Legislature(2009 - 2010)
04/16/2010 02:47 PM House JUD
| Audio | Topic |
|---|---|
| Start | |
| SB303 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 303 - WORKERS' COMP; CONTRACTORS & OTHERS
2:48:47 PM
CHAIR RAMRAS announced that the final order of business would be
2d CS FOR SENATE BILL NO. 303(RLS), "An Act relating to a
subcontractor's, contractor's, and project owner's liability for
workers' compensation and excluding certain persons from
liability for securing the payment of workers' compensation
benefits to employees; and providing for an effective date."
2:50:23 PM
SENATOR JOE PASKVAN, Alaska State Legislature, speaking as chair
of the Senate Labor and Commerce Standing Committee, sponsor of
SB 303, relayed that according to the Department of Labor &
Workforce Development (DLWD), there have been 455 fatalities in
the Alaska workplace since 1993, as well as "literally tens of
thousands of injuries" Alaska can be a dangerous place to work,
and it is therefore imperative - as part of the concept that
there be accountability and responsibility in the workplace -
that those who work in Alaska's industries have access to
justice when they are injured or killed due to the fault of
others. However, SB 303 would not apply in every situation
involving injury or death; instead, the bill would only apply in
those situations where a worker is injured or killed due to the
fault of a party other than his/her employer.
SENATOR PASKVAN explained that due to statutory changes enacted
in 2004 - via Senate Bill 323 - an owner or general contractor
avoids all liability for an injury to or the death of a
subcontractor's employee that occurs on the job even if the
owner or general contractor was acting with criminal negligence.
He offered his understanding that this information is included
in a memorandum from Legislative Legal and Research Services
that members now have in their packets. At issue, he opined, is
whether there is accountability and responsibility when there is
fault, and the purpose of SB 303 is to return Alaska to the
system that was in place prior to 2004.
SENATOR PASKVAN noted that the sponsor statement for Senate
Bill 323 - included in members' packets - claimed that that
bill's two principal modifications were, one, extending the
responsibility for payment of workers' compensation up the chain
of contracts to include project owners, and, two, barring
injured workers collecting workers' compensation benefits from
also filing a tort claim - which the sponsor statement called
"double dipping." Senator Paskvan opined, however, that there
was no such thing as double dipping - that that was an erroneous
presentation - because AS 23.30.015(g) expressly provides that
any recovery by an injured person requires a reimbursement to
the insurance carrier for the workers' compensation benefits.
The committee took an at-ease from 2:57 p.m. to 2:58 p.m.
2:59:01 PM
SENATOR PASKVAN mentioned that AS 23.30.015(g) specifically
says:
(g) If the employee or the employee's
representative recovers damages from the third person,
the employee or representative shall promptly pay to
the employer the total amounts paid by the employer
under (e)(1)(A) - (C) of this section insofar as the
recovery is sufficient after deducting all litigation
costs and expenses. Any excess recovery by the
employee or representative shall be credited against
any amount payable by the employer thereafter. If the
employer is allocated a percentage of fault under AS
09.17.080, the amount due the employer under this
subsection shall be reduced by an amount equal to the
employer's equitable share of damages assessed under
AS 09.17.080(c).
SENATOR PASKVAN, in response to a comment, pointed out under the
"exclusive remedy provisions," the employer of an injured worker
retains immunity from tort claims. Under a capitalist system,
over time, job safety is promoted because employees can choose
to work for safe employers and employers can choose to hire safe
employees. Furthermore, a determination was made approximately
100 years ago which said that as part of advancing American
commerce and industry, each business should inherently bear the
cost of injury or death on an overall basis. Again, under
statute, there is no double dipping, whether it's for benefits
paid up to the date of the tort recovery, or for future benefits
that might be paid; such recovery, he ventured, is viewed simply
as an advance of benefits, so the employer has no potential risk
whatsoever - in terms of employees - of tort liability.
SENATOR PASKVAN said the question remaining is whether a
subcontractor's employee who's injured or killed through the
fault of the contractor or the project owner would be taken care
of reasonably well. [Under the aforementioned 2004 legislation]
workers' compensation addresses situations wherein the fault
lies within an employer/employee "unit," but not if it lies
outside of that unit. He opined that the person who is at fault
for the injury should be the one who is held responsible under
the statutory reimbursement structure. Furthermore, in Alaska,
fault is apportioned - for example, if a project owner or
general contractor is found to be 50 percent at fault and the
employee is found to be 50 percent at fault, then the project
owner or general contractor would only owe 50 percent of the
damages - and passage of SB 303 would not change that.
