What's still brewing at the Legislature 2019?

Scott Murakami, Director of Labor
at the Senate Labor , Culture and the Arts
 confirmation hearing in March 2019.

[Note: forgot to post this before I went on Leave April 1, 2019]  April 1, 2019. The Department of Labor and Industrial Relations, and thus the Wage Standards Division, spends a lot of employee hours during the legislative session watching, testifying, meeting, and discussing legal issues brought up in legislation that is presented by people, some known, some unknown. As we have passed the first crossover date and now are hearing all the house bills in the Senate Committees and the senate bills in all the House Committees, it gets a little confusing to track versions of the issues.  This is a summary of what's still on our list.

Minimum wage
In January, minimum wage bills dominated our watch list with just about half of the fifty-plus measures we were tracking.  Three main issues included: 1) increasing the minimum wage; 2) allowing the counties to pass an increased minimum wage above the State minimum wage [dead in committee]; and 3) whether special lower minimum wages for sheltered workshops of handicapped individuals should remain.

I started this legislative season speculating that perhaps things might be different than previous years and in the minimum wage arena I think it has.  The labor committees each chose a measure to represent the discussions instead of scheduling each one to be heard.  This greatly streamlined the hearing process and testimony drafting. While both end-games currently land on $15 per hour, there are two competing balancing acts offered to employers.

Tax credit or health care incentive?
Both remaining measures that increase the minimum wage have some type of balancing act for employers.  The latest version of House Bill 1191 Senate Draft 1 (HB1191 SD1) raises the minimum wage to $12 an hour in 2020, and then to $15 in 2023.  The proposal also offers a tax credit to small businesses of 50 or fewer employees. The amount of the tax credit is 20% of the increase paid from the prior year up to $50,000 per year. I'm not a tax whiz but I estimate that's about $790 a person in the first year, with nothing in years 2021 or 2022, (as there is no increase those years from the prior year) and then $1248 a year for each full-time employee at minimum wage in 2023 when it increases to $15 per hour and then nothing else after that.The Department of Taxation late testimony on the tax credit ,  points out several other issues that are uncertain about the tax credit.

Senate Bill 789, House Draft 1 (SB789 HD1) has a five year graduated increase in minimum wage starting with $11 per hour January 1, 2020, increase a dollar each year and ending with $15 per hour on January 1, 2024.  The measure also allows employers to pay a reduced minimum wage for employees who are provided health care by the employers who are required to pay for health care under the Pre-paid Health Care Act.  This method provides relief to an employer between 90 cents per hour in 2020 to $2.50 per hour in 2024.  Ironically, the measure states the purpose is to incentivize the providing of health care to low-earning individuals, but the measure only provides the reduced rates for those who are already required to provide health care, so it is unlikely to do much to broaden the offering of health care to those not currently eligible.

Sub-minimum wages.
A long-standing debate here in Hawaii and across the country is addressed in Part II of SB789 HD1.
Section 387-9, Hawaii Revised Statutes (HRS) allows for certain categories of individuals to be paid a sub-minimum wage if the employer applies for it and the proposed employees fit certain criteria.  The measure eliminates "handicapped" employees from the category of people who may receive sub-minimum wage.

In the last 15 years, the Department has only issued certificates in the area where individuals with disabilities are working in a sheltered workshop. The trend we are noticing is that most employers who apply for these certificates choose to pay their employers at least minimum wage and need the certificate for other federal or state funding purposes.  So while the certificates are issued, there are very few individuals who are authorized to receive a sub-minimum wage.

While most people agree eliminating the exception to minimum wage would be a good thing, there are some families of individuals who are not sure. Because of a loved one's limited capacity, they fear a sub-minimum wage job is the only opportunity to be hired for meaningful work at federally-supplemented Sheltered Workshops. Eliminating this exception will limit those opportunities.

Should foreman be added as a classification under the construction prevailing wage law?
HB34 SD1 and SB1475 HD1 are still asking that question.  With resources spread so thin, it is the Division's point of view to follow general wage enforcement policy that limits the Department's ability to represent executives, supervisors, administrative and professional workers on the concept that these type of individuals have the capacity to negotiate and take up their own causes.  Another question is why do we need to add this category when the law already allows working foreman to be paid on the job.  There is concern that the measure implies that every classification now needs a higher paid person to supervise each classification.  The current system without a foreperson classification has been working since 1955. The Davis-Bacon law, the federal counterpart, since 1931, does not include forepersons in their prevailing wage rate schedule. Colorado recently added a similar provision that has proven to be problematic.

