Legislature(1993 - 1994)
03/23/1994 01:15 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 459 - DAMAGES & ATTY FEES FOR UNPAID WAGES CHAIRMAN PORTER introduced discussion of HB 459, noting that testimony had been taken in the Labor and Commerce Committee. He acknowledge that four people were present to testify before the Judiciary Committee and invited the bill's sponsor, Rep. Mulder, to discuss the bill. Number 763 REP. ELDON MULDER, SPONSOR OF HB 459, said he was unable to speak at length due to illness and requested that one of his staff be permitted to read the sponsor statement. Prior to Mr. Joyce's presentation of the statement, Rep. Mulder did remark, "I would like to point out to the Committee that we have been working with members of organized labor, the Department of Labor, and representatives from the employer's groups to coalesce or come together on a compromise piece of legislation which you see before you as the proposed committee Judiciary substitute. It has been a cooperative effort. I'm glad that it's worked together and has come together and with that, I'll let Howard read the statement." HOWARD JOYCE of Rep. Mulder's office delivered the sponsor statement: "This legislation addresses the awarding of punitive damages in claims of underpaid overtime compensation or statutory minimum wages under the Alaska Wage and Hour Act (AWHA). State statute imposes the payment of unpaid minimum wages or overtime compensation to an employee by an employer who has violated provisions of the AWHA. In addition to this, the employer may be liable for mandatory liquidated damages of an equal amount (AS 23.10.110(a)). "The Alaska Supreme Court in McKeown v. Kinney Shoe Corp., 820 P.2d 1068 (Alaska 1991), ruled that liquidated damages are mandatory and that any individual settlements out of court that did not include liquidated damages were invalid. "Prior to the Kinney Shoe ruling, an employee with a claim for underpaid overtime or minimum wages had a few options for redress. One, they could file complaint with the Alaska Dept. of Labor, who was able to negotiate a settlement. Two, the employer could attempt to reach a private settlement with the employer in question. In either of these cases, a settlement could be reached for an amount below full liquidated damages. Finally, if a settlement could not be reached in the above options, the case could be taken to court, where liquidated damages would be awarded in full if the case was found for the plaintiff. "As the law stands currently, an employer who is in violation of the state's minimum wage or overtime compensation laws is automatically liable for liquidated damages, regardless of the circumstances. Though this is intended as a deterrent to the employer in these instances, it creates an imbalance in certain situations. Under the current law, an employer who makes an "honest mistake" is punished as severely as an employer who knowingly violates the law. In these situations, the employer either takes his case to court, facing the possibility of paying full liquidated damages plus court costs or settling out of court for the claim plus full liquidated damages. "The Federal Labor Standards Act, upon which AWHA is based, contains identical language to AS 23.10.110(a), but also contains the following language: `....if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing his act or omission was not in violation of the Fair Labor Standards Act, . . . the court may in its sound discretion, award no liquidated damages or award any amount thereof not to exceed the amount specified in [29 U.S. Code Section 216].' 29 U.S. Code Section 260 "This additional language in the FLSA creates some flexibility for employers when an honest mistake is made. The discretion is left to the courts to decide to award partial or no liquidated damages where the employee shows it acted in good faith and it had a reasonable basis for believing it was not violating the law. "CSHB 459 (JUD) also adds a provision in Section 2 that provides the payment of court costs and attorney fees to the prevailing party in a claim decided by the court. Previous statute only provided payment of these costs to the plaintiff (employee) in these cases. This change would help to prevent erroneous claims against an employer from being brought to the court. If the Commissioner of Labor was the prevailing party in an action under this section, any court or attorney fees awarded would be remitted to the Division of Revenue for deposit into the General Fund. The House State Affairs committee added some further clarification to this provision in their committee substitute, by adding the word `recovered.' (Page 1, line 14 now reads `..commissioner shall remit the recovered attorney fees to the Dept. of Revenue.') "CSHB 459 (JUD) would also provide some protection to the employee during a compensation claim in settlements that are not supervised by the Dept. of Labor or the courts. In Section 3 (f), an employee may enter into a written settlement agreement with the employer waiving the right to receive full or any liquidated damages. CSHB 459 (JUD) requires that this settlement meets five qualifications: (1) the settlement is written in a manner that is understood by the employee; (2) specifically waives the rights or claims in AS 23.10110(a); (3) advises the employee to consult with an attorney or with the Dept. of Labor before entering the agreement; (4) allows the employee seven days to consider the settlement and (5) gives the employee five days after they enter into the settlement to revoke agreement. "The goal of HB 459 is to change the state standards regarding the awarding of liquidated damages to be congruent with federal standards. This results in a more equitable situation for both parties; protection is still provided to the employee and flexibility is afforded to the employer who makes a mistake in good faith, providing they meet the burden of proof." Number 845 REP. DAVIDSON: "A couple of questions, if I may. You talked about, on page One, line 14, that the fees shall be remitted to the Department of Revenue. Is that because [it's] the Department of Revenue out of whose budget fees for the attorneys would have come? Or does it come from the Department of Labor's budget?" REP. MULDER: "It comes from the Department of Labor's budget. If the commissioner is the person who is the party who is the defendant, or the plaintiff [inaud.], as the case may be, if they are the ones who are found in their favor in court, it would just require that the