AB1515 - Professional employer organizations.

Amended IN Senate August 10, 2026 Amended IN Senate June 23, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 1515 Introduced by Committee on Labor and Employment (Assembly Members Ortega (Chair), Elhawary, Kalra, and Ward) March 10, 2025 An act to add Chapter 1 (commencing with Section 1650) to Part 6 of Division 2 of the Labor Code, relating to employment. LEGISLATIVE COUNSEL'S DIGEST AB 1515, as amended, Committee on Labor and Employment. Professional employer organizations. Existing federal law provides for certification of a professional employer organization (PEO) by the Secretary of the Treasury and, for purposes of specified taxes and other obligations, treats a PEO as the employer of any work site employee performing services for any customer of the PEO. Existing law establishes the Division of Labor Standards Enforcement, headed by the Labor Commissioner, within the Department of Industrial Relations, for the purpose of enforcing labor laws. Existing law authorizes the Director of Industrial Relations to adopt regulations reasonably necessary to carry out certain laws relating to workers’ compensation insurance requirements, including regulations regulating the workers’ compensation self-insurance obligations of professional employer organizations. This bill would prohibit a person from providing, advertising, or otherwise holding oneself out as providing professional employer services, as defined, in the state unless the person is registered with the division. The bill would require a PEO, as defined, upon registration, to pay an initial registration fee established by the division not to exceed the reasonable cost of registration. define the terms “professional employer organization” and “professional employer services” for purposes of the Labor Code. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Chapter 1 (commencing with Section 1650) is added to Part 6 of Division 2 of the Labor Code, to read: CHAPTER 1. Professional Employer Organizations 1650. For purposes of this chapter: code, the following definitions apply: (a) “Division” means the Division of Labor Standards Enforcement. (b) (a) (1) “Professional employer organization” (PEO) or “PEO” means a person that meets any of the following criteria: (1) Is certified by the Secretary of the Treasury pursuant to Section 7705 of Title 26 of the United States Code. (A) The person is certified by the Internal Revenue Service as described in Section 301.7705-1(b) of Title 26 of the Code of Federal Regulations. (2) Is (B) The person is accredited by the Employer Services Assurance Corporation. (3) Provides professional employer services to a client pursuant (C) Pursuant to a written professional employer agreement intended by the parties to create an ongoing relationship. relationship, the person provides professional employer services to a client. (2) “Professional employer organization” or “PEO” does not include any of the following: (A) A person, including temporary staffing or trade associations, whose principal business activity is not entering into agreements for the provision of professional employment services, who does not hold themselves out as a professional employer organization, and who shares employees with a company that is a member of a controlled group of corporations or company that is under common control, as those terms are used in Section 414(b) and (c), respectively, of the Internal Revenue Code of 1986 (26 U.S.C. Sec. 414(b) and (c)), as amended from time to time. (B) A temporary services employer, as defined in Section 201.3. (C) A motion picture payroll services company, as defined in subparagraph (A) of paragraph (5) of subdivision (f) of Section 679 of the Unemployment Insurance Code. (c) (b) “Professional employer services” means services provided pursuant to a professional services agreement that provides for all or substantially all employees of a client and that includes all of the following: (1) Reporting employee wages for purposes of federal law using the professional employer organization’s federal employer identification number of the PEO. number. (2) Securing workers’ compensation insurance insurance, as specified in the professional employer agreement, in compliance with paragraph (1) of subdivision (d) of Section 3602 and Section 3700. (3) Offering employee benefit plans. 1651. A person shall not provide, advertise, or otherwise hold oneself out as providing professional employer services in the state unless the person is registered with the division under this chapter. 1652. Upon registration, a PEO shall pay an initial registration fee established by the division not to exceed the reasonable cost of providing the registration under this chapter.