(a) Contractual relationship. Except as specifically provided in this chapter, the co-employment relationship between the client and the PEO, and between each co-employer and each covered employee, shall be governed by the professional employer agreement.
(1) Nothing contained in any professional employer agreement or this chapter shall be deemed to:
(i) Diminish, abolish, or remove rights of covered employees as to clients or obligations of the client as to a covered employee, existing prior to the effective date of a professional employer agreement.
(ii) Terminate an employment relationship existing prior to the effective date of a professional employer agreement.
(iii) Create any new or additional enforceable right of a covered employee against a PEO not specifically allocated to such PEO in the professional employer agreement or this chapter.
(iv) Terminate the joint-and-several-liability provision under § 44-30-71.4, or the protections afforded the client of a PEO in possession of a current certification/authorization to engage in business issued by the division of taxation and without notification that the certification has been suspended or revoked.
(2) Each professional employer agreement shall include the following:
(i) The PEO shall reserve a right of direction and control over the covered employees; provided, that the client may retain the right to exercise such direction and control over covered employees as is necessary to conduct the client's business, to discharge any fiduciary responsibility it may have, or to comply with any applicable licensure requirements;
(ii) The PEO shall have responsibility to pay wages to covered employees; to withhold, collect, report, and remit payroll-related and unemployment taxes; and, to the extent the PEO has assumed responsibility in the professional employer agreement, to make payments for employee benefits for covered employees. As used in this section, the term "wages" does not include any obligation between a client and a covered employee for payments beyond or in addition to the covered employee's salary, draw, or regular rate of pay, such as bonuses, commissions, severance pay, deferred compensation, profit sharing, or vacation, sick, or other paid time-off pay, unless the PEO has expressly agreed to assume liability for such payments in the professional employer agreement;
(iii) The PEO shall have the responsibility to withhold, collect, report, and remit payroll-related and unemployment taxes. For purposes of chapters 39 — 41 (Rhode Island Temporary Disability Insurance Act) and chapters 42 — 44 (Employment Security Act) of title 28, and this section, the term "wages" shall be defined in accordance with § 28-42-3(29);
(iv) The PEO and the client shall both have a right to hire, terminate, and discipline the covered employees; and
(v) The responsibility to obtain workers' compensation coverage for covered employees, from a carrier licensed to do business in this state and otherwise in compliance with all applicable requirements, shall be specifically allocated to either the client or the PEO in the professional employer agreement.
(b) Allocation of rights, duties, and obligations. Except as specifically provided in this chapter or in the professional employer agreement, in each co-employment relationship:
(1) The client shall be entitled to exercise all rights, and shall be obligated to perform all duties and responsibilities, otherwise applicable to an employer in an employment relationship; and
(2) The PEO shall be entitled to exercise only those rights, and obligated to perform only those duties and responsibilities, specifically required by this chapter or set forth PEO as co-employer with respect to any covered employee shall be limited to those arising pursuant to the professional employer agreement and this chapter during the term of co-employment by the PEO of such covered employee.
(3) Unless otherwise expressly agreed by the PEO and the client in a professional employer agreement, the client retains the exclusive right to direct and control the covered employees as is necessary to conduct the client's business; to discharge any of the client's fiduciary responsibilities; or to comply with any licensure requirements applicable to the client or to the covered employees.
(c) Notice to covered employees. With respect to each professional employer agreement entered into by a PEO, the PEO shall provide written notice to each covered employee affected by the agreement of the general nature of the co-employment relationship between and among the PEO, the client, and the covered employee. The notice shall include notice to employees of the client's and the PEO's obligations under section 7(D)(4) below.
(d) Limitations on liability. Except to the extent otherwise expressly provided by the applicable professional employer agreement:
(1) A client shall be solely responsible for the quality, adequacy, or safety of the goods or services produced or sold in the client's business.
(2) A client shall be solely responsible for directing, supervising, training, and controlling the work of the covered employees with respect to the business activities of the client and solely responsible for the acts, errors, or omissions of the covered employees with regard to such activities.
(3) A client shall not be liable for the acts, errors, or omissions of a PEO, or of any covered employee of the client and a PEO, when the covered employee is acting under the express direction and control of the PEO.
(4) Nothing in this subsection (d) shall serve to limit any contractual liability or obligation specifically provided in a professional employer agreement, nor shall this subsection (d) in any way limit the liabilities and obligations of any PEO or client as defined elsewhere in this chapter.
(5) A covered employee is not, solely as the result of being a covered employee of a PEO, an employee of the PEO for purposes of general liability insurance, fidelity bonds, surety bonds, employer's liability that is not covered by workers' compensation, or liquor-liability insurance carried by the PEO unless the covered employees are included by specific reference in the professional employer agreement and applicable prearranged employment contract, insurance contract, or bond.
(e) Services not insured. A registrant under this chapter is not engaged in the sale of insurance by offering, marketing, selling, administering, or providing PEO services or employee benefit plans for covered employees.
(f) (1) Taxation. Covered employees whose services are subject to sales tax shall be deemed employees of the client for purposes of collecting and levying sales tax on the services performed by the covered employee. Nothing contained in this chapter shall relieve a client of any sales tax liability with respect to its goods or services.
(2) Any tax upon professional employer services shall be limited to the administrative fee.
(3) Any tax assessed on a per-capita or per-employee basis shall be assessed against the client for covered employees and against the professional employer organization for its employees who are not covered employees co-employed with a client.
(4) In the case of tax imposed or calculated upon the basis of total payroll, the professional employer organization shall be eligible to apply any small business allowance or exemption available to the client for the covered employees for purpose of computing the tax.
History of Section.
P.L. 2004, ch. 87, § 1; P.L. 2004, ch. 124, § 1.