Employment. Employment, as defined in s , is subject to this chapter under the following conditions:

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1 Please Note: The Department of Revenue responses provided are intended provide clarification and direction about this new law but in no way should be construed as legally binding. Consult your own attorney for legal advice or utilize the formal Declaratory Statement process to obtain legally binding guidance Employment. Employment, as defined in s , is subject to this chapter under the following conditions: (1)(a) The employment subject to this chapter includes a service performed, including a service performed in interstate commerce, by: 1. An officer of a corporation. 2. An individual who, under the usual common-law rules applicable in determining the employer-employee relationship, is an employee. However, whenever a client, as defined in s (18), which would otherwise be designated as an employing unit has contracted with an employee leasing company to supply it with workers, those workers are considered employees of the employee leasing company. An employee leasing company may lease corporate officers of the client to the client and other workers to the client, except as prohibited by regulations of the Internal Revenue Service. Employees of an employee leasing company must be reported under the employee leasing company's tax identification number and contribution rate for work performed for the employee leasing company. a. However, except for the internal employees of an employee leasing company, each employee leasing company may make a separate one-time election to report and pay contributions under the tax identification number and contribution rate for each client of the employee leasing company. Under the client method, an employee leasing company choosing this option must assign leased employees to the client company that is leasing the employees. The client method is solely a method to report and pay unemployment contributions and whichever method is chosen, such election may not impact any other aspect of state law. An employee leasing company that elects the client method must pay contributions at the rates assigned to each client company. (I) The election applies to all of the employee leasing company's current and future clients.

2 FAPEO Question: Current as of what date? Date of election or effective date DOR Response: Current as of the date the election is made, but no later than July 1, (II) The employee leasing company must notify the Department of Revenue of its election by July 1, 2012, and such election applies to reports and contributions for the first quarter of the following calendar year. The notification must include: (A) A list of each client company and the unemployment account number or, if one has not yet been issued, the federal employment identification number, as established by the employee leasing company upon the election to file by client method; FAPEO Question: What if PEO was planning to transfer clients out of entity in advance of election? DOR Response: Election applies to all employee leasing company current and future clients at the time of the election. FAPEO Question: Will state then set up account number for client? DOR Response: We are not yet sure whether a UT Account number will be required for each client. We are still in the development phase of the implementation; this question will be answered later. FAPEO Question: Does the Department of Revenue want each client in a client SUTA reporting company to obtain a new unemployment account number or should these clients utilize the account number they had when they entered the PEO relationship? DOR Answer: Clients will utilize the UT account number they had when they entered the PEO relationship. Clients who do not have a UT account number will need to obtain one. FAPEO Question: Can an ELC make the election of the client method by July 1, 2012 but provide the required information at a later date? DOR Response: Both the election and the required information must be provided by July 1, 2012, as the law specifies. This has been extended to July 2, 2012 as July 1 st is a Sunday. FAPEO Question: Within the TIP the DOR requests gross benefit charges by employer, do you want this information by quarter or summarized into one total? DOR Response: The information is needed by quarter. FAPEO Question: When an ELC makes a client reporting election - do they have to report the history of the terminated clients and their associated employees that are in the base period of 7/1/09 to 6/30/12? DOR Response: No. If so, does that have to be reported by quarter? N/A FAPEO Question: It is our understanding that when the past three years data is reported to DOR for the election to client report, data for clients that have terminated services with the PEO during

