N.C. Court Gives Unlicensed Employer Organization Temporary Reprieve

The Superior Court of Wake County, N.C., extended and continued a temporary stay for Castleton Group Inc., a professional employer organization based in Raleigh to remain in operation for an additional 60 days.

North Carolina Insurance Department officials denied an ongoing licensure request of the group last month “due to its hazardous financial condition.”

The Department, in dispute with Castleton since mid-2005, has repeatedly denied the PEO’s application for licensure because its financials have dipped to the point of insolvency, the hearing officer in the case ruled.

Superior Court Judge Donald W. Stephens is giving the company extra time to “protect the clients and worksite employees and provide a mechanism for an orderly transition of existing clients.”

The court order requires Castleton to report to the court on or before Jan. 11 with a progress update including a potential sell-off plan or transfer of its health plan or workers’ comp benefits.

Department officials say Castleton’s has a list of 89 client companies, including approximately 3,000 employees.

Professional employer organizations help manage employee related matters such as health benefits, workers’ compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. Clients contract with a PEO to assume these responsibilities and provide expertise in human resources management, allowing them to concentrate on the operational and revenue-producing side of its operations. A PEO delivers these services by establishing and maintaining an employer relationship with the employees at the client’s worksite and by contractually assuming certain employer rights, responsibilities and risk.

Under a law passed in 2005, the Department of Insurance is the licensing body for PEOs.

Castleton Group has never been licensed under the 2005 law; however, that law allowed Castleton Group to keep operating pending the resolution of the licensing dispute. An applicant for an original or renewal PEO license must demonstrate a net worth of at least $50,000 according to language contained in the law.

The decision from the hearing officer in this case determined that the Castleton Group’s liabilities exceed its assets by some $6 million.
In addition, evidence showed that the company’s former chief financial officer admitted to filing false federal payroll tax reports, resulting in an estimated $8 million in unpaid federal payroll taxes.

Sources: The Superior Court of Wake County, N.C.
North Carolina Department of Insurance

Topics Commercial Lines Business Insurance North Carolina