12 | 13 | | A BILL TO BE ENTITLED 1 |
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13 | 14 | | AN ACT ENACTING CHANGES TO THE NORTH CAROLINA PROFESSIONAL 2 |
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14 | 15 | | EMPLOYER ORGANIZATION ACT , AS RECOMMENDED BY THE DEPARTMENT 3 |
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15 | 16 | | OF INSURANCE. 4 |
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16 | 17 | | The General Assembly of North Carolina enacts: 5 |
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17 | 18 | | SECTION 1. G.S. 58-89A-5 reads as rewritten: 6 |
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18 | 19 | | "§ 58-89A-5. Definitions. 7 |
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19 | 20 | | In this Article: 8 |
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20 | 21 | | … 9 |
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21 | 22 | | (3) "Audited GAAP financial statement" means a financial statement that is 10 |
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22 | 23 | | audited by an independent certified public accountant and presented in 11 |
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23 | 24 | | accordance with generally accepted accounting principles. 12 |
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24 | 25 | | … 13 |
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25 | 26 | | (17) "Tangible net worth" means the difference between total tangible assets and 14 |
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26 | 27 | | total liabilities. For purposes of this definition, tangible assets are physical 15 |
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27 | 28 | | assets and do not include goodwill, patents, copyrights, intellectual property, 16 |
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28 | 29 | | trademarks, and any other non-physical asset. 17 |
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29 | 30 | | (17)(18) "Temporary employees" means persons employed under an arrangement 18 |
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30 | 31 | | by which an organization hires its own employees and assigns them to a client 19 |
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31 | 32 | | company to support or supplement the client's workforce in a special work 20 |
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32 | 33 | | situation, including: 21 |
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33 | 34 | | … 22 |
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34 | 35 | | (19) "Working capital" means the difference between current assets and current 23 |
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35 | 36 | | liabilities." 24 |
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36 | 37 | | SECTION 2. G.S. 58-89A-35 reads as rewritten: 25 |
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37 | 38 | | "§ 58-89A-35. License required; professional employer organization groups. 26 |
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38 | 39 | | … 27 |
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39 | 40 | | (b) Two or more professional employer organizations persons that are controlled by the 28 |
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40 | 41 | | same ultimate parent, entity, or persons may be licensed as a professional employer organization 29 |
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41 | 42 | | group. A professional employer organization group may satisfy the reporting and financial 30 |
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42 | 43 | | requirements of this Article on a consolidated or combined basis. As a condition of licensure as 31 |
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43 | 44 | | a professional employer organization group, each professional employer organization person that 32 |
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44 | 45 | | is proposes to be a member of the a professional employer organization group shall guarantee 33 |
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45 | 46 | | payment of all financial obligations of every other member. Notwithstanding the definition of 34 |
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46 | 47 | | "person" in this Article, whenever two or more entities combine to seek issuance of a single 35 |
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49 | 54 | | before issuance of a license and any license issued will be a professional employer organization 1 |
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50 | 55 | | group license issued pursuant to this subsection." 2 |
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51 | 56 | | SECTION 3. G.S. 58-89A-50 reads as rewritten: 3 |
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52 | 57 | | "§ 58-89A-50. Surety bond; letter of credit; other deposits. 4 |
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53 | 58 | | (a) An applicant for licensure shall file with the Commissioner a surety bond, or other 5 |
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54 | 59 | | items as set forth in subsection (f) of this section, in the amount of one hundred thousand dollars 6 |
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55 | 60 | | ($100,000) for the benefit of the Commissioner. An applicant whose current assets do not exceed 7 |
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56 | 61 | | current liabilities or licensee who does not have positive working capital pursuant to 8 |
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57 | 62 | | G.S. 58-89A-60(b) shall file an additional surety bond or other items set forth in subsection (f) 9 |
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58 | 63 | | of this section equal to or in excess of current liabilities less current assets.the applicant's or 10 |
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59 | 64 | | licensee's negative working capital. 11 |
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60 | 65 | | …." 12 |
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61 | 66 | | SECTION 4. G.S. 58-89A-60(g) is repealed. 13 |
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62 | 67 | | SECTION 5. G.S. 58-89A-60, as amended by Section 4 of this act, reads as 14 |
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63 | 68 | | rewritten: 15 |
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64 | 69 | | "§ 58-89A-60. License application. 16 |
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65 | 70 | | (a) Every applicant for licensure shall file with the Commissioner, on a form prescribed 17 |
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66 | 71 | | by the Commissioner, the following information: 18 |
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67 | 72 | | … 19 |
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68 | 73 | | (3) A list of all officers officers, directors, and other controlling persons of the 20 |
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69 | 74 | | applicant, their biographical information, including their education, 21 |
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70 | 75 | | management background, and business experience, and an affidavit from each 22 |
