HB-4584, As Passed House, June 30, 2011

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4584

     A bill to amend 2010 PA 370, entitled

"Michigan professional employer organization regulatory act,"

by amending sections 7, 9, 13, 15, 17, 21, 23, and 27 (MCL

338.3727, 338.3729, 338.3733, 338.3735, 338.3737, 338.3741,

338.3743, and 338.3747).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 7. (1) Except as otherwise provided in this act,

beginning September 1, 2012, a person shall not provide, advertise,

or otherwise hold itself out as providing professional employer

services in this state, unless licensed or exempt from licensure

under this act.

     (2) An applicant for licensure shall submit to the department

the application fee imposed in section 13 and a completed

application providing that provides the following information:

     (a) The name or names under which the PEO conducts business.

     (b) The address of the principal place of business of the PEO

and the address of each office it maintains within Michigan.in this

state.

     (c) The PEO's taxpayer or employer identification number.

     (d) A list by jurisdiction of each name under which the PEO

has operated within in the preceding 5 years, including any

alternative names, names of predecessors, and, if known, successor

business entities.

     (e) A statement of ownership , which shall include that

includes the name and evidence of the business experience of any

person, individually or acting in concert with 1 or more other

persons, owning or controlling, that directly or indirectly , owns

or controls 10% or more of the equity interests of the PEO.

     (f) A statement of management , which shall include that

includes the name and evidence of the business experience of any

person individual who serves as president , or chief executive

officer , or otherwise has the authority to act as senior executive

officer of the PEO.

     (g) A financial statement describing the financial condition

of the PEO or PEO group, . Before December 31, 2010, applicants may

file an unaudited financial statement. On or after January 1, 2011,

the financial statement shall be prepared in accordance with

generally accepted accounting principles and audited by an

independent certified public accountant licensed to practice in the

jurisdiction in which such that accountant is located and shall be

is without qualification as to the going concern status of the PEO.

A PEO group may submit combined or consolidated audited financial

statements to meet the requirements of this subsection. A PEO that

has not had sufficient operating history to have audited financials

based upon on at least 12 months of operating history must meet the

financial capacity requirements described in section 15 and present

financial statements reviewed by a licensed certified public

accountant.

     (h) A financial audit of the applicant. At the time of

application for an initial license, the applicant shall submit the

its most recent audit, which may not be older than 13 months.

Thereafter, a PEO or PEO group shall file on an annual basis,

within 270 days after the end of the PEO or PEO group's fiscal

year, a succeeding audit. An applicant may apply to the department

for an extension, with the department except that any request must

be accompanied by include a letter from the auditors stating the

reasons for the delay and the anticipated audit completion date.

     (i) A certification that the PEO has made an election under

section 13m of the Michigan employment security act, 1936 (Ex Sess)

PA 1, MCL 421.13m.

     (3) A Beginning September 1, 2012, a person that has been

convicted of a felony related to the operation of a PEO shall not

own or control, directly or indirectly, a PEO doing business in

this state.

     (4) Each PEO operating within in this state on the effective

date of this act shall file its completed application and submit

the license fee by July 1, 2012.not later than 180 days after the

effective date of this act. Initial licensure is valid until the

end of the PEO's first fiscal year end that is more than 1 year

after the effective date of this act. A PEO not operating within

this state on the effective date of this act shall submit its

initial licensure application prior to commencement of operations

within this state.

(4) (5) Within 180 days after the end of a licensee's fiscal

year, Before a license expires, the licensee shall may renew its

license by submitting a renewal application to the department

providing that includes any changes in the information provided in

the licensee's prior application.

(5) (6) PEOs in a PEO group may satisfy the reporting and

financial requirements of this section on a combined or

consolidated basis provided that if each member of the PEO group

guarantees the obligations under this act of each other member of

the PEO group. In the case of If a PEO group that submits a

combined or consolidated audited financial statement, including

entities that are not PEOs or that are not in the PEO group, the

controlling entity of the PEO group under the consolidated or

combined statement must guarantee the obligations of the PEOs in

the PEO group. The department shall determine whether the

requirements of this subsection are satisfied.

(6) (7) The department shall, to the extent practical, allow

the acceptance of accept electronic filings, including filing of

applications, documents, reports, and other filings required under

this act. The department may allow for the acceptance of accept

electronic filings and other assurance by an independent and

qualified assurance organization that provides satisfactory

assurance of compliance acceptable to the department consistent

with, or in lieu of, the requirements of this section, and sections

9 and 15, and other requirements of this act. The department shall

allow a PEO to authorize an assurance organization, approved by the

director, to act on the PEO's behalf in complying with the

licensure requirements of this act including, but not limited to,

electronic filings of information and payment of license fees. Use

of an approved assurance organization by a PEO is optional. This

subsection does not limit or change the department's authority to

license, to rescind, revoke, or deny a license, or to investigate

or enforce any provision of this act.

     Sec. 9. (1) The Beginning September 1, 2012, the department

may issue a limited PEO license. A PEO seeking limited licensure

under this section shall submit to the department a properly

executed and completed application on a form provided by the

department and include with the application the license fee for

limited licensure established by the department.

     (2) A PEO is eligible for a limited license upon meeting if it

meets all of the following conditions:

     (a) Is domiciled outside Michigan this state and is licensed

or otherwise regulated as a PEO in another state.

     (b) Does not maintain an office in Michigan this state or does

not directly solicit clients located or domiciled within

Michigan.in this state.

     (c) Does not have more than 50 covered employees employed or

domiciled in Michigan this state on any given day.

