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Home & Community Services of Hawaii, Inc v. Hawaii Employers' Mutual Insurance Company

September 12, 2012

HOME & COMMUNITY SERVICES OF HAWAII, INC., A HAWAII CORPORATION; PREFERRED HOME & COMMUNITY BASED SERVICES, INC., A HAWAII CORPORATION; AND ALOHA HABILITATION SERVICES, INC., A HAWAII CORPORATION, PETITIONERS-APPELLANTS/APPELLANTS,
v.
HAWAII EMPLOYERS' MUTUAL INSURANCE COMPANY, INC., INTERVENOR-APPELLEE/APPELLEE



APPEAL FROM THE LABOR AND INDUSTRIAL RELATIONS APPEALS BOARD (CASE NO. AB 2008-521(WC 08-01))

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER

MEMORANDUM OPINION

(By: Foley, Presiding J., Fujise and Reifurth, JJ.)

Petitioners-Appellants/Appellants Home & Community Services of Hawaii, Inc., Preferred Home & Community Based Services, Inc., and Aloha Habilitation Services, Inc. (the Service Providers) appeal from the August 12, 2010 Decision and Order (D&O) by the State of Hawaii Labor and Industrial Relations Appeals Board (LIRAB) dismissing Service Providers' administrative appeal for lack of jurisdiction. On appeal, the Service Providers contend LIRAB erred when it entered the following orders:

(1) The December 19, 2008 order denying the Service

Providers' motion to stay the October 22, 2008 Declaratory Ruling (Declaratory Ruling), issued by the State of Hawaii Department of Labor and Industrial Relations Director (the Director).

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER

(2) The August 12, 2010 D&O dismissing the Service Providers' appeal from the Declaratory Ruling for lack of jurisdiction.

(3) The November 10, 2010 "Order Denying [the Service Providers'] Motion for Reconsideration."

I. The Hawaii State Department of Human Services (DHS)

contracted with the Service Providers to provide Medicaid Waiver Services to elderly and disabled adults. The Service Providers provided these services by subcontracting with various individual subcontractors who provided the direct, in-home services. DHS paid the Service Providers, who then paid the Medicaid Waiver Services subcontractors (subcontractors) for their services. In the years 2004-06, the Service Providers obtained workers' compensation insurance for their employees, but not for their subcontractors, based on a belief that the subcontractors were exempt from "employment" under the "domestic exemption" provided under the then-existing Hawaii Revised Statutes (HRS) § 386-1(6) (Supp. 2006).*fn1

On February 17, 2005, the Director issued a declaratory ruling in In re Manawa Lea Health Services, Inc. (the Manawa Lea Decision), in which he determined the "domestic exemption" did not apply to subcontractors in a similar position with another service provider. After the Manawa Lea Decision was rendered, Intervenor-Appellee/Appellee Hawaii Employers' Mutual Insurance Company, Inc. (HEMIC) sought unpaid current and back workers' compensation insurance premiums from the Service Providers for their subcontractors for the years 2004-06.

On May 13, 2008, the Service Providers petitioned the Director for a declaratory ruling on whether its subcontractors were excluded from "employment" under HRS § 386-1(6) for the years 2004-06.

On October 22, 2008, the Director entered his Declaratory Ruling, declaring that the "domestic exemption" under HRS § 386-1(6) only applied to persons who were recipients of social services and social service payments. Because the Service Providers received social service payments, but not social services, the Director ruled that the subcontractors were not excluded from "employment" under HRS § 386-1. The effect of the ruling was that the Service Providers could be liable to HEMIC for unpaid current and back workers' compensation insurance premiums for the subcontractors for the years 2004-06. On November 10, 2008, the Service Providers appealed from the Declaratory Ruling to LIRAB. On November 20, 2008, the Service Providers filed a motion to stay the Declaratory Ruling. On December 19, 2008, the LIRAB denied the motion for a ...


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