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71 | 76 | | attesting to his or her good moral character and management competence. 23 |
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72 | 77 | | … 24 |
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73 | 78 | | (6) Any other reasonable information the Commissioner deems necessary and 25 |
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74 | 79 | | requires by rule to establish that the applicant and the officers and controlling 26 |
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75 | 80 | | persons are of good moral character, have business integrity, have applicable 27 |
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76 | 81 | | educational and business experience, and have financial responsibility. 28 |
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77 | 82 | | (b) Every applicant shall file with the Commissioner an audited GAAP financial 29 |
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78 | 83 | | statement, prepared as of a date not more than 90 120 days before the date of application that 30 |
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79 | 84 | | demonstrates that the applicant or licensee's current assets exceed current liabilities and attached 31 |
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80 | 85 | | has a tangible net worth of not less than fifty thousand dollars ($50,000) and positive working 32 |
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81 | 86 | | capital. The applicant shall attach to which is the audited financial statement a separate document 33 |
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82 | 87 | | signed by the applicant's chief executive and the chief financial officer certifying that (i) each 34 |
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83 | 88 | | has reviewed the audited financial statement; (ii) based on each signatory's knowledge, the 35 |
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84 | 89 | | audited financial statement does not contain any untrue or misleading statement of material fact 36 |
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85 | 90 | | or omit a fact with respect to the period covered by the audited financial statement; and (iii) based 37 |
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86 | 91 | | on each signatory's knowledge, the audited financial statement fairly presents in all material 38 |
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87 | 92 | | respects the financial condition of the licensee applicant as of, and for, the period presented in 39 |
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88 | 93 | | the audited financial statement. 40 |
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89 | 94 | | Notwithstanding the requirements of this subsection, the Commissioner may, in the 41 |
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90 | 95 | | Commissioner's discretion, accept an audited GAAP financial statement that has been prepared 42 |
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91 | 96 | | more than 90 120 days before submission to the Commissioner if the Commissioner deems such 43 |
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92 | 97 | | acceptance appropriate. The Commissioner may, in the Commissioner's discretion, impose 44 |
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93 | 98 | | conditions upon such acceptance of audited financial statements prepared more than 90 120 days 45 |
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94 | 99 | | prior to submission. 46 |
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95 | 100 | | The audited GAAP financial statement shall be prepared in accordance with generally 47 |
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96 | 101 | | accepted accounting principles and audited by an independent certified public accountant 48 |
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97 | 102 | | licensed to practice in the jurisdiction in which such accountant is located and shall be without 49 |
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98 | 103 | | qualification as to the going concern status of the PEO. A PEO group applicant. Persons applying 50 |
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99 | 104 | | for a professional employer organization group license may submit combined or consolidated 51 General Assembly Of North Carolina Session 2025 |
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101 | 106 | | audited financial statements to meet the requirements of this section, except that a PEO provided 1 |
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102 | 107 | | that the combined or consolidated audited financial statement include a combining or 2 |
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103 | 108 | | consolidating balance sheet and statement of operations of each proposed member as 3 |
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104 | 109 | | supplemental information to the combined or consolidated audited financial statement. An 4 |
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105 | 110 | | applicant that has not had sufficient operating history to have audited financial statements based 5 |
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106 | 111 | | upon does not have at least 12 months of operating history must may meet the financial capacity 6 |
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107 | 112 | | requirements of this subsection and present by filing with the Commissioner financial statements 7 |
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108 | 113 | | that have been reviewed by a an independent certified public accountant.accountant and that have 8 |
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109 | 114 | | been prepared as of a date not more than 90 days before the date of application. 9 |
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110 | 115 | | (b1) The Commissioner may accept the audited financial statement of an applicant's parent 10 |
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111 | 116 | | company, if the audited financial statement includes either a combining or consolidating balance 11 |
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112 | 117 | | sheet, income statement, statement of changes in equity, and statement of cash flows as 12 |
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113 | 118 | | supplemental information to the audited financial statement, the contents of which will allow the 13 |
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114 | 119 | | Commissioner to determine the financial condition and financial responsibility of the applicant. 14 |
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115 | 120 | | (b2) The Commissioner may accept the audited financial statement of an applicant's parent 15 |
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116 | 121 | | company and consider the financial condition and financial responsibility of the parent in lieu of 16 |
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117 | 122 | | the applicant, if all of the following requirements are satisfied: 17 |
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118 | 123 | | (1) The parent executes a guaranty agreement, in a form prescribed by the 18 |
