Help! PEO forcing my client to buy their work comp program

[Markthebroker]

Hi all.

Long story short, my client wants to put their work comp with me, but their PEO has them on a group policy. The PEO says that they require all their clients to have work comp with them.

This seems like it is somewhere between illegal and unethical to require that.

Can anyone cite any rules, regulations, laws, etc. saying that the PEO can't require people buy insurance through them? The client is in California, soon to be Kentucky as well.

Thank you in advance for everyone's help.

 

[Andle]

Didn't your client hire the PEO to work for them? If so, isn't it up to the client?....

 

[adjusterjack]

Can anyone cite any rules, regulations, laws, etc. saying that the PEO can't require people buy insurance through them?

As long as the insurance is valid, the client's obligation to the PEO is defined by the client's contract with the PEO.

If the client signed a contract with the PEO that requires that he purchase WC through the PEO then he is stuck with that obligation until his contract expires.

I suggest you obtain a copy of your client's PEO contract and study it carefully.

 

[Markthebroker]

Didn't your client hire the PEO to work for them? If so, isn't it up to the client?....

Unfortunately that's not always how contracts and agreements work. That's why I am looking for any laws or regulations that give my client an out, while still working with the PEO.

 

[adjusterjack]

Unfortunately that's not always how contracts and agreements work.

You are still going to have to read the contract because a contract is ALWAYS the first place that you look to determine what the agreement is between the two parties.

THEN you look to laws and regulations to determine whether a particular term or condition of the contract is unenforceable.

Keep in mind that your client voluntarily entered into a contract whereby his WC coverage is through the PEO's group insurance.

Is there a law prohibiting that agreement. Frankly, I doubt it, but there is a myriad of laws in CA that you would have to look through to find it.

California has a Business and Professions Code, a Commercial Code, and an Insurance Code, to name a few that might apply:

Code Search

I don't think it's important enough for anybody (except you) to wade through all those laws and I'd be surprised if anybody responds with something like "Hey, I know exactly where it is."

Again, your client's obligation to the PEO is addressed by his contract with the PEO and he should at least be aware of any potential consequences of breaching that contract if, indeed, moving his WC coverage is a breach of the contract.

 

[somarco]

Do some research on illegal tie in sales, or tie in agreement. Also referred to as a tying agreement.

Just because such arrangements are illegal doesn't mean they don't exist. Likewise, don't expect to get anywhere with your complaint. The aggrieved party must make the complaint. In this case it would be the employer, not you.

 

[leevena]

Adjusterjack is correct, you need to read the contract, and do not take anyone’s word instead. PEO’s market a variety of services, which can be sold in a variety of offerings. An analogy can be Burger King, where you can purchase items individually or in some type of pre-selected meal. I would also be willing to bet a large pizza, no make that a large pizza with pepperoni, that there is no law that prohibits the packaging of workers comp in their services. Sorry and good luck.

 

[newera]

The client can simply give notice to the PEO and leave. Not sure what the issue is? It is a voluntary service agreement.

 

[Markthebroker]

Because they want to keep the peo services, but cut the work comp. I've worked on this at length, and it looks like they have to take the w.c. if they use the payroll. Unfortunate.

 

[newera]

I understand. How many employees? I can carve out comp if they have health insurance with the PEO and at least 15-20 EE's. Might want to look into an ASO model.