Arbles v. Merit Appeals Board.

FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
30-JUN-2022
07:57 AM
Dkt. 148 OP
IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

---o0o---

AARON ARBLES, ROBERT BAILEY, REUBEN CHUN, MICHAEL
GAHAN, MICHAEL HAYASHIDA, GARRET KOMATSU,
GERALD KOSAKI, STEVE LOYOLA, JERRY LUM,
TY MEDEIROS, PAUL PAIVA, RAYMOND ROWE,
JR., WARREN SUMIDA, and ALVIN TOBOSA,
Appellants-Appellants,
v.
MERIT APPEALS BOARD, COUNTY OF HAWAI#I, MITCH ROTH,
MAYOR, COUNTY OF HAWAI#I, and WAYLEN L.K.
LEOPOLDINO, DIRECTOR OF HUMAN RESOURCES,
COUNTY OF HAWAI#I,
Appellees-Appellees1

NO. CAAP-XX-XXXXXXX

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
(CIVIL NO. 16-1-0106)

JUNE 30, 2022

GINOZA, CHIEF JUDGE, HIRAOKA AND NAKASONE, JJ.

OPINION OF THE COURT BY NAKASONE, J.

1
Pursuant to Hawai#i Rules of Appellate Procedure (HRAP) Rule
43(c)(1), Mitch Roth, the current Mayor of the County of Hawai #i is
substituted as an Appellee-Appellee herein in place of Harry Kim; and Waylen
L.K. Leopoldino, the current Director of Human Resources, County of Hawai #i,
is substituted as Appellee-Appellee herein in place of Sharon Toriano.
FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
This appeal considers the application of Hawaii Revised
Statutes (HRS) § 89C-3(b)(2),2 which requires government
employers to make adjustments to the compensation and benefit
packages of civil service employees excluded from collective
bargaining to ensure that the compensation and benefit packages
of the excluded employees are at least equal to the compensation
and benefit packages of their subordinates covered by collective
bargaining. The appellants claim that the county employer
violated HRS § 89C-3(b)(2) by paying appellants hourly rates less
than the highest hourly rates paid to their subordinates.
Appellants-Appellants Aaron Arbles, Robert Bailey,
Reuben Chun, Michael Gahan, Michael Hayashida, Garret Komatsu,
Gerald Kosaki, Steve Loyola, Jerry Lum, Ty Medeiros, Paul Paiva,
Raymond Rowe, Jr., Warren Sumida, and Alvin Tobosa (collectively,
Battalion Chiefs or Chiefs) appeal from the (1) December 27, 2016
Decision and Order Denying Appellants' Appeal (Decision and
Order) and (2) January 26, 2017 Final Judgment, filed and entered

2
HRS § 89C-3 (2012) states:

§89C-3 Adjustments for excluded civil service employees.
(a) Each jurisdiction shall provide adjustments for its
respective excluded civil service employees based on
recommendations from its respective personnel director.

(b) In formulating recommendations to the appropriate
authority, the respective director shall:
(1) Establish procedures that allow excluded civil
service employees and employee organizations representing
them to provide input on adjustments that are relevant and
important to them for the director's approval;
(2) Ensure that adjustments for excluded civil service
employees result in compensation and benefit packages that
are at least equal to the compensation and benefit packages
provided under collective bargaining agreements for
counterparts and subordinates within the employer's
jurisdiction; and
(3) Ensure that proposed adjustments are consistent
with chapter 76 and equivalent or not less than adjustments
provided within the employer's jurisdiction.

(Emphases added). "'Adjustment' means a change in wages, hours, benefits, or
other term and condition of employment." HRS § 89C-1.5 (2012).

2
FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
by the Circuit Court of the Third Circuit (Circuit Court)3 in
favor of Appellees-Appellees Mitch Roth, Mayor of the County of
Hawai#i, and Waylen L.K. Leopoldino, Director of Human Resources,
County of Hawai#i (collectively, County) and the Merit Appeals
Board (MAB).4
On appeal, the Battalion Chiefs, who are excluded civil
service employees, contend that the Circuit Court erred by
affirming the MAB's conclusion that the County provided the
Battalion Chiefs "compensation and benefit packages that [we]re
at least equal to the packages of their subordinate Captains
[(Fire Captains)] who were receiving higher hourly rates of pay
because they had more years of service or were assigned to
specialty stations, and therefore did not violate H.R.S § 89C-
3(b)(2)." The Battalion Chiefs specifically contend that the
Circuit Court and the MAB erred in excluding "Hazmat and Rescue"
differentials (hazardous assignment differential)5 paid to
certain Fire Captains and not considering pay inversions6 due to
"years of service" in the evaluation of the respective
compensation and benefit packages of the Battalion Chiefs and
Fire Captains under HRS § 89C-3(b)(2). The Battalion Chiefs also
contend that the Circuit Court erred when it concluded that

3
The Honorable Glenn S. Hara presided.
4
On appeal, the MAB filed a joinder to the County's Answering
Brief.
5
The Battalion Chiefs refer to the differential at issue as the
"Hazmat and Rescue" differential; the Circuit Court's Decision and Order
refers to it as the "hazardous duty pay differential," "hazardous duty
differential," and "hazardous duty premium differential." Because the 2011-
2017 Collective Bargaining Agreement (CBA) uses the term "hazardous assignment
differential," we use this terminology in this Opinion for consistency and
clarity.
6
As used in this case, the term "pay inversion" refers to instances
found by the Circuit Court in which a Battalion Chief may not have received
base compensation at least equal to higher paid subordinate Fire Captains
because "the Fire Captains that received higher base pay each had longer years
of service" than the respective Battalion Chief. The Circuit Court determined
that this situation did not violate HRS § 89C-3(b)(2).

