STAND. COM. REP. NO. 2152

Honolulu, Hawaii

RE:    S.B. No. 2366

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2014

State of Hawaii

Madam:

     Your Committee on Judiciary and Labor, to which was referred S.B. No. 2366 entitled:

"A BILL FOR AN ACT RELATING TO WAGE AND HOUR LAW,"

begs leave to report as follows:

     The purpose and intent of this measure is to increase the guaranteed monthly compensation amount of an employee from $2,000 to $5,000, at which amount the employee will be exempt from minimum wage, overtime, and recordkeeping requirements under the wage and hour laws.

     Your Committee received testimony in support of this measure from the Department of Labor and Industrial Relations.  Testimony in opposition to this measure was submitted by the Hawaii Food Industry Association, The Chamber of Commerce of Hawaii, and Island Princess.

     Your Committee finds that the wage and hour laws were established to safeguard existing minimum wage and maximum hour standards to maintain the health, efficiency, and general wellbeing of workers.  Under existing law, an individual who receives a guaranteed compensation of $2,000 or more per month is excluded from the wage and hour laws, enabling the employer, if subject to the wage and hour laws, to mandate the individual to work an unlimited number of hours without having to pay the individual overtime.  Since the $2,000 guaranteed compensation threshold amount was established, increases in the minimum wage rate have resulted in the guaranteed compensation amount being closer to the monthly compensation of a minimum wage worker who is covered under the wage and hour laws.  This measure raises the threshold amount for guaranteed compensation to more closely align with increases in the minimum wage rate and inflation.

     Your Committee recognizes the concerns raised in the written testimony that the increase in the guaranteed compensation amount is too large and sudden and may impose heavy financial burdens on businesses.  Your Committee also notes that the guaranteed compensation threshold amount proposed under this measure could more closely reflect the increases in the minimum wage rate and inflation.  The Department of Labor and Industrial Relations testified that the $2,000 guaranteed compensation threshold amount was enacted in 2002, when the minimum wage rate was $5.75 per hour and increased to $6.25 per hour on January 1, 2003.  The minimum wage rate is currently $7.25 per hour.  Also since 2002, the consumer price index has increased thirty percent.  Thus, the $2,000 guaranteed compensation threshold amount is approximately $2,590 in 2013 dollars.  Rather than setting a fixed guaranteed compensation threshold amount, the Department proposed a mechanism that would maintain consistency with minimum wage and inflation over time without the need for frequent legislative intervention.  This mechanism determines the guaranteed compensation threshold by multiplying the minimum wage by 320.  Three hundred twenty represents the current exemption amount ($2,000) divided by $6.25, which was the minimum wage increase going into effect the last time this exemption was increased in 2002.

     Accordingly, your Committee has amended this measure by:

     (1)  Adopting the language proposed by the Department of Labor and Industrial Relations that establishes the guaranteed compensation amount by multiplying the minimum wage rate by three hundred twenty, which retains the same proportion of the existing guaranteed compensation threshold amount to the applicable minimum wage ($2,000:$6.25); and

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

     As affirmed by the record of votes of the members of your Committee on Judiciary and Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2366, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2366, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Judiciary and Labor,

____________________________

CLAYTON HEE, Chair