funds that go to the commissioner go back to the General Fund simply because they are the ones who are expending the funds." Number 857 REP. DAVIDSON stated that he was trying to ensure that the Department of Labor, in doing its job, was not caused to expend funds from its diminishing budget only to have them absorbed into the budget of another department. He observed, "It appears to me that there are losers and gainers here, in terms of rights, who wins and who loses; in terms of dollars, who wins and who loses, in this legislation." REP. MULDER: "The purpose of the bill is to make the playing field even or level as it was before, pre-Kinney. Certainly there is very little tolerance or forgiveness considered within this bill or within many people in the legislature that I see, for those employers who are knowingly trying to defraud employees out of overtime. That's not the folks we're trying to address in this legislation. And those people are not addressed in this legislation. If an employer is knowingly cheating his employees out of overtime, they ought to be punished through liquidated damages, which is double the claim for back overtime. What is being attempted here is to cover those employers who are honest employers, who make a sincere mistake. It was not intentional. And they have to demonstrate that, through good faith, that they did not intentionally try to defraud or hurt or damage their employees. So, in terms of winners and losers, I wouldn't put it really on that playing field as much as trying to say that we're trying to make the field level and equitable for those employers who made an honest mistake." Number 884 REP. DAVIDSON: "Then, are we trying to make it easier for these people to cover their mistakes? Why aren't they more careful? There's a lot of questions here about this bill, Mr. Chairman. It makes me uneasy. Thank you very much." TAPE 94-50, SIDE A Number 003 PARRY GROVER, ATTORNEY, testified via teleconference from Anchorage in support of HB 459. "I am an attorney practicing law in Anchorage. I've practiced here for approximately 14 years. Most of my practice is representation of management in all aspects of employment law, including wage and hour. I also do some work for some public entities as a hearing officer, a neutral dispute resolver, if you will. "I'm speaking in favor of CS 459. The reason I do it is this: I have, over the years, had occasion to talk to my counterparts in other states, all over the United States. I would say I've talked to maybe 12 to 15 labor law practitioners in other states. I probably know that west coast states better than the other ones. And what I found, through these discussions with other lawyers, and a few cases with judges, with labor law professionals, that our Alaska Wage and Hour Act is harsher for Alaska employers with respect to liquidated damages than the laws of most other states and the Federal Fair Labor Standards Act. And it really has always been a mystery to me as to why Alaska should have a harsher law on liquidated damages. For any reason, many of our businesses have a more difficult time keeping a stable, uniform workforce because of the seasonal fluctuations where they may be very busy in the summer months and just die for business in the winter. And the seasonal fluctuation that other working conditions peculiar to Alaska, I think, have made compliance with the Wage and Hour Act more difficult in this state than it is in many other states where labor performance really doesn't vary from month to month significantly. But the essence of this bill as I think Mr. Joyce and Rep. Mulder said, is not to really tip the scales, but to simply bring back a level playing field. And I'd like to just talk about the four major substitute provisions and give you my view as to why I think that is the case. "In Section two, the existing law simply allows a prevailing plaintiff to recover attorney's fees. The amendment would bring this legislation into compliance with what is more common in Alaska, Alaska Civil Rule 82, where the prevailing party recovers at least partial attorney's fees. That's the rule that we're used to in Alaska. Most litigation, including most employment litigation, is governed by Civil Rule 82. And again, it just equalizes the playing field. If the plaintiff wins, he or she recovers at least partial fees. If he loses, he may have to pay, at least partial attorney's fees. That same rule applies to both sides. Right now the rule is one-sided. That's one of the aspects of the law that is harsh. "In Section three of the CS, there are three substantive provisions. Each of them accomplishes a distinct function I would like to mention. Section three (e) we bring into Alaska law something that has never been here - and again, I don't know why that is the case. But under the Federal Fair Labor Standards Act, which has been the law in the Federal Government since the 1930s, an employer who fails to pay overtime or minimum wages if they are due, is subject to liquidated damages. But the federal government has for many years provided a limited defense - let me emphasize, limited defense - if the employer can show to the satisfaction of the court; and that means bear the burden of probing, that it acted in good faith and had reasonable grounds for believing that the person was not entitled to overtime, then the court may in its discretion, award no liquidated damages or partial liquidates damages. Now, as I said, that is a limited defense. The employer must show that it acted in good faith, which under Alaska law means honestly; that the employer actually honestly believed that the position of them not paying overtime was exempt. And it must have reasonable grounds for believing that. It can't just stick its head up in the air and say, well, I think this is a salary-exempt position so I won't pay overtime. It would have to have some good reason for treating the position as being exempt. "Now, if the court, or the jury, later finds out that the person in the position was not exempt and that overtime is owed, the overtime is going to have to be paid. The plaintiff is going to be the prevailing party. So they are going to get at least partial attorney's fees. They are also going to get prejudgment interest in Alaska, so they have a fairly substantial recovery. But, again, if the employer can show-and this is true under federal law, and this is true under the law in many other states, that it had a good faith basis and acted reasonably in believing that the position was not entitled to