Requires public contractors with the State to provide living
wages to their employees.

THE SENATE                              S.B. NO.           1571
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 2 a new chapter to be appropriately designated and to read as
 3 follows:
 4                             "CHAPTER
 5                           LIVING WAGES
 6         -1  Legislative findings.  The State awards many
 7 contracts to private firms to provide services to the public and
 8 to state government.  The State also provides financial
 9 assistance and funding to others for the purpose of economic
10 development or job growth.  The State also expends grant funds
11 under programs created by the federal and state governments.
12 These expenditures serve to promote the goals established for
13 those programs by such governments and the State.  The
14 legislature intends that the policies underlying this enactment
15 serve to guide the expenditure of such funds to the extent
16 allowed by the laws and rules under which such grant programs are
17 established and administered.
18      All too frequently the procurement by contract of services
19 has resulted in the payment of wages to employees by service

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 1 contractors at or slightly above the levels required by state and
 2 federal minimum wage laws.  This type of minimal compensation
 3 tends to reduce the quantity and quality of services rendered by
 4 these employees and to inhibit the recruitment of qualified
 5 individuals for such employment.  Underpayment of employees
 6 fosters high turnover, poor morale, and lackluster performance.
 7 Deficient minimum compensation also has compelled both spouses in
 8 our married population to work and to seek more than one job,
 9 often to the detriment of family values, child rearing,
10 education, and social stability.  Inadequate wages also
11 contribute directly in many instances to the deterioration of
12 individual health, where the affected employees cannot afford
13 medical and dental insurance, despite the existence of the Hawaii
14 Prepaid Health Act.
15      Conversely, adequate compensation promotes amelioration of
16 these undesirable conditions.  Through this enactment the
17 legislature intends to require service contractors to provide a
18 minimum level of compensation that will improve the level of
19 services rendered to and for the State.
20      Where inadequate compensation is paid, such payments fail to
21 provide service employees with resources sufficient to afford
22 life in Hawaii.  Condoning such undercompensation through
23 contracting decisions involving the expenditure of state funds

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 1 unacceptably foster conditions that burden limited social
 2 services.  The State, as a principal provider of social support
 3 services, has an interest in promoting an employment environment
 4 that protects and conserves this finite resource, enhances the
 5 quality of family life and individual health for our citizens,
 6 and provides a community atmosphere conducive to academic and
 7 moral learning for our youth.  By requiring the payment of a
 8 higher minimum level of compensation, the legislation promotes
 9 these interests. 
10      In accordance with the foregoing, the legislature declares
11 that it shall be the public policy of the State to require that
12 nothing less than the living wage should be paid by contractors
13 and financial assistance recipients of the state to their
14 employees.
15         -2  Applicability.(a)  This chapter shall apply to
16 service and labor contracts which involve an expenditure in
17 excess of $20,000; provide services or labor to the State (as
18 opposed to the purchase of goods or other property or the leasing
19 of property), including the following services:
20      (1)  Automotive repair and maintenance;
21      (2)  Facility and building maintenance;
22      (3)  Food services;
23      (4)  Janitorial and custodial;

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                                     S.B. NO.           1571

 1      (5)  Landscaping;
 2      (6)  Laundry services;
 3      (7)  Office and clerical;
 4      (8)  Parking lot management;
 5      (9)  Pest control;
 6     (10)  Recreation services;
 7     (11)  Security;
 8     (12)  Shuttle transportation;
 9     (13)  Street sweeping;
10     (14)  Towing; or
11     (15)  Any other service or labor determined by the director
12           of labor and industrial relations to meet the intent of
13           this chapter.
14      (b)  This chapter shall also apply to any state financial
15 recipient, excluding any corporation organized under section
16 501(c)(3) of the Internal Revenue Code of 1986, as amended, who
17 receives direct monetary financial assistance from the State in
18 an amount of $100,000 or more in any twelve-month period executed
19 after the effective date of this Act.  Conformance to this
20 chapter shall be required throughout the term of the agreement.
21      This chapter shall not apply to any person or entity who
22 receives any indirect financial assistance, including but not
23 limited to, tax credits, subsidies or rebates, or bond financing

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 1 or loans.
 2      (c)  Any person shall be deemed a covered employee who is
 3 employed by a contractor or subcontractor of the State or a state
 4 financial recipient or any subrecipient whose compensation is
 5 attributable to the State's financial assistance who:
 6      (1)  Is not a person who provides volunteer services that
 7           are uncompensated except for reimbursement of expenses
 8           such as meals, parking, or transportation;
 9      (2)  Expends at least half of the work week on work for the
10           State; and
11      (3)  Is at least eighteen years of age.
12      (d)  The following situations shall be exempted from this
13 chapter:
14      (1)  Contracts under which federal regulations or state
15           rules preclude its applicability;
16      (2)  Contracts that involve leases, bond covenants, and the
17           like shall be reviewed on a case by case basis;
18      (3)  Contracts for professional services for specialized
19           skills, including experts, consultants, auditors,
20           engineers, attorneys, and banking;
21      (4)  Contracts where imposition of the policy is found by
22           the director of labor and industrial relations to cause
23           a hardship to small businesses.

