Subscribe to Free Daily Newsletters
Post a Job

Featured Jobs

ESOP Consultant

Ascensus
(Atlanta GA / Telecommute)
Client Success Specialist

Ubiquity Retirement + Savings
(AZ / CA / CO / FL / IL / KY / LA / MA / NC / NJ / NV / NY / OR / SC / WA / Telecommute)
Project Manager Benefits Communication

BeneCom Associates
(Acton MA / Telecommute)
Defined Contribution Plan Administrator

The MandMarblestone Group, llc
(Philadelphia PA / Telecommute)
Retirement Plan Administrator

Farmer & Betts, Inc.
(Tacoma WA / CO / OR)
Plan Document Specialist

Aimpoint Pension
(Pompano Beach FL / Telecommute)
Retirement Plan Administrator

Group RHI
(TX / Telecommute)
Retirement Plan Administration Consultant

TSC
(Edina MN / Telecommute)
Sales - 401(k) / DB Administration

Farmer & Betts, Inc.
(Tacoma WA / AL / FL / GA / IA / IL / IN / MD / MN / MO / NC / OH / OK / PA / TN / TX / VA / WI)
Senior Pension Consultant

The Ryding Company
(Westlake Village CA)
Retirement Plan Administration Manager

FranFund
(Fort Worth TX)

Free Daily News and Jobs

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Get the BenefitsLink app LinkedIn
Twitter
Facebook

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

State Law and Professional Employer Organizations

(Posted January 10, 2002)

Question 137: I know you take the position that professional employer organizations are generally not the employer of the workers on their payroll which they lease to others. However, in my state there is a law which says that the workers are employees of the PEO. So, can we go ahead and set up a single employer plan for the PEO on that basis?

Answer: No. State laws can do a great deal, but they cannot determine as a conclusion what the status of a worker is under federal tax law.

State laws frequently, for one purpose or another, treat people as employees who would not be considered employees under general common law principles. For example, in California employment status for social insurance purposes (e.g. unemployment insurance) can consider factors such as which party is better able to bear the risk of loss from unemployment -- a factor that never has been part of the common law test. This was adopted because of the welfare aspects of California's system.

The Supreme Court, in deciding what an employee was for ERISA purposes, explicitly rejected such an approach. Instead, the court ruled that traditional common law principles of general applicability are to be followed. State statutes or state court rulings do not change those principles.

Having said that, state law can have an effect. While states cannot, for employee plan or federal tax purposes, formally say "you are the employer," they can say "your rights and duties in this relationship are as follows." Those rights and duties, in turn, can have an affect on common law status under ERISA. For example, in a Florida case, the court took into consideration a state law which said that the PEO was liable for paying wages whether their client paid them or not. (However, the court also held that wasn't enough to make the PEO the employer.)

These issues are discussed in more detail in Chapter 4 of my book, Who's the Employer?.


Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2020 BenefitsLink.com, Inc.