overtime, then the court in its discretion can decide not to award liquidated damages. That's a very limited defense, but it's one that Alaska doesn't have, and it makes our playing field quite uneven when compared to other states under the federal government. "Subsection (e), Section three (e), [is] something that the Commissioner of Labor asked for early on when we proposed this legislation, and we thought this was fine. In the Kinney Shoes case, or at least let's say by the time of the Kinney Shoes case, the Department of Labor concluded that it could no longer settle overtime claims brought to it out of the mandatory assessments of liquidated damages, that it had no discretion in light of Kinney, not to demand liquidated damages. Prior to Kinney, it was the practice of the Alaska Department of Labor, to waive liquidated damages when in its judgment it thought they should be waived; it could not be required to do so. But when in the commissioner's judgment the commissioner felt that liquidated damages should be waived, they could do so. Since Kinney they haven't been able to do that. Section (e) restores to the commissioner the power to take that action. It doesn't require the commissioner to waive liquidated damages, but it allows them to. "Section (f) has to do with private settlements. One of the, I think, unfortunate things about the Supreme Court's decision in Kinney is whoever drafted the decision may have used language a little more - I'm searching for the right word - but the point I'm going to make is, they said that all settlements are void. They used the language a couple of times in the decision, that the type of settlements of overtime claims and liquidated damages claims are void. Now, I don't object to that, in the facts of the Kinney case, and if you apply that just in the facts of that case, that probably was a reasonable result. The problem with the language is, they didn't limit it to the facts, they just said private settlements for these types of claims are void. "The result has been, and my office has actually had to participate in this, when we've had cases where we had competent counsel on the other side, a claim hadn't been filed but we had discussed the claim, reached a compromise, which included all or partial liquidated damages, and looking at Kinney Shoes, we did not think that the settlement would hold up if challenged unless we took it to court. And we've actually had to tell in some cases the plaintiff to go file the complaint so we could turn around and settle it. That sort of result I think is bad policy, because it simply encourages litigation where the parties have reached private settlement. Section (f) will allow private settlement, and as you will notice in the CS, there were concerns raised by the Department of Labor on behalf of employees, that employees could be taken advantage of by their employers. We recognized the validity of what the Department of Labor was saying, and we then built in to it five hurdles an employer must jump through to make a private settlement. "These hurdles are taken out of comparable federal legislation, specifically, the Age Discrimination and Employment Act, which requires a very clear settlement agreement, a clear waiver of liquidated damages, written advice to the employee that he or she should consult with an attorney or the Department of Labor, a period of seven days to consider the settlement agreement before it's signed, and five days after it to revoke it. In other words, giving a lot of deference to the employee and encouraging the employee to get competent advice either to the Department of Labor or an attorney before a private settlement is entered into. This will, again, allow private settlements, and I think at the same time, protect employees from being taken advantage of by those few employers who may not be so inclined. Thank you." Number 245 REP. DAVIDSON: "I have this image in my mind of the `equal playing field,' with a summer employee, part-time bus driver or waitress on one end of the field, and all the expertise of the legal beagles - and that very small company, the Holland America Line - on the other, and somehow it just doesn't seem like we're playing on an equal playing field here." CHAIRMAN PORTER: "That's why we've got a Department of Labor." Number 262 BRUCE WEYHRAUCH, ATTORNEY, FAULKNER, BANFIELD, DOOGAN & HOLMES, representing a number of hourly workers, testified in opposition to HB 459. After expressing appreciation for the efforts of those involved in the legislation he stated: "Alaska is very unique. We are a seasonal state, we have a lot of seasonal workers, we're resource based, there's a lot of hourly workers here. Why should Alaska have a harsher law than other states? Because we are such a state, because we rely on hourly workers to do the work for businesses." MR. WEYHRAUCH cautioned against the constitutional issues which could be expected to rise if the legislation were deemed retroactive. "If the intent is not to tip the scale here, this retroactive date on here would probably tip the scales significantly in favor of those who haven't been paid their wages and who are due them, and those who are owed wages. And I think there may be significant constitutional problems with this retroactive date here. We think that it should read, instead of application of the Act, this action will apply only to work performed after its effective date. "Also, this statute is intended to act like a private attorney general. Instead of having to hire a bevy of bureaucrats and Department of Law investigators, it gives an incentive to the worker to get an attorney to pursue their claims for them. It puts the rights right in the hand of the individual to pursue the claim. That's why you have liquidated damages, to make sure that people get the wages that they're owed and you make it so that they don't go bankrupt pursuing their claims. So instead of having reasonable attorney's fees or determined according to court rule on the first page in (c), if you make it according to prevailing party and make sure the prevailing party gets their actual attorney's fees, then both sides benefit. If the person who says, `I have a wage that I'm owed,' and they in fact are owed that wage, they should get their actual attorney's fees, not reasonable fees set by court rule. Same way, if their claim isn't valid, then the prevailing party, which would be the employer, gets their actual fees. So it works both ways. That seems to be a more level playing field. "Finally, we talked about