CHAPTER 43-55 PROFESSIONAL EMPLOYER ORGANIZATIONS 43-55-01. Definitions

As used in this chapter: 1

2

3

4

5

6

7

8

9

10

"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

"Client" means any person that enters a professional employer agreement with a professional employer organization

"Coemployer" means either a professional employer organization or a client

"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

"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

"Licensee" means a professional employer organization licensed under this chapter

"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

"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

"Professional employer services" means the entering of a coemployment relationship under this chapter

"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

Page No. 1 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: 3

b

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

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

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

6

5

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

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

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

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

2

Page No. 2 b

c

d

e

f

g

h

i

j

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

The address of the principal place of business of the professional employer organization and the address of each office it maintains in this state

The professional employer organization's taxpayer or employer identification number

The date of the end of the applicant's fiscal year

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

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

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

A bond as provided under section 43-55-05

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

The information required in subsection 2; The license fee provided in section 43-55-04; and A bond 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

b

c

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

Any fees collected under this chapter must be deposited in the secretary of state's operating fund

3

43-55-05. Bond

1

A professional employer organization shall maintain a bond with a minimum value of the lesser 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

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

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 Page No. 3 3

4

5

2

3

2

to or with respect to a covered employee if the professional employer organization does not make the payment when due

A professional employer organization shall provide the secretary of state notice of cancellation or nonrenewal of the bond required by this section at least forty-five days before cancellation or nonrenewal of the bond

As used in this section, "bond" means a surety bond or an irrevocable letter of credit

4

5

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

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

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

b

c

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

b

The allocation of rights, duties, and obligations

(1) A statement that provides that: (a) (b) (c) 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; The client shall accurately report all wages of a covered employee to the professional employer organization; and 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

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

A statement addressing the responsibility to obtain workers' compensation coverage

c

d

Page No. 4 3. Under each professional employer agreement entered by a professional employer organization, the professional employer organization shall provide written notice to 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

4

b

c

d

e

f

A client is solely responsible for the quality, adequacy, or safety of the goods or services produced or sold in the client's business

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

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

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

This subsection does not limit any contractual liability or obligation specifically provided in the written professional employer agreement

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

5

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

6. 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

2

3

4

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

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

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

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 Provide written notice to each covered employee participating in the benefit plan that the plan is self-insured or is not fully insured

d

Page No. 5 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

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

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; An individual knowingly making a material misrepresentation or providing false or fraudulent information to the secretary of state or other governmental agency; or A willful violation of this chapter

c

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

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

b. Order an administrative penalty of not more than one thousand dollars for each Suspend or revoke the professional employer organization license; b

material violation; Issue a cease and desist order; or Impose a lesser sanction or remedy

c. Order restitution in an amount not exceeding five thousand dollars; d

e

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

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

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 2

3

4

5

6

7

8

Page No. 6 suspended includes any officer, director, agent, member, or employee of the professional employer organization

9. 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

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

2

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

Page No. 7