Application and Maintenance Procedures
ESAC reserves on an ongoing basis the authority to request additional information or the release of data for verification procedures to ensure that it has current information regarding the PEO and each Responsible Person. Additionally, each Applicant and Accredited PEO shall authorize ESAC to initiate ongoing monitoring by an independent background investigation firm to verify that there are no outstanding tax liabilities, levies or liens filed against the PEO and to verify business creditworthiness and any litigation proceedings of record.
Information provided to ESAC by Applicant PEOs shall be held in strict confidence. Per the Confidentiality section above, only ESAC staff, surety, advisors and Independent Directors have access to confidential PEO information and vote on matters involving the initial accreditation unless the PEO requests a review of the matter by the entire Board. An Applicant shall be required as part of its application process to agree on behalf of itself, its Responsible Persons, directors, officers, employees and owners that any person objecting to approval of the application or submitting documentation in support of rejection shall be entitled to absolute immunity from liability for defamation solely with respect to making such objection or providing any documentation to ESAC.
- Application Agreement. Applicants shall submit an executed PEO application agreement, Application Fee and an online application.
- Responsible Persons. Applicants shall submit the names of all its Responsible Persons and a Responsible Persons application for each individual. Each Responsible Person shall sign a statement authorizing ESAC staff and/or service providers to conduct a background investigation to confirm the accuracy of information provided in the Responsible Person application. A Responsible Person may submit evidence of prior approval as a controlling person or similar certification that has been issued within the past 5 years by a federal or state agency that ESAC determines has conducted an equal or greater background investigation than ESAC otherwise would require. A Responsible Person who has been evaluated by ESAC within the previous 6 months and currently is in good standing, is not required to be reevaluated if that person changes affiliation or employment from one PEO to another.
- PEO Operations. As part of the application, Applicants shall provide documentation and general information on the PEO's business location and contacts, business history, corporate structure, Responsible Persons, states of operation, reportable practices, property/casualty insurance, sales/client service materials, IRS 940/941 and client/worksite employee information, state licensing, and benefit and workers’ compensation plans or policies.
- Audited Financials. Applicants shall submit audited financial statements for all PEOs for the immediately preceding fiscal year accompanied by a disclosure of the methods and sources used to estimate the ultimate liability for all Loss Sensitive or Self Insured insurance plans or policies. If applicable, a list of Loss Sensitive or Self Insured Plan Reserves identifying established reserves and reserve methodologies shall accompany the audited financial statements. Any additional documentation as may be required to comply with ESAC's Financial Standard regarding "Financial Reserves" must be submitted.
- Internal Financials. Applicants shall submit unaudited financial statements for all PEOs for the year-to-date through the immediately preceding quarter. Such financial statements shall present fairly the financial position and results of the PEO's operations in accordance with generally accepted accounting principles.
- Start-Up Applicants. For Applicants that have not been operating long enough to have audited financial statements covering at least 12 months of PEO operations or have yet to achieve ongoing profitability, the application shall be accompanied by a business plan and:
- The Applicant's most recent audited financial statements, if they exist. If not, financial statements that reflect capitalization sufficient to meet Financial Standards regarding "Adjusted Net Worth Requirement," "Positive Working Capital Requirement" and "Imminent Material Risk Provision" which in no case shall be more than 60 days prior to the date of the signed Application Agreement. The balance sheet must be in a format that ESAC can cost-effectively validate the balances of all key accounts. For PEOs with workers' compensation or group employee welfare plans or policies that are not Fully Insured and Fully Funded, such financial statements shall include schedules and related footnotes documenting appropriate adjustments to the financial reserves for these plans or policies. Related insurance company or third-party administrator claim reports or loss runs documenting the basis for such calculations also shall be provided, if requested by ESAC; and
- A projection of monthly cash flow, net income and capital contributions through six months of profitable operations. The projections shall be based upon conservative assumptions of income and expenses as compared to industry norms and the Applicant’s prior operating results, if applicable. These monthly projections, monthly reporting of operating results and monthly documentation of reserve adjustments will continue until the PEO has become accredited and demonstrates consistent monthly profitability and provides ESAC with an audited financial statement covering at least 12 calendar months of PEO operations that demonstrate compliance with Financial Standards regarding "Adjusted Net Worth Requirement," "Positive Working Capital Requirement" and "Imminent Material Risk Provision."
The financial statements, financial projections and business plan shall demonstrate to ESAC's satisfaction that the Applicant will have sufficient capitalization at all times from the date of accreditation until the audited financial statements referenced in (b), above, can be provided. If the financial statements provided in support of the application do not demonstrate sufficient capitalization, the Applicant must provide a guaranty of subsequent capitalization acceptable to ESAC in an amount sufficient to demonstrate the Applicant's ability to remain in compliance with ESAC's financial standards on an ongoing basis until the audited financial statements referenced in (b), above, can be provided. The Applicant also shall provide such additional information as may be requested by ESAC to evaluate the reasonableness of the Applicant's financial projections and business plan.
- CPA Verification of Tax/Benefit Payments. An Applicant shall submit for all PEOs, in a form prescribed by ESAC, the confirmation of an independent Certified Public Accountant verifying the appropriate and timely payment of withholding and employment taxes, worksite employee and employer contributions to any employee benefit plan as defined in Section 3(3) of ERISA that is sponsored or co-sponsored by the PEO, and workers' compensation and group life and health insurance premiums for policies or plans that are sponsored or co-sponsored by the PEO. Such confirmation may be in the form of an Examination Level Attestation and/or Agreed-Upon Procedures as specified in Exhibit E.
- Responsible Persons Certification. Appropriate Responsible Persons shall attest to the accuracy of all information submitted in the application in a form prescribed by ESAC.
- Application Consideration. After staff, professional advisor and surety review of the Applicant’s submitted application materials, the complete application shall be reviewed by ESAC’s Accreditation Committee, comprised of ESAC Independent Directors. If the Accreditation Committee recommends acceptance of the Applicant, staff shall submit the Applicant’s business name, address, and Responsible Persons to all members of the Board and request any relevant information regarding the Applicant’s market practices or Responsible Persons that the Independent Directors should consider in their final vote. Following consideration of the application, including any information provided by the Board, the Independent Directors shall vote upon such application, with an affirmative vote of the majority of Independent Directors required to accept an application for accreditation.