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119 | 124 | | Commissioner, for the guaranty of all obligations related to the applicant's 19 |
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120 | 125 | | current and future client companies, including its obligations for payroll, 20 |
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121 | 126 | | payroll-related taxes, workers' compensation insurance, and employee 21 |
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122 | 127 | | benefits. 22 |
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123 | 128 | | (2) The applicant files with the Commissioner documentation acceptable to the 23 |
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124 | 129 | | Commissioner evidencing the parent's control. 24 |
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125 | 130 | | (3) The applicant submits an audited financial statement that meets the 25 |
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126 | 131 | | requirements of subsection (b1) of this section that allows the Commissioner 26 |
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127 | 132 | | to determine the financial condition and financial responsibility of the parent 27 |
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128 | 133 | | and the applicant. 28 |
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129 | 134 | | … 29 |
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130 | 135 | | (d) Every applicant shall furnish the Commissioner a complete set of fingerprints of each 30 |
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131 | 136 | | officer, director, and controlling person in a form prescribed by the Commissioner. Each set of 31 |
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132 | 137 | | fingerprints shall be certified by an authorized law enforcement officer. 32 |
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133 | 138 | | Upon request by the Department, the State Bureau of Investigation shall provide to the 33 |
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134 | 139 | | Department from the State and National Repositories of Criminal Histories the criminal history 34 |
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135 | 140 | | of any applicant and the officer, director, and controlling person of any applicant. Along with the 35 |
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136 | 141 | | request, the Department shall provide to the State Bureau of Investigation the fingerprints of the 36 |
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137 | 142 | | person that is the subject of the request, a form signed by the person that is the subject of the 37 |
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138 | 143 | | request consenting to the criminal record check and use of fingerprints and other identifying 38 |
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139 | 144 | | information required by the State and National Repositories, and any additional information 39 |
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140 | 145 | | required by the State Bureau of Investigation. The person's fingerprints shall be used by the State 40 |
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141 | 146 | | Bureau of Investigation for a search of the State's criminal history record file, and the State 41 |
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142 | 147 | | Bureau of Investigation may forward a set of fingerprints to the Federal Bureau of Investigation 42 |
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143 | 148 | | for a national criminal history record check. The Department shall keep all information obtained 43 |
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144 | 149 | | pursuant to this subsection confidential. The State Bureau of Investigation may charge a fee to 44 |
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145 | 150 | | offset the cost incurred by it to conduct a criminal record check under this section. The fee shall 45 |
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146 | 151 | | not exceed the actual cost of locating, editing, researching, and retrieving the information. 46 |
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147 | 152 | | In the event that an applicant has secured a professional employer organization license in 47 |
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148 | 153 | | another state in which the professional employer organization's controlling persons have 48 |
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149 | 154 | | completed a criminal background investigation within 12 months of this application, a certified 49 |
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150 | 155 | | copy of the report from the appropriate authority of that state may satisfy the requirement of this 50 |
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151 | 156 | | subsection. This subsection also applies to a change in a the officers, directors, and other 51 General Assembly Of North Carolina Session 2025 |
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153 | 158 | | controlling party persons of a professional employer organization. organizations and professional 1 |
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154 | 159 | | employer organization groups licensed under this Article. For purposes of investigation under 2 |
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155 | 160 | | this subsection, the Commissioner shall have all the power conferred by G.S. 58-2-50 and other 3 |
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156 | 161 | | applicable provisions of this Chapter. 4 |
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157 | 162 | | … 5 |
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158 | 163 | | (g1) The Commissioner may deny the license of an applicant under this Article if the 6 |
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159 | 164 | | Commissioner finds any of the following: 7 |
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160 | 165 | | (1) That an officer, director, or other controlling person has: 8 |
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161 | 166 | | a. Not met the requirements of G.S. 58-89A-40. 9 |
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162 | 167 | | b. Made any untrue material statement or omitted any material 10 |
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163 | 168 | | information regarding their background or experience. 11 |
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164 | 169 | | c. Violated, or failed to comply with, any professional employer services 12 |
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165 | 170 | | law or any rule or order of the Commissioner or of any other State 13 |
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166 | 171 | | official responsible for the regulation of any aspect of the applicant's 14 |
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167 | 172 | | business. 15 |
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168 | 173 | | d. Obtained or attempted to obtain the license through misrepresentation 16 |
