64:06:02:89. Professional employer organization -- Definition of co-employment relationship. A co-employment relationship results from a contract between a professional employer organization and a client company. In order for a co-employment relationship to exist, the contract must stipulate that:
(1) The professional employer organization assumes the responsibilities listed in this subdivision, including the payment of wages, salaries, payroll taxes, payroll deductions, workers compensation costs, insurance premiums, welfare benefits, and retirement benefits, and preparing and filing necessary tax returns and other documents as required by state or federal law;
(2) The client company must be the employer to any existing employees prior to the contractual relationship with the professional employment organization;
(3) The client company retains primary control over the hiring, firing, wage rates, salary increases, training, and directing the day-to-day activities of the co-employees;
(4) If the contractual relationship between the professional employer organization and the client company is terminated, then the co-employees' employment with the professional employer organization is also terminated;
(5) If a co-employee leaves the employment of the client company, that co-employee's employment is terminated with the professional employer organization; and
(6) The professional employment organization does not manage or direct the operation of the client company's business.
Source: 25 SDR 167, effective July 1, 1999; 29 SDR 177, effective July 2, 2003.
General Authority:SDCL 10-45-47.1(3).
Law Implemented:SDCL 10-45-97.
64:06:02:89.01. Application for a professional employer organization permit. Each professional employer organization, doing business in South Dakota, must be approved by the Department as a professional employer organization, as defined in SDCL 10-45-97 and § 64:06:02:89. The professional employer organization must apply in writing to the secretary on a form provided by the secretary. The form shall contain the applicant's name and address and client's name and address. A copy of the contract between the professional employer organization and the client must be filed with the form.
If a professional employer organization does not meet the qualifications of SDCL 10-45-97 and § 64:06:02:89 the organization will be required to pay sales tax on all fees charged between the organization and the client with no deduction for actual disbursements, including appropriate reserves, for the wages, salaries, payroll taxes, payroll deductions, workers' compensation costs, insurance premiums, welfare benefits, retirement benefits, and other employee benefits of its co-employees, unless otherwise exempt pursuant to SDCL chapter 10-45.
Source: 38 SDR 214, effective June 21, 2012.
General Authority: SDCL 10-45-47.1(3).
Law Implemented: SDCL 10-45-96, 10-45-97.
