BILL ANALYSIS
AB 2570
Page 1
Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2570 (Ma) - As Introduced: February 19, 2010
Policy Committee: Labor and
Employment Vote: 7-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires Professional Employment Organizations (PEOs)
to register with the Employment Development Department (EDD),
and for the director of EDD to prescribe rules relating to
quarterly reporting and establishing unemployment insurance
contributions on behalf of PEO employees. The bill also:
1)Requires the rules to recognize PEOs as the employing unit of
its worksite employees for the purpose of reporting and
determining the unemployment experience rating.
2)Allows the rules to require that each employee of a single
client be reported under a separate subaccount of the PEO to
reflect the experience of the workplace employees of the
client.
3)Requires the rules to permit PEO's to transmit the reporting
and payment data collectively as a single electronic filer.
FISCAL EFFECT
Unknown, potentially significant costs to EDD, in excess of
$200,000, to develop and implement a registration system for
entities providing professional employer services.
COMMENTS
1)Background . Professional Employer Organizations (PEOs) are
companies that provide ongoing human resources, employee
benefits, and health insurance related services to small
businesses. PEOs typically enter into contracts with small
AB 2570
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businesses, where the PEO assumes responsibility for such
things as payroll, payment of payroll-related taxes, workers'
compensation, unemployment insurance, healthcare coverage and
similar employment benefits. Employees of PEO's often provide
these services at the worksite of the contacting employer.
2)Rationale . This bill is being advanced by the National
Association of Professional Employer Organizations (NAPEO) to
facilitate discussion about regulation and industry
classification of PEOs for purposes of unemployment insurance
(UI) programs. Specifically, one factor in determining
employer contribution rates to the UI insurance fund is the
unemployment experience of the industry in which the employer
resides, and a second is the unemployment experience of the
employees of the firm.
EDD does not break out PEOs as a distinct industry group, but
rather includes PEO's within its "leasing employer"
classification, which is dominated by providers of temporary
employment services. NAPEO contends that, by being grouped
with temporary services employers, PEO are paying a rate that
is higher than warranted by the actual employment experience
of PEOs.
3)Related Legislation . AB 1560 (Committee on Labor and
Employment) from last year and AB 2975 (Keene) from 2008 were
introduced to facilitate discussions regarding regulation of
PEOs. However, those earlier discussions did not produce an
agreement, and both measures were held in this committee.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081