Legislature(1999 - 2000)

04/12/2000 01:55 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
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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