Professional employer organizations., the official text

An act to add Chapter 1 (commencing with Section 1650) to Part 6 of Division 2 of the Labor Code, relating to employment.

LEGISLATIVE COUNSEL'S DIGEST

Existing federal law provides for certification of a professional employer organization (PEO) by the Secretary of the Treasury and, for purposes of specified taxes and other obligations, treats a PEO as the employer of any work site employee performing services for any customer of the PEO. Existing law establishes the Division of Labor Standards Enforcement, headed by the Labor Commissioner, within the Department of Industrial Relations, for the purpose of enforcing labor laws.
This bill would prohibit a person from providing, advertising, or otherwise holding oneself out as providing professional employer services, as defined, in the state unless the person is registered with the division. The bill would require a PEO, as defined, upon registration, to pay an initial registration fee established by the division not to exceed the reasonable cost of registration.

The people of the State of California do enact as follows:

SECTION 1.
Chapter 1 (commencing with Section 1650) is added to Part 6 of Division 2 of the Labor Code, to read:
1.
Professional Employer Organizations1650.
For purposes of this chapter:
(a) “Division” means the Division of Labor Standards Enforcement.
(b) “Professional employer organization” (PEO) means a person that meets any of the following criteria:
(1) Is certified by the Secretary of the Treasury pursuant to Section 7705 of Title 26 of the United States Code.
(2) Is accredited by the Employer Services Assurance Corporation.
(3) Provides professional employer services to a client pursuant to a written professional employer agreement intended by the parties to create an ongoing relationship.
(c) “Professional employer services” means services pursuant to a professional services agreement that provides for all or substantially all employees of a client and includes all of the following:
(1) Reporting employee wages using the federal employer identification number of the PEO.
(2) Securing workers’ compensation insurance in compliance with paragraph (1) of subdivision (d) of Section 3602 and Section 3700.
(3) Offering employee benefit plans.

1651.
A person shall not provide, advertise, or otherwise hold oneself out as providing professional employer services in the state unless the person is registered with the division under this chapter.

1652.
Upon registration, a PEO shall pay an initial registration fee established by the division not to exceed the reasonable cost of providing the registration under this chapter.