3
FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Arciero v. City and Cty. of Honolulu, No. 30160, 2011 WL 6355166,
at *1 (App. Dec. 15, 2011) (mem.) "did not apply."7
We hold that the County's exclusion of the hazardous
assignment differential and failure to consider pay inversions
due to "years of service" resulted in the compensation and
benefit packages of the Battalion Chiefs not being "at least
equal to" their subordinates' packages, in violation of HRS §
89C-3(b)(2). For the reasons explained infra, we vacate and
remand.
I. BACKGROUND
On August 27, 2014, the Battalion Chiefs filed a
complaint with the County and then-Hawai#i Fire Department Fire
Chief Darren J. Rosario, requesting retroactive and future
adjustment of their compensation and benefit packages in
compliance with HRS § 89C-3. The County denied their request,
and on December 22, 2014, the Battalion Chiefs appealed the
denial to the MAB. Following four days of evidentiary hearings
in August and September 2015, the MAB issued its February 24,
2016 Findings of Fact, Conclusions of Law, Decision and Order
Granting In Part and Denying In Part Appeal of Appellant Aaron
Arbles and Denying Appeals of Robert Bailey, Reuben Chun, Michael
Gahan, Michael Hayashida, Garret Komatsu, Gerald Kosaki, Steve
Loyola, Jerry Lum, Ty Medeiros, Paul Paiva, Raymond Rowe, Jr.,
Warren Sumida, and Alvin Tobosa (FOFs/COLs and Order).

7
In Arciero, this court considered whether the Honolulu Battalion
Chiefs were receiving "compensation and benefit packages that [we]re at least
equal to the compensation and benefit packages" of their subordinate Fire
Captains, where the Chiefs were excluded from the opportunity to participate
in an overtime program called "Rank for Rank," resulting in some Fire Captains
being paid more than the Battalions Chiefs. HRS § 89C-3(b)(2). We upheld the
circuit court's holding that this disparity –- where the adjustment provided
to the Battalion Chiefs did not include the Rank for Rank benefit, and the
subordinate Fire Captains' compensation and benefit package did include the
Rank for Rank benefit -- violated HRS § 89C-3(b)(2). Arciero, 2011 WL
6355166, at *5.
Arciero is an unpublished decision that is not binding but may be
cited for "persuasive value." HRAP Rule 35(c)(2). In light of our resolution
of the primary contentions on appeal, it is not necessary for us to address
whether the Circuit Court correctly concluded that Arciero did not apply.

4
FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
The Battalion Chiefs appealed to the Circuit Court
pursuant to HRS § 91-14. At the November 4, 2016 hearing, the
Circuit Court affirmed the MAB's FOFs/COLs and Order. The
Circuit Court filed its Decision and Order on December 27, 2016.
The Battalion Chiefs timely appealed the January 26, 2017 Final
Judgment.
The Decision and Order sets forth the relevant
procedural history, factual findings,8 and legal conclusions as
follows:
The Hawai#i Fire Department divides Hawai#i Island into
two operational Battalions. The First Battalion covers the
east side of the island and the Second Battalion the west.
There are eleven stations in the First Battalion. Nine are
commanded by Fire Captains and two by Fire Equipment
Operators. The Second Battalion has nine stations. [9]

Within each battalion, there are also two specialty
fire stations. One provides rescue operations such as
water, high angle, and helicopter rescue. The other
provides hazardous materials ("HAZMAT") operations.
Firefighters assigned to these stations need to complete
specialized training.
Firefighter IIIs and Captains assigned to specialty
units (rescue or HAZMAT) are entitled to an hourly rate
increase of 8.126% above their rank and longevity rate. This
differential is paid for all hours worked regardless of
whether the firefighter actually participates in a rescue or
HAZMAT activity.
The Hawai#i Fire Fighters Association ("HFFA") is the
union representing firefighters working for the counties in
the State of Hawai#i. The HFFA negotiates with the Counties
to reach a Collective Bargaining Agreement ("CBA") that
applies uniformly for all members of HFF A across the State
of Hawai#i. Thus, HFFA members have the same compensation
and benefit packages under the CBA regardless of whether
they work for the County of Hawai#i or the City and County
of Honolulu. The HFFA is designated as Bargaining Unit 11.
Firefighter IIIs and Captains assigned to specialty units

8
Unchallenged findings are binding on appeal. See State v.
Rodrigues, 145 Hawai#i 487, 497, 454 P.3d 428, 438 (2019).
9
Additional background from the MAB's FOFs pertinent to the role of
the Battalion Chiefs, which was not included in the Decision and Order, is set
forth as follows: each Battalion Chief in the First and Second Battalions
commands more than nine Captains and more than fifty total firefighters while
on duty, MAB FOF 62; because firefighters work 24-hour shifts, "[t]hree
Battalion Chiefs are assigned to each Battalion and work in consecutive shifts
to provide continuous command over each Battalion at all times[,]" MAB FOF 63;
and there are a total of six operational Battalion Chiefs, id.

5
FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
(rescue or HAZMAT) are members of Unit 11 and represented by
the HFFA.
The CBA for Bargaining Unit 11 for 2011-2017 provides
for the 8.126% differential. Section 44D of the CBA states,
in part, that employees assigned to units that are
designated for search and rescue which require them to be
trained and/or certified beyond that which is required for
other members of their class (and such is not recognized in
the pricing of their class) shall be paid a hazardous
assignment differential of 8.126% of the employee's regular
salary in addition to base pay and applicable differentials
and premiums. The 8.126% differential is only paid to
specially trained and qualified personnel assigned to
specialty fire stations and not to all members of Bargaining
Unit 11, unlike Rank for Rank, which was the focus of the
Arciero case.
Battalion Chiefs are excluded managerial positions.
They are not members of Bargaining Unit 11. During the
period [sic] January 1, 2005 to January 15, 2015, no Battalion
Chief has ever been assigned to any of the Hawai #i County
Fire Department's two HAZMAT and two Rescue stations. [10]

