2016 Arkansas Code
Title 23 - Public Utilities and Regulated Industries
Subtitle 3 - Insurance
Chapter 92 - Multiple Employer Trusts and Self-Insured Plans
Subchapter 4 - -- Arkansas Professional Employer Organization Recognition and Licensing Act
§ 23-92-409. Relationships defined

(a) (1) Except as specifically provided in this subchapter, the coemployment relationship between the client and the professional employer organization and between each coemployer and each covered employee shall be governed by the professional employer agreement.

(2) Neither this subchapter nor any professional employer agreement shall:

(A) Diminish, abolish, or remove rights of covered employees as to clients or obligations of clients as to a covered employee that existed before the effective date of a professional employer agreement;

(B) Terminate an employment relationship existing before the effective date of a professional employer agreement; or

(C) Create any new or additional enforcement right of a covered employee against a professional employer organization not specifically allocated to the professional employer organization in the professional employer agreement or under this subchapter.

(b) Except as specifically provided in this subchapter or in the professional employer agreement, in each coemployment relationship:

(1) The client is entitled to exercise all rights and is obligated to perform all duties and responsibilities otherwise applicable to an employer in an employment relationship; and

(2) (A) The professional employer organization shall be entitled to exercise only the rights and obligated to perform only the duties and responsibilities specifically required by this subchapter or by the professional employer agreement.

(B) The rights, duties, and obligations of the professional employer organization as coemployer with respect to any covered employee is limited to those rights during and obligations arising under the professional employer agreement and this subchapter during the term of coemployment by the professional employer organization of the covered employee.

(c) Each professional employer agreement shall include, at a minimum, the following:

(1) (A) The professional employer organization shall reserve a right of direction and control over the covered employees.

(B) However, the client may retain the right to exercise direction and control over covered employees as is necessary to:

(i) Conduct the client's business;

(ii) Discharge any fiduciary responsibility that it may have; or

(iii) Comply with any applicable licensing requirements;

(2) The professional employer organization shall:

(A) Pay wages and salaries to covered employees;

(B) Withhold, collect, report, and remit payroll-related and employment taxes; and

(C) To the extent the professional employer organization has assumed responsibility in the professional employer agreement, make payments for employee benefits for covered employees;

(3) The professional employer organization shall retain the authority to hire, terminate, and discipline the covered employees unless otherwise agreed; and

(4) (A) The responsibility to obtain workers' compensation coverage for covered employees from a carrier licensed to do business in Arkansas and otherwise in compliance with all applicable requirements shall be specifically allocated to either the client or the professional employer organization.

(B) (i) If the responsibility under subdivision (c)(4)(A) of this section is allocated to the professional employer organization under a professional employer agreement, the professional employer agreement shall require the professional employer organization to maintain records regarding the premium and loss experience related to workers' compensation insurance provided to covered employees under the professional employer agreement.

(ii) The professional employer agreement shall also provide that, if requested by the client at or after the termination of the professional employer agreement, the professional employer organization shall provide the records maintained under subdivision (c)(4)(B)(i) of this section to the client.

(C) If the professional employer organization or any of its controlling persons cannot provide the information requested under subdivision (c)(4)(B)(ii) of this section, any insurance carrier that provided the coverage for the covered employees shall provide it upon request of the client or the Insurance Commissioner.

(5) (A) Upon request, during the period the client is a party to a professional employer organization arrangement and for a period of ninety (90) days after termination of a professional employer organization arrangement, a client or former client is entitled to receive records of the professional employer organization regarding payroll, workers' compensation coverage, losses and claims, and employee benefits provided under the professional employer organization arrangement.

(B) (i) The professional employer organization may charge a reasonable fee for the cost of reproducing the information under subdivision (c)(5)(A) of this section.

(ii) This section does not require the disclosure of information to a client or former client concerning another client or former client of the professional employer organization.

(C) Either the professional employer organization or the controlling person, to the extent the controlling person has access to the information, shall furnish the information requested within thirty (30) days of receiving the request.

(d) With respect to each professional employer agreement entered into by a professional employer organization, each professional employer organization shall provide written notice to each covered employee affected by the professional employer agreement of the general nature of the coemployment relationship between and among the professional employer organization, the client, and any covered employee.