3:04:53 PM
SENATOR PASKVAN, in response to a question, relayed that as an
attorney, he has represented those who've been injured or killed
on the job, workers' compensation insurance carriers seeking to
obtain recovery of their costs, and general liability insurance
carriers, and thus he believes that he understands the [workers'
compensation] system reasonably well. In response to a comment,
he noted that one of his core values is that of personal
responsibility - if a person breaks something, then he/she pays
for it; particularly in a capitalist system, those who are
engaged in activities for profit should be responsible for their
actions. The whole concept of immunity from one's own fault
arose out of common law developed in Europe hundreds of years
ago whereby the king could do no wrong, no matter how bad his
conduct, and thus citizens had no redress against the king for
his wrongful actions.
SENATOR PASKVAN ventured that Americans, having fought a war for
independence, disagree with that type of immunity and believe
that "the king" should be accountable and responsible to the
citizens for "the king's wrong," providing them with redress for
their grievances. The aforementioned 2004 legislation, however,
created "little kingdoms," all seeking immunity from their
actions, even negligent, grossly negligent, criminally
negligent, or recklessly indifferent actions. This is neither a
best policy nor even a good policy, he opined, and offered his
belief that returning to the system that was put in place during
the formation of the state and that remained in place until 2004
would be the best policy, particularly given that during that 45
years in between, there simply was no flood of litigation as
proponents of Senate Bill 323 argued there was - those arguments
were overblown and exaggerated. The prior system worked well
and provided an appropriate balance, and, at its core, contained
conservative principals and capitalist incentives.
CHAIR RAMRAS expressed disagreement with Senator Paskvan's
comments.
REPRESENTATIVE GRUENBERG questioned whether the immunity of a
hotel or restaurant owner who supplies food to a worker who then
gets sick would be affected by passage of SB 303.
SENATOR PASKVAN indicated that it would not.
3:15:33 PM
DON ETHERIDGE, Lobbyist, Alaska American Federation of Laborers
- Congress of Industrial Organizations (Alaska AFL-CIO), said
that the Alaska AFL-CIO is very supportive of SB 303, and is of
the same opinion as the sponsor: if a person breaks something,
he/she needs to pay for it. Offering an example of a hotel
owner whose employee gets injured as the result of illegal
actions undertaken by a bus driver hired on contract, he
questioned whether it's fair for the hotel owner to have to pay
higher workers' compensation insurance rates as a result.
CHAIR RAMRAS said yes, adding his belief that that's the way the
system works.
MR. ETHERIDGE remarked that most AFL-CIO members don't believe
that that's a good idea. In conclusion, he reiterated that the
AFL-CIO is very supportive of SB 303.
3:17:23 PM
WAYNE A. STEVENS, President/CEO, Alaska State Chamber of
Commerce (ASCC), said that the ASCC opposes SB 303 as it
pertains to exclusive liability, but supports the statutory
changes adopted by the legislature in 2004. Currently, there is
a statutory requirement for immediate employers and other
project participants to pay an injured employee's workers'
compensation benefits regardless of fault, whereas prior to
2004, he asserted, there wasn't. Under current law, all
[employers], including subcontractors, must carry workers'
compensation insurance, thus ensuring that all workers are
insured regardless of who their direct employer is, and workers'
compensation is the exclusive remedy. Prior to 2004, he
asserted, project owners, contractors, and subcontractors were
spending tremendous resources attempting to avoid liability,
whereas under current law they might instead integrate their
safety programs.
MR. STEVENS offered his understanding that Alaska's workers'
compensation statutes are intended to provide injured workers
with reasonable compensation for work-related injuries
regardless of fault or cause, and that current law allows for
increased safety awareness and coordinated safety programs -
interconnecting subcontractors and project owners. Furthermore,
he proffered, other federal and state agencies have the
authority to fine and/or shut down companies that violate safety
standards. The ASCC advocates reducing workers' compensation
expenses, particularly workers' compensation insurance rates,
and, again, does not support SB 303. In response to questions,
he offered his belief that passage of SB 303 will result in an
increase in workers' compensation insurance rates, acknowledged
that the current workers' compensation system is unfair, and
ventured that perhaps a task force could be created to
investigate what could be done to address the system's
shortcomings.
REPRESENTATIVE LYNN, with regard to the assertion that other
federal and state agencies have the authority to fine and/or
shut down companies that violate safety standards, questioned
how any of that activity is going to directly help the injured
worker.
MR. STEVENS acknowledged that it probably wouldn't help.
REPRESENTATIVE GRUENBERG opined that if someone is injured, then
it's fair that his/her expenses be paid so that he/she is made
whole, and that it's fair for the person who is responsible for
the injury occurring to pay those expenses. Referring to the
language in SB 303's sponsor statement that read in part,
"... the exclusive liability provisions of AS 23.30.055,
established in 2004, protect a project owner or general
contractor from any liability when a subcontractor's employee is
injured or killed, even when the project owner or general
contractor acts with criminal negligence ...", Representative
Gruenberg asked of Mr. Stevens, "You're not saying that's fair,
are you?".
MR. STEVENS said he was not.
CHAIR RAMRAS indicated that in his view, workers' compensation
provides an immediate remedy, whereas litigation provides a
delayed remedy, and that allowing for litigation would render
workers' compensation inadequate and therefore result in
increased insurance costs.
