New Hawaii PEO Surety Bond Requirement Vetoed by Governor

Hawaii PEO Surety Bond

New bills are constantly introduced during legislative sessions in an effort to change current policies. Although most of these bills intend to improve the industry they apply to, many fail to address the adverse impact they could have on small businesses.

In Hawaii, there’s been a history of “bad” bills being passed — bills that have yielded harmful consequences. For example, Act 129, passed in 2010, requires professional employer organizations (PEOs) to provide $250,000 Hawaii PEO surety bond. This bond amount is higher than those in all but one U.S. state with established PEO bonding requirements. As a result, long-standing small employment agencies and related businesses in Hawaii face imminent closure because they cannot afford to purchase the bond. Furthermore, due to the high cost of obtaining this type of surety bond in Hawaii, many businesses in the state currently fail to comply with the law.

Instead of working with the industry to remedy the situation, however, lawmakers chose to draft a new bill — SB 2424 — that would ultimately double the bond requirement, add a stiff registration fee and impose fines of $500 for each day of noncompliance. The bottom line? If passed, the new bill would have completely wiped out countless PEO businesses that are already struggling to fulfill the existing bonding requirement.

Individuals in the industry — including the Maui Chamber of Commerce, state department heads and lawmakers — encouraged the governor to veto SB 2424. Gov. Neil Abercrombie stated on June 25 that he intended to veto SB 2424 along with 18 other bills passed by the legislature. On July 10, he did indeed veto the bill.

Small business owners in Hawaii hope that such steps will continue to be taken as a way to increase the likelihood of success for small businesses of all kinds.