10
The Battalion Chiefs are not "assigned" to the specialty stations
or any other station, because they are assigned to battalions, and each
battalion includes two specialty stations. See Decision and Order; MAB FOFs
62, 63. The record before the MAB reflects that Battalion Chiefs are required
to have the specialized HAZMAT training to oversee the specialty stations and
to serve as Battalion Chiefs:

Q. [(BY COUNSEL FOR BATTALION CHIEFS)] Okay. Now with
respect to [(CBA Section 44)] D, you see where D says,
notwithstanding the above, employees assigned to units
that are designated for search and rescue responses, which
require them to be trained or certified, beyond that which
is required of other members of their class, shall be paid
a hazardous assignment differential of 8.126 percent of the
employee's regular salary. Do you see that?
A. [(BY BATTALION CHIEF MICHAEL HAYASHIDA)] Yes.
Q. Now, do they have to actually jump in the water to
get the 8.126 percent?

A. No. They just have to be on duty at the station, so
as long as they report for duty at 0800 hundred hours,
they automatically get the pay.
Q. But they also have to be trained or certified, is
that right?

A. Yes.
Q. And do BCs [(Battalion Chiefs)] have to be trained or
certified?
A. Yes.

(continued...)

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FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Appellants' claim they did not receive compensation
and benefit packages since 2005 that are at least equal to
the compensation and benefit packages provided under
applicable collective bargaining agreements for counterparts
and subordinates was primarily based on the report and
testimony of their expert, a certified public accountant.
The expert's report was admitted into evidence during the
hearings on the merits.

The expert identified the highest hourly rates for
Fire Captains in Hawai#i County over the time period covered
in the County's payroll records. He compared the highest
Captain's hourly rate to each Battalion Chiefs actual hourly
rate for the same pay periods. The conclusions in the
expert's report were based on his premise the 8.126 % [sic]
hazardous duty pay differential was an "adjustment".
Appellants' expert did not identify any instances in
which a Battalion Chief did not receive compensation and
benefit packages at least equal to that of subordinate Fire
Captains that did not arise from the assumption that the
8.126 % [sic] hazardous duty differential was an adjustment.

As mentioned above, the 8.126% hazardous duty
assignment is only paid to specially trained and qualified
personnel assigned to specialty fire stations and not to all
members of Bargaining Unit 11. Excluding consideration of
the hazardous duty premium differential available only to
bargaining unit employees assigned to specialty HAZMAT and
Rescue Stations, none of the Appellants identified any
specific instance in which any Appellant did not receive
compensation and benefit packages at least equal to that of
any subordinate Fire Captain.
The hazardous duty premium differential identified in
§ 44 D. of the CBA is not available to employees who are not
specially trained and not assigned to specialty HAZMAT and
Rescue stations. It does not comprise an "adjustment" to
compensation nor is it part of a benefit package for
purposes of ensuring that excluded civil service employees
receive compensation and benefit packages that are at least
equal to the compensation and benefit packages provided
under collective bargaining agreements for counterparts and

10
(...continued)
Q. And the training or certification that BCs are
required to have is what?
A. HAZMAT.

Q. And that's part of your requirement to oversee these
divisions, is that correct?
A. Yes.
(Emphases added). Thus, the Chiefs possess the same HAZMAT and rescue
training required for the specialty stations that they are required to
oversee, but they do not receive the hazardous assignment differential under
the CBA because they are excluded employees.

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FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
subordinates within the employer's jurisdiction .[11] The
CBA, at Section 32-A entitled COMPENSATION ADJUSTMENTS,
defines "basic rate of pay" as "the rate of pay assigned to
the salary range and step an employee is receiving as
compensation." The definition does not include
"differentials".
Moreover, Section 32-A, Paragraph I., sub-paragraphs 1
and 2 of the CBA, state that Temporary Differential and
Permanent Differential pay shall not be considered part of
an Employee's basic rate of pay. (Emphasis added).
In addition to the above, from July 2007 to June 2015,
the Battalion Chiefs in the County of Hawai #i Fire
Department were paid a base salary at least equal to Fire
Captains.
V. Instances of Pay Inversion

During the [August 26-27, 2015 and September 24-25,
2015] evidentiary hearings [before the MAB], [12] the Employer
identified limited instances in which a Battalion Chief may
not have received base compensation at least equal to a
subordinate fire captain. The Employer determined that, in
addition to the highest and lowest compensation, there were
intermediate steps as well as inversions. The Employer
identified inversions for three of the Appellants, namely,
Battalion Chiefs Arbles, Gahan and Lum.

The inversions in pay identified by the County for
Appellant Arbles for years 2007, 2008, and 2009 violate
Hawai#i Revised Statutes § 89C-3(b)(2) because the highest
paid non-specialty Fire Captain with equal or lesser years
of service than Appellant Arbles received higher base pay
than Appellant Arbles. HRS § 89C-3(b)(2). As a result of
Appellant Arbles' promotion early in his career, there was a
period of three years in which he did not receive
compensation at least equal to that of the highest paid fire
captain.

11
This bolded portion of the Decision and Order is a near verbatim
recitation of MAB COL 8, which stated:

8. The hazardous pay differential identified in § 44
D. of the operative collective bargaining agreements is not
available to employees who are not specially trained and not
assigned to specialty HAZMAT and Rescue stations and does
not comprise an "adjustment" nor part of a benefit package
for purposes of ensuring that excluded civil service
employees receive compensation and benefit packages that are
at least equal to the compensation and benefit packages
provided under collective bargaining agreements for
counterparts and subordinates within the employer's
jurisdiction.
The Chiefs specifically argue that COL 8 was wrong, and the Circuit Court
erred in affirming it.
12
In its Decision and Order, the Circuit Court erroneously dated the
hearings as "August 26-27, 2016 and September 24-25, 2016."

