REPORT TITLE:
Unemployment; Disputed Amounts


DESCRIPTION:
Establishes a safe harbor declaration for individuals and
business entities with no employees to appeal any determinations
by DLIR without prior deposit of disputed amounts.  (HB471 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        471
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO EMPLOYMENT SECURITY.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Many small businesses today, in an attempt to
 
 2 reduce costs, operate their businesses without employees.
 
 3 Working exclusively with independent contractors, these small
 
 4 businesses are not subject to the employment security law.  
 
 5      If the department of labor and industrial relations
 
 6 determines ex-parte that the independent contractors of a
 
 7 business are actually employees, then the business is subject to
 
 8 the immediate payment of any amounts owed plus penalties and
 
 9 fines.  Only upon payment of any disputed amounts can the
 
10 business appeal the determinations.  Sometimes, the amounts that
 
11 must be paid may be so devastatingly large that the survival of a
 
12 small business is threatened.  While the business may ultimately
 
13 prevail and receive the disputed amount back, this process may
 
14 take up to three years.
 
15      The legislature believes in supporting a business-friendly
 
16 atmosphere.  The economic success of the State is dependent on
 
17 balancing the department of labor and industrial relation's need
 
18 to be able to enforce the law and a business enterprise's need to
 
19 operate its business as it intends.  
 

 
Page 2                                                     471
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      The purpose of this Act is to create an opportunity for
 
 2 businesses that intend to operate without employees to make a
 
 3 clear statement of that intent by creating a safe harbor
 
 4 declaration that will allow businesses to identify themselves to
 
 5 the department of labor and industrial relations as entities that
 
 6 choose to operate without employees. 
 
 7      SECTION 2.  Chapter 383, Hawaii Revised Statutes, is amended
 
 8 by adding a new section to be appropriately designated and to
 
 9 read as follows:
 
10      "§383-    Safe harbor declaration.  (a)  Any person or
 
11 business entity may file with the department a safe harbor
 
12 declaration stating that it operates without employees provided
 
13 that:
 
14      (1)  The person or business entity does not intend and in
 
15           fact does not hire employees for employment as defined
 
16           in section 383-2;
 
17      (2)  No master and servant relationship exists; and
 
18      (3)  The person or business entity maintains the elements of
 
19           no master and servant relationship as set out in
 
20           section 386-6, to the satisfaction of the department.
 
21 A safe harbor declaration shall be prima facie evidence that the
 
22 person or business entity does not intend to establish any master
 
23 and servant relationships.
 

 
Page 3                                                     471
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (b)  A safe harbor declaration shall be valid for one year
 
 2 or until withdrawn.  Safe harbor declarations shall be renewed
 
 3 annually.  A safe harbor declaration shall be withdrawn within
 
 4 thirty days of hiring an employee.
 
 5      (c)  Fraudulent filing or failure to withdraw a safe harbor
 
 6 declaration shall be subject to an administrative fine of not
 
 7 more than $      for each day a violation continues, up to a
 
 8 maximum of $     ."
 
 9      SECTION 3.  Section 383-74, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§383-74  Appeal; correction of assessment or contributions.
 
12 Any person aggrieved by any assessment of a contribution or a
 
13 penalty or contributions assessed pursuant to this chapter[,
 
14 having paid the contribution or penalty,] may appeal from the
 
15 assessment by filing a written notice of appeal with the
 
16 department within twenty days after the date of mailing of the
 
17 notice of assessment to the person's last known address[.];
 
18 provided that:
 
19      (1)  The full amount of the disputed contribution and
 
20           penalty is submitted with the appeal; or
 
21      (2)  A copy of a current safe harbor declaration accompanies
 
22           the appeal.
 

 
 
 
Page 4                                                     471
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 The appeal shall be heard by the referee in accordance with
 
 2 applicable provisions of sections 383-38 and 383-39.  Any amount
 
 3 determined to have been erroneously paid as a result of the final
 
 4 determination of the appeal in favor of the employing unit, or as
 
 5 a result of a final judgment for the employing unit in an action
 
 6 brought pursuant to section 40-35, shall be refunded, without
 
 7 interest and without the addition of any other costs or charges,
 
 8 in the same manner as other refunds under this chapter.
 
 9 Notwithstanding any other provisions of law to the contrary, any
 
10 amount which is paid under protest or which is covered by any
 
11 appeal or action referred to in this section shall not be held as
 
12 a special deposit, but the amount shall in all respects be
 
13 subject to sections 383-122 and 383-127 to the same effect as
 
14 though the amount had not been paid under protest and was not
 
15 covered by the appeal or action."
 
16      SECTION 4.  Statutory material to be repealed is bracketed.
 
17 New statutory material is underscored.
 
18      SECTION 5.  This Act shall take effect upon its approval.