HONOLULU — The Kauffman Foundation’s Thumbtack.com gave Hawaii an F for small business friendliness, considering regulations, taxes, labor, hiring, licensing and zoning in determining the bad mark.
Numerous other organizations have deemed Hawaii as the most expensive — or worst — place to own a business.
Hawaii lawmakers, for the most part, have failed to take the warnings seriously, and they’ve introduced a number of controversial proposals that would place even more restrictions on business owners.
Most onerous is House Bill 634 — “successive owner” legislation — which would force people purchasing a business to retain all employees. In the current draft, the legislation designates the restriction on businesses with 100 or more employees. But as one lawmaker points out, that can easily be lowered this year or in future years to affect companies with considerably fewer employees.
The bill is “flawed” because it does not designate how long the employees must be retained. “So, as it stands, employees must be kept for perpetuity,” Kalapa said.
Some businesses are sold because they are not doing well financially. Under the new legislation, downsizing or changing the workforce is not an option.
“What investor is going to want to go into that deal?” Kalapa asked.
The legislation could backfire and lead owners to lay off employees before the business is sold – as a condition of the sale.
“The legislation has not been given much thought, and seems to be very bad legislation that will close the doors on future investment in Hawaii,” Kalapa said.
Organizations such as the Tax Foundation of Hawaii, Chamber of Commerce of Hawaii, Maui Chamber of Commerce, National Federation of Independent Business, Retail Merchants of Hawaiiand Smart Business Hawaii, oppose the measure.
However, unions including the AFL-CIO and ILWU Local 142 testified in support of the legislation, saying it will create “job security” and remove stress and uncertainty from the lives of employees facing transition. The state Department of Labor and Industrial Relations director supported the bill as well.
Matt DiGeronimo, mergers and acquisitions specialist from Smith Floyd Hawaii, shook his head in disgust when hearing about the legislation.
“What this bill is really going to do is prevent people from selling their business – they are just going to have to walk away,” DiGeronimo said.
“The deal just will not go through,” DiGeronimo said, calling the legislation “a slippery slope” that will cause the worst kind of economic downturn “when jobs and businesses just evaporate” and people’s retirement plans get decimated.
Sen. Sam Slom, the Senate’s only Republican member, heads the business advocacy group, Smart Business Hawaii. He said it’s not the first time this “bad” bill has been introduced, but it is the first time it has garnered this much momentum.
“There is no other state with such a bill and for good reason,” Slom said. “It would cripple existing businesses and make sales and purchases nearly impossible, while reinforcing Hawaii’s image as a hostile business climate with nearly weekly national organizations rating us F for business.”
While some advocates of the legislation said it affects just 4 percent of businesses with 100 employees or more in Hawaii, Slom said past anti-business legislation that started with limits such as 100 or 50 employees was enacted into law and later amended to include all employees.
“Instead of damaging business further, Hawaii lawmakers should pay attention to what every business owner and investor advises us to do to improve our business climate. We need to lower taxes and have less burdensome mandates,” Slom said.