Keeping Up With The Minimum Wage and the Guaranteed Salary Exemption

The Governor's package submitted to the 2015 legislature includes a bill that addresses the guaranteed salary exemption under the Wage and Hour Law, Chapter 387, Hawaii Revised Statutes.  Senate Bill 1122 and House Bill 953 increase the guaranteed salary exemption from $2,000 per month to 276 times the minimum wage per month. 

What's a guaranteed salary exemption?
Currently, the law excludes certain employees from the protection of the minimum wage and overtime law in Hawaii (Chapter 387, HRS).  One of the exemptions is when the employer pays their employee a guaranteed salary of $2,000 a month See section 387-1, definition of "employee" (1).  For other exemptions see section 387-1, HRS definition of "employee" paragraphs(2) through (14).  Paying a guaranteed salary of at least $2,000 per month, would technically allow an employer to have an employee work without limits and without a requirement for overtime.

Who does it apply to?
Not all employers and employees are subject to Chapter 387, HRS in its entirety.  Hawaii Wage and Hour Law is generally considered a "gap" group protection for minimum wage and overtime for those that are not covered under the federal Fair Labor Standards Act (FLSA). See the definition of "employee" paragraph (12).  An employee is covered under FLSA for minimum wage and overtime if their employer makes  more than $500,000 a year or is involved in interstate commerce (see 27 USC 203).  What paragraph (12) also provides is that if Hawaii has a higher minimum wage rate or a higher standard of overtime, then all Hawaii employees, even those protected by FLSA, are required to get at least minimum wage and overtime protection from Chapter 387, HRS.  So now that our minimum wage has increased to $7.75 and the federal minimum wage is $7.25, the Hawaii minimum wage rate applies to all, not just small businesses.  So paragraph (12) operates to keep the higher minimum wage rate and most favorable overtime rates, either State or Federal, enforceable, but generally exempts those subject to FLSA from the application of Chapter 387, HRS. 

This means that generally large businesses may not use the guaranteed salary exemption because those large businesses are more likely governed by the FLSA, not Hawaii Wage and Hour Law and the FLSA does not recognize the guaranteed salary exemption.  The guaranteed salary exemption is available only for those small entities that don't rise to the level of  FLSA jurisdiction.

Why do we need to increase the guaranteed salary exemption?
A guaranteed salary exemption is a good thing and can also be a dangerous thing.  It's good in that it allows a small business to be able to regulate their overtime expenses by guaranteeing a certain level of salary to their employees without a concern to the number of hours worked in a week.  The dangerous thing is that when it doesn't keep up with the minimum wage, the guaranteed salary exemption doesn't protect the very workers it is designed to safeguard.

The $2,000 figure was established in 2002 when the minimum wage was $5.75 and Act 43, Regular Session of 2002 changed the guaranteed salary exemption from $1,250 to $2,000.  The $2,000 would have covered approximately 168 hours of work a month at minimum wage and about 72 hours of overtime a month.  The current formula provides for a minimum of 168 hours of work a month at minimum wage and 72 hours of overtime in a month as well.

With minimum wage set to go up to $10.10 by 2018, this measure aims to track the increases in minimum wage with the guaranteed salary exemption formula.  The formula would increase the guaranteed salary exemption to $2,139 on July 1, 2015, $2,346  on January 1, 2016,  $2,553  on January 1, 2017 and $2,787.60 on January 1, 2018.

What's next?
SB1122 was passed out of the Senate Judiciary and Labor Committee on Tuesday February 17, 2015 and is now headed to the Senate Ways and Means Committee. No hearing date is set as yet.

Guess who came to our Administrator's meeting!

Yes, Governor Ige and his chief of staff Mike McCartney stopped by our Administrator's meeting at the Department of Labor and Industrial Relations (DLIR).  It was a surprise visit and caught everyone off guard.  He came to give us an update on what's going on.  The deputy director appointee, Leonard Hoshijo, will wait until the Senate approval before he actually starts at the DLIR.  Leonard's brother Bill Hoshijo is the Executive Director of the Hawaii Civil Rights Commission, an attached agency of the DLIR, and was present at the Administrator's meeting.  Bill had a good poker face so it was hard to tell if he knew that already. 

The Governor also told us that he is still looking for a DLIR Director candidate and does not plan to have a series of "Acting" Directors.  Both Elaine Young, Administrator of the Workforce Development Division,  and the Governor seemed committed to having Elaine as Acting Director for not more than 60 days and someone in line for confirmation by that time, or before.   Governor Ige asked everyone at the table what he could do for us.  For most it was staffing and technology upgrades to get rid of the mountains of paper we still use to process most of our work.

Governor Ige is a personable man who seems eager to learn about the hurdles we have been dealing with.  He genuinely seemed surprised at the situation that even if we have the money in our budgets we have difficulty getting approval to spend it.  Some fingers pointed to the retentions over the years from B&F, some identified the procurement process as cumbersome, and some just didn't make the priority list to be able to fill their vacancy or the State didn't pay enough to compete with the private sector.  With all the wants and needs expressed, it was clear that everyone was glad to see him sitting down with us and giving us a moment to speak. Many were eager to hear what he had in store for our Department, but today was a listening day.