In the event the Independent Directors do not accept an application for accreditation, the Applicant may (1) withdraw its application, (2) undertake to cure any deficiencies noted as permitted by the Standards and Procedures, or (3) request a review of the Applicant’s application by the Board of Directors, which request must be received by ESAC within thirty (30) days of the date on which notice of the nonacceptance recommendation was sent to the Applicant. If the Applicant timely requests a review by the Board:
- The Applicant may request the recusal of any Director who the Applicant believes has a conflict of interest. Such requests for recusal shall be considered by the Board in its sole discretion. Additionally, any director who is affiliated with an Applicant or who provides services to an Applicant or whose participation in the application consideration would constitute a conflict of interest, shall recuse herself or himself from consideration of such matter and shall not be in attendance when the Board considers such matter or otherwise have access to any non-public information regarding the Applicant which ESAC may have in its possession. Any Director who owns less than one (1) percent of the stock of a publicly traded PEO shall not be considered to be “affiliated” with such PEO for these purposes. Members of the Board who are disqualified from participation by the Board or who voluntarily recuse from participation shall be referred to as “Excluded Board Members.”
- Prior to the review of the application by the Board of Directors, the application forms and information submitted by the Applicant will be made available to all Board members other than Excluded Board Members unless ESAC receives a written withdrawal of the Applicant’s application within ten (10) days of the date on which notice of the review is sent to the Applicant in which case the Applicant’s application shall be deemed withdrawn. The Board, other than Excluded Board Members, shall consider all forms and information submitted as part of the Applicant’s application.
- Any Board member, including any Excluded Board Members, may object to the approval of the Applicant, in which case the Board may grant such objecting Board member a period of time within which to submit documentation that such Board member believes supports rejection of the application. Staff shall provide a copy of such documentation to the Applicant, who shall be granted a reasonable period of time within which to submit a written rebuttal of such documentation, which rebuttal shall be provided to all Board members.
- Following consideration of the application, including any objections and documentation in support thereof and any rebuttal submitted, the Board of Directors shall vote upon such application. An affirmative vote of the majority of the Board of Directors shall be required to accept an application for accreditation. Staff shall notify the Applicant of the Board of Directors’ decision.
- Notification Requirements. An Accredited PEO shall self-report in writing to ESAC full disclosure of the following events, with failure to self-report serving as grounds for disciplinary action. Notifications shall be emailed to firstname.lastname@example.org:
- Within 10 business days of discovery by any Responsible Person, failure by the Accredited PEO or any of its Responsible Persons to meet any ethical, financial or operational standard or any requirement of participation in the Client Assurance Program (Exhibit A).
- Within 10 business days if the Accredited PEO or any of its Responsible Persons, are indicted for or convicted of any criminal activity or wrongdoing, or receive any disciplinary action, suspension or revocation of any business license, or file for any sort of bankruptcy protection.
- Within 10 business days of learning of any Accredited PEO or Responsible Person that is charged, arrested, indicted or convicted of any criminal activity, wrongdoing, disciplinary action, suspension or revocation of any business license or that files for any sort of bankruptcy protection.
- Within 10 business days of receipt of any PEO-specific state or federal license/registration/certification addition, notice of restriction, non-compliance, suspension or revocation.
- Within 10 business days of the effective date of any transaction in which the Accredited PEO, Affiliate or Responsible Person: (1) engages in the Acquisition of another PEO (including assets-only transactions); (2) becomes an Affiliate with another PEO; or (3) is acquired by another PEO or an Affiliate or Responsible Person of another PEO.
- Within 30 business days of any change in Responsible Persons.
- Within 30 business days of any change in ownership of “voting stock” (per ESAC's Responsible Person definition) of 10% or more or any series of changes occurring within 180 days that total a change of 10% or more.
- PEO Operations Updates. An Accredited PEO shall submit each quarter updated documentation and general information on the PEO’s business location and contacts, business history, corporate structure, Responsible Persons, states of operation, reportable practices, property/casualty insurance, sales/client service materials, IRS 940/941 and client/worksite employee information, state licensing, and benefit and workers’ compensation plans or policies.
- Audited Financials. An Accredited PEO shall submit audited financial statements for all PEOs within 120 days of the end of its fiscal year accompanied by a Responsible Person certification and disclosing the methods and sources used to estimate the ultimate liability for all Loss Sensitive or Self Insured insurance plans or policies, including a list of all such plans. Any additional documentation as may be required to comply with ESAC's Financial Standard regarding "Financial Reserves" must be submitted along with the corresponding audited financial statements for each fiscal year.
- Quarterly Internal Financials. An Accredited PEO shall submit internal quarterly financial statements for all PEOs within 45 days of the end of each calendar quarter with the exception of the 4th calendar quarter which shall be submitted within 60 days after December 31. Such financial statements shall present fairly the financial position and results of the PEO’s operations in accordance with generally accepted accounting principles and shall be accompanied by a Responsible Person certification. An Accredited PEO may be required to submit schedules documenting the calculation of financial reserves for any Loss Sensitive or Self Insured workers’ compensation or group employee welfare benefit plans or policies.
- Subsequent Events. If an Accredited PEO's annual or quarterly financial report fails to meet the Adjusted Net Worth or Working Capital as required by Financial Standards regarding "Adjusted Net Worth Requirement," "Positive Working Capital Requirement," and "Imminent Material Risk Provision," the deficiencies shall be deemed to be cured if, at the time the annual or quarterly reports are due, the Accredited PEO files additional information evidencing action subsequent to the reporting period which shows that the PEO’s current financial status is in compliance.
In the case of audited annual financial statements, the information must take the form of a subsequent events note to the audit report issued by the independent Certified Public Accountant.
In the case of quarterly reports, the Accredited PEO may (a) submit a guaranty, surety bond, or letter of credit as provided by ESAC's Financial Standard regarding "Alternative Compliance Method for Adjusted Net Worth and Positive Working Capital Requirement," which shows that the PEO has access to sufficient funds to offset any financial deficiencies that existed in the quarterly statements, or (b) submit financial statements for the PEO reflecting the remediation accompanied by a narrative signed by a Responsible Person outlining the reasons for the deficiencies and setting forth the PEO’s plan to prevent such deficiencies in the future.
- Start-up Accredited PEO Financials. An Accredited PEO with insufficient operating history to have provided audited financial statements for at least 12 calendar months of operation shall submit along with its monthly internal financial statements an updated monthly projection by month of profit-loss until PEO achieves ongoing profitability. Such projections must be based upon conservative assumptions of income and expenses in the judgment of ESAC as compared to industry norms and the PEO's prior operating results, if applicable. The Accredited PEO also shall provide such additional information as may be requested by ESAC to evaluate the reasonableness of the PEO’s financial projections and business plan.
