DAR File No. 38804

Labor Commission, Industrial Accidents

Section R612-400-2

Employee Leasing Company Workers' Compensation Policy Endorsements

Notice of Proposed Rule

(Amendment)

DAR File No.: 38804
Filed: 08/22/2014 08:35:01 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section R612-400-2 addresses the unique workers' compensation coverage and reporting requirements that apply to professional employer organizations, their client companies and insurance carriers. The proposed amendment of Section R612-400-2 will simplify, update, and clarify the section's language and conform the section to the Utah Workers' Compensation Act and other Commission rules.

Summary of the rule or change:

The proposed new language for Section R612-400-2 provides a clear statement of its purpose, scope, and authority. The section's substantive provisions are also reorganized for clarity. The proposed change substitutes the correct term "professional employer organization" for the out-moded "employee leasing company". The proposed change eliminates the enumeration of specific reporting requirements, since insurance carriers are already required by another section, R612-400-1, to report this information. Likewise, the proposed change eliminates references to submission of policy information "in writing", since Section R612-400-1 requires that such information be submitted electronically. The proposed rule eliminates the current rule's requirement that insurance carriers provide "30 day advance notice . . . of a proposed cancellation" of coverage because such advanced notice is not authorized by the Workers' Compensation Act. Finally, the proposed rule clarifies that an insurance carrier who fails to comply with applicable reporting requirements may be subject to penalties authorized by Section 34A-2-205.

State statutory or constitutional authorization for this rule:

• Subsection 59-9-101(2)

Anticipated cost or savings to:

the state budget:

The proposed changes to Section R612-400-2, which simplify and clarify the existing workers' compensation rules for professional employer organizations, their client companies, and their insurance carriers, will not result in any additional administrative or enforcement costs to the Labor Commission, nor will the changes have any effect to the state's workers' compensation coverage expenses as an employer.

local governments:

The proposed changes to Section R612-400-2, which simplify and clarify the existing workers' compensation rules for professional employer organizations, their client companies, and their insurance carriers, will not result in any additional workers' compensation expense for local governments in their capacity as employers.

small businesses:

The proposed changes to Section R612-400-2 have no effect on small businesses other than professional employer organizations and their client companies. With respect to the professional employer organization and client companies that are subject to the proposed change, the change simplifies and clarifies existing standards. It will not result in any additional workers' compensation expense for those businesses.

persons other than small businesses, businesses, or local governmental entities:

The proposed changes to Section R612-400-2 will have no impact on the workers who are "co-employees" of professional employee organizations and their client companies. These workers will continue to receive the same workers' compensation coverage as all other Utah workers. Likewise, the proposed changes are not expected to have any financial impact on any other persons or businesses.

Compliance costs for affected persons:

The professional employer organizations, client companies, and insurance carriers that are subject to this proposed rule will not experience any additional costs in complying with the rule.

Comments by the department head on the fiscal impact the rule may have on businesses:

The proposed changes to Section R612-400-2 are part of the Industrial Accidents Division's comprehensive review of all its workers' compensation rules. The proposed changes to Section R612-400-2 do not impose any additional requirements or burdens on professional employer organizations, client companies or insurance carriers but, rather, simplify and clarify existing requirements. The proposed rule also eliminates some provisions of the old rule that were not authorized by the Workers' Compensation Act. In summary, the entities subject to the rule will not experience any additional costs of compliance but should find the new rule easier to understand and follow.

Sherrie Hayashi, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Labor Commission
Industrial Accidents
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Ron Dressler at the above address, by phone at 801-530-6841, by FAX at 801-530-6804, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/15/2014

This rule may become effective on:

10/22/2014

Authorized by:

Sherrie Hayashi, Commissioner

R612. Labor Commission, Industrial Accidents.

R612-400. Workers' Compensation Insurance, Self-Insurance and Waivers.

[R612-400-2. Employee Leasing Company Workers' Compensation Policy Endorsements.

2.1. Workers' Compensation Coverage for Client Companies Under an Endorsement Arrangement.

An insurance company licensed to write workers' compensation coverage in the state of Utah underwriting an employee leasing company as the named insured shall insure all of the primary insured's client companies under an umbrella policy and shall provide a separate endorsement for each client company unless the client company provides workers' compensation coverage under a separate policy.

