Minimum Wage Increases January 1, 2016 to $8.50

Minimum wage increases   
Back in 2014, the legislature passed   Act 82 Session Laws of Hawaii 2014,  that raised Hawaii's minimum wage incrementally to $10.10 per hour by January 1, 2018.  As of January 1, 2016, the minimum wage is raised to $8.50 per hour.  January 1, 2017, the minimum wage goes up to $9.25 per hour.


Tip credit increases
As part of the minimum wage increase, the tip credit was also increased.  As of January 1, 2016, the tip credit is 75 cents.  The tip credit remains at 75 cents even when minimum wage increases to $9.25 and $10.10.

Employers with regularly tipped employees who make at least $20 per month in tips ( See Hawaii Administrative Rule 12-20-11), may be eligible to take the tip credit of 75 cents if the employee's tips plus the wage paid equal $15.50.  This means that with minimum wage of $8.50, an employer can pay wages of $7.75 if the tips of the employee are equal to $7.75 per hour. Additional records are required to be kept to take this credit, see Hawaii Administrative Rule 12-20-12).

If employees earn less than $7.75 per hour in tips, the employer may be eligible to take a tip credit less than 75 cents.  A tip credit guideline published on the Wage Standards Division website provides the details and calculations of these scenarios.  See Exhibit 3, ( page 4) for 2016, Exhibit 4 (page 5) for 2017 and Exhibit 5 (page 6) starting January 1, 2018.

Other Resources
Minimum wage poster
Wage and Hour Law, Chapter 387, Hawaii Revised Statutes
Wage Standards Division Website:  labor.hawaii.gov/wsd

Painting and Road Striping Classifications on Hawaii State and County Projects

    

Painter - Thermoplastic striping

    There was a workshop last week on the Wages and Hours of Employees on Public Works Law, Chapter 104, Hawaii Revised Statutes (HRS).   A question that came up during the course of the session was very similar to questions we have received in the recent months.  It may be related to all the resurfacing of the roadwork going on  in the City and County of Honolulu.  The query asks what classification are the workers who are putting the lines on the road?

     Generally, if someone is painting, they are painters.  And this situation follows the general rule.  An excerpt from a recent decision letter we issued in August 2015 is below.

           "This is in response to your . . .letter . . . regarding the classification for placing pavement markings on highways, parking lots, play courts, airport runways and taxiways, on projects subject to Chapter 104, HRS.

           The proper classification for striping and/or pavement markings on roads, highways, airport runways and taxiways, is Painter. This also includes sweeping the pavement, hand casting glass beads onto pavement markings, carrying paint cans, and other related work to the striping and/or pavement markings.

          The proper classification for installing permanent raised pavement markings (reflectors) on any surface is Laborer II.

           The proper classification for thermoplastic striping and/or pavement markings on parking lots, play courts, and driveways is Painter. Pavement striping using a method other than thermoplastic striping may be performed by a Laborer II."

          Note that thermoplastic striping is always done by Painters no matter where the painting or road striping is.  Some painting i.e. by brush or spray painting of areas like parking lots or play courts or driveways may be done by Laborer II.

Wage Rate Schedule and Act 165, Regular Session of 2015

        New wage rate schedule #486 is available and effective Monday, September 21, 2016, as required under Hawaii's prevailing wage law, Wages and Hours of Employees on Public Works, Chapter 104, Hawaii Revised Statutes.  Act 165, Regular Session of 2015, amended the law to provide for overtime rates of "not less than" one and one-half times the regular rate.  It further required the overtime compensation to be at the rate set by the prevailing collective bargaining agreement.  Upon review of the prevailing collective bargaining agreements the Director has adjusted the overtime in certain classifications.  Classifications with an overtime rate adjustment are listed in the Wage Rate Schedule with a reference to footnote 13.
    
       Act 165 does not expand the availability of overtime, it simply increased the rates for designated overtime by law.  Overtime is still due after 8 hours in a day, and all day on Saturday, Sunday, and State holidays.  Act 65 has now authorized an overtime rate at 2 times the basic hourly rate plus fringe benefits for work in 15 classifications on certain weekend or State holiday days.

      The wage rate schedule also provides 3 times the basic hourly rate plus fringe benefits for work on Labor Day in 12 classifications.

Kuhio Day is an OT Day on State and County projects

Prince Kuhio Day
As a reminder to contractors working on State or County construction projects, Prince Kuhio Day is State Holiday and therefore all hours worked on Thursday March 26, 2015, need to be paid at the overtime rate. 

Calculating the correct OT rate
To calculate the overtime rate under Hawaii's prevailing wage law, Hawaii Revised Statutes Chapter 104, Hours and Wages of Employees on Public Works, take the basic hourly rate and multiply by 1.5*  then add the fringe benefit hourly rate amount to get the overtime prevailing wage rate.  For example, looking at the current applicable wage rate schedule, #485 for the prevailing wage rate of Carpenter the schedule shows $62.96.  Broken down it is a $42.25 basic hourly rate and $20.71 fringe benefit hourly rate.

Carpenter basic hourly rate $42.25 x 1.5 = 63.375 now add the hourly fringe benefit rate of $20.71 and get $84.08 for the overtime rate for carpenters on March 26, 2015.

