1997 Regular Session
To: Business and Financial Institutions
By: Senator(s) Woodfield
Senate Bill 2605
AN ACT TO CREATE THE ADMINISTRATIVE EMPLOYER ORGANIZATION AGREEMENTS ACT; TO DEFINE CERTAIN TERMS; TO REQUIRE REGISTRATION OF ADMINISTRATIVE EMPLOYERS WITH THE SECRETARY OF STATE; TO PROVIDE FOR AN ANNUAL REGISTRATION FEE; TO PRESCRIBE GENERAL RESPONSIBILITIES FOR ADMINISTRATIVE EMPLOYERS; TO PROVIDE FOR CIVIL PENALTIES FOR VIOLATIONS OF THE 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 "Administrative Employer Act."
SECTION 2. The Legislature recognizes that there is a public need for registering administrative employers, and therefore, deems it necessary in the interest of public health, safety and welfare to establish standards for the operation and registration of administrative employers in this state.
SECTION 3. (1) As used in this act, unless the context otherwise requires:
(a) "Administrative employer" (AE) means any person, business, or other entity which provides services to a "worksite employer," pursuant to an administrative employer agreement.
(b) "Worksite employer" means any person, business, or other entity which acquires the services of an administrative employer under an AEA and which otherwise retains direction and control of the employees specified in the agreement as to responsibilities not assumed by the AE.
(c) "Administrative employer agreement" (AEA) means any written labor leasing agreement or other agreement, whereunder an "administrative employer" acquires from a "worksite employer" specified employer responsibilities such as payment of wages, payroll preparation, calculation, collection, reporting and payment of payroll taxes. This term also includes administration of unemployment compensation claims, securing of applicable coverage, administration of claims attendant to such insurance coverage, sponsoring and administration of employee benefit plans, including employee welfare benefit plans and employee pension benefit plans, and provision of benefits attendant to such plans, and professional guidance as to employment matters.
(d) "Applicant" means a person registering in accordance with this act.
(e) "Client" means a person, other than an AE, who is a party to an AEA.
(f) "Controlling person" means:
(i) Any natural person who possesses, directly or indirectly, the power to direct or cause the direction of the management of policies of an AEA, through ownership of a five percent (5%) or greater interest, or voting securities of a five percent (5%) or greater interest, by contract or otherwise; or
(ii) Any natural person employed, appointed or authorized by an AE to enter into a contractual relationship with a client on behalf of the AEA.
(g) "Good moral character" means a personal history of honesty, trustworthiness, fairness, good reputation for fair dealings and respect of the rights of others and for the laws of this state and nation.
(h) "Registrant" means a person registering as an AE or AE group under this act.
(i) "Person" means an individual, an association, a company, a firm, a partnership or a corporation.
(j) "Worksite employee" means a person who performs services for a worksite employer and is the employee of the AE for purposes enumerated in Section 6 of this act.
(k) "Worksite employer" means a person, who as a client of an AE and assumes responsibility for worksite operations as necessary to conduct the client's business.
(2) The term, administrative employer agreement, is to be liberally construed so as to include any and all arrangements meeting the criteria set forth by this act, by whatever term known. For the purposes of this act, an AEA shall not include:
(a) Arrangements wherein a person, whose principal business activity is not entering into AEAs, shares employees with a commonly owned company within the meaning of Section 414(b) and (c) of the Internal Revenue Code of 1986, as amended and which does not hold itself out as an AEA; or
(b) 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.
(c) Arrangements for which a person assumes full responsibility for the product or service performed by such person or his agents and retains and exercises, both legally and in fact, a complete right of direction and control over the individuals whose services are supplied under contractual arrangements, and the person or his agents perform a specified function for the recipient which is separate and divisible from the primary business or operations of the recipient.
SECTION 4. This act shall not apply to labor organizations as defined by the National Labor Relations Act or to any political subdivision of this state, the United States and any programs or agencies thereof.
