Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Labor, to which was referred H.B. No. 1773, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to amend the workers' compensation law, including mandating further requirements for vocational rehabilitation providers, temporarily limiting the Director of Labor and Industrial Relations' rulemaking authority, and specifying procedures for filing of claims.

Testimony in support of this measure was submitted by the Hawaii Government Employees Association, the Hawaii State AFL-CIO, the ILWU Local 142, the Hawaii Chapter of the American Physical Therapy Association, the Hawaii State Teachers Association, the Hawaii State Chiropractic Association, Vocational Rehabilitation Consultants, Inc., and twenty-six individuals.

Testimony in opposition to this measure was submitted by the Department of Labor and Industrial Relations (DLIR), the Department of Commerce and Consumer Affairs, the Department of the Attorney General, Hawaii Employers' Mutual Company, Inc., Island Insurance Companies, the Chamber of Commerce of Hawaii, the Hawaii Insurers Council, First Insurance Company of Hawaii, Ltd., the National Federation of Independent Business/Hawaii, the Hawaii Medical Association, the Hawaii Business Roundtable, Hawaii Health Systems Corporation, the Employers' Chamber of Commerce, Hidano Construction, Inc., the Building Industry Association-Hawaii, and two individuals.

Comments on the measure were also submitted by the Department of Human Resources Development.

Your Committee finds that this bill incorporates into chapter 386 the substantive definitions, standards, criteria, and policies in effect on January 1, 2005 under currently existing rules and regulations, policies, and case law in the relevant substantive areas in order to preserve and protect the prerogative of the legislative branch of government and to prevent the abuse of power.

Last year the administration proposed an omnibus bill to reform the State's workers compensation system purporting to reduce the average cost of workers' compensation premiums. By seeking the enactment of a workers' compensation omnibus bill during the 2004 legislative session the administration implicitly recognized that without changes in chapter 386, the executive branch lacked sufficient authority to implement policy changes in the foregoing areas. The 2004 Legislature rejected the omnibus bill resoundingly.

Unable to achieve its objective through legislation, it now appears the administration is seeking to do through rulemaking in 2005 what it could not achieve during the 2004 legislative session. On February 7, 2005, the DLIR held a hearing on proposed rules to affect major changes in Hawaii's workers' compensation laws regarding compensability, medical care and treatment, vocational rehabilitation and other benefits, attorney's fees, and procedures for investigating and handling claims through arbitration. The proposed rule changes substantially track the areas identified in the 2004 omnibus bill (S.B. 2961), and if adopted would significantly limit the rights and benefits of workers under Hawaii's workers' compensation laws. The administration has given every indication that it intends to cut workers' rights and benefits retroactively by applying their proposed rules to all claims regardless of when they were filed.

Your Committee believes these actions by the DLIR to make changes to Hawaii Administrative Rules, chapters 12-10, 12-14, and 12-15, represents a usurpation of legislative authority. In a democratic system the role of formulating policy is reserved exclusively for those in the legislative branch. See Sherman v. Sawyer, 63 Haw. 55, 621 P.2d 349 (1980)("Legislative power" is defined as power to enact laws and to declare what law shall be). Under the separation of powers doctrine the authority of the executive branch is restricted to executing and applying the laws enacted by legislators.

Your Committee determines that the law, under the current administrative rules regarding the disability compensation division, should be maintained through codification, as well as amended through the inclusion of provisions that allow for further refinement of the law and the system. In section 7 the measure proscribes changes through rulemaking under section 386-72, HRS, after January 1, 2005, with a drop-dead clause effective January 1, 2007.

Your Committee also believes that this measure appropriately provides for adequate care and assistance for injured individuals, through appropriate vocational rehabilitation, in order for them to return to gainful employment. Furthermore, the measure successfully clarifies issues of discovery, places reasonable limits on the amount of information required to be furnished by treating physicians, provides guidance on the award of attorney's fees, limits the Director's rulemaking authority to ensure that the current rules are maintained, authorizes the insurance commissioner to investigate and prosecute complaints of workers' compensation fraud, and adds language relating to parties successfully bringing a claim of fraud.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1773, H.D. 1, and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.