The prevailing wage law is premised on a fair playing field for public projects and these measures extend the reach of the trade unions to decide how the State and counties' projects need to be staffed.  The expansion of the law creates a larger enforcement field without any additional assistance to current compliance branch enforcement staff, that are already two years behind in processing claims.

And now certified payrolls and penalties for service contracts.
SB292, HD1 and HB 158, SD1 seem destined for conference.  These measures are making additional requirements on the government contracting agencies to collect certified payrolls for laborers or mechanics on service contracts in excess of $25,000, under section 103-55, HRS.  It makes similar requirements as the public works law in Chapter 104, HRS, requiring weekly payments and penalties for violations under the measure.

Using the terms laborer or mechanics creates ambiguity as to whether all workers in the service industry are included or just the workers who are considered laborers or mechanics under the public works law, which might include service contracts for regular maintenance and repair or upkeep, in the electrical arena or landscaping for example.  It doesn't appear to include service contacts in non-construction related tasks. SB292 seems to suggest a broader audience of service workers than HB158.

General contractors liable for subcontractors employee wages in the private sector.
The Payment of Wages and Other Compensation Law, Chapter 388, HRS, directs the DLIR to enforce employer-employee agreements for wages in the private sector.  Above and beyond minimum wage, this chapter allows the DLIR to assist in recovering unpaid wages for workers who are generally paid hourly and do not have responsibilities of an executive, administrator, supervisor, or professional. Generally, the recovery averages about $1,000 but the median is closer to $500. SB1082, SD2, HD1 would allow the DLIR to collect unpaid wages of employees of subcontractors from general contractors in the construction industry.

In the past six years, the Wage Standards Division can identify 193 cases,( approximately 10% of all payment of wage cases during the same period) in the construction industry where workers in the private sector filed for unpaid wages.   Of the 11 contractors who have outstanding balances due there is only one employer who appears to have been a sub-contractor, although the name of any general contractor is not included in any documentation.  So it is uncertain how many cases this law will impact, but it doesn't look like very many.

Taking protected leave for grandchildren.
Finally, HB1343 HD1, SD1, just received a hearing at WAM.  The measure adds a grandchild as an eligible family member for employees to take protected leave under Hawaii Family Leave Law.  The most recent version suggests that only week is allowed for grandparents to take care of their grandchild.  For the birth of child or to take care of a child, spouse, parent, or sibling it remains the four week period.

Budget Outcomes.
Wage Standards Division is not unhappy with the budget outcomes of this year.  We finally had a hearings branch labor law specialist reinstated so we can provide better service to the general public in the Hearings Branch.

What I like about the 2019 Legislative Session so far.

New folks.
Senator Brian Taniguchi is the new chair of the Senate Committee on Labor, Culture and the Arts.  Senator Les Ihara, Jr is the vice chair.  While Representative Aaron Ling Johanson is returning, Vice Chair Representative Stacelynn K.M. Eli is a first time representative of District 47.  It was nice being in the audience of the first meeting of the House Committee on Labor and Public Employment as Representative Eli took her first vote on HB34 and everyone in the room gave her a round of applause. Another reason we are "lucky we live Hawaii".  Other members of the House Committee on Labor and Public Employment include Representatives Linda Ichiyama, Lisa Kitagawa, Angus L.K. McKelvey, Sean Quinlan, Kyle T.Yamashita and Lauren Matsumoto.  The Senate Committee on Labor, Culture and the Arts also includes Senators Stanley Ching, Mike Gabbard, and Kurt Fevella.

New procedures.
The budget process is the biggest noticeable change where each Department has a bill heard at the subject committee. Department of Labor and Industrial Relations (DLIR) is HB1186 and was heard today at 8:30 a.m. Wage Standards Division has asked for an additional Labor Law Enforcement Specialist and a small increase in operating expenses.  There were no questions on any of the DLIR requests, now we'll see if that's a good thing or a bad thing down the road.