- CPA Verification of Tax/Benefit Payments. An Accredited PEO shall submit for all PEOs, in a form prescribed by ESAC, the confirmation of an independent Certified Public Accountant verifying the appropriate and timely payment of withholding and employment taxes, worksite employee and employer contributions to any employee benefit plan as defined in Section 3(3) of ERISA that is sponsored or co-sponsored by the PEO, and workers' compensation and group life and health insurance premiums for policies or plans that are sponsored or co-sponsored by the PEO. Such confirmation may be in the form of an Examination Level Attestation and/or Agreed-Upon Procedures as specified in Exhibit E.
- Workers' Compensation Verification. Each Accredited PEO shall provide upon any change of coverage, a Certificate of Insurance from the PEO's insurance provider for each workers' compensation policy, or alternative coverage if permitted by law, and for each insurance policy held to comply with ESAC's Operational Standard regarding "Workers Compensation."
The PEO shall also provide a certificate listing ESAC as a certificate holder for notification in the event of policy cancellation for all workers' compensation policies, for any alternative coverage, and for the excess loss insurance policy required for any plan of self insurance. Such certificates must include confirmation by the carrier that ESAC will receive at least 30 days notification prior to cancellation of coverage.
For multi-coordinated and client-based policies, the PEO may either engage an independent Certified Public Accountant to verify workers' compensation coverage based upon sampling and verification procedures prescribed by ESAC, or provide a Certificate of Insurance for sample clients randomly selected by ESAC, along with evidence of employer liability coverage extended to both the PEO and the client plus the affidavit of an officer that all clients have workers' compensation coverage.
- Monthly Monitoring. If an Accredited PEO's financial report indicates that a Presumed Imminent Material Risk (see ESAC's Financial Standard regarding "Imminent Material Risk") is present with regard to the PEO's financial condition, the PEO will be designated for monthly monitoring by ESAC's Compliance Committee. The fact that an Accredited PEO is being monitored on a more frequent basis will not be disclosed to anyone outside of the ESAC Compliance Committee, legal and accounting advisors, and surety carrier(s), all of which will have executed a non-disclosure agreement, except where the PEO has authorized ESAC to release information to a specific regulatory agency and such agency requires the disclosure of an Accredited PEO being placed on monthly monitoring.
The following additional accreditation maintenance procedures shall be required during the time that an Accredited PEO is subject to monthly monitoring (provided however in the case of publicly-traded Accredited PEOs and PEOs that are in the “Quiet Period” prior to a public offering, ESAC and each member of its Compliance Committee, outside advisors, and surety carrier(s) that may review such monthly monitoring shall execute a non-disclosure agreement with the PEO and enter into an agreement prohibiting the buying or selling of stock of the PEO during the period that the PEO is subject to monthly monitoring):
- ESAC will notify an Accredited PEO in writing if it has been designated for monthly monitoring, to begin effective with the ending date of the last quarter for which financial conditions indicated a need for such monitoring.
- Following notification by ESAC, the PEO shall provide ESAC with monthly financial statements within 25 days following the end of each month, beginning for the month in which monthly monitoring notification was received.
- For PEOs with Loss Sensitive workers' compensation or group employee welfare benefit plans or policies, such financial statements also shall include schedules documenting appropriate adjustments to the financial reserves for these plans or policies. Related insurance company or third-party administrator claim reports or loss runs documenting the basis for such calculations also shall be provided, if requested by ESAC.
- Each monthly financial statement shall also be accompanied by a projection of cash flows and profit-loss until PEO profitability is sustained following the effective date of the monthly monitoring requirement. Such projections must be based upon reasonable assumptions of income and expenses in comparison to prior operating history and industry norms.
- Monthly monitoring will no longer be required when the ESAC Compliance Committee determines that there is no longer a Presumed Imminent Material Risk with respect to the PEO's financial condition.
- Accredited PEO Acquisitions. If an Accredited PEO, Affiliate or Responsible Person: (a) engages in the Acquisition of another PEO (including assets-only transactions), (b) becomes an Affiliate with another PEO, or (c) is acquired by another Accredited PEO or an Affiliate or Responsible Person of another Accredited PEO, ESAC must be notified within ten (10) business days and the appropriate acquisition application must be completed within 45 days and an Acquisition Fee must be paid as applicable.
An Applicant or Accredited PEO shall state whether it engages in any of the below designated Reportable Practices. In the event the PEO states that it has engaged in or intends to engage in a Reportable Practice, the PEO shall provide written evidence to ESAC that such Reportable Practice as practiced by the PEO is not reasonably likely to result in a material risk to the PEO’s financial or operational viability. Where a question of law is involved, acceptable evidence may include a written opinion of a qualified legal counsel as described in ESAC's Operational Standard related to "Reportable Practices." An Accredited PEO shall provide such written evidence to ESAC prior to the later of (1) engaging in the Reportable Practice or (2) thirty days after the Accredited PEO receives notice from ESAC that a Practice has been designated as a Reportable Practice. An Accredited PEO's failure to comply with this Procedure and not correct such failure upon written notice shall be a violation of ESAC's Operational Standard regarding "Reportable Practices."
Depending on the type and degree of potential risk associated with each reported Reportable Practice, written evidence received by ESAC shall be evaluated either by ESAC’s independent legal advisor and/or Compliance Committee to determine whether such evidence is acceptable to ESAC to show that a Reportable Practice as practiced by the PEO is not reasonably likely to result in a material risk to the financial or operational viability of the Accredited PEO. ESAC shall deliver its written finding to the PEO, which finding shall include a determination of any remedial action requirements and/or disciplinary action, if applicable. An Accredited PEO that has been adversely affected by a finding of the Compliance Committee shall have all rights of appeal as set forth in these Standards and Procedures.
The following Practices have been designated as a "Reportable Practice" by ESAC:
- Owner Participation in Cafeteria Plan means the practice by a PEO of allowing participation in a cafeteria plan sponsored or administered by the PEO by a person who is a more than 2% shareholder of an S corporation client, partner in a partnership client, a member of a limited liability company client or a sole proprietor who is a client of the PEO.
- PEO Services for Staffing Clients means the practice of providing services under a PEO Service Arrangement to one or more clients engaged in providing staffing services to customers by placing staffing employees at customer worksites.
