I. Hiring

A. At-Will v. Just Cause

Hawaii is an at-will employment state. Parnar v. Americana Hotels, Inc., 65 Hawaii 370, 652 P.2d 625 (1982). Employers are free to terminate employees, with or without cause or notice, unless the termination falls into one of the "exceptions" to at-will employment recognized under state law. The exceptions include common law and statutory claims.

1. Common Law Claims

There are two types of common law claims that modify an employer's right to terminate an employee at-will. The first type, known as a "public policy" claim, prohibits an employer from terminating an employee if the termination violates a "clear mandate of public policy." In determining whether a clear mandate of public policy exists, Hawaii courts will inquire whether the employer's conduct contravenes the letter or purpose of a constitutional, statutory, or regulatory provision or scheme. Parnar v. Americana Hotels, Inc., 65 Hawaii 370, 652 P.2d 625 (1982).

The second type of claim, called an "implied contract" claim, prohibits an employer from terminating an employee if the termination breaches a promise made by the employer to the employee of specific treatment in specific circumstances, and upon which the employee reasonably relies. Kinoshita v. Canadian Pacific Airlines, Ltd., 68 Hawaii 594 (1986). Typically, these cases involve situations where the employer has made promises in writing to an employee (usually in the form of an offer letter, personnel policies, or an employee handbook).

The Hawaii Supreme Court recently signaled that it may be willing to expand a third type of common law claim, called "promissory estoppel," to employment situations. In the past, promissory estoppel cases were limited to situations where an employer makes a promise of employment to an applicant, upon which the applicant relies, and who then undertakes certain actions in reliance upon the offer. If the employer subsequently withdraws the offer, and the employee suffers economic harm as a result, the employer may be held liable for the damages incurred by the applicant in reliance upon the employment offer. Ravelo v. County of Hawaii, 66 Hawaii 194 (1983). However, in a recent case, Gonsalves v. Nissan Motor Corporation of Hawaii, 58 P.3d 1196 (2002), the Hawaii Supreme Court suggested that "promissory estoppel" claims may be applied to oral promises made by supervisors and managers to employees, upon which the employees rely to their detriment.

Although the aforementioned common law claims do not regulate hiring per se, the risk of such claims has the practical effect of circumscribing hiring procedures. An employer must be very careful in recruiting and hiring an applicant who is qualified for the position. Hawaii employers must also take steps to ensure that any written policies and procedures contain appropriate language (called disclaimers) to guard against unwanted implied contract claims. Supervisors and managers must also be trained to avoid making any promises to employees that they will be unable or unwilling to keep.

2. Statutory Claims

In addition to common law claims, employees in Hawaii are protected from termination under various state laws. These laws prohibit an employer from terminating an employee because the employee:

• Has taken or must take time off from work for jury duty or to serve as a witness pursuant to a subpoena. Haw. Rev. Stat. Sections 612-25; 621-10.5.
• Is a victim of domestic violence or sexual assault, and is taking time off from work to seek medical attention, obtain services from a shelter, seek psychological counseling, or to participate in legal proceedings. Haw. Rev. Stat. Section 378-72.
• Has suffered a work-related injury or illness that is compensable under Hawaii's Workers' Compensation Law. Haw. Rev. Stat. Section 378-32.
• Is involved in a garnishment proceeding. Haw. Rev. Stat. Section 378-32.
• Has made a safety and health complaint. Haw. Rev. Stat. Section 396-8.
• Reports or is about to report to a public body, verbally or in writing, a violation or suspected violation of law or rule unless the employee knows the report is false. Haw. Rev. Stat. Section 378-62.
• Is requested by a public body to participate in an investigation, hearing, or court action. Haw. Rev. Stat. Section 378-62.
• Has filed a discrimination claim under Hawaii's Employment Practices Statute, is testifying in any proceeding regarding a discrimination complaint, or is otherwise assisting in a Hawaii Civil Rights Commission proceeding. Haw. Rev. Stat. Section 378-2(2).

B. Discrimination

Like federal law, Hawaii law prohibits employers from discriminating against applicants and employees on the basis of race, color, national origin, sex, religion, age, and disability. Haw. Rev. Stat. Section 378-2. However, three of these categories are administered differently from the federal anti-discrimination laws.

• "Sex" refers to the male and female gender. The Hawaii Supreme Court, however, is currently considering whether to expand this classification to include "transgenders" - individuals of one sex who are undergoing medical and psychiatric procedures to become persons of the opposite sex. Regis Inventory Specialists v. HCRC, 104 Haw. 158 (2004).
• "Pregnancy" falls under the classification for "sex." However, unlike federal law, state law requires that employers provide preferential treatment to employees disabled by pregnancy, childbirth, and related medical conditions. Haw. Admin. Rules Sections 12-46-106.
• "Age" refers to persons of any age (not just to persons above age 40, as under federal law). Haw. Admin. Rules Section 12-46-134.
• "Disability" status is determined without taking into account any devices, medication, or procedures that would correct or mitigate the effects of an individual's impairment. Haw. Admin. Rules Section 12-46-182. Furthermore, the "undue hardship" defense is limited to situations where the employer is financially unable to pay for the accommodation, even with financial assistance from its parent corporation. Haw. Admin. Rules Section 12-46-182. Thus, Hawaii's disability law is much broader than the federal Americans with Disabilities Act, and it is more difficult for an employer to prove "undue hardship" to avoid having to provide an accommodation to the disabled employee.

