SB2324 HD2.DOC

PART I

SECTION 1. Section 383-30, Hawaii Revised Statutes, is amended to read as follows:

"§383-30 Disqualification for benefits. (a) An individual shall be disqualified for benefits:

(1) Voluntary separation. For any week prior to October 1, 1989, in which the individual has left work voluntarily without good cause, and continuing until the individual has, subsequent to the week in which the voluntary separation occurred, been employed for at least five consecutive weeks of employment. For the purposes of this paragraph, "weeks of employment" means all those weeks within each of which the individual has performed services in employment for not less than two days or four hours per week, for one or more employers, whether or not such employers are subject to this chapter. For any week beginning on and after October 1, 1989, in which the individual has left the individual's work voluntarily without good cause, and continuing until the individual has, subsequent to the week in which the voluntary separation occurred, been paid wages in covered employment equal to not less than five times the individual's weekly benefit amount as determined under section 383-22(b).

An owner-employee of a corporation who brings about the owner-employee's unemployment by divesting ownership, leasing the business interest, terminating the business, or by other similar actions where the owner-employee is the party initiating termination of the employment relationship, has voluntarily left employment[.];

(2) Discharge or suspension for misconduct. For any week prior to October 1, 1989, in which the individual has been discharged for misconduct connected with work, and continuing until the individual has, subsequent to the week in which the discharge occurred, been employed for at least five consecutive weeks of employment. For the week in which the individual has been suspended for misconduct connected with work and for not less than one or more than four consecutive weeks of unemployment which immediately follow such week, as determined in each case in accordance with the seriousness of the misconduct. For the purposes of this paragraph, "weeks of employment" means all those weeks within each of which the individual has performed services in employment for not less than two days or four hours per week, for one or more employers, whether or not such employers are subject to this chapter. For any week beginning on and after October 1, 1989, in which the individual has been discharged for misconduct connected with work, and until the individual has, subsequent to the week in which the discharge occurred, been paid wages in covered employment equal to not less than five times the individual's weekly benefit amount as determined under section 383-22(b)[.];

(3) Failure to apply for work, etc. For any week prior to October 1, 1989, in which the individual failed, without good cause, either to apply for available, suitable work when so directed by the employment office or any duly authorized representative of the department of labor and industrial relations, or to accept suitable work when offered and continuing until the individual has, subsequent to the week in which the failure occurred, been employed for at least five consecutive weeks of employment. For the purposes of this paragraph, "weeks of employment" means all those weeks within each of which the individual has performed services in employment for not less than two days or four hours per week, for one or more employers, whether or not such employers are subject to this chapter. For any week beginning on and after October 1, 1989, in which the individual failed, without good cause, either to apply for available, suitable work when so directed by the employment office or any duly authorized representative of the department of labor and industrial relations, or to accept suitable work when offered until the individual has, subsequent to the week in which the failure occurred, been paid wages in covered employment equal to not less than five times the individual's weekly benefit amount as determined under section 383-22(b)[.];

(A) In determining whether or not any work is suitable for an individual there shall be considered among other factors and in addition to those enumerated in paragraph (3)(B), the degree of risk involved to the individual's health, safety, and morals, the individual's physical fitness and prior training, the individual's experience and prior earnings, the length of unemployment, the individual's prospects for obtaining work in the individual's customary occupation, the distance of available work from the individual's residence, and prospects for obtaining local work. The same factors so far as applicable shall be considered in determining the existence of good cause for an individual's voluntarily leaving work under paragraph (1)[.];

(B) Notwithstanding any other provisions of this chapter, no work shall be deemed suitable and benefits shall not be denied under this chapter to any otherwise eligible individual for refusing to accept new work under any of the following conditions:

(i) If the position offered is vacant due directly to a strike, lockout, or other labor dispute;

(ii) If the wages, hours, or other conditions of the work offered are substantially less favorable to the individual than those prevailing for similar work in the locality; and

(iii) If as a condition of being employed the individual would be required to join a company union or to resign from or refrain from joining any bona fide labor organization[.];

(4) Labor dispute. For any week with respect to which it is found that unemployment is due to a stoppage of work which exists because of a labor dispute at the factory, establishment, or other premises at which the individual is or was last employed; provided that this paragraph shall not apply if it is shown that:

(A) The individual is not participating in or directly interested in the labor dispute which caused the stoppage of work; and

