Mass. passes PEO bond requirements

MASSACHUSETTS — The Department of Labor Standards now requires a $250,000 surety bond for any professional employer organization, or PEO, that conducts business in the state.

State lawmakers passed HB 4723 in 2018, joining over 40 other states in having similar PEO licensing requirements.

The state law defines a PEO as any person engaged in the business of providing professional employer services and is subject to registration and regulation detailed in M.G.L. c. 149, §§ 192 through 203.

Each PEO or collectively each PEO group must maintain positive working capital and submit proof to the Department of Labor Standards at the time of registration and each annual renewal, according to the law. Proof of the $250,000 surety bond must also be submitted.

A PEO or PEO group without positive working capital must “provide a bond, irrevocable letter of credit or securities with a minimum market value equaling the deficiency plus $250,000,” according the law.

A surety bond covers the consumer by forming a three-party agreement between the Principal, the Obligee and the surety company that is backing the bond. In this case, the PEO or PEO group is the Principal and the State of Massachusetts is the Obligee, which is the entity requiring the bond. This bond type secures payment by the PEO of all taxes, wages, benefits or other entitlement due to or with respect to covered employees if the PEO does not make such payments when due, according to section 196 of the law.

For more information about Massachusetts PEO regulations, contact the Department at Labor services 617-626-6975 or visit their website.

Alpha Surety & Insurance Brokerage underwrites more PEO surety bonds than anyone else nationwide. We will be happy to answer any questions regarding a Massachusetts PEO surety bond or any surety bond questions in general. 

You can call 800-901-3099 or send an email through the contact us page. We are here to answer your questions and help you fully understand surety bonds regardless of whether you choose to bond with us.

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