NAPEO: National Association of Professional Employer Organizations

Government Affairs
What We Advocate


NAPEO's government affairs mission is to create and cultivate a legislative and regulatory climate in all 50 states that is hospitable to PEOs and positions the PEO industry for continued growth. The following are guiding principles for shaping the legislative and regulative climate for PEOs in the states.

NAPEO's Government Affairs program is charged to:

  1. Provide statutory recognition for and a definition of the PEO industry in state law within a reasonable regulatory framework for PEOs that provides consistency, predictability and stability of regulation.

  2. Promote laws and regulations that establish the PEO as the employer of record with the responsibility for the payment of wages, withholding and remittance of federal and state taxes, and the provision of employee benefits.

  3. Protect PEOs' insurable interest for purposes of workers' compensation, ensure that PEO's have maximum flexibility regarding workers' compensation policy structure in the voluntary market, and establish/protect exclusive remedy protection for both PEOs and their clients (regardless of which entity provides workers' compensation coverage).

  4. Recognize PEOs for purposes of unemployment compensation insurance and report taxable wages using the employer account and the experience rating of the PEO for its covered employees.

  5. Provide a statutory basis for PEOs to sponsor employee benefit plans such as healthcare, retirement, etc. for their covered employees.

  6. Assure that public policies recognize that the PEO industry supports employee access to health benefits and that PEOs offer a way for businesses to enhance availability of health benefits to employees, while assuring that accountability and assessment for health care mandates is determined at the client level and that businesses are neither advantaged nor disadvantaged via the PEO relationship.

  7. Assure that fully-insured PEO health plans are not treated as MEWAs under state law, and provide responsible regulation of self-insured plans to provide confidence in the plans' long-term solvency (use of licensed TPA, actuarially sound reserves, assets held in trust, and employees on notice of self-insured status).

  8. Protect PEOs from employer liabilities that are not expressly allocated to the PEO in a client services agreement nor within the PEO's control (e.g., no product or tort liability; no liability for wages beyond that described in the agreement and for which the PEO was not on notice).

  9. Preserve client's tax benefits, credits, and status that existed outside the PEO relationship. There should be no financial disincentives to a client from entering a PEO arrangement, and a small business' decision to contract with a PEO should be revenue neutral for the state.

  10. Assure that the sale or provision of PEO services, including employee benefits and workers' compensation, to covered employees is not treated as the business or sale of insurance.

  11. Ensure that calculation of business taxes or fees that are assessed based on gross revenues or receipts allow PEOs to exclude amounts that are used by the PEO to satisfy the PEO's responsibility for the payment of wages, taxes, and benefits to co-employees, or to limit the assessment of taxes or fees to the PEOs' administrative fees.

  12. Enact and support those statutory requirements of PEO relationships that codify those best practices that are deemed essential for the long term industry viability and credibility including but not limited to audited financial statements that demonstrate satisfaction of adequate financial responsibility, written contracts with clients, notice to covered employees of PEO relationship, minimum working capital requirements.

  13. Promote the recognition of voluntary industry self-certification programs that build trust and provide assurance to PEO clients, worksite employees, insurers, taxing authorities, regulators, and the general public by ensuring that participating PEOs comply with important ethical, financial and operational standards.

State-by-State Expansion of Legal & Operational Certainty

PEO or Employee Leasing-specific registration or licensing requirement was enacted.

State law recognition generally as an employer without a registration or licensing requirement.

Pending licensing or registration legislation.






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