REPORT TITLE:
Employee leasing


DESCRIPTION:
Requires employee leasing companies to be licensed; grants a
general excise tax exemption for certain payments made to an
employee leasing company.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           199
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO EMPLOYEE LEASING COMPANIES.


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

 1      SECTION 1.  The legislature finds that in Hawaii and many
 
 2 other states the number and complexity of laws and rules that
 
 3 must be followed by a business require extensive knowledge and
 
 4 time.  One small mistake may result in fines or penalties to the
 
 5 business.  This is particularly true of small businesses that
 
 6 devote their full time to the business itself and then must
 
 7 devote additional time to meet the many laws and rules that apply
 
 8 to the business.  While meeting laws and rules are the cost of
 
 9 doing business, relief may be provided by employee leasing
 
10 companies that perform much of the paperwork required by laws and
 
11 rules.  The leasing company will be responsible for all the
 
12 records and requirements for the employee and will lease the
 
13 employee to the business.  The business can then concentrate on
 
14 the employee's work while the employee leasing company provides
 
15 the expertise necessary to meet legal requirements.  In return,
 
16 the business will pay to the employee leasing company a fee for
 
17 the services provided, and all costs, direct and indirect,
 
18 relating to the leased employees such as salaries, workers'
 
19 compensation costs, retirement plan payments, and the like.
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1      The employee leasing business is a growing area in many
 
 2 states other than Hawaii.  In Hawaii, the cost of using an
 
 3 employee leasing company is increased since payments, salaries,
 
 4 worker's compensation payments, and all others made to the
 
 5 employee leasing company, are subject to the general excise tax.
 
 6 Unlike hotels under section 237-24.7(1), orchard properties under
 
 7 section 237-24.7(4), or management companies related to entities
 
 8 engaged in the business of selling interstate or foreign
 
 9 telecommunications services under section 237-24.7(9), Hawaii
 
10 Revised Statutes, employee leasing companies do not have an
 
11 exemption from the general excise tax for worker related payments
 
12 and do not come within the agency exception of the general excise
 
13 tax.
 
14      While it is necessary to provide a general excise tax
 
15 exemption for employee leasing companies to encourage this
 
16 activity in Hawaii, the legislature notes that many states either
 
17 register or license these companies.  Research indicates that
 
18 this is done to protect the assigned workers.  In other states
 
19 where there are a number of employee leasing companies, it has
 
20 been found that some of the companies are not properly paying
 
21 withholding taxes, workers' compensation payments, and other
 
22 required payments.  The legislature finds that the employee
 
23 leasing industry should be encouraged in Hawaii, particularly in
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1 this time of economic problems to allow small businesses and
 
 2 others to concentrate on the business itself.  However, in return
 
 3 for the general excise tax exemption, employee leasing companies
 
 4 should be licensed and required to maintain minimum assets to
 
 5 protect their assigned employees.
 
 6      It is the purpose of this Act to license employee leasing
 
 7 companies and to provide a general excise tax exemption for
 
 8 certain payments made to employee leasing companies in a manner
 
 9 similar to that provided for the hotel and other industries.
 
10      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
11 a new chapter to be appropriately designated and to read as
 
12 follows:
 
13                             "CHAPTER
 
14                    EMPLOYEE LEASING COMPANIES
 
15      § -1 Definitions.  As used in this chapter:
 
16      "Applicant" means a business entity applying for a license
 
17 or renewal of a license under this chapter.
 
18      "Assigned employee" means an employee under an employee
 
19 leasing services arrangement whose work is performed in the
 
20 State.  The term does not include an employee hired to support or
 
21 supplement a client company's work force as temporary help.
 
22      "Client company" means a person that contracts with a
 
23 license holder and is assigned employees by the license holder
 
24 under that contract.
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1      "Department" means the department of labor and industrial
 
 2 relations.
 
 3      "Director" means the director of labor and industrial
 
 4 relations.
 
 5      "Employee leasing services" means an arrangement by which
 
 6 employees of a license holder are assigned to work at a client
 
 7 company and the employee's assignment is intended to be of a long
 
 8 term or continuing nature, rather than temporary.  The term does
 
 9 not include temporary help.
 
10      "Employee leasing company" means a business entity that
 
11 offers employee leasing services.
 
12      "Government entity" means this State, or an agency, county,
 
13 public corporation, or other subdivision of this State or a
 
14 county.
 
15      "License holder" means a person licensed under this chapter
 
16 to provide employee leasing services.
 
