Report Title:




Requires successor employers to retain incumbent employees upon the divestiture, sale, or acquisition of a business. (SD1)


S.B. NO.



S.D. 1









SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:



   -1 Findings and purpose. The legislature finds that growing global interdependence has made the economy of the State greatly subject to external influence through fluctuations in world and national economies. As a result, financial distress in other geographical regions has often subjected establishments in the State to change and transfer of ownership and divestiture.

These changes, transfers of ownership, and divestitures have resulted in abrupt and unexpected unemployment for the employees of such establishments. Rising unemployment, in turn, has diminished consumer purchasing strength, contributed to the health and family problems associated with poverty, and increased the tax burden on both businesses and individuals due to expenditures for unemployment insurance compensation, welfare, and other forms of social security compensation. Transfers of ownership and divestiture have also often led to periods of labor unrest, and disruption of the services provided to residents and visitors served by such establishments.

The public interest of the State is best served by seeking to ameliorate the financial and social problems caused by these economic dislocations and resultant unemployment. Accordingly, the legislature finds that retaining existing employees when a divestiture, sale, or acquisition occurs will not only minimize the economic and social disruption caused by these transactions but will assure the harmonious continuity of needed services. Incumbent employees possess invaluable knowledge and experience with work practices, policies, and clientele and constitute a resource worthy of preservation. Therefore, the retention of incumbent workers furthers the State's interest in providing stable employment to its residents, uninterrupted and efficient service for its visitors, and a healthy consumer base for its businesses.

   -2 Definitions. As used in this chapter:

"Covered establishment" means any industrial, commercial, or other business entity which employs at any time in the preceding twelve-month period, fifty or more persons.

"Department" means the department of labor and industrial relations.

"Director" means the director of labor and industrial relations.

"Divestiture" means the transfer of any covered establishment from one employer to another due to the sale, transfer, merger, and other business takeover or transaction of business interests.

"Employer" means any individual or entity which, directly or indirectly, owns, operates, or has a controlling interest in a covered establishment.

"Length of service" means the number of years, months, and days spent by an employee in service to an employer.

   -3 Notification. An employer in a covered establishment shall provide to each employee and the director written notification of a divestiture at least ninety days prior to its occurrence. If the divestiture shall result in the loss or suspension of employment, the notification shall also furnish an explanation of the reasons for such action.

   -4 Worker retention. (a) In the event of a divestiture of a covered establishment, the successor employer shall retain incumbent employees of the affected establishment.

(b) If the successor employer determines that fewer employees are required to provide the required services, the successor employer shall retain employees by their length of service, within their job classifications, with employees with the longest length of service given preference over employees with shorter lengths of service.

(c) Any employee not retained in accordance with subsection (a) shall be placed on a preferential rehiring list in order of length of service, which shall be provided to each affected employee and the director. If the successor employer determines a need to increase its work force, it shall hire from the preferential rehiring list, giving preference to employees with the longest length of service within their classification over employees with shorter lengths of service with the affected classification. The successor employer shall exhaust all possibilities of hiring from the preferential rehiring list prior to hiring new employees.

(d) Except as provided in subsection (c), the successor employer shall not discharge without cause an employee retained pursuant to this chapter. "Cause" for this purpose shall be limited to misconduct connected with the individual's work.

   -5 Wages, benefits, and other compensation. A successor employer shall compensate each employee retained in accordance with section    -4 by payment of:

    1. The average regular wages, benefits, and other compensation received by the employee during the twelve-month period prior to divestiture; or
    2. The wages, benefits, and other compensation in effect at the time of divestiture.

   -6 Collective bargaining. Notwithstanding this chapter, any contractual agreement arrived at through collective bargaining that provides benefits in excess of those contained in this chapter shall supersede the benefits required under this chapter. If a collective bargaining agreement is silent or provides benefits less than those provided by this chapter, this chapter shall supersede the collective bargaining agreement.

   -7 Civil penalties. Any employer who fails to conform to this chapter shall be liable to each of the employees affected in an amount equal to the value of their wages, benefits, and other compensation, including interest, for the duration of the employer's violation of this chapter.

   -8 Employee remedies. (a) An action by an employee to enforce this chapter may be maintained in any court of competent jurisdiction by any one or more employees, or the employee or employees may designate an agent or representative to maintain the action.

(b) The court in any action brought under this section, in addition to any judgment awarded to the plaintiff or plaintiffs, shall allow costs of action, including costs of fees of any nature, and reasonable attorney's fees, interest, and consequential damages, if any, as deemed appropriate, to be paid by the defendant.

(c) The court may also provide injunctive relief in appropriate circumstances.

(d) In the alternative, an employee who alleges the rights afforded by this chapter have been violated, at the employee's election, may file a charge with the department which shall state the name and address of the employer alleged to have committed the violation, a summary of the facts upon which the charge is based, and any other information the department may require. The department shall serve the charge upon the employer by personal service or by mail. The employer shall answer the charge within twenty days following its service.

(e) Where the department finds there to be reasonable cause that this chapter has been violated, and cannot obtain voluntary compliance from the employer, the director shall appoint a hearings officer and schedule a contested case hearing in accordance with chapter 91. Following the completion of the contested case hearing, the hearings officer shall issue a proposed decision containing a statement of reasons including a determination of the issues of fact or law necessary to the proposed decision which shall be served upon the parties. The hearings officer may order any relief specified in subsection (b).

(f) Any party adversely affected by the proposed decision may file exceptions and present argument to the director. If the director sustains a finding that a violation of this chapter has occurred, the director shall issue a decision and order in accordance with chapter 91 requiring the respondent to cease and desist from the violation and ordering such other authorized relief as is just and proper. If the director finds no violation, the charge shall be dismissed.

   -9 Judicial review. Any person aggrieved by the order of the director shall be entitled to judicial review as provided by section 91-14.

   -10 Coexistence with other available relief. This chapter shall not be construed to limit an employee's right to bring legal action for wrongful termination, or to participate in the dislocated workers program under chapter 394B in the case of a permanent shut down of operations within a covered establishment.

   -11 Rules. The director shall adopt rules under chapter 91 as the director deems necessary for the purpose of carrying out this chapter."

SECTION 2. This Act shall take effect upon its approval.