Hawaii SB 1062 requires the PEO to post a $250,000
surety bond in connection with a professional employment agreement with a client company in the State. The bond must be a “performance or financial guaranty type bond.” Only a single bond may be posted to fulfill this requirement. The bond must cover all of the PEO’s branch locations. The bond indemnifies a client company who suffered loss as a result the PEO’s nonperformance. Surety companies could cancel the bond with 30 days written notice. The new law adds a six-month tail after the bond was canceled during which the bond is liable for the PEO’s debts incurred while the bond was in effect. Originally, the bill would have required PEOs to maintain a positive working capital of not less than $100,000. If the PEO did not have a positive working capital, it could have posted a bond, in an amount that would make up the deficiency. The bill also originally contained contains provisions concerning employee coverage under insurance policies and bonds in connection with an employer’s participation in a PEO, which were based on model legislation introduced and enacted in other states in the past few sessions. The bill was amended in the Senate prior to passage to require a $1 million bond and to remove the coverage provisions. The bond amount was lowered to $250,000 in conference negotiations between the House and Senate prior to the bill’s final passage. The new law became effective upon enactment.