S3087

An Act concerning employee leasing companies and unemployment compensation, amending P.L.2001, c.260, and supplementing chapter 21 of Title 43 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 6 of P.L.2001, c.260 (C.34:8-72) is amended to read as follows:

6. a. An employee leasing company registered under this act and the respective client companies with which it has entered into employee leasing agreements shall be the co-employers of their covered employees for the payment of wages and other employment benefits due, including the obligation under the workers' compensation law, R.S.34:15-1 et seq., to maintain insurance coverage for covered employees for personal injuries to, or for the death of, those employees by accident arising out of and in the course of employment through policies issued by an insurance carrier licensed in the State of New Jersey. Such policies shall state the name of the employee leasing company as the labor contractor for each client company, by name.

b. For purposes of [this act] P.L.2001, c.260 (C.34:8-67 et seq.), the agreement between the employee leasing company and the client company shall be one of co-employment, whereby the employee leasing company, having accepted the responsibilities set forth in section 2 of [this act] P.L.2001, c.260 (C.34:8-68), may submit reports to the department and make contributions to the Unemployment Compensation and State Disability Benefits Funds in the manner prescribed in section 7 of [this act] P.L.2001, c.260 (C.34:8-73), on behalf of those covered employees covered by the employee leasing agreement. In addition, the provisions of R.S.34:15-8, regarding the exclusivity of the remedy under the workers' compensation law for personal injuries to, or for the death of, employees by accident arising out of and in the course of their employment, shall apply to the employee leasing company and the client company, and their employees.

c. The employee leasing company shall file reports prescribed under the "unemployment compensation law," R.S.43:21-1 et seq. on behalf of its covered employees [using the State tax identification number of the employee leasing company] as set forth in section 3 of P.L. , c. (C. )(pending before the Legislature as this bill).

(cf: P.L. 2011, c.118, s.5)

2. Section 7 of P.L.2001, c.260 (C.34:8-73) is amended to read as follows:

7. a. Upon entering into the employee leasing agreement:

(1) If the employee leasing company acquires the client company's total workforce, the employee leasing company shall report wages and pay contributions pursuant to [the "unemployment compensation law," R.S.43:21-1 et seq., based on the benefit experience assigned to the employee leasing company under R.S.43:21-7. The benefit experience of the client company shall not be transferred to the leasing company and shall not be used in the calculation of the employee leasing company's future contribution rates] section 3 of P.L. , c. (C. )(pending before the Legislature as this bill).

(2) If the employee leasing company acquires less than all of the client company's total workforce, the employee leasing company shall report wages and pay contributions pursuant to [the "unemployment compensation law," R.S.43:21-1 et seq. for that portion of the workforce acquired based on the benefit experience assigned to the employee leasing company under R.S.43:21-7. The benefit experience associated with that portion of the client company's workforce acquired by the employee leasing company shall not be transferred to the employee leasing company and shall not be used in the calculation of the employee leasing company's future contribution rates. The client company shall continue to report wages and pay contributions for the workforce not acquired by the employee leasing company using the client company's contribution rate] section 3 of P.L. , c. (C. )(pending before the Legislature as this bill) with respect to that portion of the workforce so acquired.

b. Upon dissolution of the employee leasing agreement:

(1) If, under the dissolved employee leasing agreement, the employee leasing company elected to use the Entity Level Reporting Method under subsection b. of section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill) to report and pay all required contributions to the unemployment compensation fund as required under R.S.43:21-7, and the client company had leased all or a portion of its total workforce, [and if, at the time of dissolution, the client company had leased those employees for at least two full calendar years, the client company shall be assigned the rate of a new employer under R.S.43:21-7 until it is eligible for a rate based on benefit experience pursuant to that section or enters into another employee leasing agreement] the employee leasing company shall, at the time of dissolution, provide the department with the data necessary to calculate the benefit experience of the client company for purposes of determining the client company’s separate benefit experience.