REPRESENTATIVE GATTO indicated a belief that criminal negligence
would be hard to prove.
3:32:52 PM
JOHN LEWIS, President; Organizer, Ironworkers Local Union 751,
opined that the legislation passed in 2004 effectively provided
immunity to project owners and general contractors from legal
challenges by a worker injured on the job due to negligence;
prior to this change, an injured worker retained the right to
pursue a remedy from those responsible for that negligence. He
characterized the argument for changing the law in 2004 - that
it would prevent "double dipping" - as a red herring since AS
23.30.015 was already in place and clearly states that if an
injured worker received monies through court action, then the
workers' compensation benefits have to be repaid. What that
2004 change really did, he opined, was provide a way for project
owners and general contractors to cut corners on safety without
fear of financial loss from having to pay an injured worker,
while still allowing them to "sue down" or sue subcontractors
for those very same actions.
MR. LEWIS noted that under existing AS 23.30.055, if an
ironworker is hurt by the actions of someone else, the
ironworker's employer would be the one to bear the cost, and so
even just one accident could raise the employer's workers'
compensation insurance rates so high that he/she would no longer
be able to compete for jobs. Why should the person who is
responsible for an injury not be the one to pay for it, he
queried, opining that the right thing would be for the person
who caused an injury to pay for it. Existing AS 23.30.055
indemnifies everyone else who might be the true responsible
party while essentially shifting the blame/cost to the employer
who may have very well taken every step humanly possible to
safeguard his/her employee.
MR. LEWIS offered his understanding that prior to the 2004
change, AS 23.30.055 was intended to provide a resolution in the
event a worker was injured or killed on the job - a means of
clarifying that the injured worker's exclusive remedy was to use
workers' compensation insurance to take care of the costs
associated with regaining his/her health; instead, AS 23.30.055,
as a result of the 2004 change, has become a method for general
contractors and project owners to push a subcontractor into
cutting corners on safety in order to reduce their overall
costs. In conclusion, he asked the committee to support passage
of SB 303, surmising that it would simply restore the language
of AS 23.30.055 to what it was prior to the 2004 change.
3:36:43 PM
STACY ALLEN, R.N.C., Healthcare Unit Representative, Laborers
Local 341, said that the Laborers Local 341, which has 2,200
members, strongly supports SB 303, and feels that the bill
supports and enhances a culture of safety that it and other
unions have built up with management and government over the
long years prior to 2004. Senate Bill 303 would provide an
incentive for employers to work together to maintain a safe work
environment, mostly by showing that negligence will not be
tolerated and that there is a penalty for not being careful on
the job and not providing a safe work environment. In
conclusion, she urged members to move SB 303 from committee.
3:37:46 PM
ROBERT D. STONE, Attorney at Law, Law Office of Robert Stone,
LLC, first mentioned that he has represented "workers'
compensation employers" - both those that were insured and those
that were self-ensured; is now representing plaintiffs "on the
liability side"; has represented both large and small
businesses; has helped workers' compensation employers recover
their "subrogation interest" under [AS 23.30.015(g)]; and is the
president of the Alaska Association for Justice (AK.A.J.) -
formerly the Alaska Academy of Trial Lawyers (AATL). He then
opined that Senator Paskvan accurately outlined the problems
with current law - as amended in 2004 - regarding workers'
compensation, and why it's necessary to change the law [via SB
303] back to what it was prior to 2004.
MR. STONE then provided some historical information regarding
the workers' compensation system, and explained that under that
system, prior to 2004, an employee injured because of a third
party's negligence could collect workers' compensation benefits
from his/her employer, then bring suit against the third party
that actually caused his/her injury, and then, under [AS
23.30.015(g)], pay back his/her employer for the workers'
compensation benefits that he/she received. After the passage
of Senate Bill 323 in 2004, however, workers' compensation
premiums for small business owners increased because employers
were then being assessed not only on the risk that their
actions/inactions might result in injury to their employees, but
also on the risk that a third party's actions/inactions might
result in injury to their employees, and the insurance companies
had lost their reimbursement rights under [AS 23.30.015(g)]
because injured employees could no longer bring suit against the
third party that was responsible for their injuries.
MR. STONE opined that when a person causes injury to somebody
else, he/she must be held accountable, and offered a
hypothetical example wherein a subcontractor on the North Slope
gets killed by the general contractor's negligent employee.
Under current law, neither the general contractor nor his/her
employee face any liability, but prior to 2004, the general
contractor and his/her employee would be held accountable. In
conclusion, he ventured that there are many such examples of why
the law should be changed back to the way it was prior to 2004.