He spoke briefly about goals focusing on doing a better job at collecting the money that is owed to the State and wondered why if an employer gives a check to the State why does it take so long to deposit?  What is holding us back from having the goal of depositing checks in 1/2 day?  He also acknowledged that filling the vacancy created by David Pendleton's recent departure from the Labor and Industrial Relations Appeal Board(LIRAB) would be moved higher on the list, especially if it is causing a lack of quorum and holding back the processing of workers compensation appeals that LIRAB hears.

Finally, he said a couple of times that advancements in technology do not mean layoffs.  Becoming more efficient at some jobs, will only serve to allow others to address the next level. Everyone was charged-up and feeling the energy that keeps them in public service.  It feels like this first meeting, hoping we'll have a second, Governor Ige gets an A+.  Thanks for stopping by.

Open Recruitment for Labor Law Enforcement Specialist (LLES) at Wage Standards

   (NOTE: as of August 3, 2015 all positions have been filled.)
 The Wage Standards Division is recruiting for Labor Law Enforcement Specialists IV.  There are three positions available, all on Oahu.  Individuals may qualify to interview at lower levels.  That means that entry level applicants (LLES I, II, and III) will be considered.  If hired at a lower level, you can progress through the series until you reach LLES IV.  Typically those hired at LLES I, will take approximately 2 1/2 years to progress to a LLES IV.   For all levels you need to have a 4-year college degree and at least one class of bookkeeping (specialized experience may qualify but check the requirements in the recruitment notice).

What does it pay?
    Salaries for the LLES I level start at $37,464 (SR 16), in six months you may qualify for LLES II, which is $40,548, (SR 18),  after a year at LLES II, you have the time experience to qualify for LLES III, (SR 20) which currently pays $43,812.  Finally, after a year of being a LLES III, you would have the time experience to qualify for LLES IV (SR 22), which is the top of the series.  The range of annual salary for LLES IV is currently $47,400 to $70,188 annually.  A complete list of the Unit 13 salaries can be found here.  Increases to the salary schedules have already been finalized for 2016 and 2017.  A complete description of benefits offered to the State civil service employees can be found on the Department of Human Resources Development webpage.

What does an LLES do?
    LLESs  are the Division's investigators.  They meet with employers and employees, review records, interview witnesses and identify and cite violations of the law.  Being a LLES IV at the Wage Standards Division means that every day will be different and interesting.  You will learn investigation techniques, communication tools, record keeping and reporting processes.  Individuals who have strong communication abilities, are organized, good listeners, and problem-solvers will likely enjoy this career very much.  This is a rare opportunity that the positions are opened up for public recruitment because many of the people in the Division come here and stay until they retire because the job is both challenging and personally rewarding via the public service provided.  Check out our website to see the many things we do here at WSD, and see if you think this type of work is something you would excel at. (edited 10/20/15)

Paid Leave

        Paid leave for employees is a hot issue.  President Obama mentioned it in his State of the Union address, "Today, we're the only advanced country on Earth that doesn't guarantee paid sick leave or paid maternity leave to our workers. Forty-three million workers have no paid sick leave." The National Conference of State Legislatures (NCSL) maintains a web page with developments in the paid leave area.  The Wage Standards Division is currently tracking 8 paid leave bills this session.
   
Who pays for the benefits?
     Here in Hawaii there are several approaches to achieving paid leave benefits in current measures at the 28th Hawaii State Legislature.  Who pays for the benefits is one big difference in the measures.  Four of the measures have employer paid benefits. Four have employee funded benefits.

Employer paid benefits
     When the employer pays for the benefits the measures are couched as sick leave and placed in the Wage and Hour Law, Chapter 387, Hawaii Revised Statutes, or  a new chapter, and include using the leave for the care of family member (HB 9, SB 129 SB 1025, SB1047).   
      The employer funded measures earn paid leave on a per hour basis.  Three have provisions earning 1 hour per 30 hours worked,( HB 9, SB 1025, SB1047) while one is 1 hour per 40 hrs worked (SB 129), with limits of 40 or 56 hours per year.
      Three of the employer funded measures have retaliatory protection (SB 129 SB 1025, SB1047).

Employee funded benefits
     When the employee pays a percentage of their wages into a trust fund the focus is on paid family leave. (HB496, HB535, SB965, HB1049).   The employee trust fund approach is placed in the Hawaii Family Leave Law, Chapter 398, Hawaii Revised Statutes. 
      The trust fund approach also amends the application of the Hawaii Family Leave Law from employers with 100 employers to all employers with at least one employee.  This adjustment applies to the application of the protected leave, as well as any paid leave added to the law in the proposed legislation.
        The eligibility of the employee trust fund bills look to Chapter 398, HRS, which currently requires employees to have worked for 6 months before they are eligible to be protected under Hawaii Family Leave Law. (See 398-1, HRS, definition of "employee",  and HAR 12-27-5)

What's next?
     So far, three of these measures have been heard in committee.  SB 129, an employer paid benefit, was heard by the Senate Judiciary and Labor Committee on Thursday, January 29, (testimony available here) and decision making was deferred to February 17.  Today, on Tuesday, February 3, the House Committee on Labor and Public Employment heard HB496 and HB535, employee funded benefits, (testimony available here and here) and deferred both for decision making until Friday, February 6.  Stay tuned.