Oregon Bill 4005 Fails, Keeping Co-Employment Safe
I am happy to report that Oregon House Bill 4005 opposing co-employment has failed. With little time to react, Oregon working group head Anne Donavan, as well as NAPEO’s Hannah Walker and Kristin Baldwin, quickly organized a determined grass roots effort from the Oregon PEO community in opposition of this bill.
This “out of left field” effort by Paul Holvey, Chair of the House Committee on Business and Labor, was based seemingly on no actual complaints about PEO operations, as there weren’t any harmful cases or occurrences to necessitate any changes to the current system. After peeling back the onion, it appears that Mr. Holvey does not understand the significant value proposition a PEO brings to Oregon business, nor the differences in purpose between a co-employment and single employer model. His targets, for unknown reason, are the ability of PEO’s to pay takes on behalf of their client employer and workers’ compensation experience modification factors at a client level.
Fortunately, statute does understand this distinction. The basis of the industry was supported by the two communications linked below between Mr. Holvey and the Oregon Legislative Council Committee, in which Mr. Holvey asked specific questions and requested statutory interpretation.
As you will note, while the bill goes into workers’ compensation matters such as experience rating per client company, it seems to focus more on the status of a PEO and UI. After recognizing that HB 4005 was dead on arrival based on all the issues it had, Mr. Holvey sent a personal (not committee) letter to the Governor of Oregon. It is his intent to “correct the rules” regarding PEO’s and worker leasing companies. The below is an excerpt from this letter:
“After conversation and questions of the PEO advocates, the agencies, and legislative counsel, it became apparent that the Worker’s Compensation Division is incorrectly classifying PEO’s as Worker Leasing Companies and that the Department of Revenue and Employment Department are incorrectly allowing PEO’s to file payroll taxes for their client employers using the PEO tax ID numbers. This makes the small employer clients ineligible to be treated as small employers for the purpose of Paid Leave Oregon provisions and incorrectly allows the PEO to be considered as employer, complicating the experience rating and tax rates for employers.”
While the battle is won, it should not go unnoticed that many States outside or Oregon are grappling with the differences between PEOs and other single employer labor contracting models. Some operate under specific known business purposes, while other business models ride the fine line of “unlicensed PEO”, and as such, are able to play PEO without playing by the proper rules of the game. Specifically, operating in a co-employer format as a single employer.
Acceptance of the PEO Model Act in States like Oregon will help immensely to neutralize confusion in this area. I’m hopeful that this win will capture the attention of our industry’s many stakeholders, validating the PEO model not only in Oregon, but wherever else co-employment clarity is needed.
My previous testimony opposing the proposed amendments to Oregon House Bill 4005 can be found here
Author: Paul Hughes
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