The History of the Florida Association of Professional Employer Organizations
The Compelling, Inspiring, Surprising Story of the PEO Industry in Florida
Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has. — Margaret Mead
Listening to early participants in the PEO industry describe how the industry came to be established in Florida, Margaret Mead’s inspirational quote comes to mind. Attorney Michael R. Miller, the general counsel of the Florida Association of Professional Employer Organizations (FAPEO) since its inception, says that the biggest surprise looking back at the history of the industry and the association is that “a ragtag band of novice employee leasing entrepreneurs” could get bills passed to establish and license PEOs in Florida.
Interviews with several of these “novice employee leasing entrepreneurs” form the basis of this history of the PEO industry in Florida, and their stories are compelling, inspiring, and yes, surprising.
Early History of the PEO Concept
Employee leasing in the United States began as early as the 1940s. In the early 1970s, the concept was popularized by a consultant named Marvin Selter, who leased the employees of a doctor’s office in Southern California. The Employee Retirement Income Security Act of 1974 (ERISA) contained an exemption for multiple employer welfare arrangements (MEWA), which provided a loophole for employers with leased employees to claim they were exempt from the ERISA requirements. Passage of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) further encouraged employee leasing by providing a tax shelter for employers who contributed a minimum amount to employee plans. More stringent guidelines in the Tax Reform Act of 1986 later eliminated most of the TEFRA incentive, however.1
Employee Leasing Comes to Florida
During the 1970s and 1980s, the concept of employee leasing caught the attention of several entrepreneurs across Florida.
One of the first to lease employees in Florida was George Lehor, who later served as the second president of the industry association that was to become FAPEO. In 1969, Lehor purchased a temporary labor franchise from Employers Overload of Minneapolis, Minnesota, to run his South Florida operations in downtown Miami. He recalls that it was with this business that he came up with the idea of employee leasing.
“I was supplying businesses in Miami with day laborers, which was essentially contracted labor, and I saw a need much larger than the need for day labor with the companies I was already supplying with workers,” he says. “The owners’ complaints were that they couldn’t afford workers’ compensation up-front costs as well as health insurance for their families or their workers. As a result, many workers were paid under the table, so it wasn’t a hard sell for the government to want us to succeed, many years later, when they saw the benefits this type of contracted labor could provide.”
In 1970, Lehor worked out a contract to lease employees from businesses in Miami back to the owner, who would pay a rate per hour to cover the costs of all government taxes, workers’ compensation, and health insurance. As the years went on, the benefits increased and their related costs went down as the company had a work force of thousands and then tens of thousands.
“Everyone wanted to sell to us at that point,” Lehor says.
The early days of Lehor’s business seem uncomplicated by today’s standards.
“It was only family back then, and there was no competition as there is today because no one knew what we were doing,” Lehor explains. “Most contracts were really handshakes, and business was strictly word of mouth. Our clients would sell our business for us, especially the workers’ comp end of things. Most small businesses had to come out-of-pocket at the beginning of each year with thousands of dollars and then use it up as the year went on. In employee leasing, their workers were coded by the jobs they performed at their respective
businesses, and their hourly rate included the bundled cost of their workers’ compensation. Health insurance also became affordable because the group was no longer a group of, say, five older employees at a bakery, but hundreds and then thousands of all different businesses and age groups, bringing the costs down to every client.”
Lehor goes on to say that they “made up the business each day as we went along, making certain to keep within the laws of the State of Florida and other states as we expanded into 36 states.”
Another early entrant into the industry was H. Britt Landrum, Jr., the first CEO of LandrumHR in Pensacola, who founded AmStaff in 1970, an employee staffing company that later became the full-service PEO it is today. He remembers reading an article in Inc. magazine in 1981 about a company called Staff Leasing of America. The leadership of Staff Leasing had been successful in getting a bill passed in Congress that made it possible for highly compensated professionals such as doctors and lawyers to exclude their employees from their pension plans if they leased the employees from an employee leasing company.
“When I saw that article, I picked up the phone and talked to the owner of Staff Leasing of America,” Landrum recalls. “By that time he wanted to sell franchises or license others to be involved with him so they could pay him a royalty.”
Landrum also called a Staff Leasing client who had been mentioned in the Inc. article to find out why a business would want to use an employee leasing company. The answer was simple and direct: “It makes it much easier for me as an employer to handle some of those employer-employee administrative things.”
