MISSISSIPPI LEGISLATURE

1997 Regular Session

To: Insurance

By: Representative Stevens

AN ACT TO CREATE THE MISSISSIPPI PROFESSIONAL EMPLOYER ORGANIZATION LICENSING ACT; TO PROVIDE DEFINITIONS; TO AUTHORIZE THE COMMISSIONER OF INSURANCE TO PROMULGATE RULES AND REGULATIONS FOR THE LICENSING AND CONDUCT OF PROFESSIONAL EMPLOYER ORGANIZATIONS (PEOS); TO PROVIDE REQUIREMENTS FOR LICENSING; TO PROVIDE FOR PENALTIES FOR VIOLATIONS; TO PROVIDE RESPONSIBILITIES OF PEOS; TO PROVIDE FOR DISCIPLINARY ACTIONS AGAINST LICENSEES BY THE COMMISSIONER OF INSURANCE; TO AUTHORIZE THE COMMISSIONER OF INSURANCE TO MAKE INVESTIGATIONS, AUDITS OR REVIEWS AS NECESSARY TO CARRY OUT THE PROVISIONS OF THIS ACT; AND FOR RELATED PURPOSES. 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. This act shall be known and may be cited as the "Mississippi Professional Employer Organization Licensing Act."

SECTION 2. The Legislature recognizes that there is a public need for Professional Employer Organizations ("PEOs") and, therefore, deems it necessary in the interest of public health, safety and welfare to establish standards for the operation, regulation and licensing of PEOs in this state.

SECTION 3. As used in this act, unless the context otherwise requires:

(a) "Applicant" means a person applying for licensing in accordance with this act.

(b) "Client" means a person other than a PEO who contracts with a PEO to render all types of services that are relevant to persons providing services for the client.

(c) "Commissioner" means the Commissioner of Insurance.

(d) "Controlling person" means:

(i) Any natural person who possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of any PEO; or

(ii) Any natural person employed, appointed or authorized by a PEO to enter into a contractual relationship with a client on behalf of the PEO.

(e) "Licensee" means a person licensed as a PEO or PEO group under this act.

(f) "Professional Employer Organization" ("PEO") means any person engaged in providing services to a client in accordance with one (1) or more PEO arrangements.

(g) "Person" means an individual, an association, a company, a firm, a partnership or a corporation.

(h) "Professional Employer Organization ("PEO") arrangement" means an arrangement under contract, or otherwise, in which a firm contractually agrees to perform, purports to perform or actually performs services for a client for a part of the existing work force at a client worksite. The term, PEO arrangement, is to be liberally construed so as to include any and all such arrangements meeting the criteria set forth by this act, by whatever term known.

For the purposes of this act, a PEO arrangement shall not include arrangements for which a person assumes total responsibility for the product or service performed by such person or his agents and retains and exercises, both legally and in fact, primary direction and control over the individuals whose services are supplied under such contractual arrangements. The term PEO arrangement shall not include temporary help arrangements in which an organization hires its own employees and assigns them to a client to support or supplement the client's work force in special work situations such as employee absences, temporary skill shortages, seasonal workloads and special assignments and projects.

(i) "Worksite employee" means a person who performs services for a PEO and one or more clients of the PEO in accordance with a PEO arrangement.

(j) "Worksite employer" means a person who, as a client of a PEO, assumes responsibility for worksite operations as necessary to conduct the client's business.

SECTION 4. The commissioner may promulgate rules and regulations in accordance with the Administrative Procedures Act for the conduct of the business and licensing of PEOs as may be deemed necessary to carry out the provisions of this act. These rules shall have the force and effect of law and shall be enforced by the commissioner in the same manner as the provisions of this act.

SECTION 5. After the effective date of this act, and the promulgation of rules and regulations thereto, any person who engages in the business of, or acts as, a PEO by entering into any PEO arrangement with a client relating to business conducted by the client in this state without first procuring a license, or who otherwise violates the provisions of this act may be fined in an amount not to exceed Five Thousand Dollars ($5,000.00) per violation after a full hearing before the Commissioner of Insurance.

SECTION 6. (1) Each applicant for a PEO license shall demonstrate for the commissioner, and maintain, an accounting net worth of not less than the greater of:

(a) Twenty-five Thousand Dollars ($25,000.00); or

(b) Fifty Dollars ($50.00) per worksite employee not to exceed in total Fifty Thousand Dollars ($50,000.00). For the purposes of this provision, worksite employees shall mean all worksite employees of the licensee or applicant, whether performing services within or without this state, at the time of computation. Such net worth shall be demonstrated by providing a financial statement prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by at least a compilation report by an independent certified public accountant. At the applicant's option, application may be made contingent on showing required net worth before the issuance of such license but subsequent to the conditional approval thereof. Documents submitted to establish net worth shall reflect net worth as of a date not more than six (6) months before the date on which the application is submitted. In meeting the specified net worth requirement, the applicant may provide to the commissioner a surety bond or marketable securities acceptable to the commissioner in lieu of the financial statement.

