Senate passes AB 1515 to regulate Professional Employer Organizations in California

A significant step towards regulating California's Professional Employer Organizations (PEOs) was taken during the Senate Labor, Public Employment and Retirement Committee meeting on July 9, 2025. Assembly Bill 1515, presented by Assembly Member Ortega, aims to establish a clear statutory definition of PEOs and require them to register with the state to operate legally.

Currently, California lacks a formal definition and regulatory framework for PEOs, which provide essential HR and payroll services to small businesses. This bill seeks to fill that gap, aligning California with 40 other states that have already implemented similar regulations. The initiative is seen as a necessary move to enhance industry standards and protect stakeholders.

Ben Ebnick, representing the National Association of PEOs, emphasized the importance of this legislation, stating, "We think that those type of standards are good for the industry." He noted that while PEOs have successfully operated in California for over three decades, the absence of clear regulations creates confusion and potential risks.

The committee voted in favor of the bill, with a motion to pass it to the appropriations committee. The vote was 3 to 0, indicating strong support for the initiative. As discussions continue, the bill is expected to evolve further, with input from both PEO representatives and labor advocates to refine the registration process and outline the responsibilities of PEOs in the workplace.

This legislative move is poised to bring much-needed clarity and structure to the PEO industry in California, potentially benefiting small businesses and their employees across the state.