April 26, 2011, Introduced by Rep. Opsommer and referred to the Committee on Commerce.
A bill to amend 2010 PA 370, entitled
"Michigan professional employer organization regulatory act,"
by amending sections 7, 9, 15, 17, 19, 21, 23, and 27 (MCL
338.3727, 338.3729, 338.3735, 338.3737, 338.3739, 338.3741,
338.3743, and 338.3747).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 7. (1) Except as otherwise provided in this act,
beginning July 1, 2012, a person shall not provide, advertise, or
otherwise hold itself out as providing professional employer
services in this state, unless licensed or exempt from licensure
under this act.
(2) An applicant for licensure shall submit to the department
the application fee imposed in section 13 and a completed
application
providing that provides the following information:
(a) The name or names under which the PEO conducts business.
(b) The address of the principal place of business of the PEO
and
the address of each office it maintains within Michigan.in this
state.
(c) The PEO's taxpayer or employer identification number.
(d) A list by jurisdiction of each name under which the PEO
has
operated within in the preceding 5 years, including any
alternative names, names of predecessors, and, if known, successor
business entities.
(e)
A statement of ownership , which shall include that
includes the name and evidence of the business experience of any
person, individually or acting in concert with 1 or more other
persons,
owning or controlling, that
directly or indirectly , owns
or controls 10% or more of the equity interests of the PEO.
(f)
A statement of management , which shall include that
includes the name and evidence of the business experience of any
person
individual who serves as president , or chief
executive
officer , or otherwise has the authority to act as senior
executive
officer of the PEO.
(g) A financial statement describing the financial condition
of
the PEO or PEO group, . Before December 31, 2010, applicants may
file
an unaudited financial statement. On or after January 1, 2011,
the
financial statement shall be prepared
in accordance with
generally accepted accounting principles and audited by an
independent certified public accountant licensed to practice in the
jurisdiction
in which such that accountant is located and shall be
is without qualification as to the going concern status of the PEO.
A PEO group may submit combined or consolidated audited financial
statements to meet the requirements of this subsection. A PEO that
has not had sufficient operating history to have audited financials
based
upon on at least 12 months of operating history must meet
the
financial capacity requirements described in section 15 and present
financial statements reviewed by a licensed certified public
accountant.
(h) A financial audit of the applicant. At the time of
application
for an initial license, the applicant shall submit the
its most recent audit, which may not be older than 13 months.
Thereafter, a PEO or PEO group shall file on an annual basis,
within 270 days after the end of the PEO or PEO group's fiscal
year, a succeeding audit. An applicant may apply to the department
for
an extension, with the department except that any request
must
be
accompanied by include a letter from the auditors stating the
reasons for the delay and the anticipated audit completion date.
(i) A certification that the PEO has made an election under
section 13m of the Michigan employment security act, 1936 (Ex Sess)
PA 1, MCL 421.13m.
(3)
A Beginning July 1, 2012,
a person that has been convicted
of a felony related to the operation of a PEO shall not own or
control, directly or indirectly, a PEO doing business in this
state.
(4)
Each Beginning July 1,
2012, each PEO operating within in
this
state on the effective date of this act shall file its
completed
application and submit the license fee not later than 180
days
after the effective date of this act. February 1, 2013.
Initial licensure is valid until the end of the PEO's first fiscal
year
end that is more than 1 year after the effective date of this
act.
on or after July 1, 2012. A PEO not operating within in this
state
on the effective date of this act July 1, 2012 shall submit
its
initial licensure application prior to commencement of before
commencing
operations within in this
state.
(5) Within 180 days after the end of a licensee's fiscal year,
the licensee shall renew its license by submitting a renewal
application
to the department providing that
includes any changes
in the information provided in the licensee's prior application.
(6) PEOs in a PEO group may satisfy the reporting and
financial requirements of this section on a combined or
consolidated
basis provided that if each member of the PEO group
guarantees the obligations under this act of each other member of
the
PEO group. In the case of If
a PEO group that submits a
combined or consolidated audited financial statement, including
entities that are not PEOs or that are not in the PEO group, the
controlling entity of the PEO group under the consolidated or
combined statement must guarantee the obligations of the PEOs in
the PEO group. The department shall determine whether the
requirements of this subsection are satisfied.
