By Robbie Dingeman
Advertiser City Hall Writer
Honolulu officials are balking at approval of a new contract agreement covering some United Public Workers members because of questions about a new "deferred compensation" plan that would largely be controlled by state union director Gary Rodrigues.
A federal grand jury indicted the powerful labor leader Wednesday on charges that he and his daughter defrauded the union of at least $200,000. He and Robin Haunani Rodrigues Sabatini stand accused of taking members’ money from the union’s dental and health benefit programs.
The union and government employers reached agreement on a new contract Dec. 26, and members ratified the pact in January. But after hearing from city attorneys last week, the City Council’s Budget Committee postponed what was expected to be routine approval of the agreement.
Yesterday, the union’s executive board issued a statement expressing confidence in Rodrigues and supporting his continued leadership.
Neither union officials nor a union attorney responded to requests for comment. But the January issue of the UPW newsletter, Malama Pono, accuses Honolulu Mayor Jeremy Harris of using the issue to retaliate against the union.
The newsletter says: "Mayor Harris has hired an anti-union law firm to have the deferred compensation plan and other benefit negotiations in the new Unit 1 and Unit 10 agreements declared illegal."
City Corporation Counsel David Arakawa said yesterday that the city hired labor law experts after reviewing the new deferred compensation proposal. Arakawa said attorney Roger Fonseca confirmed their concerns.
Fonseca said in a letter to the city: "Our most serious problem with this proposed deferred compensation arrangement is that we believe that it is flatly prohibited by state labor law."
Hawai‘i County Civil Service Director Michael Ben said state law prohibits the creation of a pension plan outside of the existing Employees Retirement System: "We’re still not sure whether what the union is proposing is legal."
Under the UPW proposal, the government employers would be required to pay $156 each year for each employee into the union-controlled deferred compensation plan that would be similar to a 401K retirement plan.
Statewide, Unit 1 covers more than 8,700 mostly blue-collar employees whose jobs include trash collection, operating county sewer and water systems, and maintaining government buildings.
For Honolulu, that deferred compensation contribution would amount to more than $300,000 a year for nearly 2,000 employees.
Officials said the UPW plan would have seven trustees — including Rodrigues — who would all be appointed or who could be removed by Rodrigues. There is concern that Rodrigues would have almost total control over money contributed to the plan.
Kaua‘i Deputy County Attorney Margaret Hanson said a draft proposal that she reviewed calls for Rodrigues to appoint the trustees. "He was the only one that could remove them." She said the County Council has not yet acted on the agreement.
Fonseca also questioned whether it would be legal for the union to transfer money from dental and legal plans into the newly created compensation fund.
Arakawa said the city sent a letter March 5 asking the other county attorneys to join them in requesting a legal opinion from the state attorney general. Arakawa said the Big Island representative agreed, but he has not heard back from Maui or Kaua‘i. Arakawa said he also is awaiting a response from chief state negotiator Davis Yogi. Yogi could not be reached for comment.
"The city and county is ready, willing and able to recommend the funding for the raises and the plan, but we want to make sure it’s legal," Arakawa said. "It’s already in the budget."
Honolulu City Council Chairman Jon Yoshimura said the legal question raises a cloud, but the city wants to work out the problem to move forward with the agreement. "We have an obligation to support the negotiated package," he said.
"The city’s position is that we have serious concerns about whether or not this fund actually operates as it’s supposed to operate," Yoshimura said. He wonders if the city could set aside the same amount of money as a wage increase or bonus.
Some employers — including Honolulu — allow employees to invest a certain amount of money in a tax-deferred savings account. The concept is that employees would like to put off receiving some of their salary or compensation until a time where there tax situation is more favorable, usually upon retirement when income often declines.
A spokeswoman for Maui County said officials there support the intent of the plan but understand the legal challenges.
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