How can the overtime prevailing rate be paid?
For contractors with a collective bargaining agreement in place, the certified payroll will show the carpenter being paid at least $63.38 per hour and show at least $20.71 per hour paid to the union trust fund for fringe benefits.  Other contractors who pay benefits on an hourly basis, the amount of basic hourly rate and the amount of fringe benefits paid to a third party trustee will be determined by the contractors own agreement with employees, the two amounts must add up to $84.08 per hour for all work done on March 26, 2015.

For contractors who are not parties to a collective bargaining agreement  or do not pay their fringe benefits on an hourly basis, the certified payroll must show a basic hourly rate of $84.08 for overtime work, because no credit for fringe benefits can be taken in overtime when paying fringe benefits on a monthly basis.  

Fringe benefit credit applies only for straight time.
For contractors that pay their workers benefits on a monthly basis, there is a formula that can be used to calculate an hourly credit, but the credit only applies to straight time hours.  The formula can be found in Hawaii Administrative Rule 12-22-4.  To calculate the hourly fringe benefit credit for straight time hours, take the amount paid by the employer and divide it by 173 and that quotient is the hourly credit amount that can be taken for straight time hours.

*Act 165, Regular Session 2015 modified the law to provide higher overtime rates than 1.5 where collective bargaining rates prevail in classifications.  Wage Rate Schedule 486 is the first schedule to direct overtime on Sunday at 2 x the basic hourly rate for some classifications, and 3 x the basic hourly rate on Labor Day.  See Note 13 on WRS 486. 

2015 Legislative Update

Administrative Measures
This week marks an important threshold in the legislative process of moving a bill out of one body over to the other, commonly referred to as crossover.  Wage Standards is still watching several bills that made this progress.  Both administrative measures, HB 952, HD2, Relating to Wages and Hours on Public Works Law, and its companion SB 1121, SD 1 (limited the time to file a complaint with the DLIR under the prevailing wage law to one year from the time the wages were due have been modified to allow complaints within 3 years in the current version of SB1121, and complainant confidentiality still remains in both) and SB 1122, Relating to Wage and Hour Law, which adjusts the guaranteed salary exemption to track the increases in minimum wage.

Paid Sick and Family Leave Bills
Two leave bills made the crossover.  Both perspectives initially analyzed previously in this blog under Paid Leave, are still alive.  In one, the employer pays and provides up to 40 hours of sick leave a year, (SB 129, SD2 Relating to Labor), in the other, the employee contributes one-half of one percent (.5%) of their wages into a newly created fund administered by the DLIR under the family leave law.  (HB 496, HD1 Relating to Employment). There seems to be strong support for the idea.  Twenty-one different representatives (Aquino, Brower, Cachola, Choy, Creagan, Hashem, Ichiyama, Ito,  Keohokalole, Kobayashi, Luke, Lopresti, McKelvey, Mizuno, Morikawa, Onishi, Say, Saiki, Takayama, and Woodson) and five senators  (Baker, Chun-Oakland, Espero, Galuteria, and Ihara) introduced some form of an employee-funded leave system, while  six senators (Chun-Oakland, Espero, Gabbard,  Ihara, Keith-Agarin, and Shimabukura) and one representative (Takumi) introduced some form of an employer paid leave system. Notice that three of the senators (Chun-Oakland, Espero, and Ihara) introduced both employer and employee funded measures. Legislators have made it clear that the idea of paid leave is important, but deciding how to implement it promises to be an interesting conversation.

Other Matters of Interest
Under the Wages and Hours of Employees on Public Works Law, SB216 SD2, and it's companion HB391, HD1, allow the payment of overtime on public works to follow the prevailing union negotiated private contract provisions, which would authorize overtime rates to exceed the current time and one-half, on Saturdays, Sundays, State holidays and regular work days in excess of 8 hours.  A similar provision stalled in Conference Committee last legislative session. 

The bullying bill, HB 819, HD2, Relating to Bullying , being followed on the Division's Facebook Page Hawaii Teens at Work ,applies to all agencies that provide services to youth.  This includes the Wage Standards Division in the administration and enforcement of work permits for minors, under the Child Labor Law, Chapter 390, Hawaii Revised Statutes.

In the unemployment area, SB1219 SD2, Relating to Employment Security, is addressing the independent contractor determination under the Employment Security Law, Chapter 383, Hawaii Revised Statutes.  A court case on Maui where the Department was overturned in its determination of the employer-employee relationship and ruled the individual an independent contractor appears to be the motivation for this measure.  (See Maui News February 6, 2015, Chamber View).  The independent contractor classification has long been an avenue of abuse of workers in Hawaii as a method of relieving employers from their legal obligations to provide, workers compensation, health benefits, and unemployment benefits that protect employees. This is a nationwide issue and the labor departments across America struggle with finding the balance without leaving employees at risk.

Budget
HB 500 HD 1, Relating to the State Budget, has no surprises for the Division good or bad.  Our staffing and expenses are the same as last biennium, with all adjustments attributed to collective bargaining items.  (See page 419 of the Feb. 23 budget worksheets)  No restoration of the 7 positions lost since 2008, but no more reductions either.  We are in active recruitment for 3 Labor Law Enforcement Specialist positions. For the details on the positions see a former blog Open Recruitment for Labor Law Enforcement Specialists.

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.