Leased Employees: Professional Employer Organization
Workers' Compensation Coverage Requirements for Clients of Leasing Firms
Leased employees are the employees of the company that is paying to lease them and that company must have a workers' compensation policy in its name. Article 31 section 922 of the Labor Law defines the relationship between the PEO and the client employer. The employer generally recruits and hires its employees and contracts with the leasing firm to handle the payroll, taxes and benefit packages for its employees. Leasing firms (PEOs) must be licensed by the New York State Department of Labor.
Currently, clients of PEOs may be covered by either of the following methods:
- Each client of a leasing firm may procure its own workers' compensation insurance policy to cover its leased employees (as well as any non-leased employees), or
- The leasing firm can procure a separate workers' compensation insurance policy to cover the leased employees of each of its client firms. Such a policy would identify the insured as: ABC Leasing Company Inc. L/C/F XYX Machine Shop Inc. This policy only covers the leased employees of the client firm. If the client firm hires any non-leased employees (and/or wishes to protect itself from the claims of uninsured subcontractors working for it), the client firm must purchase a separate workers' compensation policy to provide coverage to individuals not specifically listed on their contract with the PEO. Please contact the Compensation Insurance Rating Board (CIRB) at 212-697-3535 or at www.nycirb.org for more information regarding workers' compensation coverage requirements for clients of leasing firms (PEOs).
Workers' Compensation Coverage Requirements for the Leasing Firm
Regarding coverage requirements for the leasing firm itself, individuals performing the administrative services of the PEO are counted as employees of the PEO. However, leased employees used by the clients of the PEO are NOT counted as employees of the PEO.
Using the above employee definitions for PEOs, regular instate and out-of-state coverage requirements for legal entities apply.