PRIOR PRINTER'S NO. 1508 PRINTER'S NO. 2624
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 AND RAMOS, APRIL 15, 1999
AS REPORTED FROM COMMITTEE ON LABOR RELATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, NOVEMBER 9, 1999
AN ACT
1 Regulating the leasing of employees; providing for licensing of
2 professional employer organizations, for unemployment and
3 workers' compensation for leased employees, for
4 responsibilities of professional employer organizations and
5 for criminal penalties and remedies; and imposing powers and
6 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 required.
12 Section 5. Application for license.
13 Section 6. Tax clearance.
14 Section 7. Fees; issuance, denial and revocation of license.
15 Section 8. Determinations and appeals.
16 Section 9. Unemployment compensation.
17 Section 10. Workers' compensation.
18 Section 11. Other responsibilities.
1 Section 12. Criminal and civil penalties; injunctions.
2 Section 13. Wages.
3 Section 14. Department.
4 Section 15. Other laws.
5 Section 16. Collective bargaining protections.
6 Section 17. Applicability.
7 Section 18. Effective date.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Short title.
11 This act shall be known and may be cited as the Professional
12 Employer Organization Act.
13 Section 2. Legislative intent.
14 The General Assembly finds and declares that it is necessary
15 to do all of the following:
16 (1) Safeguard the rights of employees participating in a
17 professional employer arrangement.
18 (2) Preserve the rights of employees with regard to
19 unemployment compensation and workers' compensation.
20 (3) Protect the interest of the Commonwealth in the
21 financial security of the unemployment compensation and
22 workers' compensation systems.
23 (4) Recognize the professional employer organization as
24 an employer.
25 (5) Preserve the integrity of the collective bargaining
26 process by prohibiting the use of professional employer
27 arrangements to interfere with the right of any employee or
28 worker to organize and/or freely choose unions or
29 associations which may represent them for the purpose of
30 collective bargaining.
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1 Section 3. Definitions.
2 The following words and phrases when used in this act shall
3 have the meanings given to them in this section unless the
4 context clearly indicates otherwise:
5 "Application." An application for a license under this act.
6 "Client." A person to whom one or more employees are <--
7 assigned by a professional employer organization under a
8 professional employer arrangement. THAT ENTERS INTO A <--
9 PROFESSIONAL EMPLOYER ARRANGEMENT WITH A PROFESSIONAL EMPLOYER
10 ORGANIZATION.
11 "Department." The Department of Labor and Industry of the
12 Commonwealth.
13 "Gross payroll." Remuneration paid by a professional
14 employer organization, during the four completed calendar
15 quarters immediately preceding the filing of an application for
16 a license, to employees assigned to clients to perform services
17 covered by section 4(a).
18 "Inside director." For a professional employer organization
19 organized as a corporation, an individual who is both a director
20 of the corporation and any of the following:
21 (1) An employee or agent of or consultant to the
22 corporation.
23 (2) An individual who is involved in the daily
24 management of the corporation.
25 (3) A spouse, parent or child of an individual listed in
26 paragraph (1) or (2).
27 "License." A new license or renewal license. A new license
28 shall include a license for which a renewal application is filed
29 late.
30 "Person." An individual, partnership, corporation, company,
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1 firm, association, organization, joint venture, limited
2 liability company or any type of business entity.
3 "Professional employer arrangement." An arrangement between <--
4 a professional employer organization and a client under which
5 the professional employer organization assigns one or more
6 employees to the client to perform services for the client on an
7 ongoing rather than temporary basis and the client obtains some
8 or all of its work force from the professional employer
9 organization. The term includes an arrangement occurring after a
10 transfer of some or all employees of the client to the
11 professional employer organization. The term does not include
12 "PROFESSIONAL EMPLOYER ARRANGEMENT." AN ARRANGEMENT BETWEEN <--
13 A PROFESSIONAL EMPLOYER ORGANIZATION AND A CLIENT UNDER WHICH
14 THE PROFESSIONAL EMPLOYER ORGANIZATION AGREES TO HIRE ONE OR
15 MORE MEMBERS OF THE CLIENT'S WORK FORCE AND AGREES TO ASSIGN ONE
16 OR MORE OF THOSE INDIVIDUALS TO THAT CLIENT TO PERFORM SERVICES
17 FOR THE CLIENT ON A LONG-TERM, ONGOING BASIS. THE TERM INCLUDES,
18 BUT IS NOT LIMITED TO: SUBSEQUENT LONG-TERM, ONGOING ASSIGNMENTS
19 TO A CLIENT BY A PROFESSIONAL EMPLOYER ORGANIZATION OF
20 INDIVIDUALS NOT PREVIOUSLY EMPLOYED BY THE CLIENT; LONG-TERM,
21 ONGOING ASSIGNMENTS TO A CLIENT, THAT IS A NEWLY FORMED
22 BUSINESS, BY A PROFESSIONAL EMPLOYER ORGANIZATION OF INDIVIDUALS
23 TO CONSTITUTE THAT CLIENT'S WORK FORCE, OR DISTINCT PORTION OF
24 THAT CLIENT'S WORK FORCE; AND LONG-TERM, ONGOING ASSIGNMENTS TO
25 A CLIENT BY THE PROFESSIONAL EMPLOYER ORGANIZATION OF
26 INDIVIDUALS TO CONSTITUTE THAT CLIENT'S WORK FORCE, OR DISTINCT
27 PORTION OF THAT WORK FORCE, AT A NEWLY INSTITUTED FACILITY. THE
28 TERM DOES NOT INCLUDE any of the following:
29 (1) An arrangement in which a person that does not make
30 its services as a professional employer organization
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1 available to the public and whose principal business activity
