Small businesses in Connecticut face a crowd of predators looking for ways to defraud them, according to the state attorney general’s office. Hundreds of scam artists, for instance, specialize in offering seemingly expensive prizes to small businesses in return for buying several hundred dollars worth of marketing products, such as pens or key chains with the company’s name on them.
After paying up, the small business owner gets a camera that “turns out to be plastic junk,” says the attorney general’s office, and the promised “precious gems look like the gravel in the driveway. Vacations have so many restrictions you’d be better off planning and paying for your own.”
And that’s just the beginning of the dangers confronting small businesses: phony charities, phony invoices demanding payment, hot deals on office supplies that turn out to be shoddy.
Something can be done in this session of the legislature to protect these small businesses. Professional employer organizations – companies that do human resources chores for small businesses, like administering payroll – are asking legislators, in a relatively unusual request for a business, to regulate them more stringently.
PEOs, as they’re called, have several decades’ history of operating honestly and competently in Connecticut but, as in all businesses, there have been a few among the 700 PEOs across the nation that have failed or defrauded clients. So the industry has taken the lead in persuading 28 states to tighten up their regulations, and is asking the same thing in half a dozen more now.
Regulate Us
Among the protections PEOs seek for their customers, the customers’ employees and the state: that PEOs be required to register with the Department of Consumer Protection and file an audited financial statement every year.
PEOs are practical as well as public spirited, though. In return for more regulation, the industry gets a clear set of rules written into state law on how it should operate. In short, it’s the legal certainty that this relatively new business needs to grow without having to worry some state agency may unilaterally make drastic changes in the regulations down the road.
Everyone wins with this legislation: Workers know their benefits are sound and generous; companies know they’re offering workers the best benefits they can afford; and the state can worry less about collecting all its employment taxes, or being certain that businesses have the required workers comp, because PEOs take responsibility for it.
Not only are PEOs one of the fastest-growing professional services businesses in the country, they also help other small businesses grow. And the Connecticut economy could use a jolt: It will grow only slowly this year, says the state Department of Labor, as manufacturing shrinks, paychecks languish and young people leave the state for glitzier cities at one of the fastest rates in the nation.
Meanwhile an inflow of new workers, most of them Hispanic and many speaking only Spanish, will need help acclimating to the work force. Small businesses, too, will need help managing a more diverse work force. PEOs, experts in all aspects of managing people, can help here, too.
And PEOs help small businesses provide big-business benefits like health insurance and 401(k)s, important in a state where 400,000 residents are uninsured.
Connecticut should give PEOs the legal certitude they need to do all these things even better. n
David Fernandez is president of East Hartford-based OEM America, a professional employer organization.
