New PEO Regulation

Last weekend, I attended an insurance agency function at which the Insurance Commissioner, Ralph Hudgens, spoke.  In his speech, he mentioned that a new regulation governing the sale of insurance products by Professional Employer Organizations (“PEOs”) has been adopted by his office.  That regulation will take effect on February 14, 2018.  It amends Sections 120-2-3-.03 and 120-2-3-.05 of the Georgia Rules and Regulations.  A definition of “negotiate” that is specifically directed at the activities of PEOs was added to Section 120-2-3-.03.  A specific requirement that any business entity that employs an individual who is engaged in the sale, solicitation, or negotiation of insurance on behalf of that entity be licensed as an insurance agency was added to Section 120-2-3-.05.

The definition of “negotiate” in Section 120-2-3-.03 tracks the one found in the Insurance Code.  It goes on to define a “purchaser” of insurance to include “current or prospective coemployers, or their employees, of professional employer organizations.”  It also addresses when an employee of a PEO will be deemed to “negotiate” with such a purchaser about the purchase of insurance.  Such a negotiation will occur if the PEO employee “offers advice or renders opinions as to the substantive benefits, terms, conditions, value, effect, advantages or disadvantages under any contract of insurance issued or offered by any insurer” to the PEO, which contract of insurance “covers or is proposed to cover” a coemployer or their employees of the PEO.

Under the new regulation, a PEO employee cannot discuss with a current or prospective customer for its services any of the terms or conditions of the insurance coverages provided through the PEO or the relative merits of such coverages compared to what the customer may already have, unless that employee has the appropriate insurance agent’s license.  In addition, if such discussions are occurring, the PEO must obtain an insurance agency license.

This new regulation in intended to level the playing field for insurance agents who are competing with PEOs to place insurance coverages for their current or prospective customers.  If a PEO wants its employees to be able to discuss the insurance coverages available through it with such customers, they must obtain an insurance agency license and the employees must obtain an insurance agent’s license; just like an independent insurance agent and agency does.

In his speech, Commissioner Hudgens encouraged anyone who has information about a possible violation of this new regulation to report it to his office once that regulation becomes effective.  He stated an intent to make a serious effort to enforce the requirements of the new regulation.  Insurance agents who have been complaining about unfair competition by PEOs in connection with the sale of insurance now have a way to stop such competition.  If they don’t take advantage of it, nothing will change.

A big thank you for this new regulation goes to the Independent Insurance Agents of Georgia and its lobbyist, John Barbour.  They were one of the leading organizations that lobbied successfully for its adoption through two administrative hearings and countless hours of meetings.


Does An Agency Have to Pay Its Employees If Its Offices Are Closed?

As I sit at home waiting for the ice to melt off the roads, I thought it would be a good idea to make my annual post on the above topic.  The fact that most of the school systems in the metro Atlanta area and North Georgia were closed yesterday and again today has created some difficult child care decisions for employees of agencies in those areas; stay home with the kids or find someone to watch them so mom or dad can go to work.

As noted in my past posts on this topic, the answer to the above question depends for the most part on whether an employee is classified as an exempt or nonexempt employee for purposes of the Fair Labor Standards Act.  I addressed how to decide whether a particular employee is a nonexempt or exempt employee in posts in 2016 about the new overtime rule that had been proposed that year, but has since been permanently stayed by the federal courts.  Even though the new rule will not take effect, it is still essential for classification as an exempt employee that the employee be paid on a salary basis in an amount that equals at least $455.00 per week.  Payment on a salary basis means the amount of an employee’s pay cannot be reduced based on the quality or quantity of the work performed by the employee during any one work week. The other requirements that must be met to be an exempt employee are explained in my earlier posts.  Nonexempt employees must be paid at least the minimum wage, but only for the time they actually perform services on behalf of the employer.

Thus, if an agency’s offices are closed for any reason and a nonexempt employee does not perform any services for the agency from home, such an employee need not be paid for the time period the offices are closed.  The same rule applies if the agency’s offices are open and a nonexempt employee does not come in or do any work from home.  This is true regardless of whether the nonexempt employee is being paid a salary or on an hourly basis by the agency. As noted above, if a nonexempt employee performs any work from home on a day when the agency’s offices are closed, they must be paid for the time they actually worked.

Whether an exempt employee’s salary may be reduced depends on whether the agency’s offices were open.  An exempt employee’s salary may only be reduced if the agency’s offices are open, but the exempt employee does not come in due to any reason other than sickness or do any work from home.  Therefore, if an exempt employee decides to stay home to take care of children who are not in school or due to severe weather decides they just can’t get to work, their next paycheck may be reduced by an amount equal to the number of full days they did not perform any services for the agency, if the agency’s offices were open for business during that time period.  However, if the exempt employee performed any work from home on a day when the agency’s offices were open, they must be paid as if they worked the whole day.

If the agency’s offices were not open for business due to inclement weather or any other reason for one or more days during a work week and an exempt employee performs any work during that workweek whether in the office or from home, they are entitled to be paid their full salary for that week.  But the agency can require such an employee to use any accrued vacation or other leave time for the time when its offices were closed.  If its offices are closed for the full work week and an exempt employee did not perform any work from home during that week, the agency can reduce the exempt employee’s pay for the number of days of that work week.

Can An Employee Who Is Sick Be Required To Go Home?

The above question was posed to me by a participant in the Free Legal Service Program that I operate for the Independent Insurance Agents of Georgia.   In light of the beginning of flu season, which according to some reports may be a bad one, it is likely that many employers will have to deal with this situation.  The short answer to the above question is Yes.  An employer actually has a legal duty to provide a safe working environment for its employees.  Requiring a sick employee to go home and thereby, avoid the possibility that they will infect other employees would be consistent with that duty.

The only potential problem with an employer requiring a sick employee to go home arises if the employer is subject to the federal employment discrimination laws, i.e., has 15 or more employees.  If such an employer has not required other sick employees to go home in the past and the sick employee in question is protected by those laws, there could be a claim of unlawful discrimination, if requiring the sick employee to go home would have an adverse effect on the employee.  Such an effect would occur if the employee’s pay was affected by being sent home.

If the sick employee who is sent home is not exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”), the employer is only required to pay the employee for the time they actually worked.  Thus, a sick non-exempt employee would only be entitled to payment for the time they were at work.  They would lose pay for the time they would have been at work if the employer had not told them to go home.  Such an employee may have an unlawful discrimination claim if they were sent home and other sick employees were not.

If the sick employee is exempt from the FLSA’s overtime pay requirements, the employer cannot reduce their pay for the time they missed at work.  Such an exempt employee must be paid for a full day’s work regardless of how long they were at work.  However, if the employer has a practice or policy of granting paid leave for employees who are sick, the employer can require that the employee make use of such paid leave for any time they miss work due to illness or injury.




Happy New Year!

It’s been a while since my last post.  I have been busy working and traveling during the last two months of 2017.  I spent a week cruising around Cuba at the end of November and a week visiting England and Scotland at the end of December.  I highly recommend visiting both places.  The people and the scenery were great in both places.  So was the food and drink.

One of my New Year’s resolutions is to do a better job of making regular posts.  My first one of this year will appear tomorrow morning.  It concerns an issue that all employers have to deal with, especially during this time of year.  Look for it at 10 a.m. tomorrow.

I hope all my readers had a safe and enjoyable Holiday Season and best wishes to them for a happy and prosperous New Year.