(2) If, under the dissolved employee leasing agreement, the [client company had leased its total workforce, and if, at the time of the dissolution, the client company had leased those employees for less than two full calendar years, the employee leasing company at the time of dissolution shall provide the Department of Labor with the data necessary to calculate the benefit experience of the client company for the duration of the employee leasing agreement. That benefit experience shall then be added to the client company's benefit experience which was established prior to entering the employee leasing agreement. Both the client company and the employee leasing company shall continue to use the rate of the employee leasing company for the period from the date of the dissolution of the employee leasing agreement until the following July 1] employee leasing company elected to use the Client Level Reporting Method under subsection c. of section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill), to report and pay all required contributions to the unemployment compensation fund as required under R.S. 43:21-7, and the client company had leased all or a portion its total workforce, the department shall compute its benefit experience in accordance with subparagraph (f) of paragraph (3) of subsection c. of section 3 of P.L. , c. (C. )( pending before the Legislature as this bill)

(3) [If, under the dissolved employee leasing agreement, the client company had leased less than its total workforce from the employee leasing company, and if, at the time of dissolution, the client company had leased those covered employees for at least two full calendar years, the benefit experience associated with that portion of the client company's workforce which had been leased from the employee leasing company shall not be transferred to the client company and shall not be used in the calculation of the client company's future contribution rates.] (Deleted by amendment, P.L. , c. (C. )(pending before the Legislature as this bill)

(4) [If, under the dissolved employee leasing agreement, the client company had leased less than its total workforce from the employee leasing company, and if, at the time of dissolution, the client company had leased those covered employees for less than two full calendar years, the leasing company shall provide the department with the data necessary to calculate the benefit experience associated with that portion of the client's workforce which had been leased from the employee leasing company. The department shall combine that benefit experience with the client company's existing benefit experience. Both the client company and the employee leasing company shall continue to use their own rates for the period from the date of the dissolution until the following July 1.] (Deleted by amendment, P.L. , c. (C. ) (pending before the Legislature as this bill)

(5) [If, immediately upon dissolution of the employee leasing agreement, the client company enters into a subsequent employee leasing agreement regarding those covered employees with another employee leasing company, the payroll relative to the client company shall be reported and paid at the rate assigned the second employee leasing company] (Deleted by amendment, P.L. , c. (C. ) (pending before the Legislature as this bill)

(cf: P.L.2001, c.260, s.7)

3. (New section) a. For purposes of the “unemployment compensation law,” R.S.43:21-1 et seq., a covered employee is an employee of the employee leasing company. An employee leasing company is responsible for the payment of contributions, surcharges, penalties, and interest assessed under the “unemployment compensation law,” R.S.43:21-1 et seq. on wages paid by the employee leasing company to the covered employees during the term of the employee leasing agreement. An employee leasing company shall use the Client Level Reporting Method to report and pay all required contributions to the unemployment compensation fund as required by R.S.43:21-7, unless the employee leasing company elects the Entity Level Reporting Method under subsection b. of this section. An employee leasing company that initially elects the Entity Level Reporting Method under subsection b. may subsequently elect the Client Level Reporting Method under subsection c. of this section. An employee leasing company that does not elect to use the Entity Level Reporting Method under subsection b. of this section may not thereafter elect to use the Entity Level Reporting Method. An employee leasing company and its related entities shall use the same reporting method for all clients.

b. An employee leasing company may elect to use the Entity Level Reporting Method, which uses the State employer account number and contribution rate of the employee leasing company to report and pay all required contributions to the unemployment compensation fund as required by R.S.43:21-7. An employee leasing company shall make that election in writing on forms prescribed by the department and make the election not later than: July 1, 2014, if the employee leasing company is doing business in New Jersey for reporting effective January 1, 2015; or the first date the employee leasing company is liable to make contributions under the “unemployment compensation law,” R.S.43:21-1 et seq., for at least one covered employee, if the employee leasing company begins doing business in New Jersey after July 1, 2014. An employee leasing company that does not make an election under this subsection b. shall use the Client Level Reporting Method pursuant to subsection c. of this section. The following provisions apply to an employee leasing company that elects to use the Entity Level Reporting Method:

(1) The employee leasing company shall file all quarterly contribution and wage reports in accordance with R.S. 43:21-7 using the state tax identification number and the contribution rate of the employee leasing company as determined under the “unemployment compensation law” R.S. 43:21-1 et seq.;

(2) The employee leasing company is subject to the provisions of R.S. 43:21-7(c)(7)(D) irrespective of whether there is common ownership, beginning on the effective date of the employee leasing agreement;

(3) Whenever the employee leasing company enters into an employee leasing agreement with a client company, the employee leasing company shall notify the department not later than 15 days after the end of the quarter in which the employee leasing agreement became effective; and

(4) The employee leasing company shall notify the department in writing on forms prescribed by the department not later than 15 days after the date of the following:

(a) The employee leasing company and a client company terminate an employee leasing agreement; or

(b) The employee leasing company elects the Client Level Reporting Method under subsection c. of this section.