who had input on this bill, the employer groups, organized labor, Dept. of Labor. I think, at least I understood, that Mr. Carr from the Dept. of Labor would be here to testify, no one representing the hourly worker, Joe Doakes, was in on these negotiations, and we'd like an opportunity to participate in these negotiations. We think there could be language that adds a provision that if somebody is going to waive liquidated damages, that the amount of those liquidated damages being waived should be specified so that they fully understand what's going to be waived and that some language be put in the bill, that if a waiver is knowing and voluntary, that should depend on all the circumstances, not just these specific six or five provisions set forth in this bill. I've provided your staff with those edits and also Rep. Mulder's staff, and we'd be glad to discuss that further with anyone that you wish, Mr. Chairman." Number 331 REP. MULDER: "Concerning Bruce's point that no one was there representing the interests of the Wage and Hour person, I take offense to that, because I think the Department of Labor does a very good job in that regard. They were an advocate, a very strong vocal advocate for the Wage and Hour individual. And, as it currently exists, if you have a dispute with your employer, you can go to the Department of Labor free of charge, no attorney's fees, and ask for their assistance and their intervention, and they will help you. So, there is representation, there is allowance here for the little guy, in fact." REP. PHILLIPS: "Mr. Weyhrauch, did you say you were an attorney?" MR. WEYHRAUCH: "Yes." REP. PHILLIPS: "And are you an attorney lobbying on behalf of a specific group of people, or -- what is your relationship, if you wouldn't mind." MR. WEYHRAUCH: "We represent individual wage earners from around the state." REP. PHILLIPS: "And how do you do that? Through individual-I mean, are you representing them here today as a lobbyist on their behalf or are those legal cases that you are dealing with in your company?" MR. WEYHRAUCH: "Both. There's one specific. I'm registered for one specific person on this, but we represent numbers of people around the state." REP. PHILLIPS: "And who are you registered to lobby for?" MR. WEYHRAUCH: "It's an individual, I can provide you that name after this..." REP. PHILLIPS: "Well, it is a matter of public record, would you please state it for the record, who you are lobbying for." MR. WEYHRAUCH: "I can't state it right now." REP. PHILLIPS: "Okay. I will get the information, and we will put it on public record. The lobbyist record is a matter of public record." MR. WEYHRAUCH: "Yes, it is." Number 363 REP. NORDLUND: "I'm just glad that Bruce has stepped forward and offered an opinion for a group of people who are affected by this legislation. I think it's entirely appropriate that there is a representative for that person; whether they work for him or not, I think is irrelevant." REP. PHILLIPS: "Nothing in this committee in debate is irrelevant. Nothing. That has been pointed out time after time after time in this committee by everybody." CHAIRMAN PORTER: "No, but opinions can be stated, so...and they can be refuted." REP. PHILLIPS: "Which I just did." CHAIRMAN PORTER recognized Rep. James. REP. JAMES: "I just wanted to comment on the comment made by Rep. Mulder regarding the Department of Labor. And since my business has been dealing with small businesses, accounting, I can verify that the Department of Labor does an excellent job of handling claims of people who have a problem. They go to the end of the world to try to help them and do help them tenaciously, so I believe that if the Department of Labor was involved in this bill, that those people have been represented." Number 387 C.J. ZANE, LOBBYIST, HOLLAND AMERICA LINE-WESTOURS, INC., testified in support of HB 459. "My name is C.J. Zane. I am registered to represent Holland America Line. We are one of several corporations that have formed a coalition to support this legislation. There are in your packets, I think there are letters of support from the Providence Hospital Group, from the State Chamber of Commerce, from the Carr-Gottstein food chain, from Tesoro Petroleum...the point is, we have a broad based range of Alaskan employers, and we count ourselves among the group of Alaska employers, and I am here to testify in favor of the bill, and in favor of the CS which we have worked out. This bill has been around for several weeks now. The process has been open. We have negotiated with legislators, with staff, with the Department of Labor, with members of organized labor; we have had an open process. And I want to assure the members of the committee that this compromise is a solid one, and one that does protect the employees in this state. "And what we sought to do was two very simple things with this legislation: We wanted to, one, go back to the pre- Kinney Shoe decision as it related to private settlements and as it relates to the department's authority and ability to settle cases, not necessarily imposing liquidated damages. They can still do that but in some cases where it's warranted this bill will allow them to waive some or all of that. "The other thing that we sought to do was something that should be just very common sense, man or woman in the street kind of thing, which is the federal law upon which I don't think there's any disagreement that the state wage and hour law is largely based, does provide for something called a good faith and reasonable belief defense. Not a defense against the original claim or the base amount of the claim; it's a limited defense that can be invoked on the issue of the doubling of liquidated damages, and that good faith and reasonable belief standard is not an easy one to meet, but it is one that is allowed under federal law and it is one that is allowed in all the Pacific coast states. We have done research on this: Washington State, Oregon and California; Idaho, we've subsequently found, also, provides for this basic sort of common sense, good faith reasonable belief defense. With that, Mr. Chairman, I just want to say again that we have worked long and hard to reach a viable compromise, one that still protects the interests of employees and brings some measure of balance back to the equation as far as employers are concerned." Number 448 KEN LEGACKI, ATTORNEY, testified via teleconference from Anchorage in opposition to HB 459. "Obviously, there has been a lot of discussion about this bill. I would like for the