     (3) A limited license is valid for 1 year and may be renewed.

     (4) Section 15 does not apply to applicants an applicant for a

limited licensure.license.

     Sec. 13. (1) The department may charge an application fee for

an initial licensure, license under this act. The amount of the fee

shall be determined by the department and shall not to exceed

$1,500.00 for an individual license and or $1,500.00 for a PEO

group license.

     (2) Except in the case of for an initial license, the term of

a license issued under this act shall be issued for a term of 3

years. The per year is 1 year, beginning on September 1 and

expiring on August 31 of the next calendar year.

     (3) The department shall issue an initial license under this

act for a term from the effective date of that initial license, as

determined by the department, to the next August 31 after that

effective date or, at the option of the department, to the second

August 31 after the effective date. If the effective date of the

license is not September 1, the department shall adjust the amount

of the annual license fee under subsection (4) for that initial

term on a pro rata basis to reflect the length of the initial term,

as determined by the department.

     (4) Subject to subsection (3), the annual license fee is

$1,500.00 for an individual license and $1,500.00 for a PEO group

license. The renewal license fee shall include the license fee

representing the 3-year term.

(5) (3) The department may adjust the license fees under this

section every 3 2 years by an amount determined by the state

treasurer to reflect the cumulative annual percentage change in the

Detroit consumer price index in the preceding 2-year period and

rounded to the nearest dollar. As used in this subsection, "Detroit

consumer price index" means the most comprehensive index of

consumer prices available for the Detroit area by the bureau of

labor statistics of the United States department of labor.

     Sec. 15. Unless otherwise exempt under this act, beginning

September 1, 2012, each PEO or collectively each PEO group shall

submit to the department evidence of and maintain either of the

following:

     (a) A minimum of $100,000.00 in working capital, as defined by

generally accepted accounting principles, as reflected in the

financial statements submitted to the department with the initial

licensure license application and each annual renewal application.

A PEO or PEO group with less than $100,000.00 in working capital at

renewal has 180 days to eliminate the deficiency in a manner

acceptable to the department. During that 180-day period, the PEO

or PEO group shall submit quarterly financial statements to the

department accompanied by an attestation of the chief executive

officer that all wages, taxes, worker's compensation premiums, and

employee benefits have been paid by the PEO or members of the PEO

group.

     (b) A bond, irrevocable letter of credit, or securities with a

minimum market value of $100,000.00, acceptable to the department.

The bond shall be held by a depository designated by the department

to secure payment by the PEO of all taxes, wages, benefits, or

other entitlements due to, or regarding, covered employees, if the

PEO or PEO group does not make those payments when due. For any PEO

or PEO group whose annual financial statements do not indicate

positive working capital, the PEO shall provide a bond in the

amount of the bond shall be $100,000.00 plus an amount sufficient

to cover the deficit in working capital.

     Sec. 17. (1) Each professional employer agreement executed on

or after September 1, 2012 shall include the following provisions:

     (a) The responsibility of the PEO to pay wages 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. For purposes

of this subdivision, wages do not include any obligation between a

client and a covered employee for payments beyond, or in addition

to, the covered employee's salary, draw, or regular rate of pay,

including bonuses, commissions, severance pay, deferred

compensation, profit sharing, or vacation, sick, or other paid time

off pay, unless the PEO has expressly agreed to assume liability

for those payments in the professional employer agreement.

     (b) The hiring, disciplining, and termination by the PEO of a

covered employee, as may be necessary to fulfill the PEO's

responsibilities under this act and the professional employer

agreement. The client may also hire, discipline, and terminate a

covered employee.

     (c) The responsibility of the client and the PEO to comply

with the worker's disability compensation act of 1969, 1969 PA 317,

MCL 418.101 to 418.941.

     (2) Each professional employer agreement executed on or after

September 1, 2012 shall provide require that the PEO provide

written notice to each covered employee affected by the agreement

regarding the general nature of the coemployment relationship

between and among the PEO, the client, and that covered employee.

     Sec. 21. (1) A Beginning September 1, 2012, a person who that

commits 1 or more of the following is subject to the penalties

prescribed under described in subsection (2):

     (a) Practices fraud or deceit in obtaining or renewing a

license.

     (b) Aids or abets another person in the unlicensed practice of

an occupation.

     (c) Engages in activities regulated under this section without

obtaining a license under this act or demonstrating exemption that

the person is exempt from licensure under this act.

     (d) In the case of If the person is a licensee or an officer

of a licensee, being is convicted of a crime relating to the

operation of a PEO.

     (e) Engages in false advertising.

     (2) After notice and opportunity for hearing under the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, the department shall do 1 or more of the following upon the

determination of a violation of if it determines that a person

violated this act, a rule adopted under this act, or an order

issued under this act:

     (a) Placement of Place a limitation on a license.

     (b) Suspension of Suspend a license.

     (c) Denial of Deny a license or renewal of a license.

     (d) Revocation of Revoke a license.

     (e) Imposition of Impose an administrative fine to be paid to

the department, not to exceed $5,000.00.

     (f) Censure the person or license.

     (g) Probation.Place the licensee on probation.

     (h) A requirement that Require restitution to be made, based

upon on proofs submitted to and findings made by the hearing

examiner after a contested case.

     Sec. 23. A person who Beginning September 1, 2012, a person

that knowingly and willfully violates this act, or who that aids

and abets, directly or indirectly, the a violation of this act, is

guilty of a misdemeanor punishable by imprisonment for not more

than 1 year or a fine of not more than $10,000.00, or both.

     Sec. 27. This act takes effect July 1, 2011.January 1, 2012.