(B) The individual does not belong to a grade or class of workers of which, immediately before the commencement of the stoppage, there were members employed at the premises at which the stoppage occurs, any of whom are participating in or directly interested in the dispute; provided that if in any case separate branches of work, which are commonly conducted as separate businesses in separate premises, are conducted in separate departments of the same premises, each such department shall, for the purpose of this paragraph, be deemed to be a separate factory, establishment, or other premises[.];

(5) If the department finds that the individual has within the twenty-four calendar months immediately preceding any week of unemployment made a false statement or representation of a material fact knowing it to be false or knowingly failed to disclose a material fact to obtain any benefits not due under this chapter, the individual shall be disqualified for benefits beginning with the week in which the department makes the determination and for each consecutive week during the current and subsequent twenty-four calendar months immediately following such determination, and such individual shall not be entitled to any benefit under this chapter for the duration of such period; provided that no disqualification shall be imposed if proceedings have been undertaken against the individual under section 383-141[.];

(6) Other unemployment benefits. For any week or part of a week with respect to which the individual has received or is seeking unemployment benefits under any other employment security law, but this paragraph shall not apply:

(A) [if] If the appropriate agency finally determines that the individual is not entitled to benefits under such other law[,]; or

(B) [if] If benefits are payable to the individual under an act of Congress which has as its purpose the supplementation of unemployment benefits under a state law.

(b) Effective July 1, 2010, notwithstanding any law or rule to the contrary, a partially unemployed individual shall not be disqualified for benefits for any week in which the individual separates involuntarily or voluntarily, with or without good cause, from an employer offering part-time employment, if the individual is:

(1) Receiving benefits while attached to a regular employer that is not offering work;

(2) Receiving partial unemployment benefits; and

(3) Exempt from work search and registration for work requirements.

For the purposes of this subsection:

"Attached to a regular employer" means:

(1) The employee is being offered work each week by the employee's regular employer; or

(2) If no work is being offered:

(A) The employer is maintaining the individual on the payroll by paying for a medical insurance plan or by maintaining the employee's sick leave or vacation credits; or

(B) There is a definite return to work date with the same employer within eight weeks.

"Partially unemployed" means the unemployment of any individual who, during a particular week, was still attached to that individual's regular employer, had no earnings or earned less than that individual's weekly benefit amount, and who worked less than or did not work that individual's normal, customary full-time hours for the individual's regular employer because of a lack of full-time work.

"Registration for work" means that an individual provides information to the employment office to be posted on the department's internet job-matching system, including but not limited to the individual's name, job skills, education, training, prior employment history and work duties, preferred working conditions, occupational licenses, and other relevant occupational information to facilitate work search efforts by the individual and increase job referrals by the employment office."

PART II

SECTION 2. In 2007, due to low unemployment rates in Hawaii and a large amount of reserves in the unemployment compensation fund (fund), the legislature passed Act 110, which reduced rates employers paid into the fund. Given that at the time the fund had approximately $500 million in reserves, providing employers with some relief from unemployment insurance (UI) contributions appeared to be prudent. However, Act 110 also contained provisions that would trigger the old contribution rates if the reserves in the fund became inadequate.

Since that time, Hawaii, as well as the rest of the nation, has experienced what is being called "The Great Recession" which has resulted in numerous business closures and massive layoffs, causing unemployment rates to skyrocket. Prior to the current recession, Hawaii experienced unemployment rates in the neighborhood of two per cent. Presently, Hawaii is experiencing unemployment rates of around seven per cent, a five percentage point increase. This increased unemployment has strained the fund to the point where, according to the department of labor and industrial relations (DLIR), the fund will have a zero balance by October or November of this year.

The rapidly decreasing amount of the fund initiated the trigger established in Act 110, and will cause the UI contribution rates to increase, to rates which for many businesses will be substantial. On average, the UI contribution rate will increase from $90 per employee per year to almost $1,070 per employee per year, which will be difficult for businesses to bear and may have an enormous impact on the overall economic recovery of the state. Striking a balance that provides necessary relief for employers from dramatic increases in UI contribution rates while maintaining an adequate level of fund reserves is one way to work toward improving Hawaii's economy.

The future adequacy of the fund and the potential need for financial support for workers who may be affected by continually lagging economic conditions have been major considerations in attempts to determine how to resolve the difficulties that are attributed to trying to maintain an adequate reserve fund while using contribution rates that are calculated based on the previous calendar year. One way to address this conflict and to help mitigate drastic rate increases in the future is to perform UI contribution rate calculations semi-annually rather than annually.

