Professional employer organizations.

The California Assembly Committee on Labor and Employment proposes new oversight requirements for Professional Employer Organizations (PEOs) through legislation that would mandate state registration and define minimum service standards. The measure establishes California's first comprehensive framework for regulating PEOs, which provide employee management services to client businesses.

Under the proposal, PEOs must register with the Division of Labor Standards Enforcement to legally operate in California. The bill defines qualifying PEOs as entities that are either certified by the U.S. Treasury, accredited by the Employer Services Assurance Corporation, or provide services through ongoing written agreements with clients. These organizations must report employee wages using their federal employer identification numbers, maintain workers' compensation insurance, and offer employee benefit plans.

The Division of Labor Standards Enforcement would oversee the registration process and collect initial registration fees from PEOs, with fee amounts capped at the administrative cost of processing registrations. This builds upon existing federal regulations, which currently provide for PEO certification through the Treasury Department for tax and employment purposes. The state registration requirement would apply to all PEOs operating in California, regardless of federal certification status.