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FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
The inversions in pay identified by the County for
Appellants Gahan and Lum did not violate HRS § 89C-3(b)(2)
because the Fire Captains that received higher base pay each
had longer years of service than Appellants Gahan and
Lum.[13] Hawai#i Revised Statutes § 76-1 et seq.; §
89C-3(b)(2). The inversions in which Appellants Gahan and
Lum may not have received base compensation at least equal
to the most highly paid subordinate fire captain resulted
from their respective promotions to Battalion Chief in the
early stages of their career in the fire department.

VI. Seniority and the Merit Principle.
The Court has reviewed the wording of HRS §
89C-3(b)(2), the statute relied upon by the Appellants.
However, the Court finds that is not the only statute
relevant to this case. The Court finds HRS Chapter 89C,
Public Officers and Employees Excluded from Collective
Bargaining, must be read as a whole. In addition, the
language of the applicable collective bargaining agreement
and the merit principle, HRS §76-1, must also be taken into
account.

HRS § 89C-2(3) allows an Employer to make adjustments
for excluded employees subject to the guideline and
limitation that any adjustment made for excluded civil
service employees shall be consistent with the merit
principle and shall not diminish any rights provided under
Chapter 76, Civil Service Law, Hawai#i Revised Statutes.
(Emphasis added).
HRS § 89C-3(b)(2) requires that the Employer ensure
that adjustments for excluded civil service employees result
in compensation and benefit packages that are at least equal
to the compensation and benefit packages provided under
collective bargaining agreements for counterparts and
subordinates within the employer's jurisdiction. Hawai #i
Revised Statutes § 89C-3(b)(2). (Emphasis added).

Hawai#i Revised Statutes § 89C-3(b)(3) requires that
the Employer ensure that proposed adjustments are consistent
with chapter 76 and equivalent or not less than adjustments
provided within the employer's jurisdiction. Hawai #i Revised
Statutes § 89C-3(b)(3). (Emphasis added).

The Hawai#i Firefighters CBA provides for the payment
of differentials. The differentials are not to be

13
This bolded portion of the Circuit Court's Decision and Order is
substantially similar to MAB COL 15, which stated:

15. The inversions in pay identified by the County for
Appellants Gahan and Lum in its Exhibit "WWW" did not violate
Hawaii Revised Statutes § 89C-3(b)(2) because the Fire Captains
that received higher base pay eaeh [sic] had longer years of service
than Appellants Gahan and Lum. Hawaii Revised Statutes § 76-1
et seq.; § 89C-3(b)(2).

The Chiefs specifically argue that COL 15 was wrong, and the Circuit Court
erred in affirming it.

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considered to be part of basic pay. Exclusion of
differentials, such as the one for 8.126% for hazardous duty
pay, in the comparison of the compensation packages between
Fire Captains and Battalion Chiefs by the Merit Appeals
Board was not in error.
The Merit Appeals Board could consider matters of
service and longevity in deciding whether the Employer was
in compliance with HRS §89C-3(b)(2). Service and longevity
are factors in the general structure of public worker pay
scales. Pay schedule and the longevity steps based on years
of service and the various step increases are matters that
are properly considered in determining whether a
compensation package is at least equal to a subordinate's
pay within the employer's jurisdiction as provided by
statute. This principle is embodied in the CBA.
The Board concludes Hawai#i Revised Statutes §
89C-3(b)(2) is properly understood and to be interpreted
consistent with the merit principle codified in Chapter 76,
Hawai#i Revised Statutes, which merit principle allows for
differences in pay among counterparts and subordinates
consistent with years of service. HRS §§ 76-1 et seq.;
89C-3(b)(2).
The facts and evidence show the Appellants, with the
exceptions noted above, were paid compensation and benefit
packages at least equal to the subordinates immediately
below them.
Lastly, there is no language in the legislative
history indicating that one of the purposes of HRS §
89C-3(b)(2) was to bestow upon battalion chiefs a benefit
that was not given across-the-board to all bargaining unit
members.

(Bolding and footnotes added).

II. STANDARDS OF REVIEW
A. Secondary Appeal
Review of a decision made by the circuit court upon its
review of an agency's decision is a secondary appeal. The
standard of review is one in which [the appellate] court
must determine whether the circuit court was right or wrong
in its decision, applying the standards set forth in HRS
§ 91-14(g) (1993) to the agency's decision.
HRS § 91-14, entitled "Judicial review of contested cases,"
provides in relevant part:
(g) Upon review of the record the court may affirm
the decision of the agency or remand the case with
instructions for further proceedings; or it may
reverse or modify the decision and order if the
substantial rights of the petitioners may have been
prejudiced because the administrative findings,
conclusions, decisions, or orders are:

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(1) In violation of constitutional or statutory
provisions; or
(2) In excess of the statutory authority or
jurisdiction of the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Clearly erroneous in view of the reliable,
probative, and substantial evidence on the
whole record; or

(6) Arbitrary, or capricious, or characterized
by abuse of discretion or clearly
unwarranted exercise of discretion.
Under HRS § 91-14(g), conclusions of law are
reviewable under subsections (1), (2), and (4);
questions regarding procedural defects under
subsection (3); findings of fact under subsection (5);
and an agency's exercise of discretion under
subsection (6).

United Pub. Workers, AFSCME, Local 646, AFL-CIO v. Hanneman, 106
Hawai#i 359, 363, 105 P.3d 236, 240 (2005) (brackets omitted)
(quoting Paul's Elec. Serv., Inc. v. Befitel, 104 Hawai#i 412,
416, 91 P.3d 494, 498 (2004)). "Pursuant to HRS § 91-14(g), an
agency's conclusions of law are reviewed de novo." Id. (internal
quotation marks and citation omitted). "A circuit court's
conclusions of law are subject to de novo review." Paul's Elec.
Serv., 104 Hawai#i at 420, 91 P.3d at 502 (citation omitted).