(e) (1) A professional employer organization shall provide to a client within fifteen (15) days of receipt of a written request a record of wages by workers' compensation class code and claims loss runs for the lesser of the prior thirty-six (36) calendar months or the period of time the professional employer agreement between the client and professional employer organization has been effective.

(2) If a professional employer organization fails to provide the information in subdivision (e)(1) of this section and if the commissioner requests no later than ninety (90) days after the termination of the policy covering the client, the insurer providing the coverage shall provide to the client within thirty (30) days the information or as much information as the insurer possesses or should possess if the insurer has complied with applicable law.

(f) (1) Either a client or a professional employer organization may sponsor retirement and welfare benefit plans for its covered employees.

(2) If limited to the employees of the professional employer organization, a welfare benefit plan offered to the covered employees of a single professional employer organization shall not be considered a multiple employer welfare arrangement or trust within the meaning of applicable law.

(3) For purposes of § 23-86-201 et seq., with respect to a health benefit plan sponsored by a professional employer organization:

(A) A professional employer organization shall be considered the employer of all of its covered employees; and

(B) All covered employees of one (1) or more clients participating in a health benefit plan sponsored by a single professional employer organization shall be considered employees of the professional employer organization.

(4) If a professional employer organization offers to its covered employees any health benefit plan that is not fully insured by an authorized insurer, the plan shall:

(A) Utilize a third-party administrator licensed to do business in this state;

(B) Hold all plan assets, including participant contributions, in a trust account; and

(C) Provide sound reserves for the plan as determined using generally accepted actuarial standards.

(g) Except to the extent otherwise provided in a professional employer agreement:

(1) A professional employer organization shall not be liable for the acts, errors, or omissions of a client or of any covered employee when the covered employee is acting under the direction and control of a client;

(2) A client shall not be liable for the acts, errors, or omissions of a professional employer organization or of any covered employee of the client and a professional employer organization when the covered employee is acting under the direction and control of the professional employer organization;

(3) This subsection does not limit any contractual liability or obligation specifically provided in a professional employer agreement or the liabilities and obligations of any professional employer organization or client as defined elsewhere in this subchapter; and

(4) A covered employee is not, solely as the result of being a covered employee of a professional employer organization, an employee of the professional employer organization for purposes of general liability, insurance, fidelity bonds, surety bonds, or employer's liability not covered by workers' compensation carried by the professional employer organization unless the covered employees are included by specific reference in the professional employer agreement and applicable prearranged employment contract, insurance contract, or bond.

(h) Except as provided under § 23-92-411, the sale of professional employer services provided by professional employer organizations licensed under this subchapter shall not constitute the sale of insurance for purposes of Arkansas insurance law.

(i) Covered employees whose services are subject to sales tax shall be deemed the employees of the client for purposes of collecting and levying sales tax on the services performed by the covered employee.

(j) A licensed professional employer organization shall be deemed an employer of the covered employees and shall perform the following employer responsibilities in conformity with all applicable federal and state laws and regulations to:

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

(2) Pay unemployment taxes as required by the Department of Workforce Services Law, § 11-10-101 et seq.;

(3) (A) Ensure that all covered employees are covered by workers' compensation insurance provided in conformance with the laws of this state.

(B) Workers' compensation coverage may be provided through a policy or plan maintained by either the professional employer organization or the client.

(C) However, for purposes of risks insured under the Arkansas Workers' Compensation Insurance Plan, § 23-67-301 et seq., the commissioner is authorized to promulgate rules and regulations as he or she deems necessary to assure that workers' compensation coverage is available to employees providing services for a client;

(4) Be entitled and to entitle the client, together as joint employers, to the exclusive remedy under § 11-9-105, under both the workers' compensation and employer's liability provisions of a workers' compensation policy or plan that either party has secured within the meaning of § 11-9-105; and

(5) (A) Not be vicariously liable for the liabilities of the client, whether contractual or otherwise.

(B) However, the client shall not be vicariously liable for the liabilities of the professional employer organization, whether contractual or otherwise.

(C) This section shall limit any direct contractual liability or any joint liability between the client and the professional employer organization.