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In Professional Employer Organization (PEO) arrangements, the PEO is generally recognized as the employer under common law principles. This relationship is characterized by the PEO taking on significant employer responsibilities, such as managing payroll, benefits, and compliance with employment laws for the employees that it co-employs with a client company.

This dual-employment model allows the client company to focus on its core business operations while the PEO handles HR-related tasks. The PEO effectively becomes the employer of record, meaning it is responsible for tax liabilities and other employer obligations related to those employees. This is crucial for understanding the legal dynamics involved, as the PEO assumes significant roles in managing the workforce and providing employment-related services.

The client company remains involved in the day-to-day management of the employees and can dictate work duties, but it does not bear the same level of responsibility for employment-related challenges. Therefore, referring solely to the PEO as the employer accurately captures the legal implications of the PEO arrangement, distinguishing how employer responsibilities are delineated within this partnership.