17      "Net worth" of an applicant means the applicant's assets
 
18 minus the applicant's liabilities, as shown on the applicant's
 
19 financial statement, or most recent federal income tax return,
 
20 plus the sum of any guarantees, letters of credit, or securities
 
21 that must be submitted to the department.
 
22      "Offer" means a proposal for acceptance or rejection that is
 
23 made in a form that the promises or performance to be rendered by
 
24 each party are reasonably certain.
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1      "Temporary help" means an arrangement by which an
 
 2 organization hires its own employees and assigns them to a client
 
 3 to support or supplement the client's work force in a special
 
 4 work situation, including:
 
 5      (1)  An employee absence;
 
 6      (2)  A temporary skill shortage;
 
 7      (3)  A seasonal workload; or
 
 8      (4)  A special assignment or project.
 
 9      § -2 License required.  No person shall engage in or
 
10 offer employee leasing services in Hawaii unless the person holds
 
11 a valid license issued under this chapter.
 
12      § -3 Net worth requirements.(a)  An applicant for an
 
13 original or renewal license shall demonstrate a net worth as
 
14 follows:
 
15      (1)  $50,000 if the applicant employs fewer that two-
 
16           hundred-fifty assigned employees;
 
17      (2)  $75,000 if the applicant employs at least two-hundred-
 
18           fifty but not more than seven-hundred-fifty assigned
 
19           employees; and
 
20      (3)  $100,000 if the applicant employs more that seven-
 
21           hundred-fifty assigned employees.
 
22      (b)  The applicant may demonstrate the applicant's net worth
 
23 to the department by providing the department with the
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1 applicant's financial statement or a copy of the applicant's most
 
 2 recent federal income tax return.  The applicant may also satisfy
 
 3 the net worth requirement through guarantees, letters of credit,
 
 4 a bond in an amount that demonstrates compliance with the
 
 5 requirements of subsection (a), or other security acceptable to
 
 6 the department.  A guarantee is not acceptable to satisfy this
 
 7 subsection unless the applicant submits sufficient evidence to
 
 8 satisfy the department that the guarantor has adequate resources
 
 9 to satisfy the obligations of the guarantee.
 
10      (c)  In computing net worth, an applicant shall include
 
11 adequate reserves for all taxes and insurance, including reserves
 
12 for claims incurred but not paid and for claims incurred but not
 
13 reported under plans of self-insurance for health benefits,
 
14 including workers' compensation, temporary disability insurance,
 
15 and prepaid health care.  The computation of net worth shall be
 
16 made in accordance with section 448, federal Internal Revenue
 
17 Code of 1986, as amended.
 
18      (d)  A document submitted to establish net worth must show
 
19 the net worth on a date not earlier that nine months before the
 
20 date on which the application is submitted.  A document submitted
 
21 to establish net worth must be prepared or certified by an
 
22 independent certified public accountant.  Information submitted
 
23 to the department is a public record under chapter 92F, except
 
24 information related to:
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1      (1)  Identification of client companies;
 
 2      (2)  Net worth;
 
 3      (3)  Financial statements; and
 
 4      (4)  Federal or state income tax returns.
 
 5      § -4 License application.(a)  In order to receive an
 
 6 employee leasing company license, a person shall file with the
 
 7 department a written application, a demonstration of net worth as
 
 8 required under section    -3, and the application fee.  The
 
 9 department shall require the applicant for a license to provide
 
10 the information necessary to determine that the applicant meets
 
11 the licensing requirements of this chapter.  Before denying a
 
12 license application, the department shall provide written notice
 
13 to the applicant specifying the reasons for denial.
 
14      (b)  Following denial or revocation of a license, and prior
 
15 to issuing a new license or reinstating a license, the department
 
16 shall consider:
 
17      (1)  The extent to which the applicant or license holder has
 
18           corrected any problems resulting in denial or
 
19           revocation; and
 
20      (2)  Whether the applicant or license holder has
 
21           demonstrated that the applicant or license holder has
 
22           exercised due diligence to avoid the reasons for the
 
23           denial or revocation.
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1 The applicant or license holder shall bear the burden of proof
 
 2 with respect to paragraphs (1) and (2).
 
 3      § -5 License issuance; term; renewal.(a)  The
 
 4 department shall issue a license to an applicant that the
 
 5 department determines has met the requirements of this chapter.
 
