Surety Bond News

The new Connecticut amendment HB 5113, effective January 1, 2009, says that PEO’s (Professional Employer Organizations) need a working capital of at least $150,000 or they need to provide a surety bond, a letter of credit, or securities with a market value of $150,000. The surety bond is to ensure that the PEO will pay the taxes, wages, benefits, or entitlements if the PEO does not pay on time. If positive working capital is not shown on the PEO’s financial statements, then the bond must be for $100,000 plus an amount sufficient to cover the deficit of the working capital. The law also states that a covered employee is not an employee of the PEO for purposes of general liability insurance, surety bonds, fidelity bonds, employer’s liability, or employer’s liability insurance. Other states have used these provisions in the past few sessions as well.

There is a new requirement for Professional Employer Organizations in the state of Utah referred to as HB 159. The new law requires the Professional Employer Organizations (PEOs) to sustain a minimum working capital of $100,000 or post a bond in an amount no less than $100,000. The surety bond would guarantee the payment of any wage, tax, benefit, or other entitlement due to a covered employee not receiving payment from the PEO when it was due. HB 159 states that a “covered employee is not, only as the result of being a covered employee of a professional employer organization, an employee of the professional employer organization for purposes of general liability insurance, fidelity bond, surety bond, employer’s liability not covered by workers’ compensation, or liquor liability insurance carried by the professional employer organization unless the covered employee is included by specific reference in the professional employer agreement and applicable prearranged employment contract, insurance contract, or bond.” The new requirements have already been introduced and enacted in other states with the new provisions based on model legislation.