Legislature(1999 - 2000)
04/12/2000 01:55 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 419 An Act relating to the weekly rate of compensation and minimum and maximum compensation rates for workers' compensation; specifying components of a workers' compensation reemployment plan; adjusting workers' compensation benefits for permanent partial impairment, for reemployment plans, for rehabilitation benefits, for widows, widowers, and orphans, and for funerals; relating to permanent total disability of an employee receiving rehabilitation benefits; relating to calculation of gross weekly earnings for workers' compensation benefits for seasonal and temporary workers and for workers with overtime or premium pay; setting time limits for requesting a hearing on claims for workers' compensation, for selecting a rehabilitation specialist, and for payment of medical bills; relating to termination and to waiver of rehabilitation benefits, obtaining medical releases, and resolving discovery disputes relating to workers' compensation; setting an interest rate for late payments of workers' compensation; providing for updating the workers' compensation medical fee schedule; and providing for an effective date. Representative J. Davies noted a change to Amendment 1, 1- LS1418\I.2, Ford, 4/12/00. [Copy on File]. The change would be to Page 1, Line 14, inserting "sub" before "contractor". Representative J. Davies MOVED to ADOPT Amendment #1. Co- Chair Therriault OBJECTED for the purpose of discussion. Representative J. Davies commented on the intent of the amendment. Present law states that the contractor is responsible for providing workmen's comp insurance for the employees of the subcontractor. The law was written to protect those employees. It was not written to require the contractor to provide insurance for the subcontractor. At present time, it is the practice to interpret it that way. That in fact makes the subcontractor an employee of the contractor. The amendment would clarify that the statute means insuring just the employees and not the subcontractor, himself. Representative J. Davies pointed out that there currently are court cases over this issue. The proposed language provides clarification. The consequences of leaving the language vague, creates circumstances where there would be people working without being insured. He reiterated that the proposed language would clarify the understanding. Vice Chair Bunde asked why the contractor would be responsible for the subcontractor's employees. Representative J. Davies advised that this is a public policy issue decided in the past. The question lies in regard to where the subcontractor with no employees "falls". This needs to be defined one way or another. Representative Phillips stated that was already contained in state law. She understood that the contractor does take care of insurance for the employees but not for an independent subcontractor. Representative G. Davis addressed that the language of the amendment would clarify the conflict. DWIGHT PERKINS, DEPUTY COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, agreed that there does exist a problem and recognized that there is a timing issue in the legislation. He noted that there had been discussion in HB 378, a similar bill, previously. Mr. Perkins noted that the Labor Union does have a concern with the legislation. He noted that the Department would defer to the ad hoc committee's recommendations. Mr. Perkins interjected that the Department wanted to work with the homebuilders. He noted that there is concern that the legislation could weigh down the worker's comp fee bill, which previously passed the House floor. PAUL GROSSI, DIRECTOR, DIVISION OF WORKER'S COMPENSATION, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, stated that the Department does not have a major position on the amendment. He additionally deferred to the ad hoc committee recommendations. He emphasized that the Department did not want to stop the bill. Co-Chair Therriault questioned the proposed problems presented from organized labor. Mr. Perkins responded that those concerns were along the line of why a subcontractor was not considered an employee and why shouldn't that individual be covered by the contractor's worker's compensation insurance. Mr. Perkins pointed out that law requires that if there are employees, that they must be covered by worker's comp. The conflict arises within the Division of Insurance. Representative J. Davies noted that the law states that the contractor is responsible for the subcontractor's employees if the subcontractor does not have insurance. The assumption is that the subcontractor will carry the insurance. Representative Phillips stressed that would be a separate issue from employee insurance. Mr. Grossi interjected that the general contractor would have liability; a sole proprietor subcontractor is not required in current statute to have worker's compensation insurance. Vice Chair Bunde stated that any subcontractor who did not have the insurance would have a competitive advantage over a subcontractor who did pay the insurance costs. Mr. Grossi agreed that their costs would be less. Representative J. Davies pointed out the Letter of Intent which provides further clarification of the amendment. Co-Chair Therriault WITHDREW his OBJECTION to the amendment. He advised concern that it could change the title. He requested further information from the ad hoc group. KEVIN DAUGHTERY, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, explained that he did have concern with the amendment. He noted that there has always been concern when traditional business practices change. He stated that the amendment would provide a modification to current law. Mr. Daughtery commented that when an owner/operator works as a subcontractor, then the general contractor must insure that proper worker's comp insurance is available. If that were removed, it would change the current process. Mr. Daughtery spoke to the seriousness of this problem. He suggested that language be added to the fee bill. He noted that there is currently an ongoing disagreement with the Department. He acknowledged that this is serious business and that these problems in the construction industry are being addressed on the national level. He reiterated that he was opposed to the amendment as drafted. Representative Phillips stressed that the provision is not a modification to current law but rather a clarification of current law. She emphasized that the amendment clarifies the existing practice. Co-Chair Mulder pointed out that the amendment was drafted to address the subcontractor who does not have employees. Mr. Daughtery argued that the amendment would be a modification to current practice. In the construction industry, if there is a situation where everyone on a job claims to be an owner/operator, the problem is the safety of the workers. They would be disadvantaged by the process. He reiterated that it would be a statutory change and would impact the industry. Co-Chair Mulder asked if this was a subversion of what was intended. Mr. Daughtery explained that there are rules, which start on the federal level. He noted that this language would be wrong, and would "loosen" the law. Co-Chair Therriault suggested that making it tighter would be a clear modification to the existing law. MITCH GRAVO, LOBBYIST, STATE HOME BUILDERS' ASSOCIATION, Juneau, testified on the amendment. He stressed that the amendment would restate Section #1 in the statutes in a different manner. The amendment only addresses if the contractor would be required to cover with insurance for a subcontractor with no employees. There is no statutory authority for the contractor to cover the subcontractor. He added that there currently are a couple of homebuilders dealing with a dispute regarding coverage with an insurance company. Mr. Gravo stressed that the intent of the legislation clarifies that if a contractor has hired a subcontractor and there are no employees, the contractor would not be required to purchase workmen's compensation insurance for that worker. There being NO further OBJECTION, Amendment #1 was adopted. Representative J. Davies MOVED to ADOPT the House Finance Committee Letter of Intent. Representative G. Davis spoke in support of the Letter of Intent. There being NO OBJECTION, it was adopted. Co-Chair Therriault MOVED to ADOPT Amendment #2, 1- LS1418\I.1, Ford, 4/11/00. [Copy on File.] Mr. Grossi discussed Amendment #2. He stated that the amendment would mitigate concerns regarding the waiver of reemployment benefits and that a doctor would have to recommend reemployment benefits. There being NO OBJECTION, it was so adopted. Representative Foster MOVED to report CSHB 419 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 419 (FIN) was reported out of Committee with a "no recommendation" and with a House Finance Letter of Intent and fiscal notes by the Office of the Governor dated 3/29/00, Department of Labor and Workforce Development dated 3/29/00 and University of Alaska dated 3/29/00.
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