 6 The department shall notify the applicant of any deficiency in
 
 7 the application not later than the thirtieth day after the date
 
 8 on which the department received the application forms.  The
 
 9 department shall issue the license within ninety days after the
 
10 date on which the completed application is filed with the
 
11 department.
 
12      (b)  A license issued or renewed by the department under
 
13 this chapter is valid for two years from the date of the issuance
 
14 or renewal of the license.  The department shall renew a license
 
15 upon receipt of a completed renewal application form and payment
 
16 of the license renewal fee.
 
17      § -6 Fees.  (a)  Each applicant for an original or
 
18 renewal of an employee leasing company license shall pay to the
 
19 department before the issuance of the license or license renewal
 
20 a fee of $        for the two-year license period.
 
21      (b)  Fees collected under this chapter shall be deposited
 
22 into the state general fund.
 
23      § -7 License not assignable; change of name or location.
 
24 (a)  A license holder shall not conduct business under any name
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1 other than that specified in the license.  A license issued under
 
 2 this chapter is not assignable.  A license holder shall not
 
 3 conduct business under any fictitious or assumed name without
 
 4 prior written authorization from the department.  The department
 
 5 shall not authorize the use of any name that is similar to that
 
 6 of a public office or agency or to that of another license holder
 
 7 in a manner that the public may be confused or misled by the
 
 8 name's use.  A license holder shall not conduct business under
 
 9 more than one name unless the license holder has obtained a
 
10 separate license for each name.
 
11      (b)  A license holder may change the license holder's
 
12 licensed name at any time by notifying the department and paying
 
13 a fee of $        for each change of name.  A license holder may
 
14 change the license holder's name upon the renewal of the license
 
15 without the payment of the name change fee.
 
16      (c)  A license holder shall notify the department in writing
 
17 of:
 
18      (1)  Any change in location of the license holder's primary
 
19           business office;
 
20      (2)  The addition or more business offices;
 
21      (3)  Any change of ownership or control; or
 
22      (4)  Any change in the location of business records
 
23           maintained by the license holder.
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1      (d)  A license holder may amend the name specified in its
 
 2 license to add a trade name, trademark, service mark, or parent
 
 3 company name.  An amendment made under this subsection shall
 
 4 comply with the requirements imposed under subsection (a).   The
 
 5 department may charge a fee of $        for processing the
 
 6 amendment.
 
 7      (e)  A license holder offering employee leasing services in
 
 8 more than one state may advertise in this State using the name of
 
 9 its parent company or under a trade name, trademark, or service
 
10 mark.  The trade name, trademark, service mark, or parent company
 
11 named shall be listed on the license in addition to the licensed
 
12 name used by the license holder in this State.
 
13      (f)  Each written proposal provided to a prospective client
 
14 company and each contract between a license holder and a client
 
15 company or assigned employee shall clearly identify the name of
 
16 the license holder.  A proposal or contract may also identify the
 
17 trade name, trademark, service mark, or parent company name of
 
18 the license holder.  A license holder may use written materials
 
19 including forms, benefit information, letterhead, and business
 
20 cards that bear only the trade name, trademark, service mark, or
 
21 parent company name of the license holder.
 
22      § -8 Agreement; notice.(a)  A license holder shall
 
23 establish the terms of an employee leasing services agreement by
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1 a written contract between the license holder and the client
 
 2 company.
 
 3      (b)  The license holder shall give written notice of the
 
 4 agreement as it affects assigned employees to each employee
 
 5 assigned to a client company worksite.
 
 6      (c)  The written notice required by subsection (b) shall be
 
 7 given to each assigned employee not later than the first payday
 
 8 after the date on which that individual becomes an assigned
 
 9 employee.
 
10      § -9 Contract requirements.(a)  A contract between a
 
11 license holder and a client company shall provide that the
 
12 license holder:
 
13      (1)  Reserves the right of direction and control over
 
14           employees assigned to the client's worksite;
 
15      (2)  Assumes responsibility for the payment of wages to the
 
16           assigned employees without regard to payments by the
 
17           client to the license holder;
 
18      (3)  Assumes responsibility for the payment of payroll taxes
 
19           and the collection of taxes from the payroll of
 
20           assigned employees;
 
21      (4)  Retains the right to hire, fire, discipline, and
 
22           reassign the assigned employees; and
 
23      (5)  Retains the right of direction and control over the
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1           adoption of employment and safety policies and the
 
 2           management of workers' compensation claims, claim
 
 3           filings, and related procedures.
 