(2) The commissioner may issue a restricted license to a PEO or PEO group resident or domiciled in another state for limited operation within this state if the applicant's state of domicile or residence provides for licensing of PEO, employee leasing or staff leasing companies and the applicant is licensed and in good standing in its state of domicile or residence, which state grants a similar privilege for restricted licensing to PEO, employee leasing or staff leasing companies or groups resident or domiciled and licensed in Mississippi under this act.

SECTION 7. (1) The commissioner, or his authorized representative, is authorized to deny an application for license:

(a) Where the application is not fully complete, properly executed or is otherwise deficient on its face;

(b) Where documents required to supplement the application are not included in the application packet or are otherwise inadequate;

(c) Where any fees required by the Commissioner of Insurance under this act are not submitted as required;

(d) Where the applicant, or any person named in the application, has made a material misrepresentation in the application;

(e) Upon a finding that any person named in the application is not of good moral character, business integrity or financial responsibility; or

(f) Upon a finding that the applicant has failed to meet or maintain any other requirement of this act or that there is good and sufficient reason within the meaning and purpose of this act to deny the application.

(2) The commissioner, or his authorized representative, shall furnish the applicant with a written statement of the reason(s) for denying the application. The applicant may request a hearing before the commissioner within thirty (30) days of receipt of the written statement. The hearing and any further appeal shall proceed as provided in the Mississippi Administrative Procedures Act. The applicant may continue to operate during such hearing and appeal process to the extent otherwise permitted by state law. If the application is rejected, the applicant shall have thirty (30) days following receipt of written notification after such finding has become nonappealable to cease all operations within the state.

(3) An applicant or licensee shall be ineligible to reapply for a license for a period of one (1) year following final agency action on the denial or revocation of a license applied for or issued under this act unless the commissioner finds good cause to allow reapplication before the expiration of the one-year period. SECTION 8. The commissioner shall have the authority to determine the amount of the fees for the administration of this act.

SECTION 9. (1) In addition to imposition of the penalties set out in this act, the commissioner may suspend for up to twelve (12) months or may permanently revoke or refuse to renew any license issued hereunder, if, after notice to the licensee of the charges against it and after hearing, the commissioner finds any one or more of the following causes exists:

(a) Any cause for which issuance of the license could have been refused had it then existed and been known to the commissioner;

(b) Violation of or noncompliance with any applicable provision of this act or of any regulation or order of the commissioner;

(c) Obtaining or attempting to obtain any license through misrepresentation or fraud;

(d) Conviction of the licensee, or any controlling person designated in the license, of a felony;

(e) Failure to provide a written response to a written inquiry from the commissioner or his authorized representative within thirty (30) days after receipt of the inquiry; or

(f) Failure to meet or maintain any other requirement of, or regulation promulgated under, this act.

(2) The license of a partnership, corporation or group may be suspended, revoked or not renewed for any of the causes set out in subsection (1) of this section as such cause relates to any controlling person designated in the license to exercise powers of the partnership, corporation or group.

SECTION 10. (1) A licensed PEO or PEO group shall perform the following general responsibilities as a licensee:

(a) The PEO arrangement shall have a written contract between the client and the PEO recognizing the PEO as a co-employer and setting forth the responsibilities and duties of each party. The contract shall disclose to the client the services to be rendered by the PEO, including charges and fees, the respective rights and obligations of the parties, and provide that the PEO:

(i) Reserves a right of direction and control over worksite employees and exercises that right in the context of the need to do so. However, the client as the worksite employer may retain such sufficient direction and control over worksite employees as is necessary to conduct the client's business and without which the client would be unable to conduct its business, discharge any fiduciary responsibility which it may have or comply with any applicable licensure, regulatory or statutory requirement of the client;

(ii) Assumes responsibility for the payment of wages of its worksite employees and related payroll taxes from its own accounts without regard to payments by the client to the PEO;

(iii) Maintains ultimate authority to hire, terminate, discipline and reassign worksite employees, subject to the terms of any collective bargaining agreements which may exist. However, the client shall have the right to accept or cancel the services of any worksite employee independent of the right of the PEO to hire or terminate any of its worksite employees;

(iv) Maintains ultimate authority to resolve and decide worksite employee grievances and disputes, subject to the terms of any collective bargaining agreements which may exist; and

(v) Maintains a right over the management of worksite safety and the right to inspect the premises to ensure that worksite employees are working in safe environments.

(b) The PEO shall give written notice of the general nature of the relationship between the PEO and the client to each worksite employee.

(c) The PEO shall submit to the commissioner, within ninety (90) days of the end of each calendar quarter, a certification by an independent certified public accountant or independent public accountant who meets the commissioner's approval that for such quarter all applicable payroll taxes have been paid on a timely basis. Upon a showing of reasonable cause, one (1) thirty-day extension per quarter shall be granted.

(d) The PEO shall maintain and make available for the commissioner's or his authorized representative's inspection any and all records concerning the PEO's conduct of business under its license, which records shall be maintained for a period of three (3) years after termination of the employment relationship or PEO arrangement.