B. Statutory Interpretation
"Statutory interpretation is a question of law
reviewable de novo." JD v. PD, 149 Hawai#i 92, 96, 482 P.3d 555,
559 (App. 2021) (citation omitted). In construing statutes, we
observe the following principles:

First, the fundamental starting point for statutory
interpretation is the language of the statute itself.
Second, where the statutory language is plain and
unambiguous, our sole duty is to give effect to its plain
and obvious meaning. Third, implicit in the task of
statutory construction is our foremost obligation to
ascertain and give effect to the intention of the
legislature, which is to be obtained primarily from the
language contained in the statute itself. Fourth, when
there is doubt, doubleness of meaning, or indistinctiveness

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or uncertainty of an expression used in a statute, an
ambiguity exists.

Id. (citation omitted).

III. DISCUSSION

A. The Circuit Court erred when it affirmed the
MAB's exclusion of the hazardous assignment
differential in comparing the respective
compensation and benefit packages under
HRS § 89C-3(b)(2).
The Battalion Chiefs contend that the Circuit Court
erred in affirming the MAB's COL 8 that HRS § 89C-3(b)(2) was not
violated where the Chiefs' compensation and benefit packages were
not at least equal to the packages of their subordinate Captains
"who were receiving higher hourly rates of pay" because they were
"assigned to specialty stations[.]" COL 8 stated in pertinent
part that because the hazardous assignment differential in CBA
Section 44D14 "is not available to employees who are not
specially trained and not assigned to specialty HAZMAT and Rescue
stations," it "does not comprise an 'adjustment'" and is not
"part of a benefit package for purposes of ensuring" that the
Battalion Chiefs' compensation and benefit packages were at least
equal to the compensation and benefit packages provided under the
CBA to the Fire Captains.

14
CBA Section 44, entitled "Hazardous Duty," provides in subsection
D that:
D. Notwithstanding the above, Employees assigned to units
that are designated for search and rescue responses
which require them to be trained and/or certified
beyond that which is required for other members of
their class (and such is not recognized in the pricing
of their class), shall be paid a hazardous assignment
differential of 8.126% of the Employee's regular
salary in addition to base pay and applicable
differentials and premiums. The minimum compensable
period shall be one shift. It is provided that such
hazardous assignment differential shall be in lieu of
the above provisions except as provided in subsection
B.1.c. relating to HAZMAT.

(Emphases added).

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Relying on the CBA, the County argues that the
hazardous assignment differential "falls outside the scope of HRS
§ 89C-3" because the statute "does not apply to differentials,"
which are "factors applied after-the-fact to wages that are 'not
considered part of an employee's basic rate of pay'" under CBA
Section 32-A(I)(1)(b).15 The MAB agreed with the County,
concluding in COL 8 that the hazardous assignment differential
"does not comprise an 'adjustment' nor part of a benefit package"
for purposes of ensuring that the respective compensation and
benefit packages were at least equal under HRS § 89C-3(b)(2).
This conclusion was erroneous.
Regardless of how the hazardous assignment differential
is characterized under the CBA, i.e., not part of an employee's
"basic rate of pay," the hazardous assignment differential is
clearly part of the Fire Captains' "compensation and benefit
packages" for purposes of HRS § 89C-3(b)(2). The hazardous
assignment differential, as described in the Decision and Order,
is an amount "8.126% of the employee's regular salary" that is
"paid" to certain qualifying employees, and is clearly a type of
compensation. From a plain reading of the statute, there are no
exceptions for specialty assignments or hazardous assignment
differentials in HRS § 89C-3(b)(2). See JD, 149 Hawai#i at 96,
482 P.3d at 559.
The CBA is a contract between the union representing
covered employees and the County, and is reviewed de novo,
similar to how we interpret statutes. See Casumpang v. ILWU,
Local 142, 94 Hawai#i 330, 343, 13 P.3d 1235, 1248 (2000)
(citation and formatting omitted) ("Collective-bargaining
agreements are the principal form of contract between an employer
and a labor organization."); Koga Eng'g & Constr., Inc. v. State

15
CBA Section 32-A(I)(1)(b) provides: "The TD [(Temporary
Differential)] pay shall not be considered part of an Employee's basic rate of
pay." The Decision and Order concluded, citing Section 32-A(I), that:
"Temporary Differential and Permanent Differential pay shall not be considered
part of an Employee's basic rate of pay."

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of Hawai#i, 122 Hawai#i 60, 72, 222 P.3d 979, 991 (2010) (stating
that the construction of a contract is a question of law, and
"absent an ambiguity, the contract terms should be interpreted
according to their plain, ordinary, and accepted sense in common
speech.") (citation and brackets omitted)).
A plain reading of the CBA, in general and specifically
in Section 44D, indicates that the hazardous assignment
differential is part of the Fire Captains' "compensation."
Section 44D states that the employee "shall be paid" the
differential if the qualifying conditions are met. CBA Section
44D (emphasis added). It also sets a "minimum compensable
period" for the hazardous assignment differential. Id. (emphasis
added). Both the Circuit Court's Decision and Order and the
County rely on the CBA language in Section 32-A that defines
"basic rate of pay" to exclude differentials, and thus support
the exclusion of the hazardous assignment differential from the
"compensation and benefit packages" of the Fire Captains.16 The
exclusion of differentials under a CBA definition, however, does
not mean that the hazardous assignment differential in this case
is not part of a "compensation and benefit" package under HRS §
89C-3(b)(2). Furthermore, Section 32-A, upon which the County
and the Circuit Court relied, is entitled "Compensation
Adjustments," which is a subsection under the section entitled
"Wages." Under the CBA's own categorization, differentials are
clearly classified as a type of compensation, for which eligible
employees are entitled to "pay adjustments" under the

16
The Circuit Court noted that Section 32-A defined "basic rate of
pay" to exclude differentials. CBA Section 32-A(A)(2) pertinently provides:

2. For purposes of this section, "basic rate of pay"
means the rate of pay assigned to the salary range and step
an Employee is receiving as compensation. For an Employee
whose position is not assigned to the salary range, "basic
rate of pay" shall mean the actual rate of compensation the
Employee is receiving as remuneration for services performed
in a particular position, not including any differentials.

