 Aloha and welcome to Kondo Insider. This is a weekly show every Thursday from 3 to 3.30 about association living in Hawaii. As we've said many times, about a third of our population lives in some form of association and the unique obligations for homeowners and boards alike are very special. We try to educate both owners and board members alike. Before we begin today's show, I'd like to just remind everybody that tomorrow is Veterans Day. I'd like to take a special moment to give a special tribute to our veterans who served our country and made our country great. And also to the families of the veterans who have made many sacrifices in support of their spouses to make our country great. So again, thank you to our veterans and their families. One of the big issues we face today is the many changes in employment law in the state of Hawaii. And there's lots of risk for associations if you make mistakes with regard to employees and so I've invited today a good friend of mine, Mike Kozak, who's an attorney specializing in employment law to talk about these issues. Welcome to the show, Mike. Thank you, Richard. And thank you for having me. Tell us a little bit about yourself and your firm. I've been an attorney here in Hawaii. This is my 10th year. I had a few years in Pennsylvania before I decided to move here. I've been with, I am now with Porter McGuire, Kea Kona and Chow right here on Bishop Street. They engage primarily in condominium law. I also have some employment background and the two fit together pretty well. Well, you know, one thing about associations, a lot of them employ either resident managers or gardeners or whatever they may, what are the, what are the big issues on employment law that you see boards getting involved in to create either lawsuits or claims? What are the basic types of cases that come forward with associations? A lot of the cases I've seen more recently include discrimination. That could be on the basis of gender identity. On the basis of gender itself, on age, any real number of topics. Those seem to be the most prevalent. Also there's wage and hour issues that come up. People feel they're entitled to overtime or they feel that they're not getting the appropriate amount of wage that they believe they have earned. And so when you have an alleged, let's say, discrimination claim, how does the board first learn about that? Does someone file against some agency or how does this kind of all get started typically? Filing can occur if you just jump right to the administrative agency. Here in Hawaii, coconut wireless seems to strike more often than not. Discrimination oftentimes is heard either from another board member or someone a board member might be close to. And so a board member heard as a potential discrimination claim or there's talk story on the coconut wireless about something. What should they do? The board should acknowledge the possibility of a discrimination suit. Speak to whomever reported it. Do some background investigation. And if you get wind that there was discrimination, do an investigation. Meet with the person, the employee who feels like they're discriminated against. Is this something in an area where when the board hears that because of the potential risks and liabilities? It's something they should get their counsel involved in early. They get some guidance because my favorite would be these volunteer board members maybe that won't understand the law that well and maybe think they're doing the right thing but really creating more liability. So when do they get their counsel kind of involved in this? If there's any doubt whether or not you're doing the right thing or you're not quite sure what to do. Involve your general counsel. Give them a ring, just ask. It could be a short conversation. I have conversations with people if it doesn't end with you really need to do this to cure this discrimination. Oftentimes they just do it as a courtesy just to head it off at the pass. And typically what kind of discrimination do you see? Oftentimes if there's different ethnicity employees, they may not get along. Also gender discrimination, some of the boards that I've had experience with seem to be the good old boys club and we hired a female resident manager and we're going to make her life a heck for whatever reason. I don't know why they would do that. So if all of a sudden I said I'm changing my name to Caitlin Emory. I wish I as a board should have my concern and be careful on how I handle that situation. I have all this, which I don't have this issue, but if I had this gender identity issue, that's the big thing these days, gender identity, people have rights and how you handle that is very critical. Well, and you're very accurate and on the cusp of recent developments. Gender identity when I was growing up, I never heard of it. All the protected classes, age, religion, sexual orientation, those have been around for decades. Gender identity is more recent. Do not discriminate on the basis of gender identity. As an employer, you are allowed to establish a certain code of conduct, dress code, times that you need to be on the job. Those things don't change. But gender identity if someone identifies as female in their male, not a basis to discriminate, don't do it. Under Hawaii a lot of the basic areas you can't discriminate. I know you said gender identity is one, what are some of the others? Age discrimination, and this is near and dear to my heart having just turned 40. 