HOUSE OF REPRESENTATIVES
THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO essential wages for essential workers.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the State of Hawaii has the highest cost of living in the United States. Despite rising prices and rising normal wages for workers, there are no scheduled increases for the state minimum wage. The department of business, economic development, and tourism's Self-Sufficiency Standard: Estimates for Hawaii 2018 report found that a single adult with no children needed to earn $16.90 per hour to be self-sufficient in the State.
The legislature also finds that, during the COVID-19 pandemic, individuals classified as "essential workers" were required to work through the pandemic at great risk to their health and safety. These essential workers often had to work two to three jobs to make ends meet, due to earning as little as the current state minimum wage of $10.10 per hour.
The legislature thereby finds that essential workers, who provided a great public service to the State during the pandemic and beyond, are deserving of adequate compensation to afford to live in the State. Upon signing the National Industrial Recovery Act in 1933, President Franklin D. Roosevelt clarified the intent of a minimum wage by stating ". . . no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By 'business' I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level—I mean the wages of decent living."
According to an October 2020 nationwide study by the nonpartisan United States Government Accountability Office, millions of full-time workers rely on public health care and food assistance programs. Several large corporate employers have thousands of full-time employees on public benefit programs in every state. Allowing these large employers to pay less than a living wage wrongfully transfers the financial burden to the county, state, and federal governments, essentially subsidizing those companies' profits with public tax dollars.
The legislature further finds that the wage distribution gap between the bottom and the middle categories of wage-earners is widening. The minimum wage must rise annually to keep up with the rising cost of living and must be indexed to a reliable source. Indexing the minimum wage to the median wage links it to overall conditions in the labor market rather than to the general level of prices or inflation. Indexing the minimum wage to the median wage will ensure that the minimum wage keeps pace with the typical worker's wage and keeps inflation lower than it would be if indexed to the Consumer Price Index.
The legislature further finds that some tipped employees in high-end establishments are highly compensated through gratuity, and therefore don't require the same base minimum wage as most tipped employees. Under this Act, employers may opt to take a sliding scale tip credit of $0.50 per dollar over the threshold amount, not to exceed federal minimum wage standards for tipped employees, when their tipped employees regularly earn more than $5.00 per hour over the minimum wage. The following table provides examples of the allowable tip credits employers may claim and the resulting wages for employees for select amounts of tips received per hour, assuming that the minimum wage is $15.00 per hour:
Tips received Total wages Tip Minimum Total wages
per hour before credit credit hourly pay after credit
$5.00 $20.00 $0 $15.00 $20.00
$10.00 $25.00 $2.50 $12.50 $22.50
$15.00 $30.00 $5.00 $10.00 $25.00
$20.00 $35.00 $7.50 $7.50 $27.50
$25.00 $40.00 $10.00 $5.00 $30.00
$30.00 $45.00 $12.50 $2.50 $32.50
The purpose of this Act is to:
(1) Require the department of taxation to share information, on a limited basis, with the department of labor and industrial relations for the purposes of enforcing the tip credit under the wage and hour law;
(2) Increase the minimum wage to fifteen dollars per hour by 2024 and index future annual increases to the median wage for all occupations in the State; and
(3) Allow employers to credit tipped employees' wages based on the amounts of tips the employees receive.
SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:
"§235- Information sharing for enforcement of the tip credit under chapter 387; confidentiality; calculation assistance for employers. (a) The department of taxation shall furnish to the department of labor and industrial relations information necessary, as collected from the employers' remittance of tax withheld, to ensure employers' compliance with and to assist in the enforcement of the tip credit under chapter 387.
The information sharing required under this section shall not conflict with section 231-18 and shall not extend to information not directly related to determining compliance with and enforcement of the tip credit under chapter 387.
All information shared with the department of labor and industrial relations under this section shall be kept confidential unless there is a violation of the tip credit under chapter 387.
(b) Beginning January 1, 2022, the department of taxation shall develop or provide access to an online tool or program that allows employers to determine whether wages paid are in compliance with the tip credit under chapter 387. The office of enterprise technology services and the department of labor and industrial relations shall assist in the development or provision of access to the online tool or program and the accuracy of the tool's or program's determinations of compliance."
SECTION 3. Section 387-2, Hawaii Revised Statutes, is amended to read as follows:
"§387-2 Minimum wages. (a) Except as provided in section 387‑9 and this section, every employer shall pay to each employee employed by the employer, wages at the rate of not less than:
(1) $6.25 per hour beginning January 1, 2003;
(2) $6.75 per hour beginning January 1, 2006;
(3) $7.25 per hour beginning January 1, 2007;
(4) $7.75 per hour beginning January 1, 2015;
(5) $8.50 per hour beginning January 1, 2016;
(6) $9.25 per hour beginning
January 1, 2017; [
per hour beginning January 1, 2018[
(8) $12.00 per hour beginning January 1, 2022;
(9) $13.50 per hour beginning January 1, 2023;
(10) $15.00 per hour beginning January 1, 2024; and
(11) The rate determined by the department on September 30, 2024, and on September 30 of each year thereafter, for the calendar year following each September 30; provided that the rate shall be calculated to the nearest cent of seventy-five per cent of the most recently published United States Department of Labor median hourly wage for all occupations in Hawaii.
Prior to January 1, 2022, the hourly wage of a tipped employee may be
deemed to be increased on account of tips if the employee is paid not less
(1) 25 cents;
(2) 50 cents per hour beginning January 1, 2015; and
(3) 75 cents per hour beginning January 1, 2016,
below the applicable minimum wage by the employee's employer and the combined amount the employee receives from the employee's employer and in tips is at least 50 cents more than the applicable minimum wage; provided that beginning January 1, 2015, the combined amount the employee receives from the employee's employer and in tips is at least $7.00 more than the applicable minimum wage.
(c) Beginning January 1, 2022, an employer may reduce or credit an employee's wages on account of tips of a tipped employee; provided that:
(1) The combined amount the tipped employee receives from the employer and in tips is at least $5.00 per hour more than the applicable minimum wage; and
(2) The tipped employee customarily and regularly receives more than $20.00 per month in tips.
The credit shall be 50 cents per hour for every dollar above the sum of the applicable minimum wage plus $5.00 per hour in tips; provided that the total credits shall not reduce an employee's wages below the minimum wage for tipped employees under federal law.
Every employer that elects to use the tip credit pursuant to this subsection shall provide written notice to each affected employee before paying that employee in accordance with this subsection."
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act shall take effect on July 1, 2021.
Wage and Hour Law; Minimum Wage; Tip Credit
Requires the department of taxation to share information with the department of labor and industrial relations for the purposes of enforcing the tip credit. Requires the department of taxation to provide an online tool or program to employers to determine compliance with the tip credit. Increases the minimum wage to $15.00 per hour by 2024 and indexes future annual increases to the median wage for all occupations in the State. Beginning 01/01/2022, adjusts the tip credit to 50 cents for every dollar above a certain amount. Requires written notice to an affected tipped employee.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.