REPORT TITLE:
Unemployment; Disputed Amounts


DESCRIPTION:
Establishes a safe harbor declaration for individuals and
business entities with no employees to appeal any determinations
by DLIR without prior deposit of disputed amounts.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           690
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO EMPLOYMENT SECURITY.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Many small businesses today, in an attempt to
 
 2 reduce costs, operate their business without employees.  Working
 
 3 exclusively with independent contractors, these businesses are
 
 4 not subject to the employment security law.  If the department of
 
 5 labor and industrial relations determines ex-parte that the
 
 6 independent contractors are employees, then the business is
 
 7 subject to the immediate payment of any amounts owed plus
 
 8 penalties and fines.  Only upon payment of any disputed amounts
 
 9 can the business appeal the determinations.  Sometimes, the
 
10 amounts that must be paid may be so devastatingly large that the
 
11 survival of a small business is threatened.  Eventually, the
 
12 business may prevail and receive the disputed amount back, but
 
13 without interest.  This process may take up to three years.
 
14      The legislature believes in supporting a business friendly
 
15 atmosphere.  The economic success of the State is dependent on
 
16 balancing the department of labor and industrial relation's need
 
17 to be able to enforce the law and a business enterprise's need to
 
18 operate its business as it intends.  The legislature finds that
 
19 creating a safe harbor declaration for businesses would identify
 

 
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                                     S.B. NO.           690
                                                        
                                                        

 
 1 to the department of labor and industrial relations those
 
 2 entities that choose to operate without employees and provide an
 
 3 opportunity for businesses who intend to operate without
 
 4 employees to make a clear statement of that intent.
 
 5      SECTION 2.  Chapter 383, Hawaii Revised Statutes, is amended
 
 6 by adding a new section to be appropriately designated and to
 
 7 read as follows:
 
 8      "�383-    Safe harbor declaration.  (a)  Any person, or
 
 9 business entity may file with the department a safe harbor
 
10 declaration stating that the business operates without employees
 
11 provided that:
 
12      (1)  The business does not intend and in fact does not hire
 
13           employees for employment as defined in section 383-2;
 
14      (2)  No master and servant relationship exists; and
 
15      (3)  The business maintains the elements of no master and
 
16           servant relationship set out in section 386-6, to the
 
17           satisfaction of the department.
 
18 A safe harbor declaration shall be prima facie evidence that a
 
19 business does not intend to establish any master and servant
 
20 relationships.
 
21      (b)  A safe harbor declaration shall be valid for one year
 
22 or until withdrawn.  Safe harbor declarations must be renewed
 

 
 
 
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                                     S.B. NO.           690
                                                        
                                                        

 
 1 annually.  A safe harbor declaration must be withdrawn within
 
 2 thirty days of hiring an employee.
 
 3      (c)  Fraudulent filing or failure to withdraw a safe harbor
 
 4 declaration shall be subject to an administrative fine of not
 
 5 more than $      for each day a violation continues, up to a
 
 6 maximum of $     ."
 
 7      SECTION 3.  Section 383-74, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "�383-74  Appeal; correction of assessment or contributions.
 
10 Any person aggrieved by any assessment of a contribution or a
 
11 penalty or contributions assessed pursuant to this chapter[,
 
12 having paid the contribution or penalty,] may appeal from the
 
13 assessment by filing a written notice of appeal with the
 
14 department within twenty days after the date of mailing of the
 
15 notice of assessment to the person's last known address[.];
 
16 provided that:
 
17      (1)  The full amount of the disputed contribution and
 
18           penalty is submitted with the appeal; or
 
19      (2)  A copy of a current safe harbor declaration accompanies
 
20           the appeal.
 
21 The appeal shall be heard by the referee in accordance with
 
22 applicable provisions of sections 383-38 and 383-39.  Any amount
 

 
 
 
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                                     S.B. NO.           690
                                                        
                                                        

 
 1 determined to have been erroneously paid as a result of the final
 
 2 determination of the appeal in favor of the employing unit, or as
 
 3 a result of a final judgment for the employing unit in an action
 
 4 brought pursuant to section 40-35, shall be refunded, [without]
 
 5 with interest and [without] the addition of any other costs or
 
 6 charges[, in the same manner as other refunds under this
 
 7 chapter].  Notwithstanding any other provisions of law to the
 
 8 contrary, any amount which is paid under protest or which is
 
 9 covered by any appeal or action referred to in this section shall
 
10 not be held as a special deposit, but the amount shall in all
 
11 respects be subject to sections 383-122 and 383-127 to the same
 
12 effect as though the amount had not been paid under protest and
 
13 was not covered by the appeal or action."
 
14      SECTION 4.  Statutory material to be repealed is bracketed.
 
15 New statutory material is underscored.
 
16      SECTION 5.  This Act shall take effect upon its approval.
 
17 
 
18                           INTRODUCED BY: ________________________