Hybrid employees complicating legislators' progress on work comp

By Steve Korris | Sep 20, 2007

CHARLESTON – Some West Virginians work for two companies on one job, and these hybrid employees have snagged state leaders in their progress from monopoly to competition in workers compensation insurance.

The hybrids work for visible employers with familiar names and invisible employers they call professional employer organizations, or PEO's.

The visible employers control production, sales and service. The PEO's control payroll, taxes, work force management and risk management.

The visible employers can hire and fire workers. So can PEO's.

The dual structure complicates the calculation of workers comp premiums, which depend on an employer's line of work and history of accidents.

West Virginia legislators in their next session will try to nail down the rights and responsibilities of PEO's in workers comp.

They face a July 1 deadline, for on that date West Virginia will introduce full competition in workers comp.

Insurance commissioner Jane Cline said she has worked with an interim legislative committee looking at PEO proposals.

"It's not a discussion that is new to the workers compensation arena," Cline said. "The National Association of Insurance Commissioners has a working group on it."

Legislators have also worked with the National Association of Professional Employee Organizations, of Alexandria, Va.

NAPEO spokeswoman Edie Clark said, "We are very involved in West Virginia and have been from the beginning."

NAPEO governmental affairs director Tim Tucker said, "It's a little bit of a different structure that needs to be put in place."

He said the department of insurance should be lauded for "rolling up their sleeves and understanding how PEO's operate."

"It's a unique opportunity to change to a market driven system," Tucker said. "Free market systems in other states have developed over many, many years."

He said legislators need to find ways for the state's rating agency to handle the data PEO's present to them.

He said legislators did not act on PEO proposals last year because they felt they needed more information and time.

"We made some progress but they wanted to make sure we got it right," Tucker said.

"We make workers comp a good line for insurers to write. It is imperative that we have a good understanding of what risk and exposure each client has."

Clark praised PEO's as having "exceptionally good" risk managers.

"They will audit your workplace and take care of the things you need to do," she said.

"They manage the claims and make sure everything is right. If there is any fraud they will detect it."

The association claims 380 members among about 700 PEO's in 50 states.

Its website estimates that two to three million Americans work for PEO's.

The website shows ASI Business Solutions of Charleston and Employers Innovative Network of Cross Lanes as association members.

It also shows CoAdvantage of Orlando, Doherty Employer Services of Minneapolis and TriNet HR of San Leandro, Calif., as operators of PEO's in West Virginia.

It states that the average PEO client has 17 employees.

It states that, "…neither party alone is responsible for performing all of the obligations of employment."

"A PEO can assist in ensuring that worksite employees are provided with a worksite that is safe, conducive to productivity and operated in compliance with employment laws and regulations," the website states.

"PEO's can manage the risks attendant to the personnel functions that they perform only if they establish an employment relationship with their worksite employees.

"Unless a PEO has a right to direct and control, hire, supervise, discipline and discharge these employees, the PEO will merely assume liability without having a means to manage that liability."

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