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169 | 174 | | or fraud. 17 |
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170 | 175 | | e. Been convicted of a felony. 18 |
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171 | 176 | | f. Been found in a final judgment or administrative proceeding to have 19 |
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172 | 177 | | committed fraud or an unfair trade practice. 20 |
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173 | 178 | | g. Been an officer, director, or other controlling person in another 21 |
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174 | 179 | | professional employer organization that has had its license or 22 |
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175 | 180 | | registration suspended, terminated, or revoked by any state. 23 |
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176 | 181 | | (2) That the applicant is not current with respect to all of its obligations for 24 |
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177 | 182 | | payroll, payroll-related taxes, workers' compensation insurance, and 25 |
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178 | 183 | | employee benefits and the applicant has failed to satisfy the Commissioner as 26 |
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179 | 184 | | to the reasons why. 27 |
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180 | 185 | | (3) That the applicant does not possess: 28 |
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181 | 186 | | a. A tangible accounting net worth of not less than fifty thousand dollars 29 |
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182 | 187 | | ($50,000). 30 |
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183 | 188 | | b. Positive working capital, or in lieu of positive working capital, 31 |
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184 | 189 | | substitute security as provided under G.S. 58-89A-50(a). 32 |
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185 | 190 | | (4) That the applicant has not provided evidence satisfactory to the Commissioner 33 |
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186 | 191 | | of financial responsibility. 34 |
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187 | 192 | | (5) That the applicant has failed to satisfy the requirements of G.S. 58-89A-50. 35 |
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188 | 193 | | (6) That a ground upon which the Commissioner could take disciplinary action 36 |
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189 | 194 | | against a licensee or other person subject to licensure requirements pursuant 37 |
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190 | 195 | | to G.S. 58-89A-155 applies to the applicant. 38 |
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191 | 196 | | (h) If the Commissioner finds that the applicant has not fully met the requirements for 39 |
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192 | 197 | | licensure, the Commissioner shall refuse to issue the license and shall notify the applicant in 40 |
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193 | 198 | | writing of the denial, stating the grounds for the denial. The application may also be denied for 41 |
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194 | 199 | | any reason for which a license may be suspended or terminated under G.S. 58-89A-155. To 42 |
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195 | 200 | | obtain a review to determine the reasonableness of the Commissioner's denial, the applicant shall 43 |
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196 | 201 | | make written demand upon the Commissioner within 30 days after notice is given under 44 |
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197 | 202 | | G.S. 150B-38(c). The review shall be completed without undue delay, and the applicant shall be 45 |
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198 | 203 | | notified promptly in writing as to the outcome of the review. If the applicant disagrees with the 46 |
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199 | 204 | | outcome of the review and seeks a hearing, under Article 3A of Chapter 150B of the General 47 |
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200 | 205 | | Statutes, on the outcome of the review, the applicant shall make a written demand upon the 48 |
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201 | 206 | | Commissioner for the hearing within 30 days after notice of the outcome of the review is given 49 |
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202 | 207 | | under G.S. 150B-38(c). 50 General Assembly Of North Carolina Session 2025 |
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204 | 209 | | (i) Removal, demotion, or discharge of a an officer, director, or other controlling person 1 |
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205 | 210 | | in response to an order of the Commissioner of the alleged unsuitability of that person is an 2 |
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206 | 211 | | affirmative defense to any claim by that individual based on the removal, demotion, or discharge. 3 |
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207 | 212 | | …." 4 |
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208 | 213 | | SECTION 6. Subsections (a1), (c1), and (c2) of G.S. 58-89A-65 are repealed. 5 |
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209 | 214 | | SECTION 7. G.S. 58-89A-70 reads as rewritten: 6 |
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210 | 215 | | "§ 58-89A-70. License issuance and maintenance. 7 |
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211 | 216 | | … 8 |
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212 | 217 | | (c) By obtaining licensure under this Article, the officers, directors, and other controlling 9 |
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213 | 218 | | persons of a licensee certify, under penalty of law, their compliance with the requirements of 10 |
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214 | 219 | | licensure and of operation as a professional employer organization pursuant to this Article. 11 |
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215 | 220 | | (d) Within 120 days after the end of each fiscal year, each licensee shall file with the 12 |
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216 | 221 | | Commissioner all of the following information: 13 |
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217 | 222 | | (1) Evidence of "financial responsibility" as set forth in G.S. 58-89A-60(b).An 14 |
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218 | 223 | | audited financial statement of the licensee or, if allowed by the Commissioner, 15 |
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219 | 224 | | an audited financial statement of the licensee's parent. The audited financial 16 |
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220 | 225 | | statement shall be in the form required by G.S. 58-89A-60(b), (b1), or (b2), as 17 |
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221 | 226 | | appropriate. 18 |
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222 | 227 | | … 19 |
