Compensation Act and also for unpaid, past due
13 workers' compensation benefits owed to employees assigned to
14 the client by the professional employer organization. The
15 amount of benefits the employee may collect in the aggregate
16 may not exceed the amount of benefits which are unpaid and
17 past due.
18 (7) Notice to the client or the professional employer
19 organization of an injury shall constitute notice to both
20 under Article III of the Workers' Compensation Act.
21 (b) Client.--The client shall be the employer of employees
22 assigned to it for purposes of the Workers' Compensation Act and
23 the professional employer organization may not use the exclusive
24 remedy provisions of section 303 of the Workers' Compensation
25 Act if any of the following paragraphs apply:
26 (1) The professional employer organization is not
27 licensed REGISTERED as required by this act. <--
28 (2) All of the following subparagraphs apply:
29 (i) The professional employer organization is owned
30 or controlled by or owns or controls the client, either
19990H1314B3750 - 24 -
1 directly or indirectly, by legally enforceable means or
2 otherwise, or the professional employer organization and
3 the client are owned or controlled, either directly or
4 indirectly, by legally enforceable means or otherwise, by
5 the same person or persons.
6 (ii) All of the professional employer organization's
7 clients are covered by subparagraph (i) or the
8 professional employer organization does not make its
9 services as a professional employer organization
10 available to the public.
11 (c) Applicability.--This section shall apply to injuries
12 suffered on or after the effective date of this section.
13 (d) Definitions.--Subject to section 3 and unless the
14 context clearly indicates otherwise, words and phrases used in
15 this section shall have the meanings given to them in the
16 Workers' Compensation Act.
17 Section 11. Other responsibilities.
18 (a) Taxes.--The professional employer organization shall
19 timely pay all payroll-related taxes and payroll withholding
20 taxes, on wages paid, to the Commonwealth and its political <--
21 subdivisions with respect to employees assigned to the client
22 and shall timely file all corresponding tax reports. The client
23 shall timely pay the taxes and timely file the reports if the
24 client is the employer of the employees for purposes of the
25 taxing statute.
26 (b) Report.--
27 (1) A professional employer organization shall file a
28 quarterly report with the department, by the last day of the
29 month immediately following the calendar quarter. The report
30 shall:
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1 (i) identify all of the following:
2 (A) names and addresses of clients to whom
3 employees were assigned during the quarter;
4 (B) names and addresses of new clients with whom
5 professional employer arrangements commenced during
6 the quarter; and
7 (C) names and addresses of clients with whom
8 professional employer arrangements ended during the
9 quarter;
10 (ii) provide all of the following for each client:
11 (A) the client's Federal employer identification
12 number and Pennsylvania unemployment compensation
13 account number;
14 (B) the address of each worksite where employees
15 are assigned to the client, the number of assigned
16 employees at each worksite and the standard
17 industrial classification code for each worksite; and
18 (C) the name of the workers' compensation
19 insurance carrier insuring employees assigned to the
20 client and the workers' compensation policy number;
21 (iii) contain other information required by the
22 department; and
23 (iv) be made in the manner prescribed by the
24 department and shall be accompanied by proof, in a manner
25 satisfactory to the department, of workers' compensation
26 insurance coverage with respect to all new clients, as
27 required under section 10.
28 (2) The department shall not be required to disclose the
29 contents of the report except for purposes of this act or
30 other laws of this Commonwealth.
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1 (c) Operation under other name.--A professional employer
2 organization may not conduct business in this Commonwealth under
3 any name other than that specified in its application without
4 the written consent of the department.
5 (d) Change in information.--A professional employer
6 organization shall notify the department in writing of a change
7 in the information contained in its application or other
8 document within 30 days after the change occurs.
9 (e) Notice to employees.--
10 (1) A professional employer organization shall provide
11 written information to employees assigned to clients as
12 required by the department, including the following:
13 (i) If the professional employer organization does
14 not meet all of its obligations and duties as an employer
15 under the Workers' Compensation Act, the client shall
16 also be liable for:
17 (A) all the obligations and duties of an
18 employer under the Workers' Compensation Act; and
19 (B) unpaid, past due workers' compensation
20 benefits under section 10(a)(6).
