North Carolina 2025-2026 Regular Session

North Carolina Senate Bill S268 Compare Versions

OldNewDifferences
11 GENERAL ASSEMBLY OF NORTH CAROLINA
22 SESSION 2025
3-S 1
4-SENATE BILL 268
3+S D
4+SENATE BILL DRS15117-NE-53
5+
56
67
78 Short Title: Amend NC PEO Act.-AB (Public)
89 Sponsors: Senators Johnson, Britt, and Settle (Primary Sponsors).
9-Referred to: Rules and Operations of the Senate
10-March 13, 2025
11-*S268 -v-1*
10+Referred to:
11+
12+*DRS15117 -NE-53*
1213 A BILL TO BE ENTITLED 1
1314 AN ACT ENACTING CHANGES TO THE NORTH CAROLINA PROFESSIONAL 2
1415 EMPLOYER ORGANIZATION ACT , AS RECOMMENDED BY THE DEPARTMENT 3
1516 OF INSURANCE. 4
1617 The General Assembly of North Carolina enacts: 5
1718 SECTION 1. G.S. 58-89A-5 reads as rewritten: 6
1819 "§ 58-89A-5. Definitions. 7
1920 In this Article: 8
2021 … 9
2122 (3) "Audited GAAP financial statement" means a financial statement that is 10
2223 audited by an independent certified public accountant and presented in 11
2324 accordance with generally accepted accounting principles. 12
2425 … 13
2526 (17) "Tangible net worth" means the difference between total tangible assets and 14
2627 total liabilities. For purposes of this definition, tangible assets are physical 15
2728 assets and do not include goodwill, patents, copyrights, intellectual property, 16
2829 trademarks, and any other non-physical asset. 17
2930 (17)(18) "Temporary employees" means persons employed under an arrangement 18
3031 by which an organization hires its own employees and assigns them to a client 19
3132 company to support or supplement the client's workforce in a special work 20
3233 situation, including: 21
3334 … 22
3435 (19) "Working capital" means the difference between current assets and current 23
3536 liabilities." 24
3637 SECTION 2. G.S. 58-89A-35 reads as rewritten: 25
3738 "§ 58-89A-35. License required; professional employer organization groups. 26
3839 … 27
3940 (b) Two or more professional employer organizations persons that are controlled by the 28
4041 same ultimate parent, entity, or persons may be licensed as a professional employer organization 29
4142 group. A professional employer organization group may satisfy the reporting and financial 30
4243 requirements of this Article on a consolidated or combined basis. As a condition of licensure as 31
4344 a professional employer organization group, each professional employer organization person that 32
4445 is proposes to be a member of the a professional employer organization group shall guarantee 33
4546 payment of all financial obligations of every other member. Notwithstanding the definition of 34
4647 "person" in this Article, whenever two or more entities combine to seek issuance of a single 35
47-license under this Article, the requirements for group licensure under this subsection shall be met 36 General Assembly Of North Carolina Session 2025
48-Page 2 Senate Bill 268-First Edition
48+license under this Article, the requirements for group licensure under this subsection shall be met 36
49+FILED SENATE
50+Mar 12, 2025
51+S.B. 268
52+PRINCIPAL CLERK General Assembly Of North Carolina Session 2025
53+Page 2 DRS15117-NE-53
4954 before issuance of a license and any license issued will be a professional employer organization 1
5055 group license issued pursuant to this subsection." 2
5156 SECTION 3. G.S. 58-89A-50 reads as rewritten: 3
5257 "§ 58-89A-50. Surety bond; letter of credit; other deposits. 4
5358 (a) An applicant for licensure shall file with the Commissioner a surety bond, or other 5
5459 items as set forth in subsection (f) of this section, in the amount of one hundred thousand dollars 6
5560 ($100,000) for the benefit of the Commissioner. An applicant whose current assets do not exceed 7
5661 current liabilities or licensee who does not have positive working capital pursuant to 8
5762 G.S. 58-89A-60(b) shall file an additional surety bond or other items set forth in subsection (f) 9
5863 of this section equal to or in excess of current liabilities less current assets.the applicant's or 10
5964 licensee's negative working capital. 11
6065 …." 12
6166 SECTION 4. G.S. 58-89A-60(g) is repealed. 13
6267 SECTION 5. G.S. 58-89A-60, as amended by Section 4 of this act, reads as 14
6368 rewritten: 15
6469 "§ 58-89A-60. License application. 16
6570 (a) Every applicant for licensure shall file with the Commissioner, on a form prescribed 17
6671 by the Commissioner, the following information: 18
6772 … 19
6873 (3) A list of all officers officers, directors, and other controlling persons of the 20
6974 applicant, their biographical information, including their education, 21
7075 management background, and business experience, and an affidavit from each 22
7176 attesting to his or her good moral character and management competence. 23
7277 … 24
7378 (6) Any other reasonable information the Commissioner deems necessary and 25
7479 requires by rule to establish that the applicant and the officers and controlling 26
7580 persons are of good moral character, have business integrity, have applicable 27
7681 educational and business experience, and have financial responsibility. 28
7782 (b) Every applicant shall file with the Commissioner an audited GAAP financial 29
7883 statement, prepared as of a date not more than 90 120 days before the date of application that 30
7984 demonstrates that the applicant or licensee's current assets exceed current liabilities and attached 31
