2006 Utah Code - 58-59-306 — Financial requirements, contractual relations, and allocation of rights, duties, and obligations.

     58-59-306.   Financial requirements, contractual relations, and allocation of rights, duties, and obligations.
     (1) Nothing contained in this chapter or in any professional employer agreement shall affect, modify, or amend any collective bargaining agreement, or the rights or obligations of any client, PEO, or covered employee under the federal National Labor Relations Act, the federal Railway Labor Act, or similar state law.
     (2) Nothing contained in this chapter or any professional employer agreement shall affect, modify, or amend any state, local, or federal licensing, registration, or certification requirement applicable to any client or covered employee.
     (a) A covered employee who must be licensed, registered, or certified according to law or regulation is considered solely an employee of the client for purposes of license, registration, or certification requirement.
     (b) A PEO may not be considered to engage in any occupation, trade, profession, or other activity that is subject to licensing, registration, or certification requirements, or is otherwise regulated by a governmental entity solely by entering into and maintaining a coemployment relationship with a covered employee who is subject to the requirements or regulation.
     (c) Unless otherwise expressly agreed to by the client in the professional employer agreement, a client has the sole right to direct and control the professional or licensed activities of covered employees and of the client's business.
     (3) With respect to a bid, contract, purchase order, or agreement entered into with the state or a political subdivision of the state, a client company's status or certification 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 into an agreement with a registrant or uses the services of a registrant.
     (4) (a) At least quarterly, a PEO shall have an independent certified public accountant, licensed to practice in the jurisdiction in which the PEO is domiciled, review the PEO's records and prepare a statement indicating whether all federal, state, and local withholding taxes, unemployment taxes, FICA taxes, workers' compensation premiums, and employee benefit plan premiums have been paid.
     (b) The PEO must provide the statement to a client upon request from the client.
     (5) (a) Except as specifically provided in this chapter, the coemployment relationship between the client and the PEO, and between each coemployer and each covered employee, shall be governed by the professional employer agreement.
     (b) Nothing contained in any professional employer agreement or this chapter shall be considered to:
     (i) diminish, abolish, or remove the rights of covered employees as to clients or obligations of the client as to a covered employee, existing prior to the effective date of a professional employer agreement;
     (ii) terminate an employment relationship existing prior to the effective date of a professional employer agreement; or
     (iii) create any new or additional enforceable right of a covered employee against a PEO not specifically allocated to the PEO in the professional employer agreement or this chapter.
     (c) Each professional employer agreement shall include the following:
     (i) (A) the PEO shall reserve a right of direction and control over the covered employees; and

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     (B) the client may retain the right to exercise the direction and control over covered employees as is necessary to conduct the client's business, to discharge any fiduciary responsibility which it may have, or to comply with any applicable licensure requirements;
     (ii) the PEO shall have responsibility to:
     (A) pay agreed upon wages and salaries to covered employees;
     (B) withhold, collect, report, and remit payroll-related and unemployment taxes; and
     (C) the extent the PEO has assumed responsibility in the professional employer agreement, to make payments for employee benefits for covered employees;
     (iii) the PEO and the client shall both have a right to hire, terminate, and discipline the covered employees; and
     (iv) the responsibility to obtain workers' compensation coverage for covered employees, from a carrier licensed to do business in Utah and otherwise in compliance with all applicable requirements, shall be specifically allocated to the client in the professional employer agreement.
     (d) Except as specifically provided in this chapter or in the professional employer agreement, in each coemployment relationship:
     (i) the client may exercise all rights and is obligated to perform all duties and responsibilities otherwise applicable to an employer in an employment relationship;
     (ii) (A) the PEO may exercise only those rights, and is obligated to perform only those duties and responsibilities, specifically required by this chapter or set forth in the professional employer agreement; and
     (B) the rights, duties, and obligations of the PEO as coemployer with respect to any covered employee is limited to those arising under the professional employer agreement and this chapter during the term of coemployment by the PEO of the covered employee; and
     (iii) unless otherwise expressly agreed by the PEO and the client in a professional employer agreement, the client retains the exclusive right to direct and control the covered employees 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 the covered employees.
     (e) With respect to each professional employer agreement entered into by a PEO, the PEO shall provide written notice to each covered employee affected by the agreement of the general nature of the coemployment relationship between and among the PEO, the client, and the covered employee.
     (f) (i) Except to the extent otherwise expressly provided by the applicable 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 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 those activities; and
     (C) a client is not liable for the acts, errors, or omissions of a PEO, or of any covered employee of the client and a PEO when the covered employee is acting under the express direction and control of the PEO.
     (ii) Nothing in this Subsection (5)(f) shall serve to limit any contractual liability or obligation specifically provided in a professional employer agreement, nor shall this Subsection

