§ 5-75-7 - General requirements and provisions.
SECTION 5-75-7
§ 5-75-7 General requirements andprovisions. – (a) Contractual relationship. Except as specifically provided in thischapter, the co-employment relationship between the client and the PEO, andbetween each co-employer and each covered employee, shall be governed by theprofessional employer agreement.
(1) Nothing contained in any professional employer agreementor this chapter shall be deemed to:
(i) Diminish, abolish or remove rights of covered employeesas to clients or obligations of such client as to a covered employee, existingprior to the effective date of a professional employer agreement.
(ii) Terminate an employment relationship existing prior tothe effective date of a professional employer agreement.
(iii) Create any new or additional enforceable right of acovered employee against a PEO not specifically allocated to such PEO in theprofessional employer agreement or this chapter.
(iv) Terminate the joint and several liability provisionunder R.I.G.L. § 44-30-71.4, or the protections afforded the client of aPEO in possession of a current certification/authorization to engage inbusiness issued by the division of taxation and without notification that thecertification has been suspended or revoked.
(2) Each professional employer agreement shall include thefollowing:
(i) The PEO shall reserve a right of direction and controlover the covered employees; provided, that the client may retain the right toexercise such direction and control over covered employees as is necessary toconduct the client's business, to discharge any fiduciary responsibility whichit may have, or to comply with any applicable licensure requirements;
(ii) The PEO shall have responsibility to pay wages tocovered employees; to withhold, collect, report and remit payroll-related andunemployment taxes; and, to the extent the PEO has assumed responsibility inthe professional employer agreement, to make payments for employee benefits forcovered employees. As used in this section, the term "wages" does not includeany obligation between a client and a covered employee for payments beyond orin addition to the covered employee's salary, draw or regular rate of pay, suchas bonuses, commissions, severance pay, deferred compensation, profit sharingor vacation, sick or other paid time-off pay, unless the PEO has expresslyagreed to assume liability for such payments in the professional employeragreement;
(iii) The PEO shall have the responsibility to withhold,collect, report and remit payroll related and unemployment taxes. For purposesof chapters 39 – 41 (Rhode Island Temporary Disability Insurance Act) andchapters 42 – 44 (Employment Security Act) of title 28, and this section,the term "wages" shall be defined in accordance with § 28-42-3(28).
(iv) PEO and the client shall both have a right to hire,terminate and discipline the covered employees; and
(v) The responsibility to obtain workers' compensationcoverage for covered employees, from a carrier licensed to do business in thisstate and otherwise in compliance with all applicable requirements, shall bespecifically allocated to either the client or the PEO in the professionalemployer agreement.
(b) Allocation of rights, duties, and obligations.Except as specifically provided in this chapter or in the professional employeragreement, in each co-employment relationship:
(1) The client shall be entitled to exercise all rights, andshall be obligated to perform all duties and responsibilities, otherwiseapplicable 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, specificallyrequired by this chapter or set forth PEO as co-employer with respect to anycovered employee shall be limited to those arising pursuant to the professionalemployer agreement and this chapter during the term of co-employment by the PEOof such covered employee.
(3) Unless otherwise expressly agreed by the PEO and theclient in a professional employer agreement, the client retains the exclusiveright to direct and control the covered employees as is necessary to conductthe client's business, to discharge any of the client's fiduciaryresponsibilities, or to comply with any licensure requirements applicable toclient or to the covered employees.
(c) Notice to covered employees. With respect to eachprofessional employer agreement entered into by a PEO, such PEO shall providewritten notice to each covered employee affected by such agreement of thegeneral nature of the co-employment relationship between and among the PEO, theclient, and such covered employee. Such notice shall include notice toemployees of the client's and the PEO's obligations under section 7(D)(4) below.
(d) Limitations on liability. Except to the extentotherwise 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 client'sbusiness.
(2) A client shall be solely responsible for directing,supervising, training and controlling the work of the covered employees withrespect to the business activities of the client and solely responsible for theacts, errors or omissions of the covered employees with regard to suchactivities.
(3) A client shall not be liable for the acts, errors oromissions of a PEO, or of any covered employee of the client and a PEO whensuch covered employee is acting under the express direction and control of thePEO.
(4) Nothing in this subsection shall serve to limit anycontractual liability or obligation specifically provided in a professionalemployer agreement, nor shall this subsection in any way limit the liabilitiesand obligations of any PEO or client as defined elsewhere in this chapter.
(5) A covered employee is not, solely as the result of beinga covered employee of a PEO, an employee of the PEO for purposes of generalliability insurance, fidelity bonds, surety bonds, employer's liability whichis not covered by workers' compensation, or liquor liability insurance carriedby the PEO unless the covered employees are included by specific reference inthe professional employer agreement and applicable prearranged employmentcontract, insurance contract or bond.
(e) Services not insured. A registrant under thischapter is not engaged in the sale of insurance by offering, marketing,selling, administering or providing PEO services or employee benefit plans forcovered employees.
(1) Covered employees whose services are subject to sales taxshall be deemed employees of the client for purposes of collecting and levyingsales tax on the services performed by the covered employee. Nothing containedin this chapter shall relieve a client of any sales tax liability with respectto its goods or services.
(2) Any tax upon professional employer services shall belimited to the administrative fee.
(3) Any tax assessed on a per capita or per employee basisshall be assessed against the client for covered employees and against theprofessional employer organization for its employees who are not coveredemployees co-employed with a client.
(4) In the case of tax imposed or calculated upon the basisof total payroll, the professional employer organization shall be eligible toapply any small business allowance or exemption available to the client for thecovered employees for purpose of computing the tax.