2 is not entering into professional employer arrangements
3 shares employees with a commonly owned company within the
4 meaning of section 414(b) and (c) of the Internal Revenue
5 Code of 1986 (Public Law 99-514, 26 U.S.C. § 414(b) and (c)).
6 (2) A temporary help arrangement in which a person
7 assigns one or more employees to another person, to support
8 or supplement the other person's work force in special,
9 temporary work situations, such as employee absences, skill
10 shortages, seasonal workloads and special assignments.
11 (3) A vendor arrangement in which:
12 (i) a person provides a product or service to
13 another person;
14 (ii) the person providing the product or service is
15 fully responsible for it; and
16 (iii) providing the product or service to the other
17 person, rather than assigning one or more employees to
18 the other person to constitute some or all of the other
19 person's work force, is the purpose of the arrangement.
20 "Professional employer organization." A person that assigns <--
21 one or more employees to a client under ENTERS INTO a <--
22 professional employer arrangement WITH A CLIENT. The term <--
23 includes an applicant for a license.
24 "Responsible person." An individual who:
25 (1) is the proprietor of a sole proprietorship;
26 (2) is a general partner in a partnership;
27 (3) is a shareholder who owns at least 15% of the voting
28 shares of a corporation or who is an inside director or
29 officer; OR <--
30 (4) has the authority to ESTABLISH AND direct the <--
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1 policies or management of the organization; or. <--
2 (5) has the authority to enter into professional <--
3 employer arrangements on behalf of the organization.
4 "Secretary." The Secretary of Labor and Industry of the
5 Commonwealth.
6 "Study period." The period from July 1, 2000, through June <--
7 30, JANUARY 1, 2001, THROUGH DECEMBER 31, 2003. <--
8 "Tax Reform Code." The act of March 4, 1971 (P.L.6, No.2),
9 known as the Tax Reform Code of 1971.
10 "Unemployment Compensation Law." The act of December 5, 1936
11 (2nd Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment
12 Compensation Law.
13 "Workers' Compensation Act." The act of June 2, 1915
14 (P.L.736, No.338), known as the Workers' Compensation Act.
15 Section 4. License required.
16 (a) Unlicensed operation prohibited.--A professional
17 employer organization may not engage in a professional employer
18 arrangement without a license if an employee is assigned to the
19 client to do any of the following:
20 (1) Perform services in this Commonwealth for the
21 client. This paragraph does not include services which are
22 isolated, transitory or incidental to services performed
23 outside this Commonwealth.
24 (2) Perform services for which the client's base of
25 operations is located in this Commonwealth.
26 (b) Term of license.--Except as otherwise prescribed by the
27 department, a license shall be valid for two years unless
28 revoked.
29 (c) Transfer or assignment prohibited.--A license is a
30 privilege that is not transferable or assignable.
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1 Section 5. Application for license.
2 Application AN APPLICATION for a license must include all <--
3 specific information and documentation required by the <--
4 department, including specific information on the applicant's <--
5 PROFESSIONAL EMPLOYER ORGANIZATION'S ownership, operations in <--
6 other states, and past and present compliance with applicable
7 laws. The application must be made in the manner prescribed by
8 the department.
9 Section 6. Tax clearance.
10 (a) Waiver of confidentiality.--An application constitutes a
11 waiver of confidentiality with respect to the department for tax
12 information in the possession of the Department of Revenue or
13 the Office of Attorney General, regardless of the source and a
14 consent to the providing of the information to the department.