- Risk Sharing Insurance Plan Participation means the practice of an Accredited PEO entering into a contract or otherwise participating in a captive, plan, policy, trust or any other arrangement in which the Accredited PEO shares in any manner some amount of financial risk associated with providing employee benefits or any other insurance service, including health and workers’ compensation insurance, with one or more non-Affiliate entities.
- Non-PEO Services through a PEO Entity means an Accredited PEO entity is contracting with a client to provide an Employment-Related Service other than through a PEO Service Arrangement.
ESAC Notification Requirements
ESAC shall notify ESAC's surety carrier in writing within 5 business days of the following ESAC determinations with respect to an Accredited PEO:
- Material change in ownership;
- Violation of an ESAC financial standard;
- Termination of accreditation;
- Imposed sanction; and
- Designation for monthly monitoring
Termination of Accreditation
- Accreditation may be relinquished by an Accredited PEO only if the relinquishment meets the definition of a Voluntary Relinquishment of Accreditation.
- Except for a Voluntary Relinquishment of Accreditation, accreditation of an Accredited PEO may be terminated only pursuant to an Agreed Termination of Accreditation or an Involuntary Termination of Accreditation.
- In the case of any termination of accreditation, ESAC shall endeavor to notify Covered Clients, as defined in the Participation Agreement.
- In the case of Voluntary Relinquishment of Accreditation, the notification shall state that the relinquishment of accreditation was voluntary and that Covered Clients have thirty (30) days to file any claim under the Client Assurance Program.
- In the case of an Agreed Termination of Accreditation, the notification shall state that the Accredited PEO and ESAC agreed to the termination of accreditation and that Covered Clients have thirty (30) days to file any claim under the Client Assurance Program.
- In the case of an Involuntary Termination of Accreditation, the notification shall state that ESAC terminated the accreditation of an Accredited PEO due to the violation of one or more provisions of the Standards and Procedures or the Participation Agreement and that Covered Clients have thirty (30) days to file any claim under the Client Assurance Program.
Limitation of Liability of ESAC and Standard of Review
- Except as expressly provided in these Standards and Procedures and to the fullest extent permissible by law, as a condition of application for accreditation, an Accredited PEO, former Accredited PEO, Applicant, Responsible Person, and the respective owners, officers, employees or agents thereof agrees that such Person shall not bring a legal action of any type against ESAC, its Board of Directors, any Committee of ESAC, or any officer, employee, agent or representative thereof with respect to any action, omission or decision taken by ESAC, its Board of Directors, any Committee of ESAC, or any officer, employee, agent or representative thereof so long as such action, omission or decision was made in good faith. Neither ESAC, its Board of Directors, any Committee of ESAC, nor any officer, employee, agent or representative thereof shall be liable, responsible or accountable for damages or otherwise to any Accredited PEO, former Accredited PEO, Applicant, or Responsible Person or respective owners, officers, employees or agents thereof for any acts taken or performed or for any omission to act, if such conduct is taken in good faith, without regard to fault or negligence. It is intended that limitation of liability shall constitute qualified immunity from liability for defamation, libel and slander. Such qualified immunity shall not apply only if it is shown that such allegation was false and made willfully with the intent to damage or injure the person claiming injury or was otherwise made with malice.
- Except as expressly provided in these Standards and Procedures, any action or decision taken by ESAC, its Board of Directors, or any Committee of ESAC, so long as in accordance with these Standards and Procedures, may be made in the sole discretion of ESAC, its Board of Directors, or any Committee of ESAC, as the case may be, and shall be final, conclusive, and not subject to review or appeal.
Grounds for Disciplinary Action
Any of the following violations by an Accredited PEO shall be considered grounds for disciplinary action:
- Failure to meet or maintain any provision of the Standards and Procedures.
- Failure to comply with the terms and conditions of, or a breach of any representation or warranty contained in the Participation Agreement (Exhibit A), if applicable.
- Failure to provide ESAC with information requested or with access to the PEO’s records or premises in a timely manner.
- Failure to abide by the terms of any conditions for probation as established by ESAC and provided in writing to the PEO.
- Allowing the use of accreditation status by an Affiliated Entity or marketing agency not properly granted accreditation by ESAC or using an unauthorized Entity or trade name or names in marketing its services.
- Knowingly giving incomplete, false or forged information to ESAC or purposefully withholding relevant information.
- Failing to provide required information and reporting in a timely manner or to respond to requests or directives for information in a timely manner.
- Being convicted of or found guilty of, or entering a plea of nolo contendere, regardless of adjudication, to a crime in any jurisdiction which relates to the operation of a PEO or the ability to engage in business as a PEO or as a Responsible Person of a PEO.
- Failure to inform ESAC within 10 business days of discovery of any material fact adversely affecting the PEO’s accreditation status, participation status in the Client Assurance Program, or the qualification of a Responsible Person to serve in such capacity with the PEO.
- Failure to pay in a timely manner (a) any fee or reimbursement due to ESAC or (b) assessments as provided in the Participation Agreement; provided however, that failure to pay a Compliance Assessment to ESAC within ten (10) days of written notice shall result in an immediate Involuntary Termination of Accreditation, which is not subject to appeal.
Rights of Applicants and Accredited PEOs
- Any Applicant or Accredited PEO has the right to request by prior written notice the recusal of any Board member it reasonably believes possesses a bias against it, has a conflict of interest, or is otherwise unable to make an objective decision on the matter at hand.
- Any party to a proceeding who is adversely affected by an order or finding of the ESAC Compliance Committee has the right to file a motion for appeal to the ESAC Board, and any other party to such proceeding has the right to file a response to a motion for appeal, except in the case of either (a) a "Substantial Failure" of an Accredited PEO to perform its employer "Financial Obligations" or (b) the failure to pay a "Compliance Assessment" to ESAC within ten (10) days of written notice, as such terms are defined in the Participation Agreement, in which case the findings of the Compliance Committee shall be ratified by a majority vote of the Board of Directors and shall be final.
- Applicants or Responsible Person applicants have the right to cure deficiencies in their application noted by the Board or staff within the time frame prescribed by ESAC in a letter notifying the Applicant or Responsible Person applicant that the application is incomplete or deficient.
- All Accredited PEOs have the right to vote (one vote per PEO or PEO Group) on all matters provided for by ESAC's Bylaws, including the election of officers and directors.
- All Accredited PEOs have the right to use ESAC's logo within ESAC guidelines and restrictions.