3:45:38 PM
HOWARD GREY, Director, Anchorage Branch, Alaska Miners
Association (AMA), mentioned that he currently manages a company
and has owned companies in the past, and is therefore familiar
with the workers' compensation system in Alaska. He offered his
belief that the current system appears to work pretty well,
particularly for employees, because responsibility is defined
and placed where it should be - with the employer. The employer
should be responsible for both the supervision and safety of
his/her employees, and if the supervisor doesn't think the
situation is safe, then he/she shouldn't expose his/her employee
to that situation. The current concern the AMA has with SB 303,
he relayed, is that it will probably create a legal morass - and
should thus be avoided - and could also encourage
[subcontractors] to forego or ignore or try to avoid their
workers' compensation responsibilities, whereas under existing
law, that's not the case - the employer has the responsibility
and liability.
MR. GREY, in conclusion, said that SB 303 doesn't appear to be
correcting a problem or an oversight; reiterated that the
current system seems to be working fairly well overall;
acknowledged that perhaps administrative and enforcement issues
could still be addressed by the administration; and offered his
belief that overall, the responsibility is currently being
placed where it belongs.
3:48:59 PM
KENTON BRINE, Assistant Vice President, State Government
Relations, Property Casualty Insurers Association of America
(PCIAA), after mentioning that the property casualty insurance
companies belonging the PCIAA collectively provide about one-
third of the workers' compensation coverage in Alaska, stated
that the PCIAA is opposed SB 303, believing it would expose
general contractors to civil litigation related to on-the-job
injuries, and wouldn't keep workers' compensation rates
affordable. He asked legislators to carefully consider the
ramifications of passing SB 303, predicting that it couldn't
help but have an impact on insurance rates and lead to higher
costs for employers, contractors, and subcontractors. In
response to questions, he ventured that the goals of any
workers' compensation system are to provide the greatest amount
of access to workers' compensation coverage to employees, treat
the injuries they sustain on the job, and get them back to work
as quickly as possible. He predicted that if the system that's
in place encourages all workers' to be covered, and provides
oversight to ensure that such policies are in place, then it's
probably also a system that encourages greater risk-management
oversight by insurers.
REPRESENTATIVE HOLMES asked Mr. Brine whether he thinks it's
fair for a general contractor or project owner to be completely
immune from liability when a worker is injured or killed on the
jobsite due to criminal negligence on the part of the general
contractor or project owner.
MR. BRINE said that that doesn't very sound fair, but added that
he couldn't say that there isn't already a remedy for such a
worker under current law. Furthermore, insurance companies
don't pay out benefits for intentional acts, so if there is a
pattern of intentional [bad] behavior by a project owner or a
general contractor, it's going to be difficult for him/her to
get insurance in the first place.
REPRESENTATIVE HOLMES asked Mr. Brine whether he thinks it's
fair for a subcontractor's workers' compensation insurance rates
to go up when an injury is due to the negligence or criminal
negligence of the general contractor or project owner.
MR. BRINE said that that doesn't sound fair if that's what's
actually occurring. However, insurance companies - through risk
management programs - do their best to analyze the root causes
of workplace accidents, he explained, and opined that it's not
fair to assert that workers' compensation insurance rates are
automatically going to go up in any given situation due to the
negligence of others on the jobsite.
3:57:17 PM
KEVIN B. DOUGHERTY, General Counsel, Alaska District Council of
Laborers, after mentioning that he has been active in the
workers' compensation "area" since about 1981, said he supports
SB 303 as restoring the traditional workers' compensation values
of looking after injured employees and their families. Those
values were in place in Alaska from 1915 until a loophole was
created in 2004 [by passage of Senate Bill 323]. He offered his
belief that SB 303 would correct that loophole and would restore
an incentive for safety, and listed some of the safety education
programs offered by various companies in Alaska prior to 2004.
It's really important to ensure that Alaska's laws are honest
and straightforward, he opined, for example, by defining
employers as employers, not as some other party as current law
does - such political double speak in statute is not a good
thing for Alaskans and does not constitute good public policy.
MR. DOUGHERTY said that whenever he's spoken to a widow or an
injured worker, they've been expecting honesty from the system,
and therefore he appreciates the sponsor's intent to statutorily
restore that. In response to a question, he said that the
statutory definition of employer was artificially expanded in
2004 with the passage of Senate Bill 323, and characterized that
definition as inaccurate and that expansion as not being
forthright. In response to further questions, he said that from
a practical standpoint, most people know who their employer is,
and in the workers' compensation system, people can't sue their
employer and must simply live with that. For example, there was
a 19-year-old who was killed on the job in Anchorage, and his
family received only $20,000 for that death because that's all
that workers' compensation provided for. If that man had been
killed by a project owner or some other third party, however,
then all could agree, he surmised, that that third party should
be the one to have been held responsible. That's where safety
emanates from: when people have to be responsible, then safety
is typically taken very seriously.
MR. DOUGHERTY, in response to other questions, indicated that
[under SB 303], if a general contractor was doing construction
on an office building and an office employee was injured due to
the general contractor's negligence, then that general
contractor would be held responsible, and proceeds from any
resulting litigation would go towards reimbursing the workers'
compensation benefits paid by the office worker's employer.