Landrum says he did more research about other companies around the country that were involved in employee leasing. Some were “bad actors” that “offered self-insured health plans but either did not collect enough to pay claims or used the money for other purposes,” Landrum explains. “Some people thought of [employee leasing] as a get-rich-quick scheme. They were aggregating payroll, a lot of dollars, but then they didn’t do the right things. They didn’t pay the taxes, and they didn’t pay the claims on health insurance. They had self-funded
workers’ compensation plans and didn’t pay those claims. All of that resulted in some really horrendous newspaper articles. The industry had a really black eye. It was the impetus for [industry members to say], “We need some regulation. People who get into this business have got to operate in a way that’s legal, or this business will go away. Legislators will basically legislate us out of business.”
Looking to find likeminded industry members who wanted to promote ethical business practices, Landrum joined the National Staff Leasing Association, which had been formed in 1984, as well as a southeastern coalition of employee leasing companies.
“In those days we were hungry for information and relied on the experiences of others in the areas of obtaining health insurance benefits and workers’ comp coverage for leased employees, as well as general liability coverage for our businesses,” Landrum explains. “All those insurance products were hard to get for start-up operations.”
Celeste Dockery initially entered the staff leasing industry in 1985 as an accountant for Employers Management, Inc., in Sarasota. She and Lynn Hall subsequently formed Professional Employee Management. Like Landrum, Dockery recalls the difficulties that a few bad actors had caused for the fledgling industry.
“The Florida Division of Unemployment claimed we were operating illegally and wanted to shut us down,” she says. “This was a reaction to an employee leasing company that had recently gone out of business and owed hundreds of thousands, if not millions of dollars in unpaid state and federal payroll taxes, workers’ compensation insurance premiums, and health insurance premiums.”
Another early industry participant, Carlos Saladrigas, Sr., cofounder of Vincam Group, recalls reading an article in TIME Magazine about employee leasing in Texas. The year was 1983.
“It caught my attention, not knowing anything about the existing industry at the time,” Saladrigas says. “The concept was fantastic, to provide economies of scale and professional knowledge in human resource management to small- or medium-sized businesses. My partner, Pepe Sanchez, and I got together, and we decided we wanted to open this business, and we began to work on a business plan.”
In 1984, Saladrigas and Sanchez formed Vincam Group, Inc., in Miami. Saladrigas was working for an HMO at the time, establishing the first prepaid Medicare demonstration project in the nation. He saw firsthand the importance of health care in the employment relationship and the difficulty that small- and medium-sized businesses had when competing with larger employers to provide affordable, high-quality health care coverage. He says this solidified his commitment to the concept of employee leasing.
Another industry pioneer, Mel Klinghoffer, now president and CEO of A1HR, a Division of Oasis Outsourcing, says he got his ideas for his first employee leasing company back in the 1960s while working for the temp agency Kelly Girl, where he provided production workers for large companies such as Sanyo Electric, Jensen Speakers, and Turtle Wax. He started Action Staffing in 1984 as a temp company and quickly converted his business to provide both temporary help and employee leasing.
Klinghoffer also notes that bad players in the industry were the reason why reputable business owners began to see the need for licensure.
“They [unscrupulous companies] were going out of business and failing to pay taxes—the clients’ and the employees’ social security, federal tax, federal unemployment tax, and state unemployment tax,” Klinghoffer recalls. “The bureaus were having a fit going after some, and some they weren’t. They couldn’t make up their mind who was really responsible. That’s another reason why we wanted to put this together and eventually get the Legislature to pass licensing in order to recognize the good players, the ones that followed the law and paid their taxes and are not out to just rip people off.”
George Lehor also recalls the difficulties caused for his business and the rest of the industry after unscrupulous companies entered the scene.
“We don’t recall any struggles early on until some 15 years later when others came into the industry and they were not honorable people,” he says. “They saw an opportunity to take advantage of small business owners, and they would drop their costs. We knew they would not be able to cover the taxes, but there was nothing we could do but watch. These new businesses were never going to cover their costs as they took the money and disappeared, and that was the reason we had to regulate, or lose what we had built.”
Fortunately, the industry was also attracting people of integrity who wanted to learn more about the business. Before Richard (Rick) Ratner purchased Modern Employers, Inc., he hired an attorney to research the employee leasing concept.
“We wanted to be sure it was legal,” he explains. “It sounded too good to be true! How could it be legal?”
With his due diligence completed, the attorney provided assurance that the employee leasing concept was, indeed, legal, but as Ratner recalls, the Florida Department of Revenue wasn’t 100% convinced back in the early- to mid-1980s.
We wanted to be sure it was legal. It sounded too good to be true! How could it be legal?”
