Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 134
                                     H.D. 2

Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committees on Consumer Protection and Commerce and
Judiciary and Hawaiian Affairs, to which was referred H.B. No.
134, H.D. 1, entitled: 


beg leave to report as follows:

     The purpose of this bill is to expand the existing exclusion
from workers' compensation coverage of mental stress injuries
resulting solely from good faith employer disciplinary action, by
removing the requirement that the injury result solely from the
disciplinary action, and adding an exclusion for mental stress
injuries caused by good faith personnel actions.

     Your Committees received testimony supporting this measure
from the Attorney General, the City and County of Honolulu, the
Building Industry Association of Hawaii, the Chamber of Commerce
of Hawaii, the Hawaii Insurers Council, the Small Business
Economic Revitalization Group, and a concerned business
proprietor.  Testimony in opposition was received from the
Hawai'i Nurses' Association, the Hawaii State Teachers
Association, the ILWU Local 142, the Hawaii State AFL-CIO, the
Laborers' International Union of North America Local 368, AFL-
CIO, and Unity House, Inc.

     Those opposing the measure stated that the mental stress
compensability exclusion should be limited to the issues in
Mitchell v. State of Hawaii, 85 Haw. 250 (1997), and that this
bill expands the exclusion too far.  There was testimony that the

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                                 Page 2

claims excluded from workers' compensation law could consequently
be brought as tort actions for emotional distress, and the bill
would therefore impose potentially greater, largely unknown
liability risks on employers.  Those opposing the bill also felt
that the law currently works well to distinguish between
legitimate and frivolous claims, and that expanding the exclusion
would result in denial of meritorious claims.  Others stated that
it was too early to determine the effect of the current law and
lacking practical experience of its application, this bill was
premature. Finally, there was testimony that by deleting the word
"solely", any injury, even if partially the result of good faith
disciplinary or other personnel action, might be found to be non-

     On the other hand, your Committees heard testimony
supporting this measure stating that the existing exclusion for
mental stress injuries caused by good faith disciplinary actions
was unfairly limited and did not provide employers with adequate
relief, because it:

     (1)  Required that the excluded mental stress result
          "solely" from disciplinary actions; and

     (2)  Did not include stress caused by necessary and
          legitimate personnel actions such as layoffs,
          performance evaluations, demotions, and job transfers.

     Your Committees believe that further examination and
discussion of the issues raised by testifiers is necessary to
determine the best course of action.  To facilitate discussion
leading to satisfactory resolution of the questions raised by
this bill, your Committees have amended the effective date of the
bill by leaving it blank.

     As affirmed by the records of votes of the members of your
Committees on Consumer Protection and Commerce and Judiciary and
Hawaiian Affairs that are attached to this report, your
Committees are in accord with the intent and purpose of H.B. No.
134, H.D. 1, as amended herein, and recommend that it pass Third
Reading in the form attached hereto as H.B. No. 134, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Consumer
                                   Protection and Commerce and
                                   Judiciary and Hawaiian


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                                 Page 3

______________________________     ______________________________
PAUL T. OSHIRO, Chair              RON MENOR, Chair