23-562. Professional employer agreements; rights; notice

A. A professional employer agreement shall:

1. Govern the co-employment relationship between the client and the professional employer organization and between each co-employer and each covered employee.

2. Reserve to the client the right to direct and control covered employees to the extent necessary to conduct the client's business and to discharge any fiduciary responsibility or to comply with any licensing requirement that applies to the client or a covered employee.

3. Require the professional employer organization to pay the wages of covered employees, to withhold, collect, report and remit payroll-related and unemployment taxes and to make payment for employee benefits for covered employees. For the purposes of this paragraph, wages do not include obligations between a client and a covered employee that exceed a covered employee's salary, bonuses, commissions, severance pay, deferred compensation, profit sharing or vacation, sick or other paid time off pay unless the professional employer organization expressly agrees to assume liability for the additional obligations in the professional employer agreement.

4. Permit both the professional employer organization and client to have a right to hire, terminate and discipline covered employees.

5. Specify whether the client or the professional employer organization will purchase and maintain the workers' compensation policy for covered employees from a carrier that is licensed to conduct business in this state. If the professional employer organization purchases the workers' compensation policy, the professional employer organization shall maintain and, if requested by the client on termination of the agreement, be able to provide to the client records regarding the loss experience related to the workers' compensation insurance that is provided to the covered employees.

B. A professional employer agreement shall not:

1. Affect, modify or amend any collective bargaining agreement or any rights or obligations of any client, professional employer organization or covered employee that are required under the federal national labor relations act, the federal railway labor act or this title.

2. Affect, modify or amend any state, local or federal licensing, registration or certification that is required by any client or covered employee.

3. With respect to a bid, contract, purchase order or agreement entered into with this state or a political subdivision of this state, affect the status of a client's company as a small, minority-owned, disadvantaged or woman-owned business enterprise or as a historically underutilized business because the client entered into a professional employment agreement with a professional employer organization.

4. Diminish, abolish or remove any rights of covered employees to any clients or obligations of clients to any covered employees that existed before the effective date of a professional employer agreement.

5. Terminate an employment relationship that existed before the effective date of a professional employer agreement.

6. Establish new or additional enforceable rights of a covered employee against a professional employer organization that are not specifically allocated to the professional employer organization under the professional employer agreement or this article.

C. Unless specifically provided in a professional employer agreement or this article:

1. The client shall perform all responsibilities that otherwise apply to an employer in an employment relationship.

2. The professional employer organization shall perform only the responsibilities that are specifically required under this article or a professional employer agreement. The rights, duties and obligations of a professional employer organization as a co-employer with respect to any covered employee are limited to the responsibilities that are contained in the professional employer agreement and that arise during the term of co-employment by the professional employer organization for the covered employees.

D. Every professional employer organization that enters into a professional employer agreement shall provide notice to each covered employee who is affected by the agreement. The notice may be included in the form of the employment documents that a covered employee completes for the professional employer organization.