Kawashima v. State, Department of Education., 398 P.3d 728

Background

Consolidated appeals (Garner and Kawashima) concern substitute teachers (per diem) and part‑time temporary teachers (PTTs; hourly) employed by Hawai‘i DOE alleging underpayment tied to statutory per‑diem formula (HRS §302A‑624(e)) and School Code Regulation 5203.
Regulation 5203 historically linked PTT hourly rates to substitute per‑diem rates; DOE revised that practice in 2005 and ultimately adopted HAR ch. 8‑66 in 2012 through formal rulemaking.
In Garner, ICA earlier held substitute teachers were underpaid under HRS §302A‑624(e); on remand circuit court awarded per‑diem and — later — hourly back wages to class members who also worked hourly, plus interest under HRS §103‑10; State paid a partial settlement for per‑diem claims for an earlier period.
In Kawashima, circuit court held Regulation 5203 had the force of law and awarded PTTs hourly back wages but denied them interest under HRS §103‑10 (though it calculated hypothetical interest amounts).
On consolidation the Hawai‘i Supreme Court examined: (1) whether Regulation 5203 is a rule subject to HRS ch. 91; (2) whether Regulation 5203 and/or HRS §302A‑624(e) were incorporated into teachers’ contracts so as to create hourly back‑wage liabilities; and (3) whether HRS §103‑10 authorized interest on the back wages.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is School Code Regulation 5203 an HRS ch. 91 rule (i.e., law) so it could not be amended without formal rulemaking?	5203 implements pay policy affecting statewide PTT pay and thus has force of law; DOE couldn't lawfully sever its link to HRS §302A‑624(e) without ch. 91 process.	5203 is an internal School Code policy governing DOE personnel management and not a rule under ch. 91, so DOE could amend it administratively.	Regulation 5203 is not a ch. 91 rule; it is internal management and does not affect private rights/procedures available to the public.
Were PTT and substitute teachers’ hourly‑wage claims (contract claims) enforceable because 5203 (or state law) was incorporated into their employment contracts?	Contracts incorporate applicable state law and DOE policy (Garner I); thus PTTs/substitutes who worked hourly are owed hourly back wages tied to the underpaid per‑diem rate.	Because 5203 has no force of law and is an internal policy, it was not incorporated into contracts; DOE lawfully changed PTT pay and is not liable for hourly back wages.	5203 does not have force of law and was not incorporated into contracts; summary judgment awarding hourly back wages was erroneous.
Is HRS §103‑10 (prompt payment/interest for contractors) applicable to teachers to permit interest on back wages?	§103‑10 applies to “any person” who provides services pursuant to a contract, so teachers qualify and are entitled to interest; §103‑10 is an immunity‑waiving, money‑mandating statute.	§103‑10 targets contractors/vendors under the Procurement Code (goods/services procurement); it was intended to aid business claimants, not state employees; sovereign immunity bars prejudgment interest unless expressly stipulated.	§103‑10 does not apply to these employee wage claims; legislative purpose and statutory context show it targets contractors for goods/services, so Plaintiffs are not entitled to interest under §103‑10.
Effect of prior ICA decision (Garner I) on interest theory under §103‑10	Plaintiffs: Garner I did not decide §103‑10 issue; they may pursue new theory on remand.	State: law of the case bars interest theories previously rejected.	Garner I did not resolve the §103‑10 issue; court evaluated it on the merits and rejected application of §103‑10 here.

Key Cases Cited

Garner v. State, [citation="122 Hawai'i 150, 223 P.3d 215"] (Haw. Ct. App. 2009) (ICA holding DOE violated HRS §302A‑624(e) re: substitute per‑diem wages)
Green Party of Hawaii v. Naqo, [citation="138 Hawai'i 228, 378 P.3d 944"] (Haw. 2016) (test for when agency statements are ch. 91 rules vs. internal management exceptions)
Aguiar v. Hawaii Hous. Auth., 55 Haw. 478, 522 P.2d 1255 (Haw. 1974) (internal regulations that alter private rights are rules)
Rose v. Oba, 68 Haw. 422, 717 P.2d 1029 (Haw. 1986) (hospital bylaws as internal management, not ch. 91 rules)
Doe v. Chang, 58 Haw. 94, 564 P.2d 1271 (Haw. 1977) (internal manuals directed solely to agency staff are not rules)
Burk v. Sunn, 68 Haw. 80, 705 P.2d 17 (Haw. 1985) (agency policy with direct impact on recipient rights constitutes a rule)
Taylor‑Rice v. State, [citation="105 Hawai'i 104, 94 P.3d 659"] (Haw. 2004) (principles on waiver of sovereign immunity and law‑of‑the‑case limits)