2019 Tennessee Code
Title 62 - Professions, Businesses and Trades
Chapter 43 - Tennessee Professional Employer Organization Act
§ 62-43-109. Professional employer organization deemed employer.
(a) A professional employer organization shall be deemed an employer of its covered employees and shall pay state unemployment premiums as required by the Tennessee Employment Security Law, compiled in title 50, chapter 7 and as amended.
(b) A professional employer organization shall keep separate records and submit separate state unemployment insurance wage and premium reports with payments pursuant to title 50, chapter 7, part 4 and as amended, to report the covered employees of each client by using the client's state employer account number as provided for in subsection (c) and using the premium rate based on the aggregate reserve ratio of the professional employer organization as provided in subsection (d).
(c)
(1) For each professional employer organization having one (1) or more covered employees with a client in this state, such professional employer organization shall file an application with the chief administrative officer of the division of employment security of the department of labor and workforce development for an account number for each client having one (1) or more covered employees in this state; provided, the application shall include:
(A) The aggregate state number assigned to the professional employer organization, along with the name, address and phone number of the professional employer organization;
(B) The name, physical address and phone number of the client;
(C) The name of the client's owner, partners, corporate officers, limited liability company members and managers, if board managed, or general partners;
(D) The federal identification number of the client;
(E) The signature of the client's principal or attorney in fact;
(F) A brief description of the client's major business activity, listing any products produced or sold, or service provided; and
(G) Any other information which may be required by the department of labor and workforce development.
(2) The professional employer organization shall notify the department of labor and workforce development in writing of any additions or deletions of clients during the quarter in which such changes occur.
(3) All information furnished to the department of labor and workforce development under this subsection (c) shall be treated as confidential information as provided in § 50-7-701 and as amended.
(d) A professional employer organization shall determine the aggregate reserve ratio of a professional employer organization by using one (1) of the following two (2) methods:
(1)
(A) Total all the state unemployment premiums paid on both the state taxable wages of a professional employer organization and on the state taxable wages of all the clients of such professional employer organization for all years during which the professional employer organization has been subject to title 50, chapter 7 and all the years each individual client has been a client of the professional employer organization as of the computation date, as provided in § 50-7-403(k)(1) and as amended;
(B) Subtract therefrom the total of all benefits charged to the aggregate reserve account of the professional employer organization for all years, including the benefits charged resulting from benefits paid to covered employees of each individual client for all the years each client has been a client of the professional employer organization as of the computation date;
(C) Divide the difference determined in subdivision (d)(1)(A)(ii) by the average taxable payroll for the three (3) most recently completed calendar years, ending on the computation date, of the professional employer organization, plus the average taxable payroll of each client for that portion of the three-year period during which such client was a client of the professional employer organization;
(D) The resulting quotient shall be the aggregate reserve ratio of the professional employer organization beginning the July 1 following the computation date; and
(E) The employer premium rate for the professional employer organization shall be determined by matching its aggregate reserve ratio to the appropriate premium rate table pursuant to title 50, chapter 7 and as amended; or
(2) In cases where the aggregate reserve account of a professional employer organization has not been chargeable with benefits for thirty-six (36) consecutive months ending on the computation date, the professional employer organization shall be assigned the new employer premium rate based upon the reserve ratio of the professional employer organization's industrial classification as determined pursuant to § 50-7-403(b)(1)(B) and as amended.
(e) A professional employer organization shall not be considered a successor employer, within the meaning of title 50, chapter 7 and as amended, to any client and shall not acquire the experience history of any client with whom there is not any common ownership, management or control. The client, upon terminating its relationship with the professional employer organization, shall not be considered a successor employer, within the meaning of title 50, chapter 7 and as amended, to the professional employer organization and shall not acquire any portion of the experience history of the aggregate reserve account of the professional employer organization with whom there is not any common ownership, management or control. For purposes of this subsection (e), the existence of professional employer agreement, without other evidence of common control, shall not constitute common ownership, management or control.
(f)
(1) A client shall be jointly and severally liable with a professional employer organization for state unemployment premiums for each of the client's covered employees; provided, however, that a client shall be relieved of joint and several liability for state unemployment premiums if the professional employer organization has posted a corporate surety bond, as described in this subsection (f), with the administrator of the division of employment security of the Tennessee department of labor and workforce development in the amount of one hundred thousand dollars ($100,000) for so long as the bond remains in force.
(2) The corporate surety bond shall be in form and content approved by the department of labor and workforce development as evidenced by the department's written consent thereto, and shall be issued by an organization currently licensed and authorized to issue the bond in this state.
(3) The bond shall be conditioned for the benefit of the department of labor and workforce development, who may enforce the bond to collect unpaid unemployment insurance premiums, interest and penalties owed by the professional employer organization pursuant to title 50, chapter 7, part 4 and as amended.
(4) Any surety is required to provide the administrator of the division of employment security of the department of labor and workforce development sixty (60) days' notice of cancellation of the bond.
(5) If after three (3) full calendar years, throughout which a professional employer organization has paid all unemployment insurance premiums due in a timely manner and has a positive unemployment insurance reserve account, the bond may be reduced to an amount no less than thirty-five thousand dollars ($35,000) as determined and approved by the administrator conditioned upon the total taxable payroll for the previous calendar year and other factors deemed relevant by the administrator.
(6) Any reduced bond shall be subject to review on no less than an annual basis by the administrator, who may adjust the required amount of the bond as is deemed appropriate.