In addition to the foregoing classifications, Hawaii also makes it unlawful to discriminate against applicants and employees based on: ancestry (which is defined as the cultural or linguistic characteristics of the individual); sexual orientation (whether an individual is heterosexual or homosexual); marital status (whether an individual is married, single, or divorced); and arrest and court record. Haw. Rev. Stat. Section 378-2 (1).

Administration and enforcement of Hawaii's anti-discrimination laws is the responsibility of the Hawaii Civil Rights Commission, a state government agency with broad enforcement powers. Haw. Rev. Stat. Chapter 368. Employees who believe they have been discriminated against are also entitled to file civil claims for damages in state court. Haw. Rev. Stat. Section 368-12. Unlike federal law, there are no limits on damages under Hawaii's discrimination law.

C. Employment Applications

Employers must be very careful in drafting employment application forms for use by job applicants. The Hawaii Civil Rights Commission carefully scrutinizes employment applications for questions or requests that may elicit information relating to classifications protected from discrimination under state law. For example, asking an applicant to indicate whether she wishes to be called "Miss" or "Mrs." would be construed as an attempt to determine the applicant's marital status, which is prohibited under state law. Employers should check the Hawaii Civil Rights Commission website at www.state.hi.us/hcrc for a list of permissible and impermissible pre-employment inquiries.

Hawaii employers are also prohibited from asking applicants for information about their arrest and court records. Questions regarding convictions may only be asked after the applicant has been offered the job. However, employers may not use conviction records to exclude an individual from employment (or to terminate an employee) if: (a) state law prohibits a person with a criminal record from holding the job in question; (b) the conviction is not rationally related to the job; or (c) more than ten years has passed since the employee was released from incarceration for the crime. Haw. Rev. Stat. Section 378-2.5.

D. Use of Employment Contracts

It is common for Hawaii employers to provide written employment contracts to individual employees, particularly high level managers and executives. However, employees with written employment contracts that include a definite period of employment are not considered at-will employees. Parnar v. Americana Hotels, Inc., 65 Hawaii 370, 652 P.2d 625 (1982). The terms and conditions of employment for these individuals, including the circumstances under which they may be terminated, are governed by the written contract. Moreover, because written employment contracts are generally interpreted like other types of contracts, the documents must be carefully drafted to ensure that all terms are clear and unambiguous.

In addition, there are several other restrictions that Hawaii employers must observe when drafting a written employment contract:

• Absent approval from the State, the contract must provide for at least two payroll periods per month. Haw. Rev. Stat. Section 388-2.
• The employer may not require the employee to waive the minimum wage and overtime provisions under the State's wage and hour law, or the law governing payment of wages. Haw. Rev. Stat. Sections 387-4.5 and 388-8.
• The employer may not require the employee to waive benefits to which he or she is entitled as a matter of law. These "protected" benefits include workers' compensation insurance, unemployment insurance, and temporary disability insurance. Haw. Rev. Stat. Sections 383-161, 386-78 and 392-29. Employees may waive their rights to coverage for prepaid health care. However, the waiver must be on a form provided by the Department of Labor and Industrial Relations and expires after one year. Haw. Rev. Stat. Section 393-21.
• Clauses that require the employee to submit any disputes under the contract to binding arbitration must comply with the Hawaii Arbitration Act. The Act establishes procedures for selecting arbitrators, conducting arbitrations, awarding relief, and seeking judicial enforcement of arbitration decisions. Haw. Rev. Stat. Chapter 658A.

E. Advertising/Recruitment

State anti-discrimination regulations prohibit employers from advertising for applicants who speak a particular language unless the employer can prove that the language requirement is a bona fide requirement for the job. Haw. Admin. Rules 12-46-174, 12-46-177.

Hawaii law also requires that employers advertising for replacement workers to fill in during a strike must specify whether the applicants will be used as temporary or permanent replacements for striking employees. Haw. Rev. Stat. Section 379-3.

F. Employment References/Background Investigations

Employers in certain industries or employers that employ individuals in certain job classifications are prohibited from hiring employees with criminal records. These employers include, but are not limited to: educational institutions, Haw. Rev. Stat. Section 378-3(8); financial institutions, Haw. Rev. Stat. Section 378-3(9); and companies that employ commercial drivers, Haw. Rev. Stat. Sections 286-233 and 286-234.

For all other employers, the decision on whether to conduct background checks is left to the company's discretion. Most companies, however, are reluctant to provide information about former employees out of concern that negative references or comments may result in lawsuits against the employer providing the reference. See Vlasaty v. Pacific Club, 670 P.2d 827 (1983). However, state law bars current or former employees from filing lawsuits against employers that supply prospective employers with job references unless the employee can prove that the information or opinion disclosed by the employer was knowingly false or knowingly misleading. Haw. Rev. Stat. Chapter 663-1.95.

II. Compensation and Benefits

The Hawaii Department of Labor and Industrial Relations is responsible for administering and enforcing state laws governing compensation and benefits, which are embodied in several sections of the Hawaii Revised Statutes and the Hawaii Administrative Rules. From time to time, the Department also issues declaratory rulings (administrative decisions) interpreting the laws and regulations. For more information contact the Department at www.dlir.state.hi.us.

In general, all Hawaii employers must comply with the State laws and regulations governing compensation and benefits, regardless of the number of persons employed by the employer. (There are very limited exceptions for specific industries and specific jobs.) Failure to comply with the laws and regulations governing compensation and benefits may result in government agency investigations and/or civil litigation. The sanctions for non-compliance include fines, court orders to reimburse an employee for any expenses incurred as a result of the employer's failure to provide the required benefit, monetary damages for non-payment of wages, and, in extreme cases, court orders to close a non-complying business.

A. Minimum Wage

Hawaii's minimum wage is $6.25 per hour. Haw. Rev. Stat. Section 387-2.