40 is the cutoff for age discrimination. Gender, male or female. Pregnancy was established, I think, back in the 1960s. Ethnicity, those are pretty much the classic core. And religion was one of the other. Yes, religion is. And religion is another. So when you have a person who feels they didn't discriminate, you know, this employee, it feels like they've been discriminated. And they want to file something. They start with a lawyer, and then you go to a government agency, or what typically happens? You do not need a lawyer at all. What happens is you can go to the Equal Opportunity Employment Commission. That's the federal agency. There are 300 Alamoana Boulevard. Or you can go to Hawaii Civil Rights Commission. That's the state agency. They will do a pre-discrimination questionnaire. It reminds me of Turbo Tax, where you're filling in blanks. From there, it goes to an intake. An investigator gets assigned, and off and running we go. You do not need a lawyer as a complainant, as a discriminated against employee. And so that agency all of a sudden sends the board a letter saying a complaint has been filed against you or a claim has been filed against you for discrimination. Do they tell you very much what the claim is, or is it just kind of more vague? Both. I've seen complaints where it's extremely vague. There's no specificity as to what actions were done or who did them or the dates or times and places. Flip side of the coin. I've seen other ones that are very detailed. I started employment on September 1st. On September 10th, someone called me an ethics slur. My employer knew about it and didn't do anything. And I can't go to work now without being called some sort of racist term or something like that. So in that situation, the board now gets this claim from EEOC or the Hawaii Civil Rights Commission, HCRC as we call it. What should they do when they get it? I would immediately call your general counsel. This is a lawsuit, even though it's at an administrative agency. I would identify the deadline. Deadline is usually on the very first sentence. It'll say you have 10 or 14 days to respond to this. Third thing, tender it to your insurance company. That's what you have insurance for. Insurance will appoint counsel to defend you if it depends on your own. The employer is still subject to the employee suing in an actual court, like federal or state. And my recollection on this was the agency will do some sort of investigation. At some point in time, they'd probably make it a determination to move forward or not to move forward. Correct. That's correct. That would define it. If the agency decides not to move forward, do the employees still have rights to pursue otherwise? The employee will get a notice of dismissal and a notice of right to sue, typically have 90 days. Even if the investigation at Hawaii Civil Rights says no discrimination, the employee can still go file in state court in that instance and repeat the allegations all over again and now you're in a court system that gets to be very expensive very quickly. And so when you have this issue, I remember an example I would give you is I remember in an association they had parking stalls and their outdoor parking stalls and there were stripes. And so the allegation by the owner was that because she was probably a little heavier than she should be, that when they re-striped the parking lot that they made her parking stall intentionally six inches smaller to get even because of her, she wasn't well-liked there. And so they were using this as some kind of tactical move by the board by making the parking stall six inches smaller. And I remember that went on forever with regard to investigation. And some of those things are hard to prove. Is the stall really six inches smaller? Was it intentional or not intentional? And you can see that the sticky wicket to me, but it is and that brings up something very interesting. The owner or employee essentially was asking for a reasonable accommodation to have their stall increased in size to what they thought it was. And the way you just described it is very often how you'll encounter. People don't use magic language and say, I need my stall as a reasonable accommodation for my weight, which is protected to be bigger. So in that instance, it's so easy to miss someone making that type of request, not do any investigation, not do much of anything. The bottom line is if you get a complaint for discrimination or something that could seem like a reasonable accommodation, do something, don't do nothing. Doing nothing sends people to these administrative agencies, which is what their job is for. And then you wind up in an administrative complaint or worse, do an investigation, do, look into it. Assign somebody to look in to see if the striping was altered or if there's some way that she could be accommodated if she really needs it. You know, if I remember correctly, you know, under the code, if it's a full-size stall, it's eight feet, six inches of the width, and if it's a compact stall, it's seven feet, six inches. It was seen to me they would have a condominium mat that they could go and investigate whether it was striped properly or not. Because certainly even someone saying I'd like a reasonable accommodation to have a nine foot stall may interfere with the rights of the stall owner. If those stalls are independently owned by the owner and it's in the declaration that another person, you're now taking like six inches of their property away from someone you may not have a right to. So