STAND. COM. REP. NO. 674-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2518
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Labor and Public Employment and Finance,
to which was referred H.B. No. 2518 entitled: 

     "A BILL FOR AN ACT RELATING TO PUBLIC EMPLOYMENT,"

beg leave to report as follows:

    The purpose of this bill, as received by your Committees, is
to implement two constitutional mandates that:

    (1) There be a civil service based on merit; and

    (2) Public employees have the right to bargain collectively.

    The bill, as received, repealed 11 chapters of title 7 of the
Hawaii Revised Statutes (HRS), entitled "Public Officers and
Employees," and eight statutes.  At the hearing, no fewer than 49
individuals and organizations submitted testimony in support and
opposition.  Your Committees recognize the complex nature of this
bill, as submitted, and the potential impact it would have on
more than 52,000 government employees.

    Upon careful consideration, your Committees have amended this
bill by replacing its entire contents.  As amended, this bill
addresses the following areas of concern.



 
 
 
 
 
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    1. PURPOSE

    The purpose of this bill, as reflected in section 1, is to
reform public employment laws to improve the efficiency and
effectiveness of government consistent with the merit principles
under article XVI, section 1, and the right of public employees
to organize for the purpose of collective bargaining under
article XIII, section 2, of the Hawaii State Constitution.


    2. PERFORMANCE

    Your Committees recognize that under section 76-1, HRS, the
retention of "unnecessary and inefficient employees" in public
employment is inimical to the merit principles.  While section
76-41, HRS, provides for the annual review and rating of employee
performance, no meaningful consequence (except a denial of step
increment) has been known to attach to a substandard performance
rating or to the continued substandard performance by certain
civil servants.  Those who are charged with conducting the
performance evaluations are not held accountable for the lack of
true and accurate appraisals, and the right of an employee to
challenge an adverse personnel action is inadequately defined.

    Accordingly, your Committees amended section 76-41, HRS, in
section 8 of this bill to authorize the suspension, demotion,
transfer, or removal of employees who continue to receive
substandard rating evaluations after they have been given
adequate forewarning and retraining.  Employees shall retain
their right to challenge adverse actions under grievance
procedures pursuant to law (See sections 76-42, 89-10(a), 89-
11(a), HRS).  Section 8 of this bill also requires public
officers and employees who are excluded from collective
bargaining to certify all performance ratings of subordinate
personnel to ensure compliance with section 76-1, HRS.

    To have a meaningful performance-based system in the public
sector, top level administrators and managers must be held
responsible for certifying that performance ratings of their
subordinates are true and accurate.  To ensure accountability,
section 6 of the bill authorizes the suspension, demotion,
transfer, or removal of a public officer or employee excluded
from collective bargaining who falsely certifies that a
subordinate employee is "necessary and efficient," when that is
clearly not the case.  Specifically, excluded personnel shall be
duty bound to certify that they have taken all reasonable
measures to eliminate subordinates who are "unnecessary and
inefficient employees."


 
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    Further, section 21 of this bill makes an appropriation for
the development of inservice training programs to improve the
quality of service provided by public employees.


    3. AUTONOMY

    As the Hawaii Supreme Court held in Hawaii Government
Employees' Association v. County of Maui, 59 Haw. 65, 87 (1978)
the policies underlying the civil service and compensation laws
are statewide in application and "uniformity in the
administration of the law is essential to its success."  As
important as home rule may appear for the counties, there are
equally important public policy considerations that favor the
retention of a statewide merit system.  Thus, for those who
continue to face discrimination on the basis of gender, the
principle of equal pay for equal work remains as relevant and
vital today as it was half a century ago.

    However, recent developments suggest that the priorities of
certain counties may not have been properly considered or
addressed under the existing structure of multi-employer
bargaining under chapter 89, HRS.  The voting process under
section 89-6(b), HRS, appears unduly weighted in favor of the
State even where it employs none or a few bargaining unit
employees.  The Superintendent of Education, the President of the
University of Hawaii, Chief Justice, and Chief Executive Officer
of the Hawaii Health Systems Corporation are not included in the
collective bargaining process.

