2016 North Dakota Century Code Title 43 Occupations and Professions Chapter 43-55 Professional Employer Organizations
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CHAPTER 43-55
PROFESSIONAL EMPLOYER ORGANIZATIONS
43-55-01. Definitions.
As used in this chapter:
1. "Administrative fee" means the fee charged to a client by a professional employer
organization for professional employer services. The term does not include any
amount of a fee which is for wages and salaries, benefits, workers' compensation
coverage, payroll taxes, withholding, or other assessment paid by the professional
employer organization to or on behalf of a covered employee under a professional
employer agreement.
2. "Client" means any person that enters a professional employer agreement with a
professional employer organization.
3. "Coemployer" means either a professional employer organization or a client.
4. "Coemployment relationship" means a relationship that is intended to be an ongoing
relationship rather than a temporary or project-specific relationship, wherein the rights,
duties, and obligations of an employer which arise out of an employment relationship
have been allocated between coemployers under a professional employer agreement
and this chapter.
5. "Covered employee" means an individual having a coemployment relationship with a
professional employer organization and a client, who has received written notice of
coemployment with the professional employer organization, and whose coemployment
relationship is under a professional employer agreement subject to this chapter. An
individual who is an officer, director, shareholder, partner, or manager of the client is a
"covered employee" to the extent the professional employer organization and the client
have expressly agreed in the professional employer agreement that the individual is a
covered employee and if the individual meets the criteria of this subsection and acts as
an operational manager or performs day-to-day operational services for the client.
6. "Licensee" means a professional employer organization licensed under this chapter.
7. "Professional employer agreement" means a written contract between a client and a
professional employer organization which provides for the coemployment of a covered
employee, for the allocation of employer rights and obligations between the client and
the professional employer organization with respect to a covered employee, and the
assumption of the responsibilities required by this chapter.
8. "Professional employer organization" means a person engaged in the business of
providing professional employer services. The term does not include an arrangement
through which a person that does not have as its principal business activity the
practice of entering a professional employer arrangement and does not hold itself out
as a professional employer organization and that shares an employee with a
commonly owned company within the meaning of section 414(b) and (c) of the Internal
Revenue Code of 1986; an independent contractor arrangement through which a
person assumes responsibility for a product produced or a service performed by the
person or the person's agents and retains and exercises primary direction and control
over the work performed by an individual whose services are supplied under the
arrangement; or the provision of temporary help services.
9. "Professional employer services" means the entering of a coemployment relationship
under this chapter.
10. "Temporary help services" means services consisting of a person recruiting and hiring
its own employees; finding another organization that needs the services of those
employees; assigning those employees to perform work at or services for the other
organization to support or supplement the other organization's workforce, to provide
assistance in special work situations, such as an employee absence, skill shortage, or
seasonal workload or to perform a special assignment or project; and customarily
attempting to reassign the employees to another organization when the employers
finish each assignment.
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43-55-02. Rights, duties, and obligations unaffected.
1. Neither this chapter nor a professional employer agreement may affect, modify, or
amend a collective bargaining agreement or any right or obligation of a client,
professional employer organization, or covered employee under federal law.
2. Neither this chapter nor a professional employer agreement may:
a. Diminish, abolish, or remove any right of a covered employee to a client or
obligation of the client to a covered employee existing before the effective date of
the professional employer agreement.
b. Affect, modify, or amend any contractual relationship or restrictive covenant
between a covered employee and a client in effect at the time a professional
employer agreement becomes effective or prohibit or amend a contractual
relationship or restrictive covenant that is entered subsequently between a client
and a covered employee.
3. A covered employee who is required under law to be licensed, registered, or certified
is deemed solely an employee of the client for purposes of the license, registration, or
certification requirement.
4. Unless otherwise provided by this chapter, a professional employer organization is not
deemed to engage in any occupation, trade, profession, or other activity that is subject
to licensing, registration, or certification requirements or is otherwise regulated solely
by entering and maintaining a coemployment relationship with a covered employee
who is subject to the requirement.
5. A client has the sole right of direction and control of the professional or licensed
activities of a covered employee and of the client's business. The covered employee
and client remain subject to regulation by the entity responsible for licensing,
registration, or certification of the covered employee or client.
