GET; Employee Leasing Exemption

Provides a GET exemption for amounts representing employee wages
and benefits paid to an employee leasing company.

THE SENATE                              S.B. NO.           1623
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT


 1      SECTION 1.  Chapter 237, Hawaii Revised Statutes, is amended
 2 by adding a new section to be appropriately designated and to
 3 read as follows:
 4      "237-     Leased employee exemption; loss of exemption;
 5 definitions.  (a)  In addition to other amounts exempt from
 6 taxation under this chapter, this chapter shall not apply to
 7 amounts received by an employee leasing company from a client
 8 company equal to and which are disbursed by the employee leasing
 9 company for leased employee wages, salaries, payroll taxes,
10 insurance premiums, and benefits, including retirement, vacation,
11 sick leave, and health benefits.
12      (b)  Where any client company of any employee leasing
13 company utilizes the services of a leased employee, the client
14 company and the employee leasing company, with respect to the
15 leased employee, shall not be exempt from the requirements of any
16 federal, state, or county law, including labor or employment
17 laws, collective bargaining rights, anti-discrimination
18 provisions, or other law with respect to the protection and
19 rights of employees, including chapters 377 and 378, that would
20 apply to the leased employee if the leased employee had been an

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                                     S.B. NO.           1623

 1 employee of the client company instead of the employee of the
 2 employee leasing company.  These rights shall not be abrogated by
 3 any contract or agreement between the client company and the
 4 employee leasing company that contains terms or conditions that
 5 could not be lawfully contained in a contract or agreement
 6 directly between the client company and the leased employee if no
 7 employee leasing company was involved.
 8      The client company shall be deemed to have satisfied its
 9 obligations with respect to any leased employee under any
10 applicable law, including without limitation, workers
11 compensation laws including chapter 386, employee insurance
12 coverage including chapters 383, 385, 392, and 393, and tax
13 withholding and reporting laws, if and to the extent that those
14 obligations are satisfied by the employee leasing company acting
15 in its capacity as employer of the leased employee.
16      If, by or through any contract between the client company
17 and any employee leasing company, or otherwise, leased employees
18 are excluded from any employee rights or employee benefits
19 required to be provided to employees of the client company by the
20 client company, the exemption under this section shall not be
21 applicable.  Written notification of any violation of this
22 paragraph to the department by any union or the department of
23 labor and industrial relations shall be sufficient to make this

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                                     S.B. NO.           1623

 1 exemption unapplicable.
 2      Failure of the employee leasing company to pay any tax
 3 withholding for leased employees or any federal or state taxes
 4 for which the employee leasing company is responsible shall
 5 immediately cancel the exemption under this section permanently.
 6      (c)  As used in this section:
 7      "Assigned leased employee" means an employee under an
 8 employee leasing services arrangement whose work is performed in
 9 the State.  The term does not include an employee hired to
10 support or supplement a client company's work force as temporary
11 help.
12      "Client company" means a person that contracts with an
13 employee leasing company and is assigned leased employees by the
14 employee leasing company under that contract.
15      "Employee leasing company" means a business entity that
16 offers employee leasing services.
17      "Employee leasing services" means an arrangement by which
18 employees of an employee leasing company are assigned to work at
19 the client company and the leased employee's assignment is
20 intended to be of a long term or continuing nature, rather then
21 temporary.  The term does not include temporary help.
22      "Leased employee" means the same as defined in section
23 414(n) of the Internal Revenue Code of 1986, as amended.

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                                     S.B. NO.           1623

 1      "Temporary help" means an arrangement by which an
 2 organization hires its own employees and assigns them to a client
 3 company to support or supplement the client's work force in a
 4 special situation, including:
 5      (1)  An employee absence;
 6      (2)  A temporary skill shortage;
 7      (3)  A seasonal workload; or
 8      (4)  A special assignment or project."                      
 9      SECTION 2.  New statutory material is underscored.
10      SECTION 3.  This Act shall take effect on July 1, 1999.
12                           INTRODUCED BY:  _______________________