Minimum Wage Update

     The minimum wage measures that were reported out from the money committees before crossover  SB 2609 SD1 and HB 2580 HD1, were completely different proposals that came out of the subject matter committees as I wrote about them on February 21.  These bills, as modified by the Senate Committee on Ways and Means  and the House Committee on Finance, had no Consumer Price Index adjustments and tip credit was back on the table. 

    Only SB2609 SD1 survived the crossover early in March.

Poverty and minimum wage
    The House Labor and Public Employment Committee worked to use the poverty standards as a trigger threshold to allow tip credit.  Using a 250% variable of the poverty threshold, the trigger mechanism was to limit the ability of the employer to take the tip credit until workers earned that amount.  See SB2609 SD1 HD1.   In 2014, the 250% amount of Hawaii poverty guidelines is calculated out to $33,500, using the 2014 Hawaii poverty guidelines.

    In the Finance Committee hearing April 2, Representative Ward posed the question whether the enforcement  would use an accrual or cash basis.  A cash basis would mean tip credit could be taken after the worker earned $33,500.  Accrual basis would disperse the amount out over the year, i.e. $2,792 per month, or $644 per week; or $16 per hour, and the tip credit would be taken at that point.The HD2 version offered the answer to Representive Ward's question, the accrual basis.

Tip Credit

      "Tip credit" is a term used to indicate the amount of money an employer can subtract from the minimum wage to determine the cash wage required to be paid to regularly tipped employees.  For example, federal minimum wage is $7.25, with a minimum cash wage of $2.13, so the maximum tip credit under the Federal Labor Standards Act ("FLSA") is $5.12.  This means a restaurant employer can pay $2.13 per hour to a server and use $5.13 of the server's tips to make up the minimum wage.

     In Hawaii, the current tip credit is twenty-five cents that can be deducted from Hawaii's minimum wage of $7.25, or a minimum cash wage of $7.00 as long as the total earned in wages and tips is at least $7.75.   SB2609 HD2, provides for a tip credit increase to 75 cents by 2016 as long as the worker earns at least $15.50 per hour, and $17.00 per hour by 2018.   For tipped workers this works out to a cash wage of $7.75 in 2016, $9.25 in 2018. 


Recent Developments in Tip Credit

      Testimony from many employers in the restaurant industry indicate that the tip credit is essential to their survival and to the benefit of the lower paid un-tipped "back of the house" employees.  Representative Johanson asked these employers, "Why not share the tips with dishwashers, cooks, and managers too?"  The simple response is the U.S. Department of Labor has had a long-standing enforcement policy that wages belong to the employee and if there was an agreed upon pooling of tips, only those who were regularly tipped could partake in the sharing of tips, effectively eliminating those "back of the house" folks from receiving any of the tips.

     This is just part of the answer, since the Oregon Restaurant Association sued the USDOL Wage and Hour Division challenging  their exercise of authority in passing regulations that legitimized the USDOL tip pooling enforcement policy.  The court decision which came out in June 2013 and sided with the Oregon Restaurant Association says that if an employer does not take a tip credit, there is no authority for the USDOL to determine how an employer could contract with employees regarding the distribution of tips collected in the employer's establishment.  In essence, the court said if no tip credit was taken, tip pools could be shared by anyone. See Oregon Restaurant and Lodging, et al., v. Hilda L. Solis, et al., 948 F.Supp. 2nd 1217 (2013).

      The Oregon Restaurant Association wrinkle in the enforcement of tip pooling may create a new paradigm from the federal perspective for employers with regularly tipped employees.  From the Hawaii point of view, a tipped employee is still considered to be someone who receives  more than $20 a month in tips.  See Hawaii Administrative Rule 12-20-11.

What's next?

     The current minimum wage bill, SB 2609 is in Conference Committee with Senator Hee, Chair, Senator Ige Co-Chair; Senators Ihara, Kouchi, and Shimabukuro as conferee members along with Representatives Nakashima and Luke as Co-Chairs; and Representatives Ichiyama, Nishimoto, and Thielen as conferee members.  Conference hearings already held on April 17 and 21, have continued the matter with no resolution as of today.  The next conference meeting is on April 23, at 10:30 a.m. in Conference Room 325 at the State Capitol. 

Revised Notice of Paycard use extended until Sept. 1, 2014

         (7/9/14 update: Pay cards were authorized in Act 208, 2014)
        The Director has revised the suspension of the use of pay cards as a method of payment of wages to be effective Sept. 1, 2014.  The Revised Notice is available the Wage Standards website.   The extension will provide ample time for the State legislature to act via the measure H.B. 1814 that is directly addressing the issue.  Currently, the measure is allowing both direct deposit and pay roll cards as long as they are voluntary, among other requirements. 
       
       If the measure passes and becomes law, the provisions of the new law will prevail.