However, DLIR has stated that converting their current system that is based upon annual calculations, to one based on semi-annual calculations will require time, manpower, and financing. Accordingly, the purpose of this part is to require DLIR, with assistance from the Department of Business, Economic Development, and Tourism, to conduct a study to determine the cost of converting their current unemployment contribution rate calculations system from one that calculates rates annually to one that does so semi-annually.

SECTION 3. (a) The department of labor and industrial relations, with the assistance of the department of business, economic development, and tourism, shall conduct a study of the unemployment compensation fund to determine the cost and feasibility of converting the present system for calculating unemployment contribution rates from one that makes these calculations annually to one that makes these calculations on a semi-annual basis. The study shall include equipment costs, computer software costs, labor costs, maintenance costs, and any other costs that may be incurred with the establishment of the semi-annual system. The report shall also include the timeframe necessary for the establishment of a semi-annual system, including the time the department finds will be necessary to inform employers of the new semi-annual system, and shall include the department's plan for the implementation of a new semi-annual system.

(b) The director of labor and industrial relations, with assistance from the director of business, economic development, and tourism, shall submit a report of the department's findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2011.

SECTION 4. There is appropriated out of the special unemployment insurance administration fund established under section 383-127, Hawaii Revised Statutes, the sum of $ or so much thereof as may be necessary for fiscal year 2010-2011 for a study of the unemployment compensation fund to determine the cost and feasibility of converting the present system for calculating unemployment contribution rates from one that makes these calculations annually to one that makes these calculations on a semi-annual basis.

The sum appropriated shall be expended by the department of labor and industrial relations for the purposes of this part.

PART III

SECTION 5. In 1982, with the ongoing recession, high unemployment, and a growing number of jurisdictions unable to pay unemployment insurance benefits except from loans obtained from the federal government, the legislature passed House Concurrent Resolution No. 103, House Draft 1, which requested the auditor to review the administration and adequacy of the state's unemployment compensation fund and determine whether any statutory changes needed to be made to maintain the solvency of the fund.

The findings and recommendations of this review were published and submitted to the legislature by the auditor in a report entitled "Study of the Financing of the Unemployment Compensation Fund of the State of Hawaii" in February of 1983.

The legislature finds that current economic conditions are similar to those faced in 1982 and that a review of the financing mechanisms of the unemployment compensation fund is prudent at this time.

Accordingly, the purpose of this part is to require the department of labor and industrial relations, with assistance from the department of business, economic development, and tourism, to review the study conducted by the auditor in 1982, reassess the recommendations of that report, and report back to the legislature on its findings and recommendations, including any proposed legislation, to address challenges facing the financing mechanisms of the unemployment compensation fund.

SECTION 6. (a) The department of labor and industrial relations, with assistance from the department of business, economic development, and tourism, shall review and reassess the findings and recommendations of the study performed by the auditor in 1982 in accordance with House Concurrent Resolution No. 103, House Draft 1. The review and reassessment shall consider any of the recommendations contained in the report that may be relevant and applicable to the current fiscal situation facing the unemployment compensation fund.

(b) The department of labor and industrial relations, with assistance from the department of business, economic development, and tourism, shall also review any recommendations contained in the study, or any other recommendations, regarding the fairness and equitability of the contribution rate schedules and determine whether there is a present need to increase the contribution rates based on fairness and equitability of the contribution rate schedules and how to accomplish this, and shall include its findings and recommendations in the report required under subsection (c).

(c) The director of labor and industrial relations, with assistance from the director of business, economic development, and tourism, shall prepare a report on the department's review and reassessment of the 1982 study, including the review and assessment of any relevant recommendations proposed in the study, and submit the director's findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2011.

SECTION 7. There is appropriated out of the special unemployment insurance administration fund established under section 383-127, Hawaii Revised Statutes, the sum of $ or so much thereof as may be necessary for fiscal year 2010-2011 for a review and reassessment of the findings and recommendations of the study performed by the auditor in 1982 in accordance with House Concurrent Resolution No. 103, House Draft 1.

The sum appropriated shall be expended by the department of labor and industrial relations for the purposes of this part.

PART IV

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2020.

THE SENATE	S.B. NO.	2324
TWENTY-FIFTH LEGISLATURE, 2010		S.D. 2
STATE OF HAWAII		H.D. 2