- Loss of Rights and Privileges: If an Accredited PEO allegedly fails to comply with the accreditation Standards and Procedures, the PEO will be investigated by ESAC. Upon a finding by ESAC that the PEO is in violation and upon a failure of the PEO to cure such violation within the prescribed time period, the PEO will lose all the rights and privileges of being an Accredited PEO and will not represent itself in any fashion to be an Accredited PEO and in good standing with ESAC. The PEO’s status as an Accredited PEO and its participation in any ESAC-administered programs shall be terminated. A terminated PEO shall not be entitled to a refund of any fees, but it shall remain liable to ESAC for any fees or other amounts owed.
Procedures for Handling Alleged Violations, Defaults & Claims
The following procedures shall be used for the reporting and handling of an allegation of a failure to comply with, or a violation of, the Standards and Procedures.
The ESAC Board reserves the right to amend and exercise its best judgment with regard to these procedures depending on the nature and severity of the alleged violation and the urgency with which corrective action needs to be taken. In all cases, the goal will be to preserve the right of each Accredited PEO to due process and to considerate, confidential and professional treatment, while making fair and impartial decisions that are in the best long-term interest of the PEO industry by protecting the PEO's clients, worksite employees, insurers and taxing authorities, and by protecting the surety carrier that backs ESAC's programs.
Notwithstanding anything provided for in these procedures, a "Default" by a PEO participating in the Client Assurance Program to perform in a timely manner its "Financial Obligations," as defined in Exhibit A, shall be handled according to the provisions of the Participation Agreement. All claims made under the Client Assurance Program shall be handled by a Claims Committee according to the provisions of the Client Participation Certificate (Attachment A to the Participation Agreement), as may be amended from time to time. For all other failures or alleged violations, these "Procedures for Handling Alleged Violations, Defaults & Claims" shall be followed.
A Compliance Committee, established by the ESAC Board of Directors in accordance with its Bylaws, shall handle all reported or discovered violations, failures to comply, and any other allegations made against an Accredited PEO. ESAC's President shall determine the exact size and composition of the Compliance Committee on a case-by-case basis depending upon the nature and urgency of the matter to be considered. At a minimum, the Compliance Committee shall include ESAC’s President as the committee Chair and not less than three Independent Directors selected by the President based on the nature of the issue.
The Compliance Committee shall be responsible for conducting or supervising investigations by staff or professional advisors, determining probable cause, conducting mediation hearings, conducting arbitration hearings, reporting findings, establishing appropriate penalties and corrective measures, and rendering final judgments. All final decisions and findings of the Compliance Committee shall be made by majority vote and signed by the Committee chair. Compliance Committee decisions involving Involuntary Termination of Accreditation or participation in any ESAC-administered program must be ratified by majority vote of Independent Directors on the Board of Directors.
An Accredited PEO shall have the right to an appeals hearing before the ESAC Board of Directors for all final judgments of the Compliance Committee except in the case of either (1) a “Substantial Failure” of an Accredited PEO to perform its employer “Financial Obligations” or (2) the failure to pay a “Compliance Assessment” to ESAC within ten (10) days of written notice, as such terms are defined in the Participation Agreement. Such hearings shall be granted liberally by majority vote of the Board based on factual justification presented by the accused PEO in a written motion filed within 10 business days of receipt of the final decision of the Compliance Committee.
An Accredited PEO shall have the right to request the recusal of any Compliance Committee member. Such request shall be made in writing and shall set forth the justification for such recusal along with any supporting evidence. Requests for recusal shall be acted upon by majority vote of the entire Board and shall be granted liberally for just cause based on factual information provided by the requesting PEO.
Reporting of an Allegation of a Default or Failure to Comply
Allegations or complaints involving an Accredited PEO may be reported to ESAC by e-mail, fax, courier, or mail, or by telephone followed by a method of written verification.
An alleged failure may be discovered and reported by ESAC staff, by the PEO’s clients, worksite employees, insurers, or government regulators, or by any other third party. A $250 filing fee is required to discourage frivolous allegations in the case of an allegation made by a third party not having a material interest in the PEO’s affairs through a client service agreement, employment relationship, insurance policy, ESAC accreditation or related program participation, or by regulatory authority. The complainant shall pay such filing fee at the time of filing the written complaint. If the allegation is found to be true, the filing fee will be returned to the complainant. If the allegation is found to be untrue, the filing fee will be paid to the accused PEO.
Procedure for Handling an Allegation of a Default or Failure to Comply
The following general procedure will be followed by ESAC upon discovery or receipt of an allegation of a possible default or failure to comply with the Standards and Procedures or the Participation Agreement, excluding (a) a "Substantial Failure" of an Accredited PEO to perform its employer "Financial Obligations" or (b) the failure to pay a "Compliance Assessment" to ESAC within ten (10) days of written notice, as such terms are defined in the Participation Agreement.
- ESAC staff shall gather preliminary facts by telephone from the complainant and the accused Accredited PEO and report such findings to the Compliance Committee ordinarily within 2 business days of discovery or receipt of the allegation.
- At any time during the proceedings, from the time the written complaint is received until a final determination is made, the Accredited PEO may decline to contest some or all of the allegations. In order to do so, the Accredited PEO must provide ESAC with written assurance that it will not contest in any manner the allegation of the specific violation(s). The Compliance Committee shall then determine if further investigation is warranted and the penalty, if any, to be assessed as provided below under “Penalties.”
- The Compliance Committee shall consider the information gathered by staff, conduct such additional investigation as it deems appropriate, and make a determination of probable cause. If the Compliance Committee determines that probable cause does not exist, the matter shall be dismissed and a report of findings shall be distributed to the accused PEO, the complainant(s), if any, and the ESAC Board.
- Upon a finding by the Compliance Committee of probable cause that a default or failure to comply has occurred (“Probable Cause Finding”):
- The Compliance Committee shall schedule and conduct a mediation hearing by telephone or in person, in its sole discretion, within 20 business days of the probable cause determination, provided however, such mediation hearing shall be held within 5 business days of receipt of a “Reported Failure” of an Accredited PEO to perform its employer “Financial Obligations” made by a client, worksite employee, insurer, taxing authority or other regulator of the accused PEO.
- As a condition of contesting a Probable Cause Finding, the accused PEO agrees that (a) it will bear its own costs in connection with any such contest and will not seek to recover any portion of such costs from ESAC, the Compliance Committee, or any representative of either, and (b) it will pay the expenses incurred by ESAC in connection with any contest of the Probable Cause Finding, including without limitation ESAC’s attorney fees and other direct costs incurred in connection with the investigation of the alleged default or failure to comply through the final resolution of any contest of the Probable Cause Finding regardless of the outcome of such contest (“ESAC Expenses”).