Free Prevailing Wage Workshop April 17

The Division recognizes how complicated the Wages and Hours of Employees on Public Works Law, Chapter 104, Hawaii Revised Statues, can be so we regularly offer a free workshop.  The next free workshop is scheduled for April 17 at the DLIR Conference Room, 830Punchbowl St., Room 310.    You can find the sign up sheet for our next scheduled class on our website  at: http://labor.hawaii.gov/wsd.  Here is a direct link to the workshop flyer.  The size of the class is limited so sign up early to be assured of a spot.

Use of Pay Cards Suspended May 1, 2014

[7/9/14 update:  Act 208,  authorized use of pay cards see: July 9 blog]
 [NOTE:  on April 3, a revised memo extended the date until Sept 1, 2014, see April 3 blog]
       Yesterday,  March 19, 2014, the Director signed a memo suspending the guidelines for use of pay cards in Hawaii as of May 1, 2014.  On May 1, 2014, the State of Hawaii will not recognize the use of pay cards for payment of wages and other forms of payment must be used.

      The guidelines were developed after a 2006 declaratory order authorized their use with certain conditions.  The Director's March 19 memo refers to State legislation active now that relates to this issue.  HB1814, HD2, SD1, was heard and passed out of the Senate Judiciary and Labor Committee yesterday.  The SD1 version should be available soon.  This legislation may effect whether pay cards are permanently banned or allowed to be used with restrictions.

     The memo does not effect the treatment of the direct deposit method of payment. 

2014 Legislative Regular Session

     The legislative session is well on its way.  We started out monitoring 37 measures that affected the laws Wage Standards enforces.  The process has already brought the number of bills that we are keeping tabs on to just eleven.  Along with the link to the 2013 Annual Report here is a short summary of our assessment of the 2014 session. . .so far. 

2013 Annual Report
     The Department of Labor and Industrial Relations 2013 Annual Report to the legislature is now available for public review on the DLIR website.  To view it click here.  The Wage Standards Division appears on page 11.  It's a good exercise to summarize a year's worth of work into less than 600 words with one chart and one picture.

Minimum Wage
     Last year about this time, I was convinced we would have a new minimum wage, after all it had been six years, now seven years after the last increase in minimum wage.  2014 will be the year of minimum wage changes. The two measures that have passed out of Committee are House Bill 2580 and Senate Bill 2609.  Both measures repeal the tip credit, both measures invoke the Consumer Price Index (CPI) as a method to keep the minimum wage on the pace of the economy, and both measures propose increases in three increments until the CPI takes over any increases.  That's a lot of similarities.   House Bill 2580 was introduced by 31 representatives so there is already a lot of support.
    
     The differences between the two bills are the levels of the increments, and how the calculated amounts once the CPI increases kick in will be rounded.  The differences in the incremental amounts grow from 20 cents in 2015 to 60 cents in 2017.  In House Bill 2580, minimum wage goes to $8 on January 1, 2015, then $8.75 on January 1, 2016, and $9.50 on January 1, 2017. In Senate Bill 2609,  minimum wage goes to $8.20 in 2015, $9.15 in 2016 and then $10.10 in 2017.  In both the Senate Bill and the House Bill the CPI will be used to adjust the minimum wage as of 2018 using the CPI calculated from the prior twelve months from Sept. 1,  although in the Senate Bill, the CPI calculation can not act to lower the minimum wage.  This prohibition is absent in the House version.  The Senate version rounds the CPI calculation to the nearest 5 cents, the House version to the nearest cent. The table below summarizes the differences.

DIFFERENCES	SB2609	HB2580
As of Jan 1, 2015	$8.20	$8.00
As of Jan 1, 2016	$9.15	$8.75
As of Jan 1, 2017	$10.10	$9.50
CPI-W Adjustment Rounding	5 cents	1 cent
Limits?	No decrease	Up or down

    Connected to the minimum wage issue is the guaranteed salary compensation exemption from Hawaii minimum wage and overtime law, Wage and Hour Law, Chapter 387, Hawaii Revised Statutes.  This current exemption allows businesses not subject to the Fair Labor Standards Act (FLSA) to set their workers salary at $2,000 per month which makes them exempt from minimum wage and overtime under Hawaii law.  SB2366 SD1 contains a provision to track the minimum wage increases caused by the CPI calculation by modifying the guaranteed salary amount to a formula that multiplies the minimum wage by 320.  This equals approximately 160 hours of straight time at minimum wage and 106 overtime hours at time and half of minimum wage per month.