Hawaii law imposes special wage and benefit requirements on employers that have state contracts for construction of public works in excess of $2,000. Haw. Rev. Stat. Chapter 104. The law requires the employer to: pay prevailing wages and benefits to various classes of laborers and mechanics; submit weekly payroll certifications; post wage rates in a prominent place and at the work site, and provide a copy to each employee; maintain detailed payroll records; pay employees once a week; and give employees Saturdays, Sundays and holidays off from work. State law also imposes similar obligations on employers that have state contracts for services in excess of $25,000. Haw. Rev. Stat. Section 103-55.

The "prevailing wage" requirements for State contracts are calculated differently than the prevailing wage requirements for construction contracts and service contracts with the federal government.

B. Minimum Age

Hawaii law defines a "minor" as any person under the age of 18 years. Except in limited situations (theatrical work and coffee harvesting), minors must be at least 14 years of age to begin working, and minors under the age of 18 years may not work in positions that are considered "hazardous." Haw. Rev. Stat. Section 390-2. Employers wishing to employ minors must have valid certificates of employment and age on file for each minor. The certificates are issued by the State, and must be returned to the Department of Labor and Industrial Relations when the minor leaves employment with the company. Haw. Rev. Stat. Sections 390-2 and 390-3.

C. Wage Payments

Employers must designate a minimum of two payroll periods per month, and employees must be paid within seven days after the close of the payroll period. Haw. Rev. Stat. Section 388-2. Departure from this rule requires approval from the Department of Labor and Industrial Relations.

Hawaii law also prescribes the time for payment of wages to employees who resign, who are terminated, or who die; regulates withholdings from employees' wages; requires employers to notify employees of their rates of pay and changes in pay rates; and requires that employers provide employees detailed explanations in their paychecks of time worked and paid. Haw. Rev. Stat. Sections 388-1 through 388-7.

D. Child Labor

State laws govern the employment of minors. As stated above, minors must be at least 14 years of age to work, and they may not work in hazardous positions if they are under the age of 18 years. In addition, state law limits the work hours of minors age 16 years or younger. Haw. Rev. Stat. Section 390-2.

In general, minors should be paid at least the minimum wage and applicable overtime rates. They are also entitled to benefits required by law. However, student workers may be paid at lower wage rates if they meet certain regulatory requirements. Haw. Rev. Stat. Section 387-9.

E. Health Insurance

Hawaii law requires employers to provide comprehensive medical care benefits to employees under plans approved by the Department of Labor and Industrial Relations. A qualifying plan must either cover or reimburse employees for the cost of health care that includes hospitalization, surgery, medical or nursing care, drugs, and other restorative appliances. Haw. Rev. Stat. Chapter 393.

Employers must provide health care benefits to all regular employees who perform non-seasonal work for at least 20 hours per week for four consecutive weeks. A regular employee is defined as one who earns at least 86.67 times the minimum hourly wage and works at least 20 hours or more for four consecutive weeks. Haw. Rev. Stat. Sections 393-3(8), 393-11, and 393-14. Employers may finance the statutory health care benefits by paying the entire premium or sharing the costs with the employee. The employer may charge the employee up to one-half the premium amount, subject to a maximum of 1.5% of the employee's wages. Haw. Rev. Stat. Section 393-13.

F. Overtime Issues

Hawaii's law on overtime pay is very similar to the federal law. Employers must pay employees overtime pay for all hours worked in excess of 40 in one workweek, and overtime pay is calculated at the rate of one and one-half times the employee's regular hourly rate of pay. Certain categories of employees (executives, administrators, professionals, and outside salespersons) are exempt from the overtime pay provisions. The state regulations, like the federal regulations for exempt employees, set forth criteria that must be met in order for an individual to be considered exempt from the overtime pay requirements. Haw. Admin. Rules Section 12-21-6.

G. Workday/Workweek/Work hours

Hawaii employers have the discretion to set the work hours, work day, and work week of their employees. State law only requires that employees be paid overtime pay for all hours worked in excess of 40 in the employer's designated work week, and that employers maintain detailed time and pay records for employees. Haw. Rev. Stat. Sections 387-3 and 387-6.

H. Temporary Disability Insurance

Hawaii employers must provide temporary disability insurance benefits to any employee who works at least 20 hours or more per week, at $400.00 or more per week, for a 14-week period during the four completed calendar quarters immediately preceding the first day of disability. The benefit provides wage-loss compensation for employees temporarily disabled from work due to a non-occupational illness or injury (which includes pregnancy, childbirth, or related medical conditions). Eligible employees receive benefit payments, which are a percentage of their regular wages, for the entire period of their disability up to a maximum of 26 weeks.

An employer may provide temporary disability insurance by purchasing insurance through a licensed carrier, adopting a sick leave policy that is approved by the Department of Labor and Industrial Relations, or by being a party to a collective bargaining agreement that contains sick leave benefits at least as favorable as those set forth in the statute. Employers may require employees to contribute up to one-half of the cost of the insurance premium, subject to a maximum of 0.5% of the employee's weekly taxable wages. Haw. Rev. Stat. Chapter 392.

I. Reciprocal Beneficiaries

Hawaii law requires an employer to provide benefit coverage to the "reciprocal beneficiary" of an employee. Reciprocal beneficiaries are similar in status to spouses, but are limited to persons at least 18 years of age, unmarried, who are legally prohibited from marrying one another under State law (i.e., same sex couples, relatives), and who are not registered as reciprocal beneficiaries of any other persons. Reciprocal beneficiary status must be registered with the State, and certificates are issued, which are then used to verify status and entitlement to benefits. Haw. Rev. Stat. Sections 572C-1 to 572C-7.

