STAND. COM. REP. NO. 566

Honolulu, Hawaii

, 2005

RE: H.B. No. 861

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Labor & Public Employment, to which was referred H.B. No. 861 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:

The purpose of this bill is to exclude from the definition of "employment" under the workers' compensation law any services performed by an individual who:

(1) Has a distributional interest of at least 50 percent in a limited liability company;

(2) Is a partner of a partnership; or

(3) Is a sole proprietor.

The Department of Labor and Industrial Relations, Hawaii Independent Insurance Agents Association, Hawaii Association of REALTORS, and VSPS Very Specialized Plant Service testified in support of this measure. ILWU Local 142 opposed this bill. The Employers' Chamber of Commerce commented on 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. This bill is designed to remedy this situation.

However, your Committee finds that, as currently written, the bill allows for individuals to opt in and out of purchasing workers' compensation insurance without penalty and that this may lead to abuse of the system. Accordingly, your Committee has amended this measure by:

(1) Adding a section requiring an unspecified fee to be charged when an individual who initially elected not to purchase workers' compensation insurance, but subsequently decides to purchase workers' compensation insurance; and

(2) Providing for an unspecified increase in this fee for each subsequent instance of opting in and out of the workers' compensation system.

Technical, nonsubstantive amendments were also made for clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Labor & Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 861, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 861, H.D. 1, and be referred to the Committees on Consumer Protection & Commerce and Judiciary.

Respectfully submitted on behalf of the members of the Committee on Labor & Public Employment,

 

____________________________

KIRK CALDWELL, Chair