(e) The PEO shall notify the commissioner in writing within thirty (30) days of any changes among partners, directors, officers, members and controlling persons designated in the license.

(f) The PEO shall post the license issued under this act in a conspicuous place in the client's principal place of business and display in clear public view in each office of the PEO in this state a notice stating that the PEO is licensed and regulated by the commissioner and that any questions or complaints should be directed to the commissioner.

(2) A licensed PEO shall be deemed an employer of its worksite employees and shall have a right to and shall perform the following responsibilities:

(a) Pay wages and collect, report and pay employment taxes from its own accounts;

(b) Pay unemployment taxes as required by law; and

(c) Ensure that all of its Mississippi employees are covered by workers' compensation provided in accordance with the laws of this state through a policy maintained or established by the PEO or client. No license shall be issued to any PEO until the PEO files with the commissioner evidence of workers' compensation coverage for all its worksite employees in this state.

(3) A licensed PEO shall disclose to the commissioner, to each of its clients and to its worksite employees information on any health or life fringe benefit program provided for the benefit of its worksite employees. Such information shall include for each plan:

(a) The type of benefits;

(b) The identity of each insurer or benefit provider for each type of coverage;

(c) The amount of benefits for each type of coverage and to whom or on whose behalf benefits will be paid;

(d) The policy limits on each insurance policy or benefit plan; and

(e) Whether such coverage is fully insured, partially insured, fully self-funded or other method under which the benefit plan operates.

Disclosure as required by this section may be made by any written means reasonably calculated to inform adequately the worksite employees of the above matters. Such written means may include, without limitation, a summary plan description which meets the requirements of the Employee Retirement Income Security Act of 1974, as amended.

(4) Subject to any contrary provisions of the contract between the client and the PEO, the PEO arrangement that exists between a PEO and its clients shall be interpreted for purposes of insurance, bonding and employer's liability as follows:

(a) The PEO shall be entitled along with the client to the exclusivity of the remedy under both the workers' compensation and employer's liability provisions of a workers' compensation policy or plan that either party has secured.

(b) A PEO shall not be liable for the acts, errors or omissions of a client or of any worksite employee acting under the direction and control of a client. A client shall not be liable for the acts, errors or omissions of a PEO or of any employee of a PEO acting under the direction and control of the PEO. Nothing herein shall limit any contractual liability between the PEO and the client, nor shall this subsection in any way limit the liabilities of a PEO or client as defined elsewhere in this act.

(c) Worksite employees of a client and a PEO shall be considered as the employees of the client for the purposes of general liability insurance, automobile insurance, fidelity bonds, surety bonds, employer's liability and liquor liability insurance carried by the client. Worksite employees of a client and a PEO are not deemed employees of the PEO for purposes of general liability insurance, automobile insurance, fidelity bonds, surety bonds, employer's liability or liquor liability insurance carried by the PEO unless the employees are included by specific reference in the applicable insurance contract or bond.

(d) The sale of PEO arrangements in conformance with the provisions of the act shall not constitute the sale of insurance within the meaning of applicable state law.

SECTION 11. (1) Upon finding that a licensee has violated any provisions of this act or any rules and regulations established thereto, the commissioner may take one or more of the following disciplinary actions:

(a) Deny an application for licensure;

(b) Revoke, suspend, restrict or decline to renew a license;

(c) Impose an administrative fine not to exceed One Thousand Dollars ($1,000.00) for every count or separate offense;

(d) Issue a reprimand;

(e) Place the licensee on probation for a period of time and subject to such conditions as the commissioner may specify; or

(f) Impose upon the licensee the cost of investigation and prosecution, including reasonable attorney fees.

(2) Upon revocation or suspension of a license, the licensee shall immediately return to the commissioner the license which was revoked or suspended.

SECTION 12. (1) Any person who engages in the business of or acts as a PEO without first procuring a license, or otherwise violates the provisions of this act or any rules and regulations promulgated by the commissioner in accordance with this act, shall be liable for a civil penalty for each such offense of Five Thousand Dollars ($5,000.00) for each count or separate offense. Each day of violation shall constitute a separate offense.

(2) In addition to the penalties described in this act, the commissioner shall have the statutory power to enjoin or restrain by bringing an action in the Chancery Court of Hinds County, Mississippi, against any person who engages in business of or acts as a PEO without having first procured a license for so engaging or acting.

SECTION 13. The commissioner may make, or cause to be made, investigation, audits or reviews within or without the state as the commissioner deems necessary to carry out this act and the commissioner may assess the PEO all necessary expenses in carrying out the investigation, audits or reviews.

SECTION 14. Nothing in this act exempts a client of a PEO nor any worksite employee of a client and a PEO from any other state, local or federal licensure or registration requirement. Any individual who must be licensed, registered or certified according to law and who is a worksite employee is deemed an employee of the client for purposes of the license, registration or certification.

SECTION 15. If any provision of this act, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and to that end the provisions of this act are severable.

SECTION 16. This act shall take effect and be in force from and after January 1, 1998.