Reciprocal beneficiaries receive only certain designated benefits as a result of that relationship. Among these are: (1) survivorship rights, including inheritance, workers compensation, survivorship benefits, and state employees retirement beneficiary benefits; (2) health related benefits, including hospital visitation, private and public employee prepaid medical insurance benefits, auto insurance coverage, mental health commitment approvals and notifications, and family and funeral leave; and (3) legal standing relating to wrongful death, victims rights, and domestic violence family status.

III. Time Off/Leaves of Absence

Hawaii has several laws governing employee leaves of absence (which are considered another form of employee benefits). These laws are also administered and enforced by the Hawaii Department of Labor and Industrial Relations. Non-compliance in these areas may also result in government agency investigations and/or civil litigation. The sanctions for non-compliance with the laws governing leaves of absence are similar to the sanctions in wage and benefit cases.

A. Paid Vacation

There is no requirement for Hawaii employers to provide employees with paid vacation. However, if an employer elects to provide such a benefit, State law requires the employer to put the policy in writing and distribute it to all eligible employees. Haw. Rev. Stat. Section 388-7(3). The written policy must set forth all the terms and conditions for receiving paid vacation. Employees who believe that their employers have not complied with the written policy may file administrative complaints with the Department of Labor and Industrial Relations.

B. Paid Sick Leave

As in the case of paid vacations, Hawaii law does not require an employer to provide employees with paid sick leave. However, if an employer elects to provide the benefit, State law requires the employer to put the policy in writing and distribute it to all eligible employees. Haw. Rev. Stat. Section 388-7(3). Again, the written policy must set forth all applicable terms and conditions for paid sick leave. Violations of the written policy may be reported to the Department of Labor and Industrial Relations.

C. Leave for Domestic Violence

In 2003, the Hawaii State Legislature passed Act 60, which requires employers (beginning on January 1, 2004) to provide employees, who have been employed for six or more consecutive months, with Victims Leave if the employee or his or her minor child is a victim of domestic violence or sexual violence. Haw. Rev. Stat. Section 378-72. The leave must be for the purpose of: seeking medical attention for the employee or minor child to recover from psychological injuries or disabilities caused by the violence; obtaining services from a victim services organization; obtaining psychological or other counseling; temporarily or permanently relocating; or taking legal or other actions to enhance the physical, psychological, or economic health or safety of the employee, the child, or those who work/associate with the employee.

Employers with 50 or more employees must provide up to 30 days of unpaid Victims Leave each calendar year. Employers with fewer than 50 employees must provide up to five days of leave each calendar year. Employees returning from leave are guaranteed reinstatement to their original positions or a position of comparable status and pay.

D. Family and Other Medical Leave

The Hawaii Family Leave Law requires employers with 100 or more employees to provide employees (who have worked for the company at least six or more months) an unpaid leave of absence of up to four weeks each calendar year for any of the following reasons: birth of the employee's child; the employee's adoption of a child; or to enable the employee to care for his or her child, spouse, reciprocal beneficiary, parent, or grandparent with a serious health condition. Haw. Rev. Stat. Chapter 398.

The law does not require an employer to give an employee seniority credit or employment benefits during the leave. However, if an employer provides paid sick leave to its employees, the employer must permit employees eligible for Family Leave to use up to 10 days of accrued and available sick leave per year to care for a child, spouse, reciprocal beneficiary, parent, parent-in-law, grandparent, or grandparent-in-law with a serious health condition.

An employee returning from Family Leave is entitled to reinstatement to the same position he or she held prior to the leave, or an equivalent position with equivalent benefits, pay, and other terms and conditions of employment.

E. Disability Leave

Hawaii law does not mandate a specific leave period for employees who are unable to work due to a physical or mental disability. However, there are two laws that regulate the treatment of disabled employees.

First, Hawaii's anti-discrimination law requires an employer to provide reasonable accommodation to disabled employees whose impairment prevents them from performing their job duties. Haw. Admin. Rules Section 12-46-182. Allowing a disabled employee to use an available leave of absence during periods of disability may be considered a reasonable accommodation.

Second, employees on leave due to disability are entitled to continue receiving health insurance coverage under the employer's prepaid health insurance plan, under the same terms and conditions as employees who are actively employed. The obligation to continue health insurance coverage is for three months following the month in which the disability began or for as long as the employee is receiving regular wages from the employer, whichever is longer. Haw. Rev. Stat. Section 393-15.

F. Pregnancy Leave/Paternal Leave

In addition to Family Leave, Hawaii law requires employers to provide employees disabled by pregnancy, childbirth, or related medical conditions with a leave of absence for a reasonable period of time (which is defined as the period for which the employee is certified as disabled by her physician). During this leave period, the employer must continue to provide coverage for the employee's benefits, and seniority continues to accrue during the leave. When the employee is released to return to work, she must be reinstated to her original job or a position with equivalent status, benefits, and pay. Haw. Admin. Rules Section 12-46-108.

The foregoing benefit is not provided to fathers (paternal leave) or to employees with non-pregnancy or childbirth-related medical conditions. Employees wishing to take paternity leave must use Family Leave, and those wishing to take leave due to disabilities must seek reasonable accommodation from their employer.

G. Workers' Compensation

Hawaii has a complex system of workers' compensation insurance, which provides reimbursement for medical expenses and partial wage replacements for employees who suffer work-related injuries or illnesses. Haw. Rev. Stat. Chapter 386. See the discussion below in Section IX for more information.

