2022 Kentucky Revised Statutes Chapter 336 - Labor and employment 336.242 Rights, duties, and responsibilities of client and professional employer organization in a co-employment relationship -- Professional employer agreement -- Notice -- Imposition of taxes.
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336.242 Rights, duties, and responsibilities of client and professional employer
organization in a co-employment relationship -- Professional employer
agreement -- Notice -- Imposition of taxes.
(1)
(2)
Except as specifically provided in KRS 336.230 to 336.250, or in a professional
employer agreement, in each co-employment relationship:
(a) The client shall be entitled to exercise all rights, and shall be obligated to
perform all duties and responsibilities, otherwise applicable to an employer in
an employment relationship;
(b) The professional employer organization shall be entitled to exercise only those
rights, and shall be obligated to perform only those duties and responsibilities,
specifically required by KRS 336.230 to 336.250 or set forth in the
professional employer agreement. The rights, duties, and obligations of the
professional employer organization as co-employer with respect to any
covered employee shall be limited to those arising out of the professional
employer agreement and KRS 336.230 to 336.250 during the term of coemployment by the professional employer organization of the covered
employee; and
(c) Unless otherwise expressly agreed by the professional employer organization
and the client in a professional employer agreement, the client retains the
exclusive right to direct and control the covered employees as necessary to
conduct the client's business, to discharge any of the client's fiduciary
responsibilities, or to comply with any licensure requirements applicable to
the client of the covered employees.
Except as otherwise provided in KRS 336.230 to 336.250, the co-employment
relationship between the client and the professional employer organization, and
between each co-employer and each covered employee, shall be governed by the
professional employer agreement. Each professional employer agreement shall:
(a) Include the allocation of rights, duties, and obligations as set forth in
subsection (1) of this section;
(b) Provide that the professional employer organization shall have responsibility
to pay wages to covered employees; to withhold, collect, report and remit
payroll and unemployment taxes; and, to the extent the professional employer
organization has assumed responsibility in the professional employer
agreement, to make payments for employee benefits for covered employees as
a result of the outsourcing of payroll duty to the professional employer
organization by the client. As used in this paragraph, "wages" does not include
any obligation between a client and a covered employee for payments beyond
or in addition to the covered employee's salary, draw, or regular rate of pay
such as bonuses, commissions, severance pay, deferred compensation, profit
sharing, or vacation, sick, or other paid time off, unless the professional
employer organization has expressly agreed to assume liability for payments
in the professional employer agreement;
(c) Provide that the professional employer organization shall have a right to hire,
(3)
(4)
discipline, and terminate a covered employee as may be necessary to fulfill the
professional employer organization's responsibilities under KRS 336.230 to
336.250 and the professional employer agreement. The client shall have a
right to hire, discipline, and terminate a covered employee; and
(d) Provide that the responsibility to obtain and maintain workers' compensation
coverage for covered employees from an insurer licensed to do business in
this Commonwealth and otherwise in compliance with all applicable
requirements shall be specifically allocated to either the client or the
professional employer organization in the professional employment
agreement.
A professional employer organization shall provide written notice to each covered
employee affected by a professional employer agreement entered into by a
professional employer organization. The notice shall set forth the general nature of
the co-employment relationship between and among the professional employer
organization, the client, and the covered employees. Nothing in this subsection shall
create a presumption of liability against a professional employer organization for
the acts, errors, or omissions of the covered employees. Notwithstanding any
provision to the contrary, the statute of limitations for a claim of a covered
employee against a professional employer organization shall not begin to run until
the covered employee knew or should have known about the professional employer
organization agreement and the identity of the professional employer organization,
but in no event shall the statute of limitations be more than one (1) year from the
date the original lawsuit was timely filed by the covered employee. Nothing in this
subsection shall limit the existing statute of limitations for any causes of action
contained in the original lawsuit for the covered employee.
Except to the extent otherwise expressly provided by the applicable professional
employer agreement:
(a) A client shall be solely responsible for workplace safety and for the quality
and adequacy of the goods and services produced or sold in the client’s
business. Nothing in KRS 336.230 to 336.250 shall limit an injured workers'
ability to recover increased compensation under KRS 342.165 from the coemployer;
(b) A client shall be solely responsible for directing, supervising, training,
retaining, and controlling the work of the covered employees with respect to
the business activities of the client and solely responsible for the acts, errors,
or omissions of the covered employees with regard to these activities. Nothing
in this subsection shall create a presumption of liability against a professional
employer organization for the acts, errors, or omissions of the covered
employees. Notwithstanding any provision to the contrary, the statute of
limitations for a claim of an injured party who is not a covered employee
against a professional organization shall not begin to run until the injured
party who is not a covered employee knew or should have known about the
professional employer organization agreement and the identity of the
professional employer organization, but in no event shall the statute of
(5)
(6)
limitations be more than one (1) year from the date the original lawsuit was
timely filed by the injured party who is not a covered employee. Nothing in
this paragraph shall limit the existing statute of limitations for any causes of
action contained in the original lawsuit for the injured party who is not a
covered employee;
(c) 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 express direction and control of the professional employer
organization;
(d) A professional employer organization shall not be liable for the acts, errors, or
omissions of a client or of any covered employee of the client when the
covered employee is acting under the express direction and control of the
client;
(e) Nothing in this subsection shall serve to limit any contractual liability or
obligation specifically provided in the written professional employer
agreement; and
(f) A covered employee is not, solely as a result of being a covered employee of a
professional employer organization, an employee of the professional employer
organization for the purposes of general liability insurance, fidelity bonds,
surety bonds, employer's liability which is not covered by workers'
compensation, or liquor liability insurance 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.
A professional employer organization under KRS 336.230 to 336.250 is not
engaged in the sale of insurance or in acting as a third-party administrator by
providing professional employer services which include services and employee
benefit plans for covered employees.
For purposes of the Commonwealth or any city, county, or other political
subdivision thereof:
(a) 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. Nothing contained in KRS
336.230 to 336.250 shall relieve a client of any sales tax liability with respect
to its goods or services;
(b) Any tax or assessment imposed upon professional employer services or any
business license or other fee which is based upon gross receipts shall allow a
deduction for the gross income or receipts of the business derived from
performing professional employer services that is equal to that portion of the
fee charged to a client that represents the actual cost of wages and salaries,
benefits, workers' compensation, payroll taxes, withholding, or other
assessments paid to or on behalf of a covered employee by the professional
employer organization under a professional employer agreement;
(c)
(d)
Any tax or assessment or mandated expenditure on a per capita or per
employee basis shall be assessed against the client for covered employees and
against the professional employer organization for its employees who are not
covered employees co-employed with a client. Benefits or monetary
consideration that meet the requirements of mandates imposed on a client and
that are received by covered employees through the professional employer
organization either through payroll or through benefit plans sponsored by the
professional employer organization shall be credited against the client's
obligation to fulfill the mandates; and
In the case of a tax or assessment imposed or calculated upon the basis of total
payroll, the professional employer organization shall be eligible to apply any
small business allowance or exemption available to the client for the covered
employees for purpose of commuting the tax.
Effective: July 14, 2022
History: Created 2022 Ky. Acts ch. 50, sec. 7, effective July 14, 2022.
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