committee to try to envision an employee who makes $4.75/hr. or $5/hr. trying to negotiate with his employer. A wage earner who is dependant on the employer for his job, dependent on his employer to make payment, dependent on his employer to feed his children, and the employer hands him an agreement and says, `Here, sign this.' An employee has no choice but to sign that agreement. If everybody is commenting about the Department of Labor being such an advocate, why don't we change that language in the bill and make it mandatory that the Department of Labor approve of the settlement? If it's such a fair and honest deal, and if the employer is dealing in such good faith...if they have nothing to hide?" He introduced three of his clients who were present with him. "The employer of Mr. Pat Bliss told him to take seven and a half cents on the dollar. When Mr. Bliss said, that's not fair, the employer then harassed him and terminated him. What's his remedy? He's been out of work for a year and a half. He's a man in his fifties. Mr. Stewart went to five attorneys. They all said his claim was not worth enough money because `I only get a percentage of your claim, your claim's not that high.' "I've looked at the federal law, which said that the employer has to pay attorney's fees if it's a good case. We won at the Supreme Court, and that's the law they're now trying to change. But try and imagine somebody who, like Mr. Stewart, who made $4.75/hr, going to an attorney who charges anywhere from $125 to $150/hr. to ask him to look at a piece of paper. Is that fair to the employee? Mr. Harris complained to the employer that they were violating the Wage and Hour Act. The employer then told Mr. Harris that they were `downsizing' and asked if he would either be terminated or moved to California. To keep his job he moved to California. Shortly thereafter he was terminated by the company." MR. LEGACKI presented further testimony concerning workers who were being deprived of wages and who feared retaliatory treatment by employers in pursuing their claims. [Underlay of whispered conversation damages sound quality.] He noted in particular one individual who was afraid to appear before the committee because his employer was a major proponent of the legislation. "There's a lot of people who would like to testify and tell stories on how this bill would impact. It is not a level playing field. If you have someone like Holland America Inc., or any big company, it is in their best interests to fight these cases tooth and nail, because they know if they have to pay one, they will probably have to pay another one. And it is a gamble that they take." You're encouraging them to take a gamble.... "You'll hear a lot of stories about people who file complaints with the Wage and Hour, that the employers, even though the Department of Labor tells them they are in violation, still will not pay the wages. So what you're encouraging for these big companies with the good faith defense is to try to gamble, and if they get caught, they can negotiate that. It's a calculated risk, a business risk for them. "There's a lot of work that has to be done with this bill, a lot of testimony, a lot of input that still needs to be done.... The Department of Labor's hands are tied, because they can only address certain issues.... I know lots of people who would like to put more input into this bill, and a lot of people who would like to testify. I request that you hold up this bill...get more people to testify and tell you about their stories, tell you what it's like to be threatened. As I said, I have Mr. Harris, Mr. Bliss and Mr. Stewart here with me, they'd be happy to tell you their experiences in dealing with their employers and the results. Thank you." REP. JAMES: "My question is, these three people that you're talking about there, that have had such bad luck, did each one of these people take their claim to the Department of Labor in the beginning?" Number 560 MR. LEGACKI: "Yes, all three of them did." Mr. Legacki described the saga of Mr. Harris, who had indeed gone to the Department of Labor but whose case had undergone some considerable, concealed manipulations by the national corporation for whom he had worked, and the story of Mr. Bliss, whose employer, in spite of a written ruling from the Department of Labor, had independently determined what it was willing to pay. CHAIRMAN PORTER interjected a question. "Ken, before you leave the first one. Are you saying that this bill would change the situation on that first case? It seems to me that was certainly something less than good faith." MR. LEGACKI: "Oh, absolutely. But [the employee has] to hire an attorney. And now you're saying that instead of paying my actual attorney's fees, for example...they have three attorneys in Chicago - " CHAIRMAN PORTER again interrupted, saying, "Just a second, yes. But that's a different issue, really, than compensation for your client." MR. LEGACKI: "Not necessarily. Not if he has to pay his attorney out of his wages at the end of the rainbow." CHAIRMAN PORTER: "Well, that's generally a court rule." MR. LEGACKI: "Yes, the court has ruled and this bill will change [indisc.], the court has ruled that the employer has to pay the actual attorney's fees. [Underlay of conversation amongst committee members again detracts from sound quality.] Now, this employer has taken me all around the country, and costs and attorney's fees [increase]. Now, if the claim is only worth $100,000, after a while the attorney says, `I can't work any more for free and I'm going to take 1/3 of your wages that you earned.' The employee is left with less than what he is entitled to. And that's one of the things [the] company is doing, it's trying to make an example, they're trying to push the gamble up as much as possible, make it as difficult as possible, so the employees will cave in. [Consider] the seasonal employees. Look at a bunch of seasonal employees working for Holland America, for example. Now, at the end of the season if an employee fights, the company is going to put all of its resources against that employee because it does not want to set a precedent for the other employees. They may even offer some of these kids, you know, 25, 50 cents on a dollar, than what they normally should pay them to go away. If you take away the attorney's fees provision, the attorney has got to get paid out of the employee's wages, and that's wrong, because the employee earned that money, and he should be paid that money. The attorney's fees are over and above