(7)
The department shall, to the extent practical, allow the
acceptance
of accept electronic filings, including filing of
applications, documents, reports, and other filings required under
this
act. The department may allow for the acceptance of accept
electronic filings and other assurance by an independent and
qualified assurance organization that provides satisfactory
assurance of compliance acceptable to the department consistent
with,
or in lieu of, the requirements of this section, and sections
9 and 15, and other requirements of this act. The department shall
allow a PEO to authorize an assurance organization, approved by the
director, to act on the PEO's behalf in complying with the
licensure requirements of this act including, but not limited to,
electronic filings of information and payment of license fees. Use
of an approved assurance organization by a PEO is optional. This
subsection does not limit or change the department's authority to
license, to rescind, revoke, or deny a license, or to investigate
or enforce any provision of this act.
Sec.
9. (1) The Beginning July
1, 2012, the department may
issue a limited PEO license. A PEO seeking limited licensure under
this section shall submit to the department a properly executed and
completed application on a form provided by the department and
include with the application the license fee for limited licensure
established by the department.
(2)
A PEO is eligible for a limited license upon meeting if it
meets all of the following conditions:
(a)
Is domiciled outside Michigan this
state and is licensed
or otherwise regulated as a PEO in another state.
(b)
Does not maintain an office in Michigan this state or does
not
directly solicit clients located or domiciled within
Michigan.in this state.
(c) Does not have more than 50 covered employees employed or
domiciled
in Michigan this state on any given day.
(3) A limited license is valid for 1 year and may be renewed.
(4)
Section 15 does not apply to applicants an applicant for a
limited licensure.license.
Sec. 15. Unless otherwise exempt under this act, beginning
July 1, 2012, each PEO or collectively each PEO group shall submit
to the department evidence of and maintain either of the following:
(a) A minimum of $100,000.00 in working capital, as defined by
generally accepted accounting principles, as reflected in the
financial statements submitted to the department with the initial
licensure
license application and each annual renewal application.
A PEO or PEO group with less than $100,000.00 in working capital at
renewal has 180 days to eliminate the deficiency in a manner
acceptable to the department. During that 180-day period, the PEO
or PEO group shall submit quarterly financial statements to the
department accompanied by an attestation of the chief executive
officer that all wages, taxes, worker's compensation premiums, and
employee benefits have been paid by the PEO or members of the PEO
group.
(b) A bond, irrevocable letter of credit, or securities with a
minimum market value of $100,000.00, acceptable to the department.
The bond shall be held by a depository designated by the department
to secure payment by the PEO of all taxes, wages, benefits, or
other entitlements due to, or regarding, covered employees, if the
PEO or PEO group does not make those payments when due. For any PEO
or PEO group whose annual financial statements do not indicate
positive working capital, the PEO shall provide a bond in the
amount
of the bond shall be $100,000.00 plus an amount sufficient
to cover the deficit in working capital.
Sec.
17. (1) Each Beginning July
1, 2012, each professional
employer agreement shall include the following provisions:
(a) The responsibility of the PEO to pay wages to covered
employees; to withhold, collect, report and remit payroll-related
and unemployment taxes; and, to the extent the PEO has assumed
responsibility in the professional employer agreement, to make
payments for employee benefits for covered employees. For purposes
of this subdivision, wages do not include any obligation between a
client and a covered employee for payments beyond, or in addition
to, the covered employee's salary, draw, or regular rate of pay,
including bonuses, commissions, severance pay, deferred
compensation, profit sharing, or vacation, sick, or other paid time
off pay, unless the PEO has expressly agreed to assume liability
for those payments in the professional employer agreement.
(b) The hiring, disciplining, and termination by the PEO of a
covered
employee, as may be necessary to fulfill the PEO's
responsibilities under this act and the professional employer
agreement. The client may also hire, discipline, and terminate a
covered employee.
(c) The responsibility of the client and the PEO to comply
with the worker's disability compensation act of 1969, 1969 PA 317,
MCL 418.101 to 418.941.
(2)
Each Beginning July 1,
2012, each professional employer
agreement
shall provide require that the PEO provide written notice
to each covered employee affected by the agreement regarding the
general nature of the coemployment relationship between and among
the PEO, the client, and that covered employee.
Sec. 19. (1) Except to the extent otherwise expressly provided
for by the professional employer agreement, beginning July 1, 2012,
all of the following apply:
(a) A client is solely responsible for the quality, adequacy,
or safety of the goods or services produced or sold in the client's
business.
(b) A client is solely responsible for directing, supervising,
training, and controlling the work of the covered employees with
respect to the business activities of the client and is solely
responsible for the acts, errors, or omissions of the covered
employees regarding those activities.
(c) A client is not liable for the acts, errors, or omissions
of
a PEO or of any covered employee of the client and a PEO when if
the covered employee is acting under the express direction and
control of the PEO.