8085 has a tangible net worth of not less than fifty thousand dollars ($50,000) and positive working 32
8186 capital. The applicant shall attach to which is the audited financial statement a separate document 33
8287 signed by the applicant's chief executive and the chief financial officer certifying that (i) each 34
8388 has reviewed the audited financial statement; (ii) based on each signatory's knowledge, the 35
8489 audited financial statement does not contain any untrue or misleading statement of material fact 36
8590 or omit a fact with respect to the period covered by the audited financial statement; and (iii) based 37
8691 on each signatory's knowledge, the audited financial statement fairly presents in all material 38
8792 respects the financial condition of the licensee applicant as of, and for, the period presented in 39
8893 the audited financial statement. 40
8994 Notwithstanding the requirements of this subsection, the Commissioner may, in the 41
9095 Commissioner's discretion, accept an audited GAAP financial statement that has been prepared 42
9196 more than 90 120 days before submission to the Commissioner if the Commissioner deems such 43
9297 acceptance appropriate. The Commissioner may, in the Commissioner's discretion, impose 44
9398 conditions upon such acceptance of audited financial statements prepared more than 90 120 days 45
9499 prior to submission. 46
95100 The audited GAAP financial statement shall be prepared in accordance with generally 47
96101 accepted accounting principles and audited by an independent certified public accountant 48
97102 licensed to practice in the jurisdiction in which such accountant is located and shall be without 49
98103 qualification as to the going concern status of the PEO. A PEO group applicant. Persons applying 50
99104 for a professional employer organization group license may submit combined or consolidated 51 General Assembly Of North Carolina Session 2025
100-Senate Bill 268-First Edition Page 3
105+DRS15117-NE-53 Page 3
101106 audited financial statements to meet the requirements of this section, except that a PEO provided 1
102107 that the combined or consolidated audited financial statement include a combining or 2
103108 consolidating balance sheet and statement of operations of each proposed member as 3
104109 supplemental information to the combined or consolidated audited financial statement. An 4
105110 applicant that has not had sufficient operating history to have audited financial statements based 5
106111 upon does not have at least 12 months of operating history must may meet the financial capacity 6
107112 requirements of this subsection and present by filing with the Commissioner financial statements 7
108113 that have been reviewed by a an independent certified public accountant.accountant and that have 8
109114 been prepared as of a date not more than 90 days before the date of application. 9
110115 (b1) The Commissioner may accept the audited financial statement of an applicant's parent 10
111116 company, if the audited financial statement includes either a combining or consolidating balance 11
112117 sheet, income statement, statement of changes in equity, and statement of cash flows as 12
113118 supplemental information to the audited financial statement, the contents of which will allow the 13
114119 Commissioner to determine the financial condition and financial responsibility of the applicant. 14
115120 (b2) The Commissioner may accept the audited financial statement of an applicant's parent 15
116121 company and consider the financial condition and financial responsibility of the parent in lieu of 16
117122 the applicant, if all of the following requirements are satisfied: 17
118123 (1) The parent executes a guaranty agreement, in a form prescribed by the 18
119124 Commissioner, for the guaranty of all obligations related to the applicant's 19
120125 current and future client companies, including its obligations for payroll, 20
121126 payroll-related taxes, workers' compensation insurance, and employee 21
122127 benefits. 22
123128 (2) The applicant files with the Commissioner documentation acceptable to the 23
124129 Commissioner evidencing the parent's control. 24
125130 (3) The applicant submits an audited financial statement that meets the 25
126131 requirements of subsection (b1) of this section that allows the Commissioner 26
127132 to determine the financial condition and financial responsibility of the parent 27
128133 and the applicant. 28
129134 … 29
130135 (d) Every applicant shall furnish the Commissioner a complete set of fingerprints of each 30
131136 officer, director, and controlling person in a form prescribed by the Commissioner. Each set of 31
132137 fingerprints shall be certified by an authorized law enforcement officer. 32
133138 Upon request by the Department, the State Bureau of Investigation shall provide to the 33
134139 Department from the State and National Repositories of Criminal Histories the criminal history 34
135140 of any applicant and the officer, director, and controlling person of any applicant. Along with the 35
136141 request, the Department shall provide to the State Bureau of Investigation the fingerprints of the 36
137142 person that is the subject of the request, a form signed by the person that is the subject of the 37
138143 request consenting to the criminal record check and use of fingerprints and other identifying 38