- The Compliance Committee shall determine the amount of a retainer (“Retainer”) that shall be required of the accused PEO, which Retainer shall be used to pay ESAC Expenses. Throughout the pendency of the contest of the Probable Cause Finding, in its discretion, the Compliance Committee may increase and/or require periodic replenishment of the Retainer.
- The accused PEO shall pay the Retainer, including any increase(s) or replenishment(s), within five (5) business days of notice by the Compliance Committee or prior to the conduct of any mediation, arbitration or other hearing with respect to the contest of the Probable Cause Finding, if sooner. The failure of the accused PEO to make any required payment to the Retainer will result in the dismissal of the accused PEO contest of the Probable Cause Finding, in which case the alleged default or failure to comply may lead to disciplinary action up to and including termination of accreditation.
- To the extent ESAC Expenses exceed the amounts paid into the Retainer, the accused PEO shall pay any such excess upon written notice from ESAC. Upon final resolution of the Probable Cause Finding, after payment of all ESAC Expenses, any remaining balance of the Retainer shall be refunded to the accused PEO. Should the accused PEO be completely exonerated of all allegations, ESAC reserves the right to (i) refund all or part of the Retainer and/or (ii) assess the complainant, if it is an Accredited PEO, with all or a portion of the costs.
- If the matter is not resolved in the mediation hearing, the Compliance Committee shall conduct any other investigation that it deems appropriate and shall issue a written judgment of findings and required cures or penalties, if any. Such findings shall be distributed to the accused PEO, the complainant(s), if any, and to the ESAC Board. Provided, however, if the allegation was made by a client, worksite employee, insurer, taxing authority or regulator of the accused PEO and the matter was not resolved in the mediation hearing, the Compliance Committee shall schedule an arbitration hearing as soon as possible and within not more than 30 days after the mediation hearing, with at least 10 business days prior written notice to all parties involved.
- The arbitration hearing, if such is held, shall be conducted by the Compliance Committee according to the provisions of these Standards and to the extent not inconsistent, the rules of the American Arbitration Association, and a written report of findings shall be distributed to the accused PEO, the complainant(s), if any, and the ESAC Board.
- Upon receipt of the Compliance Committee’s final judgment following either a mediation or arbitration hearing, the accused PEO shall have 10 business days to file a motion to appeal the Compliance Committee’s findings to the ESAC Board. The Board shall schedule the appeals hearing at such time and place as it deems appropriate with at least 10 business days prior written notice to all involved parties. The judgment of the Board at the end of the appeals hearing, if one is held, shall be final.
All information, communications, investigative reports, hearing records, findings and related materials, other than public information, shall be considered confidential and shall be kept in strictest confidence by ESAC, its Board, staff, advisors and service providers to the extent allowed by law except as specifically provided by these procedures and by the terms of Exhibit A, as may be amended from time to time.
Standards for Hearings
The following standards shall apply to the conduct of ESAC Hearings.
- Types of Hearings: A hearing may be held for the purpose of mediation, arbitration, consideration of a motion for an extension of time to cure a violation, or appeal of a decision of the Compliance Committee to the ESAC Board.
- Hearing Tribunal: The “Hearing Tribunal” shall consist of the ESAC Compliance Committee or the Board of Directors. The Board of Directors shall appoint a “Hearing Officer.”
- Location and Time: All hearings except those held for the purpose of arbitration or appeal may be conducted telephonically, or at ESAC headquarters or a mutually agreed upon location, at a time and date set by ESAC. Hearings held for the purpose of arbitration or appeal shall be held at a location, time and date set by ESAC.
- Notice: Notice of a hearing shall be mailed confidentially to the parties by certified mail or overnight courier, return receipt requested. A copy of the written complaint and investigative report shall also be mailed to all involved parties.
- Procedure: The Hearing Officer shall preside over the hearing making the final determination as to the procedures to be followed. The Hearing Tribunal shall consider all evidence it deems relevant to its final decision. Final decisions of the Hearing Tribunal shall be made by majority vote, documented in writing and signed by the Hearing Officer.
- Representation: One or more members of management and other representatives, including legal counsel, may represent the Accredited PEO under investigation. The complainant and ESAC may also be represented by legal counsel.
- Order of Presentation: The following is intended to serve as a general guide to the conduct of the hearing:
- The opening statement by the Hearing Officer as to the guidelines of the hearing, its purpose, and the rights and privileges of parties involved.
- The opening statement on behalf of the Accredited PEO under investigation, not to exceed 10 minutes in length, should concisely indicate what he/she intends to show. This statement may be deferred until the conclusion of the investigator’s presentation at the option of the PEO.
- The report of ESAC’s investigation will be presented by the party(ies) who conducted the investigation and will not exceed 30 minutes. It shall set out all of the relevant matters contained in the investigative report, as discussed above.
- ESAC investigator(s) shall present such testimony and exhibits as deemed appropriate, not to exceed one hour.
- The PEO under investigation and related witnesses, if any, may present testimony and exhibits, not to exceed one hour.
- Cross-examination of witnesses by opposing parties, not to exceed one-hour total for all witnesses, will be allowed and shall not count against the time permitted for a party to present its case.
- If desired, the investigator(s) and the PEO under investigation may present a summation, not to exceed 15 minutes per party.
- At the conclusion of the hearing, the Hearing Tribunal will make a finding of violation or lack of violation or a ruling as to continuance of investigation or hearing. In the event of a finding of violation, one or more of the penalties described below will be assessed. If the hearing is to be continued, the date shall be determined at the time of the hearing. The findings shall be set forth in a written order setting out the parties involved, the nature of the allegations, the findings, the actions required to correct any deficiency, and the assessment of penalty, if any.
- Burden of Proof: The investigator shall have the burden of establishing a violation of a standard or required procedure by a preponderance of the evidence.
- Admissibility: Statutory and case-made rules relating to the order of proof, conduct of the hearing, and presentation and admissibility of evidence shall not be applicable to such hearings. Any relevant evidence, including hearsay, shall be admitted by the Hearing Officer if it is the sort of evidence upon which responsible persons are accustomed to rely on in the conduct of business affairs, regardless of the admissibility of such evidence in a court of law.