15 (b) Review.--Upon receipt of an application, the Department
16 of Revenue and the Office of Attorney General shall provide
17 information regarding the applicant's PROFESSIONAL EMPLOYER <--
18 ORGANIZATION'S tax status to the department.
19 Section 7. Fees; issuance, denial and revocation of license.
20 (a) Fee and workers' compensation.--Prior to issuance of a <--
21 license, the professional employer organization must do
22 ISSUANCE.--THE DEPARTMENT MAY ISSUE A LICENSE TO A PROFESSIONAL <--
23 EMPLOYER ORGANIZATION ONLY IF THERE IS COMPLIANCE WITH all of
24 the following:
25 (1) Pay THE PROFESSIONAL EMPLOYER ORGANIZATION MUST PAY <--
26 to the department a nonrefundable fee in accordance with the
27 following:
28 (i) If the professional employer organization has a
29 gross payroll of less than $250,000, a new license fee of
30 $250 $125 or a renewal license fee of $125 $62.50. <--
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1 (ii) If the professional employer organization has a
2 gross payroll of not less than $250,000 and not more than
3 $500,000, a new license fee of $450 $225 or a renewal <--
4 license fee of $225 $112.50. <--
5 (iii) If the professional employer organization has
6 a gross payroll of more than $500,000 but not more than
7 $1,000,000, a new license fee of $675 $337.50 or a <--
8 renewal license fee of $337.50 $168.75. <--
9 (iv) If the professional employer organization has a
10 gross payroll of more than $1,000,000 but not more than
11 $2,500,000, a new license fee of $950 $475 or a renewal <--
12 license fee of $475 $237.50. <--
13 (v) If the professional employer organization has a
14 gross payroll of more than $2,500,000 but not more than
15 $5,000,000, a new license fee of $1,225 $612.50 or a <--
16 renewal license fee of $612.50 $306.25. <--
17 (vi) If the professional employer organization has a
18 gross payroll of more than $5,000,000 but not more than
19 $7,500,000, a new license fee of $1,500 $750 or a renewal <--
20 license fee of $750 $375. <--
21 (vii) If the professional employer organization has
22 a gross payroll of more than $7,500,000 but not more than
23 $10,000,000, a new license fee of $1,775 $887.50 or a <--
24 renewal license fee of $887.50 $443.75. <--
25 (viii) If the professional employer organization has
26 a gross payroll of more than $10,000,000, a new license
27 fee of $2,000 $1,000 or a renewal license fee of $1,000 <--
28 $500.
29 (2) Provide THE PROFESSIONAL EMPLOYER ORGANIZATION MUST <--
30 PROVIDE proof, in a manner satisfactory to the department, of
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1 workers' compensation insurance coverage for existing clients
2 under section 10.
3 (b) Other requirements.--The department may issue a license <--
4 to a professional employer organization if there is compliance
5 with all of the following:
6 (1) (3) The application and all required documents are <--
7 MUST BE complete and accurate and meet the requirements of <--
8 this act.
9 (2) (4) The professional employer organization meets <--
10 MUST MEET all requirements of sections 5 and 6 and this <--
11 subsection.
12 (3) All fees are (5) ALL FEES MUST BE paid, all reports <--
13 are filed and all penalties are paid or are subject to a <--
14 deferred payment plan approved by the department.
15 (4) (6) All tax returns due to the Commonwealth are MUST <--
16 BE filed.
17 (5) (7) All taxes, interest and penalties owed to the <--
18 Commonwealth are MUST BE: <--
19 (i) paid;
20 (ii) subject to a deferred payment plan approved by
21 the department; or
22 (iii) under appeal unless the applicable statute
23 requires the payment of taxes while an appeal is pending.
24 (c) (B) Denial or revocation.--The department may deny an <--
25 application for a license or revoke a license for good cause
26 ASSOCIATED WITH THE LEGISLATIVE INTENT OF THIS ACT or if a THE <--
27 professional employer organization or a responsible person does
28 any of the following:
29 (1) Violates this act or a regulation or order under
30 this act.
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1 (2) Fails to provide a written response to a written
2 inquiry from the department within 30 days from the date of
3 receipt of the inquiry.
4 (3) Makes a misrepresentation of material fact or fails
5 to disclose a material fact in any application, document or
6 communication under this act.
7 (4) Obtains or attempts to obtain a license by fraud or
8 bribery.
9 (5) Was sentenced for a Federal or State offense
10 involving dishonesty or fraud or for an offense under the Tax
11 Reform Code, the Unemployment Compensation Law, section 305
12 of the Workers' Compensation Act or this act.
13 (6) Defaults on a deferred payment plan under subsection
14 (b)(3) or (5). (A)(5) OR (7). <--
15 (C) ADDITIONAL CRITERIA FOR DENIAL OF LICENSE 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 based on information which would have been a basis to
2 deny the application if the department had known the information
3 at the time the license was issued.
4 (e) Termination of professional employer arrangements.--
5 (1) A professional employer organization that ceases to
6 be licensed 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.
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.
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 under subsection (c) (B), the organization may <--
4 not reapply for a license for one year. The one-year period
5 shall be calculated as prescribed by the department.
6 Section 8. Determinations and appeals.
7 (a) Determinations.--
8 (1) A determination denying an application, revoking a
9 license or charging a penalty, and any decision on an appeal,
10 must be sent by certified mail to the professional employer
11 organization at the address designated in the application and
12 must designate the effective date of the determination.
13 (2) The department shall grant or deny a completed
14 application for a new license within 90 days after it is
15 filed. The, EXCEPT THAT THE department may withhold a <--
16 determination until the requirements of section 7(a)(1) AND <--
17 (2) are met.
18 (b) Appeals.--If a professional employer organization has an
19 application for a license denied or a license revoked, or is
20 charged a penalty, the organization may appeal the determination
21 to the secretary. The appeal must specifically set forth its
22 factual and legal arguments on which it is based. Arguments not
23 contained in the appeal shall be waived. The appeal must be
24 filed within 30 days after the date of the determination or the
25 department's action shall be final.
26 (c) Supersedeas.--An appeal of a determination by the
27 department denying an application for a renewal license under
28 section 7(c) 7(B) OR (C), revoking a license, or charging a <--
29 penalty shall operate as a supersedeas while the appeal under
30 subsection (b) is pending. The effective date of a denial,
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1 revocation or penalty subject to this subsection shall not be
2 prior to the expiration of the appeal period under subsection
3 (b).
4 (d) Burden of proof.--
5 (1) Except as set forth in paragraph (2), in an appeal
6 of a license denial or revocation, the burden of proof shall
7 be on the professional employer organization.