    To afford all public employers an appropriate role in the
bargaining process, your Committees, in sections 12 and 13 of the
bill have redefined "employer" or "public employer" to include
all chief executives of relevant employer jurisdictions and
adjusted the votes fairly within the relevant bargaining units.
In bargaining units 11 (firefighters) and 12 (police), where the
State employs fewer firefighters and no police officers, the
relative votes of the State and the counties have been modified
to give the counties a collective majority.

    Section 14 of the bill amends section 89-10, HRS, to
authorize separate employer jurisdictions greater flexibility in
negotiating memoranda of agreement with exclusive representatives
of public employees to improve the efficiency and effectiveness
of their respective operations.  No consent or approval of other
public employers is required.  The duration of all memoranda of
agreement shall run concurrently with applicable multi-employer
collective bargaining agreements whose expiration dates are set
by statute unless extended by mutual consent in writing when the

 
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pertinent multi-employer agreement is either extended or a new
one is negotiated.

    In sections 3 and 7 of the bill, greater autonomy is afforded
to all jurisdictions to establish new classification and
recruitment procedures for themselves, with the express condition
that the principle of equal pay for equal work on a statewide
basis is assured.  In section 7 of the bill, each jurisdiction is
allowed to bypass rulemaking requirements relating to
classification and recruitment.


    4. ARBITRATION

    Recently, state and county representatives have raised
concerns relating to the cost implications of mandatory
arbitration in bargaining units 2, 3, 4, 6, 8, 9, 10, and 13.
Invariably, arbitrators from outside Hawaii play a critical role
in arbitrating disputes over cost items, and arbitration awards
are final and binding under section 89-11, HRS.  Although the
criteria set forth in that section require consideration of such
factors as "financial ability of the employer to meet these
costs" or the "present and future general economic conditions of
the counties and the State," the perception exists that
arbitrators are not sensitive enough to the employer's inability
to pay.

    At the same time, public employers recognize that without
mandatory arbitration, public employees should be afforded a
meaningful right to strike.  That right is seriously curtailed at
present because "essential employees" and "essential positions"
as defined in section 89-2, HRS, have been broadly interpreted
under the proscriptions of section 89-12(c), HRS.  On balance,
public employers favor prohibiting mandatory arbitration in units
2, 3, 4, 8, 9, 10, and 13, and restoring a meaningful right to
strike to bargaining unit employees.  Of course, the change
should not affect bargaining unit 11 (firefighters) and unit 12
(police), where serious public safety and health considerations
outweigh the disadvantages or concerns regarding arbitration
under present circumstances.

    Section 15 of the bill amends section 89-11(d), HRS, to
exclude mandatory arbitration for bargaining units 2, 3, 4, 6, 8,
9, 10, and 13.  In consideration of this revision, section 16 of
the bill restores a meaningful right to strike under section 89-
12, HRS.  References to "essential employee" and "essential
position" have been deleted from section 89-2, HRS, in section 12
of the bill to conform with these changes.  These amendments are
consistent with the need to re-establish a proper balance in the

 
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relationship between public employers and public employees, which
is fundamental to collective bargaining in the public sector.


    5. MANAGEMENT

    Some chief executives maintain that they should be authorized
to hire and fire all top level managers and administrators in
government to carry out the mandate of the people who elected
them to office.  New employees who are responsive to change
should be brought aboard notwithstanding chapters 76 and 77, HRS.
As meritorious as that position may be, your Committees have long
recognized that a system based on political patronage is contrary
to positive principles of public administration established in
article XVI, section 1 of our Constitution.  Exempting public
managers and administrators from civil service coverage erodes
the openness, merit, and independence that remain at the heart of
modern government.

    However, your Committees recognize that top level managers
and administrators have a special responsibility to ensure that
government is made more efficient and effective.  Accountability
for performance by these excluded personnel is critical to our
overall goals.  Accordingly, section 17 of this bill amends
section 89C-2, HRS, to require compliance with performance-based
standards as a condition for receipt of wage adjustments.  In
addition, section 6 of the bill requires excluded officers and
employees to certify performance appraisals of those subordinates
and authorizes remedial actions when they falsely certify that a
subordinate employee is necessary and efficient. 