139144 information required by the State and National Repositories, and any additional information 39
140145 required by the State Bureau of Investigation. The person's fingerprints shall be used by the State 40
141146 Bureau of Investigation for a search of the State's criminal history record file, and the State 41
142147 Bureau of Investigation may forward a set of fingerprints to the Federal Bureau of Investigation 42
143148 for a national criminal history record check. The Department shall keep all information obtained 43
144149 pursuant to this subsection confidential. The State Bureau of Investigation may charge a fee to 44
145150 offset the cost incurred by it to conduct a criminal record check under this section. The fee shall 45
146151 not exceed the actual cost of locating, editing, researching, and retrieving the information. 46
147152 In the event that an applicant has secured a professional employer organization license in 47
148153 another state in which the professional employer organization's controlling persons have 48
149154 completed a criminal background investigation within 12 months of this application, a certified 49
150155 copy of the report from the appropriate authority of that state may satisfy the requirement of this 50
151156 subsection. This subsection also applies to a change in a the officers, directors, and other 51 General Assembly Of North Carolina Session 2025
152-Page 4 Senate Bill 268-First Edition
157+Page 4 DRS15117-NE-53
153158 controlling party persons of a professional employer organization. organizations and professional 1
154159 employer organization groups licensed under this Article. For purposes of investigation under 2
155160 this subsection, the Commissioner shall have all the power conferred by G.S. 58-2-50 and other 3
156161 applicable provisions of this Chapter. 4
157162 … 5
158163 (g1) The Commissioner may deny the license of an applicant under this Article if the 6
159164 Commissioner finds any of the following: 7
160165 (1) That an officer, director, or other controlling person has: 8
161166 a. Not met the requirements of G.S. 58-89A-40. 9
162167 b. Made any untrue material statement or omitted any material 10
163168 information regarding their background or experience. 11
164169 c. Violated, or failed to comply with, any professional employer services 12
165170 law or any rule or order of the Commissioner or of any other State 13
166171 official responsible for the regulation of any aspect of the applicant's 14
167172 business. 15
168173 d. Obtained or attempted to obtain the license through misrepresentation 16
169174 or fraud. 17
170175 e. Been convicted of a felony. 18
171176 f. Been found in a final judgment or administrative proceeding to have 19
172177 committed fraud or an unfair trade practice. 20
173178 g. Been an officer, director, or other controlling person in another 21
174179 professional employer organization that has had its license or 22
175180 registration suspended, terminated, or revoked by any state. 23
176181 (2) That the applicant is not current with respect to all of its obligations for 24
177182 payroll, payroll-related taxes, workers' compensation insurance, and 25
178183 employee benefits and the applicant has failed to satisfy the Commissioner as 26
179184 to the reasons why. 27
180185 (3) That the applicant does not possess: 28
181186 a. A tangible accounting net worth of not less than fifty thousand dollars 29
182187 ($50,000). 30
183188 b. Positive working capital, or in lieu of positive working capital, 31
184189 substitute security as provided under G.S. 58-89A-50(a). 32
185190 (4) That the applicant has not provided evidence satisfactory to the Commissioner 33
186191 of financial responsibility. 34
187192 (5) That the applicant has failed to satisfy the requirements of G.S. 58-89A-50. 35
188193 (6) That a ground upon which the Commissioner could take disciplinary action 36
189194 against a licensee or other person subject to licensure requirements pursuant 37
190195 to G.S. 58-89A-155 applies to the applicant. 38
191196 (h) If the Commissioner finds that the applicant has not fully met the requirements for 39
192197 licensure, the Commissioner shall refuse to issue the license and shall notify the applicant in 40
193198 writing of the denial, stating the grounds for the denial. The application may also be denied for 41
194199 any reason for which a license may be suspended or terminated under G.S. 58-89A-155. To 42
195200 obtain a review to determine the reasonableness of the Commissioner's denial, the applicant shall 43
196201 make written demand upon the Commissioner within 30 days after notice is given under 44
197202 G.S. 150B-38(c). The review shall be completed without undue delay, and the applicant shall be 45
198203 notified promptly in writing as to the outcome of the review. If the applicant disagrees with the 46
199204 outcome of the review and seeks a hearing, under Article 3A of Chapter 150B of the General 47
200205 Statutes, on the outcome of the review, the applicant shall make a written demand upon the 48
201206 Commissioner for the hearing within 30 days after notice of the outcome of the review is given 49
202207 under G.S. 150B-38(c). 50 General Assembly Of North Carolina Session 2025
203-Senate Bill 268-First Edition Page 5
208+DRS15117-NE-53 Page 5
204209 (i) Removal, demotion, or discharge of a an officer, director, or other controlling person 1
