South Carolina Code of Laws
Chapter 68 - Regulation Of Professional Employer Organizations
Section 40-68-120. Licensee's obtaining of workers' compensation coverage; licensee-sponsored and client-sponsored benefit plans for assigned employees; unemployment taxes; notification of start and end of relationship with client company.

(A) A licensee may elect to obtain workers' compensation insurance coverage in the same manner as any other employer as provided for in this subsection:
(1) An insurer issuing the policy must be licensed in this State to write such policies.
(2) An insurer issuing a policy of workers' compensation insurance to a licensee may not plead as a defense:
(a) that the client company is not subject to Title 42. The insurer is estopped to deny coverage;
(b) lack of an employment relationship between a person engaged in an employment as defined in Title 42 and the client company;
(c) breach of contract by the licensee or client company. The insurer is not entitled to plead as a defense to an employee's claim for benefits any defects in the performance of a contract between the licensee and client company.
(3) No policy of insurance against liability arising under Title 42 may be issued to a licensee unless the policy contains the agreement of the insurer that the insurer will promptly pay to the persons entitled to them all benefits conferred by Title 42 and all installments of the compensation that may be awarded or agreed upon and that the obligation is not affected by default of the licensee or client company or by default in giving notice required by the policy or otherwise.
(4) A policy of insurance issued to a licensee is, and must be construed as, a direct promise by the insurer to the person entitled to compensation enforceable in his name.
(5) The insurer agrees that:
(a) notice to or acknowledgment of the occurrence of an injury on the part of the client company is notice to or knowledge on the part of the licensee and its workers' compensation insurer;
(b) for purposes of Title 42, the jurisdiction of the client company is the jurisdiction of the licensee and its workers' compensation insurer;
(c) the licensee and its workers' compensation insurer, in all things, are bound by and subject to the awards, judgments, or decrees rendered against them under the provisions of Title 42; and
(d) insolvency, bankruptcy, or discharge in bankruptcy of the licensee or client company does not relieve the workers' compensation insurer from the payment of compensation for disability or death sustained by an employee during the life of a workers' compensation insurance policy issued to the licensee.
(6) No agreement by an employee to pay a portion of a premium paid by the licensee or client company to an insurer or to contribute to a benefit fund or department maintained by a licensee or client company for the purpose of providing insurance under Title 42 is valid, and any licensee or client company who makes a deduction for the purpose from the pay of an employee entitled to benefits under Title 42 is guilty of a misdemeanor and, upon conviction, must be fined not more than one thousand dollars plus reimbursement to the employee of the deductions.
(7) When a person referred to as a licensee undertakes to provide assigned employees to a client company, the licensee is liable to pay a worker employed by the client company compensation under Title 42 which the licensee would have been liable to pay if the worker had been immediately employed by the licensee. When the licensee is liable to pay compensation under this section, it is entitled to indemnity from a client company who would have been liable to pay compensation to the worker independently of this section and have a cause of action for indemnity. This section must be construed to require that a licensee's workers' compensation carrier is liable to pay compensation to the client company's entire work force with the licensee and carrier's right to indemnity from the client company.
(B) If workers' compensation coverage is obtained, that insurance must comply with the applicable provisions of the insurance laws of this State.
(C) A licensee is entitled to the same rights to obtain all types of insurance coverage, including endorsements obtained by other business entities doing business in this State.
(D) For companies who have obtained workers' compensation insurance coverage in the residual (assigned risk) market, the first three years that a client company has a contract with a licensee, the licensee shall pay workers' compensation insurance premiums based on the experience modification rate of the client company. The South Carolina Department of Insurance shall adopt regulations to implement this subsection. This subsection applies only to the residual (assigned risk) market.
(E) The licensee must categorize leased employees according to their classification within a client company.
(F) A licensee and client company both are deemed an employer and may sponsor and maintain benefit plans for assigned workers. An employee health benefit plan sponsored by a licensee for the benefit of assigned employees must be an insured health benefit plan offered by an insurer licensed under Title 38. The employee health benefit plans provided by a licensed insurance provider, including the use of third party administrators, must comply with the applicable provisions of the insurance laws of this State and other federal law, including The Employment Retirement Income Security Act (ERISA), 29 USC Section 101, et seq. No licensee may maintain, sponsor, offer, endorse, or otherwise proffer self-insured, self-funded, or other plans for health benefits, that are not licensed with the Department of Insurance.
(G) Notwithstanding subsection (F), a client company may include assigned employees in a benefit plan sponsored and maintained solely by the client company for its own employees, as long as the benefit plan complies with Title 38 and federal law including ERISA.
(H) A professional employer organization or professional employer organization group is responsible for the payment of unemployment taxes pursuant to law.
(I) Licensees, within thirty days, shall notify the South Carolina Department of Employment and Workforce and the department of the start and termination of the licensee's relationship with a client company.
HISTORY: 1993 Act No. 169, Section 1; 2005 Act No. 112, Section 1.

Code Commissioner's Note
Pursuant to the directive to the Code Commissioner in 2010 Act No. 146, Section 122, "Department of Employment and Workforce" was substituted for all references to "Employment Security Commission", and "Executive Director of the Department of Employment and Workforce" or "executive director" was substituted for all references to the "Chairman of the Employment Security Commission" or "chairman" that refer to the Chairman of the Employment Security Commission, as appropriate.