SECTION 5. (1) Every applicant for a initial AE registration shall file with the Secretary of State an annual completed application on a form prescribed and furnished by the Secretary of State. The registration shall be accompanied by a non-refundable fee of One Thousand Dollars ($1,000.00) each year.
(2) Applicants registering as an AE or AE group shall meet the following minimum standards:
(a) If an individual, the applicant must be of the age of majority;
(b) If a partnership, the applicant shall state the names and home addresses of all partners and indicate whether each partner is a general or a limited partner; the applicant shall include a copy of the partnership agreement or an affidavit signed by all partners to the effect that no written partnership agreement exists;
(c) If a corporation, the applicant shall state the names and home addresses of all officers, directors and shareholders who own a five percent (5%) or greater interest in the corporation or its predecessors in the preceding five (5) years. The applicant shall include a certificate of good standing from the Secretary of State evidencing its qualification to do business in this state; and
(d) If a group, the parent entity or other entity authorized to act on behalf of the group shall be the applicant; the applicant shall include for each AE within the group the information required in paragraphs (b) and (c) of this subsection.
(3) The registrant shall provide the trade name or names under which the registrant conducts business, its taxpayer or employer identification number and the address of its principal place of business in this state and the address of any other office within this state through which the registrant intends to conduct businesses as an AE or AE group. If the registrant's principal place of business is located in another state, such address shall be provided.
(4) The registrant shall provide a list by jurisdiction of each name under which the registrant has operated in the preceding five (5) years, including any alternative names, names of predecessors and names of related business entities with common majority ownership.
(5) The registrant shall provide any other information the Secretary of State deems reasonably necessary to show that the registrant and each controlling person is of good moral character and business integrity.
(6) Being convicted of or entering a plea of nolo contendre to fraud, deceit or misconduct as it relates to any section of this act shall be deemed sufficient grounds to deny registration.
(7) All foreign companies registering under this act shall also furnish to the Secretary of State all information as required under the laws of the state in which they are domiciled, and must meet all requirements in this state that would be required of them in the state in which they are domiciled including all fees. For the purposes of this act, the majority of all home offices, payroll functions and administration duties wherever performed shall constitute a resident.
SECTION 6. (1) A licensed AE or AE group shall perform the following general responsibilities as a registrant:
(a) Have a written contract between the client and the AE recognizing the AE as an employer for specific purposes and setting forth the responsibilities and duties of each party; the contract shall disclose to the client the services to be rendered by the AE, the respective rights and obligations of the parties, and provide that the AE shall be viewed as an employer for payroll administration, federal tax and health care, cafeteria plans, withholding, and all other duties and obligations of AE described in the contract;
(b) Give written notice of the general nature of the relationship between the AE and the client to each worksite employee; and
(c) Notify the Secretary of State in writing of a change of business address or any changes among partners, directors, officers, members and controlling persons designated in the registration within thirty (30) days of the change.
(2) A registered AE shall be deemed an employer of the worksite employees for the following purposes and shall have a right to and shall perform the following responsibilities:
(a) Pay wages and collect, report, and pay taxes, and shall be required to follow all laws and regulations of various state and federal agencies; for purposes of unemployment taxes, the AE shall be viewed as the successor employer by the Mississippi Employment Security Commission and shall be required to follow all rules and regulations as promulgated by the Mississippi Employment Security Commission.
(b) Ensure that all of its Mississippi employees are covered by workers' compensation in accordance with the laws of this state through a policy maintained or established by the AE or client. Such policy shall be with a company admitted in this state with the Department of Insurance and have an "A" rating; except those self-funded plans specifically established by an act of the Mississippi Legislature. A registered AE shall promptly notify its clients of any changes of its workers' compensation insurance carrier. All questions concerning workers' compensation shall be addressed by the Commissioner of Insurance and/or the Mississippi Workers' Compensation Commission as required under current law.