6. For purposes of determination of a tax credit or other economic incentive based on
employment, a covered employee is deemed an employee solely of the client. A client
is entitled to the benefit of any tax credit, economic incentive, or other benefit arising
as the result of the employment of a covered employee of the client. If the grant or
amount of the incentive is based on the number of employees, each client must be
treated as employing only those covered employees coemployed by the client. A
covered employee working for another client of the professional employer organization
may not be counted. Each professional employer organization shall provide, upon
request by a client or an agency or department of the state, employment information
reasonably required for administration of the tax credit or economic incentive and
which is necessary to support any request, claim, application, or other action by a
client seeking the tax credit or economic incentive.
7. With respect to a bid, contract, purchase order, or agreement entered with the state or
a political subdivision, a client company's status or certification by any agency of this
state as a small, minority-owned, disadvantaged, or woman-owned business
enterprise or as a historically underutilized business is not affected because the client
company has entered an agreement with a professional employer organization or uses
the services of a professional employer organization.
43-55-03. Licensing requirements.
1. A person may not provide, advertise, or otherwise hold itself out as providing
professional employer services, unless the person is licensed under this chapter. A
person engaged in the business of providing professional employer services shall
obtain a license regardless of its use of the term or conducting business as a
"professional employer organization", "staff leasing company", "registered staff leasing
company", "employee leasing company", "administrative employer", or any other
name.
2. Each applicant for licensure shall provide the secretary of state with the following
information:
a. The name of the professional employer organization and any name under which
the professional employer organization intends to conduct business in this state.
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b.
3.
4.
5.
The designation of organization of the applicant whether domestic or foreign; a
corporation, limited liability company, general partnership, limited partnership,
limited liability partnership, limited liability limited partnership, sole proprietor, or
any other person subject to a governing statute; and the jurisdiction of origin of
the organization.
c. The address of the principal place of business of the professional employer
organization and the address of each office it maintains in this state.
d. The professional employer organization's taxpayer or employer identification
number.
e. The date of the end of the applicant's fiscal year.
f. A list of jurisdictions in which the professional employer organization has
operated in the preceding five years, including any alternative names, names of
predecessors, and, if known, successor business entities.
g. A statement of ownership, which must include the name and address of any
person that owns or controls twenty-five percent or more of the equity interests of
the professional employer organization.
h. A statement of management, which must include the name and address of any
individual who serves as president, chief executive officer, or otherwise has the
authority to act as a senior executive officer of the professional employer
organization.
i. A bond as provided under section 43-55-05.
j. A copy of the employer's quarterly contribution and wage report to job service
North Dakota for the quarter ending immediately before the date submitted to the
secretary of state. A professional employer organization that has not filed an
employer's quarterly contribution and wage report with job service North Dakota
shall submit a bond in the amount as provided under section 43-55-05.
A license issued under this section is valid for one year and may be renewed within
sixty days before the expiration of the license by submitting to the secretary of state:
a. The information required in subsection 2;
b. The license fee provided in section 43-55-04; and
c. A bond as provided under section 43-55-05.
A person applying for licensure or a renewal of licensure shall maintain continuously its
organization's applicable records current and in good standing as otherwise required
by law.
The secretary of state shall maintain a list of professional employer organizations
licensed under this chapter.
43-55-04. Fees.
1. Upon filing of an application for a license, a professional employer organization shall
pay a fee of one thousand dollars.
2. Upon filing of an application for renewal of a license, a professional employer
organization shall pay a fee of five hundred dollars.
3. Any fees collected under this chapter must be deposited in the secretary of state's
operating fund.
43-55-05. Bond.
1. A professional employer organization shall maintain a bond with a minimum value of
the greater amount of one hundred thousand dollars or five percent of the total wages
reported on the employer's quarterly contribution and wage report to job service North
Dakota for the quarter ending immediately before the date submitted to the secretary
of state but not to exceed five hundred thousand dollars.
2. A professional employer organization that has not filed an employer's quarterly
contribution and wage report with job service North Dakota shall submit a bond in the
amount of one hundred thousand dollars.
3. The bond must be held by the secretary of state and secure payment by the
professional employer organization of any tax, wage, benefit, or other entitlement due
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4.
to or with respect to a covered employee if the professional employer organization
does not make the payment when due.
