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Hawaii Sick Leave Statute Unconstitutional, Unfairly Targets Some Employers, Judge Rules

Friday, January 4, 2013
(Hawaii Pac. Health v. Takamine, D. Haw., No. 11-00706, 12/31/12)

Key Holding:Recently enacted Hawaii law prohibiting employers with collective bargaining agreements from retaliating against employees taking sick leave is subject to NLRA preemption and violates equal protection clause.

Key Takeaway:Court finds state law targeting only employers that are parties to collective bargaining agreements is constitutionally invalid and encroaches upon areas better left to control of economic forces, not congressional regulation.

Anna Kwidzinski

A 2011 Hawaii statute restricting employers with collective bargaining agreements from disciplining employees for taking sick leave when they may not be ill is preempted by the National Labor Relations Act and violates the equal protection clause of the 14th Amendment, the U.S. District Court for the District of Hawaii held Dec. 31 (Hawaii Pac. Health v. Takamine, D. Hawaii, No. 11-00706, 12/31/12).

Granting partial summary judgment for 21 employers, mostly hotel and health care companies, the court said a statutory provision covering employers that are parties to collective bargaining agreements is not a constitutionally valid and neutral minimum labor standard. Instead, the court said, the Hawaii law falls within the scope of Machinists preemption because it impermissibly supplants a congressional decision in the NLRA to maintain unregulated an area better left to economic forces.

Since the state law negatively affects only employers with collective bargaining agreements, it unfairly favors unions and employees in violation of equal protection guarantees constitutionally afforded to similarly situated employers, the court said.

The statute effectively shifts the balance of power away from employers and tilts good-faith negotiations in employees' favor, Judge Susan Oki Mollway said.

The court did not rule on the employers' motion for a permanent injunction and set a hearing for April 15 to determine the appropriate remedy.


CBA Portion Unconstitutional
In June 2011, Hawaii enacted a statute prohibiting employers from firing, demoting, or withholding pay from employees who use accrued and available sick leave.

The new legislation applies only to organizations that employ at least 100 people and “have a collective bargaining agreement with their employees.” The law does not expressly distinguish between unionized and nonunionized employees working for the same employer.

The 21 employers sued in federal court in November 2011, alleging they were unfairly targeted by the new law and challenging its validity. The employers sued the director of the Department of Labor and Industrial Relations, Dwight Takamine, whose office is responsible for enforcing the new law.

The companies challenged as unconstitutional the portion of the law that applies only to employers that are parties to collective bargaining agreements, but did not oppose the language pertaining to employers with 100 or more employees. The 21 employers also sought a permanent injunction against enforcement of the statute.

The court deferred to the legislative process and refused to follow DLIR's suggestion of striking only a certain part of the provision because rewriting the law “would create obligations on employers that the legislature did not actually impose.”


Better Left to Market Forces
The NLRA preempts Hawaii's sick leave statute because it improperly encroaches on substantive aspects of the collective bargaining process that federal law protects, the court decided.

The Hawaii law effectively discriminates against employers that are parties to collective bargaining agreements, and is tantamount to giving workers a free 72-hour pass in which their employers cannot ask if they were legitimately sick, Judge Mollway said.

 

The U.S. Supreme Court held in Lodge 76, International Association of Machinists v. Wisconsin Employment Relations Commission, 427 U.S. 132, 92 LRRM 2881 (1976), that both the National Labor Relations Board and individual states are barred from regulating matters that Congress intended to leave unregulated and better left to the control of economic market forces. Collective bargaining is one of those matters, Mollway said.

The judge found that at least some of the 21 employers' collective bargaining agreements include provisions allowing disciplinary action against employees who lie about sick leave and contain specific clauses stating that a doctor's note will not be required unless there is a question of abuse or an absence longer than two days.

But the Hawaii law provides that covered employers may only require written verification from a physician if an employee uses three or more consecutive days for sick leave.

When Hawaii enacted this new provision, it touched upon existing bargained-for contract terms and essentially undercut the 21 employers' collective bargaining agreements, the court held. It found that the new law provides large employers' workers, whether unionized or not, a benefit that was not successfully bargained for.


Outside of Hawaii's Police Powers
The court explained that the NLRA does not preempt all state regulations affecting terms of labor agreements, and allows states to enact minimum labor standards regarding health care, child labor, minimum wage, and occupational safety.

“States have traditionally had great latitude under their police powers to pass laws protecting workers in employment relationships,” Mollway wrote.

But states may not regulate within the protected zone reserved for market freedom, the court said. They must endeavor to enact neutral requirements for minimum labor standards that do not impermissibly intrude into collective bargaining and must refrain from creating targeted negative restrictions, the court said.

“Even if an employer with a collective bargaining agreement has some employees not covered by that agreement, no party in the present case cites any authority suggesting that [the law's] effect on some nonunionized employees at a company that also has some unionized employees somehow makes the statute a neutral minimum labor standard equally applicable to all employees,” the court said. “The statute is inapplicable to employees of employers without collective bargaining agreements.”

The Hawaii law effectively discriminates against employers that are parties to collective bargaining agreements, and is tantamount to giving workers a free 72-hour pass in which their employers cannot ask if they were legitimately sick, the court said.

“The absence of any comparable restriction on employers lacking collective bargaining agreements demonstrates that the State has targeted unionized employers over a term or condition of employment,” Mollway said.


Violation of Equal Protection Clause
Hawaii's sick leave law also cannot be upheld because it fails to meet the rational basis test and therefore violates the equal protection clause, the court ruled.

“The State clearly has a rational basis for choosing not to impose the cost of compliance with the statute on small businesses that might sustain negative financial consequences out of proportion to any benefit to employees,” the judge wrote.

Distinguishing between employers with collective bargaining agreements and those without is not rationally related to a legitimate government purpose and contradicts legislative intent, the court reasoned.

“The purposes identified by the State are its interests in protecting employees who use sick leave from retaliation by employers and in protecting the employment relationship,” Mollway said. “But those reasons provide no justification for treating employers with collective bargaining agreements differently from employers without such agreements.”

The court rejected DLIR's assertion that the statute meant to prevent employers from breaching collective bargaining agreements.

The new statute is irrational, the court said, because the law goes after employers whose workers are already protected by collective bargaining agreements and union representation, and have access to contractual remedies for employer breaches not necessarily available to nonunionized employees.

“Those employees are less in need of statutory protection than their nonunion counterparts,” the judge wrote. “Union employees have grievance rights, while many nonunion employees do not.”

If Hawaii really wanted to protect all employees, it could have written provisions in accordance with the equal protection clause and restricted retaliatory actions by employers both with and without collective bargaining agreements, the court said.

Richard M. Rand and Megumi Sakae of Marr Jones & Wang in Honolulu represented the 21 employers. Frances E.H. Lum, Nelson T. Higa, and Doris Dvonich of the Hawaii Attorney General's Office represented Takamine in his official capacity as DLIR director.

By Anna Kwidzinski


Text of the decision is available at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/1.-Hawaii-Pacific-Health-v.-Takamine(1).pdf.

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