2010-1212 SB2626 SD1 SMA

PART I

SECTION 1. The legislature finds that cronyism is defined in the Merriam-Webster online dictionary as "partiality to cronies especially as evidenced in the appointment of political hangers-on to office without regard to their qualifications."

Nationally, the assassination of United States President James Garfield over the President's cronyism in appointments to federal government positions led to adoption of the Pendleton Civil Service Reform Act, which is the cornerstone of the modern federal government civil service system.

The evils of cronyism were obviously heavy on the minds of the framers of the original Constitution of the State of Hawaii when they drafted what is now enumerated article XVI, section 1 of the Constitution of the State of Hawaii. That provision states, in pertinent part, that "employment of persons in the civil service, as defined by law...shall be governed by the merit principle."

Indeed, in Konno v. County of Hawaii, 85 Hawai‘i 61 (1997), the Hawaii supreme court held that one obvious purpose and intent of this Hawaii constitutional provision is "the elimination of the 'spoils system' which awarded jobs based on political loyalty."

However, in determining the exact breadth of the positions that should be protected from cronyism via the civil service system, in Konno the Hawaii supreme court stated that it is the legislature's duty to do so. In fact, in Konno, the Hawaii supreme court stated that especially in situations where there are countervailing interests in making the determination as to which positions are protected by the civil service system, "clear guidance from the legislature is indispensable."

One of the purposes of this Act is for the legislature to provide clear guidance to protect the state civil service system from the evils of cronyism and to decide the scope of the positions to be protected from cronyism within civil service.

In construing the scope of the statutory civil service system that existed at the time, the Hawaii supreme court held in Konno that the civil service system cannot be read as "only including those employees who are paid regular salaries by the government [because] such an interpretation would allow the state [administration]...to avoid civil service coverage simply by reducing the size of...[the state's] official payroll." The Hawaii supreme court in Konno further construed the then existing statutory term "civil service" to mean "those services that have been customarily and historically provided by civil servants."

While Konno dealt with the portion of chapter 76, Hawaii Revised Statutes, that addressed employment in the civil service system of the State's political subdivisions, and this Act concerns the civil service system of the State, the legislature finds that such a difference is immaterial. Through this Act, the legislature is exercising its authority, "as defined by law" as set forth in article XVI, section 1, of the Constitution of the State of Hawaii, to determine the scope of the state civil service. In doing so, the legislature adopts the approach set forth in Konno.

A more critical purpose of this Act is to exercise austerity with respect to all state executive budget expenditures, by imposing an absolute hiring freeze on permanent civil service position holders for the relatively short duration of nine months or less. Hiring freezes are commonly used by federal government agencies to immediately reduce expenditures, and thereby conserve limited federal funds. Given the Hawaii state government's current revenue shortfalls, the legislature finds that immediate conservation of state funds can be implemented through the hiring freeze required under this Act.

The legislature further finds that implementation of the hiring freeze set forth by this Act is preferable to the permanent filling of civil service positions and other state positions that have civil service-like functions, particularly in the face of additional layoffs of civil service positions and positions with civil service-like functions that are projected to occur within a second wave of layoffs this year. The legislature has identified several instances in which the 2009 practice of laying off permanent, state civil service positions with specialized expertise had no rational basis. (See the joint committee report released by the senate committee on economic development and technology and the house committee on economic revitalization, business, and military affairs, October 15, 2009; senate ad hoc committee report no. 1, on the closure of Kulani correctional facility, October 14, 2009; and senate ad hoc committee report no. 2, investigating the impact of layoffs of agricultural inspectors, October 14, 2009.)

The state auditor's report no. 10-01 (Investigation of Specific Issues of the Department of Business, Economic Development and Tourism, January 2010) has found that at least one department has spent Hawaii taxpayer dollars imprudently, with that department failing to fully disclose to the legislature the full nature of federal reimbursement funds that it received, failing to accurately characterize the use of the funds spent, providing incomplete or misleading information to the state procurement office (that allowed the department to expend trade mission funds solicited from private sector participants outside the Hawaii public procurement code with no restrictions and without any effective internal controls), and creating opportunities for fraud and abuse through its ineffective oversight of expenditures and reporting requirements for out-of-state offices.