 4      (b)  Each license holder is responsible for the license
 
 5 holder's contractual duties and responsibilities to manage,
 
 6 maintain, collect, and make timely payments for:
 
 7      (1)  Insurance premiums;
 
 8      (2)  Benefit plans maintained by the license holder;
 
 9      (3)  Other employee withholding;
 
10      (4)  Any other expressed responsibility within the scope of
 
11           the contract for fulfilling the duties imposed under
 
12           this subsection, subsection (a), and sections    -15
 
13           and    -21.
 
14      § -10  Employee benefit plans  A license holder may
 
15 sponsor and maintain employee benefit plans for the benefit of
 
16 assigned employees.  A client company may include assigned
 
17 employees in any benefit plan sponsored by the client company.
 
18      § -11  Workers' compensation.(a)  A license holder may
 
19 contract with a client company to obtain workers' compensation
 
20 insurance for the license holder's assigned employees through an
 
21 insurance company and subject to the requirements of chapter 386.
 
22      (b)  If a license holder maintains workers' compensation
 
23 insurance, the license holder shall pay workers' compensation
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1 insurance premiums based on the experience rating of the client
 
 2 company.
 
 3      § -12  Health benefit plans.  A license holder shall not
 
 4 sponsor a plan of self-insurance for health benefits except as
 
 5 permitted by the Employee Retirement Income Security Act of 1974
 
 6 (29 USC section 1001 et seq) or as required by chapter 393.
 
 7      § -13  Unemployment taxes; payroll.(a)  A license holder
 
 8 is the employer of an assigned employee for the purposes of
 
 9 chapters 235 and 383.
 
10      § -14  Posting requirements.  Each license holder shall
 
11 post in a conspicuous place in the license holder's principal
 
12 place of business in this State the license issued under this
 
13 chapter.  Each license holder shall display, in a place that is
 
14 in clear and unobstructed public view, a notice stating that the
 
15 business operated at the location is licensed and regulated by
 
16 the department and that any questions and complaints should be
 
17 directed to the department.
 
18      § -15  Required information.  Each license holder shall:
 
19      (1)  Maintain adequate books and records in this State
 
20           regarding the license holder's duties and
 
21           responsibilities;
 
22      (2)  Maintain and make available at all times to the
 
23           director the following information, which shall be
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1           treated as proprietary and confidential under chapter
 
 2           92F and is exempt from disclosure to persons other than
 
 3           other governmental agencies having a reasonable,
 
 4           legitimate purpose for obtaining the information:
 
 5           (A)  The correct name, address, and telephone number of
 
 6                each client company; and
 
 7           (B)  Each client company contract.
 
 8      § -16  Agent for service of process.  Each license holder
 
 9 shall maintain a business office and a registered agent for
 
10 service of process in this State.
 
11      § -17  Prohibited acts.(a)  A person shall not:
 
12      (1)  Engage in or offer employee leasing services without
 
13           holding a license under this chapter as an employee
 
14           leasing company;
 
15      (2)  Use the name or title "employee leasing company",
 
16           "staff leasing company", "licensed staff leasing
 
17           company", "licensed employee leasing company",
 
18           "professional employer organization", or
 
19           "administrative employer" or otherwise represent that
 
20           the person or entity is licensed under this chapter
 
21           unless the person or entity holds a license issued
 
22           under this chapter;
 
23      (3)  Represent as the person's own the license of another
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1           person or represent that a person is licensed if the
 
 2           person does not hold a license;
 
 3      (4)  Use or attempt to use a license that has expired or
 
 4           been revoked.
 
 5      (b)  Violation of this section shall be a misdemeanor.
 
 6      § -18  Interference with collective bargaining prohibited.
 
 7 For the purposes of the collective bargaining process, including,
 
 8 but not limited to, the right to organize employee units based
 
 9 upon specific worksites, each employee leasing company shall be
 
10 bound by labor relations law and shall be responsible for any
 
11 violation of a collective bargaining agreement covering any of
 
12 its assigned employees to which it is a party.  An employee
 
13 leasing company shall not reassign assigned employees to
 
14 different client companies for the purpose of interfering with
 
15 the terms and conditions of any collective bargaining agreement
 
16 or organizational activity.  Nothing in this section shall
 
17 relieve a client company of its obligations under any applicable
 
18 labor relations law.
 