3 that time is also required to be reported. We also understand that we can move current clients from one PEO to another before making the election. Can we also move terminated clients from the PEO where the history was incurred? DOR Response: No. In addition, it is not necessary to report the history of terminated clients. FAPEO Question: Will the state provide a resource to inquire if clients have an existing client SUI number? DOR Response: No, the legislation did not fund such a resource. If the ELC has a Power of Attorney on file for their client, they can call our toll free number ( ) to seek assistance obtaining SUI numbers. We recommend that the ELC clients provide this data to the ELC directly. (B) A list of each client company's current and previous employees and their respective social security numbers for the prior 3 state fiscal years or, if the client company has not been a client for the prior 3 state fiscal years, such portion of the prior 3 state fiscal years that the client company has been a client must be supplied; FAPEO Question: Confirm prior three years are for Year Endings 6/30/12, 6/30/11 and 6/30/10? DOR Response: Confirm. Prior three state fiscal years include years ending 06/30/2010, 06/30/2011, and 06/30/2012. (C) The wage data and benefit charges associated with each client company for the prior 3 state fiscal years or, if the client company has not been a client for the prior 3 state fiscal years, such portion of the prior 3 state fiscal years that the client company has been a client must be supplied. If the client company's employment record is chargeable with benefits for less than 8 calendar quarters while being a client of the employee leasing company, the client company must pay contributions at the initial rate of 2.7 percent; and DOR Guidance: Clients who have never had a UT Account Number will need to establish one by completing and submitting the Florida Business Tax Application (DR-1). The fastest way to obtain an unemployment tax account number is by registering online: They should indicate that they operate by leasing all employees and identify the leasing company. The clients must complete this process for themselves, a leasing company cannot do this for their clients. We will not reject a file with FEIN's if the UT Account number has not yet been issued but they need to have applied for one. A UT account number is necessary to properly administer the client method election. If the client already has a UT account number assigned, the ELC providing the FEIN is sufficient for the Department to pull the UT Account number.

4 FAPEO Question: Confirm client records chargeable with benefits for greater than or equal to 8 calendar quarters, state will calculate client rate according to the same formula used for PEO rates based on 2012 rate formula, using the full 3 year benefit ratio. DOR Response: Correction - client records chargeable with benefits for greater than or equal to 8 calendar quarters, state will calculate client rate according to the same formula used for PEO rates based on 2013 rate formula, using the full 3 year benefit ratio. FAPEO Question: Therefore, the three year criteria is to collect data, and the benefits paid based on 8 calendar quarters determines rate calc < 8 calendar quarters = NER DOR Response: Less than 8 chargeable quarters = initial rate > 8 calendar quarters =calculated rate DOR Response: Greater than 8 chargeable quarters = calculated/assigned rate = 8 calendar quarters = calculated rate DOR Response: Equal to 8 chargeable quarters = calculated/assigned rate FAPEO Question: With regard to clients that have been with a PEO less than a year, and the PEO makes the election for client reporting, how long will the client retain the 2.70%? Are they considered a new employer beginning 1/1/13 and will get 10 calendar quarters of 2.70%, or could they be rated earlier than that? DOR Response: The client will retain the initial rate of 2.7% until they have 8 chargeable quarters in their filing history with the PEO. FAPEO Question: Assume a client is with a client reporting option ELC and they have earned a rate under 2.7%. If they move to another client reporting ELC sometime in 2013, will they take that rate with them since it is their earned rate or will they start over at 2.7 since they have no history with the new ELC? DOR Response: If they move to an unrelated ELC, they will have no history with the new ELC and therefore will be at the initial rate of 2.7%. If they move to a related ELC, they will take their history and their rate will not change until the following annual rate calculation occurs. FAPEO Question: Referencing a client that is with a PEO that has made a client reporting election - When will they receive a rate based on their client history? DOR Response: When there are 8 chargeable quarters of data available under the ELC. FAPEO Question: For example, if a client is with the ELC less than a year - don't they receive a 2.70 rate? DOR Response: Yes, the client would have the Initial Tax Rate. FAPEO Question: If they have been with the ELC more than a year but less than the three year period of 7/1/09 to 6/30/12, what rate do they receive? DOR Response: The Initial Tax Rate of 2.7%. FAPEO Question: Do they receive a calculated rate once they reach the 3 year history with the ELC? DOR Response: The ELC client will have an earned rate after there are 8 chargeable quarters of history with the ELC. If the ELC has filed for the client beginning with the 3rd quarter 2010 (quarter ending 09/30/2010), through the 4th quarter 2012 (quarter ending 12/31/2012), the client should receive an earned rate for 2013.

