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Cx VR Unemployment | HAWAII LABOR & EMPLOYMENT LAW

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HEC Legislative Digest Now Available

Each state Legislative session, the Hawaii Employers Council prepares a Legislative Digest summarizing bills that may be of interest to Hawaii employers.  This year, the bills covered include those in the following categories:

  • Employment Practices and Employment Rights
  • Hawaii Family Leave Law
  • Wage and Hour – Minimum Wage
  • Wage and Hour – Miscellaneous
  • Unemployment Insurance
  • Workers’ Compensation
  • Health and Insurance
  • Public Employees
  • Public Contracts
  • Government Agencies
  • General Excise Tax; Tax Credits
  • Miscellaneous

If you would like to view the Legislative Digest, you can view a copy here:  HEC Legislative Digest.

2012 Legislative Update

The 2012 Legislative Session is done.  All we have left to do is wait and see what bills the Governor signs, vetoes, or allows to become law without his signature.

This year, the legislature appeared to be focused on unemployment insurance as one of the hot topics.  In fact, two bills regarding Hawaii’s unemployment insurance laws have already been signed into law by the Governor, and a third is on its way.  In addition, several other bills (on both employment and non-employment issues) are also still alive, and have been sent to the Governor for his signature or veto.

Hawaii Employers Council* (“HEC”) tracks legislation affecting Hawaii’s employers, and a copy of the Legislative Digest and Legislative Update articles can be found on HEC’s website here.

In addition, I will be presenting a seminar on the 2012 Legislative Session at the Hawaii Employers Council on June 6, 2012 at 9 am.  This briefing is FREE for HEC Members.  Also presenting with me will be Lowell Kalapa, President of the Tax Foundation of Hawaii.

*My employer.  See blog post here for more details.

Governor Signs Bill Regarding Employer Appeals of Unemployment Tax Rates

The Governor has signed Act 013 into law, which clarifies the process for how an employer can appeal their unemployment insurance (“UI”) contribution tax rates for the year.

The current law, Section 383-69 of the Hawaii Revised Statutes (“HRS”), provides that employers have 15 days from the mailing of their contribution rate notice to file an application for review and redetermination.  As it is currently written,  HRS § 383-69 does not specify that the Employment Security Appeals Referees’ Office (“ESARO”) is the agency responsible for hearing the appeal (it just states that the “department” will hear the appeal.)  Therefore, to clear up any confusion, this bill specifies that rate determination appeals shall be filed with ESARO.

This bill was introduced as an administration bill, and more specifically, as a “housekeeping” measure.  Despite such a seemingly innocuous label for this bill, however, things should be noted:

First, this bill deleted language from HRS  § 383-69 that previously provided that appeals made to the circuit court (after ESARO issues its ruling) “shall be heard in a summary manner and shall be given precedence over all other civil actions, except for proceedings arising under section 383-41 and the workers’ compensation law of the State.”  Thus, this is actually a significant but overlooked component of this new law, because employers’ appeals of their rate determination are no longer required be addressed in an expeditious manner by the courts.  This change in the law may end up being a point of concern for employers, because it will take employers longer to contest their UI contribution rates.

Second, and more alarmingly, the initial draft of this bill contained language that would have taken away employers’ rights to appeal the ESARO decision to the circuit court.  Rather, the ESARO decision would have become final and binding upon an employer.  This  would have been a major infringement on employers’ rights to challenge their UI contribution tax rates.  Fortunately, later drafts of this bill, including the draft signed by Governor Abercrombie, included employers’ right to file administrative appeals with circuit court.

A copy of this measure can be read here.

Bill To Raise UI Contribution Rates (For Some) Closer To Becoming Law

A bill that is related to Act 006 passed earlier this year, and would raise the unemployment insurance (“UI”) contribution rates for 21 of the 160 tax schedule rates for Hawaii employers, passed Third Reading before the Hawaii State Senate on Tuesday, April 10, 2012.  This bill, in its current form, is HB 2264 HD2 SD1.

This measure haw now been sent back to the State House of Representatives to “agree” or “disagree” to the current form of the the bill.  At this point, it is unclear whether the House will agree or disagree to the current form of the bill.  It is worth noting, however, that the only revision made by the Senate was to change the effective date of this new law (if passed) to July 1, 2012 (it was January 1, 2013 in the House’s version.)  In addition, that revision was made at the suggestion of the Department of Labor and Industrial Relations.  Therefore, there is a likelihood that the measure will be accepted – or agreed to – by the House in its current form.

If this bill passes Final Reading in the House, it will be sent to Governor Abercrombie for his approval.  If the House “disagrees” with the current form of the bill, it will be sent to a conference committee, which will be comprised of senators and representatives.  If the bill is passed out of conference committee, it will then need to be approved again by the full House and Senate.

Under this new law, tax rates will rise from anywhere between 0.2% to 1.2% of an employer’s taxable wage base.  (The taxable wage base has a maximum of $38,800 for 2012.)  The maximum tax rate will increase from 5.4% to 6.6%.  The smallest increase will be from 5.4% to 5.6% per employee, whereas the largest increase will be from 5.4% to 6.6% per employee.  Based on the taxable wage base for 2012, this 1.2% increase could lead to a maximum increase of $465 per employee.

This bill is an interesting one for employers, because some employers will be negatively impacted by the new law, whereas other employers will actually benefit from the changes.  Specifically, this bill affects only employers with a negative reserve ratio (meaning they have had a lot of unemployment benefits charged against them).  Employers with a positive reserve ratio will not have their UI contribution rates affected under this measure.  Additionally (and I apologize if this is getting complicated to follow), the overall UI tax schedule is determined by the amount of money in the state’s UI fund.  If the UI fund is higher, employers are placed on a lower tax schedule.  If the fund is lower, employers are placed on a higher tax schedule. Therefore, the long term effect of HB 2264 HD2 SD1 is that a heavier burden will be placed on employers with a negative reserve ratio to replenish the state’s UI fund, which will in turn, lower the overall tax schedule for all employers.

You can read a copy of HB 2264 HD2 SD1 here.

Governor Signs Unemployment Bill Into Law

On March 9, 2012, Governor Abercrombie signed Act 006 into law.  This new law contains two major components.  First, it artificially sets the Unemployment Insurance (“UI”) tax rate for employers at a lower schedule for 2012 than would have otherwise been required by law.  Without Act 006, employers would have been placed on what is known as Schedule H for 2012.  Under Act 006, however, employers will be placed on Schedule F instead.

You can view a copy of all the UI tax schedules here, but in a nutshell, Schedule A is the lowest tax schedule (meaning it has the lowest UI contribution rates) and Schedule H is the highest tax schedule.  The UI tax schedule is set every year by the Department of Labor and Industrial Relations (“DLIR”), and is based upon the amount of money contained in the state’s UI fund.  Generally speaking, if there is more money in the fund, employers are placed on a lower tax schedule.  If there is less money in the fund, employers are placed on a higher tax schedule.

By being placed on Schedule F instead of Schedule H for 2012, employers are expected to save approximately $550 per employee, depending on where they fall within the tax schedule.

The second component of Act 006 (re)increased the maximum amount payable to people who are collecting UI benefits to 75% of the average weekly wage for April 2 through December 31, 2012.  Without Act 006, the maximum amount payable to UI claimants would have been 70% of the average weekly wage.  This 5% difference equates to about $26 per week.

The bill became effective upon the Governor’s signature, retroactively to January 1, 2012.  The DLIR is currently in the process of conducting experience ratings for employers and mailing out the experience rating notices.

You can view the Governor’s press release here, and a copy of the new law here.