WORKING TOWARD STATE-LEVEL RECOGNITION OF THE CO-EMPLOYMENT MODEL

Mitigating risk on behalf of the SMBs we serve is inherently part of our role as PEO leaders. And, as we all know, we can only take this on when our own industry risk is mitigated. One such risk is state recognition of the co-employment model. In recent years, regulators and legislators have challenged the PEO industry and the co-employment model in states like New Mexico, Oregon, and Washington DC where PEO statutes are limited or nonexistent. This is an ongoing conversation, and as we continue to grow as an industry, it’s important to understand the significance of these discussions.

First, some context. We’ve seen tremendous growth in the PEO industry, and this would not have been possible without state recognition of the co-employment model. States like New York (where Justworks started), Florida, and Texas, which were some of the earliest to adopt recognition status, are, unsurprisingly, the states with some of the largest PEO presence. State recognition sets forth our legal obligations and those of our customers, so without these statutes as a guideline, our rights and responsibilities would be called into question. State recognition is also significant in terms of health insurance offerings. Our ability to offer our worksite employees access to large group health plans is based on our position as a co-employer, which is outlined in the state statutes.

Over the past 40 years, NAPEO State Government Affairs has worked tirelessly to both proactively enact and/or improve state recognition statutes, and to also defend against challenges where our statutes are limited or not yet enacted. Enacting a statute is a multi-year initiative that requires many resources, but the risk is too great if we do not continue to fight in states where we have limited recognition or none at all. The ultimate goal is to achieve state recognition in all 50 states so PEOs can support even more SMBs.

In 2025, NAPEO will continue to work towards state recognition, with an emphasis on California and Georgia. While PEOs currently operate in these states, strong co-employment statutes will de-risk the important work PEOs are doing with SMBs in these states.

As we look ahead, please keep an eye on opportunities to support these efforts – from testifying in front of state legislatures, to raising awareness of the positive impact PEOs have on SMBs – working toward recognition at the state level is important and necessary work for our industry.