Section R. 421.190 - Common paymaster; employee leasing companies; payrolling; temporary help firmsRule 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.Mich. Admin. Code R. 421.190
1999-2000 AACS; 2002 AACS