Clearly the fledgling industry faced many challenges in Florida, but fortunately a group of industry leaders emerged who would form the first statewide association for employee leasing companies.
From FAEL to FELA to FAPEO
The Florida Association of Employee Leasing filed as a Florida Not For Profit Corporation with the Florida Department of State on August 8, 1986. The name of the association changed to the Florida Employee Leasing Association on February 19, 1990, and finally to the Florida Association of Professional Employer Organizations on August 8, 1995.
The earliest meetings of the organization included companies in Manatee and Sarasota counties: the owners of Staff Leasing (now Tri-Net), Bill Mullis, Doug Mark, Tom Cooley, and J.R. (Jim) Roberts; Jack Zickafoose of A-Accurate Employee Leasing; Payroll Alternative Corporation’s Steven Farkas; Mel Klinghoffer of Action Staffing; and Celeste Dockery and Lynn Hall of
Professional Employee Management. They met at the Barnett Bank building on Dale Mabry in Tampa.
Dockery recalls that the group quickly realized that the organization needed input and support from across Florida, so they contacted other company owners including Bill Holt and Bill Harper of Staff Management Systems, Henry Hardin and Kirk Scoggins of Staffing Concepts, George Lehor of Employers Contract Services, Carlos Saladrigas, Sr., and Pepe Sanchez of Vincam (now ADP Total Source), Stuart Lasher and Steve Esrick of National Business Solutions (now Paychex Business Solutions), and Leo McGeehan of Modern Employment Services.
Saladrigas recalls the early days of the association, saying, “Very early on, we had a lot of difficulties. We had every single government agency on our back, from unemployment insurance to insurance commissioners all over the place. They wanted to shut us down because they were convinced that we were nothing but a scheme to break down employment systems, from unemployment to collection of the withholding taxes to insurance issues. Of course, we also had the insurance brokerage industry chasing us down because we were competing with them
and taking away particularly the workers’ compensation policy, which has always been a big money maker for insurance brokers.”
Like his colleagues, Saladrigas also recounts a barrage of bad press about the industry due to unscrupulous companies that siphoned off millions of dollars in tax withholdings and insurance premiums.
“The [environment for the] industry was incredibly hostile from a regulatory point of view at the beginning,” Saladrigas recalls. “That led us to have a number of conversations in the industry where we decided collectively that it was critical to become very proactive.”
Mel Klinghoffer has similar recollections about the need for the industry to take action in an organized way.
“The industry itself needed some structure in order to educate the public, the clients, the employees, and the state and feds, actually all of them because they didn’t really know who we were, what we were,” he says. “We were each doing our own thing, so we were not really an organized business. All of us provided different services. We were so diversified that it was very difficult to educate everybody into understanding what we are actually and what the value is of utilizing our services. That was something that brought us all together, and we said, ‘We need to unite and hold one front.’”
Rick Ratner echoes this, saying, “We were all like comrades then. We were competing against each other, but we were more competing against the forces that were threatening our survival. We’d go to meetings and things were so brand new, nobody knew, ‘Hey, are we supposed to do this?’ We would ask ourselves that all the time at the beginning, ‘Can we do this?’ Things would come up, ‘Are we allowed to do that?’ You know, ‘Can we have insurance for our people? Do we have our own health insurance plan?’ And so other people were doing different things, and when we got together at these meetings it was pretty fantastic that people for the most part would share things about what they did, and that’s what got me really excited. It was nice to hear what other people were doing. It was fantastic! It was like being around for the invention of the automobile.”
SUTA: The First Challenge to the Industry
The first challenge the association needed to tackle was the issue of who the employer was for the purposes of reporting and remitting state unemployment taxes (SUTA) to the Florida Department of Revenue. The year was 1986.
Celeste Dockery recalls that the Florida Division of Unemployment had targeted her business as one of the first employee leasing companies to try to close down due to a perceived lack of compliance with state regulations. Dockery hired Mike Miller to walk her through the process of documenting the fact that her company was providing services properly. They were successful in getting the division to pull back from its investigation of Dockery’s company, but she says it had become clear that the industry had two choices: litigate or legislate.
Mel Klinghoffer elaborates on this, saying, “There was a lot of difficulty convincing the state that we should be listed as the employer of record. At the time, they were contacting a lot of our clients and telling them that we weren’t officially the employer and that the client still owed the taxes, even though we were paying them.”
Klinghoffer goes on to say that Mike Miller’s individual representation of companies on the SUTA issue was extremely helpful to the industry when it came to lobbying.