Regardless, though, the employer could not be sued, and, if the
employer was a government entity, then neither could the
citizens whom that government entity was entrusted to serve.
Again, under the aforementioned traditional values, the party
that's negligent should have to pay, he concluded.
4:07:04 PM
KIP KNUDSON, Manager, External Affairs, Tesoro Alaska Company
("Tesoro"), asked the committee to set aside SB 303, offering
his belief that adoption of its language would undo a reform
that created a safety benefit for the Alaska workplace and
specifically for Tesoro. He said he doesn't believe that tort
liability motivates safety programs. Current law has allowed
for the dismantling of what he called cumbersome and bizarre
legal barriers between Tesoro's safety programs and those run by
its contractors, and coordinating such programs results in a
better culture of safety and ultimately a safer workplace.
Noting that supporters of SB 303 say it will restore the concept
of "you break it you pay for it," he argued that such a concept
was never really in place prior to 2004, and predicted that
SB 303 wouldn't bring that concept any closer to fruition
either.
MR. KNUDSON proffered that the no-fault standard of workers'
compensation was adopted to eliminate uncertainty for both the
employee and employer in cases involving injury or death;
regardless of fault, the employee would be compensated. Prior
to 2004, he opined, Alaska law contained a loophole that created
uncertainty for project owners and contractors, and SB 303 would
reestablish that loophole. He offered his belief that
currently, no employer - either contractor or project owner - is
immune from providing workers' compensation coverage, and, in
return, the no-fault standard is applied.
[Chair Ramras turned the gavel over to Representative Herron.]
MR. KNUDSON opined that if the concern is that workers'
compensation is not providing an adequate remedy in the case of
injury or death, then the debate should focus on that deficiency
rather than on expanding tort liability.
[Representative Herron returned the gavel to Chair Ramras.]
MR. KNUDSON offered his belief that prior to 2004, things were
unclear, particularly regarding control of the workplace and
allocating fault. In conclusion, he added, "I think the issue
of fairness [both under current law and prior to 2004] ... has
been set aside in the ... [workers' compensation] deal; it's not
fair for a project owner to be sued regardless of fault, as was
the case prior to 2004, for example."
4:10:58 PM
MAYNARD TAPP, Owner, Hawk Consultants, LLC, after mentioning
that his company is primarily involved in oil and gas
construction and maintenance projects in Alaska, recommended
that SB 303 be set aside. He relayed that just recently, his
company passed its "million-hour mark for no lost-time-
injuries"; that it took 25 years to reach that milestone; and
that he believes existing workers' compensation laws are
sufficient in protecting Alaska workers. With the industry's
current high safety standards in place, he opined, there is no
need to support SB 303, and all that its passage would do would
be to increase insurance rates in an attempt to cover an
indefinable risk, thus making it difficult for companies to
maintain economic viability thereby resulting in less project
development. In conclusion, he said he opposes SB 303.
MR. TAPP, in response to questions, offered his understanding
that injuries/deaths resulting from acts of criminal negligence
aren't covered by workers' compensation insurance; that acts of
criminal negligence wouldn't be addressed by SB 303; and that
all insurance rates for all jobs covered under workers'
compensation "are assured liability" by all workers and all
companies within the system, and so it's fair for everyone's
rates to go up when problems with safety aren't dealt with.
4:15:43 PM
MICHAEL COMBS, Owner, Combs Insurance Agency, Inc., noted that
under [existing AS 23.30.045(a),] the contractor only becomes
liable for the subcontractor's employees if the subcontractor
fails to secure workers' compensation insurance, whereas in
contrast, SB 303's proposed AS 23.30.045(a) reads in part, "If
the employer is a subcontractor ..., the contractor is liable
for and shall secure the payment of the compensation to
employees of the subcontractor unless the subcontractor secures
the payment." Furthermore, existing AS 23.30.055 in part reads,
"The liability of an employer prescribed in AS 23.30.045 is
exclusive ...", and yet, he pointed out, no attempt has been
made to update the definition of the term "employer" beyond how
AS 23.30.395(20) defines that term: "'employer' means the state
or its political subdivision or a person employing one or more
persons in connection with a business or industry coming within
the scope of this chapter and carried on in this state;".
MR. COMBS opined that since SB 303 proposes to put the general
contractor within the scope of coverage under AS 23.30, even
though he/she may be able to transfer the obligation to the
subcontractor by written contract, unless the subcontractor
secures payment, the contractor should still be eligible for the
exclusive-remedy protection afforded under AS 23.30.055. "We
took and moved the general contractor into the first position as
an employer, in this case; I'm not sure why that's been done,
but it looks to me like in the language itself, that's what's
been done," he added. There is nothing fair about workers'
compensation, he opined, because it pays for both the employee's
and the employer's negligence regardless whether it's [simple]
negligence or criminal negligence - the employee is protected at
all times. In conclusion, he encouraged the committee to set
SB 303 aside.