Which leads to another thing I'm liking about these Labor Committees, there seems to be a little more respect for people's time and effort to participate in the process. Today Representative Johanson released all the DLIR people he had asked to be there to answer any questions.   In a hearing last week Representative Johanson took the time to explain how the agenda was planned to get through some of the issues he anticipated to be quicker so the bills with more testimony would be in the middle.  When the hearing was running up against the scheduled Noon House legislative session, he apologized for the "ambitious agenda". 

In previous years when an increase in minimum wage was on the table, the hearings scheduled might go on for hours.  This year we've had one in the Senate and one in the House that both felt short and sweet.  Minimum wage moves on in SB789 and HB1191.

New scope
Since I've been at the DLIR, I've seen the "labor" component in the Senate move around to different places.  When it was with the Judiciary and known as JDL it was run by Clayton Hee, then Gilbert Keith-Agaran.  When Jill Tokuda led in 2017 it was just the Labor Committee.  The Judiciary Committee split off and went to Senator Brian Taniguchi.  Now the Senate Labor Committee has undergone another transformation and is now the Committee on Labor, Culture and the Arts. 

As a docent at the Honolulu Museum of Art  (HoMA) that makes me happy that I might hear about some of the issues that live on the periphery of my life during the legislative session but always remain a central source of happiness in my life.  The first time I was in Room 224, I noticed a large Allyn Bromley print. It was like sitting with a friend. The lighting and glass covering the print made it difficult to get a good shot.  I'll keep trying... stay tuned.

Free Prevailing Wage Workshop March 20

Free workshop!
There aren't many things that are free these days, but our Chapter 104 workshop still is!  The next one is scheduled for March 20 at 830 Punchbowl Street, Room 310, Honolulu, HI  96813, at 8:30 to 11:30 a.m.  The class takes a little bit more than two hours with a break and some exercises, with time left at the end to discuss specific issues of attendees.

Availability
The Wage Standards Division schedules a prevailing wage class at least twice a year, once in March and once in October.  Typically they are booked SRO.  This March has a smaller audience as of today so there is room for you if you've been worried about all those new penalties that were passed in 2016 Act 192.

Workshop highlights
The agenda includes a little theory, a lot of practical information, and some-hands on exercises to understand what is needed to be in compliance.  In addition, we just had a public hearing on new rules that are in the process of being finalized and published. Get first hand up-to-date information on these new rules.

Who should come?
Anyone who wants to understand what and how to pay construction employees who are working on a state or county funded project!  If the money came from a State or local public entity or in some other way promoted by a State or county entity then it is more than likely subject to this law.  Payroll clerks, project managers, construction company owners or construction workers who want to understand the law, avoid penalties, and work with State and counties to build a better Hawaii!

Click here to find out how to sign up, or email dlir.wages@hawaii.gov or call 808-586-8771 to sign up.

Wage Rate Schedule Released

Today, the new wage rate schedule for construction jobs was released that applies to work by laborers and mechanics as of February 19, 2018.

The Wage Rate Schedule Bulletin No. 491, effective February 19, 2018, is available on the Internet at:

              http://labor.hawaii.gov/rs/

Click on Wage Rate Schedule in the blue box to access the Wage Rate Schedule Bulletins.

For the Wage Rate Schedule 491 direct link: http://labor.hawaii.gov/rs/files/2018/02/WRS491.pdf

Note:     The Apprentice Schedule 491 reflects changes to the “LABORER I” classification.  CONSTRUCTION CRAFT LABORER (LABORER I) is now named CONSTRUCTION CRAFT and is under LABORER I. Also, a new class, HAZARDOUS WASTE MATERIAL TECHNICIAN has been added under LABORER I.

Both of these apprentice classifications, Construction Craft and Hazardous Waste Material Technician are supervised by journey workers classified as Laborer I, according to the Apprentice Agreements.

               

Status of "White Collar" Exemption (Part 541) from Overtime under Fair Labor Standards Act (FLSA)

Feds provide update to states at ILSA
I just returned from the  Interstate Labor Standards Association (ILSA) National meeting in lovely Little Rock Arkansas.  This is a group of like-minded public servants across the United States, and Canada interested in developing and sharing their knowledge and experiences around current wage and hour related issues.