5 FAPEO Question: A client with is with a client level reporting PEO, had more than 12 quarters of data and received a rate. According to the call wage/benefit charges follows the client when they go from one client level reporting PEO to another unrelated client level reporting PEO (from one competitor PEO to another.) According to F.S (1)(2) a VI, the client retains the experience rating. How does the PEO who acquired the client obtain the client's rate? DOR Response: The new & unrelated ELC will not acquire the client's past rate history. The client will begin at the Initial Rate (.0270) with the new ELC until such time as an earned rate can be established. The department will retain the experience information from the previous ELC. So - if the client subsequently leaves the new ELC, decides to file on their own, and they haven't broken chargeability, the experience from both ELC's will be used to calculate the client's own tax rate. FAPEO Question: How can we get electronic copies of our benefits paid reports for the past 8 quarters? DOR Response: The Department does not generate electronic copies of benefits paid documents. FAPEO Question: As a follow-up, Can you tell me if this information is available at the Department of Economic Opportunity? Would you know who the best person is to ask to find out if there is someone over there who can provide these reports? Some PEOs track as they go, others need to obtain this information so they can report it. DOR Response: After further research the Department has determined it is able to produce this information however it will require time and resources. Currently there are no resources dedicated to this effort. Only if an ELC is unable to produce this information on their own should they contact the Department. The ELC can send an request to Margaret Gowen at GowenM@dor.state.fl.us and provide the ELC unemployment tax account number and a list of the quarters for which they are requesting the benefit charges. We will attempt to assist the ELC with the request, as resources permit. FAPEO Question: While we understand that a UT number will be needed to properly administer the client SUTA option and that a timely request for a number if a client company does not have one is appropriate. The law, however, does not say that to meet the July 1 deadline they will need to have applied for a UT number. The law says that in order to meet the deadline the notification must include a UT number or FEIN if a UT has not yet been issued. PEOs are indicating that they are having trouble getting all the information the notification requires prior to the July 1 deadline. Adding this additional requirement that is not required by the new law further complicates this. In addition, DOR s TIP states that you only need to file a UT number or a FEIN by July 2. The TIP does indicate that you will need a UT number and must obtain one but again does not tie that to the deadline. DOR Response: The statutes do not provide a time frame for applying for an unemployment tax (UT) account number however the Department will not be able to administer the client method without one. Client companies making the client method election that do not have a UT number should have applied for one when they make the election. Unemployment tax account numbers can be applied for online and are usually provided within 3 days. (D) The wage data and benefit charges for the prior 3 state fiscal years that cannot be associated with a client company must be reported and charged to the employee leasing company.

6 FAPEO Question: Unassigned benefit charges for the prior three state fiscal years that cannot be associated with a client company, must reported and charged to the PEO? DOR Response: Benefit charges not attributable to a current client will remain with the PEO. More information will be provided on this issue as implementation progresses. FAPEO Question: How to report and how charged? DOR Response: This process will be developed as implementation progresses. FAPEO Question: Is this socialized costs for clients out of business? DOR Response: The Department will administer this provision as the law requires. Any wage data and benefit charges that cannot be associated with a client company must be reported and charged to the PEO. FAPEO Question: Who determines? Is it an internal reconciliation, where the PEO would be unable to prove an remaining balance? DOR Response: The Department of Revenue makes the final determination, which is appealable. FAPEO Question: Will the employee information be required by quarter or can we combine the Q Q information? What file format will this be required in? DOR Response: The information is required by quarter; here is the link to the import specifications: See the document labeled Specifications for importing the ELC - client method reports. FAPEO Question: What if a client has multiple contract dates that overlap the "look back period"? The client terminated, there was a pause and then the client reinstated. Do we give the latest and only provide wages/benefit charges from the latest contract period(s)? Do we provide all wages regardless of contract dates? DOR Response: We need the data for all quarters for which the ELC reported the client. If the ELC did not report the client for a range of quarters somewhere in the period 7/1/2009 to 6/30/2012 because the client moved to an unrelated ELC, or reported on their own, then the ELC will not report client for those specific quarters. If, however, the client moved between related ELC's during the 12 quarters, the current ELC should report the wages/benefit charges for all 12 quarters. (The data should have been transferred out and back with the client between the related ELC's) (III) Subsequent to choosing the client method, the employee leasing company may not change its reporting method. (IV) The employee leasing company shall file a Florida Department of Revenue Employer's Quarterly Report for each client company by approved electronic means, and pay all contributions by approved electronic means. FAPEO Question: Will concessions be allowed if PEO is in process but not yet able to report client level detail in electronic format by April 30, 2012?