IV. Termination Issues

A. Wrongful Termination Claims

Absent a written contract governing the terms and conditions under which an employee may be terminated, a Hawaii employer may terminate an employee at any time, with or without cause or notice (which is called "at-will"). However, the at-will employment relationship is subject to "exceptions" that are delineated either in state laws or in court decisions.

As discussed above, there are a number of state laws that prohibit the termination of employees who engage in certain protected conduct (i.e., serve as jurors or witnesses in legal proceedings; take leaves of absence provided by law; file claims for statutorily mandated benefits; or participate in government investigations, hearings, or court proceedings). Hawaii courts also recognize two common law exceptions to the employment at-will doctrine - the public policy exception and the implied contract exception.

Under the public policy exception, a termination can result in a civil lawsuit if the employer's reason for the termination is deemed to violate a public policy. The court decisions recognizing an action for wrongful termination in violation of public policy fall loosely into three categories: (1) cases where the employee was discharged for refusing to commit an unlawful or wrongful act; (2) cases where the employee was discharged for performing a public obligation (this includes what is commonly referred to as "whistle-blowing"); and (3) cases where an employee was fired for exercising a legal right or privilege. Parnar v. Americana Hotels, Inc., 65 Hawaii 370, 652 P.2d 625 (1982).

Under the implied contract exception, courts have held that certain written representations by employers (typically found in offer letters, personnel policies, or an employee handbook) can create binding contractual obligations (implied contracts). An employer will not be allowed to terminate or take action against an employee if it contravenes any promises it made to the employee about the circumstances under which the employee may be terminated, or the procedures that would be followed by the employer prior to any termination.

B. Discrimination Claims

Hawaii law prohibits employers from discriminating against employees on the basis of race, sex, age, religion, color, ancestry, disability, sexual orientation, marital status, and arrest and court record. The law applies to all aspects of the employment relationship, including recruitment, hiring, compensation or other terms and conditions of employment, and termination. Haw. Rev. Stat. Chapter 378.

As discussed above, Hawaii defines the aforementioned categories in the same manner as under federal law with the following exceptions.

• The Hawaii Supreme Court is considering whether to expand the definition of "sex" discrimination to include discrimination against "transgenders" - individuals of one sex who are undergoing medical and psychiatric procedures to become persons of the opposite sex - in addition to males and females. Regis Inventory Specialists v. HCRC, 104 Haw. 158 (2004).
• "Age" refers to persons of any age (not just to persons above age 40, as under federal law). Haw. Admin. Rules Section 12-46-134.
• "Disability" status is broadly defined to include persons with significant physical or mental impairments, regardless of whether any devices, medication, or procedures would correct or mitigate the effects of their impairment. Haw. Admin. Rules Section 12-46-182.

Hawaii's anti-discrimination law applies to all employers having one or more employees, except the federal government. The law does not prohibit an employer from terminating an employee for reasons relating to the employee's ability to perform the work. Nor does the law require an employer to retain an employee if continued employment would conflict with or effect federal or state security regulations.

The Hawaii Civil Rights Commission is the state government agency empowered to enforce the State's laws on employment discrimination. Haw. Rev. Stat. Chapter 368. The Commission's powers under the law include, but are not limited to, investigation and conciliation of complaints, holding hearings, commencing civil actions in state court to enforce the law, and adopting administrative rules.

C. Severance Pay

Absent a written agreement to do so, employers are not required to pay severance to employees who are terminated from employment. There is, however, an exception for terminations resulting from business transactions, such as the sale of a company, a merger, or a reorganization of the company. See Section V below for more details.

D. Harassment

Like federal law, Hawaii law requires employers to maintain a work environment free of discriminatory harassment. Haw. Rev. Stat. Chapter 378. The definition of "harassment" is generally the same as the definition under federal law. However, there is one significant difference between federal and Hawaii law that is important for employers to know. Under state law, the term, "employer," means any person and any "agent" of such person. In short, managers, supervisors, and co-workers (under certain circumstances) can be sued as individuals for violating the state's employment discrimination law and regulations. Haw. Rev. Stat. Section 378-1. This broad definition of "employer" can sometimes make it very difficult to defend discrimination, and particularly harassment, lawsuits.

V. Layoffs/Work Force Reductions/Redundancies

A. Advance Notice

Hawaii has a law, called the "Dislocated Workers Act," which requires employers with 50 or more employees to provide each employee and the Director of the Department of Labor and Industrial Relations with 60 days' advance written notice of a closing, partial closing, or relocation of the business. Haw. Rev. Stat. Chapter 394B. A "closing" is defined as a situation involving: (a) a sale, transfer, merger, or other business takeover or transaction of business interests; (b) a permanent shutting down of all or a portion of the operations within a covered establishment due to the transaction; and (c) an actual or potential lay-off or termination of employees as a result of the transaction. Because of the way the state laws define employment and employer, every sale of a business automatically results in a termination of employment and triggers the obligations under the law.

Failure to give the requisite notice may result in claims by employees for civil penalties equivalent to an amount equal to the value of the employees' wages, benefits, and other compensation for the three months preceding the sale.

B. Severance Pay

The Dislocated Workers Act also requires Hawaii employers with 50 or more employees, whose employees lose employment as result of a business transaction, to pay each terminated employee a "dislocated worker allowance." The allowance is equivalent to the difference between the employee's average weekly wage prior to the termination, and the weekly unemployment insurance benefits the employee receives after the termination. The dislocated worker allowance is paid to the employee as long as he or she receives unemployment insurance benefits, up to a maximum of four weeks. Haw. Rev. Stat. Chapter 394B.

