2019 Tennessee Code
Title 62 - Professions, Businesses and Trades
Chapter 43 - Tennessee Professional Employer Organization Act
§ 62-43-106. Registration.
(a)
(1) No person shall provide, advertise or otherwise hold itself out as providing professional employer services in this state unless such person is registered under this chapter.
(2) The department shall register an applicant meeting the requirements of this chapter.
(3)
(A) If the department denies registration to an applicant, the department shall provide written notice that includes the reasons for the denial. The applicant shall have sixty (60) days from the date the notice was sent to:
(i) Submit proof to the department that the reasons for the denial have been cured; or
(ii) Request, in writing, reconsideration from the commissioner.
(B) The department shall provide written notice of its determination after considering the applicant's submission or request under subdivisions (a)(3)(A)(i) or (a)(3)(A)(ii) within thirty (30) days of receiving a submission or request.
(C)
(i) After submission of a written request for consideration, an initial applicant shall have the right to appear before the commissioner or the commissioner's designee to present the applicant's request for reconsideration. If an applicant wishes to appear before the commissioner or the commissioner's designee to present their request for reconsideration, then the department shall provide written notice of its determination within thirty (30) days after such appearance; provided, that it is the commissioner's decision as to whether or not the defect or defects have been cured and whether or not to issue the registration.
(ii) An applicant who is not an initial applicant may request a hearing pursuant to § 4-5-320 before the commissioner makes a final determination to deny a renewal registration.
(4) Registration under this chapter shall remain in force for two (2) years from the date of issuance of registration.
(b) Each applicant for initial registration under this chapter shall submit to the department the following:
(1) Any name under which the applicant conducts business;
(2) The address of the principal place of business of the applicant and of each office it maintains in this state;
(3) The applicant's taxpayer or employer identification number;
(4) A list by state of each name under which the applicant has operated in the preceding five (5) years, including any alternative names, names of predecessors and, if known, successor business entities;
(5) A statement of ownership, which shall include the name, address and principal occupation of any person that, individually or acting in concert with one (1) or more other persons, owns or controls, directly or indirectly:
(A) Twenty percent (20%) or more of the equity interests of the applicant who is a publicly traded entity; or
(B) Ten percent (10%) or more of the equity interest of the applicant who is not a publicly traded entity;
(6) A statement of management, which shall include the name, address and principal occupation of any person who serves as president, chief executive officer or otherwise has the authority to act as a senior executive officer of the applicant;
(7) If the applicant or a person listed in subdivisions (b)(5) or (6) has in any jurisdiction:
(A) Been convicted of or entered a plea of nolo contendere to a crime relating to the operation of a professional employer organization;
(B) Been disciplined relating to the operation of a professional employer organization;
(C) Been convicted of or entered a plea of nolo contendere to an offense relating to bribery, dishonesty or fraud;
(D) Been convicted of or entered a plea of nolo contendere to any felony. However, an action taken under this subdivision (b)(7)(D) shall be subject to the applicable provisions of the Fresh Start Act that are compiled in chapter 76, part 1 of this title; or
(E) Been found liable for civil fraud;
(8) A financial statement setting forth the financial condition of the applicant; provided, that:
(A) The applicant shall submit the most recent audit of the applicant with its initial application;
(B) No financial statement submitted with the initial application shall be older than thirteen (13) months from the date of the report of the auditor;
(C) Within one hundred eighty (180) days of the close of an applicant's fiscal year, the applicant shall submit its most recent financial statement; provided, that an applicant may apply to the department for additional time to submit its financial statements, and such a request shall be accompanied by a letter from the auditors stating the reasons for the delay and the anticipated audit completion date;
(D) Financial statements submitted pursuant to this subdivision (b)(8) shall be prepared in accordance with generally accepted accounting principles and audited by an independent certified public accountant licensed to practice in the jurisdiction in which such accountant is located; provided, that no resulting report of the auditor shall include:
(i) A qualification or disclaimer of opinion as to adherence to generally accepted accounting principles; or
(ii) A statement expressing substantial doubt about the ability of the applicant to continue as a going concern;
(E) An applicant may submit combined or consolidated audited financial statements to meet the requirements of this section;
(F) Notwithstanding subdivision (b)(8)(D)(i):
(i) An applicant that has not had sufficient operating history to have financial statements based upon at least twelve (12) months of operating history shall meet the financial capacity requirements in subsection (c) and submit financial statements reviewed by an independent certified public accountant; and
(ii) If an applicant is a subsidiary or is related to a variable interest entity, then the applicant may submit financial statements of the professional employer organization, professional employer organization group or the controlling organization;
(G)
(i) In lieu of audited financial statements required by this subdivision (b)(8), an applicant or registrant with small operations may submit financial statements compiled by an independent certified public accountant;
(ii) The department shall consider an applicant or registrant a professional employer organization with small operations if the applicant or registrant submits to the department:
(a) A request to be deemed a PEO with small operations on a form prescribed by the department; and
(b) The most recent fourth quarter federal Form 941 of the applicant or registrant and any related person that offers professional employer services; provided, the aggregate annualized wages shall be less than fifty million dollars ($50,000,000);
(iii) The form required in subdivision (b)(8)(G)(ii) shall be submitted to the department in any year the applicant or registrant seeks to be considered a professional employer organization with small operations;
(iv) In any year that an applicant or registrant with small operations does not meet the requirements to maintain such status, that applicant or registrant shall have six (6) months from the close of the current fiscal year of the applicant or registrant to either:
(a) Meet the requirements of this subdivision (b)(8)(G); or
(b) Submit audited financial statements;
(9) Evidence of workers' compensation coverage for covered employees in this state who are subject to the Tennessee Workers' Compensation Law, compiled in title 50, chapter 6 and as amended; and
(10) A written statement in regards to whether the applicant sponsors a self-insured health plan.