205210 in response to an order of the Commissioner of the alleged unsuitability of that person is an 2
206211 affirmative defense to any claim by that individual based on the removal, demotion, or discharge. 3
207212 …." 4
208213 SECTION 6. Subsections (a1), (c1), and (c2) of G.S. 58-89A-65 are repealed. 5
209214 SECTION 7. G.S. 58-89A-70 reads as rewritten: 6
210215 "§ 58-89A-70. License issuance and maintenance. 7
211216 … 8
212217 (c) By obtaining licensure under this Article, the officers, directors, and other controlling 9
213218 persons of a licensee certify, under penalty of law, their compliance with the requirements of 10
214219 licensure and of operation as a professional employer organization pursuant to this Article. 11
215220 (d) Within 120 days after the end of each fiscal year, each licensee shall file with the 12
216221 Commissioner all of the following information: 13
217222 (1) Evidence of "financial responsibility" as set forth in G.S. 58-89A-60(b).An 14
218223 audited financial statement of the licensee or, if allowed by the Commissioner, 15
219224 an audited financial statement of the licensee's parent. The audited financial 16
220225 statement shall be in the form required by G.S. 58-89A-60(b), (b1), or (b2), as 17
221226 appropriate. 18
222227 … 19
223228 (4) An attestation, executed by the chief financial officer and the chief executive 20
224229 officer of the licensee, that the licensee is current with respect to all of its 21
225230 obligations for payroll, payroll-related taxes, workers' compensation 22
226231 insurance, and employee benefits. If any of the obligations listed in this 23
227232 subdivision are in dispute with a client and the disputed amount is material 24
228233 when considered in the context of the licensee's most recent audited financial 25
229234 statement, then the licensee shall disclose the nature of the dispute causing the 26
230235 obligations to be unpaid and the amount of money in controversy. 27
231236 (4)(5) Any other reasonable information the Commissioner determines is needed for 28
232237 the review of a licensee. 29
233238 (e) In order to maintain licensure, each licensee may be required to file with the 30
234239 Commissioner no later than 45 days after the end of each quarter of the fiscal year: 31
235240 (1) A financial statement for the preceding quarter that is not audited but is set 32
236241 forth in a format similar to the annual audited GAAP financial statement; and 33
237242 (2) An attestation, executed by the chief financial officer and the chief executive 34
238243 officer of the licensee, that the licensee is current with respect to all of its 35
239244 obligations for payroll, payroll-related taxes, workers' compensation 36
240245 insurance, and employee benefits. If any of the obligations listed in this 37
241246 subdivision are in dispute with a client and the disputed amount is material 38
242247 when considered in the context of the licensee's most recent audited financial 39
243248 statement, then the licensee shall disclose the nature of the dispute causing the 40
244249 obligations to be unpaid and the amount of money in controversy.attestation 41
245250 in the form required by subdivision (4) of subsection (d) of this section." 42
246251 SECTION 8. G.S. 58-89A-75 reads as rewritten: 43
247252 "§ 58-89A-75. De minimis registration. 44
248253 (a) A person who seeks to offer limited professional employer services in this State shall 45
249254 be eligible for de minimis registration status upon compliance with this section and may operate 46
250255 as a de minimis registrant in this State upon notification pursuant to this section. A person shall 47
251256 satisfy the requirements for a de minimis registration only if the professional employer 48
252257 organization: 49
253258 (1) Does not maintain a physical professional employer organization office 50
254259 located in this State; 51 General Assembly Of North Carolina Session 2025
255-Page 6 Senate Bill 268-First Edition
260+Page 6 DRS15117-NE-53
256261 (2) Is not domiciled in this State; 1
257262 (2)(3) Does not employ salespersons who reside or direct their sales activities in this 2
258263 State; 3
259264 (3)(4) Does not employ directly or in common control with another person, as 4
260265 defined in G.S. 58-89A-5(12), more than 50 assigned employees in this State; 5
261266 (4)(5) Does not advertise through any media outlet physically located in this 6
262267 State;State, provided, however, that this subdivision shall not prohibit a person 7
263268 from advertising through publications, trade journals, directories, radio, 8
264269 television, or the internet if such advertising is not expressly directed toward 9
265270 employers in this State. 10
266271 (5)(6) Is a licensed or registered professional employer organization in at least one 11
267272 other state of the United States; and 12
268273 (6)(7) Is operated by and under the control of persons of good moral character. 13
269274 A professional employer organization operating under a de minimis registration shall be subject 14
270275 to all of the responsibilities and authority of a licensee under this Article except for 15
271276 G.S. 58-89A-50, 58-89A-60 and 58-89A-70(c), (d), and (e). 16
272277 …." 17
273278 SECTION 9. This act is effective when it becomes law and applies to applications 18
274279 for license issuance or renewal submitted on or after that date. 19