Conf. Comm. Rep. No. 156-12 S.B. No. 2424, S.D. 2, H.D. 2, C.D. 1
(Professional Employer Organizations; Fees and Expenses; Bond Requirements; Appropriation) AS AMENDED, PASS FINAL READING.
The bill creates new fees and allows the director of DLIR to create additional fees and raise existing fees by administrative rule.
The bill creates a special fund, which BUF generally opposes. In testimony on the SD2 draft, the Tax Foundation of Hawaii remarked that “DLIR special funds that earmark general fund revenues cannot be justified as they restrict budget flexibility, create inefficiencies, and lessen accountability.”
Per ProService Hawaii, a PEO servicing over 1000 small businesses in Hawaii, the bill’s language in §373L-F is problematic. It states that the PEO “shall be deemed the employer for purposes of unemployment insurance, workers’ compensation, temporary disability insurance, and prepaid health care coverage.” It appears to allow companies to contract out their liabilities and responsibilities as an employer for the above purposes. The PEO cannot assume the sole responsibilities for such items unless the client company has remitted all of its hours and wages to the PEO, along with the associated payroll taxes, premiums, and other funds. The statute does not match the way other state and federal agencies treat the co-employment relationship: holding the client or worksite employer responsible for conduct at the workplace, and limiting the PEOs responsibility to the scope of services provided by contract to the client. Thus, it is bad public policy.

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