(c) Except as provided by subdivision (b)(8)(F)(i) and subsection (f), an applicant shall maintain either:
(1) Positive working capital at registration as reflected in the financial statements submitted to the department under subdivision (b)(8); or
(2) An applicant that does not have positive working capital may provide a bond, irrevocable letter of credit or securities with a minimum market value equaling the deficiency plus one hundred thousand dollars ($100,000) to the department; provided, that such instruments are to be held by an institution designated by the department, securing payment by the applicant of all taxes, wages, benefits or other entitlements due to or with respect to covered employees if the applicant does not make such payments when due.
(d)
(1) No later than one hundred eighty (180) days after the applicant's fiscal year that is the second year of its current registration, the applicant may renew its registration by:
(A) Notifying the department of any changes in the information submitted under subsection (b); and
(B) Submitting the financial statement required under subdivision (b)(8) or the alternatives under subdivision (b)(8)(G) or subsection (c), as applicable.
(2) An applicant's existing registration shall remain in effect during the pendency of a renewal application.
(e) An applicant who is a professional employer organization group may satisfy the requirements in this section on a combined or consolidated basis; provided, that each member of the professional employer organization group guarantees the financial capacity obligations under this chapter of each other member of the professional employer organization group. In the case of a professional employer organization group that submits a combined or consolidated audited financial statement including entities that are not professional employer organizations or that are not in the professional employer organization group, the controlling entity of the professional employer organization group under the consolidated or combined statement shall guarantee the obligations of the professional employer organizations in the professional employer organization group.
(f)
(1) An applicant is eligible for a limited registration under this chapter if such applicant:
(A) Submits a request for limited registration to the department;
(B) Is domiciled outside this state and is licensed or registered as a professional employer organization in another state;
(C) Does not maintain an office in this state or directly solicits clients located or domiciled within this state; and
(D) Does not have more than fifty (50) covered employees employed or domiciled in this state.
(2) Limited registration is valid for two (2) years and may be renewed.
(3) An applicant seeking limited registration under this subsection (f) shall provide the department with information and documentation necessary to show that the applicant qualifies for a limited registration.
(4) Subdivision (b)(8) and subsection (c) shall not apply to applicants for limited registration.
(g) Notwithstanding § 62-43-104, the department shall maintain a list of registrants that is readily available to the public by electronic or other means.
(h)
(1) The department shall to the extent practical, permit the acceptance of electronic filings in conformance with the Uniform Electronic Transactions Act, compiled in title 47, chapter 10 and as amended, including applications, documents, reports and other filings required by this chapter.
(2) The department may provide for the acceptance of electronic filings and other assurance by an independent and qualified assurance organization approved by the department that provides satisfactory assurance of compliance acceptable to the department consistent with or in lieu of the requirements in subsections (b) and (c), and other requirements of this chapter or the rules promulgated pursuant to it.
(3) The department may permit an applicant to authorize such an approved assurance organization to act on the applicant's behalf in complying with the registration requirements of this chapter, including electronic filings of information and payment of registration fees; provided, that use of such an approved assurance organization shall be optional and not mandatory for an applicant.
(4) Nothing in this subsection (h) shall limit or change the department's authority to register or terminate registration of a registrant or applicant or to investigate or enforce this chapter.
(i) A registrant shall:
(1) Submit to the department, within ninety (90) days of the end of each calendar quarter, a statement by an independent certified public accountant or independent public accountant that for the quarter all applicable payroll taxes have been paid on a timely basis. Upon a showing of reasonable cause, one (1) thirty-day extension per quarter shall be granted by the department;
(2) Maintain and make available for the department's inspection any and all records concerning the registrant's conduct of business under its registration, which records shall be maintained for a period of three (3) years after termination of the professional employer agreement;
(3) Notify the department in writing of a change in the information submitted under subdivisions (b)(1)-(7) within thirty (30) days of such change;
(4) Post the registration issued under this chapter in a conspicuous place in the principal place of business and display in clear public view in each registrant's office in this state a notice stating that the professional employer organization is licensed and regulated by the department and that any questions or complaints should be directed to the department; and
(5) Submit a written response to a written inquiry from the department within thirty (30) days of receiving the inquiry.
