Cayetano

This case involves a challenge by employees of the State of Hawaii to Act 355, the State’s “pay lag” law. Act 355 would allow the State to postpone by a few days, at six different times, the dates on which state employees are to be paid. It also declares those postponements to be “not subject to negotiation.” The district court granted a preliminary injunction against the operation of this statute on the ground that it impaired the obligations of the employees’ collective bargaining agreement in violation of the Contract Clause of the United States Constitution. We agree with the district court’s reasoning and affirm.

BACKGROUND

The predecessor to Act 355 was Act 80 (Session Laws of Hawaii 1996). Enacted in 1996, Act 80 gave Hawaii’s governor the power to convert from a “predicted payroll” to an “after-the-fact payroll.” A predicted payroll requires state agencies to assume or predict their employees’ rate of absenteeism during an entire pay cycle. An after-the-fact payroll system pays employees only for time already worked, eliminating the overpayment problem. The problem with a predicted payroll is that if employees failed to report to work and had insufficient leave to draw…