Employee Leasing Quotes : PEO Blog

Maybe a hand full of times every year, I’m asked about the personal guaranty on an employee leasing contract. Why is it there and what’s the purpose?

The main purpose of this area of the contract has to do with payroll. Here’s the scenario: if Joe, the owner of ABC plumbing, calls the employee leasing company with his payroll for employees, then closes business the next day and takes off (without paying for his payroll)- the PEO is responsible for paying the employees who got ditched.
In other words, if incorporating can personally shield you from liability as a result of bad business practices, this section can strip that away, and in this case- allow the PEO to go after Joe.
I’m not aware of any cases or issues that arise where the personal guaranty has purpose. If you know of any, write me a note. I would be interested in hearing about it.

Maybe a hand full of times each year I’m asked about the personal guaranty on an employee leasing contract. Why is it there and what’s the purpose?

The main purpose of this area in the contract has to do with payroll. Here’s the scenario: If Joe, the owner of ABC Plumbing, calls in hours for payroll on his employees, then closes the business the next day and takes off – the PEO is responsible for paying the employees who got ditched.

So, if incorporating can shield you personally from liability as a result of bad business practices – this section can strip that privilege away and in this case allow the PEO to go after Joe personally. I’m not aware of any other cases or regular issues that arise where the personal guaranty has been used. If you know, write me a note - I would be interested in hearing about it.