what the wages should be." CHAIRMAN PORTER: "Okay, Ken, thank you. Are there any other questions? Rep. Mulder?" REP. MULDER: "What Mr. Legacki doesn't point out to you is the fact that nothing in this bill prohibits employees or former employees who have wage disputes from taking it to court. We're not restricting that ability at all. If you have a gripe and cannot get it solved through DOL, your recourse is to take it to court. And we're not prohibiting that option from you. You're fully allowed to do that." MR. LEGACKI: "First of all, the Department of Labor does not take claims over $5,000. They have a policy there now, and I think there's a state statute that says to that effect, that the department claims jurisdiction only up to $5,000. Second, you are forcing them to take it to court because you want to litigate the good faith issue. And [indisc. - when?] we have to take that to court, you do not want to pay the full attorney's fee. That's why this package that's being introduced, it's actually harmful to employees, and more beneficial to the employer because it gives the employer an advantage. An employer who has a lot of money has an advantage to try to oppress the employee. This bill with the private settlement, as I mentioned before, if an employer hands a wage earner who is dependent upon that employer to feed his wife and children, what other option does the employee has? He has to sign that. That's the reality." CHAIRMAN PORTER: "I saw some shaking of heads on that $5,000 plateau. Is that - ? " Number 633 RANDY CARR, CHIEF, WAGE AND HOUR ADMINISTRATION FOR THE ALASKA DEPARTMENT OF LABOR, responded to Chairman Porter's question. "The representation by Mr. Legacki is correct, but misguided. The statutes divide wage and hour authority into two sections. One section deals solely with the Wage and Hour Act; that is, minimum wage and overtime violations. That section does not have a statutory limit with regards to the amount of claim that the Department of Labor may pursue. There is a separate section of the statutes that deals with general wage claims and contract enforcement. That has a $5,000 cap. So the only statutory limit applies to issues other than overtime. The overtime cases that we take now are not limited in any way by statute, but we have practical limitations placed upon us by budgetary considerations." REP. DAVIDSON: "You spoke about budgetary limitations, so...if someone were to try to get back wages for last summer, when could that person, with your backlog and diminishing resources with which to deal with these kinds of things, when could that person reasonably expect to resolve this dispute with their employer through your offices?" MR. CARR: "We track our closure time frames on cases on an annualized basis, and the average length of time to process a case through collection now is six and one-half months, presently." REP. DAVIDSON: "Thank you." CHAIRMAN PORTER asked if there were further questions; there being none, he requested the wishes of the committee. Number 660 REP. NORDLUND: "I have an amendment I would like to offer." Number 668 REP. KOTT: "I would move that we adopt CS for HB 459 dated 3/14/94-J." CHAIRMAN PORTER: "We have a motion to adopt the CS. Is there objection? Seeing none, the CS is in front of us, and the amendment is coming around. Will you mark this Amendment #1, please." Number 670 REP. NORDLUND: "I drew up this amendment based on some of my conversations with Mr. Weyhrauch who testified for us today, and it's my understanding that the Department of Labor would not have any problem with these two changes to the bill. What the first one would do is state that, under the conditions by which a waiver is written, the five points that are in the bill right now, the conditions of the waiver, would not be limited to those five points, but that other circumstances could be considered. "My concern here is that you've got to keep in mind the intimidation that a large employer has over an employee. And where they might be willing to sign all of these things on a statement, that there might be other conditions or circumstances that the court might want to take into consideration that might be to the detriment of the employee or might be able to discern some way in which the employee was intimidated into signing such a statement. "The other part of that is adding a fifth element to that list that sets out the amount of liquidated damages that the employee would be waiving. I think it's important that they know exactly how much money they would be giving up. With that, Mr. Chairman, I would move the amendment." Number 703 REP. PHILLIPS: "Object." Number 705 REP. DAVIDSON: "I certainly support this amendment. I think it's fair for people at this level of the economic ladder to understand more fully what it is they're giving up when they're competing on such an equal playing field." Number 708 REP. MULDER: "I would speak against the amendment because, in a nutshell, all it's going to do is encourage further litigation, which is what we're attempting to diminish or overcome to begin with; second, in relation to--sets off the approximate amount of liquidated damages--there's really no way to determine that. It's a very ill-defined term in relation to a quantifiable amount. I think Mr. Grover could highlight that point if you will give him the opportunity to respond." REP. NORDLUND: "My understanding of liquidated damages is, it's just double. It's again the amount that was owed. So, if you know the amount that's owed, you know what the liquidated damages are." REP. MULDER inquired if Mr. Grover was still on-line. Mr. Grover responded affirmatively. REP. MULDER asked, "Parry, this is Eldon. They have proposed the amendment first to, whether a waiver is knowing and voluntary depends on upon all of the circumstances, however a waiver is not knowing and voluntary unless the settlement agreement includes all the following; and then, also, the second part of the amendment, it sets up the approximate amount of liquidated damages that is being waived. Could you talk about those two amendments?" Number 729 MR. GROVER: "Sure. As to the first one, I believe that's implicit. It simply says that a waiver shall not be considered knowing and voluntary unless the five conditions are met. You've got to meet those five conditions. As I listened to Mr. Legacki talk, he talked about employer threats and intimidation. I don't know of any court in Alaska that they found in fact that an employee was intimidated by the employer, in the manner that