STAND. COM. REP. NO. 2393

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 1062

       S.D. 1

 

 

 

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2010

State of Hawaii

 

Madam:

 

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 1062 entitled:

 

"A BILL FOR AN ACT RELATING TO PROFESSIONAL EMPLOYER ORGANIZATIONS,"

 

begs leave to report as follows:

 

     The purpose of this measure is to regulate professional employment organizations by creating a new regulatory system in the Department of Commerce and Consumer Affairs including:

 

     (1)  Requiring registration with the Department of Commerce and Consumer Affairs;

 

     (2)  Establishing criteria for registration including disclosure of management and financial information;

 

     (3)  Directing the Department of Commerce and Consumer Affairs to establish and maintain the capacity to accept filings, create forms, maintain records, and adopt rules to regulate the professional employer organization industry;

 

     (4)  Establishing registration fees;

 

     (5)  Establishing criteria for professional employer organizations' financial capacity;

 

     (6)  Creating criteria for the conduct of business and the regulation of employer-employee relationships, including supervision and the provisions of benefits, for professional employer organizations; and

 

     (7)  Creating enforcement mechanisms for the regulatory regime established.

 

     Testimony in support of this measure was received from Altres.  Testimony with comments was received from the Professional and Vocational Licensing Division of the Department of Commerce and Consumer Affairs.  Written testimony presented to the Committee may be reviewed on the Legislature's website.

 

     Your Committee finds that professional employer organizations act as an outsourced human resource department for other businesses and are responsible for providing personnel and payroll services as well as ensuring the client company's compliance with state and federal laws regarding, labor, taxation, and insurance.  Your Committee finds that the importance of professional employer organizations' functions to Hawaii businesses and workers, as well as to the State justifies regulation of these organizations. 

 

     Your Committee finds that this measure establishes regulation of professional employer organizations as business to business concerns.  Your Committee notes that this measure has been amended extensively since its introduction and has evolved from its original form that created a new regulated industry for professional employer organizations to its current form which merely sets general requirements for the conduct of business in this State.   Your Committee notes that this type of regulation is a common practice of the Legislature and is outside of the type of regulation that requires a sunrise review by the Auditor pursuant to section 26H-6, Hawaii Revised Statutes. 

 

     Your Committee has amended this measure by:

 

     (1)  Deleting the regulatory system established by its original version and replacing it with new provisions to require registration with the Insurance Commissioner including disclosure of management information and financial condition, demonstrating eligibility to do business in the State, and compliance with the relevant insurance laws;

 

     (2)  Requiring professional employer organizations to post a bond in the amount of $1,000,000;

 

     (3)  Specifying certain exemptions from registration and bond requirements;  

 

     (4)  Authorizing the Insurance Commissioner to adopt rules as necessary to implement registration of professional employer organizations;

 

     (5)  Changing its effective date so that the measure is effective immediately; provided the registration requirements created by the measure shall take effect July 1, 2011 in order to allow sufficient time for the Insurance Commissioner and the industry to comply with new requirements.   

 

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1062, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1062, S.D. 1, and be placed on the calendar for Third Reading.

 

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

 

 

 

____________________________

ROSALYN H. BAKER, Chair