“By representing several of the companies, Mike was learning the industry very rapidly,” Klinghoffer says. “Mike would talk to everybody [in the industry] and they’d all give their opinions. It was difficult [to explain the industry to others] because everybody provided different services. We were not like one thing where you sell apples. We are a very diverse industry with diverse services.”
Mike Miller picks up the story at this point.
“I was a young attorney. I had done some work for a restaurant called the Summerhouse Restaurant in Sarasota. The Summerhouse Restaurant was owned by an attorney named Saul Paster. Saul called me and said, ‘I’ve got a client called Staff Leasing. I believe their services are more labor-oriented than business-oriented. Would you be willing to speak with them?’ And I spoke with Staff Leasing. They were having an issue with the Florida Department of Revenue with regard to who was the employer for unemployment purposes. And I asked them, ‘Is there anyone else who does what you guys do?’ and they said, ‘Yeah, we have a few folks that do what we do.’ I said, ‘If I’m going to go to Tallahassee to speak with the Department of Revenue, I’d love to be able to say that I represent an association.’ And we got together at the Holiday Inn on Route 41 in Bradenton, and we formed the precursor of FAPEO.”
According to Miller, this is when an informal group of businesses that provided similar yet diverse services truly became an industry.
“They sent me to Tallahassee to work with the Department of Revenue,” he says. “Our first meeting was extremely contentious, but the department, after a series of meetings, got to understand that we were the good guys. Without the assistance of Rhett Hensley (who went on to be chief of tax at the U.S. Department of Labor, Rhett’s boss Milton Miley, and others at the Department of Revenue, the industry might have died then and there, but we came up with a bill that recognized the employee leasing companies as the employer for unemployment
purposes, and the industry was off and running.”
Exemption From the Sales Tax on Services
The next big hurdle for the industry was a controversial sales tax on services passed at the urging of Republican Governor Bob Martinez. The new tax became effective on July 1, 1987. As written, the bill would have required an employee leasing company (ELC) to pay sales tax on the entire amount billed to a client, the majority of which was actually for reimbursement, not payment for a service. For example, if payroll was $1,200 and the ELC charged 10% for a total bill of $1,320 to the client, the ELC would be required to remit the 5% state sales tax on the entire $1,320.
FAEL mounted a strong lobbying campaign, seeking a partial exemption from the tax. Miller recalls using a brochure based on a statement made by Supreme Court Chief Justice John Marshall in the 1819 decision McCulloch v. Maryland in which Chief Justice Marshall stated, drawing on words from Daniel Webster: “The power to tax involves the power to destroy.”
“We were one of the few industries that did not come out against the sales tax on services [in its entirety],” Miller clarifies. “We were just saying, ‘If you tax our entire bill to our client, which involves pass-through wages and benefits, that involves the power to destroy our industry.’”
FAEL urged the Legislature to amend its proposal with the following language:
For purposes of computing the amount of sales tax owed involving services performed by an employee leasing company, a sales tax shall not be imposed upon the reimbursement paid by a client of an employee leasing company to an employee leasing company for the wages and benefits paid to employees. The tax shall only be computed upon the sum charged by the employee leasing company which exceeds such wage and benefit reimbursements.
Despite promises from legislative leaders that the exemption sought by employee leasing companies would be in the bill, the day the bill was scheduled to be voted on in the Senate, one powerful senator told Mike Miller that he “didn’t like big banks, and he didn’t like big employers” and that he had decided to “kill your industry.” When Mike tried to argue with him, he told Mike, “You have one minute to convince me.” Mike tried, but the senator refused to budge. Britt Landrum recalls that both the House and the Senate then passed the bill,
with neither chamber including the language proposed by FAEL that legislative leaders had promised would be in the bill. The bill then immediately went to a conference committee. Fortunately, Landrum had developed a working relationship with his senator, Senator W.D. Childers (D-Pensacola). Landrum continues the story.
“My senator came over to me and he said, ‘You sit right where you are. I’ll be back in a few minutes,’” Landrum says.
Landrum recalls that Senator Childers was gone for about 30 minutes. He went down to see Senator Dempsey Barron (D-Panama City). He came back and told Landrum that the chairman of the committee had called the committee back into session. Within a few minutes, the committee had given the employee leasing industry its exemption. Landrum goes on to state, “I went on
to the airport, and on the way I learned the governor had signed the bill. It was that close.”
Only a few months later, the governor called for repeal of the sales tax on services after national advertisers canceled or reduced their advertising in Florida, and national media groups protested the tax by canceling conventions they had booked in the state. On December 11, 1987, the Florida Legislature enacted legislation, immediately signed by the governor, raising the sales tax rate from 5% to 6% and repealing the sales tax on services effective January 1, 1988.