Against this backdrop of fiscal uncertainty, breakdowns in efficient, timely delivery of critical services, and disruption of normal governmental functions, it is the legislature's intent to halt further deterioration of core government functions.

SECTION 2. Chapter 76, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§76- Positions insulated from partiality; appointment prohibited practices; penalties; Hawaii enforcement board established. (a) It shall be prohibited for any person, directly or indirectly, to:

(1) Fill, attempt to fill, accept, or attempt to accept any and all positions insulated from partiality, from the effective date of Act , Session Laws of Hawaii 2010, through midnight January 2, 2011, including but not limited to issuing or causing to be issued requests for proposals that call for individuals who are not government employees to perform work that is traditionally performed by civil service employees, or contracts that fulfill such requests for proposals;

(2) Retaliate against any person or entity participating in any manner in the investigating of or bringing of an appointment prohibited practice, including but not limited to providing information regarding a possible appointment prohibited practice either to a person or entity who is authorized to bring an appointment prohibited practice complaint, or in testimony in a Hawaii enforcement board proceeding; or

(3) Compensate or cause to be compensated an attorney or representative of a respondent to represent the respondent in any matter that arose under this section, including but not limited to an appeal of the Hawaii enforcement board's findings of fact, conclusions of law, and decision and order, where that person is not the respondent or the spouse of the respondent.

(b) This section shall be in full force and effect notwithstanding any contrary provision in the Hawaii Revised Statutes; the Hawaii Administrative Rules; or the provisions, memoranda, documents, or writings of any part of the State, including but not limited to any conflict of law in any of the foregoing laws, rules, or documents.

(c) It shall be an appointment prohibited practice for any person to cause or commit in any manner, directly or indirectly, individually or in concert with other persons, a violation of subsection (a).

A civil penalty is imposed on any person who commits an appointment prohibited practice, with the doctrine of respondeat superior being inapplicable thereto, thereby making no superior person or entity, including but not limited to a government entity liable for payment of that penalty. The civil penalty shall not exceed $500,000 per individual filling, or attempting to fill a position in a manner that constitutes an appointment prohibited practice. The civil penalty shall be deposited into the general fund.

No form of immunity shall make any person, including without limitation the governor, exempt from payment of the penalty, with this clause constituting a waiver of sovereign immunity. In executing any order or judgment that imposes the penalty upon a person, any and all property of that person shall be subject to execution, including but not limited to any property upon which a limitation on execution of an order or judgment would normally apply, including but not limited to limitations as spendthrift provisions in a trust, and the limitation on the execution on property held as tenants by the entirety. Any property, including but not limited to money, which was transferred from the respondent in an appointment prohibited practice proceeding to any person or entity six months prior to, or one day after the effective date of Act , Session Laws of Hawaii 2010, but prior to the filing of an appointment prohibited practice complaint, whichever is shorter in duration, shall be void and subject to execution even though the property is in the possession of the transferee; provided that this voiding of transfers shall not apply to transfers that satisfied the following debts of the respondent that are bona fide: payments of loans to financial institutions that are registered with the state or federal government; utility payments; and bona fide payments for food, clothing, and shelter for the respondent.

(d) There is established the Hawaii enforcement board within the department labor and industrial relations for administrative purposes only. The board shall adjudicate allegations that any person or entity has committed an appointment prohibited practice, pursuant to the contested case provisions in chapter 91.

The Hawaii enforcement board shall consist of five members as follows:

(1) One member shall be appointed by the governor;

(2) One member shall be appointed by the president of the senate;

(3) One member shall be appointed by the speaker of the house of representatives;

(4) One member shall be appointed by agreement of the three chapter 89 exclusive representative organizations that have the largest number of bargaining unit members; and

(5) One member shall be appointed by agreement of all chapter 89 exclusive representative organizations; provided that if no agreement is reached, then by a per capita of chapter 89 bargaining unit members vote with their respective exclusive representative organizations voting on their behalf in the respective bargaining units that they represent.