8 (2) In an appeal of a license denial or revocation under
9 section 7 7(B), the burden of proof shall be on the <--
10 department.
11 (3) In an appeal of a determination by the department
12 charging a penalty under section 12(c), the burden of proof
13 shall be on the department.
14 (e) Administrative agency law.--Proceedings under this
15 section are subject to 2 Pa.C.S. Ch. 5 Subch. A (relating to
16 practice and procedure of Commonwealth agencies) and Ch. 7
17 Subch. A (relating to judicial review of Commonwealth agency
18 action).
19 Section 9. Unemployment compensation.
20 (a) Employer.--For purposes of the Unemployment Compensation
21 Law.--
22 (1) Except as otherwise provided in this section, the
23 professional employer organization shall be the employer of
24 employees assigned to the client.
25 (2) The client shall be the employer of employees
26 assigned to it by the professional employer organization if
27 any of the following conditions exist:
28 (i) The professional employer organization is not
29 licensed as required by this act.
30 (ii) All of the following apply:
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1 (A) The professional employer organization is
2 owned or controlled by or owns or controls the
3 client, either directly or indirectly, by legally
4 enforceable means or otherwise, or the professional
5 employer organization and the client are owned or
6 controlled, either directly or indirectly, by legally
7 enforceable means or otherwise, by the same person or
8 persons.
9 (B) All of the professional employer
10 organization's clients are covered by clause (A) or
11 the professional employer organization does not make
12 its services as a professional employer organization
13 available to the public.
14 (iii) The professional employer organization fails
15 to comply with the requirements of subsection (b) with
16 respect to a client.
17 (b) Quarterly reports.--
18 (1) If a professional employer organization is the
19 employer of employees assigned to the client for purposes of
20 the Unemployment Compensation Law, the Employer's Quarterly
21 Report of Wages Paid to Each Employee, Form UC-2A, filed
22 under the Unemployment Compensation Law shall include, in
23 addition to information normally required, the following
24 information and other information required by the department:
25 (i) For each client, the report shall contain all of
26 the following information:
27 (A) Name.
28 (B) Federal employer identification number.
29 (C) Pennsylvania unemployment compensation
30 account number.
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1 (ii) The names, Social Security account numbers,
2 wages, credit weeks and other data of employees assigned
3 to clients shall be listed separately for each client.
4 (iii) For calendar quarters in the study period, the
5 report shall indicate, for each client, whether the
6 client is covered by subsection (g)(9) and whether the
7 client paid wages prior to the study period. If this
8 information is unknown to the professional employer
9 organization, the client shall provide this information
10 at the request of the professional employer organization;
11 and the professional employer organization shall include
12 in the report the information provided by the client.
13 (2) Except as set forth in paragraph (3), information
14 provided to the department by a professional employer
15 organization under this subsection shall be confidential to
16 the same extent as other unemployment compensation
17 information.
18 (3) The information in a quarterly report shall be made
19 available to an approved workers' compensation insurance
20 rating organization upon request, for use as authorized by
21 law, under confidentiality restrictions established by the
22 department.
23 (c) Limitations.--
24 (1) Notwithstanding section 4(l)(6) of the Unemployment
25 Compensation Law, services performed by an employee assigned
26 to a client by a professional employer organization shall not
27 constitute employment for purposes of the Unemployment
28 Compensation Law if:
29 (i) the employee is the client;
30 (ii) the employee is a general partner in the
19990H1314B2624 - 15 -
1 client; or
2 (iii) the services would not constitute employment
3 if performed in the employ of the client.
4 (2) Notwithstanding section 4(x)(6) of the Unemployment
5 Compensation Law, remuneration paid by a professional
6 employer organization to an employee assigned to a client
7 shall not constitute wages for purposes of the Unemployment
8 Compensation Law if:
9 (i) the employee is the client;
10 (ii) the employee is a general partner in the
11 client; or
12 (iii) the remuneration would not constitute wages if
13 the client was the employer of the employee for purposes
14 of the Unemployment Compensation Law and paid the
15 remuneration.
16 (3) If an employee assigned to a client is a corporate
17 officer of the client, the employee's eligibility for
18 benefits under section 402(h) of the Unemployment
19 Compensation Law shall be determined by the employee's
20 relationship to the client.
21 (d) Client liability.--If the professional employer
22 organization is the employer of employees assigned to a client
23 for purposes of the Unemployment Compensation Law and does not
24 pay unemployment compensation contributions, interest or
25 penalties in full and when due on wages paid to employees
26 assigned to the client, the client shall also be liable for the
27 unpaid, past due contributions, interest and penalties and be
28 subject to all enforcement and collection provisions of the
29 Unemployment Compensation Law. This subsection shall not apply
30 to liability under subsection (e)(4).
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1 (e) Determinations and liability.--
2 (1) For each client of a professional employer
3 organization, the department shall determine all of the
4 following:
5 (i) The amount of contributions payable by the
6 professional employer organization on wages paid by it
7 during the study period to employees assigned to the
8 client. For purposes of this subparagraph, the
9 professional employer organization's contribution rate
10 shall be established without regard to section 301(a)(2)
11 of the Unemployment Compensation Law.
