STAND. COM. REP. NO. 1344-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2859
                                     S.D. 1
                                     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 S.B. No. 2859, S.D. 1, 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 reform the public employment laws that were enacted to
implement two constitutional mandates: that there be civil
service based on the merit and that public employees have the
right to bargain collectively.

     After careful consideration, your Committees amended this
bill by deleting its substance and inserting the language from
H.B. No. 2518, H.D. 1.  As amended, this bill allows greater
latitude in the reformation of the public employment system.
Your Committees acknowledge that to improve the efficiency and
effectiveness of government, there must be a positive inter-
relationship between civil service and collective bargaining,
consistent with sound merit principles.  

     1.   PURPOSE

     Your Committees focused on the original eighteen points for
civil service reform, as proposed by the Administration.  As
amended, this bill addresses sixteen reform items that will bring
about systemic change to the existing system within the present
structure.  Your Committees believe that this approach will

 
 
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promote a positive work environment by utilizing the present
merit system, as mandated by article XVI, section 1 of the Hawaii
State Constitution, and recognizing the right of public employees
to bargain collectively, as required by article XIII, section 2
of the Hawaii State Constitution.

     2.   PERFORMANCE 

     Your Committees are well aware that performance is
recognized first by the accountability of its managers and second
through its employees.   Performance is based on the merit
principle, which is firmly established under section 76-1, Hawaii
Revised Statutes (HRS).

     It is the declared policy of the State that the personnel
system be applied and administered in accordance with the merit
principles.  Consequently, it is counterproductive to retain
unnecessary and inefficient employees.  As such, section 76-41,
HRS, was amended to authorize the suspension, demotion, transfer,
or removal of employees who continue to receive substandard
evaluations.  This amendment also recognizes employee rights to
challenge adverse actions through the grievance procedure and
focuses on the administrators and managers who should be
responsible for certifying the performance of their subordinates.

     3.   DECENTRALIZATION

     It is well established that uniformity in the law is
essential to its success.  A decentralized system would add to
the confusion of a statewide merit system by promoting inequities
within similar classifications of employees and violating the
principle of equal pay for equal work.

     To address the concerns of home rule by the counties, the
terms "employer" or "public employer" were redefined to include
all chief executives of relevant employer jurisdictions.

     Your Committees adjusted the voting process under section
89-6(b), HRS, to give all public employers an appropriate role in
the bargaining process.  With respect to the counties who employ
the majority of firefighters and police, the relative votes have
been modified to give the counties a collective majority.

     To address individual employer concerns and allow
jurisdictions greater flexibility, section 89-10, HRS, was
amended to allow memoranda of agreement with exclusive
representatives of public employees, with the memoranda to run
concurrently with existing collective bargaining agreements.


 
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     To give public employers more flexibility, section 76-5.5,
HRS, has been amended and a new section has been added to chapter
77, HRS, to allow greater autonomy for all jurisdictions to
establish new classification and recruitment procedures.

     4.   MANDATORY ARBITRATION

     The cost implications of mandatory arbitration, which is
final and binding under section 89-11, HRS, have played a major
role in the economics of the State.  Arbitrators play a vital
part in arbitrating disputes over cost items, with little
restraint over imposing awards and no regard to the ability of
the employer to pay.  At the same time, it must be recognized
that employees should be afforded a meaningful bargaining
position and the right to strike.  As such, section 89- 11(d),
HRS, has been amended to exclude mandatory arbitration for
bargaining units 2, 3, 4, 6, 8, 9, 10, and 13.  In addition,
references to "essential employee" and "essential position" have
been deleted from section 89-2, HRS, to conform with these
changes.

     These amendments are necessary to reestablish the proper
balance between public employers and public employees in the
collective bargaining process.

     5. MANAGEMENT

     Chief executives, top-level managers, and administrators,
who are excluded from civil service, are essential to a
successful administration.  Moreover, it would be hypocritical to
direct reform solely at ordinary employees without addressing the
responsibility of upper-level management.  Consequently,
performance and accountability is expected of excluded personnel,
as reflected in the amendment to section 89C-2, HRS, which
requires compliance with performance-based standards and the
responsibility for performance ratings of all subordinate
employees.

     6.   OVERTIME 

     Overtime abuse is a major problem in the calculation of
average final compensation to boost retirement benefits.  Concern
has been expressed by those employee groups who are required to
work overtime based on a management decision.  These employees,
who are required to work overtime through no fault of their own,
should not be penalized by a mandatory reduction to their average
final compensation.


 
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     Nevertheless, the situation has given rise to certain
employees who avail themselves or others of excessive overtime
merely to increase retirement benefits.  Certainly, this practice
should be prohibited, and your Committees have addressed this by
adding a new section to chapter 80, HRS, to penalize employees
who abuse overtime assignments.

     7.   REPAYMENTS

     The collection of overpayments to employees, whether by
mistake or inadvertence, is a burdensome process.  To streamline
this process, section 78- 12(e), HRS, has been amended to allow
an employer to immediately deduct overpayments, which have
occurred within a year.  In the event employees dispute that an
overpayment was made, employees are afforded the right to file a
grievance under applicable procedures and required to sustain the
burden of proof that no overpayment was made.  However, if an
employee should prevail, the employee would be entitled to all
appropriate remedies.

