Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred H.B. No. 2491 entitled:

begs leave to report as follows:

The purpose of this bill is to provide consistency across the divisions of the Department of Labor and Industrial Relations (DLIR) in determining whether an employee is entitled to employment benefits under state law. This bill clarifies the definition of "employment" under the Hawaii Temporary Disability Insurance Law (chapter 392, Hawaii Revised Statutes (HRS)) and the Workers' Compensation Insurance Law (chapter 386, HRS) by codifying the "ABC" test to determine whether an individual is an "employee" or "independent contractor".

DLIR testified in support of this bill with amendments.

Currently, the determination of whether an individual is an "independent contractor" or "employee" is made on a case-by-case basis and may vary among the different divisions of DLIR. This has resulted in a situation in which individuals find themselves qualified for one program but not for the others within DLIR.

Your Committee received a proposed draft from DLIR which, among other things, applies the same definition and criteria for "employment" to include the State Wage and Hour Laws (chapter 387, HRS), Payment of Wage and Other Compensation Laws (chapter 388, HRS), the Child Labor Laws (chapter 390, HRS), and Family Leave Laws (chapter 398, HRS). These amendments were inadvertently left out of this administration bill.

Because the proposed draft included material outside the scope of the original bill, your Committee would have preferred to hold a public hearing on this proposal. However, because this proposal was submitted as "late testimony", public comment could not be obtained.

While the proposed draft does not specifically amend chapter 393, HRS, the Prepaid Health Care Act, your Committee is concerned that any change to administrative rules under DLIR's management of the Prepaid Health Care Act pursuant to this bill could conceivably be viewed as a "substantive change" to the Prepaid Health Care Act and result in invalidation of the rule through preemption by the federal Employee Retirement Income Security Act of 1974 (29 U.S.C. section 1001 et. Seq.) (ERISA).

Accordingly, for purposes of facilitating continued discussion on these issues, your Committee has deleted the substance of this bill, and inserted the contents of DLIR's proposed draft. As amended, this bill applies consistent definitions for the terms, "employment" and "wage" to all programs administered by DLIR, including chapters 378, 386, 387, 388, 390, 391, 392, 393, and 398, HRS.

In addition, your Committee has added language to clarify that in the event that anything in this bill is held by a court of competent jurisdiction to be preempted by ERISA, the preempted amendment made by this bill will be repealed in its entirety. This language is similar to that found in H.B. No. 2090, H.D. 1, which was approved by this Committee on February 6, 2004.

Further, your Committee has inserted a defective date of February 31, 3003 to continue discussion of this bill.

Lastly, numerous technical, nonsubstantive amendments were made for purposes of clarity, style, and conformity.

As affirmed by the record of votes of the members of your Committee on Labor and Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2491, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2491, H.D. 1, and be referred to the Committee on Finance.