12 (ii) The amount of contributions that would have
13 been payable by the client on wages paid by the
14 professional employer organization during the study
15 period to employees assigned to the client if the client
16 had been the employer of the employees for purposes of
17 the Unemployment Compensation Law and paid the wages. A
18 determination under this subparagraph shall be made in
19 the following manner:
20 (A) The department shall establish a
21 contribution rate for the client in accordance with
22 paragraph (2) for each year in the study period
23 during which the professional employer organization
24 paid wages to employees assigned to the client.
25 (B) The contribution rates established under
26 clause (A) shall be multiplied by the amount of wages
27 paid by the professional employer organization during
28 each year of the study period, respectively, to
29 employees assigned to the client, to the extent the
30 wages would be taxable under section 4(x)(1) of the
19990H1314B2624 - 17 -
1 Unemployment Compensation Law if the client had been
2 the employer of the employees for purposes of the
3 Unemployment Compensation Law and paid the wages.
4 (C) The sum of the calculations for each year
5 under clause (B) shall constitute the amount
6 determined for the client under this subparagraph.
7 (2) The department shall establish a contribution rate
8 for a client for purposes of paragraph (1)(ii) in accordance
9 with the following:
10 (i) The contribution rate shall be determined
11 pursuant to the provisions of the Unemployment
12 Compensation Law applicable to the client.
13 (ii) The client's record of unemployment
14 compensation experience shall be modified as follows:
15 (A) Contributions paid by the client shall
16 include contributions which would have been payable
17 by the client on wages paid by the professional
18 employer organization during the study period to
19 employees assigned to the client if the client had
20 been the employer of the employees for purposes of
21 the Unemployment Compensation Law and paid the wages.
22 (B) Wages paid by the client shall include wages
23 paid by the professional employer organization during
24 the study period to employees assigned to the client.
25 The wages paid by the professional employer
26 organization shall be considered taxable wages paid
27 by the client to the extent they would be taxable
28 under section 4(x)(1) of the Unemployment
29 Compensation Law if the client had been the employer
30 of the employees for purposes of the Unemployment
19990H1314B2624 - 18 -
1 Compensation Law and paid the wages.
2 (C) The client's benefit charges shall include
3 benefit charges based on wages paid by the
4 professional employer organization during the study
5 period to employees assigned to the client.
6 (3) The determinations required under paragraphs (1) and
7 (2) shall be made after the study period has ended.
8 (4) For each professional employer organization, the
9 department shall calculate the sum of the amounts determined
10 under paragraph (1)(i) and the sum of the amounts determined
11 under paragraph (1)(ii). If the sum of the amounts determined
12 under paragraph (1)(ii) exceeds the sum of the amounts
13 determined under paragraph (1)(i), the professional employer
14 organization shall be liable to pay into the Unemployment
15 Compensation Fund the difference between the sums to the
16 extent the difference exceeds $1,500. The professional
17 employer organization's liability under this paragraph shall
18 be a liability for contributions for purposes of the
19 Unemployment Compensation Law in accordance with all of the
20 following:
21 (i) It shall be a liability in addition to any other
22 liability under the Unemployment Compensation Law.
23 (ii) It shall be assessed, subject to reassessment,
24 and due as provided in section 304 of the Unemployment
25 Compensation Law.
26 (iii) It shall be subject to all enforcement and
27 collection provisions of the Unemployment Compensation
28 Law.
29 (iv) For purposes of sections 301.1(c)(1) and 309.2
30 of the Unemployment Compensation Law, it shall be a
19990H1314B2624 - 19 -
1 liability for contributions with respect to wages paid in
2 the last calendar quarter of the study period.
3 (v) It shall not be a liability for contributions
4 for purposes of section 301.1(b) of the Unemployment
5 Compensation Law.
6 (f) Financial impact study.--
7 (1) The department shall study the following to evaluate
8 the financial impact of professional employer arrangements on
9 the Unemployment Compensation Fund for the study period:
10 (i) Employers that cease to pay wages, in whole or
11 in part, and enter into professional employer
12 arrangements under which the professional employer
13 organization pays wages during the study period to
14 employees assigned to them as clients, including the
15 reserve account balances of such employers and the
16 diversion of benefit charges to the State adjustment
17 factor.
18 (ii) The effect of professional employer
19 arrangements on contributions payable by former clients,
20 and clients who become the employer of employees assigned
21 to them by professional employer organizations for
22 purposes of the Unemployment Compensation Law, on wages
23 paid during the study period, including the effect of the
24 arrangement on such a client's eligibility for a
25 calculated contribution rate and the effect of excluding
26 the employment experience attributable to the period of
27 the arrangement, or attributable to the period for which
28 the professional employer organization was the employer
29 for purposes of the Unemployment Compensation Law, from
30 the calculation of such a client's contribution rate.
19990H1314B2624 - 20 -
1 (iii) Professional employer organizations that cease
2 to pay wages during the study period, including the
3 reserve account balances of such organizations, the
4 diversion of benefit charges to the State adjustment
5 factor and unpaid unemployment compensation liabilities.