- Participants and Witnesses: Each participant is responsible for providing its own witnesses, including the payment of all expenses associated with their appearance at the hearings. All witnesses shall give testimony under oath or other affirmation administered by the Hearing Officer.
- Exhibits: Not less than 5 business days prior to the hearing, the investigator shall provide the party under investigation with a list of witnesses that the investigator intends to call and copies of all exhibits the investigator intends to introduce at the hearing. At the hearing, both parties shall provide each member of the Hearing Tribunal with copies of exhibits when introduced in evidence. Documentary evidence must be of a size consistent with the ease of handling, transportation, and filing. Large exhibits may be used during the hearing, but reduced copies must be provided for the record.
- Non-Responsiveness by the Investigated PEO: In the event that the PEO being investigated does not appear for the hearing or does not supply information requested as part of the investigative process, the PEO’s accreditation status will automatically be suspended pending a final decision by the Hearing Tribunal as to further disciplinary actions.
Upon an admission or finding of a violation of a standard or required procedure, ESAC shall stipulate and enforce any one or a combination of the following actions:
- Letter of Warning: Such letter shall describe the nature of the offense and warn the Accredited PEO that a continued failure to comply shall result in further disciplinary action up to and including permanent revocation of accreditation and participation in ESAC programs. Under this action, ESAC may require documentation of the nature and date of actions taken to rectify the alleged violation, and repayment of the complainant’s $250 filing fee, if any. For repeated violations that are not materially severe in nature, but which result in additional expense to ESAC, a fine not to exceed $1,000 per occurrence may be assessed. Failure of an Accredited PEO to comply with the terms of the warning letter and to pay any fine that may be assessed in a timely manner shall be subject to additional penalties.
- Probation: Under this action, the PEO shall be given a specified period of time to cure any deficiency or violation of a standard or required procedure. ESAC may also stipulate a set of conditions or limitations for the PEO. Such conditions may range from requiring more frequent financial reporting to other requirements or limitations. Failure to abide by all the limitations and conditions of probation established by ESAC shall result in the suspension and possible revocation of the PEO’s accreditation. The period of time allowed for curing a deficiency or violation shall vary according to the nature of the offense as follows:
- Five business days for an Accredited PEO to fully cure a “Substantial Failure” to perform one or more of the “Financial Obligations” covered by the Client Assurance Program, provided however, if ESAC determines in its sole judgment that the PEO does not have the ability to fully cure the “Substantial Failure” within 5 business days, the PEO shall be found to be in default and subject to immediate and irreversible revocation of accreditation and program participation. Since swift and decisive action is essential in such an event, the Accredited PEO shall not have the right to request an extension of the time to cure or to appeal a final decision of the Compliance Committee that has been ratified by the ESAC Board of Directors.
- Five business days for an Accredited PEO to fully cure a “Reported Failure” to perform one or more of the “Financial Obligations” covered by the Client Assurance Program or a violation of any other term or condition of the related Participation Agreement (Exhibit A). In such case, the Accredited PEO shall have a right to request an extension of the time to cure, not to exceed a total time to cure of 30 days and shall have a right to appeal a final decision of the Compliance Committee.
- For all other violations or failures to comply, whether self-reported, detected by ESAC staff or service providers, or reported by others, the Accredited PEO shall have 45 days to fully cure the deficiency. In such cases, the Accredited PEO shall have the right to request a hearing to consider an extension of time to cure of up to an additional 30 days beyond the expiration of the 45-day period and shall have a right to appeal a final decision of the Compliance Committee.
- The ESAC Independent Directors may grant one or more additional periods of probation and may otherwise impose such terms, conditions or restrictions upon an Accredited PEO as the Independent Directors shall determine is necessary or desirable in protecting the interests of ESAC, its programs, and the surety carrier.
- Suspension: If an Accredited PEO shall fail to fully cure a deficiency within the time specified by ESAC and no additional extension of time to cure is available or is granted, the accreditation and participation of the PEO in ESAC programs shall be suspended subject to any right to appeal. If the suspended PEO fails to appeal, has no remaining right to appeal, or has its appeal denied, then the revocation of accreditation and participation of the suspended PEO shall be final on the day following the final day of suspension.
- Revocation of Accreditation and Participation: Subject to any right to appeal expressly provided in these Standards and Procedures, this action is final and entails the complete and total loss of ESAC accreditation and termination of participation in ESAC-administered programs.
- In determining the amount of penalty(ies) to be assessed, if any, ESAC shall consider the seriousness of the violation, any history of previous violations, the amount necessary to deter future violations and to protect affected third parties, efforts made to correct the violation, and any other matters that justice may require.
- ESAC shall specify in its written finding the sanctions imposed against an Accredited PEO and shall provide a copy of such findings to the PEO by certified mail or overnight courier, with return receipt requested, at its address of record. Except for a “Substantial Failure” to perform “Financial Obligations” or failure to pay a "Compliance Assessment" to ESAC within ten (10) days of written notice, as provided above, an Accredited PEO is entitled to request a hearing in all cases where ESAC warns or proposes to fine, places on probation, suspends or revokes the PEO’s accreditation and program participation.
The following procedures shall apply to allow for the appeal of a final judgment rendered by the Compliance Committee:
- The Accredited PEO that is adversely affected by a finding of the Compliance Committee, and that appeared at the hearing, if any, may file a motion for appeal, except in the case of either (a) a “Substantial Failure” of an Accredited PEO to perform its employer “Financial Obligations” or (b) the failure to pay a “Compliance Assessment” to ESAC within ten (10) days of written notice, as such terms are defined in the Participation Agreement, in which case a decision of the Compliance Committee that has been ratified by the Board of Directors shall be final. Such motion for appeal must be filed within 10 business days of the party’s receipt of the written finding. All motions to appeal shall be considered by the ESAC Board.
- The Compliance Committee may file a response to a motion to appeal within 10 business days of service of the motion to appeal.
- Such motions and responses will be filed in writing with ESAC with copies provided to all involved parties.
- A finding of the Compliance Committee shall not be effective until the time to file a motion to appeal has expired or until a motion to appeal has been denied.
- Failure to file a motion to appeal within the specified time limit will constitute waiver of the right to do so.
- Upon the timely filing of a motion for appeal and following the time period within which a response may be filed, or following the filing of a timely response, the Board shall consider the motion and response, if any, and shall either grant or deny an appeal hearing. Consideration by the Board of such motion and response, if any, may be by telephone conference. If an appeal is granted, the Board shall set a date, time and location for the appeal hearing.