7 DOR Response: Assuming you are referring to the Employers Quarterly Report (UCT-6) for the Quarter ending March 31, 2013, no; currently, any employer with ten or more employees must report and pay electronically. FAPEO Question: Regarding a question about bulk payments for ACH credit and the answer was that each account had to have a separate payment. What about ACH debit? Will there be a bulk file for this type of payment? DOR Response: No, there must be an individual payment for each client report for ACH debit as well. (V) For the purposes of calculating experience rates when the client method is chosen, each client's own benefit charges and wage data experience while with the employee leasing company determines each client's tax rate where the client has been a client of the employee leasing company for at least 8 calendar quarters before the election. The client company shall continue to report the nonleased employees under its tax rate. FAPEO Question: Confirm this date is 6/30/2010 DOR Response: The client must have 8 chargeable quarters with the PEO to earn a rate (different from the initial rate). FAPEO Question: Confirm "non-leased employees" refers to employees not covered under PEO arrangement? And rate is same calculated rate as will be used by PEO for covered employees? DOR Response: Non-leased employees are the employees not covered under the PEO arrangement; the calculated rate for the non-leased employees will be based on wage and benefit data separate from the history of the leased employees of the PEO, therefore, the rate will not be the same. (VI) The election is binding on each client of the employee leasing company, for as long as a written agreement is in effect between the client and the employee leasing company pursuant to s (3)(a). If the relationship between the employee leasing company and the client terminates, the client retains the wage and benefit history experienced under the employee leasing company. FAPEO Question: If PEO elects client reporting, will rate notices be sent to PEO or client? DOR Response: ELC/PEO FAPEO Question: If PEO elects client reporting, will benefit charges be sent to the PEO or client? DOR Response: ELC/PEO FAPEO Question: In other states where the PEO is considered the employer for UI purposes with client reporting options such as Illinois, Georgia and Colorado, non-profits are permitted to retain their reimbursable status. Will you reconsider your position on the answer you gave on the call?

8 May non-profits within PEOs which are reporting on a client basis continue to choose the reimbursable option? DOR Response: No. Our position is based on current law found in Chapter 443, Florida Statutes. (VII) Notwithstanding which election method the employee 816 leasing company chooses, the applicable client company is an employing unit for purposes of s The employee leasing company or any of its officers or agents are liable for any violation of s engaged in by such persons or entities. The applicable client company or any of its officers or agents are liable for any violation of s engaged in by such persons or entities. The employee leasing company or its applicable client company are not liable for any violation of s engaged in by the other party or by the other party's officers or agents. (VIII) If an employee leasing company fails to select the client method of reporting not later than July 1, 2012, the entity is required to report under the employee leasing company's tax identification number and contribution rate. (IX) After an employee leasing company is licensed pursuant to part XI of chapter 468, each newly licensed entity has 30 days after the date the license is granted to notify the tax collection service provider in writing of their selection of the client method. A newly licensed employee leasing company that fails to timely select reporting pursuant to the client method of reporting must report under the employee leasing company's tax identification number and contribution rate. (X) Irrespective of the election, each transfer of trade or business, including workforce, or a portion thereof, between employee leasing companies is subject to the provisions of s (3)(g) if, at the time of the transfer, there is common ownership, management, or control between the entities. FAPEO Question We want to confirm that despite our election to client report under one (1) PEO entity, provided we comply with s (g)(3) and F.AC. 60BB-2.031(b), this new regulation and the existing statutory and administrative framework permit us to transfer part of the workforce from this designated entity to another commonly controlled PEO entity that will remain PEO reporting. As an example: Company has PEO 1 and PEO 2. PEO 1 has 1000 client companies. On or before July 1, we designate PEO 1 as a client reporting entity. PEO 2 will remain PEO reporting. Prior to January 1, 2013, we transfer 500 of the 1000 clients from PEO 1 to PEO 2. As of January 1, 2013 PEO 1 will be client reporting but will have only those 500 remaining client entities. We are permitted to do this, correct? DOR Response: Yes, the law permits the transfer of workforce between related entities however, pursuant to (3)(g) F.S., the experience must also be transferred. At the time the election is