C. Benefits

Employers are not required to provide benefits coverage to employees after their last day of employment. The exceptions are for employees who have elected to continue participating in the employer's group health plans, in accordance with the federal Consolidated Omnibus Budget and Reconciliation Act (COBRA), and for employees who are entitled to continue receiving prepaid health care coverage for up to three months following the onset of their disability, or for as long as the employee is receiving regular wages from the employer, whichever is longer. Haw. Rev. Stat. Section 393-15.

If, however, the employer has adopted plans or programs that entitle employees to receive cash distributions for certain benefits upon termination (such as payments for unused leaves of absence, return of employee contributions to retirement plans, or cash outs of the employee's account in a profit sharing or similar benefit plan), then such payments must be made as of the last day of work, or in accordance with the payment schedule set forth in the plan.

In addition, employees receiving workers' compensation insurance benefits and temporary disability insurance benefits at the time of their layoff will continue to receive the payments until such time as the benefits have been exhausted or terminated, in accordance with state law. Haw. Rev. Stat. Chapters 386 and 392.

D. Use of Separation Agreements

There are no Hawaii laws that specifically regulate separation agreements. However, there are state laws that restrict waivers of certain statutory rights. As a consequence, a separation agreement may not be fully enforced if it includes:

• Waiver of an individual's right to unemployment insurance benefits. Haw. Rev. Stat. Section 383-161;
• Waiver of an individual's right to workers' compensation benefits, absent approval from the Department of Labor and Industrial Relations, Labor Appeals Board. Haw. Rev. Stat. Section 386-78; or
• An assignment, pledge, or encumbrance of any right to temporary disability insurance benefits that are or may become due or payable. Haw. Rev. Stat. Section 392-29.

VI. Unfair Competition/Covenants Not to Compete

A. Trade Secrets

Hawaii has adopted the Uniform Trade Secrets Act. Haw. Rev. Stat. Chapter 482B.

B. Covenants Not to Compete

Hawaii permits employers and employees to enter into covenants not to compete. However, the enforceability of covenants not to compete is determined by the courts on a case-by-case basis. In other words, if an employee leaves an employer and begins to work for a competitor, in violation of his or her covenant, and the former employer attempts to enforce the covenant, the court will view the agreement and the circumstances to determine if the covenant is enforceable. The factors that are considered in this analysis are: (1) duration of the restriction; (2) geographic restriction; and (3) breadth of the restriction. Technicolor, Inc. v. Traeger, 57 Hawaii 113 (Haw. 1976).

C. Non-Solicitation of Employees and Customers

Covenants not to solicit employees or customers are considered to be covenants not to compete and are analyzed as such.

VII. Personnel Administration

A. Required Postings

In addition to the various postings required by federal law, Hawaii requires employers to post the following notices in an area readily accessible to employees:

• Wage & Hour Law. Haw. Rev. Stat. Section 387-6(b).
• Payment of Wages & Other Compensation Law. Haw. Rev. Stat. Section 388-7.
• Unemployment Insurance for Workers. Haw. Rev. Stat. Section 383-23.
• Workers' Compensation Law, Hawaii Temporary Disability Insurance Law, and Hawaii prepaid Health Care Act. Haw. Rev. Stat. Sections 386-122, 392-42 and Haw. Admin. Rules Section 12-12-64.
• Safety & Health Protection on the Job. Haw. Rev. Stat. Section 396-6.
• Log & Summary of Occupational Injuries and Illnesses - OSHA 300A. Haw. Rev. Stat. Section 396-6(e).
• Vacation policy (if employer does not distribute in writing to each employee). Haw. Rev. Stat. Section 388-7(3).
• Sick leave policy (if employer does not distribute in writing to each employee). Haw. Rev. Stat. Section 388-7(3).

B. Required Training

Hawaii does not mandate employment-related training for supervisory or non-supervisory employees. Certain jobs and industries that are regulated by the state may, however, require proof of training and/or skills as a condition of licensure for individuals working in a job (i.e., real estate salespersons, registered nurses, security guards, etc.), or as a prerequisite for allowing a company to operate in a particular line of business (i.e., insurance). The laws and regulations applicable to these industries and jobs are administered and enforced by the Hawaii Department of Commerce and Consumer Affairs. www.hawaii.gov/dcca.

Although Hawaii does not mandate employment-related training, we recommend employers conduct training on certain topics such as discrimination and harassment, safety and health procedures, and workplace violence procedures. This is because the state government agencies charged with enforcement of the State's equal employment opportunity and occupational safety laws expect employers to have such training programs in place. Investigators view the absence of such programs negatively, particularly in enforcement investigations and audits.

C. Personnel Records

In Hawaii, personnel records are the property of the employer. Consequently, unless a private sector employer has voluntarily adopted a policy that gives an employee access to his or her personnel records, there is no obligation to allow the employee to view or copy the files.

D. Meal and Rest Periods

The 2003 Hawaii State Legislature amended the Wage and Hour Law to require employers to provide employees with a 30-minute unpaid meal break after eight hours of work. However, because the law contains exemptions for several industries whose employees typically work longer than eight hours per day, and because most employers tend to limit workdays to eight hours, this law does not apply to most employers.

The only other Hawaii law regulating meal and rest periods pertains to mothers who are breastfeeding. Employers may not prohibit an employee from expressing breast milk during meal or other break periods. Haw. Rev. Stat. Section 378-10.2. Employers with employees who elect to express milk during work hours often provide the employees with a private area for the activity.