it's not always such an easy task to figure this all out. It definitely is not. And in this particular case, just so you know, the big risk to me is that, frankly, a lot of these are very gray areas. They are. And what happened here was they settled. So that's what the Civil Rights Commission does is they get you to settle. And part of that was that all the board members had to take classes. So now board members had to take classes on their obligations to not discriminate. Even though this issue was fairly, in my opinion, benign, if the stall had been mispainted, they could say we're sorry and repainted it and fixed it. And if it wasn't, they could have said, look, we've measured this out and given them an answer. And like you said, not ignore it whatsoever. So yes, Hawaii Civil Rights does tend to push settlement very heavily. If you do want to find out getting a claim and it's a cause claim, there's reason to believe there's discrimination. You go to a settlement process and most times you do settle out. One thing that I've encountered is board members are very reluctant to go to this class on how to not discriminate. I think it's some kind of stigma or something of that sort. I'd say, no, please don't think of it like that. It's general education. It's a one day, you get an hour lunch break. It's not a difficult class. I've gone through the materials and it's actually very informative. It's not something to be afraid of. Are you seeing any more claims than what I'm gonna call service animals or emotional support animals? Yes. And why? Because a service animal is very unique. You have to have training, you have to have certain paperwork, you have to have physician support, emotional support animal, any medical or treating provider can give you a certificate that says, this dog is going to help my emotional stability and I need it. So counter that with a no pets policy and now you have an emotional support animal and people see, well, you have a dog but I can't have a dog. And I think it erodes away no pet policies but at this point, if you get a doctor's note it could be a nurse, chiropractor, I've seen dentists, I've seen all sorts of things. Take it seriously. Well, I did a show briefly before we take a break and I talked about emotional support animals and I had slides of the emotional support kangaroo, the emotional support snake, the emotional support turkey. You know, it's actually in some ways a disadvantage to be really disabled because people, there are opportunities for people to misuse this process and because they want a pet, because it's a little grayer area, this emotional support animal issue. It is, much so more than service animal, that's pretty regulated. We're talking about employment law here and we're going to take a short break for a minute and be right back. Aloha. I'm State Senator Russell Ruderman. I represent the Pune and Kau district on the Big Island and the host of Ruderman Roundtable. We're here on Think Tech Hawaii every other Tuesday at 2 p.m. You can join us at thinktechhawaii.com. You can find a link there to a page where you can see past episodes and we talk here about good government, environmental issues and issues of the day facing the state of Hawaii. I'm Russell Ruderman. Please join us for the Ruderman Roundtable. Mahalo. Hello, I'm Marianne Sasaki. Welcome to Think Tech Hawaii where some of the most interesting conversations in Honolulu go on. I have a show on Wednesdays from one to two called Life in the Law where we discuss legal issues, politics, governmental topics and a whole host of issues. I hope you'll join me. Welcome back to Condo Insider. We're talking with Mike Kozak about risks for board of directors and associations with regard to the current employment law. We briefly talked about the discrimination type complaints and the risks, basically saying when you get the complaint, don't ignore it and to get in contact with your general counsel. And we're now gonna take a brief conversation about a term I hear all the time. I don't really understand what it is. I've kind of seen these claims and what I'm gonna call the hostile work environment. Is there such thing as a hostile work environment? What is it? Of course there's such a thing as a hostile work environment. But what I've encountered often is one employee may or may not get along with another or two or three just don't get along for whatever reason. That's not a hostile work environment ordinarily. Hostile work environment has to be persuasive across the board, nasty place to be to put it in plain English. The key is pervasive, pervasive throughout the company. So it's not just one or two that don't get along with somebody. It's an entire department, multi-departments that are typically not treating someone the way they would treat all the other employees. So if it's just one person and they just had a bad day and they got mad with each other, that's not necessarily a hostile work environment? No, it's not. And to revisit the way you initially had asked one or two or three, that could be if your company is four people. So if you have four employees and three out of the four are ganging up against the other, it just depends on the size of the company how pervasive it might be. 75%, three out of four, that's pretty pervasive. If you have 30 employees and three or four don't get along, now you're talking 10%, that's not pervasive. It's taken on a case-by-case basis and it's not something where you have a bad day or you just don't