(3) AEs shall not be held liable for the taxes or wages not remitted to the AE by the worksite employer.
(4) A registered AE shall be deemed an employer for the purposes of sponsoring and maintaining employee benefit and welfare plans for its worksite employees. Nothing herein shall require an AE to provide comparable benefits to worksite employees located at different client worksites.
(5) All other duties and obligations shall be determined by contract between the AE and their respective clients.
(6) A registered AE shall disclose 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. Any changes in benefits must be in writing and the AE must notify clients and employees within thirty (30) days. The information shall include for each plan:
(a) The type of benefits;
(b) The identity of each insurer 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; and
(e) Whether the coverage is fully insured, partially insured or fully self-funded.
(7) If AE provide benefits through either a single employer or a multiple employer benefit trust as defined under the Employee Retirement Income Security Act of 1974 (ERISA), then that company must meet the following requirements. Any changes to the plan will require the company to notify all worksite employees within thirty (30) days in writing of said changes. The following requirements are:
(a) Must state if the plan has reinsurance, and the name of the reinsurance company and must meet requirements of admission in Mississippi;
(b) Must state amount of reinsurance; and the single and the aggregate amounts;
(c) Must file a copy of their benefit plan with the Commissioner of Insurance; and
(d) Must maintain a reserve equal to their three (3) highest months claims experience in each calendar year as determined by the certified actuary of their choice. Disclosure as required by this section may be made by any written means reasonably calculated to adequately inform the worksite employees. Written means may include without limitation, a summary plan description which meets the requirements of the ERISA, as amended. For purposes of this act, the Commissioner of Insurance shall have the right to promulgate rules governing all self-funded plans established by an AEA pursuant to the requirements of this act.
(8) Subject to any contrary provisions of the contract between the client and the AE, the AE arrangement that exists between an AE and its clients shall be interpreted for the purposes of insurance, bonding and employer's liability as follows:
(a) The AE and the client shall be entitled to the exclusivity of the remedy under both the workers' compensation and employer's liability provisions of a worker's compensation policy or plan that either party has secured.
(b) An AE 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 an AE or of any employee of an AE acting under the direction and control of the AE. Nothing herein shall limit any contractual liability between the AE and the client, nor shall this subsection in any way limit the liabilities of an AE or client as defined elsewhere in this act.
(c) Worksite employees of a client and an AE shall be considered as the employees of the client for the purpose of general liability insurance, automobile insurance, fidelity bonds, surety bonds, employer's liability and liquor liability insurance carried by the AE unless the employees are included by specific reference in the applicable insurance state law.
(d) The sale of AE arrangements in conformance with this act shall not constitute the sale of insurance within the meaning of applicable state law.
SECTION 7. (1) Any person who engages in the business of or acts as an AE without first registering, or otherwise violates the provisions of this act, shall be liable for a civil penalty for each offense of One Thousand Dollars ($1,000.00) for each count or separate offense not to exceed Ten Thousand Dollars ($10,000.00). Each day of violation shall constitute a separate offense.
(2) In addition to the penalties provided in this act, the Secretary of State may 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 an AE without having first registered.
(3) In the event the Secretary of State or the Consumer Protection Division of the State Attorney General's Office determines a violation occurred, the offending AE shall pay all costs associated with the investigation, audits or reviews.
SECTION 8. All registration fees collected under this act shall be deposited into the General Fund of the State of Mississippi.
SECTION 9. Nothing in this act exempts a client of an AE nor any worksite employee of a client and an AE 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. Except to the extent provided otherwise in the contract with a client, an AE is not liable for the general debts, obligations, loss of profits, business goodwill or other consequential special or incidental damages of a client with which it has entered into an AEA.
SECTION 10. Should any part of this act be held invalid or unconstitutional by a court of competent jurisdiction or by new regulations issued by appropriate regulatory agencies, the balance of this act shall remain in full force and effect.
SECTION 11. This act shall take effect and be in force from and after July 1, 1998.