The Hawaii enforcement board shall use the Hawaii labor relations board facilities, statutory and administrative rules for the adjudication of prohibited practices within the meaning of chapter 89, in the adjudication of claims of commissions of appointment prohibited practices, and in doing so shall substitute in these chapter 89 statutory and administrative rules, appropriate statutory and administrative terms from this section for the adjudication of appointment prohibited practices; provided that notwithstanding any law to the contrary, there shall be a two-year statute of limitations in which to file a complaint with the Hawaii enforcement board that a person has committed an appointment prohibited practice.

The president of the senate and the speaker of the house of representatives shall each appoint an attorney who is employed by the legislature to represent the Hawaii enforcement board when it conducts proceedings under this section. At the pleasure of the Hawaii enforcement board, the following shall represent the Hawaii enforcement board in any court proceeding to which the Hawaii enforcement board is a party: the department of the attorney general; any attorney who is an employee of the legislature except for attorneys of the legislative reference bureau; or a private attorney of the Hawaii enforcement board's choice; provided that if a private attorney is appointed, the attorney shall be paid from the funds appropriated to the department of the attorney general for the payment of special attorneys general. The Hawaii enforcement board is empowered to, and shall award reasonable attorney's fees to be paid to the complainant by the respondent in any case that is filed with the Hawaii enforcement board and in which the complainant has prevailed.

(e) The following entities and persons may bring a complaint against any person alleged to have committed an appointment prohibited practice:

(1) Any exclusive representative within the meaning of chapter 89 who represents the members of a bargaining unit that contains at least one position insulated from partiality, and that has suffered the adverse affects of an appointment prohibited practice; or

(2) Any entity or person who has been directly or indirectly displaced or otherwise adversely affected by an appointment prohibited practice;

provided that the complainant shall have the burden of proving by a preponderance of the evidence that an appointment prohibited practice has been committed by the respondent named in the appointment prohibited practice complaint.

(f) The department of the attorney general and any attorney directly or indirectly affiliated with it, including but not limited to the attorney general, any deputy attorney general, and any special deputy attorney general, shall not represent or cause another to represent, in any manner, any person who is alleged to have directly or indirectly committed an appointment prohibited practice, at any stage of an appointment prohibited practice proceeding, including without limitation at the appellate stage.

(g) The complainant and the respondent to an allegation that the respondent violated an attempt to accept under subsection (a)(1) may resolve that allegation if the respondent agrees to:

(1) Resign immediately from the position insulated from partiality that the respondent filled;

(2) Execute a release of claims in favor of the State and the complainant;

(3) Not to seek any position with the State for a period of five years after the resignation becomes effective; and

(4) Testify truthfully regarding transactions and occurrences that led to that respondent obtaining a position insulated from partiality in violation of subsection (a).

All other respondents may resolve with the complainant the allegations that they committed appointment prohibited practices in any agreed upon manner; provided that one of the terms of the resolution shall be that the respondents testify truthfully regarding transactions and occurrences that led to the commission of appointment prohibited practices.

All resolutions of allegations of appointment prohibited practices shall be approved by the Hawaii enforcement board. The foregoing resolution of a complaint that subsection (a) has been violated shall not affect any other claim that any other person violated any provision of subsection (a).

(h) After a party to a contested case conducted under the provisions of this section receives notice of prevailing therein, the party may make a motion to the circuit court that has venue over the vanquished party for an order confirming the findings of fact, conclusions of law, and decision and order of the Hawaii enforcement board. There is no time limitation for making such a motion. Thereupon, the circuit court shall grant the motion and issue an order confirming the findings of fact, conclusions of law, and decision and order, unless an appeal of those findings of fact, conclusions of law, and decision and order is granted pursuant to section 91-14. Upon the granting of the motion and order of confirmation, the same shall be filed in the office of the clerk of the circuit court and this shall constitute the entry of judgment. The judgment entered in accordance with this subsection shall have the same force and effect, in all respects as, and is subject to all the provisions of law relating to, a judgment in an action, and it may be enforced, as if it had been rendered in an action in the circuit court in which it is entered.