2.2. Notification of a New Policy and Endorsements.

A. Any insurance carrier underwriting a new policy naming an employee leasing company as the primary insured shall notify the division in writing or by electronic means within ten working days of the new policy including all client companies covered under the policy. The notification shall include all the information as specified in this rule.

B. The insurance carrier shall subsequently notify the division in writing or by electronic means within ten working days of any new client company endorsements covered under a leasing company's umbrella policy after the initial policy is written giving all information as specified in this rule.

2.3. Required Information.

The following information is required on any notice sent to the division on a policy underwritten by the insurance carrier naming an employee leasing company as the primary insured.

A. Name and both mailing and physical address of the employee leasing company.

B. The policy number and effective dates of coverage for the employee leasing company.

C. Each client company's DBA's (doing business as) names(s) and mailing and physical location(s).

D. The Standard Industrial Classification (SIC) for each client company.

E. The effective dates of coverage on the endorsement for each client company.

2.4. Reporting Injuries.

The reporting of injuries as required in Section 34A-2-407 shall be in the name of the client company.

2.5. Cancellations.

Any insurance carrier underwriting an employee leasing company as the primary insured shall:

A. Give the division a 30 day advance notice in writing or by electronic means of a proposed cancellation of an employee leasing company or any client company written as an endorsement under an employee leasing company's policy.

B. Give the division notice in writing or through electronic means within ten working days after cancellation of a policy underwritten naming the employee leasing company as the primary insured and any cancellation of an endorsement of a client company covered under the primary insured.

C. Failure by an insurance carrier to notify the division of the cancellation of either the primary insured employee leasing company or a client company will result in the continuation of coverage by the insurance carrier until the division receives notification as specified in this rule.]

R612-400-2. Workers' Compensation Coverage for Professional Employer Organizations and Client Companies.

A. Purpose, Authority and Scope.

1. Purpose. The Utah Professional Employer Organization Licensing Act, Title 31A, Chapter 40, Utah Code Annotated, ("the Act") allows a professional employer organization ("PEO") and a client company to establish a contractual relationship by which the PEO and client company are co-employers of some or all of the client company's workers. This rule establishes workers' compensation coverage and reporting requirements for such co-employment relationships.

2. Authority. This rule is enacted pursuant to authority granted by Section 34A-40-209 of the Act.

3. Scope. This rule applies only to those situations in which one or more workers are co-employees of a PEO and client company. The rule does not apply to workers who are solely employed by either a PEO or a client company. In such cases, the coverage and reporting requirements generally applicable to sole employers must be followed.

B. Alternatives for Providing Workers' Compensation Insurance Coverage for Co-employees.

1. Coverage provided by Client Company utilizing a PEO. A client company may provide workers' compensation coverage for co-employees of the client company and PEO by purchasing an insurance policy from a workers' compensation insurance company. The insurance policy shall list the client company as the named insured and shall provide coverage for the PEO as an additional insured by means of an individual endorsement.

2. Coverage provided through a PEO for a client company. Alternatively, a PEO may provide workers' compensation coverage for co-employees of the client company and PEO by purchasing an insurance policy, if available, from a workers' compensation insurance company. The insurance policy shall list the PEO as the named insured and shall provide coverage for the client company as an additional insured by means of an individual endorsement.

C. Insurance Carrier Reporting Obligation.

1. New Policies. An insurance company providing workers' compensation coverage to a PEO and client company shall comply with the reporting requirements set forth in Subsection R612-400-1. Such reports shall identify any PEO or client company covered by endorsement under the policy.

2. Additional insureds under an existing policy. If an insurance company extends coverage under an existing policy to a PEO or client company by means of an additional endorsement, the company shall report such additional endorsement and coverage to the Division in accordance with the requirements of Section R612-400-1.

3. Cancellations. An insurance company shall notify the Division of cancellation of coverage for any PEO or client company by complying with the requirements of Section R612-400-1. Failure by an insurance company to provide such notice will result in the continuation of coverage by the insurance company until the Division receives notification and may also result in imposition of penalties pursuant to Section 34A-2-205.

D. Reporting Injuries.

Work-related injuries of co-employees shall be reported in the name of the client company.

 

KEY: workers' compensation, insurance, rates, waivers

Date of Enactment or Last Substantive Amendment: [December 23, 2013]2014

Authorizing, and Implemented or Interpreted Law: 59-9-101(2)