    6. OVERTIME

    Currently, overtime pay is included in the calculation of
"average final compensation" as defined in section 88-21, HRS.
The responsibility to assign overtime is delegated to top level
managers and administrators, who are required to maintain or
expand essential services with fewer employees.  The situation
has given rise to concern that certain employees in anticipation
of retirement deliberately assign to themselves or others
excessive overtime solely to boost retirement benefits.
Obviously, such a practice by employees is improper and should be
prohibited. 

    Section 5 of this bill prohibits the excessive assignment of
overtime for the sole purpose of increasing any employee's
average final compensation under section 88-21, HRS.  Overtime
compensation improperly received must be deducted from the

 
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calculation of retirement benefits by the employees' retirement
system.  While more drastic proposals have been offered on this
matter, your Committees recognize there are constitutional limits
prohibiting the impairment or diminution of "accrued benefits" in
article XVI, section 2 of the State Constitution.  Moreover, it
would be arbitrary and capricious to punish all beneficiaries for
the misdeeds of only certain individuals.


    7. REPAYMENTS

    In the administration of chapter 79, HRS, certain departments
of the State continue to experience difficulty in the calculation
of sick leave, vacation, worker's compensation, and other paid
leaves.  Mistakes of fact and of law result in the inadvertent
overpayment of employees.  The repayment procedures are
cumbersome and costly.  Under existing laws, the exhaustion of
chapter 91, HRS, procedures is a necessary precondition for
collecting an indebtedness to government.

    To streamline the process, section 11 of the bill amends
section 78-12(e), HRS, to permit the employer to immediately
deduct alleged overpayments that have occurred within one year.
The employee is afforded the right to file a grievance under
applicable procedures and receive remedies if the deduction was
improper.  Moreover, it is the intent of your Committees that the
burden of proof in this process be placed on the employee to show
that there was no overpayment.  The availability of meaningful
remedies comports with the requirements of due process and
fairness.  At the same time, it affords government the right to
obtain repayment of salary payments immediately.


    8. DRUG TESTING

    The constitutional right of privacy continues to limit the
scope of drug testing of job applicants for public employment and
public officers and employees.  See Chandler v. Miller, 520 U.S.
305, 137 L.Ed. 2d 513 (1997) (candidates for state office could
not be required to take a drug test).

    Government is allowed to conduct drug tests without
individualized suspicion when there is a  "special need"
outweighing the individual's privacy interest.  See Skinner v.
Railway Labor Executives' Association, 489 U.S. 602 (1989) and
National Treasury Employees v. Von Raab, 489 U.S. 656 (1989).


 
 
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    Public safety is a recognized "special need."  See
International Brotherhood of Teamsters v. Department of
Transportation, 932 F.2d 1292 (9th Cir. 1991).

    Your Committees recognize that there is a problem with drugs
and drug testing, and your Committees intend to incorporate the
"two strikes and out" policy for those who fail drug testing.

    In addition, although drug testing may be allowed in certain
instances, the procedures and sanctions for a positive drug test
are mandatory subjects of collective bargaining.  See United
Public Workers, AFSCME, Local 646, AFL-CIO v. Stephen Yamashiro
et al., Case No. CE-01-260; Order No. 1277 (1/12/96) (requiring
bargaining over DOT drug and alcohol testing for safety sensitive
positions).  The law in the private sector is the same on this
issue.  See Johnson-Bateman Co., 295 NLRB No. 26.

    However, your Committees believe that drug testing of
applicants for government employment in safety sensitive
positions should be permitted because of the "special need"
outweighing concerns for individual privacy.  In the private
sector bargaining, drug testing for job applicants is not a
mandatory subject of collective bargaining.  See Star Tribune
Division, 295 NLRB No. 53 (1989).  Section 4 of this bill
provides the necessary authorization for drug testing for persons
considered for safety sensitive positions and the rejection of
job applicants who test positive for drugs.