(Emphasis added).

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"Compensation Adjustments" Section 32-A. See CBA Section 32-
A(A)(5)17 (providing a formula for computing pay adjustments for
employees working less than a normal month, consisting of a
"monthly basic rate of pay" plus various categories of
differentials). Thus, the language and structure of the CBA,
treating differentials as a type of compensation adjustment,
support our conclusion that the hazardous assignment differential
is part of the Fire Captains' compensation, and is encompassed
within the Captains' "compensation and benefit packages" under
HRS § 89C-3(b)(2). (Emphasis added). The Circuit Court and the
MAB erred in concluding that the hazardous assignment
differential was not a part of the Fire Captains' compensation
and benefit packages for purposes of assessing whether the
compensation and benefit packages of the Battalion Chiefs were at
least equal thereto under HRS § 89C-3(b)(2). See United Pub.
Workers, 106 Hawai#i at 363, 105 P.3d at 240.

B. The Circuit Court erred when it affirmed the
MAB's failure to consider pay inversions due
to "years of service" when comparing the
respective compensation and benefit packages
of the Battalion Chiefs and their subordinates
under HRS § 89C-3(b)(2).
The Battalion Chiefs contend that the Circuit Court and
the MAB erred in concluding that HRS § 89C-3(b)(2) was not
violated because the higher hourly rates of pay that some
subordinate Fire Captains received were due to those Captains
having more years of service than some Battalion Chiefs. The
Battalion Chiefs assert that there is no "years of service"

17
CBA Section 32-A(A)(5) provides,

Pay adjustments for Employees who work less than a normal
month shall be computed pursuant to the following formula:
Employee's monthly basic rate of pay (as shown on the
appropriate salary schedule) plus Permanent Differential
(PD), Temporary Differential (TD), Conversion Differential
(CD), or Temporary Compression Differential (TCD), as
applicable multiplied by (number of days worked divided by
number of working days in a month, including holidays).

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exception to the requirements of HRS § 89C-3(b)(2); and that the
subsection (b) requirement that adjustments be "consistent" with
the HRS § 76-1 merit principle does not mean that "years of
service" can justify Fire Captains being compensated more than
Battalion Chiefs. The Chiefs point out that the merit principle
in HRS § 76-1 does not mention "'years of service' or any similar
concept," and argue that the Circuit Court erroneously affirmed
the MAB's COL 15. We also address COL 16, which contains the
MAB's interpretation of the pertinent statutes relevant to COL
15. COLs 15 and 1618 state:
15. The inversions in pay identified by the County
for Appellants Gahan and Lum in its Exhibit "WWW" did not
violate Hawaii Revised Statutes § 89C-3(b)(2) because the
Fire Captains that received higher base pay eaeh [sic] had
longer years of service than Appellants Gahan and Lum.
Hawaii Revised Statutes § 76-1 et seq.; § 89C-3(b)(2).

16. The Board concludes Hawaii Revised Statutes §
89C-3(b)(2) is properly understood and interpreted
consistent with the merit principle codified in Chapter 76,
Hawaii Revised Statutes, which merit principle allows for
differences in pay among counterparts and subordinates
eonsistent [sic] with years of service. Hawaii Revised
Statutes §§ 76-1 et seq.; 89C-3(b)(2).

The issue presented here is, as to the excluded Battalion Chiefs
under HRS Chapter 89C, when interpreting the parity requirement
of HRS § 89C-3(b)(2) consistent with the merit principle, whether
increased pay for subordinate employees' "years of service" must
be considered as part of the subordinates' "compensation and
benefit" package. We conclude that it must.

18
These COLs were adopted and incorporated into the Circuit Court's
Decision and Order, as stated supra.

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Under HRS § 76-1,19 the merit principle is "the

19
HRS § 76-1 (2012) provides:
§76-1. Purposes; merit principle.
It is the purpose of this chapter to require each
jurisdiction to establish and maintain a separately
administered civil service system based on the merit
principle. The merit principle is the selection of persons
based on their fitness and ability for public employment and
the retention of employees based on their demonstrated
appropriate conduct and productive performance. It is also
the purpose of this chapter to build a career service in
government, free from coercive political influences, to
render impartial service to the public at all times,
according to the dictates of ethics and morality and in
compliance with all laws.

In order to achieve these purposes, it is the declared
policy of the State that the human resource program within
each jurisdiction be administered in accordance with the
following:

(1) Equal opportunity for all in compliance with all
laws prohibiting discrimination. No person shall
be discriminated against in examination,
appointment, reinstatement, reemployment,
promotion, transfer, demotion, or removal, with
respect to any position when the work may be
efficiently performed by the person without
hazard or danger to the health and safety of the
person or others;

(2) Impartial selection of individuals for public
service by means of competitive tests which are
fair, objective, and practical;

(3) Incentives for competent employees within the
service, whether financial or promotional
opportunities and other performance based group
and individual awards that encourage continuous
improvement to achieve superior performance;

(4) Reasonable job security for competent employees
and discharge of unnecessary or inefficient
employees with the right to grieve and appeal
personnel actions through the:
(A) Contractual grievance procedure for
employees covered by chapter 89; or

(B) Internal complaint procedures and the merit
appeals board for employees excluded from
coverage under chapter 89;
(5) Equal pay for equal work shall apply between
classes in the same bargaining unit among
jurisdictions for those classes determined to be
(continued...)

