Michigan Administrative Code
Department - Labor and Economic Opportunity
Unemployment Insurance Agency
Employment Security
Part 2 - EMPLOYERS
Section R. 421.190 - Common paymaster; employee leasing companies; payrolling; temporary help firms
Universal Citation: MI Admin Code R. 421.190
Current through Vol. 24-16, September 15, 2024
Rule 190.
(1) As used in this rule:
(a) "Captive provider"
means an employee leasing company which limits itself to providing services and
employees to only 1 client entity and the entity's subsidiaries and affiliates
and which does not hold itself out as available to provide leasing services to
other client entities that do not share an ownership relationship with the
employee leasing company.
(b)
"Client entity," also known as a "work-site employer," means the business
entity that contracts with an employee leasing company for the purpose of
providing employees and related services to the client entity.
(c) "Common paymaster" is the arrangement by
which different services performed by 1 individual are divided among 2 or more
employers that are related through commonality of ownership, and the individual
is compensated by 1 of those employers that acts as the common paymaster. Under
such an arrangement, different employers benefit from the services of the same
individual, but these services are reflected in the experience rating of, and
the payment of unemployment taxes by, only 1 of the employers. If 2 or more
related corporations concurrently employ the same individual and compensate
that individual through a common paymaster that is 1 of the corporations, the
corporations may elect to report wages and pay unemployment taxes of all shared
employees of the related corporations through a common paymaster and the
related corporations will be considered to be a single employing unit. The
common paymaster for purposes of reporting wages and paying Michigan
unemployment taxes of all shared employees shall be the corporation that has
the highest Michigan unemployment tax rate. Corporations are considered to be
related if they satisfy any 1 of the following tests at any time during the
calendar quarter:
(i) The corporations are
members of a controlled group of corporations as defined in section 1563 of the
internal revenue code,
26 U.S.C.
§1563, or would be members if certain
stock ownership percentage requirements between corporations were relaxed and
certain exclusions made inapplicable.
(ii) In the case of a corporation that does
not issue stock, either 50% or more of the members of 1 corporation's board of
directors or other governing body are members of the other corporation's board
of directors or other governing body, or the holders of 50% or more of the
voting power to select such members are concurrently the holders of 50% or more
of that power with respect to the other corporation.
(iii) Fifty percent or more of 1
corporation's officers are concurrently officers of the other
corporation.
(iv) Thirty percent or
more of 1 corporation's employees are concurrently employees of the other
corporation. Corporations are considered related for an entire calendar quarter
if 1 of the requirements listed in paragraphs (i) to (iv) of this subdivision
is satisfied. Concurrent employment means the contemporaneous existence of an
employment relationship between an individual and 2 or more
corporations.
(d)
"Employee leasing company (ELC)," also known as a "professional employer
organization," means an independently established business entity that does all
of the following:
(i) Provides employees to a
client entity.
(ii) Pays the wages
of the employees.
(iii) Reports and
withholds applicable taxes from the wages of the employees.
(iv) Administers the benefits for the
employees.
(v) Provides other
payroll, human resources, and other management assistance services that are
agreed upon with its client entity. The employees provided to the client entity
may have previously been employed directly by the client entity. The
relationship between the client entity and ELC is intended to be long-term or
continuing, rather than temporary or intermittent, and the employees are,
generally, not subject to reassignment. The majority of the workers at a client
entity's worksite, or a majority of workers in a specialized group within that
workforce, consists of employees assigned by the leasing company.
(e) "Payrolling" is the practice
of establishing a related or associated company for the purposes of reassigning
the employee payroll functions from 1 business entity to the related business
entity, usually to take advantage of the lower unemployment tax rate of the
related business entity. Direction and control of the involved employees are
not transferred along with the payroll to the related business entity, and the
related entity is not an employee leasing company. The related business entity
to which the payroll is assigned is not the employer for unemployment insurance
tax purposes. The entity for which services are performed and which exercises
direction and control over the employee is the employer.
(f) "Temporary help firm" means an employer
whose primary business is to provide a client entity with the temporary
services of 1 or more individuals under contract with the employer. Employment
with a temporary help firm is characterized by a series of limited-term
assignments of an individual to a client entity based on a written or oral
contract between the temporary help firm and the client entity. The assignment
is usually for a specified period. A separate written or oral employment
contract exists between the temporary help firm and each individual it hires as
an employee. The employee of the temporary help firm is subject to reassignment
by the temporary help firm. Completion of an assignment for the client entity
by an employee employed by the temporary help firm does not, in itself,
terminate the employment contract between the temporary help firm and the
individual. A temporary help firm that meets the requirements of section 41 of
the act is a liable employer and shall pay unemployment taxes on its
employees.
(2) An ELC that meets the requirements of section 41 of the act is a liable employer and responsible to pay unemployment taxes on the employees leased to the client entity. For unemployment tax purposes in Michigan, the ELC, and not the client entity, is the employer of the leased employees if all of the following conditions are met:
(a) An employing entity
representing itself to be an ELC shall comply with the requirements of this
rule to be considered by the agency to be an ELC for purposes of the act and
this rule. If the agency determines the entity is not an ELC within the meaning
of this rule, then the payroll of workers at the client entity will be assigned
or reassigned to the client entity and the client entity's prior experience
rating will be reinstated.
(b) The
ELC shall administer all payroll and all benefit services for the client
entity, pay the wages of the workers, and have the right, both in contract and
in fact, to hire, promote, reassign, discipline, and terminate the leased
workers. The ELC cannot delegate the rights to the client entity. The client
entity's officers may be considered employees of the leasing company when they
are acting as operational managers, or performing services, for the client
entity.
(c) The ELC retains the
right to exercise direction and control over the daily activities of the
workers or can delegate the right to the client entity.
(d) Neither the ELC nor any individual owner
of the ELC, nor owners of the ELC in the aggregate, has an ownership interest
of more than 20% in the client entity, including the client entity's
subsidiaries and affiliates, and the client entity does not have more than 20%
ownership interest in the ELC.
(e)
Neither the ELC nor any individual owner or other employee of the ELC has
direct or indirect control over the client entity.
(f) The ELC does not limit itself to
providing services and employees to any 1 client entity, including that
entity's subsidiaries and affiliates, but holds itself out to the public in
general as available to provide leasing services. The ELC shall not be a
captive provider of employee services.
(3) To be considered the employer of the leased employees, the employee leasing company shall comply with all of the following operational requirements:
(a) The
ELC shall maintain records pertaining to the employees of the ELC who perform
services for the client entity. In addition, the ELC shall make the records
available to the agency, on request.
(b) Upon request, the ELC shall promptly
provide the agency with a copy of the employee lease agreement with any of its
client entities and with a list of the ELC's client entities.
(c) The ELC shall comply with federal, state,
and local employment and business registration laws, regulations, and
ordinances. If the ELC does not so comply, then the agency may decline or cease
to recognize an employing entity as an ELC.
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