he described, would find that a knowing and voluntary waiver. So I think the existing language already addresses that. "Now, in terms of the second amendment that I heard described, about putting in the amount of liquidated damages, the amount may be uncertain. In fact, it usually is because if the employer thinks they've acted in good faith and fairly, they may believe they owe no liquidated damages. It's like any other claim. If you have an employment discrimination claim, an employee may believe a very large figure, the employer may believe a small figure. And the whole essence of the settlement is, having those different points of view, they compromise. And they reach a middle ground and settle. The same thing is true here. It could be as much as double or the employer could believe, `No, I've got an opinion from the Dept. of Labor, I thought the position was exempt, I owe you zero liquidated damages.' So we're just adding another factor that I don't think makes the settlement any fairer or makes it any more knowing and voluntary, but makes it more likely to be challenged by a lawyer who finds some defect in what the employer wrote down." Number 752 REP. NORDLUND: "I thought it would be implicit also that if the employee is willing to sign an agreement, that they are signing an agreement on the amount of wages that they are owed. That is a determined amount, and that they are just also being made aware of the fact that they are waiving the opportunity to collect double that amount, that specific amount. The amount that was agreed upon." MR. GROVER: [Loud paper shuffling in foreground damages sound quality of Mr. Grover's testimony.] "I have handled many, many cases in this category. Quite often, there are a number of things that are uncertain. Whether it be the Department of Labor - and most courts look at these exemptions on a week by week basis - there may be a question of whether the employee was exempt, say, during the summer months, throughout the winter months, how many hours he works; there can be all sorts of factual issues that bear upon how much is owed. So frequently, just like any employment claim, be it a wrongful termination claim, a sexual harassment claim, there may be any number of factors which make the figure imprecise. And that's to say that's true with wage and hour claims. And that's certainly true with settlement of wage and hour claims with the Department of Labor. So the parties may not know exactly the amount that is owed. The employer may think it's low, the employee may think it's high. That's the essence of a settlement, is a compromising of disparate views." Number 774 REP. DAVIDSON: "In the discussion by Mr. Grover, at the first part of this amendment - and I've learned to be very careful as far as dealing with these kinds of situations - he did say `a waiver shall not be considered to be' saying it was about the same. I am pretty sure he meant to say, as the bill says, `a waiver may not be considered to be.'" MR. GROVER: "Unless it makes the five criteria. That's right. Thank you." CHAIRMAN PORTER: "I think in that context `may' and `shall' are synonymous - but usually they're not, that's correct." Number 784 REP. NORDLUND: "For Mr. Grover: The first part of my amendment, then, you say it's implied. What would be the danger in putting this language in there just so it's instructive to the attorneys as well as to the employee that those are not the only conditions?" MR. GROVER: "I don't really have any quarrel with that first change, sir. Would you mind reading back that language? I'm not sure I heard you, I want to make sure I understood exactly what that was." CHAIRMAN PORTER: "I think, if I may, if I understood Rep. Nordlund's first statement of explanation of the amendment, I don't know if it says what it is that you intended. If I am not mistaken you want the ability to bring up any other criteria to determine whether or not the statement was knowing or voluntary, not just all of the five." REP. NORDLUND: "That is correct." CHAIRMAN PORTER: "You want a sixth or a seventh or an eighth if you..." REP. NORDLUND: "All of the circumstances that...yes, that's right." CHAIRMAN PORTER: "Do you understand that, Parry?" MR. GROVER: "Yes. I believe that what Rep. Nordlund is talking about is language that Mr. Weyhrauch had proposed, and he had the other day presented language to us that reads as follows: `Whether the waiver is knowing and voluntary depends on all of the circumstances,' and then it goes on and says, `but is not considered knowing and voluntary unless the settlement agreement...,' and then it's one, two, three, four, five. If that's the language -" CHAIRMAN PORTER: "That's substantially the language, yes." MR. GROVER: "I think we're on the same plane." REP. MULDER: "So, Parry, I'm still trying to get back from you, when we had discussed it earlier, your feeling was that it has the potential of leading to further litigation. Is that still your point? Or do you think that that's not a great concern." MR. GROVER: "The language that I just read to you, I think, if the committee feels it's necessary, I think it would be acceptable. What I object to is adding additional points to the laundry list of things that employers must do, the one, two, three, four, five. I was objecting specifically to the proposal that you list the amount of liquidated damages, for the simple reason you're going to have different views on what those are. And the figure may not be right. It may simply open up another avenue for attack. Frankly, ladies and gentlemen, lawyers are nitpickers. Look at any kind of agreement, anything that's done, is to find one little thing that is wrong with it, blow it up and convince the judge to throw it all out. I am very reluctant to see additional subpoints added. I think that just increases the chance that the entire settlement will be thrown out." Number 825 REP. NORDLUND: "I move that we divide the question so that we can vote separately on the additions to page two, line 27, and then a separate question on the additions to page three, line two." CHAIRMAN PORTER: "Is there objection to a motion to divide? Seeing none, we have before us then Amendment #1 as amended, which only would affect page two, line 27." REP. NORDLUND: "So I'll move Amendment #1A, do you want to call it that?" CHAIRMAN PORTER: "We'll call it 1A." REP. PHILLIPS and REP. JAMES objected. CHAIRMAN PORTER: "There is objection. Is there further discussion? Could we have a roll call vote, please?" A ROLL CALL VOTE WAS TAKEN by the