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selection of persons based on their fitness and ability for
public employment and the retention of employees based on their
demonstrated appropriate conduct and productive performance."
HRS § 76-1 lists various policy directives in subsections (1)
through (6) to achieve the purposes of Chapter 76, including the
merit principle (merit principle policies). These merit
principle policies include equal opportunity and non-
discrimination under subsection (1); impartial selection through
competitive tests under subsection (2); financial or promotional
incentives for competent employees under subsection (3);
reasonable job security for competent employees and discharge of
unnecessary or inefficient employees through contractual
grievance procedures for Chapter 89 employees or by internal
complaint and the MAB for employees excluded from Chapter 89,
under subsection (4); equal pay for equal work between classes in
the same bargaining unit under subsection (5); and harmonious and
cooperative relations between government and its employees under
subsection (6). See HRS § 76-1.
"Years of service," referenced in COL 16, is apparently
a term related to the CBA calculating a covered employee's "step
movement" or increase in basic rate of pay to the next higher
step within a pay range.20 COL 16 appears to express part of the

19
(...continued)
equal through systematic classification of
positions based on objective criteria and
adequate job evaluation, unless it has been
agreed in accordance with chapter 89 to
negotiate the repricing of classes; and
(6) Harmonious and cooperative relations between
government and its employees, including employee
organizations representing them, to develop and
maintain a well-trained, efficient, and
productive work force that utilizes advanced
technology to ensure effective government
operations and delivery of public services.
(Emphases added).
20
CBA Section 32-A(O), entitled "Step Movement," provides:

(continued...)

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merit principle policy in subsection (5) of HRS § 76-1, which
states:

(5) Equal pay for equal work shall apply between classes
in the same bargaining unit among jurisdictions for
those classes determined to be equal through
systematic classification of positions based on
objective criteria and adequate job evaluation, unless
it has been agreed in accordance with chapter 89 to
negotiate the repricing of classes[.]

This merit principle policy does not apply to excluded employees
like the Battalion Chiefs, who are not in a "bargaining unit."

20
(...continued)
1. Definitions - The following definitions shall be
applicable to this subsection:
a. "Step movement" means an increase of an
Employee's basic rate of pay to the next
higher step within the pay range which may
be granted as provided in Section 32.
Wages.
b. "Service anniversary date" means the date
the Employee is granted a step movement,
which shall be the anniversary of the
Employee's last date of hire (adjusted for
periods of time not creditable as provided
in subsection (3.) below).

c. "Service" means employment service for the
Employer in an existing or previously
existing class or position which is or has
been included in or excluded from the
bargaining unit for which the Union is
certified as the exclusive bargaining
representative under the provisions of the
Hawaii Collective Bargaining in Public
Employment Law. Service shall include
service in all Employer jurisdictions.

2. Eligibility for Step Movement - Any Employee at
a step or rate below the maximum step of the pay
range shall be eligible for and shall receive a
step movement on the Employee's service
anniversary date, provided the Employee has
completed the cumulative years of service
corresponding to the next higher step as
specified in the following:
. . . .
[(sets forth the cumulative years of service
range for each step)].

(Emphasis added).

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This case concerns HRS Chapter 89C excluded employees
not covered by a CBA, for whom any HRS § 89C-3(b)(2) parity
adjustment made must be "consistent" with the HRS § 76-1 merit
principle. HRS § 89C-2 (2012), entitled "Adjustments authorized;
limitations, restrictions," provides that: "(3) Any adjustment
made for excluded civil service employees shall be consistent
with the merit principle and shall not diminish any rights
provided under chapter 76 . . . ." (Emphasis added). HRS § 89C-
3(b)(3) also requires that the employer "[e]nsure that proposed
adjustments are consistent with chapter 76 . . . ."
We have closely examined the merit principle policies
under HRS § 76-1, and the merit principle policy that is most
applicable to the circumstances of this case under HRS § 89C-
3(b)(2) is HRS § 76-1(3), which states: "[i]ncentives for
competent employees within the service, whether financial or
promotional opportunities and other performance based group and
individual awards that encourage continuous improvement to
achieve superior performance . . . ." Thus, it would be contrary
to merit principle policies for a fire captain who is promoted to
battalion chief to be paid less than a fire captain with more
years of service. Such a practice would be a financial
disincentive for qualified fire personnel to seek to be promoted
to battalion chief.
HRS §§ 89C-2(3) and 89C-3(b)(3) simply state that the
adjustments must be "consistent" with the "merit principle" or
"Chapter 76." Fulfillment of the merit principle expressed in
HRS § 76-1(3) includes providing incentives to "competent
employees," such as "financial or promotional opportunities" to
"encourage continuous improvement" by these competent employees.
Conducting an HRS § 89C-3(b)(2) comparison that allows for
differences in pay based on years of service, where subordinate
Fire Captains end up with higher compensation than their superior
Battalion Chiefs as described in COL 15, provides a financial
disincentive for Fire Captains to pursue promotional