Upon dissolution of an employee leasing agreement: the client company’s contribution rate and benefit experience shall be determined in accordance with subsection b. of section 7 of P.L.2001, c.260 (C.34:8-73); and the employee leasing company shall provide the department with the information required by subsection b. of section 7 of P.L.2001, c.260 (C.34:8-73).

c. (1) The Client Level Reporting Method uses the state employer account number and contribution rate of the client company to report and pay all required contributions to the unemployment compensation fund as required by R.S. 43:21-7.

(2) An employee leasing company which uses the Entity Level Reporting Method may subsequently elect the Client Level Reporting Method, subject to the following requirements:

(a) The employee leasing company shall make the election to use the Client Level Reporting Method not later than December 1 of the calendar year before the calendar year in which the election is to be effective;

(b) The election shall be made in a written notice on a form prescribed by the department; and

(c) The election shall be effective on January 1 of the calendar year immediately following the year in which the department receives the notice of election.

(3) The following apply to an employee leasing company that elects to use the Client Level Reporting Method:

(a) Whenever the employee leasing company enters into an employee leasing agreement with a client company, the employee leasing company shall notify the department not later than 15 days after the end of the quarter in which the employee leasing agreement became effective;

(b) An employee leasing company reporting at the entity level which elects client level reporting will immediately provide data to the department to enable them to calculate the benefit experience rate of each client company;

(c) If a client company is an employing unit on the date the employee leasing agreement becomes effective, the client company retains its experience balance, liabilities, and wage credits, and R.S. 43:21-7(c)(7) does not apply to the client company or to the employee leasing company;

(d) If a client company is not an employing unit on the date the employee leasing agreement becomes effective, the client company immediately qualifies for an employer experience account under R.S. 43:21-7 and is subject to section 1 of P.L.1992, c.202 (C.43:21-7.7) for purposes of establishing an initial contribution rate;

(e) A client is associated with the employee leasing company’s employer experience account by means of the employee leasing company’s primary federal employer identification number (FEIN) for purposes of liability under the “unemployment compensation law,” R.S.43:21-1 et seq. and federal certification; and

(f) Upon the dissolution of an employee leasing agreement, the client company shall retain the experience balance, liabilities, and wage credits for the client company’s employing unit account; the client company’s federal employer identification number (FEIN) shall become the primary FEIN on the employing unit’s account; and the employee leasing company’s FEIN shall not be associated with the client’s company’s employing unit account.

d. A client company that transfers between employee leasing companies is not subject to R.S. 43:21-7(c)(7) whenever:

(1) The employee leasing companies are not commonly owned, managed, or controlled; and

(2) Both employee leasing companies have elected to use the Entity Level Reporting Method.

e. For the purposes of this section:

(1) The term “Client Level Reporting Method” has the meaning set forth in subsection c. of this section;

(2) The term “Entity Level Reporting Method” has the meaning set forth in subsection b. of this section; and

(3) The terms “client company,” “covered employee,” “employee leasing agreement” or “professional employer agreement,” and “employee leasing company” or “professional employer organization” have the meanings set forth in section 1 of P.L.2001, c.260 (C.34:8-67).

4. This act shall take effect immediately.

STATEMENT

This bill changes the manner in which unemployment insurance (UI) taxes are determined for an employee leasing company (ELC), by permitting an ELC to have the taxes determined on the basis of either the experience rating of the ELC or of the ELC’s client companies.

Under the bill, an ELC may elect to use an “Entity Level Reporting Method” if the ELC does so not later than July 1, 2014, or the first date that the ELC is liable to pay UI taxes, if the ELC begins doing business after July 1, 2014. It may subsequently elect to change to a “Client Level Reporting Method.” If the ELC does elect the “Client Level Reporting Method,” it is not permitted to elect, or to return to, the “Entity Level Reporting Method.”

Under current law, UI tax rates for an ELC are based exclusively on the experience of the ELC, not its client companies.