committee. REPRESENTATIVES NORDLUND, DAVIDSON VOTED YEA; REPRESENTATIVES KOTT, GREEN, PHILLIPS, JAMES AND PORTER VOTED "NAY.".Amendment #1A to HB 459 was therefore not adopted by the committee. Chairman Porter asked for a motion on Amendment #1B. REP. NORDLUND: "Mr. Chairman, I wish Mr. Weyhrauch was here, because I frankly don't have the knowledge to rebut Mr. Grover's comments about whether or not liquidated damages can be determined or not, so...I know, Rep. Davidson had the same amendment, unless you want to pursue that..." Number 844 CHAIRMAN PORTER: "For what it's worth, these are settlements that would happen before that would be determined. And the only way that would be determined really, would be by an outside agency, if there was agreement or if there was disagreement, on how much was owed. We could be talking about a situation where he forgot to punch out but has a friend who said he really did work, and those kinds of things that, somebody would just have to make up their mind how much actual overtime was going to be considered, DOL or a court. Then you'd have an absolute number for liquidated damages. But if you're trying to settle it beforehand, that's the whole idea. If there's a dispute, that you would not be able to know...at least, reach an agreement on what kind of damages it would be." Number 855 REP. NORDLUND: "There might be a better way of arriving at this, then. The point here is that to agree to sign a waiver like that without knowing within at least some range, let's say, of how much money that they're giving up, might make the person change their mind on signing the waiver. And that's the point of it. And I don't have the expertise to know what the experience has been to determine what kind of range you're talking about." Number 861 CHAIRMAN PORTER: "I think it has to be a knowing waiver, and generally knowing that liquidated damages means twice the amount of disputed overtime, is part of knowing what you're waiving." REP. MULDER: "Rep. Nordlund, your concern was one that we did discuss in great length and detail; in fact, did compromise on. And those concerns related to the five points under Section (f). And specifically, number three, under (f), says, part of that agreement, that settlement agreement, advises the employee to consult with an attorney or with the department before entering into an agreement. In other words, if they have any misunderstanding, any misgivings about it, talk to someone who may have better information. If you are at all unclear about it, the department, you know, that's what they exist for in terms of that specific division. So that was part of the give and take in this whole process. To try and make adequate concern for the employee. To make sure that they weren't being coerced, they weren't being hoodwinked in a sense of the way, shape or form, that they were being adequately informed about what they could potentially be owed." CHAIRMAN PORTER: "I particularly like the fail-safe of five days after the signing." REP. NORDLUND: "Just a point on hiring an attorney: they'd probably have to pay the attorney more than they'd ever collect, in some cases, so -- I wish I could figure out a better way of structuring my intent here. I can't do that, so at this point I guess I'll just withdraw the amendment, unless, Cliff, you want to go ahead with it?" REP. DAVIDSON: "No, I agree." CHAIRMAN PORTER: "Amendment #1B is withdrawn. What is the wish of the committee?" REP. JAMES: "I move that we move - do we have the CS before us?" REP. NORDLUND: "Mr. Chairman, I do have one other amendment." [Side A ends abruptly.] TAPE 94-50, SIDE B Number 000 CHAIRMAN PORTER: "...We're off teleconference." Number 004 REP. NORDLUND: "This deals with the effective date of the Act and the retroactivity aspect of the bill, rather. I have some concerns about that. It seems to me that if we're going to create new legislation to put everybody on notice, that it should apply to cases that happen after the effective date of the Act. To go ahead of that time, I think, causes possible constitutional problems regardless of the language in here, and even if it is constitutional, you can be absolutely sure that this is going to be a point that's going to be litigated in every case. If the intent of this is to lessen the amount of litigation, I think making this basically a retroactive effective date is counter-productive to the intent of the bill." CHAIRMAN PORTER: "Do you want to move the amendment?" REP. NORDLUND: "I'll move the amendment." Number 032 REP. PHILLIPS: "Object. Just on the point of retroactivity, certainly in the history of Alaska legislative deliberations and statutes being passed, etc., etc., the issue of retroactivity has been constitutionally upheld time after time. And it is argued on a case by case basis, but it has been upheld many times in many laws that we've written." Number 045 CHAIRMAN PORTER: "If I could speak to it just quickly, this is even a different kind of situation than a standard retroactive provision, because the situation that requires the Department of Law to only settle with limited liquidated damages, has only come about as a result of this court case. Before that, that wasn't what they were doing. So, we've had different standards. And actually making it retroactive would give the department a little more leeway and employers and employees a little more leeway, than they have right now. I would speak against the amendment." REP. NORDLUND: "You can see that this is inviting further litigation on the issue of constitutionality in those cases, and it doesn't seem like a good idea to me." CHAIRMAN PORTER: "The objection is maintained. Could we have a roll call vote please on Amendment #2 - we will call this J.4, dated 3/23." A ROLL CALL VOTE WAS TAKEN by the committee. REPRESENTATIVES DAVIDSON AND NORDLUND VOTED YEA; REPRESENTATIVES PHILLIPS, GREEN, KOTT, JAMES AND PORTER VOTED NAY. Amendment #2, J.4, of HB 459 was therefore not adopted by the committee. CHAIRMAN PORTER: "We have in front of us then CS HB 459." Number 094 REP. JAMES: "Mr. Chairman, I would move this bill out of committee, with individual recommendations, and ask for unanimous [indisc. due to paper shuffling noise -- agreement?]." CHAIRMAN PORTER: "And attached fiscal notes, which are zero." REP. JAMES: "And attached fiscal notes." CHAIRMAN PORTER: "The motion has been made to move. Is there objection? Seeing none, the bill is moved." ADJOURNMENT No time was given in notes for adjournment.
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