21 (ii) If the professional employer organization does
22 not pay wages in full and when due, the client shall also
23 be liable for unpaid, past due wages under section 13(b).
24 (iii) The name and address of the workers'
25 compensation insurance carrier insuring the employee.
26 (2) The information required under paragraph (1) shall
27 be provided to an employee at the time of hire and thereafter
28 at intervals not exceeding six months. An employee shall be
29 notified immediately of a change in the information.
30 (f) Notice to client.--Prior to commencing a professional
19990H1314B3750 - 27 -
1 employer arrangement, a professional employer organization shall
2 provide all of the following information in writing to the
3 client:
4 (1) If the professional employer organization does not
5 meet all of its obligations and duties as an employer under
6 the Workers' Compensation Act, the client shall also be
7 liable for:
8 (i) all the obligations and duties of an employer
9 under the Workers' Compensation Act; and
10 (ii) unpaid, past due workers' compensation benefits
11 owed to employees assigned to the client under section
12 10(a)(6).
13 (2) The circumstances under which the client shall be
14 the employer for purposes of the Workers' Compensation Act
15 under section 10(b).
16 (3) If the professional employer organization does not
17 pay unemployment compensation contributions, interest and
18 penalties in full and when due on wages paid to employees
19 assigned to the client, the client shall also be liable for
20 the unpaid, past due contributions, interest and penalties
21 under section 9(d).
22 (4) The circumstances under which the client shall be
23 the employer for purposes of the Unemployment Compensation
24 Law under section 9(a)(2).
25 (5) If the professional employer organization does not
26 pay wages owed to employees assigned to the client in full
27 and when due, the client shall also be liable for the unpaid,
28 past due wages under section 13(b).
29 (g) Notice regarding act.--A professional employer
30 organization shall post at a conspicuous location on its
19990H1314B3750 - 28 -
1 premises a placard or sign, in a form approved by the
2 department, containing the following information:
3 (1) A statement that the entity is a professional
4 employer organization under this act.
5 (2) A summary of the key provisions of this act, as
6 determined by the department.
7 (3) The telephone number of the appropriate office of
8 the department to which questions concerning this act and its
9 application should be directed.
10 (H) APPLICABILITY.--SUBSECTION (A) SHALL APPLY TO <--
11 REMUNERATION PAID ON OR AFTER THE EFFECTIVE DATE OF SUBSECTION
12 (A). SUBSECTION (B) SHALL APPLY TO CALENDAR QUARTERS AFTER
13 DECEMBER 31, 2000.
14 Section 12. Criminal and civil penalties; injunctions.
15 (a) Operation without a license BEING REGISTERED.-- <--
16 (1) A professional employer organization that violates
17 section 4(a) commits a misdemeanor of the third degree. Each
18 day of proscribed conduct shall constitute a separate
19 offense.
20 (2) A person, other than a professional employer
21 organization, that knowingly authorizes, implements,
22 administers, supervises or participates in a professional
23 employer arrangement for which a license REGISTRATION is <--
24 required, on behalf of an unlicensed UNREGISTERED <--
25 professional employer organization, commits a misdemeanor of
26 the third degree. Each day of proscribed conduct shall
27 constitute a separate offense.
28 (b) Misrepresentation or nondisclosure.--
29 (1) A professional employer organization that makes a
30 misrepresentation of material fact or fails to disclose a
19990H1314B3750 - 29 -
1 material fact in an application or other document or
2 communication under this act commits a misdemeanor of the
3 third degree.
4 (2) A person, other than a professional employer
5 organization, that knowingly makes a representation of
6 material fact or fails to disclose a material fact in an
7 application or other document or communication under this act
8 commits a misdemeanor of the third degree.
9 (c) Violations.--A professional employer organization that
10 violates this act shall be subject to a civil penalty of not
11 more than $1,000 per day for each violation.
12 (d) Injunction.--Upon petition by the department, a court of
13 competent jurisdiction may enjoin a professional employer
14 organization from violating this act.
