STAND. COM. REP. NO. 1411

Honolulu, Hawaii

RE: H.B. No. 167

H.D. 2

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2023

State of Hawaii

Sir:

Your Committee on Government Operations, to which was referred H.B. No. 167, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO WAGES,"

begs leave to report as follows:

The purpose and intent of this measure is to make general contractors that enter into or are under contracts for work on buildings, structures, or other private works liable for debt incurred by subcontractors for wages due to claimants for performance of labor in the contract between the general contractor and owner in the State.

Your Committee received testimony in support of this measure from the Department of Labor and Industrial Relations, Operating Engineers Local Union No.3, Hawaii Regional Council of Carpenters, and Pacific Resource Partnership. Your Committee received testimony in opposition to this measure from Structural Builders Hawaii, Inc.; Building Industry Association of Hawaii; Graham Builders; JT Smith Construction, LLC; and two individuals. Your Committee received comments on this measure from the Department of Accounting and General Services, General Contractors Association of Hawaii, and Subcontractors Association of Hawaii.

Your Committee finds that there have been numerous construction projects in the State where unscrupulous employers engage in payroll and tax fraud by hiring dubious subcontractors. One such scheme was revealed at the Maile Sky Court construction site in Waikiki where the general contractor working on the site utilized subcontractors who underpaid employee wages without providing necessary benefits and safety standards. While the subcontractor received several fines from federal and state agencies, the general contractor involved went unpenalized and accrued all financial benefits of the scheme without repercussions. This individual's misuse of subcontractors allowed him to underbid legitimate contractors, report and pay lower taxes, and avoid liability of unpaid wages. Your Committee therefore finds this measure necessary to ensure that general contractors are liable for unpaid wages of their subcontractors, and provide a tool for general contractors to ensure all subcontractor workers are being paid properly and in compliance with the law.

Your Committee has amended this measure by:

(1) Replacing the term "private work" with "private construction work" throughout the measure;

(2) Clarifying that contractor liability applies to private construction work not subject to chapter 104, Hawaii Revised Statutes;

(3) Inserting language to require payments be made in a timely manner consistent with prompt payments under section 103-10.5, Hawaii Revised Statutes;

(4) Making conforming changes to the definition of "employer" in chapter 388, Hawaii Revised Statutes, relating to payment of wages and other compensation; and

(5) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 167, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 167, H.D. 2, S.D. 1, and be referred to your Committee on Commerce and Consumer Protection.

Respectfully submitted on behalf of the members of the Committee on Government Operations,

________________________________

ANGUS L.K. MCKELVEY, Chair