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.