HOUSE OF REPRESENTATIVES

H.R. NO.

98

TWENTY-NINTH LEGISLATURE, 2017

 

STATE OF HAWAII

 

 

 

 

 

HOUSE RESOLUTION

 

 

Urging the department of labor and industrial relations to train its auditors to require satisfaction of at least 15 of the 20 factors used for employment determinations when both parties contemplate an independent contractor relationship with one another.

 

 

 

     WHEREAS, the Internal Revenue Service developed a list of 20 factors that may be utilized in determining whether an employer-employee relationship exists; and

 

     WHEREAS, the Department of Labor and Industrial Relations (DLIR) adopted the 20 factors under section 12-5-2, Hawaii Administrative Rules, with the intent that auditors use the factors as a guide in determining whether an individual is in an employer-employee relationship; and

 

     WHEREAS, however, DLIR auditors have been draconian in applying the 20-part test by finding that an individual is in an employment relationship even though a majority of the 20 factors indicate that the individual is a bona fide independent contractor; and

 

     WHEREAS, due to the high cost of living in Hawaii, it is common for people to be employed or receive unemployment benefits and accept temporary independent contract work elsewhere; and

 

     WHEREAS, in Envisions Entertainment v. DLIR, Civil No. 13-1-0931(2), DLIR incorrectly determined that an employment relationship existed despite both parties contemplating an independent contractor relationship with one another; and

 

     WHEREAS, situations such as the one that arose in Envisions, generally occur when an individual who is receiving unemployment benefits from an employer reports income from work performed as an independent contractor on an unemployment benefits claim; and

 

     WHEREAS, in situations where DLIR determines that an individual is an employee rather than an independent contractor, the individual loses all money paid towards general excise taxes and may lose unemployment benefits; and

 

     WHEREAS, appealing a determination made by DLIR may cost thousands in attorney's fees and a deemed employer may need to ask an individual to return payments so that the deemed employer may deduct taxes and Social Security and Medicare fees; and

 

     WHEREAS, erroneous determinations by DLIR detrimentally affect business relationships between affected parties because the deemed employer is less likely to contract with the individual again, which may discourage the individual from reporting temporary income in the future; now, therefore,

 

     BE IT RESOLVED by the House of Representatives of the Twenty-ninth Legislature of the State of Hawaii, Regular Session of 2017, that DLIR is urged to train its auditors to require satisfaction of at least 15 of the 20 factors used for employment determinations when both parties contemplate an independent contractor relationship with one another; and

 

     BE IT FURTHER RESOLVED that a certified copy of this Resolution be transmitted to the Director of Labor and Industrial Relations.

 

 

 

 

OFFERED BY:

_____________________________

 

 

Report Title: 

DLIR; Auditors; Independent Contractors; Employment Security