2023 Hawaii Revised Statutes › Title 21. Labor and Industrial Relations › 373L. Professional Employer Organizations › 373L-3 Bond required.

§373L-3 Bond required.
(a) No professional employer organization shall enter into a professional employment agreement with a client company in the State unless the professional employer organization posts a surety bond, or an irrevocable letter of credit equivalent to the required bond amount, that is based on the previous year's total payroll of the professional employer organization. The total payroll of the professional employer organization shall be the amount reported on the Internal Revenue Service Form W-3, Transmittal of Wage and Tax Statements, that was most recently filed with the federal government in the year in which the bond or irrevocable letter of credit is to become effective. The bond or its irrevocable letter of credit equivalent required under this section shall be on a sliding scale as follows:
(1) For professional employer organizations with a total payroll up to and including $25,000,000, a bond or its irrevocable letter of credit equivalent of $25,000;
(2) For professional employer organizations with a total payroll of $25,000,001 to $150,000,000, a bond or its irrevocable letter of credit equivalent of $75,000; and
(3) For professional employer organizations with a total payroll of $150,000,001 and higher, a bond or its irrevocable letter of credit equivalent of $250,000.
If the professional employer organization posts a bond, the director shall be named as the obligee and the bond may be canceled only if the professional employer organization gives sixty days prior written notice to the surety and the director or if the surety gives thirty days prior written notice to the director of cancellation of the bond. If the professional employer organization furnishes an irrevocable letter of credit approved by the director, the director shall be named as the beneficiary, and the irrevocable letter of credit shall be issued by a bank, savings bank, or other depository financial institution insured by a federal depository insurance agency and authorized to do business in the State. The requirements of this section shall be satisfied by a single bond or its irrevocable letter of credit equivalent. If a professional employer organization has more than one branch location, the bond or its irrevocable letter of credit equivalent shall cover all locations.
(b) The bond required by this section shall be issued by a surety or federally insured lending institution authorized to do business in the State to indemnify a client company who may suffer loss as a result of nonperformance by a professional employer organization.
(c) Upon cancellation or expiration of the bond, the surety or insurer shall remain liable for any claims against the bond for a period of six months; provided that:
(1) The debts were incurred while the bond was in effect; and
(2) The director notifies the surety or insurer, as the case may be, of any claims within ninety days of discovery of any claims.
(d) The surety or insurer is not required to release any moneys or collateral to the professional employer organization during the six months after cancellation of the bond.
(e) Failure to have in effect a current bond shall result in automatic forfeiture of registration pursuant to this chapter and shall require the professional employer organization to immediately cease doing business in the State. A professional employer organization whose registration is forfeited shall apply as a new applicant for registration in order to resume business in the State. [L 2010, c 129, pt of §1; am L 2013, c 174, §6]