MR. COMBS, in response to questions, offered his understanding
that although it's not fair for somebody to be criminally
negligent, there are other methods of dealing with such behavior
other than via the workers' compensation system and general
liability coverage; and that with regard to safety issues on a
jobsite, everyone who sets foot on that jobsite - whether a
general contractor or a subcontractor - is responsible for the
safety conditions their employees must work under. Moreover,
under the workers' compensation system, it doesn't matter who
causes the injury to an employee or who has the workers'
compensation insurance - the employee will be covered regardless
- though injury claims are going to result in an increase in
workers' compensation insurance rates.
4:25:41 PM
[Due to technical difficulties with the official recording, all
volumes must be set at maximum for the period between
4:25:42 p.m. and 4:30:06 p.m.]
JEANINE ST. JOHN, Vice President, Lynden Logistics, Inc.,
remarking that stable and predictable laws are very critical for
enabling companies to conduct business in Alaska, said her
company believes that SB 303 would sharply reverse the 2004
statutory changes, which were recently upheld [as not being
unconstitutional] by the Alaska Supreme Court [in Schiel v.
Union Oil Company of California], and which, she opined, were
fair, appropriate, and good - providing the benefit of exclusive
remedy to the companies that pay workers' compensation. Senate
Bill 303, she predicted, would undermine the underlying concept
of workers' compensation. In conclusion, she expressed disfavor
with changing the current law; suggested that before taking any
action, members review what the court had to say on the issue;
and opined that SB 303 would result in increased costs and was
not the right answer for addressing any of the perceived
problems.
4:29:55 PM
REPRESENTATIVE HOLMES asked Ms. St. John whether she thinks it's
fair for a general contractor or project owner to be completely
immune from liability when a worker is injured or killed on the
job due to negligence or criminal negligence on the part of the
general contractor or project owner.
MS. ST. JOHN offered her belief that there would be various
other remedies available to the injured worker in such a
situation.
4:30:38 PM
EVERETT H. BILLINGSLEA, General Counsel, Lynden Incorporated,
added his belief that if a company is absolved of negligence,
that's consistent with the concept of the workers' compensation
system, and so the company - the upstream contractors and owners
- should have the benefit of the exclusive remedy.
REPRESENTATIVE HOLMES asked Mr. Billingslea whether he thinks
it's fair for a subcontractor's workers' compensation insurance
rates to go up when an injury or death is due to the negligence
of the general contractor or project owner.
MR. BILLINGSLEA said he doesn't agree with the argument that
workers' compensation rates either have or are going to go up
due to the statutory changes made in 2004. If they do go up,
however, any increase would be more than offset by the savings
on litigation costs and general liability insurance premiums, he
opined.
4:33:43 PM
JOHN GRUMMETT, Shattuck & Grummett Insurance; National Director,
Alaska Independent Insurance Agents & Brokers, Inc. (AIIAB),
said that the AIIAB is opposed to SB 303, and doesn't think it
would enhance the system at all. At issue, he surmised, is how
the legislature wants to treat workers in terms of ensuring that
they are covered and getting treatment, and whether it wants to
create another level of litigation. He remarked, "There's talk
about negligence, here, but there's also the issue of ...
partners and sole proprietors and LLCs, where people are allowed
to ... be excluded from coverage when they buy a [workers'
compensation] policy, ... whereas on the ... corporation side,
they're automatically included unless they're excluded." So
although there might be a lot of things wrong with the workers'
compensation system, the AIIAB doesn't believe that SB 303 will
solve them, he concluded.
REPRESENTATIVE HOLMES asked Mr. Grummett whether he thinks a
general contractor or project owner should be completely immune
from liability when a worker is injured or killed on the job due
to negligence or criminal negligence on the part of the general
contractor or project owner.
MR. GRUMMETT said he doesn't think general contractors and
project owners should be the only ones [to have immunity], and
indicated that he is questioning why the bill appears to be
focused on just the construction industry and not on every
industry.
REPRESENTATIVE HOLMES asked Mr. Grummett whether he thinks it's
fair for a subcontractor's workers' compensation insurance rates
to go up when an injury is due to the negligence or criminal
negligence of the general contractor or project owner.
MR. GRUMMETT said, "I don't think it's fair but I think that
that's what ... we're left to deal with right now."
4:37:40 PM
MICHELE KAHLE relayed that she would be speaking on behalf of
her deceased son, Tyler Kahle, who was killed while working at a
mine construction site in Nome. She said that although the 2004
statutory changes effected by Senate Bill 323 were touted as
being necessary in order to ensure that workers were insured
under workers' compensation, that was already the case prior to
2004: everyone - whether project owner, general contractor, or
subcontractor - was already required to have workers
compensation insurance. Furthermore, when Senate Bill 323 was
enacted, workers lost all of their rights, she opined, but most
didn't realize it at the time, since the question wouldn't arise
until they were injured or killed; for giving up all those
rights, workers received nothing in return.