E. Payment Upon Discharge or Resignation

Employees who are terminated, with or without cause, must receive payment for all wages earned up to the date of termination, at the time of termination. (The term "wages" may include vacation and/or sick leave if the employer's vacation and/or sick leave policy specifies that employees receive payment for any unused vacation and/or sick leave upon separation from employment.) However, if the termination occurs at a time and under conditions that prevent the employer from making immediate payment, the payment is due the next working day after the termination. Haw. Rev. Stat. Section 388-3(a).

Employees who resign must receive payment for all wages earned as of the date of resignation, not later than the next regular payday. Payment can be made through regular channels or by mail if the employee requests. However, if the employee gives at least one pay period's advance notice of resignation, the employer must pay all wages earned on the employee's last day of work. Haw. Rev. Stat. Section 388-3(b).

If an employee is suspended as a result of a labor dispute (strike) or is laid off, the employer must pay all wages earned as of the date of the suspension or layoff to the employee no later than the next regular pay day. Payment can be made through regular channels or by mail if the employee requests. Haw. Rev. Stat. Section 388-3(c).

F. Giving Employment References

Hawaii law does not require an employer to provide employment references for current or former employees. The decision on whether to provide an employment reference is left to the employer's discretion. As discussed above, most companies are actually reluctant to provide such information out of concern that negative references or comments may result in lawsuits against the employer providing the reference. See Vlasaty v. Pacific Club, 670 P.2d 827 (1983).

State law, however, bars current or former employees from filing lawsuits against employers that supply prospective employers with job references, unless the employee can prove that the information or opinion disclosed by the employer was knowingly false or knowingly misleading. Haw. Rev. Stat. Chapter 663-1.95. Consequently, employers electing to provide job references should take steps to ensure that the information provided to a prospective employer is accurate and, if possible, supported by documentation.

G. Recordkeeping

In addition to federal recordkeeping requirements, Hawaii employers must retain the following records:

• Payroll data: including information on rate of pay, hours, straight time earnings, overtime earnings, deductions, authorizations for deductions, total wages per pay period, tax withholding forms. Haw. Rev. Stat. Sections 387-6 and 388-7.
• Child labor: Copies of minors' certificates of employment and age must be retained for as long as the minor is employed. Upon separation, the document must be returned to the Department of Labor and Industrial Relations. Haw. Rev. Stat. Section 390-3.
• Benefit information: including records of all work-related injuries and illnesses, as well as medical and other records pertaining to workers' compensation claims; and copies of any Waiver of Health Care Coverage. Haw. Rev. Stat. Sections 386-95, 386-96, and 393-21.
• Employment records: including recruitment and hiring records (advertisements, vacancy announcements and postings, referrals, employment applications and/or resumes, dates of hire); training or apprenticeship records; records regarding a change in status (promotions, demotions, transfers); documents on employee separations (layoffs, resignations, terminations, and date of separation). Haw. Rev. Stat. Sections 378-6(b) and 383-94(c).
• Occupational injuries and illnesses: including documents pertaining to safety and health programs; records of deaths, injuries, and illnesses. Haw. Rev. Stat. Section 396-6(e).

VIII. Privacy

A. Drug Testing

Unlike federal law, which mandates drug testing in certain situations, Hawaii's Substance Testing Act places restrictions on employers that elect to test employees for drugs. Haw. Rev. Stat. Chapter 329B. The law prohibits employers (except those that are mandated under federal law to do testing) from requiring, requesting, or suggesting that any individual submit to a substance abuse test unless that test meets all of the requirements of the Substance Abuse Testing Act.

In general, Hawaii law requires employers to use only laboratories licensed by the Hawaii Department of Health for testing; pay for all costs, including confirmatory testing costs; provide individuals to be tested a written statement of the specific substances to be tested for, a statement that over-the-counter medications or prescribed drugs may result in positive test results, and a medication disclosure form that allows the individual to disclose any over-the-counter medication or prescribed drugs taken within the previous 30 days; and keep any information concerning a substance abuse test strictly confidential. Haw. Rev. Stat. Sections 329B-4 through 329B-6. Failure to adopt or adhere to the procedures contained in the law will invalidate the test result, and the employer will not be able to report or use the result for any purpose. Furthermore, willful or knowing violations of the law may subject the employer to civil actions for damages, injunctive relief, attorney's fees and costs, as well as fines for each violation. Haw. Rev. Stat. Section 329B-7.

B. Personnel Records

There is no state law requiring private sector employers to protect the personnel files of employees from improper disclosures. As discussed above, personnel records and information are viewed as company property. However, Hawaii's State Constitution www.hawaii.gov/lrb/con/ recognizes privacy as a constitutional right under state law, and most employers, as a matter of practice, do not release information regarding employees, absent the employee's consent, a request by a government agency pursuant to an administrative investigation or proceeding, a subpoena, or pursuant to a court order.

C. Off-Duty Conduct

Hawaii does not have a law that specifically addresses an employer's ability to discipline or terminate an employee for his or her off-duty conduct.

D. Medical Information

State law prohibits the disclosure of records or information (which includes any form of verbal or written communication) of any person that indicates he or she has HIV infection, ARC or AIDS. Haw. Rev. Stat. Section 325-101. The law applies to employers, as well as health care providers, physicians, laboratories, clinics, and other health care entities. Release of information is strictly regulated, and will only be allowed if it is covered by one of the circumstances enumerated in the statute. For employers, release of information is restricted to situations where the infected person has provided prior written consent to such a release. Haw. Rev. Stat. Section 325-101(2).

Hawaii employers must also maintain strict confidentiality of information obtained from medical examinations. This information (which would include records of an individual's medical condition and medical history) must be maintained on separate forms and in separate, confidential medical files. Information in these records may not be released except that supervisors and managers may be informed regarding the necessary restrictions on the work or duties of the employee and necessary accommodations; first aid and safety personnel may be informed, when appropriate, if the disability might require emergency treatment; and government officials investigating compliance with the disability discrimination regulations shall be provided relevant information upon request. Haw. Admin. Rules Section 12-46-191.