(i) For any and all appeals of the Hawaii enforcement board's decisions, the costs of the preparation of the record on appeal, including but not limited to the cost of transcribing the hearing proceedings shall be borne solely by the appellant.

(j) For the purposes of this section:

"Any and all positions in the civil service" means all positions in the State under section 76-16, as the section existed on December 31, 2009; provided that, notwithstanding the foregoing, the provision that requires the director of human resources and development to determine the applicability of the statute to specific positions shall not apply; provided further that, notwithstanding the foregoing, "any and all positions in the civil service" also means any and all positions that would be held by civil service employees or members of the civil service but for the fact that the positions are vacant, and any and all positions that perform personal services for the benefit of the State that have customarily and historically been held by civil servants, whether or not these positions are within the state employment system or within the employment system of a person or entity that is not a government.

"Fill" means a person performing work in a position insulated from partiality or of a position insulated from partiality, be it as an employee, an independent agent, an employee of a person, or entity who has entered into a contract, agreement, or understanding with the State, or an independent agent of an entity that has entered into a contract, agreement, or understanding with the State, or otherwise, for any length of time; provided that it shall not mean an employee who, having been continuously employed in a position insulated from partiality prior to January 1, 2009, performs work in a position insulated from partiality on a temporary assignment, as that term is customarily utilized in the state civil service system; provided further that it shall not mean a person who performs work as an emergency hire for a duration of ninety consecutive calendar days or less.

"Position" means a specific office or job, whether occupied or vacant, requiring full- or part-time employment of one person; provided that "position" also means a specific office or job, whether occupied or vacant, which normally requires full- or part-time employment of one person, but that is capable of being shared by two or more people, or that is being shared by two or more people.

"Positions insulated from partiality" means any and all positions in the state civil service; any and all positions that were held by state civil service employees or members of the state civil service just prior to becoming vacant; classified and non-classified positions of the department of education; and faculty and non-faculty positions of the University of Hawaii and the community college system.

"State" means any and all parts of the State of Hawaii government, including but not limited to the state entities set forth in the Hawaii state constitution; the state entities under chapter 26; any and all state bodies corporate and state corporations, including but not limited to the Hawaii health systems corporation, the University of Hawaii and the research corporation of the University of Hawaii; and all subdivisions, employees, agents, servants, intermediaries, or offshoots of any of the foregoing entities.

"To directly or indirectly" means any entity, including but not limited to the State, or person to take direct action or inaction, such as, without limitation, hiring employees; or the State to take indirect action or inaction, such as, without limitation, making a written or verbal contract, agreement, or understanding with a third party for the third party to cause an action, transaction, or occurrence to transpire or not transpire at any time."

PART II

SECTION 3. Chapter 78, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§78- Non-civil service, temporary employees; report by state agencies. Every state agency shall report to the legislature all non-civil service, temporary employees employed by the agency for each quarterly period of the fiscal year, not later than the fifteenth day following the end of each quarterly period, as follows:

(1) Each position filled by a non-civil service, temporary employee, the purpose of the position, and the date that the position was established;

(2) How long the position has been filled by a non-civil service, temporary employee, and the reason the position has not been filled by a permanent civil service or exempt employee; and

(3) In the case of any position that has been filled by the rehiring of a person for at least three contract periods in one fiscal year, the reasons for the rehiring and why the position should or should not be made permanent.

For the purposes of this section, "non-civil service, temporary employee" means any person employed for a contract period of less than ninety days."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

THE SENATE	S.B. NO.	2626
TWENTY-FIFTH LEGISLATURE, 2010		S.D. 1
STATE OF HAWAII		Proposed