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223 | 228 | | (4) An attestation, executed by the chief financial officer and the chief executive 20 |
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224 | 229 | | officer of the licensee, that the licensee is current with respect to all of its 21 |
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225 | 230 | | obligations for payroll, payroll-related taxes, workers' compensation 22 |
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226 | 231 | | insurance, and employee benefits. If any of the obligations listed in this 23 |
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227 | 232 | | subdivision are in dispute with a client and the disputed amount is material 24 |
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228 | 233 | | when considered in the context of the licensee's most recent audited financial 25 |
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229 | 234 | | statement, then the licensee shall disclose the nature of the dispute causing the 26 |
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230 | 235 | | obligations to be unpaid and the amount of money in controversy. 27 |
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231 | 236 | | (4)(5) Any other reasonable information the Commissioner determines is needed for 28 |
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232 | 237 | | the review of a licensee. 29 |
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233 | 238 | | (e) In order to maintain licensure, each licensee may be required to file with the 30 |
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234 | 239 | | Commissioner no later than 45 days after the end of each quarter of the fiscal year: 31 |
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235 | 240 | | (1) A financial statement for the preceding quarter that is not audited but is set 32 |
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236 | 241 | | forth in a format similar to the annual audited GAAP financial statement; and 33 |
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237 | 242 | | (2) An attestation, executed by the chief financial officer and the chief executive 34 |
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238 | 243 | | officer of the licensee, that the licensee is current with respect to all of its 35 |
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239 | 244 | | obligations for payroll, payroll-related taxes, workers' compensation 36 |
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240 | 245 | | insurance, and employee benefits. If any of the obligations listed in this 37 |
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241 | 246 | | subdivision are in dispute with a client and the disputed amount is material 38 |
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242 | 247 | | when considered in the context of the licensee's most recent audited financial 39 |
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243 | 248 | | statement, then the licensee shall disclose the nature of the dispute causing the 40 |
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244 | 249 | | obligations to be unpaid and the amount of money in controversy.attestation 41 |
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245 | 250 | | in the form required by subdivision (4) of subsection (d) of this section." 42 |
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246 | 251 | | SECTION 8. G.S. 58-89A-75 reads as rewritten: 43 |
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247 | 252 | | "§ 58-89A-75. De minimis registration. 44 |
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248 | 253 | | (a) A person who seeks to offer limited professional employer services in this State shall 45 |
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249 | 254 | | be eligible for de minimis registration status upon compliance with this section and may operate 46 |
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250 | 255 | | as a de minimis registrant in this State upon notification pursuant to this section. A person shall 47 |
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251 | 256 | | satisfy the requirements for a de minimis registration only if the professional employer 48 |
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252 | 257 | | organization: 49 |
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253 | 258 | | (1) Does not maintain a physical professional employer organization office 50 |
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254 | 259 | | located in this State; 51 General Assembly Of North Carolina Session 2025 |
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256 | 261 | | (2) Is not domiciled in this State; 1 |
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257 | 262 | | (2)(3) Does not employ salespersons who reside or direct their sales activities in this 2 |
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258 | 263 | | State; 3 |
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259 | 264 | | (3)(4) Does not employ directly or in common control with another person, as 4 |
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260 | 265 | | defined in G.S. 58-89A-5(12), more than 50 assigned employees in this State; 5 |
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261 | 266 | | (4)(5) Does not advertise through any media outlet physically located in this 6 |
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262 | 267 | | State;State, provided, however, that this subdivision shall not prohibit a person 7 |
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263 | 268 | | from advertising through publications, trade journals, directories, radio, 8 |
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264 | 269 | | television, or the internet if such advertising is not expressly directed toward 9 |
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265 | 270 | | employers in this State. 10 |
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266 | 271 | | (5)(6) Is a licensed or registered professional employer organization in at least one 11 |
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267 | 272 | | other state of the United States; and 12 |
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268 | 273 | | (6)(7) Is operated by and under the control of persons of good moral character. 13 |
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269 | 274 | | A professional employer organization operating under a de minimis registration shall be subject 14 |
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270 | 275 | | to all of the responsibilities and authority of a licensee under this Article except for 15 |
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271 | 276 | | G.S. 58-89A-50, 58-89A-60 and 58-89A-70(c), (d), and (e). 16 |
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272 | 277 | | …." 17 |
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273 | 278 | | SECTION 9. This act is effective when it becomes law and applies to applications 18 |
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274 | 279 | | for license issuance or renewal submitted on or after that date. 19 |
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