6 (iv) Situations where a professional employer
7 organization ceases to pay wages during the study period
8 to employees assigned to a client because the
9 professional employer arrangement is terminated, but
10 continues to pay wages to employees assigned to other
11 clients; where the client does not enter into a new
12 professional employer arrangement; and where the client
13 does not pay wages after the arrangement is terminated.
14 Data to be studied under this subparagraph includes that
15 portion of the professional employer organization's
16 reserve account balance attributable to the client,
17 calculated as though the client had been the employer of
18 employees assigned to it by the professional employer
19 organization for purposes of the Unemployment
20 Compensation Law and benefit charges attributable to the
21 client.
22 (2) After the study period has ended, the department
23 shall submit a final report on the findings of the study to
24 the Governor and the General Assembly, including information
25 about the determinations made under subsection (e). A report
26 under this paragraph shall not contain information identified
27 with a named client or professional employer organization.
28 (g) Applicability.--
29 (1) Subsection (a) shall apply to services for which
30 wages are paid from July 1, 2000, through June 30, JANUARY 1, <--
19990H1314B2624 - 21 -
1 2001, THROUGH DECEMBER 31, 2004.
2 (2) Subject to paragraph (1), subsection (a)(2)(iii)
3 shall apply to wages paid and services for which wages are
4 paid during the earliest calendar quarter for which the
5 professional employer organization fails to comply with
6 subsection (b) and subsequent calendar quarters.
7 (3) Subsection (b) shall apply to calendar quarters
8 after June 30 DECEMBER 31, 2000. <--
9 (4) Subsection (c)(1) shall apply to services performed
10 after the effective date of subsection (c).
11 (5) Subsection (c)(2) shall apply to remuneration for
12 services performed after the effective date of subsection
13 (c).
14 (6) Subsection (c)(3) shall apply to weeks of
15 unemployment commencing after the effective date of
16 subsection (c).
17 (7) Subsection (d) shall apply to contributions,
18 interest and penalties on wages paid after June 30 DECEMBER <--
19 31, 2000.
20 (8) Subsections (e) and (f) shall not apply to a
21 professional employer organization to the extent the
22 organization is not the employer of employees assigned to
23 clients for purposes of the Unemployment Compensation Law.
24 (9) Subsections (e) and (f)(1)(i), (ii) and (iv) shall
25 not apply to a client if any of the following exist:
26 (i) A professional employer organization paid wages
27 prior to the study period to employees assigned to the
28 client.
29 (ii) In the first calendar year in which the
30 professional employer organization paid wages to
19990H1314B2624 - 22 -
1 employees assigned to the client, the client paid wages
2 prior to payment of wages by the professional employer
3 organization and the client has not filed unemployment
4 compensation reports with respect to the wages it paid.
5 (h) Definitions.--Subject to section 3 and unless the
6 context clearly indicates otherwise, words and phrases used in
7 this section shall have the meanings given to them in the
8 Unemployment Compensation Law.
9 Section 10. Workers' compensation.
10 (a) Rights and duties.--Except as otherwise provided in this
11 section, for purposes of the Workers' Compensation Act, the
12 professional employer organization shall be an employer of
13 employees assigned to the client; and all of the following
14 provisions shall be applicable:
15 (1) The professional employer organization shall
16 maintain workers' compensation insurance coverage for
17 employees assigned to the client, and if coverage is so
18 provided, the client shall be deemed to have met its
19 obligation under section 305 of the Workers' Compensation Act
20 for those employees. The professional employer organization
21 shall provide the client with a certificate of insurance
22 evidencing workers' compensation coverage annually and name
23 the client as a certificate holder.
24 (2) The professional employer organization shall pay
25 workers' compensation benefits in full and when due to
26 employees assigned to the client.
27 (3) Workers' compensation premiums for a professional
28 employer organization shall be based upon rules filed by an
29 approved rating organization under the Workers' Compensation
30 Act and rates approved by the Insurance Department.
19990H1314B2624 - 23 -
1 (4) Workers' compensation insurance shall be obtained
2 from an insurance carrier licensed to write workers'
3 compensation insurance policies in this Commonwealth.
4 (5) The professional employer organization and the
5 client shall be jointly entitled to the exclusive remedy
6 provisions of section 303 of the Workers' Compensation Act.
7 (6) If the professional employer organization does not
8 meet its obligations and duties as an employer under the
9 Workers' Compensation Act, the client shall also be liable
10 for all the obligations and duties of an employer under the
11 Workers' Compensation Act and also for unpaid, past due
12 workers' compensation benefits owed to employees assigned to
13 the client by the professional employer organization. The
14 amount of benefits the employee may collect in the aggregate
15 may not exceed the amount of benefits which are unpaid and
16 past due.
17 (7) Notice to the client or the professional employer
18 organization of an injury shall constitute notice to both
19 under Article III of the Workers' Compensation Act.
20 (b) Client.--The client shall be the employer of employees
21 assigned to it for purposes of the Workers' Compensation Act and
22 the professional employer organization may not use the exclusive
23 remedy provisions of section 303 of the Workers' Compensation
24 Act if any of the following paragraphs apply:
25 (1) The professional employer organization is not
26 licensed as required by this act.
27 (2) All of the following subparagraphs apply:
28 (i) The professional employer organization is owned
29 or controlled by or owns or controls the client, either
30 directly or indirectly, by legally enforceable means or
19990H1314B2624 - 24 -
1 otherwise, or the professional employer organization and
2 the client are owned or controlled, either directly or
3 indirectly, by legally enforceable means or otherwise, by
4 the same person or persons.