E. Searches

There is no state law that imposes restrictions on employers searching employee property brought onto company premises. However, employers may be subject to common law claims for invasion of privacy if they search areas in which employees have a reasonable expectation of privacy. Consequently, it is advisable for Hawaii employers to provide written notice to employees if the employer intends to adopt procedures for conducting searches.

F. Lie Detector Test

Private employers cannot require applicants or employees to take a polygraph test as a condition of employment or continued employment. Haw. Rev. Stat. Section 378-26 through 378-29.3.

G. Fingerprints

Hawaii does not have any law that specifically addresses whether an employer may fingerprint an employee.

H. Social Security Numbers

Hawaii does not have a law that specifically addresses whether an employer may disclose an employee's social security number.

I. Surveillance and Monitoring

There is no law that specifically addresses whether an employer may conduct surveillance (electronic or otherwise) on employees.

IX. Employee Injuries/Workers' Compensation

Hawaii has an extensive workers' compensation program. Haw. Rev. Stat. Chapter 386. All employers are required to provide coverage for all employees and the exceptions to such coverage are quite limited (i.e., volunteers for religious, charitable, or educational institutions; ministers, priests, rabbis; etc.). Employers may finance the cost of workers' compensation benefits by purchasing insurance from an authorized carrier or by maintaining a self-insured status. Employers pay for the entire premium for workers' compensation coverage.

The statutes, regulations, and cases interpreting the Workers' Compensation Law are extensive. In general, the system is heavily weighted in favor of employees. The law is administered by the Disability Compensation Division and the Labor and Industrial Relations Appeals Board of the Department of Labor and Industrial Relations. The Division and the Appeals Board have the power to conduct investigations, hold hearings, issue decisions, impose penalties, and seek enforcement of the law through civil actions.

X. Unemployment

Hawaii has an unemployment insurance system that is also administered by the Department of Labor and Industrial Relations. Hawaii's Employment Security Law provides temporary payments to workers who have lost their jobs through no fault of their own. The program is financed through a quarterly tax on employers. The amount of the contribution is based on the employer's experience record and wages paid to each employee. Haw. Rev. Stat. Chapter 383. Every legal entity that employs one or more individuals is subject to the law.

XI. Health & Safety and Unions - Industrial Relations

A. Health & Safety

Hawaii's Occupational Safety & Health Act is similar to the federal law. All employers are required to provide employees with a workplace that is free from recognized hazards; provide employees with safety devices and safeguards; comply with safety standards, as set by State regulations; maintain records, as required by the regulations (records of accidents, illnesses, injuries, etc.); post notices and inform employees about their rights and the employer's obligation under the law; and refrain from discriminating against or discharging employees who exercise their rights under the law. Haw. Rev. Stat. Chapter 396.

The law is administered and enforced by the Occupational Safety and Health Division of the Department of Labor and Industrial Relations, which has the authority to conduct inspections and investigations, set safety and health standards, issue citations, hold hearings on contested cases, order remedies, and enforce its orders in court. The Division enforces the federal, as well as the state, safety and health standards.

B. Employer Responsibilities for Commercial Drivers

Companies that employ commercial drivers must also meet additional requirements. Haw. Rev. Stat. Sections 286-233 and 286-234. The law prohibits the employer from knowingly allowing, permitting, or authorizing a driver to drive a commercial motor vehicle if: (a) the driver has had his or her driver's license or permit suspended, revoked or cancelled; (b) the driver has lost his or her privilege to drive a commercial motor vehicle in the state; (c) the driver has been disqualified from driving a commercial motor vehicle; or (d) the driver has more than one commercial driver's license. Employers must take affirmative steps to determine if its drivers are qualified to work as commercial drivers. An employer that violates this statute is subject to a fine of potentially increasing amounts, depending upon the number of previous offenses it has had. Haw. Rev. Stat. Sections 286-234.

C. Smoking in Public Places, H.R.S. Chapter 328K, Part I

There is a state law on smoking that affects private employers that have public places on their premises. Haw. Rev. Stat. Chapter 328K, Part I. The law prohibits smoking in a wide range of public spaces and, as a result, has an indirect effect on work places. Signs that include the words "Smoking Prohibited by Law" must be posted in areas adjacent to the non-smoking areas so that a clear delineation exists. Violations result in fines that are enforced in the same fashion as traffic citations. There is, however, an exemption for small businesses.

D. Unions

Hawaii's Employment Relations Act, Haw. Rev. Stat. Chapter 377, gives employees the right to organize, form, join, or assist labor organizations; to bargain collectively through representatives of their own choosing; to engage in concerted activities for collective bargaining, mutual aid, or protection; and the right to refrain from such activities. However, in general, the law does not apply to employees protected by federal labor laws.

As discussed above, Hawaii law requires employers seeking temporary or permanent replacements for striking employees to explicitly mention in any advertisement that a labor dispute exists. Haw. Rev. Stat. Chapter 379. In addition, State law prohibits individuals from picketing before or about private residences. Haw. Rev. Stat. Chapter 379A.

For further information regarding labor and employment law in Hawaii, please contact:

Anna M. Elento-Sneed, Esq.
Alston Hunt Floyd & Ing
1001 Bishop Street, Suite 1800
Honolulu, HI 96813
Tel: (808) 441-6228
Fax: (808) 524-5976
aes@ahfi.com
www.ahfi.com