19      § -19  Grounds for disciplinary action.(a) The
 
20 department may take disciplinary action against a license holder
 
21 on any of the following grounds:
 
22      (1)  Being convicted of:
 
23           (A)  Bribery, fraud, or intentional or material
 

 
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                                     S.B. NO.           199
                                                        
                                                        

 
 1                misrepresentation in obtaining, attempting to
 
 2                obtain, or renewing a license;
 
 3           (B)  A crime that relates to the operation of an
 
 4                employee leasing company or the ability of the
 
 5                license holder to operate an employee leasing
 
 6                company;
 
 7           (C)  A crime that relates to the establishment or
 
 8                maintenance of a self-insurance program, whether
 
 9                health insurance, workers' compensation insurance,
 
10                or other insurance;
 
11           (D)  A crime that relates to fraud, deceit, or
 
12                misconduct in the operation of an employee leasing
 
13                company;
 
14      (2)  Giving materially false or forged evidence to the
 
15           department in connection with obtaining or renewing a
 
16           license or in connection with disciplinary proceeding
 
17           under this chapter;
 
18      (3)  Transferring or attempting to transfer a license issued
 
19           under this chapter;
 
20      (4)  Violating this chapter or any order or rule issued by
 
21           the department or director under this chapter;
 
22      (5)  Failing to cooperate with an investigation,
 
23           examination, or audit of the license holder's records
 

 
Page 17                                                    
                                     S.B. NO.           199
                                                        
                                                        

 
 1           conducted by the license holder's insurance company or
 
 2           the insurance company's designee, as allowed by the
 
 3           insurance contract or authorized by law;
 
 4      (6)  Failing to notify the department of a change in
 
 5           ownership, principal business address, or the address
 
 6           of accounts and records within thirty days after the
 
 7           change;
 
 8      (7)  Failing to correct any tax filings or payment
 
 9           deficiencies within a reasonable time as determined by
 
10           the department of taxation;
 
11      (8)  Refusing, after reasonable notice, to meet reasonable
 
12           health and safety requirements within the license
 
13           holder's control and made known to the license holder
 
14           by a federal or state agency;
 
15      (9)  Being delinquent in the payment of the license holder's
 
16           insurance premiums other than those subject to
 
17           legitimate dispute;
 
18     (10)  Being delinquent in the payment of any employee benefit
 
19           plan premiums or contributions other than those subject
 
20           to a legitimate dispute;
 
21     (11)  Failing to maintain the net worth requirements required
 
22           under section    -3.
 
23      (b)  For the purposes of this section, "conviction" includes
 

 
Page 18                                                    
                                     S.B. NO.           199
                                                        
                                                        

 
 1 a plea of nolo contendere or a finding of guilt, regardless of
 
 2 adjudication.
 
 3      § -20  Sanctions.(a)  Upon a finding that a ground for
 
 4 disciplinary action exists under one or more provisions of
 
 5 section    -18 or    -19, the department may impose
 
 6 administrative penalties in an amount not less than $        and
 
 7 not more than $       .
 
 8      (b)  Disciplinary action may be taken, an application for a
 
 9 new or renewal license may be denied, or a license may be revoked
 
10 by the department subject to chapter 91, with notice and
 
11 opportunity for hearing provided to the affected applicant,
 
12 license holder.
 
13      (c)  Upon revocation of a license, the license holder shall
 
14 immediately return the revoked license to the department and the
 
15 department shall notify the department of taxation of the date of
 
16 the revocation.
 
17      § -21  Effect of other laws.(a)  This chapter does not
 
18 exempt a client company or any assigned employee, from any other
 
19 license requirements imposed under federal, state, or county law,
 
20 including without limitation, license requirements, labor or
 
21 employment laws, collective bargaining rights, anti-
 
22 discrimination provisions, or other laws with respect to the
 
23 protection and rights of employees.  The assigned employee shall
 

 
Page 19                                                    
                                     S.B. NO.           199
                                                        
                                                        

 
 1 be deemed to be an employee of the client company with respect to
 
 2 the enforcement of those employee rights.  The client company
 
 3 shall be deemed to have satisfied its obligations to its assigned
 
 4 employees under any applicable law, including, without limitation
 
 5 workers' compensation laws, the Hawaii prepaid health law,
 
 6 temporary disability insurance law, and tax withholding and
 
 7 reporting laws if and to the extent that these obligations are
 
 8 satisfied by the employee leasing company acting as employer of
 
 9 the assigned employee.
 
10      (b)  An employee who is licensed, registered, or certified
 
11 under state law and who is assigned to a client company shall be
 
12 considered to be an employee of the client company for the
 
13 purpose of that license, registration, or certification.
 
