SCR33

WHEREAS, the "Underground economy" refers to those individuals and businesses that utilize schemes to conceal or misrepresent their employee population to avoid one or more of their employer responsibilities related to wages, payroll taxes, insurance, licensing, safety, or other regulatory requirements; and

WHEREAS, the underground economy also encompasses other activities such as tax evasion, payroll fraud, under-the-table work, and wage theft; and

WHEREAS, these activities may include but are not limited to paying wages in cash, skimming some or all the cash takings, not paying overtime wages, paying sub-minimum wages, charging individuals for transportation and supplies essential to the work, underreporting employees, misclassifying employees as independent contractors, forcing employees to set up shell subcontractor entities, running a part of normal business activities off-the-books, not registering a business to avoid tax obligations or to avoid obtaining the necessary licenses and insurance policies; and

WHEREAS, the health of Hawaii's economy, its workers and its businesses are harmed by the existence of an illegal underground economy in which individuals and businesses conceal their activities from government licensing, regulatory, and taxing authorities; and

WHEREAS, individuals and businesses that operate in the underground economy do so in violation of labor, employment, tax, insurance, and occupational safety laws, by failing to pay required wages, carry workers' compensation insurance, comply with health, safety, and licensing requirements, or pay income taxes and payroll taxes that fund unemployment insurance, disability insurance, and Medicare and Social Security benefits; and

WHEREAS, certain businesses also improperly classify their employees as "independent contractors" (referred to as "employee misclassification") and hire undocumented workers to avoid compliance with labor, employment, tax, insurance and other regulatory requirements; and

WHEREAS, the underground economy and, in particular, the practice of employee misclassification exploits vulnerable workers and deprives them of legal benefits and protections; gives unlawful businesses an unfair competitive advantage over lawful businesses by illegally driving down violators' taxes, wages, and other overhead costs; defrauds the government of substantial tax revenues; and harms consumers who suffer at the hands of unlicensed businesses that fail to maintain minimum levels of skills and knowledge; and

WHEREAS, Hawaii faces an underground economy and employee misclassification problem which has deprived the State of valuable tax revenue; and

WHEREAS, in 2016, federal and State agencies formed task forces ad-hoc that were instrumental in enforcing wage laws against employers who were found guilty for employee misclassification; and

WHEREAS, it is critical to ensure that the State has a unified strategy and approach toward protecting Hawaii's economy, its workers, and its businesses from an illegal underground economy, through joint efforts to combat the underground economy and employee misclassification, ensuring safe working conditions and proper payment of wages for workers; creating an environment where legitimate businesses can thrive; and to supporting the collection of all taxes, fees, and penalties due from employers; now, therefore,

BE IT RESOLVED by the Senate of the Thirty-second Legislature of the State of Hawaii, Regular Session of 2024, the House of Representatives concurring, that the Department of Labor and Industrial Relations is requested to convene an Interagency Enforcement Task Force to combat the underground economy and employee misclassification in the State; and

BE IT FURTHER RESOLVED that the Interagency Enforcement Task Force is requested to:

(1) Serve as the State's interagency advisory and enforcement entity, with representation from state and county government agencies, to combat the underground economy and employee misclassification;

(2) Facilitate timely information sharing between and among taskforce members, including through the establishment of protocols by which participating agencies will advise or refer to other agencies matters of potential investigative interest;

(3) Identify those industries and sectors where the underground economy and employee misclassification are most prevalent and target task force members' investigative and enforcement resources against those sectors, including through the formation of interagency investigative and enforcement teams;

(4) Assess existing investigative and enforcement methods, both in Hawaii and in other jurisdictions, and develop and recommend strategies to improve those methods;

(5) Encourage businesses and individuals to identify violators by soliciting information from the public, facilitating the filing of complaints, and enhancing the available mechanisms by which workers can report suspected violations;

(6) Solicit the cooperation and participation of prosecuting attorneys at the federal, state, and county levels and other relevant federal, state and county enforcement agencies, including the United States Department of Labor, and establish procedures for referring cases to prosecuting authorities as appropriate;

(7) Work collaboratively with employers, labor, and community groups to diminish the size of the underground economy and reduce the number of employee misclassifications by, among other means, disseminating educational materials regarding the applicable laws, including the legal distinctions between independent contractors and employees, and increasing public awareness of the harm caused by the underground economy and employee misclassification;