(5)(f) in any way limit the liabilities and obligations of any PEO or client as defined elsewhere in this chapter.
     (iii) A covered employee is not, solely as the result of being a covered employee of a PEO, an employee of the PEO for 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 PEO, unless the covered employee is included by specific reference in the professional employer agreement and applicable prearranged employment contract, insurance contract, or bond.
     (g) A registrant under this chapter is not engaged in the sale of insurance by offering, marketing, selling, administering, or providing PEO services or employee benefit plans for covered employees.
     (h) (i) (A) Covered employees whose services are subject to sales tax are considered the employees of the client for purposes of collecting and levying sales tax on the services performed by the covered employees.
     (B) Nothing contained in this chapter shall relieve a client of any sales tax liability with respect to its goods or services.
     (ii) No portion of a PEO fee to a client that represents pass-through amounts to be paid for covered employee wages, employment-related taxes, withholding, or benefits is subject to any sales or excise tax.
     (i) (i) A client and a PEO shall each be considered an employer for purposes of sponsoring retirement and welfare benefit plans for its covered employees.
     (ii) A fully insured welfare benefit plan offered to the covered employees of a single PEO is considered a single employer welfare benefit plan and may not be considered a multiple employer welfare arrangement, and is exempt from the licensing requirements contained in Title 31A, Insurance Code.
     (iii) PEOs are exempt from Title 31A, Chapter 30, Individual, Small, and Group Employer Health Insurance Act.
     (iv) (A) Any PEO offering workers' compensation coverage, a health benefit plan, or any other insurance plan, must comply with all federal and state laws applicable to these products.
     (B) If the PEO chooses to use a third-party administrator for the receipt and payment of health benefit claims, that third-party administrator must be licensed to do business in the state under Title 31A, Insurance Code.
     (C) Anything pertaining to the insurance products referred to in this section or the use of an unlicensed third-party administrator is subject to administrative penalties and forfeitures under Title 31A, Insurance Code.
     (v) If a PEO offers to its covered employees any health benefit plan which is not fully insured by an authorized insurer, the plan shall:
     (A) utilize a third-party administrator licensed by the Utah State Insurance Department; and
     (B) hold all plan assets, including participant contributions, in a trust account.
     (vi) If a PEO offers to its covered employees any health benefit plan which is not fully insured by an authorized insurer, the PEO shall:
     (A) represent that such plan is not fully insured; and
     (B) deliver to each plan participant a summary plan description that accurately describes the terms of the plan, including disclosure that the plan is self-funded or partially self-funded.

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     (vii) (A) The Department of Insurance may audit on a random basis, or upon finding a reasonable need, any health benefit plan which is not fully insured by an authorized insurer.
     (B) The cost of the audit shall be borne by the PEO if there is material noncompliance.
     (j) (i) The client in a coemployment relationship shall secure workers' compensation benefits for the covered employees by complying with Subsection 34A-2-201(1) or (2) and commission rules under Subsection 34A-2-103(3)(a).
     (ii) Every authorized insurer who offers or provides Workers' Compensation Insurance coverage to a PEO, its client companies, or both shall comply with Title 31A, Chapter 19a, Utah Rate Regulation Act, and Chapter 21, Insurance Contracts in General, prior to the issuance of an insurance policy.
     (iii) The exclusive remedy provisions of Sections 34A-2-105 and 34A-3-102 apply to both the client company and the PEO in a coemployer relationship under this section.
     (k) (i) For purposes of Title 35A, Chapter 4, Employment Security Act, covered employees of a registered PEO are considered the employees of the PEO, which shall be responsible for the payment of contributions, penalties, and interest on wages paid by the PEO to its covered employees during the term of the applicable professional employer agreement.
     (ii) The PEO shall report and pay all required contributions to the unemployment compensation fund using its state employer account number and the contribution rate of the PEO.
     (iii) On the termination of a contract between a PEO and a client or the failure by a PEO to submit reports or make tax payments as required by this chapter, the client shall be treated as a new employer without a previous experience record unless that client is otherwise eligible for an experience rating.

Repealed and Re-enacted by Chapter 260, 2003 General Session