    Safety sensitive positions include:

    (1)  Those positions requiring the ability carry to firearms;

    (2)  Positions located in an adult correctional facility or
         youth correction facility;

    (3)  Positions authorized to administer controlled
         substances;

    (4)  Positions requiring a commercial driver's license;

    (5)  Positions requiring unimpaired performance to avoid risk
         to the health and safety of the public;

    (6)  Positions involved in lifesaving activities, responding
         to emergencies, or rescue operations;

    (7)  Positions with responsibility for the security of
         government buildings;


 
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    (8)  Positions requiring unimpeachable integrity and
         judgment; and

    (9)  Positions involving the custody and maintenance of truly
         sensitive information.


    9. SEPARATIONS

    Both employers and employee representatives agree that
existing layoff and bumping procedures tailored to civil service
rules are ineffective, counter-productive, and costly.
Operational requirements of management are often not given
priority, and the legitimate expectations of affected employees
are sometimes ignored.  Advance planning and greater flexibility
to restructure government and to address employee interests are
essential to avoid these pitfalls.

    Section 2 of the bill establishes a new part in chapter 78,
HRS, entitled, "Voluntary Separation," to authorize an integrated
program for workforce reduction and restructuring, voluntary
severance benefits, and early retirement incentives.  The process
contemplates the earliest identification of affected jobs and
employees, and the presentation of meaningful options to eligible
employees with reasonable conditions.  The adverse impact
normally associated with a layoff is minimized, and it is
believed that a well implemented program will be less costly to
taxpayers in the long run.

    Section 19 of this bill appropriates $1 from the Pension
Accumulation Fund for the Employees' Retirement System to process
early retirement incentives.  Section 20 of this bill
appropriates $1 for affected departments to process the voluntary
severance benefits.


    10. HEALTH FUND

    As indicated in a recent report by the Legislative Auditor,
major changes are needed in coverage, administration, and funding
to chapter 87, HRS, to ensure the continued viability of the
Public Employees Health Fund (Health Fund).  Although the amount
of Health Fund contributions by public employees and public
employers are negotiable under section 89-9(a), HRS, Health Fund
benefits are excluded from bargaining requirements under section
89-9(d), HRS.

    Your Committees find that Health Fund issues are inter-
related with those included in this bill, and an appropriate

 
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resolution of cost containment issues requires an integrated plan
of action.  To this end, your Committees have addressed this
issue in another bill, H.B. No. 1869, H.D. 1, which establishes
the Hawaii Employer-Union Health Benefits Trust Fund.


    11. CONFLICTING REMEDIES

    Disputes over wages, hours, and working conditions for
employees and positions covered by chapter 89, HRS, are resolved
before Hawaii Labor Relations Board under section 89-5, HRS, or
through contractual grievance-arbitration procedures negotiated
pursuant to sections 89-10(a) and 89-11(a), HRS.  It was not the
intent of the Legislature to afford public employees duplicate
and potentially conflicting remedies under chapters 76 and 89,
HRS.  See section 89-19, HRS.

    Accordingly, section 9 of this bill amends section 76-48,
HRS, to clarify that the Civil Service Commission shall not have
jurisdiction over disputes involving wages, hours, and working
conditions of persons and positions covered by chapter 89, HRS.
Under this provision, all disputes over promotions to bargaining
unit positions identified in section 89-6, HRS, for example, are
beyond the subject matter jurisdiction of the Civil Service
Commission.  Employees adversely affected shall be limited to
procedures and remedies made available to employers and employees
under sections 89-10(a), 89-11(a), and 89-14, HRS.


    12. MANAGED COMPETITION

    Under Act 230, Session Laws of Hawaii (SLH) 1998, a Committee
on Public-Private Competition for Governmental Services was
established to determine the feasibility of a managed competition
process to improve the efficiency and effectiveness of
governmental services through private-public competition.  In its
report, the committee found such a program to be feasible, but
recommended that the process be flexible and adjusted to the
needs and requirements of each jurisdiction.

    Interest has also been expressed over an Employee Stock
Ownership Plan (ESOP), particularly for employees of the Hawaii
Health System Corporation.

