Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary, to which was referred H.B. No. 386, H.D. 1, entitled:

beg leave to report as follows:

The purpose of this bill is to extend the exemption from mandatory workers' compensation insurance to employers owning fifty percent or more of a Limited Liability Company (LLC), or Limited Liability Partnership (LLP), thus providing parity with employers who have at least fifty percent ownership in a corporation. Specifically, this bill excludes from the workers' compensation definition of "employee":

Testimony in support of this bill was received from the Department of Labor and Industrial Relations, Department of Business, Economic Deve1opment, and Tourism, Chamber of Commerce of Hawaii, Hawaii Employers' Mutual Insurance Company, and Hawaii Business League. Hawaii Independent Insurance Agents Association supported the intent of the bill. Testimony in opposition to this bill was submitted by ILWU Local 142.

Your Committees find that workers' compensation provides medical insurance and wage loss coverage for work-related injuries of employees while protecting employers from civil liability resulting from those injuries.

Persons who own at least a fifty percent interest in the corporation that employs them, are presently exempt from mandatory workers' compensation. However, the law requires LLCs and LLPs to maintain workers' compensation insurance for the benefit of their employees even though their only employees are the owners of, or partners in the company. Since a LLC owner or LLP partner would have nothing to gain from having workers' compensation insurance and would save money by not purchasing such insurance, it seems that they should also be exempt.

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 386, H.D. 1, and recommend that it be referred to the Committee on Finance.