get along with somebody or they rub you the wrong way. It has to be pervasive, severe conduct. And so it doesn't prohibit a supervisor or a board of director from counseling an employee about work performance and what they need to improve their job. That wouldn't, even though the employee may not want to hear it, it doesn't prevent an employer meaning the board and or the resident manager or their boss from taking constructive efforts to help them improve their job performance. Yeah, performance should be going on anyway, regardless of discrimination or any legal problems. But that's a good time to engage with an employee and say, are you experiencing any problems at work? Do you think for any reason you're unable to continue to serve for another year, assuming it's an annual review? You know, it's an open door. Give them an open space to vent. So performance reviews are important in listening to employees and responding to what they say. Even if their employee, let's just say, hypothetically is not correct. And they realize the issue of hostile work environment. Having that quote hearing or meeting and discussion with an open mind to try to resolve the issues is probably the best course of action. Yeah, do something. Don't do nothing. Even if someone reports it and you think, ah, I don't believe this guy, this is just totally made up, 100% false. I'm just gonna let it go. I caution against that because employee day to day to day, it's gonna build up and build up and build up until you get to a head. Well, I'm gonna shift gears for a second, please. From my perception, one of the biggest mistakes I think some boards make. And one of the biggest potential liabilities for an association is when people misunderstand the difference between an independent contractor or a legitimate independent contractor and an employee. And I see too many times that boards often think they're doing the association of service by calling someone an independent contractor, therefore not providing medical, not providing workers' compensation insurance and other statutory benefits and saying, well, he's an independent contractor. I mean, there's a lot of risk with that, but can you kind of help us with what the difference between an independent contractor and employee is? Yes, I can. And you're absolutely right, it's fraught with risk. An employee is someone who typically is told when to be at their job, what their job is going to be. They're given supplies, like a desk, a computer, a telephone, a fax machine. They're given job duties, oftentimes they're given a salary. Regardless of how many days or time off you might be, you get paid time off, you can see where I'm going with this. Independent contractor, on the other hand, is someone who is not given direction by an employer. They're not given a salary by an employer. There's no withholdings. There's no insurance provided. They bring their own equipment. They make their own hours. They're given a task and then they do it. The best example, I'm in an office with about 20 people, employees, minus the partners. A copier goes down, they call a copier guy. He comes in and fixes it. No one tells him what to do, how to do it, when to do it. Usually, hey, I need this fixed right now, that's fine. But he comes in, he has his own equipment, has his own supplies. He's not a part of the company. If the company takes a loss one year, you do poorly. That doesn't affect the independent contractor. Well, I'm gonna get a little more detail if we have time at the end of the show on the new overtime regulations. But it seems to me that that also is a risk if you have a person, an independent contractor and they're working more hours, whatever it may be, and all of a sudden you decide you don't wanna use them anymore, they could be following these claims that have fairly significant penalties in repayment of the wages, but also the employment taxes and all the rest of these things. And how big is the risk and what kind of risks are there? Well, the biggest difference in the risk is if you're doing it on purpose, willful, or if you're doing it inadvertently, non-willful. Penalties for non-willful are really set forth more as to be penal. One and a half percent of the wages that would have been paid is a penalty. Obviously, they don't have to pay the wages. You have to pay the Medicare and Medicaid Social Security and then a 20% penalty on that. That assumes you're filing the correct tax forms, which I don't wanna get into, it's very complicated. If you're inadvertently doing it and not filing the proper tax form, that doubles. If you're willfully doing it, then it goes up even further and it also triggers personal liability for deliberately misclassifying. And bear in mind, personal liability means you report it to the insurance carrier and they say, no, that's not covered. We cover the association, not what some person willfully decides to do on their own. Yeah, well, willful neglect is not typically covered under these DNR policies. The example I've always used, and maybe it's a good or a bad example, is that you hire an independent contractor. Do you think you're saving the association money? You're doing your quote fiduciary duty, although you're not. And that guy who's your handyman, he's working in a ladder, he falls off a ladder and he breaks his back and can't work ever again. I've always said, I wonder if that employee's lawyer doesn't agree with you that he's an independent contractor or you're not gonna find yourself in major