Workers’ Compensation Exclusivity of Remedy
The association successfully lobbied for the workers’ compensation exclusivity of remedy bill in 1989, enshrined in Florida Statutes 440.11(2).
Britt Landrum learned about a need for this workers’ compensation reform after making a presentation about using his employee leasing services for an association of car dealers. One of the attendees told Landrum that if he leased his employees, he could be sued if a worker got hurt, even if that employee had collected workers’ compensation for the injury. Landrum relates what this car dealer told him:
“I have workers’ comp on my employees right now, and I’m excluded from being sued if one of them gets hurt, but if I sign up with you, I lose that exclusivity, that protection.”
Landrum researched the issue and discovered that the car dealer had a valid point. While the “borrowed servant doctrine” existed, there still was the possibility that the client could be sued following an injury to an employee and that the client could be held liable.
“I rewrote the language to provide the employee leasing companies the exclusivity they needed and sent it to Mike Miller and to W.D. Childers,” Landrum recalls.
Miller recalls it as another collaborative effort that required Landrum and other members to educate their legislators and to lobby for needed protections. Association members spent long hours walking the halls of the Capitol and speaking to anyone who would listen to the association’s story. In this regard, Miller recalls one of his favorite stories.
“It was 7:00 in the evening, and Britt Landrum and I were still trying to convince legislators to support this bill,” Miller says. “I saw a person coming out of a senator’s office, and I ran up to him and handed him our brochure. I made my pitch about PEOs, which were then called employee leasing companies. After I finished speaking with him and we had walked away, Britt leaned over to me and said, ‘Mike, I don’t think he was a senator. He had a hammer and a pair of pliers in his pocket.’ We really were novices. We were new to the whole political process, but, boy, look what we accomplished.”
With these efforts, soon the association had another victory in the books. And there were more to come.
Regulation: A Controversial Decision That Paid Huge Dividends
As the 1980s gave way to the 1990s, industry members faced more and more challenges, some due to the bad actions of a few unscrupulous and/or unqualified companies and others due to a lack of understanding of what the industry did to help small businesses and the state’s economy. The time had come to consider the idea of regulating the industry. It was an idea that would prove controversial among industry members. Rick Ratner considered it a tough sell.
“There were many members who, entrepreneurial types, you say the word regulation, and they spit, they don’t want to hear that,” he says.
Ratner recalls that a combination of three factors ultimately led many members of the association to consider regulation as the best way to further the industry. First, some industry members were interested in expanding by attracting venture capitalists, and regulation would provide credibility. Second, the industry faced the stigma of not appearing legitimate because of the illegal actions of a few bad actors. Regulation would go a long way toward repairing the image of the industry. The third factor was driven by the actions of then Insurance Commissioner Tom Gallagher. He viewed the employee leasing companies as providers of insurance, and he wanted to regulate the industry under the Department of Insurance.
“We did not want to be regulated by the insurance department,” Ratner says.
“For us it was like, OK, if we’re going to be regulated, then we need to, number one, write the regulations ourselves, and two, we need to voluntarily become regulated.”
Other industry members were coming to the same conclusion. It was a controversial decision, but the industry decided to pursue licensure with the State of Florida.
At this point, many of the association’s members registered as lobbyists and once again began walking the halls of the Capitol in Tallahassee. As Celeste Dockery puts it, passing the licensure bill required “education, education, education.”
Part of the education process needed to target the PEO business owners who were not certain that regulation was the best path for the industry to take. Carlos Saladrigas recalls telling his colleagues, “If we don’t have an industry, we’re never going to have a business.”
In Saladrigas’ view, it was crucial for the industry to build its credibility in order for individual businesses to build value over time. He says that convincing everyone to pursue regulation was a Herculean task in its own right, but it was done. He told his fellow business owners, “We can have an opportunity to make a few dollars here or there, but we’re not going to have a sustainable business if we don’t have a sustainable industry.”
Saladrigas says that committing to a sustainable, regulated industry helped the early members of the industry to overcome their personal and competitive interests and collaborate for the success of the industry.
“That was quite a story!” he exclaims. “So when you are coming to Tallahassee and say, ‘We want to regulate ourselves,’ it raises all kinds of issues. Who’s going to pay for it? Who’s going to do it? Where do you go? Where do you fit? They wanted to fit us in the insurance department, which we didn’t want to do, so we finally ended up choosing to [be regulated] under the Department of Business, now the Department of Business and Professional Regulation. We chose a model of self-regulation, which was incredibly attractive because the board was made
up of a majority of industry members, so it was a true example of self-regulation, and I think it worked very well.”
