Brief ⁽¹⁾

Sub. for SB 121 would codify the relationship between a Professional Employment Organization (PEO) and the business and employees for whom they provide services. A PEO is a business organization that contracts with small business owners to provide comprehensive human resource services through a co-employment arrangement. Specifically, the bill contains the following provisions:

Written Contract. Each PEO would be required to have a written contract between the client and the PEO setting out the responsibilities and duties of each party. This contract would contain a description of the types of services to be rendered by the PEO and the respective rights and obligations of the parties.

Written Notice. The PEO would be required to provide written notice to the assigned workers located at the client work site describing the general nature of the relationship between the PEO and the client.

Income Tax Withholding. The PEO would be considered an employer for purposes of Kansas income tax withholding.

Tax and Tax Incentive Treatment. The client would give payroll information for assigned workers to the Department of Revenue for income tax purposes and to qualify for certain tax incentives.

PEO Responsibilities. For as long as the contract between the PEO and client remains in force, the PEO would assume the following responsibilities:

• •Pay wages and collect, report, and pay employment taxes of assigned workers from its own accounts.
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• •Pay unemployment taxes as required by law.
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• •Secure and provide all required workers compensation coverage for assigned workers either in the PEO name or in the client's name.
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PEO and Client Status

• •Both the client and the PEO would be considered the employer for purposes of the Workers Compensation Act.
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• •Both the client and the PEO would be entitled to protection of the exclusive remedy provision of the Workers Compensation Act irrespective of which entity secures and provides the workers compensation coverage.
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• •A recognized PEO would be deemed the employer for the purposes of sponsoring and maintaining benefit and welfare plans for assigned workers.
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• •Assigned workers would be deemed employees of the client for general liability purposes as well as the following: automobile insurance, fidelity bonds, surety bonds, or employer's liability insurance other than workers compensation insurance.
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• •A PEO providing human resource services for a client engaged in the practice of an occupation, trade, or profession that is licensed, certified, or otherwise regulated by a governmental entity would not be engaged in the unauthorized practice of such occupation, trade, or profession.
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Background

The Senate Committee held hearings on SB 121, at which time representatives of Oasis Outsourcing, the Kansas Trial Lawyers Association, the Kansas AFL-CIO, and the Kansas Department of Revenue offered testimony regarding the bill. Several amendments were adopted by the Senate Committee, including the following:

• •Language declaring the value of PEOs contained in the first section of the bill was stricken and replaced with a simple statement naming the act.
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• •Language specifically exempting labor organizations defined by the National Labor Relations Act and governmental entities from the provisions of the PEO Act and asserting that the bill would have no effect on existing collective bargaining agreements was stricken.
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• •Language giving PEOs the right of direction and control over workers assigned to the client's location was stricken.
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• •Language designating the client as the employer of an assigned worker for income tax purposes and to establish eligibility for certain business tax incentives was added.
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• •Language clarifying that assigned workers are employees of the client for general liability purposes was added.
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• •Technical amendments.
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The Division of the Budget reports that passage of SB 121 would have no fiscal effect on the state.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi