NAPEO: National Association of Professional Employer Organizations

June/July 2014
The PEO legal and regulatory environment is like the 24/seven news cycle: the flood of information never stops. You can check any time of the day or night, any day of the week, and there will be something requiring your attention.
    Surely, there can't be that much news to fill so much time. The fact is, there is. Just like the torrent of never-ending Internet and cable reports, there are new stories every day, but at the same time, the news may not always be new–it's often a rehash of previous news. And, the news may not always be complete–it's frequently an announcement about forthcoming or developing news. The difference is, however, that PEOs need to pay attention to rehashed news and incomplete news as well as the latest developments, because every little regulatory change matters, and it often takes time to prepare for forthcoming changes.
    It's a dizzying milieu in which to operate. Take the regulatory agencies, for example. Revised overtime regulations are in the works at the Department of Labor. While immigration reform legislation is up in the air, Immigration and Customs Enforcement is aggressively enforcing existing law and auditing employers. The National Labor Relations Board is pushing for regulatory reforms that will affect all employers. While it's been years since specific guidance about the application of Title VII in the staffing context, which includes PEOs, case law continues to develop in this area.
    A major part of the PEO value proposition is based on the fact that employment laws and regulations are daunting to small businesses. A PEO's compliance assistance can help even the smallest clients avoid litigious pitfalls and, as clients grow, they become subject to certain thresholds they previously didn't meet. Thus, the PEO must structure the relationship to address obligations and minimize risk.
    Perhaps the area most subject to news updates is the Affordable Care Act. In addition to constantly changing rules and regulations, PEOs must also monitor the agency bulletins, opinion letters, technical releases, notices, and revenue rulings that are being used to implement healthcare reform.
    As employment law begins to catch up with technology, particularly social media, new compliance obligations are emerging. Thirteen states now have employee password protection laws, with 25 more states considering it. While federal legislation has failed thus far, the agencies are beginning to weigh in and data privacy protection legislation is looming.
    There is also news at the state level on the workers' comp and SUTA reporting fronts. NAPEO has been working with the National Council on Compensation Insurance for the past several years to address reporting issues, one of which is defining what a PEO is–particularly how it is different than temporary staffing for workers' compensation purposes. As to SUTA, NAPEO's Model Act provides for reporting at the PEO level. However, Leadership Councils have more frequently been requesting the NAPEO Board of Directors for the flexibility to allow the option of client-level reporting for a given state.
    With the constant legal and regulatory news cycle, the environment is getting hotter (in an uncomfortable way) for small business. On the other hand, this also makes the PEO value proposition hotter (in a great way)!...
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Onboarding New Client Employers and Client Employees Under the ACA
Brendan W. Williams, Esq.
So, your PEO has entered into a contract with a new client. Congratulations! But, you have also acquired a number of silent business partners–the many regulatory agencies and regimens you must now address. One of the biggest and newest is the Affordable Care Act (ACA).
    A big issue under the ACA is how to address healthcare coverage responsibilities that may arise when a PEO co-employs a new client's staff. This may pose particularly trying issues if the PEO sponsors a group health plan for its worksite employees. Perhaps first and foremost, the...

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executive office
A Strategic Approach to Government Affairs
Arthur L. Geiger
There are numerous challenges in owning and operating a business, not the least of which is existing and pending government regulations. Not only is an individual business affected by various regulations, but so are all the businesses associated together within a defined industry. Understanding the varied profiles and differing needs of the stakeholders and other audiences is crucial. In this article, I will present my observations about an individual PEO's approach to having an effective government affairs strategy.
    Most companies have a strategic business plan, but only some include a...

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human resources
The World, According to Google
Jason Carney, SPHR
Non-profits don't have to pay overtime. Interns can file for you all summer and you don't have to pay them a dime. Your receptionist is an exempt employee because she went to college and if you go to college, you don't have to punch a clock. Seriously—it's true! I read it on the Internet.
    How many times have you heard similar stories from a client company? Just like the story of the guy who woke up in a bathtub of ice and one fewer kidney, the Internet is full of labor-related urban legends. In fact, some of the most uncomfortable conversations I have had with client contacts involve debunking myths they read on the Internet.
    Saying "you're wrong" isn't a great way to retain clients, so how do we make sure we are armed with the information we need to convince a client he or she is wrong?...

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Developing Strategic Alliances
Joe Clifton
Jet-Pro PEO recently entered a partnership with the Independent Fixed Base Operators Association (IFBOA) to provide their member companies with access to Fortune 100 benefits, HR, payroll, and healthcare reform-compliant solutions. By joining forces with IFBOA, Jet-Pro PEO has the opportunity to reach more prospects and benefit from the association's existing sales and marketing strategy. In exchange, IFBOA member companies have the ability to increase employee satisfaction and stabilize benefits, payroll, and HR administrative costs while ensuring...
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the inside word
The Power Behind Market Share
Mark C. Perlberg
2014 NAPEO Chairperson

From the earliest days of our industry (even when it was called staff leasing), people who understood the true value of the co-employment concept (before it had that name) were drawn to PEO. Entrepreneurs in related industries heard about it and wanted to join the initial "pioneers." Small business owners who used a PEO often stuck with it, even when they decided to migrate from their initial PEO selection.
    Well, if PEO is such a great idea, why isn't the industry's market share growing more dramatically? Although estimates vary (in part because the definitions of "small business" vary) after 30 years, PEO market share is still hovering around 3 to 5 percent of the small business market. Why? Is it because...

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napeo notebook
NAPEO Headquarters is Hub of Activity
Patrick J. Cleary
May was a busy month around NAPEO, as it seemingly grows into a permanent condition. As I write this, I have just returned from our small business focus groups in Dallas, Texas. (More about this in our Up Front column on page 10.) We are busy in the final throes of preparation for the PEO Capitol Summit ( Turnout and registration are strong, a testament to the great program put together by the team here at NAPEO and the Legal Advisory Council. Adding Pulitzer Prize-winning journalist Bob Woodward as a luncheon speaker provides a "Wow!" factor and an extra boost in interest, excitement, and turnout.
    But, back to May, a month filled with...

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up front
Inside the Mind of a Small Business Owner
As NAPEO Chairman Mark Perlberg notes in his column this month, PEO market share has hovered between 3 and 5 percent for many years now. Despite the PEO value proposition and the important services provided by PEOs, moving beyond the 3 to 5 percent barrier has proved challenging.
    While we know instinctively that thousands of small businesses would benefit significantly from partnering with PEOs, clearly the small business owners themselves–the ones who are making these decisions–do not know. Our challenge is to find out what they know and don't know about our industry and determine the best ways to convey the advantages and benefits of PEOs so we can expand our reach into the small business market.
    One of the ways we're accomplishing this is through a series of focus groups...

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napeo advisor
Pro-Rated Rewards, COBRA Notices, IRS Guidance, Performance Standards and the ADA
William J. Schilling, Esq.
Q. Our group health plan charges a tobacco premium surcharge but allows avoidance of the charge if at enrollment or re-enrollment the participant agrees to take and complete within the plan year an educational program to cease smoking. If one of our participants (a smoker) initially fails to enroll in the tobacco cessation program but enrolls mid-year, is he entitled to avoid the surcharge?
    A. It depends on the provisions of your plan. There is no statutory or regulatory requirement that he get the reward. If he was provided a reasonable opportunity to enroll in the tobacco cessation program at the beginning of the plan year and to qualify for the reward (i.e., avoiding the tobacco premium surcharge) under the program, the plan is not required to...

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capitol comment
Lots of Workplace, Labor and, Safety Standards from the Obama Administration
Thom Stohler
While it doesn't seem like Congress can get anything done, the Obama administration has been aggressively moving forward on regulations and executive orders, especially in the areas of workplace, labor, and safety standards.
    The president has issued several executive orders and memoranda on wages, for example...

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The Long and Winding Road
NAPEO's Journey Towards Federal Legal Certainty

Lou Basso and Kathleen A. Hillegas, Esq.
NAPEO's effort to introduce and pass federal legislation has definitely been a long haul on a very long and winding road. Many NAPEO members are aware of the effort to move what is now known as the Small Business Efficiency Act (SBEA), but may not be aware or don't remember the genesis of the legislation. Let's review.
    PEOs today enjoy a significant degree of statutory certainty under state law–in large part due to the efforts of the NAPEO Millennium Project, which was approved in 1999 and committed $1 million dollars in funding over a period of five years to enhance the statutory and regulatory environment for all PEOs. Federal certainty remains a NAPEO goal–the need for which is evident from the ongoing challenges to the PEO business model that have arisen over the years.
    In 1985, congressional leaders discussed a law to prohibit...

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peo index
PEO Index Markedly Down in First Quarter
John Slavic
"After several years of an essentially upward trajectory, the PEO Index turned decidedly negative in the first quarter of this year. Despite a seasonal propensity to indicate a decline in the first quarter of past years, 2014 was more pronounced. Two factors likely account for the downturn: first, the severe winter weather possibly negatively affected hours worked and employees hired; second, and more important, yet another delay by the Obama administration in the employer mandate reduced small business urgency in seeking solutions from PEOs. However, it is likely only...
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peo spotlight
NAPEO's State Government Affairs Program
Expanding Operational Certainty Across the Nation

Stephanie Oetjen
Pretty much everyone who was in the PEO industry throughout the 1980s and early 1990s has a war story about state government affairs in the industry's early days. Bob Burbidge, president of Genesis HR Solutions, Inc., Burlington, Massachusetts, has several, in fact.
    There was the time in 1992 when Massachusetts–in response to massive workers' comp fraud by a PEO in Rhode Island–changed its rules about how workers' comp policies were written, but didn't bother to tell brokers or PEOs. The state inspector shut down one of Bob's clients and the client called Bob.
    "I had to pay a $500 fine," said Bob. "We only had 18 clients, so I filled out 18 applications, raced down to the bureau, and ran into the chief. He said, 'I want to see you tomorrow with your client list.' We went in, and at the beginning of the meeting...

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global insights
Global Trade Benefits Hit Home
Thomas J. Donohue
The surge in commercial activity that will be made possible under major trade deals that the United States is negotiating with key global partners may seem worlds away for the average small business or consumer. But the truth is that the benefits of greater U.S. trade will hit very close to home.
    Expanded access to foreign markets will help connect American businesses with more of the world's customers–95 percent of whom live beyond U.S. shores. With more customers, U.S. businesses can sell more goods and services, hire more employees, and pump more revenue into the economy.
    Already, one in three...

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NAPEO Medallion Partners
NAPEO Thanks its 2013 Medallion Partners
Diamond Partners

F.W. Davison and Company         Risk Transfer Programs, LLC        
Platinum Partners

Artex Cedar Hill         Compass Consulting Group, Inc.         Humana         MassMutual Financial Group         McHenry Consulting

Summit Software         ThinkWare Corporation         Transamerica Retirement Solutions
Gold Partners

ALLInsurance Solutions Management, LLC         Avalara         MetLife         PayPlus         Pinnacle Financial Services
Silver Partner

eflexgroup         Fisher & Phillips LLP         Human Resources Mexico, S. de R.L        
Bronze Partners

Capital Alliance Corp.         Comply Right Distribution Services         NetWise Technology

ResourceDirect         SaaShr / A Kronos Company         U. S. Risk Insurance Group, Inc.      

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