15 Section 13. Wages.
16 (a) Professional employer organization.--The professional
17 employer organization shall be liable to pay wages owed to
18 employees assigned to the client in full and when due.
19 (b) Client.--If the professional employer organization does
20 not pay wages owed to employees under subsection (a), the client
21 shall also be liable for the unpaid, past due wages.
22 (c) Collection of wages.--Unpaid, past due wages owed to an
23 employee may be collected from the professional employer
24 organization under subsection (a), the client under subsection
25 (b), or both. The amount of wages the employee may collect in
26 the aggregate may not exceed the unpaid amount. It shall not be
27 necessary to pursue or exhaust legal remedies against one before
28 pursuing legal remedies against the other.
29 (d) Rights and liabilities.--Rights and liabilities under
30 this section shall exist in addition to other legal rights and
19990H1314B3750 - 30 -
1 liabilities with respect to wages.
2 (e) Applicability.--This section shall apply to wages which
3 become due on or after the effective date of this section.
4 (f) Definition.--As used in this section, the term "wages"
5 has the meaning given in section 2.1 of the act of July 14, 1961
6 (P.L.637, No.329), known as the Wage Payment and Collection Law.
7 Section 14. Department.
8 (a) Regulations.--The department shall promulgate
9 regulations to implement and administer this act. Within six
10 months from the effective date of this section, the department
11 shall submit notice of proposed rulemaking on these regulations
12 to the Independent Regulatory Review Commission, the appropriate
13 standing committees of each chamber of the General Assembly, and
14 the Legislative Reference Bureau.
15 (b) Guidelines.--The department shall adopt guidelines,
16 including guidelines regarding information on applications,
17 required documents, reports, appeals and the issuance of
18 licenses REGISTRATIONS. The guidelines shall remain in effect <--
19 until the earlier of:
20 (1) the effective date of the regulations promulgated
21 under subsection (a); or
22 (2) 18 months from the effective date of this section.
23 (c) General enforcement.--The department may conduct audits,
24 inspections and investigations as necessary to administer and
25 enforce this act. The books and records of a professional
26 employer organization and a client shall be available to the
27 department for inspection and copying at reasonable times. The
28 department may examine any individual under oath or affirmation
29 and issue subpoenas to compel the attendance of witnesses and
30 the production of documents.
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1 Section 15. Other laws.
2 This act does not exempt a client or a professional employer
3 organization from other Federal, State or local law. Rights,
4 responsibilities and liabilities conferred and imposed by this
5 act shall exist in addition to rights, responsibilities and
6 liabilities which otherwise exist, except where the result would
7 be inconsistent with this act.
8 Section 16. Collective bargaining protections.
9 (a) Interference prohibited.--Professional employer
10 arrangements shall not be established or otherwise utilized, in
11 whole or in part, to interfere with the right of any employee or
12 worker to organize and/or freely choose unions or associations
13 which represent them for the purpose of collective bargaining.
14 (b) Assignment prohibited.--A professional employer
15 organization shall not assign or reassign leased employees for
16 the purpose, in whole or in part, of interfering with the terms
17 and conditions of any existing collective bargaining agreement
18 or any effort on the part of any employee or worker to organize
19 and/or freely choose unions or associations which does or may
20 represent them for the purpose of collective bargaining.
21 Section 17. Applicability.
22 Unless this act provides for specific applicability, the
23 department may, by regulation, specify the applicability of any
24 provision of this act.
25 Section 18. Effective date.
26 This act shall take effect as follows:
27 (1) The following provisions shall take effect on
28 January 1, 2001:
29 (i) Section 4(a).
30 (ii) Section 9(a), (b), (d), (e) and (f).
19990H1314B3750 - 32 -
1 (iii) Section 11(a), (b) and (f)(3) and (4).
2 (2) The following provisions shall take effect in 60
3 days:
4 (i) Section 9(c).
5 (ii) Section 10.
6 (iii) Section 11(e) and (f)(1), (2) and (5).
7 (iv) Section 13.
8 (3) The remainder of this act shall take effect
9 immediately.
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