    Sections 4 and 18 of this bill authorize the implementation
of a feasibility study by the Board of Directors of the Hawaii
Health System Corporation on an ESOP, and provide enabling
legislation to the State and Counties to establish programs for
managed competition.  Consistent with the purpose of Act 230, SLH

 
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1998, your Committees require compliance with the civil service
laws, merit principles, and collective bargaining laws.
Flexibility is afforded to each governmental jurisdiction to
determine how best to implement the managed process of private-
public competition, as recommended by the Committee on Public-
Private Competition for Government Services.


    13. NEW CLASSIFICATION SYSTEMS

    Employer and employee representatives agree that greater
flexibility should be granted to the directors of each county to
establish new classification systems within their respective
jurisdictions.  Your Committees agree, provided that the
principle of equal pay for equal work on a statewide basis is
maintained.  Section 3 of the bill creates a new section in
chapter 77, HRS, to afford the flexibility requested with the
understanding that the merit principles are maintained on a
uniform statewide basis.


    14. RECRUITMENT

    Public employer and employee representatives further agree
that the State, counties, the judiciary, and the Hawaii Health
System Corporation should be afforded additional latitude to
facilitate the process of recruitment under chapter 76, HRS.
Each jurisdiction should have the right to bypass bureaucratic
checkpoints serving no meaningful purpose.  However, flexibility
may not compromise the principle of equal pay for equal work that
must be maintained on a statewide basis.  Section 7 of the bill
amends section 76-5.5 accordingly.


    15. APPEALS

    Your Committees have reviewed and examined the authority and
jurisdictions of the Hawaii Labor Relations Board, state and
county civil service commissions, the Public Employees
Compensation Appeals Board, and the role of grievance-arbitration
procedures established pursuant to sections 89-10(a) and 89-
11(a), HRS, to determine whether consolidation is needed.  Your
Committees believe the appeal procedures continue to serve
distinct and necessary functions and that consolidation would not
be in the public interest.  However, section 9 amends section 76-
48, HRS, to resolve an area of conflict in subject matter
jurisdiction disputes relating to wages, hours, and conditions of
work of bargaining unit employees and positions under chapter 89,
HRS.

 
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    16. SLICE WASTE AND TAPE (SWAT)

    In conjunction with the Lieutenant Governor's program to
"Slice Waste and Tape" (SWAT) in government, your Committees have
reviewed the rulemaking procedures under chapter 91, HRS,
relating to recruitment and classification of civil service
employees.  Your Committees believe the procedures are in some
ways cumbersome and unnecessary.  Accordingly, section 10 of the
bill amends section 76-79, HRS, to authorize the Civil Service
Commission and the director to bypass rulemaking procedures
currently in effect for recruitment and classification purposes.
Your Committees believe the amendment complies with the view that
personnel rules in these areas should be part of the internal
management exception to rulemaking under chapter 91, HRS.


    17. BARGAINING DEADLINES

    Employer and employee representatives agree that bargaining
deadlines should be established to coordinate the timetable for
negotiations and impasse procedures so that cost items that are
subject to appropriations by the Legislature are available soon
after the legislative session commences.  Accordingly, section 14
of the bill amends section 89-10(c), HRS, to establish key
deadlines in the process.  The deadlines shall not be applicable,
however, where a strike is called or where it is impossible to
meet the deadline due to circumstances beyond the control of the
parties.  This bill also disallows retroactive payment for any
cost items submitted after the deadlines.

     As affirmed by the records of votes of the members of your
Committees on Labor and Public Employment and Finance that are
attached to this report, your Committees are in accord with the
intent and purpose of H.B. No. 2518, as amended herein, and
recommend that it pass Second Reading in the form attached hereto
as H.B. No. 2518, H.D. 1, and be placed on the calendar for Third
Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Labor and Public
                                   Employment and Finance,

                                   
                                   
                                   
                                   
______________________________     ______________________________
DWIGHT Y. TAKAMINE, Chair          TERRY NUI YOSHINAGA, Chair