With Mike Miller’s professional guidance, the association debated the pros and cons of regulating the industry, and a group that included George Lehor, Carlos Saladrigas, Bill Holt, and others worked with Miller to draft language for the licensing bill that ultimately was passed by the Florida Legislature and signed by the governor in 1991.
George Lehor recalls being asked to help with the bill’s drafting to create a statute that would “keep the integrity of the industry for ourselves and others who were honest to be able to continue to offer much-needed assistance to small businesses in the state of Florida.” He says he was pleasantly surprised by the support and help they received in drafting the bill, with many members sharing their ideas to make it successful and “hopefully last a long time.”
The process of creating a licensing statute required a great deal of time and effort from association members. Miller recalls that the road to licensure was eased by Representative
Toby Holland (R-Palmetto), who took up the cause, as well as Wilbur Boyd, a former senator from Bradenton, who had become an industry participant and was a close personal friend of Governor Lawton Chiles. Carlos Saladrigas recalls that Senator Boyd was instrumental in gaining the governor’s support for the licensing bill.
“I am almost convinced that we would have never gotten the bill passed if it had not been that Wilbur got the commitment of the governor that he would sign it,” Saladrigas says, “because you know, believe it or not, even in a democratic administration, the tendency is not to regulate.”
Mike Miller recalls how association members stepped up to lobby for regulating the industry.
“It was a process that involved everyone in the industry,” he says. “We all went to Tallahassee. We all knocked on doors. We all handed out our brochures. And once again, we wore out our shoe leather.”
Rick Ratner recalls that regulation “opened up the floodgates” for the industry.
“People were getting millions and millions of dollars for their companies,” he says. “It was like [it] opened up the floodgates. I think even those guys who were dead set against regulation now see the value to it. At the time, Florida was the only state that had any kind of regulation at all. And it made us seem like we’re a real business segment. I think it might have even helped us to sell better, too, because now we’re more legitimate. It was easier to convince [clients] that we were up-and-up as long as we had the seal of approval from the State of Florida.”
Carlos Saladrigas likewise saw the immediate benefits of belonging to a regulated industry.
“We became a model in the nation,” he recalls. “There were a couple of states afterwards that followed and emulated what we were doing, but nobody has done it to the extent that we did it in Florida. It brought instant credibility to the industry.”
Like many Florida members, Saladrigas was also active in the national association, which originally was known as the National Staff Leasing Association. He recalls the time when member companies began to debate the need to change the name of the association.
“We wanted to get the name away from employee leasing because of all of the negative connotations that it had,” Saladrigas says. “Having been in the HMO industry, I saw the value in Wall Street. I saw how HMOs were being traded at high multiples and were being attractive, so I proposed to follow the same conceptual model of the HMO industry to our industry so that we would have equity credibility in the markets. So I proposed the name PEO, which meant professional employer organizations, to distinguish from the old term of employee leasing companies, which sort of had the connotation that employees were disposable and you simply lease them, when that’s not what we did. What we did was to enrich and bring more value to the employee relationship, not take it away.”
The name of the national association changed to the National Association of Professional Employer Organizations in 1993, and the state association followed suit in 1995, becoming the Florida Association of Professional Employer Organizations.
FAPEO Hires a Lobbyist and an Executive
Just prior to changing its name to FAPEO in 1995, the association’s leadership began its search for a lobbyist based in Tallahassee to assist FAPEO with the many challenging legislative and regulatory issues. Christina Harris Schwinn, FAPEO president 1994-1995, says that the relationship between Ron Villella, his governmental relations firm Smith, Bryan & Myers, and FAPEO “blossomed into a beneficial, long-term relationship for FAPEO.”
“During my presidency, we formed a legal advisory committee for FAPEO made up of me, Mike Miller, Richard Goldman, and Burr Boyd [son of Senator Wilbur Boyd],” Schwinn says. “The legal advisory committee recognized that without professional help in Tallahassee, many of the association’s initiatives would never get off the ground. This group along with Ron and others worked tirelessly on behalf of the industry. It was through the leadership of this committee and the support of the board and the association’s members that it became possible to form that strong partnership with Ron Villella and his team.
“On a personal note, I found Ron to be a great mentor,” Schwinn continues. “He was kind, patient, and never got upset because he was asked the same question over and over again or when FAPEO’s board of directors tasked him with what seemed to be impossible tasks. Ron was a very skilled lobbyist whose talents were well recognized. More importantly, Ron was the type of person everyone wanted to call friend. He inspired you to be your best and truly cared about the people he worked with.”
