Controversial legislation seeking to regulate Hawaii human resource firms has landed a spot on Gov. Neil Abercrombie's list of potential vetoes, signaling the bill may be shelved.
Lawmakers earlier this year passed Senate Bill 2424, which would impose tens of thousands of dollars in added operating costs and require companies be backed by a bond of up to $1 million in an effort to regulate so-called professional employer organizations, or PEOs.
Local firms, including several Maui-based companies, have said the proposed rules are so onerous, they may be forced to shut down.
Abercrombie on Monday included the bill on a list of 19 measures he intends to veto.
"This bill is overly broad and will impose restrictions too difficult for all PEOs to comply with," the governor said in a statement.
PEOs, sometimes referred to as employee leasing firms, act as an outsourced human resources department for small businesses, performing such functions as payroll and administering benefits for employees.
"It's a great sign, and I'm optimistic this will get vetoed, but we still have a lot of energy left to continue our grass-roots effort to educate the community and stakeholders about the true impact of this bill so that it does get vetoed," said Matthew Delaney, spokesman for the newly formed Hawaii Association of Professional Employer Organizations, which represents about 30 local businesses.
Delaney is president and CEO of Hawaii Human Resources. The Honolulu-based firm opened a Lahaina office last year and plans to open a Kahului office by year's end.
Senate Bill 2424 was introduced by state Sen. Roz Baker, who represents South and West Maui, and co-sponsored by nine other state senators, as a follow-up to a 2010 law that aimed to regulate the local PEO industry. Thirty-eight other states already regulate these businesses.
The state Department of Labor and Industrial Relations said that it has not been able to enforce the 2010 law, which requires PEOs to register with the state and post a $250,000 bond. The bond is to ensure that the payrolls of client companies can be covered if the PEO skips town.
Under SB 2424, starting Sunday, companies would be required to pay registration fees, produce audited financial statements and obtain larger bond amounts to do business in Hawaii. They also would face penalty fees for failure to register and comply with the rules. The registration fees and penalties are intended to help fund enforcement personnel.
Even at the existing $250,000 level, Hawaii's bonding requirement would be the highest in the nation for PEOs, according to the National Association of Professional Employer Organizations.
Delaney said he and a half-dozen local PEOs recently met in-person with Abercrombie to discuss the impacts of the bill. The group also met separately with Baker and Labor Department Director Dwight Takamine.
"Our presentation was that we weren't just requesting a veto and then planning to walk away," Delaney said. "Our group of Hawaii PEOs intends to join the effort to really work together on legislation and registration that makes sense for everybody, and that's achievable. We're hopeful that all parties and stakeholders can get together to achieve the original intent of this bill, which was consumer protection."
Abercrombie has until July 10 to either veto or sign bills into law, or allow them to become law without his signature. While issuing his intent to veto the bills, per the state Constitution, the 19 measures on the potential veto list are still under consideration, according to the governor's office.
* Nanea Kalani can be reached at nkalani@mauinews.com.