     8.   DRUG TESTING

     Public safety issues relating to problems with drugs in the
workplace are legitimate concerns.  Without minimizing the
constitutional protections afforded all individuals in this
respect, chapter 78, HRS, has been amended by adding a new
section to allow preemployment drug testing for applicants for
safety sensitive positions and to allow the rejection of any
applicant who tests positive for drugs.

     9.   SEPARATIONS

     Voluntary separation from government service is preferable
to existing layoffs and reduction in force procedures.  Chapter
78, HRS, has been amended by adding a new part entitled,
"Voluntary Separation," to authorize an integrated program for
workforce reduction and restructuring, including voluntary
severance benefits and early retirement incentives.  The sum of
$1 has been appropriated from the general fund to process the
voluntary severance benefits provided for in this new part.

     10.  HEALTH FUND

     A recent report by the Legislative Auditor indicated the
need to address funding, administration, and coverage issues to
ensure the continued viability of the Hawaii Public Employees
Health Fund.  These issues are interrelated with those included
in this bill, and resolution of cost containment requires an
integrated plan of action.  Accordingly, your Committees

 
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addressed this issue in H.B. No. 1869, H. D. 1, which would
establish the Hawaii Employer-Union Health Benefits Trust Fund.

     11.  CONFLICTING REMEDIES

     It was brought to the attention of your Committees that
there are conflicting remedies existing between statutory
provisions and collective bargaining agreements.  To remedy this
situation, disputes over wages, hours, and conditions of
employment should be resolved before the Hawaii Labor Relations
Board.  To avoid duplication of efforts, section 76-48, HRS, has
been amended to clarify that the Civil Service Commission does
not have jurisdiction over disputes involving wages, hours, and
conditions of employment.

     12.  MANAGED COMPETITION

     To remain efficient, government must use its resources in
the most cost-effective manner.  Whether continued service to the
public should be offered by government or private competition is
a question that should be addressed.

     To the extent that Act 230, Session Laws of Hawaii (SLH)
1998, addressed the study and implementation of public-private
competition, your Committee has added a new section to chapter
78, HRS.  This new section allows both the State and the counties
to establish a managed process as provided by Act 230, provided
that civil service laws, merit principles, and collective
bargaining laws are not violated.

     Additionally, the bill has been amended to require the
Hawaii Health Systems Corporation to conduct a study on the
feasibility of an employee stock ownership plan to improve
efficiency and effectiveness through managed competition.

     13.  NEW CLASSIFICATION SYSTEMS

     It is acknowledged that greater flexibility is needed by the
directors of the counties and the State to establish new
classification systems within their respective jurisdictions.  As
such, a new section has been added to chapter 77, HRS, to allow
directors the flexibility to adjust and reclassify positions,
provided that the principle of equal pay for equal work is
maintained on a statewide basis.

     14.  RECRUITMENT

     In line with classification, the recruitment of qualified
employees is a prerequisite to an effective and efficient

 
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workforce.  Each jurisdiction should be allowed the flexibility
to facilitate the recruitment process and allowed to fill
positions in the most expeditious manner as possible.

     Hence, section 76-5.5, HRS, was amended to authorize
directors to use new technologies and develop alternatives that
are more efficient to ensure the availability of a qualified
applicant pool.

     15.  APPEALS

     The appeal process is a distinct and necessary function to
ensure a viable system of checks and balances.  It is not
feasible to have conflicts among the Hawaii Labor Relations
Board, the Civil Service Commission, and the Public Employees
Compensation Appeals Board.  To clarify this process, section 76-
48, HRS, has been amended to allow appeals to the Civil Service
Commission, except for disputes involving wages, hours, and
conditions of employment.  The Hawaii Labor Relations Board would
address disputes involving wages, hours, and conditions of
employment.

     16.  SLICE WASTE AND TAPE (SWAT)

     The present rulemaking procedures under chapter 91, HRS,
relating to recruitment and classification are cumbersome and
time-consuming.  To address this, section 76-79, HRS, has been
amended to authorize the Civil Service Commission and the
personnel directors of the Counties of Hawaii, Maui, and Kauai to
bypass rulemaking procedures currently required for recruitment
and classification purposes.  Other streamlining reforms were
made to the recovery of employee overpayments and duplicative
efforts of the appeal process have also been clarified.

     17.  BARGAINING DEADLINES

     There is a need to establish bargaining deadlines to
coordinate negotiations and impasse procedures to bring cost
items to the Legislature for approval in a timely manner.
Accordingly, section 89-10, HRS, has been amended to establish a
calendar driven process by mandating that on January 1st of the
preceding even-numbered year, all alternative dispute resolution
procedures under section 89-11, HRS, are to be completed no later
than December 31st of that year.  The amendment further mandates
that cost items are to be submitted to the legislative bodies no
later than January 31st of the subsequent odd-numbered year. 


 
 
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     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 S.B. No. 2859, S.D. 1, as amended herein,
and recommend that it pass Second Reading in the form attached
hereto as S.B. No. 2859, S.D. 1, 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