One of the people with whom Villella worked most closely was Mike Miller, FAPEO general counsel. Miller recalls his work with Villella, saying, “Ron and I operated as a team in passing PEO legislation. While we did not have the glitz and glamour of Bogey and Bacall, and perhaps at times we looked more like Abbott and Costello, with Ron always in the role of straight man while I wandered the halls of the House and Senate trying not to embarrass myself, we made quite a team. It was Ron who orchestrated the passage of every major piece of PEO legislation during his 16 years as FAPEO’s lobbyist. He was an incredible man.”
Villella retired in 2010, but not before grooming a successor within the firm to take his place as lobbyist for FAPEO. David Daniel took over from Villella in 2010, and he has represented the association ever since. Sadly, FAPEO lost a great friend and advocate when Ron Villella died in 2014 after a three-year battle with cancer. He was 70 years old.
In 1996, the association’s leadership recognized that the organization had developed to the point that it needed strong day-to-day management. The search was on for an executive director.
Robert Skrob, while relatively new to association management 20 years ago, was already proving his ability to improve communications, host profitable events, and grow thriving memberships for statewide associations. Skrob, a CPA, worked at an association management firm in Tallahassee that had the infrastructure the association needed to get to the next level in providing excellent membership services and industry representation. Skrob purchased the company from his employer in 1999 and continues to provide management for FAPEO as its executive director.
Rick Ratner was president of FAPEO when the association made the decision to hire Robert Skrob in January 1997.
“It was Ron [Villella] who orchestrated the passage of every major piece of PEO legislation during his 16 years as FAPEO’s lobbyist.”
“It must have been a good decision — he’s still here,” Ratner says, tongue-incheek. Turning serious, he continues, “It was an easy decision for us. Robert was the right guy at the right time. He checked all the boxes. He had experience. He had contacts. And he had the ability to deal with the diverse group of PEO owners we had at that time. Plus, the fact that we could
hire him on a contract basis instead of having to hire someone full time was very helpful. And we just liked him. He is a down-to-earth guy, a real people person.”
Tort Reform Limits PEO Liability
The list of FAPEO’s accomplishments is long. In addition to passing the first SUTA bill in 1986, removing the industry from the sales tax on services in 1987, passing the 1989 workers’ compensation exclusivity of remedy bill, and obtaining licensure for the industry in 1991, the association successfully lobbied for important tort reform legislation.
“With each issue, we were getting more sophisticated in our efforts,” Mike Miller recalls. “Florida was the leader. In most instances we were the lone wolf. The other [states] looked at what we did and then, ultimately, came along and said, ‘What Florida’s doing makes a lot of sense. Let’s try it in our state.’”
The next victory for FAPEO was tort reform, which passed and was signed into law in 1999.
Miller remembers Ron Villella’s work on this issue, saying, “Ron called me and said Senator Skip Campbell and the Trial Bar were waiting to meet me in the senator’s office. When I got there, I was directed into a side office where a representative from the Trial Bar was waiting. I was told by Senator Campbell, ‘Don’t come out of there until you have tort reform legislation ready to go to the Senate.’ This tort reform language became law after Ron deftly worked the bill through the House and Senate, and it is now a bedrock of the PEO industry.”
Under Florida Statutes Section 768.098, Limitation of liability for employee leasing, even if a PEO is deemed a joint employer pursuant to Section 468.520, the PEO will not be held liable under Florida tort law for the tortious actions of another employer in that relationship or for the tortious acts of any jointly employed employee under that relationship as long as the PEO did not authorize or direct the tortious action or have actual knowledge of the conduct and fail to take appropriate action, and as long as proper language is included in the
Mike Miller continues to stress today that despite state tort reform, PEOs should take advantage of regulatory rules enacted by the Florida Board of Employee Leasing Companies and have specific language in their service agreements assigning direction and control of the worksite employees to the client, to the extent allowed by law.
Another Important Achievement: A Client SUTA Option
Another important achievement for FAPEO was creating a client SUTA option for PEOs. In July 2012, language creating a client SUTA option for PEOs was added to the governor’s unemployment compensation package. For already licensed Florida PEOs, it allowed a PEO to make a one-time election by July 1, 2012, to report and pay contributions under the contribution rate of the client, beginning on January 1, 2013. Each existing PEO was able to decide whether or not it was going to report under the PEO’s calculation, which is by the aggregate
of all of the PEO’s employees, or under the client SUTA option. For PEOs that had not yet gone through the licensure process at the Board of Employee Leasing Companies, the legislation provided that they have 30 days following licensure to elect the client SUTA option. If the client SUTA option is not elected during this 30-day period, traditional PEO reporting of SUTA is required.