5 (ii) All of the professional employer organization's
6 clients are covered by subparagraph (i) or the
7 professional employer organization does not make its
8 services as a professional employer organization
9 available to the public.
10 (c) Applicability.--This section shall apply to injuries
11 suffered on or after the effective date of this section.
12 (d) Definitions.--Subject to section 3 and unless the
13 context clearly indicates otherwise, words and phrases used in
14 this section shall have the meanings given to them in the
15 Workers' Compensation Act.
16 Section 11. Other responsibilities.
17 (a) Taxes.--The professional employer organization shall
18 timely pay all payroll-related taxes and payroll withholding
19 taxes, on wages paid, to the Commonwealth and its political
20 subdivisions with respect to employees assigned to the client
21 and shall timely file all corresponding tax reports. The client
22 shall timely pay the taxes and timely file the reports if the
23 client is the employer of the employees for purposes of the
24 taxing statute.
25 (b) Report.--
26 (1) A professional employer organization shall file a
27 quarterly report with the department, by the last day of the
28 month immediately following the calendar quarter. The report
29 shall:
30 (i) identify all of the following:
19990H1314B2624 - 25 -
1 (A) names and addresses of clients to whom
2 employees were assigned during the quarter;
3 (B) names and addresses of new clients with whom
4 professional employer arrangements commenced during
5 the quarter; and
6 (C) names and addresses of clients with whom
7 professional employer arrangements ended during the
8 quarter;
9 (ii) provide all of the following for each client:
10 (A) the client's Federal employer identification
11 number and Pennsylvania unemployment compensation
12 account number;
13 (B) the address of each worksite where employees
14 are assigned to the client, the number of assigned
15 employees at each worksite and the standard
16 industrial classification code for each worksite; and
17 (C) the name of the workers' compensation
18 insurance carrier insuring employees assigned to the
19 client and the workers' compensation policy number;
20 (iii) contain other information required by the
21 department; and
22 (iv) be made in the manner prescribed by the
23 department and shall be accompanied by proof, in a manner
24 satisfactory to the department, of workers' compensation
25 insurance coverage with respect to all new clients, as
26 required under section 10.
27 (2) The department shall not be required to disclose the
28 contents of the report except for purposes of this act or
29 other laws of this Commonwealth.
30 (c) Operation under other name.--A professional employer
19990H1314B2624 - 26 -
1 organization may not conduct business in this Commonwealth under
2 any name other than that specified in its application without
3 the written consent of the department.
4 (d) Change in information.--A professional employer
5 organization shall notify the department in writing of a change
6 in the information contained in its application or other
7 document within 30 days after the change occurs.
8 (e) Notice to employees.--
9 (1) A professional employer organization shall provide
10 written information to employees assigned to clients as
11 required by the department, including the following:
12 (i) If the professional employer organization does
13 not meet all of its obligations and duties as an employer
14 under the Workers' Compensation Act, the client shall
15 also be liable for:
16 (A) all the obligations and duties of an
17 employer under the Workers' Compensation Act; and
18 (B) unpaid, past due workers' compensation
19 benefits under section 10(a)(6).
20 (ii) If the professional employer organization does
21 not pay wages in full and when due, the client shall also
22 be liable for unpaid, past due wages under section 13(b).
23 (iii) The name and address of the workers'
24 compensation insurance carrier insuring the employee.
25 (2) The information required under paragraph (1) shall
26 be provided to an employee at the time of hire and thereafter
27 at intervals not exceeding six months. An employee shall be
28 notified immediately of a change in the information.
29 (f) Notice to client.--Prior to commencing a professional
30 employer arrangement, a professional employer organization shall
19990H1314B2624 - 27 -
1 provide all of the following information in writing to the
2 client:
3 (1) If the professional employer organization does not
4 meet all of its obligations and duties as an employer under
5 the Workers' Compensation Act, the client shall also be
6 liable for:
7 (i) all the obligations and duties of an employer
8 under the Workers' Compensation Act; and
9 (ii) unpaid, past due workers' compensation benefits
10 owed to employees assigned to the client under section
11 10(a)(6).
12 (2) The circumstances under which the client shall be
13 the employer for purposes of the Workers' Compensation Act
14 under section 10(b).
15 (3) If the professional employer organization does not
16 pay unemployment compensation contributions, interest and
17 penalties in full and when due on wages paid to employees
18 assigned to the client, the client shall also be liable for
19 the unpaid, past due contributions, interest and penalties
20 under section 9(d).
21 (4) The circumstances under which the client shall be
22 the employer for purposes of the Unemployment Compensation
23 Law under section 9(a)(2).
24 (5) If the professional employer organization does not
25 pay wages owed to employees assigned to the client in full
26 and when due, the client shall also be liable for the unpaid,
27 past due wages under section 13(b).
28 Section 12. Criminal and civil penalties; injunctions.
29 (a) Operation without a license.--
30 (1) A professional employer organization that violates
19990H1314B2624 - 28 -
1 section 4(a) commits a misdemeanor of the third degree. Each
2 day of proscribed conduct shall constitute a separate
3 offense.
