2023 Tennessee Code › Title 62 - PROFESSIONS, BUSINESSES AND TRADES (§§ 62-1-101 — 62-76-203) › Chapter 43 - TENNESSEE PROFESSIONAL EMPLOYER ORGANIZATION ACT (§§ 62-43-101 — 62-43-114) › Section 62-43-108 - Basis of co-employment relationship

(a)
(1)
The co-employment relationship shall be based on a written professional employer agreement between the client and the professional employer organization setting forth the responsibilities and duties of each co-employer. The professional employer agreement shall disclose to the client the services to be rendered, including charges and fees, the respective rights and obligations of the parties and provide that the professional employer organization:
(A)
Reserves a right of direction and control over covered employees of the client; however, the client may retain sufficient direction and control over covered employees that is necessary to conduct the client's business and without which the client would be unable to conduct its business, discharge any fiduciary responsibility that it may have or comply with any applicable licensure, regulatory or statutory requirement of the client;
(B)
Pursuant to this section, assumes responsibility for the payment of wages of its covered employees, its payroll-related taxes and its employee benefits from its own accounts without regard to payments by the client to the professional employer organization; and
(C)
Retains a right to hire, terminate and discipline covered employees.
(2)
A professional employer organization shall give written notice of the general nature of the relationship between the professional employer organization and the client to each covered employee.
(3)
A professional employer organization shall be deemed an employer of its covered employees and shall pay wages to covered employees; withhold, collect, report and remit payroll-related and unemployment taxes; and, to the extent the professional employer organization has assumed responsibility in the professional employer agreement, make payments for employee benefits for covered employees. As used in this section, the term "wages" does not include any obligation between a client and a covered employee for payments beyond or in addition to the covered employee's salary, draw, or regular rate of pay, such as bonuses, commissions, severance pay, deferred compensation, profit sharing or vacation, sick or other paid time off pay, unless the professional employer organization has expressly agreed to assume liability for such payments in the professional employer agreement.
(b)
Except to the extent otherwise expressly provided by the applicable professional employer agreement:
(1)
A client shall be solely responsible for the quality, adequacy or safety of the goods or services produced or sold in client's business;
(2)
A client shall be solely responsible for directing, supervising, training and controlling the work of the covered employees with respect to the business activities of the client and solely responsible for the acts, errors or omissions of the covered employees with regard to such activities;
(3)
A client shall not be liable for the acts, errors, or omissions of a professional employer organization, or of any covered employee of the client and a professional employer organization when such covered employee is acting under the express direction and control of the professional employer organization;
(4)
A professional employer organization shall not be liable for the acts, errors, or omissions of a client or of any covered employee of the client when such covered employee is acting under the express direction and control of the client;
(5)
Nothing in this subsection (b) shall serve to limit any contractual liability or obligation specifically provided in the written professional employer agreement; and
(6)
A covered employee is not, solely as the result of being a covered employee of a professional employer organization, an employee of the professional employer organization for purposes of general liability insurance, fidelity bonds, surety bonds, employer's liability which is not covered by workers' compensation, or liquor liability insurance carried by the professional employer organization unless the covered employees are included by specific reference in the professional employer agreement and applicable prearranged employment contract, insurance contract or bond.
(c)
(1)
A professional employer organization may sponsor and maintain employee benefit and welfare plans for the benefit of its covered employees. Any of those plans that are plans of insurance shall comply with the applicable provisions of the insurance laws of this state. The self-insured plans developed under this section are not subject to premium taxes. The department may promulgate rules regulating self-insured plans under this section.
(2)
An applicant or registrant shall disclose to the department, to each client company and to all eligible covered employees the following information relating to any benefit plan of insurance provided for the benefit of its covered employees:
(A)
The type of coverage and a copy of the insurance policy or certificate or summary plan description;
(B)
The identity of each insurer for each type of coverage;
(C)
The amount of benefits for each type of coverage and to whom or on whose behalf benefits will be paid; and
(D)
The policy limits on each insurance policy.
(3)
Nothing in this subsection (c) shall require a professional employer organization to provide comparable benefits to covered employees located at different clients.
(4)
The sale of professional employer services in conformance with this chapter shall not constitute the sale of insurance within the meaning of applicable state law.
Acts 2012, ch. 1081, § 1.