BILL ANALYSIS �
AB 975
Page 1
ASSEMBLY THIRD READING
AB 975 (Ma)
As Introduced February 18, 2011
Majority vote
LABOR & EMPLOYMENT 5-0 APPROPRIATIONS 12-5
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|Ayes:|Swanson, Alejo, Allen, |Ayes:|Fuentes, Blumenfield, |
| |Furutani, Yamada | |Bradford, Charles |
| | | |Calderon, Campos, Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Establishes specified regulatory requirements for
professional employer organizations (PEOs). Specifically, this
bill :
1 Provides that a person or entity shall not provide, advertise
or otherwise hold itself out as providing professional
employer services unless that entity or person is registered
as a PEO with the Employment Development Department (EDD).
2)Requires the director of EDD to prescribe rules establishing
the method for PEOs to report quarterly wages and
contributions for worksite employees and states the following:
a) The rules shall recognize the PEO as the employing unit
of its worksite employees for reporting purposes but may
require that each worksite employee of a single client be
reported under a separate and unique EDD subaccount of the
PEO to reflect the experience of the worksite employees for
a client;
b) Any EDD subaccount shall be used solely to determine
experience rates for that individual subaccount on an
annual basis; and,
c) Any rule promulgated shall also include administrative
AB 975
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requirements that permit a PEO to transmit the reporting
and payment date required collectively as a single
electronic filing with EDD.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill would result in one-time costs to EDD of
approximately $5.2 million to implement this bill. In addition,
there would be ongoing costs to EDD of approximately $10 million
to implement this measure.
COMMENTS : This bill represents the latest in a series of bills
sponsored by the PEO industry seeking to amend California law to
adequately reflect and regulate the PEO industry.
According to the industry, PEOs are companies that allow their
small business clients to cost-effectively outsource the
management of human resources, employee benefits and health
insurance. In a PEO arrangement, the employer's (or client's)
responsibilities for its worksite employees are expressly
allocated or shared pursuant to a written agreement between the
client and the PEO. In such arrangements, the PEO typically
assumes responsibility for such things as payroll, payment of
payroll-related taxes, workers' compensation, unemployment
insurance, healthcare coverage and similar employment benefits.
Supporters argue that this bill provides a necessary regulatory
framework for PEOs operating in California by providing clear
and transparent guidelines for both operators, and importantly,
for those small businesses that partner with PEOs for payroll,
human resource and benefit purposes.
They state that PEOs specialize in managing benefits, payroll
and human resources, allowing their small business clients to
focus on their real business priorities to grow their bottom
line and succeed.
Supporters state that they have worked with the Employment
Development Department and other interested parties for more
than five years to craft legislation that provides appropriate
protections for small businesses and employees as well as the
state while also bolstering the statutory guidelines for PEOs.
They believe this legislation will greatly improve transparency
with the state in addition to providing one set of standards by
which all PEOs must abide by in the state of California. They
conclude that with the enactment of this bill, California will
join more than 37 states that have specific statutory provisions
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addressing the statutory requirements of the PEO-small business
relationship.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0000881