Notice of cancellation or nonrenewal of the surety bond required by this section shall
be provided to the secretary of state at least forty-five days before cancellation or
nonrenewal.
43-55-06. General requirements.
1. Except as specifically provided in this chapter or in a professional employer
agreement, in each coemployment relationship:
a. 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.
b. The professional employer organization is entitled to exercise only those rights
and obligated to perform only those duties and responsibilities specifically
required by this chapter or set forth in the professional employer agreement. The
rights, duties, and obligations of the professional employer organization as
coemployer with respect to any covered employee are limited to those arising
under the professional employer agreement and this chapter during the term of
coemployment by the professional employer organization of the covered
employee.
c. The client retains the exclusive right to direct and control any covered employee
as is 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 or to a covered employee.
2. Except as specifically provided in this chapter, a coemployment relationship between
the client and the professional employer organization, and between each coemployer
and each covered employee, must be governed by the professional employer
agreement. Each professional employer agreement must include:
a. The allocation of rights, duties, and obligations.
b. (1) A statement that provides that:
(a) The professional employer organization shall pay wages to any
covered employee and shall withhold, collect, report, and remit
payroll-related and unemployment taxes on wages paid to the covered
employee by the professional employer organization;
(b) The client shall accurately report all wages of a covered employee to
the professional employer organization; and
(c) The professional employer organization shall make payments for
employee benefits for covered employees to the extent the
professional employer organization has assumed responsibility in the
professional employer agreement.
(2) As used in this subdivision, the term "wages" means all remuneration for
services to the professional employer organization and the client, regardless
of source, including a commission or bonus and the cash value of any
remuneration in a medium other than cash. Any gratuity customarily
received by an individual in the course of the individual's service from any
source other than the client or the professional employer organization must
be treated as wages received from the individual's coemployers.
c. A statement providing that the professional employer organization has the right to
hire, discipline, and terminate a covered employee as may be necessary to fulfill
the professional employer organization's responsibilities under this chapter and
the professional employer agreement and that the client has the right to hire,
discipline, and terminate a covered employee.
d. A statement addressing the responsibility to obtain workers' compensation
coverage.
3. Under each professional employer agreement entered by a professional employer
organization, the professional employer organization shall provide written notice to
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4.
5.
6.
each covered employee affected by the agreement of the general nature of the
coemployment relationship.
Except to the extent otherwise expressly provided by a professional employer
agreement:
a. A client is solely responsible for the quality, adequacy, or safety of the goods or
services produced or sold in the client's business.
b. A client is solely responsible for directing, supervising, training, and controlling the
work of a covered employee with respect to the business activities of the client
and solely responsible for any act, error, or omission of a covered employee
relating to those activities.
c. A client is not liable for any act, error, or omission of a professional employer
organization or of any covered employee of the client and a professional
employer organization if the covered employee is acting under the express
direction and control of the professional employer organization.
d. A professional employer organization is not liable for any act, error, or omission of
a client or of any covered employee of the client if the covered employee is acting
under the express direction and control of the client.
e. This subsection does not limit any contractual liability or obligation specifically
provided in the written professional employer agreement.
f. 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 bond, surety bond,
employer's liability not covered by workers' compensation, or liquor liability
insurance carried by the professional employer organization unless the covered
employee is included by specific reference in the professional employer
agreement and applicable prearranged employment contract, insurance contract,
or bond.
A professional employer organization is not engaged in the sale of insurance or in
acting as a third-party administrator by offering, marketing, selling, administering, or
providing professional employer services which include services and employee benefit
plans for a covered employee.
Nothing in this chapter or in a professional employer agreement may be construed to
affect the provisions of section 52-04-24 or 65-01-08.
43-55-07. Benefit plans.
1. Both a client and a professional employer organization are deemed to be an employer
for purposes of sponsoring retirement and welfare benefit plans for a covered
employee.
2. A fully insured welfare benefit plan offered to the covered employees of a professional
employer organization is considered a single employer welfare benefit plan and may
not be considered a multiple employer welfare arrangement.