(8) Work collaboratively with federal, state, and local social services agencies to provide assistance to vulnerable populations that have been exploited by the underground economy and employee misclassification, including but not limited to immigrant workers;

(9) Identify potential regulatory or statutory changes that would strengthen enforcement efforts, including any changes needed to resolve existing legal ambiguities or inconsistencies, and potential legal procedures for facilitating individual enforcement efforts;

(10) Consult with representatives of business and labor organizations, members of the Legislature, representatives of county governments, community groups, and other agencies concerning the activities of the task force and its members, and ways of improving its effectiveness, including consideration of whether to establish an advisory panel under the Department of Labor and Industrial Relations;

(11) Transmit an annual report, no later than twenty days prior to the convening of each Regular Session to the Legislature, Governor, mayor of each county, and chair of each county council summarizing the task force's activities during the preceding year; provided that the annual report is requested to:

(a) Describe the task force's efforts and accomplishments during the year;

(b) Identify any administrative or legal barriers impeding the more effective operation of the task force, including any barriers to information sharing or joint action;

(c) Propose, after consultation with representatives of business and labor organizations, members of the Legislature, representatives of county governments, community groups and other agencies, the appropriate administrative, legislative, or regulatory changes to strengthen the task force's operations and enforcement efforts and reduce or eliminate any barriers to those efforts; and

(d) Identify successful preventative mechanisms for reducing the extent of the underground economy and employee misclassification, thereby reducing the need for greater enforcement; and

(12) Take appropriate steps to publicize its activities; and

BE IT FURTHER RESOLVED that to the extent permitted by law, every agency within the State and counties' executive branch is requested to make all reasonable efforts to cooperate with the task force and to furnish information and assistance as the task force reasonably deems necessary to accomplish its purposes; and

BE IT FURTHER RESOLVED that the Interagency Enforcement Task Force is requested to regularly hold meetings closed to the public when task force members plan to discuss sensitive matters related to its investigations, potential criminal referrals, and public safety and security topics; and

BE IT FURTHER RESOLVED that the Director of Labor and Industrial Relations or Deputy Director of Labor and Industrial Relations is requested to serve as chairperson of the Interagency Enforcement Task Force and to invite the following to serve as members:

(1) A representative from the United States Department of Labor Wage and Hour Division, Honolulu District Office;

(2) Director of Taxation or the Director's designee;

(3) Administrator of the Hawaii Occupational Safety and Health Division of the Department of Labor and Industrial Relations or the Administrator's designee;

(4) Administrator of the Disability Compensation Division of the Department of Labor and Industrial Relations or the Administrator's designee;

(5) Administrator of the Unemployment Insurance Division of the Department of Labor and Industrial Relations or the Administrator's designee;

(6) Administrator of the Wage Standard Division of the Department of Labor and Industrial Relations or the Administrator's designee;

(7) Division Administrator of the Professional and Vocational Licensing Division of the Department of Commerce and Consumer Affairs or the Division Administrator's designee;

(8) Complaints and Enforcement Officer of the Regulated Industries Complaints Office of the Department of Commerce and Consumer Affairs or the Complaints and Enforcement Officer's designee;

(9) Executive Director of the Office of Consumer Protection of the Department of Commerce and Consumer Affairs or the Executive Director's designee;

(10) Director of each county's planning and permitting department or the Director's designee;

(11) The Attorney General; and

(12) Additional members from federal, state, or county agencies as deemed appropriate by the chairperson of the Interagency Enforcement Task Force; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the District Director of the Honolulu District Office of the United States Department of Labor Wage and Hour Division; Governor; Director of Labor and Industrial Relations; Director of Taxation; Director of Commerce and Consumer Affairs; Attorney General; Mayors of the City and County of Honolulu, County of Maui, County of Kauai, and County of Hawaii; and Chairpersons of the Honolulu City Council, Maui County Council, Kauai County Council, and Hawaii County Council.

	OFFERED BY:	_____________________________

Report Title:

Department Of Labor and Industrial Relations, Task Force, Employee Classification, Employee Rights, Wages, Benefits

THE SENATE	S.C.R. NO.	33
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII