SB 266
Enacts new provisions of law relating to professional employer organizations
LR Number:
Last Action:
4/3/2017 - SCS Voted Do Pass S Professional Registration Committee (0249S.07C)
Journal Page:
Calendar Position:
Effective Date:
August 28, 2017

Current Bill Summary

SCS/SB 266 - This act establishes regulations and registration requirements for professional employer organizations (PEOs).


Under this act, no person is permitted to provide, advertise, or otherwise hold itself out as providing professional employer services unless such person is registered with the Secretary of State. PEO’s may register individually or as a group. PEOs may further apply for limited registration. A PEO is eligible for limited registration if it is domiciled outside the state, licensed as a PEO in another state, does not maintain an office in this state or directly solicit clients in this state, and does not have more than 50 employees employed or domiciled in this state on any given day.

The Secretary of State shall maintain a list of PEOs registered in this state. The Secretary is permitted to produce forms to be used for registration but shall permit the acceptance of electronic filings by either the PEO or an independent qualified assurance organization authorized by the PEO to act on behalf of a PEO.

PEOs shall pay an initial registration fee not to exceed $500 with an annual renewal fee not exceed $250. PEOs seeking limited registration shall pay an initial and annual registration fee not to exceed $250. The Secretary may determine a lower fee to be paid by a PEO. The Secretary shall determine a fee to be paid by PEO groups. No fee shall exceed the amount reasonably necessary for the administration of the act.


Each PEO or PEO group shall maintain either positive working capital or provide a bond, irrevocable letter of credit, or securities with a minimum market value equaling the deficiency plus one hundred thousand dollars to the Secretary of State. PEOs seeking limited registration are not required to meet these requirements.

The act establishes the conditions under which a client and a PEO may enter into a professional employment agreement as well as the rights and responsibilities of each party.


Persons may be sanctioned by the Secretary of State for, among other things, providing professional employer services without registering, for providing false or fraudulent information in conjunction with any registration, renewal, or report required by this act, or for willful violations of this act. Such sanctions may include revocation of license or the imposition of an administrative penalty of not more than $1,000, among other potential penalties.


The responsibility to obtain workers' compensation coverage shall be specifically allocated in the professional employer agreement to either the PEO or the client.

If the coemployment relationship between a PEO and a client is terminated, the client shall utilize an experience modification rating that reflects its individual experience. The PEO shall provide a client its workers' compensation information within 5 business days of receiving or giving notice that the relationship has been terminated.

A client may request its workers' compensation information at any time and the PEO shall provide such information to the client within 5 business days of receiving such request. Such information shall also be provided to any future client insurer if requested by such client.

Any PEO which fails to comply with the workers' compensation coverage provisions shall have its registration revoked by the Secretary of State.

A client is additionally required to provide prospective insurers with its workers' compensation information upon receiving such information from the PEO. A client is further required to disclose to a prospective insurer its current or previous relationship with a PEO. Violation of these provisions is subject to a Class A misdemeanor.


For purposes of this act, covered employees shall be considered employees solely of the client and not the PEO. Moreover, the client shall have the sole right of direction and control of the professional or licensed activities of covered employees and of the client's business.

The act modifies the definition of "lessor employing unit" for the purposes of unemployment law to include PEOs.


This act provides that a client's status or certification as a minority-owned or woman-owned business enterprise shall not be affected because such client has entered into an agreement with a PEO or uses the services of a PEO.

This act is substantially similar to HB 1154 (2017), HB 1196 (2017), and HB 1198 (2017), SCS/SB 877 (2016), HB 1703 (2016), and HB 2203 (2014).