- The Accredited PEO making the appeal shall have the burden of showing that the findings of the Compliance Committee were clearly erroneous.
- Filing a motion to appeal shall automatically stay the effective date of the finding until the ESAC Board issues a finding on the motion.
- All findings on matters of appeal shall be final and not subject to further reconsideration or appeal.
- Any motion filed pursuant to these procedures shall contain a concise statement of the grounds for appeal.
All fees are established by ESAC’s Board of Directors and are non-negotiable. Fees are due in full within 30 days of the invoice receipt by the PEO.
An Applicant must pay an Application Fee equal to $5,000 prior to initiating the formal accreditation application process. This fee will be credited to the Bond and Accreditation Fees upon approval of the Applicant’s accreditation and participation in the Client Assurance Program.
An Accredited PEO or PEO Group must pay an annual Accreditation Fee to submit an application for initial and renewal accreditation and for participation in the Client Assurance Program. A PEO's annual Accreditation Fee is based upon the fee schedule established by the ESAC Board of Directors and the PEO’s annual gross wages as reported to the IRS on the PEO's most recently filed Form 940. A current fee calculation schedule is available at www.ESAC.org.
Each Accredited PEO / PEO Group and Separately Accredited PEO / PEO Group must pay the annual premium for a surety bond provided by ESAC's surety with the Employer Services Trust as the Principal ("Accredited PEO Bond"). The amount of the Accredited PEO Bond shall be the greater of $250,000 or 5% of the PEO or PEO Group's total state and federal employment taxes for the prior calendar year rounded up to the nearest $250,000 and not to exceed $1 million. The annual fee for the Accredited PEO Bond will be equal to 1% of the bond amount ("Bond Fee"). A $15 million surety bond underwritten by the same surety with the Employer Services Trust as Principal will provide excess coverage for the Accredited PEO Bond at no additional cost to the Accredited PEO or PEO Group.
If an Accredited PEO or an Affiliate of an Accredited PEO acquires assets or engages in an Acquisition of either a non-Accredited or Accredited PEO, an Acquisition Fee will be due to ESAC. However, an Acquisition Fee will not be due for the following exceptions:
- Separately Accredited PEOs: If the acquired PEO is an Accredited PEO or becomes an Accredited PEO, and the PEOs operate as Separately Accredited PEOs, each PEO will pay its respective annual Accreditation Fee and an Acquisition Fee will not be due. However, if such PEOs cease operating as Separately Accredited PEOs, the surviving PEO will pay an Acquisition Fee.
- Assets-Only Acquisitions: If the Accredited PEO acquires only the assets of another PEO, an Acquisition Fee will not be due. However, if the Accredited PEO transfers or acquires any master employee benefits or workers’ compensation policies because of the transaction, a fee of $1,000 will be charged to reimburse ESAC for direct costs.
The Acquisition Fee will be based on the most recently reported IRS Form 940 wages for the acquired PEO or PEO Group and calculated using the Accreditation Fee schedule. The newly acquired PEO’s or PEO Group’s wages will not be included in the calculation of the Accredited PEO’s annual Accreditation Fee until after 12 months subsequent to the Acquisition date.
The determination of whether an Acquisition has occurred and whether an Acquisition Fee is payable shall be made by ESAC in its sole discretion.
Delinquent Reporting Penalties
Accurate and complete accreditation maintenance reports must be submitted to ESAC by no later than the deadlines published in the "Application and Maintenance Procedures" section of this manual. Submission of materially inaccurate or incomplete reports shall be disregarded for purposes of compliance and treated as delinquent reports. Should an extension be necessary for completion of a report, the PEO is required to contact ESAC in writing at least five (5) business days prior to the deadline to request an extension. The extension must be approved by ESAC staff in writing before the extension will be granted. Failure to submit accurate and complete accreditation maintenance reports by the deadline, or to obtain an approved extension, shall result in the immediate assessment of a $500 delinquent report penalty plus an additional $250 penalty assessed every seven (7) days thereafter. If a report is more than 30 days late or if more than one reporting deadline has been missed in a calendar year, the accredited PEO will be referred to the Compliance Committee for further disciplinary action. ESAC shall be allowed to deviate from these disciplinary actions in instances of aggravating or mitigating circumstances, such as habitual offenders or unexpected, one-time events.
Reimbursement of Direct Costs
Each new PEO Responsible Person application will incur a $550 reimbursement fee. Each new PEO entity that is not the result of an acquisition or merger will incur a $250 entity addition fee. Requests for changes in an Accredited PEO's group name or address will incur a $150 name/address change fee. Termination of accreditation will incur a $500 termination fee plus any direct costs for ESAC's delivery of required client notifications. To the extent ESAC's directly related outside costs incurred in responding to subpoenas, regulatory inquiries, and litigation to which ESAC is not a party, exceed any amounts paid to ESAC by the issuing party, the PEO or PEO Group relating to the subject information shall promptly pay such costs upon written notice from ESAC. In like manner, to the extent an ESAC compliance verification inquiry or investigation is triggered by an Accredited PEO being under governmental investigation or where a 3rd party involved in litigation with an Accredited PEO causes ESAC to incur out-of-pocket expense, upon written notice from ESAC, the subject PEO or PEO Group shall promptly pay the expense.
Denial of Application and Treatment of Pending Applications
In the event an Applicant is not approved for accreditation within 3 months following the Applicant's submittal of the online application and all requested supporting documentation, and satisfactory completion of any corrective action needed to meet an accreditation requirement, the Application Fee will be fully refunded. If the Applicant (1) fails to complete its application within 6 months; or (2) withdraws its application for any reason during the accreditation process; or (3) fails to complete all required action to qualify for accreditation, the Application Fee shall be retained by ESAC to cover its application processing costs and the application shall be terminated. If accreditation and participation are not denied but a final decision is pending receipt by ESAC of additional or modified materials, then the Application Fee will be retained by ESAC until the application is acted upon by ESAC or withdrawn by the Applicant.
If an Applicant that has been denied accreditation chooses to re-apply or if an application is pending further action by the Applicant, the Responsible Person application(s) will remain valid and will be considered current for a period of 6 months from the date of receipt of the initial application by ESAC. After a period of 6 months, the Responsible Person applications as well as the PEO's application must be updated and the applicable Reimbursement of Direct Costs fees must be paid. Such additional fees are necessary because background investigations must be repeated along with a current financial evaluation to make the application again current.