Q&A: Company using PEO is still liable for legal compliance
Question: We’re thinking about using a professional employer organization (PEO) to handle all of our payroll, hiring, and HR functions. Any legal concerns we should be aware of?
Answer: Yes. Use of a PEO can save you time and allow you to stay focused on your business functions, but be sure you don’t lose sight of the company’s legal obligations altogether. Federal and state employment laws place responsibility on employers to ensure legal compliance. Even if you contract with a third party who agrees to indemnify your company for any legal violations, the court can still hold your company and its officers liable and require them to pay for damages. One CEO in Ohio recently found this out the hard way when the court ruled that he was jointly and severally liable with his company and the PEO for failing to pay employees overtime as required by federal law. The CEO’s defense that he hired the PEO and then “didn’t think anything else about it” was seen by the court as an admission of negligence on his part. The court awarded double damages as a penalty, with a total award of half a million dollars (Parks v. Central USA Wireless LLC, SD Ohio, Sept. 2019).
As a Vigilant member, you have 24/7 access to our members-only website with numerous resources explaining the company’s employment law obligations. For example, information on overtime requirements can be found in our Legal Guides, such as “At a Glance: Overtime” (5180), and “Daily Overtime in Oregon and California” (4063). You also have access to your Vigilant employment attorney who can assist you with your human resources and employment law questions.