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opportunities to become Battalion Chiefs. See HRS § 76-1(3).
Such an anomalous result does not encourage employees to seek
continuous improvement over the course of their government
careers and is contrary to the merit principle. See id.
At oral argument,21 the County asserted that it would
not be able to fairly re-price compensation for Battalion Chiefs
every time a Fire Captain with many years of service retires.
HRS § 89C-3 does not require such immediate re-pricing. As
asserted by the Battalion Chiefs, HRS § 89C-3(b)(1) provides that
the respective personnel director of a jurisdiction "[e]stablish
procedures that allow excluded civil service employees and
employee organizations representing them to provide input on
adjustments that are relevant and important to them for the
director's approval[.]" The County can properly address re-
pricing due to "years of service" under HRS § 89C-3 by
establishing procedures as set out in subsection (b)(1).
Thus, it was error for the Circuit Court and the MAB,
in COL 16, to fail to consider pay inversions caused by "years of
service" calculations when evaluating the respective compensation
and benefit packages of the Battalion Chiefs and subordinate Fire
Captains for required adjustments under HRS § 89C-3(b)(2)
consistent with the merit principle. See United Pub. Workers,
106 Hawai#i at 363, 105 P.3d at 240. The pay inversion described
in COL 15 violated HRS § 89C-3(b)(2) to the extent the
compensation package of a battalion chief was less than that of a
subordinate fire captain with more years of service, and was
inconsistent with the merit principle under HRS § 76-1(3). See
id.
C. The legislative history supports the result
reached in this case.
The plain language of HRS § 89C-3(b)(2) requires a
government jurisdiction to make adjustments to ensure that
excluded civil service employees' compensation and benefit

21
Oral argument was held in this case on June 1, 2022.

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packages are "at least equal to" the packages of their
subordinates under collective bargaining agreements. The
language of the statute does not contain any exceptions for
specialty assignments, exclusion of differentials, or pay
inversions due to "years of service." The legislative history
supports the analysis and result reached in this case.
"[T]he plain language rule of statutory construction
does not preclude an examination of sources other than the
language of the statute itself even when the language appears
clear upon perfunctory review." Sato v. Tawata, 79 Hawai#i 14,
17, 897 P.2d 941, 944 (1995) (citations and punctuation omitted).
We may examine "sources other than the language of the statute
itself" to "discern the underlying policy which the legislature
seeks to promulgate . . . to determine if a literal construction
would produce an absurd or unjust result, inconsistent with the
policies of the statute." State v. Demello, 136 Hawai#i 193,
197, 361 P.3d 420, 424 (2015) (citation and internal quotation
marks omitted).
In 2005, the Legislature amended HRS § 89C-3 to include
the language "at least equal to," requiring that employers ensure
that adjustments for excluded civil service employees result in
compensation and benefit packages that are at least equal to
their counterparts and subordinates under CBAs. 2005 Haw. Sess.
Laws Act 2, § 1 at 788.22 The Legislature recognized that there
was a "disparity in compensation and benefits" between excluded

22
Act 2 amended subsection (b)(2) as follows:
(2) Ensure that adjustments for excluded civil service
employees result in compensation and benefit packages
that are [appropriate for what they do and the
contribution they make in consideration of] at least
equal to the compensation and benefit packages
provided under collective bargaining agreements for
counterparts and subordinates within the employer's
jurisdiction; and
. . . .

2005 Haw. Sess. Laws Act 2, § 1 at 788.

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civil service employees and their counterparts and subordinates
covered by CBAs. S. Stand. Comm. Rep. No. 1857, in 2005 Senate
Journal, at 1901. The bill was introduced "in the interest of
fairness and equity" because while the prior version of HRS §
89C-3 seemed "equitable on its face," the current bill "level[ed]
the playing field by requiring excluded employees to be
compensated at a level that is at least equal to the compensation
and benefit packages provided under collective bargaining
agreements for their counterparts and subordinates." S. Stand.
Comm. Rep. No. 1177, in 2005 Senate Journal, at 1588; S. Stand.
Comm. Rep. No. 1857, in 2005 Senate Journal, at 1901. The
Legislature recognized that excluded civil service employees
"should not be treated less favorably than their counterparts who
are covered by collective bargaining agreements" and emphasized
that the purpose of having equivalent compensation and benefit
adjustments for excluded civil service employees was to maintain
fairness and increase morale. H. Stand. Comm. Rep. No. 106, in
2005 House Journal, at 1088; S. Stand. Comm. Rep. No. 1177, in
2005 Senate Journal, at 1588. Thus, it was "necessary to
adequately compensate these excluded employees at a level which
is at least equal to their counterparts who are covered by
collective bargaining." S. Stand. Comm. Rep. No. 1177, in 2005
Senate Journal, at 1588.
The legislative history confirms that the Legislature
intended to eliminate any unfairness and "disparity in
compensation and benefits" for excluded civil service employees
under HRS § 89C-3. S. Stand. Comm. Rep. No. 1857, in 2005 Senate
Journal, at 1901; see Demello, 136 Hawai#i at 197, 361 P.3d at
424. The Legislature viewed an employer's adjustment to the
compensation and benefit packages for excluded civil service
employees as necessary to ensure equitable compensation and
increase morale under HRS § 89C-3. See S. Stand. Comm. Rep. No.
1177, in 2005 Senate Journal, at 1588. Both a plain reading of

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HRS § 89C-3 and the legislative history support the result
reached in this case.
IV. CONCLUSION
For the foregoing reasons, we vacate the (1) December
27, 2016 Decision and Order Denying Appellants' Appeal and (2)
January 26, 2017 Final Judgment, filed and entered by the Circuit
Court of the Third Circuit, and remand to the Circuit Court with
instructions to remand to the Merit Appeals Board for proceedings
in accordance with this Opinion.

On the briefs:
/s/ Lisa M. Ginoza
Robert M. Hatch, Chief Judge
Margery S. Bronster,
(Bronster Fujichaku Robbins /s/ Keith K. Hiraoka
A Law Corporation) Associate Judge
for Appellants-Appellants.
/s/ Karen T. Nakasone
D. Kaena Horowitz, Associate Judge
Mark D. Disher,
Deputies Corporation Counsel,
County of Hawai#i,
for Appellees-Appellees
Mitch Roth, Mayor of County of
Hawai#i and Waylen L.K.
Leopoldino, Director of Human
Resources, County of Hawai#i.

James E. Halvorson,
Deputy Attorney General,
for Appellee-Appellee
Merit Appeals Board.

24