FAPEO held special meetings for members prior to the election deadline to explain how the client SUTA option would affect their businesses so that members had all the information they needed to make an informed choice. FAPEO is proud of the strong working relationship the association has maintained with the Florida Department of Revenue since 1986, and the association worked closely with the department throughout the 2012 legislative process and the subsequent implementation of the client SUTA option.
As evidenced by the 78 PEOs that elected the client SUTA option by the initial deadline, it is clear that the efforts put forth by the FAPEO legislative team and members resulted in a significant achievement for the PEO industry in Florida.
What a Small Group of Committed Individuals Can Do
From the time the association was officially established on August 8, 1986, to now, FAPEO has been a voice for PEOs, educating the public, employers, employees, and state and federal lawmakers and regulators on the many benefits PEOs offer to businesses and to the economy of Florida. FAPEO’s story is a story about people, people who committed themselves to creating an industry and protecting it.
Mike Miller returns to his thoughts about the amazing things the industry’s members have accomplished.
“No one back in 1986 could have guessed where the industry would be today,” he says. “We were just novices, novices with a belief that the PEO industry was really an amazing benefit to the citizens of Florida, to small businesses, to the state. We set out to pass legislation that would enhance the industry’s presence here in Florida, and we were successful. It is amazing when you think of what a small group of men and women have been able to accomplish.”
Of course, this small group of association members needed a good legal advisor, and they found him in Mike Miller. The early members of the association can’t say enough about the critical role Miller played and continues to play in the industry. Actually, almost any conversation with any FAPEO member today includes mention of how much Mike Miller has done for the PEO industry.
Carlos Saladrigas says that Miller was instrumental in getting the licensing bill written and passed, saying, “We worked together very, very closely writing that bill. The debates of getting there within the association were lengthy and numerous because obviously not everybody wanted [regulation].”
About Miller, Rick Ratner says, “Even at the beginning, with state unemployment [compensation], he got us out of a lot of messes. The way the whole thing was crafted with ‘a’ right of direction and control is brilliant. I think Mike should get all the credit. [Without Mike’s efforts] who knows what would have happened to the industry. It could have just died [from] a million paper cuts from whatever Florida bureaucracy would have taken over. He’s an extraordinary person. I think the world of him. He’s ‘the guy,’ and not just in Florida. A lot of the states that have regulation have adopted the model in Florida that he wrote.”
Celeste Dockery reflects on the decision to hire Miller as the association’s general counsel. She recalls hearing other PEO business owners talk about how articulate he was and how well he had represented them in court or at hearings.
“[Those business owners] encouraged the association to take that step and hire him,” Dockery says. “It’s probably the best decision any PEO organization ever made. A lot of times, I’ll look at things that happen at the national level, and I’m just shocked at why they didn’t call Mike in for assistance.”
Mel Klinghoffer captures the satisfaction that he and his colleagues derive from working in the PEO industry when he says, “I always have fun, and I’ve always loved the industry. I love the fact that we put so many people to work and keep them working. We help the companies so that they can keep it working and operate their own company and make it profitable. We just do a lot of good things for a lot of good people. We’ve had a lot of people thank us over the years and a lot of customers tell us they didn’t know what they would do without us. That’s
really a good feeling. They love the services, and it allows them to focus on their own businesses, their own operations. We feel like we help a lot of people, and that’s a really good feeling.”
To a person, the PEO owners and managers interviewed for this history love the industry. The phrase “it’s in your blood” comes up again and again.
Rick Ratner says he tried to retire from the industry and found he couldn’t.
“We’ve been so close to it for so long,” he says. “If you had a business, why would you operate without using a PEO? We changed the way businesses are run these days.”
1 Source: PEO101.com
Editor’s Note: The problem with history is that the people making it rarely know it at the time. It’s only as we look back that we understand momentous events for what they are. Contemporaneous records of the early days of the PEO industry are hard to come by. We are grateful to the early participants in the industry’s state association who shared their recollections recorded here. This history is by no means comprehensive. There were many important participants beyond the ones interviewed or mentioned (for example, Jim Haggerty was one of the first employee leasing owners in Florida, and Calvert Courtney brokered the sale of many companies). We thank all association members, past and present, for their contributions to a vibrant PEO industry in the state of Florida.