A presentation made by one of the federal representatives of the United States Department of Labor, Wage and Hour Division (USDOL-WH), provided some light on the shifts happening in the USDOL-WH.  The current Trump administration appears to be in the process of some significant changes to the proposed rules outlined in the this blog on May 16, 2016, that were originally proposed to take effect on December 1, 2016. A challenge to the rule which included an injunction issued in November 2016 imposed an injunction on the implementation of the rules which is currently still effective. See Nevada, et al., v. U.S. Dep't of Labor, et al., 218 F. Supp. 3d 520, 534 (E.D. Tex. 2016), appeal pending, No. 16-41606 (5th Cir.)  As of August 31, 2017, the court ruled that USDOL-WH exceeded their authority by imposing a salary level and invalidated the rule. See: https://www.dol.gov/whd/overtime/final2016/litigation.htm. September 5, 2017, the DOL dropped it's appeal of the injunction and defense of the rule.
 
Still looking for public comment by September 25, 2017.
Despite the ruling on August 31, 2017, the USDOL is still looking for comments on its  Request for Information (RFI)  issued July 26, 2017, and due September 25, 2017.   It is important to participate as the  public input  may impact changes under the Trump administration to the overtime rules exempting white collar workers.  See https://www.dol.gov/whd/overtime/rfi2016.htm .  The link to the Federal Register announcing the request can be found at https://www.federalregister.gov/documents/2017/07/26/2017-15666/request-for-information-defining-and-delimiting-the-exemptions-for-executive-administrative

The 11 questions it seeks comments are as follows:

1. In 2004 the Department set the standard salary level at $455 per week, which excluded from the exemption roughly the bottom 20 percent of salaried employees in the South and in the retail industry. Would updating the 2004 salary level for inflation be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used? Alternatively, would applying the 2004 methodology to current salary data (South and retail industry) be an appropriate basis for setting the salary level? Would setting the salary level using either of these methods require changes to the standard duties test and, if so, what change(s) should be made?

2. Should the regulations contain multiple standard salary levels? If so, how should these levels be set: by size of employer, census region, census division, state, metropolitan statistical area, or some other method? For example, should the regulations set multiple salary levels using a percentage based adjustment like that used by the federal government in the General Schedule Locality Areas to adjust for the varying cost-of-living across different parts of the United States? What would the impact of multiple standard salary levels be on particular regions or industries, and on employers with locations in more than one state?

3. Should the Department set different standard salary levels for the executive, administrative and professional exemptions as it did prior to 2004 and, if so, should there be a lower salary for executive and administrative employees as was done from 1963 until the 2004 rulemaking? What would the impact be on employers and employees?

4. In the 2016 Final Rule the Department discussed in detail the pre-2004 long and short test salary levels. To be an effective measure for determining exemption status, should the standard salary level be set within the historical range of the short test salary level, at the long test salary level, between the short and long test salary levels, or should it be based on some other methodology? Would a standard salary level based on each of these methodologies work effectively with the standard duties test or would changes to the duties test be needed?

5. Does the standard salary level set in the 2016 Final Rule work effectively with the standard duties test or, instead, does it in effect eclipse the role of the duties test in determining exemption status? At what salary level does the duties test no longer fulfill its historical role in determining exempt status?

6. To what extent did employers, in anticipation of the 2016 Final Rule's effective date on December 1, 2016, increase salaries of exempt employees in order to retain their exempt status, decrease newly non-exempt employees' hours or change their implicit hourly rates so that the total amount paid would remain the same, convert worker pay from salaries to hourly wages, or make changes to workplace policies either to limit employee flexibility to work after normal work hours or to track work performed during those times? Where these or other changes occurred, what has been the impact (both economic and non-economic) on the workplace for employers and employees? Did small businesses or other small entities encounter any unique challenges in preparing for the 2016 Final Rule's effective date? Did employers make any additional changes, such as reverting salaries of exempt employees to their prior (pre-rule) levels, after the preliminary injunction was issued?

7. Would a test for exemption that relies solely on the duties performed by the employee without regard to the amount of salary paid by the employer be preferable to the current standard test? If so, what elements would be necessary in a duties-only test and would examination of the amount of non-exempt work performed be required?

8. Does the salary level set in the 2016 Final Rule exclude from exemption particular occupations that have traditionally been covered by the exemption and, if so, what are those occupations? Do employees in those occupations perform more than 20 percent or 40 percent non-exempt work per week?