Prevailing Wage
     It's no secret that prevailing wage claims under the Wages and Hours of Employees on Public Works Law, Chapter 104, Hawaii Revised Statutes continue to monopolize a substantial portion of the Labor Law Enforcement Specialists (LLES) time.  Wage Standard Division LLES investigators have more than 250 pending claims against 50 employers as of this writing.  To make enforcement effective the Division proposed several concepts to address the penalties and related issues during this session.  Senate Bill 2260  and Senate Bill 2261, address those issues and have made progress in the Senate. The first senate drafts reflect the discussions Wage Standards had with Department of Attorney General and Department of Accounting and General Services in developing SB2872, and SB2873.   In the House side House Bill 2323 similar to Senate Bill 2261 SD1 was also moved out of the House Committee on Labor and Public Employment.

      Another prevailing wage proposal still moving expands overtime to be defined by the collective bargaining agreement that prevails in the specific laborer or mechanic classification.  Currently, overtime is limited to time and one-half.  The current restriction creates an uneven playing field between union and non-union bidders.  Requiring prevailing practices that pay some laborers or mechanics double-time in certain situations will level the playing field.   (See HB 1958 HD1 and SB 2704, SD1).

     The last prevailing wage proposal still on the table is whether or not our Division will get more investigators.  In the current Senate version there are two positions created and money appropriated out of the general fund.  (See SB 3039 SD1).  The House version still resembles the original proposal to create a special fund from a percentage of construction funds for public works that are subject to enforcement of the Wages and Hours of Employees on Public Works Law, Chapter 104, Hawaii Revised Statutes.   Unfortunately, the current percentage amount (.01) wouldn't generate enough funds to provide the salaries of  even one Labor Law Enforcement Specialist.  (See HB 1976 HD1 also waiting to see what the Finance Committee's HD2 looks like.)

Direct Deposit and Pay Cards

        HB 1814, HD1 (decision making after Wednesday's Feb 19 Consumer Protection hearing will be Monday) has brought some awareness to some of our posted policies about employer payments to employees.  In 2006, when the former administration made a declaratory ruling that the DLIR would allow pay cards as an acceptable form of payment to employees, Wage Standards posted the policies and practice by which direct deposit and pay cards would be acceptable forms of payment to employees.  Employees had to voluntarily choose to use direct deposit or pay cards before employers could use that form of payment.  Other requirements included the ability to withdraw the employee's full wages every pay period at least once without fees and the agreements had to be in writing including notices of the processes and the ability to stop using direct deposit or pay cards at the employee's discretion.  See Direct Deposit, Debit Cards and Electronic Policies on our "guidelines" page.   These are similar requirements that are currently part of HB1814 HD1.  The major difference is that HB 1814 HD1 requires the employer to pay any fees associated with the debit card.  Complaints against employers regarding these type of payments are usually resolved quickly without complications.  The Office of Consumer Protection recommends ensuring that Regulation E is followed. (See the testimony at pages 8-11, for Regulation E). We couldn't agree more.
    
     Change in current policy for pay cards in planning
     Note that as of April 1, 2014, in the light of this legislation, the current administration is considering withdrawing the 2006 declaratory decision that allowed direct deposit and pay cards.   If your business is currently using pay cards as a method of payment to employees you should be reviewing your payment procedures to ensure future payments to employees continue to be in compliance with any new developments.

Human Trafficking Poster

   As of January 1, 2014,  Act 245, Session Laws of Hawaii 2013, requires certain employers to post a notice to employees about help for Human Trafficking.  The poster can be found on the DLIR website here. The National Human Trafficking Resource Center Hotline is 1-888-373-7888.

   The types of employers that are required to post this poster include employers who:

1.  Hold a class 5 or class 11 liquor license pursuant to section 281—31, Hawaii Revised Statutes;
2.  Maintain a massage therapy establishment that employs five or more people; or
3. Employ one or more erotic or nude massagers or erotic or nude dancers as defined in section 712—1210, Hawaii Revised Statutes.

  Act 245 also includes a penalty in the amount of $100 a day for employers who violate this requirement.  This penalty is a civil action.  The Act is now codified at section 371-20, Hawaii Revised Statutes.

Elevator Rules to be Reviewed by Small Business Regulatory Review Board

   Tomorrow, Wednesday, January 22, 2014, the Small Business Regulatory Review Board has the current rules amendments for elevator, escalators and other similar type of equipment on the their agenda.  The meeting will be held at 9:30 a.m. at the No. 1 Capitol District Building, 250 South Hotel Street, Conference Room 436. 

   The update of the Elevator rules has not been accomplished since 1999.  Since then the industry has undergone no less than four updates of the standards.  While new elevators have always had to conform with the most current standards, it is the older elevators in the State that may need some updating.

    This review is an important step in the rules amendment process.  The next step will be a public hearing to allow public comment about the proposed rules.  The current step is meant to make sure rules amendments consider the impact on small business and make appropriate accommodations as required.  As safety is the number one issue at the Hawaii Occupational, Safety and Health Division, this usually means what is good for one is good for all.