Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred H.B. No. 386 entitled:

begs leave to report as follows:

The purpose of this bill is to extend the exemption for workers compensation insurance to employers owning fifty percent or more of a Limited Liability Company (LLC) or Limited Liability Partnership (LLP).

The National Federation of Independent Business, Hawaii Business League, Chamber of Commerce of Hawaii, Hawaii Restaurant Association, Hawaii Employers' Mutual Insurance Company, Inc., and Hawaii Association of Realtors testified in support of this measure. The Department of Labor and Industrial Relations (DLIR) testified in support of the intent of this measure. ILWU, Local 142 testified in opposition to this measure.

Workers' compensation provides medical insurance and wage loss coverage for work-related injuries of employees while protecting employers from civil liability resulting from these injuries. Current Hawaii law requires employers to maintain workers' compensation insurance for the benefit of their employees, even in cases of an LLC or LLP where the only employees are the owners of or partners in the company. Since an owner or partner would have nothing to gain from suing themselves for workers compensation, it would appear that an LLC or LLP could be exempted from the workers' compensation insurance requirement.

Your Committee feels that further clarification of the workers' compensation insurance exemption is needed. Accordingly, your Committee has amended this measure by removing language allowing an LLC member or LLP partner to elect to provide coverage for oneself under section 386-4, HRS.

Other technical, nonsubstantive amendments were made for purposes of clarity, style, and conformity.

As affirmed by the record of votes of the members of your Committee on Labor and Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 386, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 386, H.D. 1, and be referred to the Committees on Consumer Protection and Commerce and Judiciary.