3. For purposes of chapter 26.1-36.3, a professional employer organization is considered
the employer of all of its covered employees, and all covered employees of any client
participating in a health benefit plan sponsored by a single professional employer
organization are 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 must:
a. Utilize an authorized third-party administrator;
b. Hold all plan assets, including participant contributions, in a trust account;
c. Provide sound reserves for the plan as determined using generally accepted
actuarial standards; and
d. Provide written notice to each covered employee participating in the benefit plan
that the plan is self-insured or is not fully insured.
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43-55-08. Disciplinary actions - Complaints - Adjudicative proceedings - Penalties Appeals.
1. The secretary of state may:
a. Deny an application for a professional employer organization license;
b. Suspend a professional employer organization license for a period of not more
than sixty months;
c. Request the attorney general to bring an action in district court to recover
restitution or penalties imposed under this chapter; or
d. Not renew or issue a new professional employer organization license until a
professional employer organization has paid any civil penalty or restitution
imposed under this chapter.
2. Any person acting in the capacity of a professional employer organization without a
license is guilty of a class A misdemeanor. In addition to the license fee due if the
person subsequently applies for a license, the person may be assessed a civil penalty
by the secretary of state, following written notice to the person of an intent to assess
the penalty, in an amount not to exceed three times the amount of the license fee.
3. An individual may file a duly verified complaint with the secretary of state charging that
the professional employer organization is guilty of any of the following:
a. The conviction of the professional employer organization or a controlling person
of the professional employer organization of a crime that relates to the operation
of the professional employer organization or which relates to fraud or deceit or
the ability of the professional employer organization or the controlling person of
the professional employer organization to operate the professional employer
organization;
b. An individual knowingly making a material misrepresentation or providing false or
fraudulent information to the secretary of state or other governmental agency; or
c. A willful violation of this chapter.
4. A complaint must be on a form approved by the secretary of state and must set forth
sufficient facts upon which a reasonable individual could conclude that any of the acts
or omissions in subsection 3 has been committed.
5. The secretary of state shall review a complaint filed under this section. If the secretary
of state determines a complaint provides sufficient facts upon which a reasonable
individual could conclude that one or more of the acts or omissions set forth in
subsection 3 has been committed, the secretary of state may initiate an adjudicative
proceeding under chapter 28-32. If, after an adjudicative proceeding or as part of an
informal disposition under chapter 28-32, the secretary of state determines that the
professional employer organization is guilty of an act or omission charged or if the
licensee admits guilt to an act or omission charged, the secretary of state may:
a. Suspend or revoke the professional employer organization license;
b. Order an administrative penalty of not more than one thousand dollars for each
material violation;
c. Order restitution in an amount not exceeding five thousand dollars;
d. Issue a cease and desist order; or
e. Impose a lesser sanction or remedy.
6. Any act or omission under subsection 3 may also constitute grounds for the attorney
general to bring an action under chapter 51-15 and may subject the professional
employer organization to all provisions, procedures, remedies, and penalties provided
for in chapter 51-15.
7. A professional employer organization aggrieved by a decision of the secretary of state
in denying, revoking, or suspending the professional employer organization license or
ordering restitution or penalties may appeal the decision to the district court of Burleigh
County.
8. A professional employer organization may not obtain a license under any name after
the denial of an application for a license or during the period of a revocation or
suspension. For the purposes of this subsection, a professional employer organization
that has had an application for a license denied or which has had a license revoked or
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9.
suspended includes any officer, director, agent, member, or employee of the
professional employer organization.
Upon request of the secretary of state or attorney general, a professional employer
organization promptly shall provide an audited financial statement verified by a
certified public accountant licensed to practice in the jurisdiction in which the
accountant is located.
43-55-09. Confidential records.
1. The social security number or federal tax identification number disclosed or contained
in an application filed with the secretary of state under this chapter is confidential. The
secretary of state shall delete or obscure any social security number or federal tax
identification number before a copy of an application is released to the public.
2. All audited financial reports and the employers' quarterly contribution and wage report
to job service North Dakota are confidential except to the extent necessary for the
proper administration of this chapter by the secretary of state or the attorney general.
43-55-10. Interagency cooperation.
A state agency, in performing duties under other laws that affect the regulation of
professional employer organizations, shall cooperate with the secretary of state as necessary to
administer and enforce this chapter.
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