On October 15, Oregon's Workers' Compensation Division adopted Administrative Order 26-066.
It rewrites Chapter 436, Division 180 of the Oregon Administrative Rules.
The old title: Worker Leasing.
The new title: Professional Employer Organizations and Temporary Service Providers.
That is more than a change of vocabulary.
Buried in the order is a requirement that will change how workers' compensation policies are issued to PEOs in Oregon.
Why the Rules Changed? The rules follow House Bill 2800, passed by the Oregon Legislature in 2025.
That bill replaced the term "worker leasing company" with "professional employer organization" in Oregon law. The old language dated to 1993, and it never fit how PEOs actually operate.
HB 2800 also pointed toward rulemaking on how PEO coverage is structured. NAPEO wrote in PEO Insider that the rulemaking would look at moving Oregon away from being largely a master policy state, and that it had asked for a hybrid approach rather than a full MCP model.
Order 26-066 is the result of that rulemaking.
Two Dates Worth Writing Down
July 1, 2027. The amended rules take effect. Licenses issued before that date remain valid.
January 1, 2028. Insurers providing coverage to a PEO under a policy with an effective date on or after this date must issue it on a multiple coordinated policy basis.
The two dates are about six months apart. The first is when the rulebook changes. The second is when the policy structure changes.
What "MCP Basis" Means in the Rule?
For policies effective on or after January 1, 2028, the insurer must issue:
· A policy in the name of the PEO, and
· A separate policy in the name of each client to whom the PEO must provide coverage.
Each client policy must carry the PEO's name followed by "LCF" and the client's name. It must also include an endorsement identifying it as a multiple coordinated policy and naming the PEO and its policy number.
The rule adds two more points.
The PEO is responsible for paying premium on the client policy, regardless of whether the client reimburses it.
And the PEO is treated as the employer for purposes of two Oregon statutes, ORS 656.423 and 656.427.
The text of the order does not describe a master policy alternative for policies in that category.
The Insurer's Role Gets Clearer
The order adds a new rule on insurer responsibility.
When an insurer covers a PEO, and the PEO is responsible for covering a client, the insurer assumes the PEO's liability for compensation due to that client's covered and direct hire employees. That assumption takes effect on the latter two dates: when the insurer began covering the PEO, or when the PEO became responsible for the client's coverage.
Insurers must also file proof of coverage for the PEO and for each client through electronic data interchange, within 30 days after coverage takes effect.
Notice Deadlines for PEOs
For PEOs insured through a carrier, the rule now sets timeframes for notifying the insurer:
· 15 days after the PEO becomes responsible for a client's coverage
· 30 days to report changes or corrections to client information
· 30 days after learning a client obtained other coverage
· 15 days after a reinstatement of client coverage becomes necessary
When a PEO ends its responsibility for a client's coverage, termination is not effective until at least the 30th day after the insurer receives notice.
Self-insured PEOs continue to file notices with the Division directly.
Licensing and Reporting
The order also changes how PEOs are licensed and what they report.
· First-time applicants must provide an organization chart showing all persons with whom they share majority common ownership. Renewal applicants do not.
· PEOs must notify the Division at least 30 days before a license expires if they intend to cancel or not renew it and certify that they will have no clients at expiration.
· PEOs with no clients may voluntarily suspend their licenses.
· Limited licenses remain available to out-of-state PEOs with no more than two Oregon clients and five covered employees in total, subject to other conditions.
· The license fee remains $2,050, and a license runs for two years.
Each PEO must also submit a client list to the Division every 12 months. For each client, it includes the legal name, FEIN, number of Oregon subject workers, the date the PEO relationship began, and the dates of Oregon coverage.
A Definition Worth Noticing
The updated definitions draw a clear line.
A PEO is a person that enters a PEO relationship with a client, meaning an agreement under which certain employer responsibilities for the client's workers are allocated.
The definition excludes a person that provides only temporary workers, and a person that provides administrative services without assuming employer responsibilities for client workers.
The rules also distinguish between "covered employees," for whom a PEO has assumed employer responsibilities, and "direct hire employees," for whom it has not. The PEO's coverage obligation applies to both, unless the client has its own proof of coverage on file with the director.
What PEOs Operating in Oregon May Want to Do Now
· Put both dates on the calendar and start the conversation with carriers and brokers early.
· Confirm that client-level information can be produced to the standard the notice and client-list rules expect, including FEIN, payroll, and effective dates.
· Review how the PEO's own policies, contracts, and processes treat premium responsibility on client-level policies.
· Talk with counsel about how the definitions and notice rules apply to the PEO's specific arrangements.
An Open Question
Policy structure shapes how risk is seen. If Oregon's approach means every client has its own policy, what changes for a PEO that operates across several states with different structures?
And what would it take for that PEO to compare client-level performance consistently across all of them?
We'd like to hear how PEOs and carriers are thinking about it.
Sources:
Oregon Workers' Compensation Division, Administrative Order 26-066 (OAR 436-180, effective July 1, 2027); Oregon HB 2800 (2025); NAPEO PEO Insider, "Workers' Comp. On Our Minds: Updates & Trends from Key States"