litigation because all these benefits of Worker's Comp think it would have provided an income to that person for a long time where rehabilitation doesn't exist anymore. Yeah, it's gone. And who's gonna pay for it? Association and members, right? Through a lawsuit. So many times in my duties of the former management company executive, I would take on new projects and I would see that a former company was allowing them to have that person as an independent contractor. And the first thing I would say to them is, no, you gotta change. Because even if you have a guy who's making minimal wages, you can get a minimal Worker's Comp policy maybe $500 a year. It's not significant money. The liability, if you think nothing's gonna ever go wrong. Think again. Think again because the liability and the risk for the association could be huge depending on what really happened. It far outweighs the benefit of just correctly classifying, getting however much the policy might be, but it's low. In another example, I just briefly used to emphasize the point is I know a situation where employee who was covered was seriously injured we almost lost his leg, became he couldn't walk hardly at all. And the cost between the medical and the rehabilitation and getting him a new job was astronomical. If they hadn't been legitimate about how they did things, all those costs would have been on the association. And possibly individually on some of the board of directors. It's possible. And if you have a huge liability exposure, you could even run into a situation where you have a bankrupt association. You have to file for bankruptcy protection. Is that protected association, bankruptcy in that case? Ordinarily, my understanding is a bankruptcy would insulate you from having to fulfill certain judgments. So it's assuming the person gets a judgment, but it's entirely possible if your liability far out exceeds your ability to pay, what other choice do you have? Well in the sense of association about bankruptcy and you have personal liability and you're gonna have to have the same consequences and filing bankruptcy doesn't mean you're not gonna take part of your assets in your estate to satisfy the claim. No, of course not. That's at risk. So kind of going into what we kind of alluded into is that we have these new rules, I think it's taking effect in December. December 1st, a couple weeks away. New overtime rules. Can you briefly summarize what that is? Yes, I can. This does not affect hourly employees. They get overtime period. In order to be exempt, you do not pay overtime. You have to be paid a salary and you have to have administrative, executive or professional duties. Administrative typically is managing people telling them what to do. Executives like hiring, firing. Professional is like lawyer or specialized knowledge. So if you have the salary and you have one of those three, ordinarily you're exempt. The level of exemption has nearly doubled. It used to be, and this was created in the 1970s, if you made over 23,000, and I have the exact figure, well I'm not gonna look for it, but it was about $23,000. If you made over that, then you're generally exempt from overtime. Now that's gone up to $47,476. So if you make less than 47,000 in change, you're eligible for the overtime. If you make more than generally you're not going to be eligible unless you meet certain other tests. And since it's such a new rule, if you had a resident manager making $30,000 a year and you provided him an apartment that was worth $30,000 a year because you're giving him an apartment to get utilities and the rest of it, does that count toward it? Do we know whether that counts towards the compensation or not? Well that's an excellent question and it's unclear to me. And the reason it's a little easier with the old rules is nowadays you pay somebody $23,000 as a salary plus and they're exempted out plus you give them the unit. That's a pretty common place. I haven't seen any authority as of yet where someone can count or offset the value of a rental against payment of the $47,476. It's unclear at this point. So if in fact you again don't pay somebody the overtime and they make a claim that they were entitled to overtime they've kept her. I'm assuming it's up to the association to maintain the records. They can't say we don't have any records, we don't agree with the employee. Oh no. They're gonna have to have some valid proof with the employee, for example, filled out the forms and signed them and now he's trying to say he didn't develop the forms correctly. That wouldn't probably go too far. No it wouldn't. And Hawaii law mandates that you keep employment records for at least one year. Okay, well, we're down to one minute on our show. I wanna thank you for being here talking about the risks of employment law. What's your final short version of your recommendation to board members? Final recommendation is if you have any reason to believe there's something going wrong, do something, don't do nothing. And probably include your general counsel. Yes, when in doubt, that's what they're there for. Okay, I wanna thank Mike Kozak for being here this week on Condo Insider talking about employment law. Next week our show is gonna be focused on board of directors and their ethical responsibilities. We have an expert talking about ethics coming in next week. Again, I wanna thank all the veterans and their families for what they do for our country. We'll see you on Condo Insider next Thursday at 3 p.m. Aloha.