MS. KAHLE, with regard to the argument that other federal and
state agencies have the authority to address safety violations,
pointed out that such actions are not going to make an injured
[or killed] employee [or his/her family] whole. For the death
of her son, for example, those responsible were only legally
required to pay $5,000. "Were we made whole?" she queried, and
challenged those present to look her in the eye tell her that
her family was. Alaska's workers' compensation system is
broken, and although SB 303 isn't going to fix it, it would be a
good start, she opined, to at least put the statute back to what
it was for the 40 years prior to 2004 so that workers would have
some rights again in situations involving gross negligence.
MS. KAHLE offered her belief that currently, an injured worker
in Alaska is better off if there isn't any insurance at all,
because that's the only way he/she can recover damages. She
noted that her son was not the only fatality that occurred that
day - both he and a coworker were dropped 60-plus feet from a
man lift. She stated that she supports SB 303, and surmised
that unless a person has experienced what she has, that person
is just kidding himself/herself to think that the current
statute encourages safety on the job. Since when does a lack of
accountability encourage compliance with anything? Although the
federal Mine Safety & Health Administration (MSHA) fined one of
the parties responsible for her son's death, that fine is still
being litigated - that party "has all sorts of recourse, and we
have none," she added.
MS. KAHLE offered her belief that as things stand today,
employers, subcontractors, and project owners are not only
experiencing cost savings, they are actually profiting from
people's deaths and injuries. Employees are unknowingly
assuming all of the risks, and no one is being held accountable
for their safety. Tyler and his co-worker are proof of that.
Going to work should never be a grave mistake for anyone in the
U.S., but today it is, she concluded.
4:44:28 PM
RALPH SEEKINS, speaking as the former Alaska State Senator who
sponsored Senate Bill 323 in 2004, offered his understanding
that workers' compensation insurance doesn't cover deliberate
acts, and expressed agreement with that exclusion.
Acknowledging that nothing could compensate one for the loss of
a family member or even an employee, he indicated that when the
legislature was addressing the workers' compensation statutes
back in 2004 via Senate Bill 323, the issue of just compensation
wasn't addressed. Indicating that passage of SB 303 would
result in the statutory language reverting back to what it was
prior to passage of Senate Bill 323 - wherein the contractor was
responsible for securing workers' compensation for the employees
of the subcontractor - he relayed that he'd disagreed with that
concept, and explained that Senate Bill 323 was intended to
change that requirement such that the contractor would be
responsible for securing workers' compensation for the employees
of the subcontractor only if the subcontractor failed to do so,
and such that if the contractor failed to do so, then the
project owner would be required to do so, and thereby close what
he considered to be a loophole. Again, the compensation
schedule wasn't addressed via Senate Bill 323.
MR. SEEKINS accused the State of Alaska of scamming contractors
by requiring them to sign indemnification agreements that hold
the State of Alaska harmless; relayed that research indicates
that many government entities and large employers have the same
requirement; and accused insurance adjusters and attorneys of
conspiring with each other against employers. Senate Bill 323,
he then indicated, was intended to allow small employers the
ability to require the same type of indemnification while still
providing coverage for all employees, and to exempt situations
involving defective equipment so that any employees injured by
such equipment could still file suit unrelated to workers'
compensation. He acknowledged that at the time he was promoting
the passage of Senate Bill 323, he knew that no double dipping
was really occurring. He asserted, however, that an employer
who paid out workers' compensation benefits, even though he/she
might eventually get reimbursed as the result of a successful
tort action, was then subject to what he called an experience
modification on his/her insurance policy; he referred to this as
"double jeopardy." Mr. Seekins, too, noted that the court has
ruled that the current statutes [are not unconstitutional], and
accused Senator Paskvan of not declaring a conflict of interest.
In conclusion, he predicted that if SB 303 is adopted, "it" will
happen again and the State of Alaska will continue to benefit
from "it."
MR. SEEKINS, in response to a question, indicated that the
Alaska State Chamber of Commerce (ASCC) asked him to sponsor
Senate Bill 323.
CHAIR RAMRAS characterized SB 303 as an inadequate solution to
the problems imbedded in the workers' compensation system.
MR. SEEKINS opined that what employers were after in 2004 was
the benefit of "the deal" without the "double jeopardy," and
again reiterated that Senate Bill 323 did not address the
compensation schedule. He offered his understanding that
project owners were only seeking the same coverage granted to
contractors and subcontractors, and indicated that if the goal
of SB 303 is to get rid of that coverage for project owners,
then it should also be gotten rid of for all employers. In
response to a question, he offered his understanding that the
terms, "criminal negligence" and "gross negligence" are defined
in statute, opined that such acts shouldn't be exempted from
other penalties, and again predicted that passage of SB 303
would result in litigation and "double jeopardy."