14      (c)  A license holder is not engaged in the unauthorized
 
15 practice of an occupation, trade, or profession that is licensed,
 
16 certified, or otherwise regulated by a government entity solely
 
17 by entering into a employee leasing arrangement with a client
 
18 company and assigned employees.
 
19      § -22  Exemptions.  This chapter shall not apply to labor
 
20 organizations, government entities, or temporary help service.
 
21      § -23  Director's investigatory powers; rules.(a)  If
 
22 the director has a reliable basis to believe that any license
 
23 holder is violating this chapter, the director shall have the
 

 
Page 20                                                    
                                     S.B. NO.           199
                                                        
                                                        

 
 1 right to review and inspect all of the license holder's books and
 
 2 records during regular business hours at the license holder's
 
 3 place of business.
 
 4      (b)  The director may adopt rules under chapter 91 for the
 
 5 purposes of this chapter."
 
 6      SECTION 3.  Chapter 237, Hawaii Revised Statutes, is amended
 
 7 by adding a new section to be appropriately designated and to
 
 8 read as follows:
 
 9      "§237-     Additional amounts not taxable.  In addition to
 
10 other amounts exempt from taxation under this chapter, this
 
11 chapter shall not apply to amounts received by an employee
 
12 leasing company licensed under chapter     from a client company
 
13 as defined in section    -1 on behalf of an assigned employee as
 
14 defined in section    -1 equal to and which are disbursed by the
 
15 employee leasing company for an assigned employee's wages,
 
16 salaries, payroll taxes, insurance premiums, and benefits,
 
17 including retirement, vacation, sick pay, and health benefits."
 
18      SECTION 4.  Section 386-121, Hawaii Revised Statutes, is
 
19 amended by amending subsection (a) to read as follows:
 
20      "(a)  Employers, except the State, any county or political
 
21 subdivision of the State, or other public entity within the
 
22 State, shall secure compensation to their employees in one of the
 
23 following ways:
 

 
Page 21                                                    
                                     S.B. NO.           199
                                                        
                                                        

 
 1      (1)  By insuring and keeping insured the payment of
 
 2           compensation with any stock, mutual, reciprocal, or
 
 3           other insurer authorized to transact the business of
 
 4           workers' compensation insurance in the State;
 
 5      (2)  By depositing and maintaining with the state director
 
 6           of finance security satisfactory to the director of
 
 7           labor and industrial relations securing the payment by
 
 8           the employer of compensation according to the terms of
 
 9           this chapter;
 
10      (3)  Upon furnishing satisfactory proof to the director of
 
11           the employer's solvency and financial ability to pay
 
12           the compensation and benefits herein provided, no
 
13           insurance or security shall be required, and the
 
14           employer shall make payments directly to the employer's
 
15           employees, as they may become entitled to receive the
 
16           same under the terms and conditions of this chapter;
 
17      (4)  By membership in a workers' compensation self-insurance
 
18           group with a valid certificate of approval under
 
19           section 386-194; [or]
 
20      (5)  By membership in a workers' compensation group insured
 
21           by a captive insurer under chapter 431, article 19[.];
 
22           or
 
23      (6)  By contract with an employee leasing company licensed
 

 
Page 22                                                    
                                     S.B. NO.           199
                                                        
                                                        

 
 1           under chapter     whereby the employee leasing company
 
 2           purchases workers' compensation insurance for employees
 
 3           assigned to a client company as defined in
 
 4           section    -1.
 
 5      Any person who wilfully misrepresents any fact in order to
 
 6 obtain the benefits of paragraph (3) shall be guilty of a
 
 7 misdemeanor."
 
 8      SECTION 5.  Any employee leasing company as defined in
 
 9 section    -1, Hawaii Revised Statutes, in business in Hawaii
 
10 before the effective date of section 1 of this Act shall be
 
11 licensed under section 1 of this Act within ninety days after the
 
12 effective date of this Act and shall not be subject to section 1
 
13 of this Act until the expiration of the ninety day period.
 
14 Section 3 of this Act shall not apply to any employee leasing
 
15 company in business in Hawaii before the effective date of this
 
16 Act until the employee leasing company is licensed under
 
17 section 1 of this Act.
 
18      SECTION 6.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 7.  This Act shall take effect on July 1, 1999, and
 
21 section 3 shall apply to gross income and gross proceeds received
 
22 after June 30, 1999.
 
23 
 
24                           INTRODUCED BY:  _______________________