STAND. COM. REP. NO.  559

Honolulu, Hawaii

                , 2013

RE:   H.B. No. 144

      H.D. 2

Honorable Joseph M. Souki

Speaker, House of Representatives

Twenty-Seventh State Legislature

Regular Session of 2013

State of Hawaii

Sir:

     Your Committee on Consumer Protection & Commerce, to which was referred H.B. No. 144, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO PROFESSIONAL EMPLOYER ORGANIZATIONS,"

begs leave to report as follows:

The purpose of this measure is to clarify professional employer organization (PEO) responsibilities, including meeting the statutory requirements of chapter 373L, Hawaii Revised Statutes, and the nexus between the registration of PEOs and qualification for the state general excise tax exemption.

The Department of Labor and Industrial Relations and the Department of Taxation provided testimony in support of this measure.  ALTRES, Inc., provided testimony in opposition to this measure.  ProService Hawaii; Tax Foundation of Hawaii; Hawaii Human Resources, Inc.; Hawaii Association of Professional Employer Organizations; William L. Wong CPA & Associates, Inc.; HRBenefix; Exceptional, Inc., dba Employers Options; and Talent HR Solutions, LLC provided comments on this measure.

     Your Committee has amended this measure by setting forth and clarifying professional employer organization responsibilities and related matters as follows:

(1)  Renaming the title of chapter 373K, Hawaii Revised Statutes, to "Professional Employer Organizations" and adding new sections to clarify PEO requirements, including requiring PEO registration; establishing registration and renewal fees; setting forth the responsibilities and duties of the Director of Labor and Industrial Relations with respect to PEOs; requiring notification to the Department of Labor and Industrial Relations regarding relationships between a PEO and its client companies; for decisions involving the denial, suspension, etc., of registration renewal, clarifying the applicable hearings process and providing for judicial review; and adding certain definitions;

(2)  Authorizing the Director of Labor and Industrial Relations to establish sliding scale fees based on PEO annual payroll;

(3)  Establishing sliding scale bond requirements for PEOs based on PEO annual payroll;

     (4)  Repealing chapter 373L, Hawaii Revised Statutes, which relates to PEOs;

     (5)  Changing its effective date to July 1, 2112, for the purpose of facilitating further discussion; and

     (6)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 144, H.D. 1, as amended herein, and recommends that it be referred to the Committee on Finance in the form attached hereto as H.B. No. 144, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection & Commerce,

____________________________

ANGUS L.K. McKELVEY, Chair