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                                     S.B. NO.           1571

 1         -3 Payment of minimum compensation to employees.(a)
 2 Employers shall pay employees a wage of no less than the hourly
 3 rates set under this chapter.  The initial rates shall be $7.25
 4 per hour with health benefits, as described in subsection (b), or
 5 otherwise $9.50 per hour.  The rates shall be adjusted annually
 6 in accordance with changes in the Consumer Price Index for Urban
 7 Consumers in the Honolulu Metropolitan Area (United States
 8 Department of Labor, Bureau of Labor Statistics).  Where the
 9 Honolulu CPI increases by at least one per cent, the minimum
10 hourly compensation rate shall be increased by an equal
11 percentage, but in no event shall any annual increase exceed the
12 prior annual rate by more than five per cent.
13      (b)  Health insurance benefits shall consist of the payment
14 of at least $1.25 per hour towards family medical insurance for
15 employees.  Proof of health insurance benefits must be submitted
16 to the State within ten days after execution of the contract or
17 receipt of state financial assistance to qualify for the reduced
18 hourly wage rate for employees provided with health care
19 benefits.
20         -4 Supersession by collective bargaining agreement.  If
21 parties subject to this chapter provide greater compensation for
22 employees than that provided by this chapter through a collective
23 bargaining agreement, the agreement shall supersede the

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                                     S.B. NO.           1571

 1 requirements of this chapter.
 2         -5 Employee retention requirements.(a)  If any
 3 contract subject to this chapter is over the amount of $50,000
 4 and provides for the continuation of a service currently provided
 5 by another contractor, the selected contractor or subcontractor
 6 will be required to provide for continued employment of employees
 7 subject to this section.
 8      A "retention employee" shall be defined as any person
 9 employed by the predecessor contractor or any subcontractor to
10 the predecessor contractor who provides direct labor or service
11 on the public contract and is not an "exempt" employee under the
12 Fair Labor Standards Act.
13      (b)  Employment shall be offered to all qualified retention
14 employees.  A "qualified retention employee" is one who has been
15 employed for at least the six-month period prior to the date of
16 the new contract by the predecessor service contractor or
17 subcontractor.  The new service contractor or subcontractor may
18 deem a retention employee not to be qualified only if the
19 employee has been convicted of a crime that is related to the job
20 or to job performance, or the contractor can demonstrate to the
21 State that the employee presents a significant danger to
22 customers, co-workers, or the State.
23      (c)  The new service contractor or subcontractor may treat

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                                     S.B. NO.           1571

 1 any of its current employees as retention employees for purposes
 2 of this chapter who, based on payroll records or other reliable
 3 evidence can be shown to have been employed for at least the six-
 4 month period prior to the date of the new contract by the
 5 contractor or subcontractor, and would otherwise need to be
 6 terminated as a result of this program.
 7      (d)  In the event that the service contractor or
 8 subcontractor does not have enough positions available for all
 9 qualified retention employees and its current eligible retention
10 employees, the service contractor or subcontractor shall hire the
11 predecessor contractor's qualified retention employees and retain
12 its current employees who are eligible for retention under this
13 chapter by seniority within each employment classification.  For
14 any positions that become available during the initial ninety-day
15 period of the new contract, the service contractor or
16 subcontractor shall hire qualified retention employees and rehire
17 its current employees who are eligible for retention under this
18 chapter by seniority within each employment classification.
19      (e)  Qualified employees of the predecessor contractor may
20 not be discharged without cause during the initial ninety-day
21 period of their employment.
22      Each qualified retention employee who receives a
23 satisfactory performance evaluation at the end of the initial

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                                     S.B. NO.           1571

 1 ninety-day period of employment will be offered continued
 2 employment under terms and conditions established by the
 3 contractor or subcontractor for all of its employees.
 4         -6  Retention program.  The State shall provide the
 5 service contractor or subcontractor with a list of names,
 6 addresses, dates of hire, and employment classifications for all
 7 covered employees of the outgoing service contractor or
 8 subcontractor interested in continued employment. 
 9      Contracts entered into after the effective date of this Act
10 shall obligate the contractor or subcontractor to provide names
11 of all qualified retention employees at the end of the contract.
12         -7  Enforcement.  All service contracts or financial
13 assistance agreements to which this chapter applies shall provide
14 that if a violation of any provision of this chapter occurs and
15 is not corrected after written notice, the State, at its option,
16 may do any of the following:
17      (1)  Suspend or terminate the contract or financial
18           assistance agreement for cause;
19      (2)  Require the employer to pay any amounts underpaid in
20           violation of the required payments, the State's
21           administrative costs, liquidated damages, and in the
22           case of financial assistance, refund any of the sums
23           disbursed by the State."

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                                     S.B. NO.           1571

 1      SECTION 2.  This Act shall take effect upon its approval.
 3                           INTRODUCED BY:_________________________