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New York Passes Law Regulating Professional Employer Organizations

New York Passes Law Regulating Professional Employer Organizations
  • November 8, 2002

Professional employment organizations generally contract with employers to handle administrative employment responsibilities, such as payroll and tax withholdings, workers' compensation insurance, and other benefits. Partly in response to charges some PEOs were acting improperly, the New York legislature recently has passed a law requiring PEOs to register with the State Department of Labor. The law sets minimum financial worth standards and establishes detailed reporting requirements, including the submission of audited financial statements. PEOs must register and pay an initial fee of $1,000 within 180 days of the end of the fiscal year after the law becomes effective.

The new also law mandates that PEOs and their clients have a written contract specifying responsibilities and duties of each party and deems PEOs to be "employers" for various laws, including workers' compensation law. It may also affect PEO status as the "employer" under other laws not specifically identified.

PEOs should carefully examine these new requirements in light of their operations and those of their clients and review their existing contracts. This law could significantly affect the legal liability of both the PEO and the contracting employer.

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