9. The 2016 Final Rule for the first time permitted non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level. Is this an appropriate limit or should the regulations feature a different percentage cap? Is the amount of the standard salary level relevant in determining whether and to what extent such bonus payments should be credited?

10. Should there be multiple total annual compensation levels for the highly compensated employee exemption? If so, how should they be set: by size of employer, census region, census division, state, metropolitan statistical area, or some other method? For example, should the regulations set multiple total annual compensation levels using a percentage based adjustment like that used by the federal government in the General Schedule Locality Areas to adjust for the varying cost-of-living across different parts of the United States? What would the impact of multiple total annual compensation levels be on particular regions or industries?

11. Should the standard salary level and the highly compensated employee total annual compensation level be automatically updated on a periodic basis to ensure that they remain effective, in combination with their respective duties tests, at identifying exempt employees? If so, what mechanism should be used for the automatic update, should automatic updates be delayed during periods of negative economic growth, and what should the time period be between updates to reflect long term economic conditions?

Send comments

Submit comments, identified by

 (1) Agency: USDOL - Wage and Hour Division and

 (2) Regulatory Information Number (RIN) 1235-AA20, by either of the following methods:

Electronic Comments: Follow the instructions for submitting comments on the Federal eRulemaking Portal http://www.regulations.gov.

Mail: Address written submissions to Melissa Smith, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW., Washington, DC 20210.

Remember that responses to this RFI will be published and respondents need not reply to all questions listed above. 

2017 Legislature Part 3 - Conference

 Today, April 7, 2017 is the Second Decking Deadline
        "Decking" refers to the deadline a bill must be in it's final form to be considered for third passage by either the Senate or the House.   The purpose of the decking deadlines is to give legislators sufficient time to read and understand a bill they are considering for passage on third or final reading. In addition, the second decking deadline also serves to give a bill's originating house notice of any amendments made by the non-originating house and time to consider whether to agree to the amendments or to refer the bill to a conference committee to resolve areas of disagreement. For more on the process see the Legislative Timetables and Process.

 Wage Standards is still watching
     The following measures have all been heard and passed their final committee referrals in the non-originating house and we expect conference committees to be convened some time next week after the measure is reported out.

• Sick leave in HB4, HD1 SD1
• Penalties for Chapter 388 in HB208 HD2 SD1
• Siblings and death of a family member added to Family Leave HB213 HD 1 SD1
• Special prevailing rates for rental housing projects HB 1179  HD2 SD2  and it's companion SB1105 SD2 HD2
• Adds employers of correction officers to those allowed to use lie detectors in the workplace HB1130 HD1 SD1; 

and of course

• The Executive Budget Bill HB100 HD1 SD1 

Next steps
      DLIR will be watching and waiting to see who will be on the conference committees, especially for the Executive Budget Bill HB100 HD1 SD1, as the Senate did not concur with the House on the addition of one new Labor Law Enforcement Specialist III (see page 631 of the Budget Worksheet SD1) for the Wage Standards Division.  The LLES position requested in the Executive Budget is an important part of the Wage Standards Division sustainability model if we are to avoid the dramatic backlog of cases that exist today.  It also makes financial sense to have an entry level person doing essential entry level work, rather than senior personnel being drawn away from their primary responsibilities of advanced investigations and end up paying overtime to move the work forward.

      DLIR will be reaching out to the Conference Committees in written form and in-person to get the important points across that we are aware of.  We urge everyone to participate in the process.

Barber and Beauty Shops Notice

   Wage Standards  mailed out just over 4800 notices yesterday to a list of licensed barber

and beauty shops.  The notice is aimed to correct a problem identified from a complaint filed by a working apprentice hairstylist.  While working in a salon to get hours to qualify to apply for a license, some of the salons the apprentice worked in did not pay her for the hours worked, only provided the certification of  experience hours.  As part of the investigation our office noticed a practice in the industry that appeared to be misunderstood. Apprentices/interns working in a Barber or Beauty Shop need to be paid and treated like employees.  The notice can be found on our website here.

    After consulting with  the DCCA Barber and Beauty Licensing Board and resolving the complaint the Wage Standards Division is reaching out to the industry to clarify the situation and provide an opportunity for any Barber and Beauty Shops that may have failed to pay their apprentices or interns a chance to remedy any past mistakes.  The division would look back six years if an investigation were launched so providing this window for voluntary compliance is important to avoid any penalties that may be imposed.