When it comes to managing business operations, many companies turn to Professional Employer Organizations (PEOs) to handle essential HR functions. While PEOs provide significant value in areas like payroll, compliance, and benefits administration, they are often mistaken for legal advisors. However, it’s crucial to understand that a PEO is not a lawyer and cannot replace the role of legal counsel. Here’s why:
- A PEO Provides HR and Administrative Support, Not Legal Advice
A PEO’s primary function is to manage human resources, payroll, benefits, and compliance with employment laws to ensure businesses stay in line with regulations. A PEO can offer HR guidance and support, but they are not able provide actual legal representation or offer legal advice.
Lawyers are trained to provide legal guidance, draft legal documents, and represent businesses in legal matters. Lawyers can advise on complex legal issues such as leave laws, discrimination risks and complex discipline and termination issues. Lawyers can also represent your business in any legal proceeding or investigation. Additionally, Lawyers can draft, review and revise your policies and practices to ensure they align with employment laws.
- PEOs Are Not Experts in the Law
PEO’s can offer guidance and support and stay up to date about compliance related to many employment laws, but they are not trained to interpret the laws and are not always equipped to understand when a company is required to comply.
Employment laws are at times very nuanced and complicated and they frequently change. There are federal, state and some city employment laws that can apply concurrently. Additionally, many laws vastly differ depending on what state an employee is located in. Lawyers are trained to research and interpret these laws, understand when certain laws apply and stay up to date on how new laws, orders, regulations and case law can impact employment laws.
- PEOs Are Not Licensed to Practice Law
PEOs, while experienced in HR compliance, do not hold law degrees or legal licenses and cannot interpret laws or represent clients in court. PEO’s are also not allowed to provide legal advice because they are not licensed to practice law.
Lawyers must comply with licensing requirements to practice law and are bound by ethical and professional obligations in order to be able to provide legal advice tailored to their clients. Additionally, if your business is facing litigation, contract disputes, or regulatory investigations, only a licensed attorney can provide legal representation inside and outside of the courtroom.
- Legal Advice is Confidential and Privileged
Attorney-client privilege protects communications between businesses and their lawyers, ensuring confidentiality in legal matters. PEOs do not offer privileged advice, meaning any information shared with them is not legally protected in the same way.
While PEOs may play a crucial role in helping businesses manage their workforce efficiently, they should not be mistaken for legal professionals. So, although PEO’s may be able to implement policies that align with employment laws or perform administrative HR functions, if your business faces a lawsuit, needs to draft complex contracts, or needs legal advice about an employment scenario, an attorney is best suited to navigate these legal challenges. Understanding the difference ensures that businesses receive the right type of guidance when handling HR and legal matters.
If your company needs legal assistance, contact Gutwein Law at 765.423.7900.