4 (2) A person, other than a professional employer
5 organization, that knowingly authorizes, implements,
6 administers, supervises or participates in a professional
7 employer arrangement for which a license is required, on
8 behalf of an unlicensed professional employer organization,
9 commits a misdemeanor of the third degree. Each day of
10 proscribed conduct shall constitute a separate offense.
11 (b) Misrepresentation or nondisclosure.--
12 (1) A professional employer organization that makes a
13 misrepresentation of material fact or fails to disclose a
14 material fact in an application or other document or
15 communication under this act commits a misdemeanor of the
16 third degree.
17 (2) A person, other than a professional employer
18 organization, that knowingly makes a representation of
19 material fact or fails to disclose a material fact in an
20 application or other document or communication under this act
21 commits a misdemeanor of the third degree.
22 (c) Violations.--A professional employer organization that
23 violates this act shall be subject to a civil penalty of not
24 more than $1,000 per day for each violation.
25 (d) Injunction.--Upon petition by the department, a court of
26 competent jurisdiction may enjoin a professional employer
27 organization from violating this act.
28 Section 13. Wages.
29 (a) Professional employer organization.--The professional
30 employer organization shall be liable to pay wages owed to
19990H1314B2624 - 29 -
1 employees assigned to the client in full and when due.
2 (b) Client.--If the professional employer organization does
3 not pay wages owed to employees under subsection (a), the client
4 shall also be liable for the unpaid, past due wages.
5 (c) Collection of wages.--Unpaid, past due wages owed to an
6 employee may be collected from the professional employer
7 organization under subsection (a), the client under subsection
8 (b), or both. The amount of wages the employee may collect in
9 the aggregate may not exceed the unpaid amount. It shall not be
10 necessary to pursue or exhaust legal remedies against one before
11 pursuing legal remedies against the other.
12 (d) Rights and liabilities.--Rights and liabilities under
13 this section shall exist in addition to other legal rights and
14 liabilities with respect to wages.
15 (e) Applicability.--This section shall apply to wages which
16 become due on or after the effective date of this section.
17 (f) Definition.--As used in this section, the term "wages"
18 has the meaning given in section 2.1 of the act of July 14, 1961
19 (P.L.637, No.329), known as the Wage Payment and Collection Law.
20 Section 14. Department.
21 (a) Regulations.--The department shall promulgate
22 regulations to implement and administer this act. Within six
23 months from the effective date of this section, the department
24 shall submit notice of proposed rulemaking on these regulations
25 to the Independent Regulatory Review Commission, the appropriate
26 standing committees of each chamber of the General Assembly, and
27 the Legislative Reference Bureau.
28 (b) Guidelines.--The department shall adopt guidelines,
29 including guidelines regarding information on applications,
30 required documents, reports, appeals and the issuance of
19990H1314B2624 - 30 -
1 licenses. The guidelines shall remain in effect until the
2 earlier of:
3 (1) the effective date of the regulations promulgated
4 under subsection (a); or
5 (2) 18 months from the effective date of this section.
6 (c) General enforcement.--The department may conduct audits,
7 inspections and investigations as necessary to administer and
8 enforce this act. The books and records of a professional
9 employer organization and a client shall be available to the
10 department for inspection and copying at reasonable times. The
11 department may examine any individual under oath or affirmation
12 and issue subpoenas to compel the attendance of witnesses and
13 the production of documents.
14 Section 15. Other laws.
15 This act does not exempt a client or a professional employer
16 organization from other Federal, State or local law. Rights,
17 responsibilities and liabilities conferred and imposed by this
18 act shall exist in addition to rights, responsibilities and
19 liabilities which otherwise exist, except where the result would
20 be inconsistent with this act.
21 Section 16. Collective bargaining protections.
22 (a) Interference prohibited.--Professional employer
23 arrangements shall not be established or otherwise utilized, in
24 whole or in part, to interfere with the right of any employee or
25 worker to organize and/or freely choose unions or associations
26 which represent them for the purpose of collective bargaining.
27 (b) Assignment prohibited.--A professional employer
28 organization shall not assign or reassign leased employees for
29 the purpose, in whole or in part, of interfering with the terms
30 and conditions of any existing collective bargaining agreement
19990H1314B2624 - 31 -
1 or any effort on the part of any employee or worker to organize
2 and/or freely choose unions or associations which does or may
3 represent them for the purpose of collective bargaining.
4 Section 17. Applicability.
5 Unless this act provides for specific applicability, the
6 department may, by regulation, specify the applicability of any
7 provision of this act.
8 Section 18. Effective date.
9 This act shall take effect as follows:
10 (1) The following provisions shall take effect on July <--
11 1, 2000 JANUARY 1, 2001: <--
12 (i) Section 4(a).
13 (ii) Section 9(a), (b), (d), (e) and (f).
14 (iii) Section 11(a), (b) and (f)(3) and (4).
15 (2) The following provisions shall take effect in 60
16 days:
17 (i) Section 9(c).
18 (ii) Section 10.
19 (iii) Section 11(e) and (f)(1), (2) and (5).
20 (iv) Section 13.
21 (3) The remainder of this act shall take effect
22 immediately.
C30L43VDL/19990H1314B2624 - 32 -