A. Contractual relationship. Except as specifically provided in the Oklahoma Professional Employer Organization Recognition and Registration Act, 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. Nothing contained in any professional employer agreement or the Oklahoma Professional Employer Organization Recognition and Registration Act shall be deemed to:

1. Diminish, abolish or remove rights of covered employees as to clients or obligations of such client as to a covered employee, existing prior to the effective date of a professional employer agreement;

2. Terminate an employment relationship existing prior to the effective date of a professional employer agreement; or

3. Create any new or additional enforcement right of a covered employee against a PEO not specifically allocated to such PEO in the professional employer agreement or the Oklahoma Professional Employer Organization Recognition and Registration Act.

B. Allocation of rights, duties and obligations. Except as specifically provided in the Oklahoma Professional Employer Organization Recognition and Registration Act or in the professional employer agreement, in each coemployment relationship:

1. The client shall be entitled to exercise all rights, and shall be obligated to perform all duties and responsibilities, otherwise applicable to an employer in an employment relationship; and

2. The PEO shall be entitled to exercise only those rights, and obligated to perform only those duties and responsibilities, specifically required by the Oklahoma Professional Employer Organization Recognition and Registration Act or set forth in the professional employer agreement. The rights, duties, and obligations of the PEO as coemployer with respect to any covered employee shall be limited to those arising pursuant to the professional employer agreement and the Oklahoma Professional Employer Organization Recognition and Registration Act during the term of coemployment by the PEO of such covered employee.

C. Professional employer agreement requirements. Each professional employer agreement shall include, at a minimum, the following:

1. The PEO shall reserve a right of direction and control over the covered employees; provided, that the client may retain the right to exercise such 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;

2. The PEO shall have responsibility to pay wages and salaries to covered employees; to withhold, collect, report, and remit payroll-related and unemployment taxes; and, to the extent the PEO has assumed responsibility in the professional employer agreement, to make payments for employee benefits for covered employees;

3. Both the PEO and the client shall retain authority to hire, terminate, and discipline the covered employees; and

4. The responsibility to obtain workers’ compensation coverage for covered employees, from a carrier licensed to do business in this state and otherwise in compliance with all applicable requirements, shall be specifically allocated to either the client or the PEO. If such responsibility is allocated to the PEO under any such agreement, such agreement shall require that the PEO maintain and provide to the client, at the termination of the agreement if requested by the client, records regarding the premium and loss experience related to workers’ compensation insurance provided to covered employees pursuant to such agreement.

D. Notice to covered employees. With respect to each professional employer agreement entered into by a PEO, such PEO shall provide written notice to each covered employee affected by such agreement of the general nature of the coemployment relationship between and among the PEO, the client, and such covered employee.

E. Workers’ compensation. Both client and the PEO shall be considered the employer for the purpose of coverage under the Workers’ Compensation Act and both the PEO and its client shall be entitled to protection of the exclusive remedy provision of the Workers’ Compensation Act irrespective of which coemployer obtains such workers’ compensation coverage.

F. Benefit plans.

1. A client and a PEO shall each be deemed an employer for purposes of sponsoring retirement and welfare benefit plans for its covered employees.

2. A welfare benefit plan offered to the covered employees of a single PEO shall not be considered a multiple employer welfare arrangement, or MEWA, as provided for in Section 633 of Title 36 of the Oklahoma Statutes, and shall be exempt from the licensing requirements contained in Section 634 of Title 36 of the Oklahoma Statutes.

3. For purposes of the Small Employer Health Reform Act, a PEO shall be considered the employer of all of its covered employees and all covered employees of one or more clients participating in a health benefit plan sponsored by a single PEO shall be considered employees of the PEO.

4. 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 to do business in this state,

b.hold all plan assets, including participant contributions, in a trust account, and

c.provide sound reserves for such plan as determined using generally accepted actuarial standards.

G. Limitations on liability. Except to the extent otherwise provided in a professional employer agreement:

1. A PEO shall not be liable for the acts, errors, or omissions of a client, or of any covered employee when such covered employee is acting under the direction and control of a client;

2. A client shall not be liable for the acts, errors, or omissions of a PEO, or of any covered employee of the client and a PEO when such covered employee is acting under the direction and control of the PEO;

3. Nothing in this subsection shall serve to limit any contractual liability or obligation specifically provided in a professional employer agreement, nor shall this subsection in any way limit the liabilities and obligations of any PEO or client as defined elsewhere in the Oklahoma Professional Employer Organization Recognition and Registration Act; and

4. 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 employees are included by specific reference in the professional employer agreement and applicable prearranged employment contract, insurance contract, or bond.

H. Services not insurance. The sale of professional employer services provided by PEOs registered under the Oklahoma Professional Employer Organization Recognition and Registration Act shall not constitute the sale of insurance for purposes of Oklahoma Insurance Law.

I. Sales taxes. Covered employees whose services are subject to sales tax shall be deemed the employees of the client for purposes of collecting and levying sales tax on the services performed by the covered employee.

Added by Laws 2002, c. 64, § 7, eff. Nov. 1, 2002.