H. B. 4273
(By Delegate Morgan)
(By Request of the Insurance Commissioner)
[Introduced February 2, 2010; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend and reenact §33-46A-2 of the Code of West Virginia,
1931, as amended; and to amend said code by adding thereto a
new section, designated §33-46A-4a, all relating to
professional employer organizations; revising definition of
"professional services," subjecting unlicensed professional
employer organizations to penalty and other provisions
regulating the unauthorized transaction of insurance; and
authorizing insurance fraud unit to conduct investigations.
Be it enacted by the Legislature of West Virginia:
That §33-46A-2 of the Code of West Virginia, 1931, as amended
be amended and reenacted; and that said code be amended by adding
thereto a new section, designated §33-46A-4a, all to read as
follows:
ARTICLE 46A. PROFESSIONAL EMPLOYER ORGANIZATIONS.
§33-46A-2. Definitions.
(a) "Administrative fee" means the amount charged to a client-
employer by a PEO for professional employer services. It does not
include amounts paid by a client-employer to the PEO for wages and
salaries, benefits, payroll taxes, withholding or assessments paid
by the PEO to or on behalf of covered employees under the
professional employer agreement.
(b) "Client-employer" means an employer who enters into a
professional employer agreement with a PEO.
(c) "Covered employee" means a person employed by a client-
employer for whom certain employer responsibilities are shared or
allocated pursuant to a PEO agreement. Persons who are officers,
directors, shareholders, partners and managers of the client-
employer and who perform day-to-day operational services for the
client-employer will be covered employees only to the extent
expressly set forth in the professional employer agreement.
(d) "PEO group" means two or more PEOs that are majority owned
or commonly controlled by the same entity, parent or controlling
persons.
(e) "Person" means a natural person or a legal entity,
including, without limitation, a sole proprietorship, firm,
partnership, limited liability company, association, trust or
corporation.
(f) "Professional employer agreement" means a written contract
by and between a client-employer and a PEO under which a PEO
contracts to provide professional employer services for an administrative fee.
(g) "Professional employer organization" or "PEO" means a
person engaged in the business of providing professional employer
services, regardless of its use of the term, or conducting business
as a "staff leasing company," "registered staff leasing company,"
"employee leasing company," "administrative employer," or any other
name. For purposes of this article, the following is not a PEO:
(1) A person who 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;
(2) A person who neither holds itself out as a PEO, nor enters
into professional employer agreements as its principal business
activity;
(3) An independent contractor who assumes responsibility for
the product produced or service performed by a person or his or her
agents and who retains and exercises primary direction and control
over the work performed; or
(4) A person who provides temporary help services.
(h) "Professional employer services" means functions that are:
(1) Allocated to a PEO in a PEO agreement;
(2) Customarily exercised by an employer with respect to its
employees, including, but not limited to, hiring, firing and
disciplining employees, paying wages, withholding and paying
payroll taxes, maintaining employee benefit plans, and providing
for mandatory workers' compensation coverage; and
(3) Exercised with respect to a majority of the employees of
a client-employer; and
(4) Intended to be of a continuing rather than a temporary or
seasonal nature.
(j) (i) "Worksite employees" means persons employed by a PEO
and not by a client-employer.
§33-46A-4a. Operation of a PEO as transaction of insurance;
enforcement; penalties; fraud unit may
investigate.
(a) The operation of a PEO constitutes the transaction of
insurance for the purposes of article forty-four of this chapter,
and any person who operates a PEO without a license issued in
accordance with this article is subject to the same criminal, civil
and administrative penalties as provided in article forty-four of
this chapter for the unauthorized transaction of insurance.
(b) In addition to the other investigative authority granted
to the commissioner in this chapter, the insurance fraud unit
created pursuant to the provisions of section eight, article
forty-one of this chapter may investigate suspected violations of
this article.
NOTE: The purpose of this bill is to authorize the Insurance
Commissioner to apply the same enforcement provisions to unlicensed
professional employer organizations (PEOs) as are applicable to
unauthorized insurers and to allow the fraud unit to investigate
PEOs.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.