(d) A PEO is not liable for the acts, errors, or omissions of
a
client or of any covered employee of the client when if the
covered employee is acting under the express direction and control
of the client.
(2) This section does not limit any contractual liability or
obligation specifically provided in the written professional
employer agreement.
(3) Beginning July 1, 2012, all of the following apply:
(a) A covered employee is not, solely as the result of being a
covered employee of a PEO, an employee of the PEO for purposes of
general liability insurance, fidelity bonds, surety bonds,
employer's liability not covered by worker's compensation, or
liquor liability insurance carried by the PEO unless covered
employees are included by specific reference in the professional
employer agreement and applicable prearranged employment contract,
insurance contract, or bond.
(b) (4)
A PEO is not considered engaged in
the sale of
insurance or in acting as a third party administrator by offering,
marketing, selling, administering, or providing professional
employer services that include services and employee benefit plans
for covered employees.
(c) (5)
A client and a PEO are each
considered an employer for
purposes of sponsoring retirement and welfare benefit plans for its
covered employees. A fully insured welfare benefit plan offered to
the covered employees of a single PEO shall be treated, for
purposes of state law, as a single employer welfare benefit plan.
(d) (6)
For purposes of this state or any
political
subdivision of this state and except as otherwise specifically
provided for PEO arrangement by law, covered employees whose
services are subject to sales tax are considered the employees of
the client for purposes of collecting and levying sales tax on the
services performed by the covered employee. This act does not
relieve a client of any sales tax liability with respect to its
goods or services.
(4) (7)
Except as otherwise specifically
provided for PEO
arrangement
by law, a all of the
following apply beginning July 1,
2012:
(a)
A tax or assessment imposed upon on professional
employer
services
or any business license or other fee that is based upon on
gross receipts shall allow a deduction from the gross income or
receipts of the business derived from performing professional
employer services that is equal to that portion of the fee charged
to a client that represents the actual cost of wages and salaries,
benefits, worker's compensation insurance, payroll taxes,
withholding, or other assessments paid to, or on behalf of, a
covered employee by the professional employer organization under a
professional employer agreement.
(b) (8)
Except as otherwise specifically provided for PEO
arrangement
by law, a A tax assessed, assessment, or mandated
expenditure on a per capita or per employee basis shall be assessed
against the client for covered employees and against the
professional employer organization for its employees who are not
covered employees co-employed with a client. Benefits or monetary
consideration that meet the requirements of mandates imposed on a
client and that are received by covered employees through the PEO,
either through payroll or through benefit plans sponsored by the
PEO, shall be credited against the client's obligation to fulfill
those mandates.
(c) (9)
Except as otherwise specifically provided for PEO
arrangement
by law and in the case of If a tax or an assessment is
imposed
or calculated upon on the basis of total payroll, the
professional employer organization is eligible to apply any small
business allowance or exemption available to the client for the
covered employees for the purpose of computing the tax.
Sec.
21. (1) A Beginning July
1, 2012, a person who that
commits 1 or more of the following is subject to the penalties
prescribed
under described in subsection (2):
(a) Practices fraud or deceit in obtaining or renewing a
license.
(b) Aids or abets another person in the unlicensed practice of
an occupation.
(c) Engages in activities regulated under this section without
obtaining
a license under this act or demonstrating exemption that
the person is exempt from licensure under this act.
(d)
In the case of If the
person is a licensee or an officer
of
a licensee, being is convicted of a crime relating to the
operation of a PEO.
(e) Engages in false advertising.
(2) After notice and opportunity for hearing under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328,
the department shall do 1 or more of the following upon the
determination
of a violation of if it
determines that a person
violated this act, a rule adopted under this act, or an order
issued under this act:
(a)
Placement of Place a limitation on a license.
(b)
Suspension of Suspend a license.
(c)
Denial of Deny a license or renewal of a license.
(d)
Revocation of Revoke a license.
(e)
Imposition of Impose an administrative fine to be paid to
the department, not to exceed $5,000.00.
(f) Censure the person or license.
(g)
Probation.Place the
licensee on probation.
(h)
A requirement that Require
restitution to be
made, based
upon
on proofs submitted to and findings made by the hearing
examiner after a contested case.
Sec.
23. A person who Beginning
July 1, 2012, a person that
knowingly
and willfully violates this act, or who that aids and
abets,
directly or indirectly, the a
violation of this act, is
guilty of a misdemeanor punishable by imprisonment for not more
than 1 year or a fine of not more than $10,000.00, or both.
Sec.
27. This act takes effect July 1, 2011.January 1, 2012.