9 made the required information must be provided for all current clients of the PEO/ELC, regardless if a transfer of workforce is planned prior to January 1, FAPEO Question: Prior to making the election to be a Client Reporting entity, can PEO 1 transfer clients over to PEO 2 (related entity)? For example PEO 1 has 500 clients. Can they transfer 300 clients over to PEO 2 and then make the decision for PEO 1 to be client reporting. Also, what rate would the transferred clients have in PEO 2. Would they have the rate of PEO 2 or would the PEO 2 rate changed based on the history of the transferred clients? (A similar question came up on the call, she s asking if she can transfer the clients to another company, provided she comply with s (g)(3) and F.AC. 60BB-2.031(b), BEFORE making the election and providing all of the client details.) DOR Response: ELC/PEO 1 can transfer clients over to ELC/PEO 2 any time they wish to, as long as they follow current Florida law and rules. The rate will depend on several things: Is ELC/PEO 2 electing the Client Method? If so, the clients will have the rate earned under ELC/PEO 1. If not, then the clients would have the combined rate of ELC/PEO 2 and the amount of history transferred over from ELC/PEO. FAPEO Question: If PEO 2 decides to be Client Reporting and PEO 1 decides to stay PEO reporting, can we move clients from PEO 1 to PEO 2 and make them client reporting? DOR Response: Yes FAPEO Question: I have a PEO that currently does not have any leased employees, only corporate employees. I understand corporate employees remain under the PEO's UT acct., makes sense. I also understand that I can move clients into this client reporting PEO and that the election to do so, along with quarterly wages and benefit charges, must be reported by July 2 through the Department of Revenue website for those I might chose to move, correct? DOR Response: The election of the ELC/PEO to report and pay using the Client Method must be accomplished on or before July 2, Current client information must also be reported by July 2, Please see the TIP for detailed information. FAPEO Question: I understand that once the ELC/PEO has elected for client reporting method it cannot change back, but can a client be moved from client reporting back to ELC/PEO reporting at any time, including after July 2? Of course provided their history moves with them. Also, can a client who is ELC/PEO reporting be moved into the client reporting PEO after the election is made (after July 2)? DOR Response: Yes. Yes. FAPEO Question: If I register an ELC/PEO as client reporting with no current clients can I move clients in next year? DOR Response: Yes. FAPEO Question: For a company who has never transitioned clients from one company to another pursuant to (3)(g) F.S., what is the proper process for those transfers. What do they need to report to the DOR to ensure they are in compliance? DOR Response: The successor (the entity that acquired the workers) would need to submit a DR-1 within 90 days of the date of the transfer.

10 FAPEO Question: I am reading that to move a client to another PEO we have to complete a DR-1, but nowhere on this form does it ask for employee, wage and benefit charge information. How does this information get moved with the client? What exactly must be filed when a PEO moves a client from one entity to another? Evidently some PEOs know but others are just figuring this out and want to make sure they do it in compliance. DOR Response: They must file a DR-1 and an UCS-1S within 90 days of acquisition, if there is no common ownership. To resolve or correct any issues with the ELC elections, the leasing company should contact the Experience Rating Group at: Experience_Rating@dor.state.fl.us FAPEO Question: If employee 1234 works for client A for multi quarters under a ELC #1 owned by Bob, that files by client. Then at some point employee 1234 gets fired and or quits client A and goes to work for client Z that is a file by ELC #2 owned by Bob. DOR Response: Is this considered SUTA dumping? FAPEO Question: Based on the information provided, this does not appear to be SUTA dumping. And or impacts the rate transfer history? DOR Response: Individual employment does not impact rate transfer. FAPEO Question: If the PEO client process some of their employee's payroll and the PEO processes some payroll, will the PEO and client each be allowed to file a return? DOR Response: Yes, since both the client and the ELC will have different account numbers, both will be able to file returns for any quarter in question.