5:07:22 PM
GAIL VOIGTLANDER, Chief Assistant Attorney General - Statewide
Section Supervisor, Torts and Worker's Compensation Section,
Civil Division (Anchorage), Department of Law (DOL), in response
to questions, explained that there isn't any language in SB 303
limiting it to just the construction industry; that under
SB 303, the project owner would no longer be required to pick up
coverage of workers' compensation and so would also no longer be
subject to proposed AS 23.30.055 as an employer for purposes of
exclusive liability; that whether a contract's indemnification
provisions would protect the project owner and the contractor
would depend on the contract itself; that although contracts
vary widely, generally they address those whom the project owner
is seeking indemnification from; that with regard to contracts
entered into by the State of Alaska, some of what's required in
such contracts is set forth in statute and some is just prudent
practice, particularly given that the State of Alaska could be
viewed as a deep pocket in terms of someone seeking a tort
remedy via litigation; that although including indemnification
in contracts entered into by the State of Alaska provides a
better way to manage risk, it does come at some cost to the
State, with that cost being reflected in the bidding; and that
because of statutory requirements, in contracts entered into by
the State of Alaska, indemnification can't be shifted to another
entity in situations where negligent acts have occurred and the
sole negligent party is the State of Alaska.
REPRESENTATIVE GRUENBERG, in response to questions, explained
that AS 11.81.900(a)(4) reads:
(4) a person acts with "criminal negligence" with
respect to a result or to a circumstance described by
a provision of law defining an offense when the person
fails to perceive a substantial and unjustifiable risk
that the result will occur or that the circumstance
exists; the risk must be of such a nature and degree
that the failure to perceive it constitutes a gross
deviation from the standard of care that a reasonable
person would observe in the situation.
MS. VOIGTLANDER indicated that she has not seen any instances
wherein the mens rea required under that definition of "criminal
negligence" was used in a civil context.
REPRESENTATIVE GRUENBERG, in response to a question, surmised
that a charge of criminally negligent homicide might be
warranted for an on-the-job accident, such as when a party's
criminally negligent behavior results in a mining disaster, for
example.
5:22:54 PM
TRENA HEIKES, Director, Central Office, Division of Workers'
Compensation, Department of Labor & Workforce Development
(DLWD), in response to a question, said that it's been the
reduction in injuries over the past decade which has resulted in
workers' compensation insurance rates declining, and that those
rates are set based on two elements: payroll multiplied by
risk, with risk - or experience modification - having to do with
the number of injuries the employer has experienced. In
response to another question, she declined to venture whether
passage of SB 303 would affect workers' compensation rates.
[Chair Ramras turned the gavel over to Representative Herron.]
5:24:04 PM
GREY MITCHELL, Director, Central Office, Division of Labor
Standards & Safety, Department of Labor & Workforce Development
(DLWD), in response to a question, explained that there are
statutory provisions that hold a controlling employer liable for
safety violations at a worksite, and that that liability would
transfer to a general contractor, but [neither SB 303 nor Senate
Bill 323] change that liability in terms of complying with
occupational safety and health standards.
REPRESENTATIVE HOLMES surmised, then, that passage of SB 303
wouldn't do anything to discourage employers from engaging in
safety programs.
MR. MITCHELL concurred. In response to a question, he offered
his understanding that in a recent accident that occurred during
construction of a [sky bridge] between two legislative office
buildings, a piece of equipment that was being used was not
actually designed for the purpose it was being used for, and the
resulting investigation determined that both the main contractor
and the subcontractor were liable for the resulting accident
that injured two employees. Neither the main contractor nor the
subcontractor, though, was found to be criminally negligent.
REPRESENTATIVE GATTO expressed disagreement with that finding.
[Representative Herron returned the gavel to Chair Ramras.]
MR. MITCHELL, in response to a comment and a question, offered
his understanding that a lack of proper training was a factor in
that accident, and that no deaths resulted.
CHAIR RAMRAS, after ascertaining that no one else wished to
testify, closed public testimony on SB 303.
5:29:36 PM
SENATOR PASKVAN, in wrap up, relayed that the intent of SB 303
is to return Alaska to what he referred to as the good public
policy that was in place prior to 2004, and opined that passage
of Senate Bill 323 in 2004 resulted in the elimination of what
he termed, "just compensation for at-fault conduct" and in the
injection of the concept of "fault immunity" into the workers'
compensation system. Prior to 2004, the tort-liability system
provided a remedy, and although it was a delayed remedy, it held
only those at fault accountable, and, again, in Alaska, damages
are apportioned according to fault. The workers' compensation
system is broken, he opined, when a contractor or project owner
who is at fault can kill or injure a subcontractor's employee
without being held accountable. Senate Bill 303 would fix that
problem, and in no way asserts that there isn't currently a
commitment to safety. However, because there are incidences,
the question becomes whether, when there is fault, that
responsibility and accountability should attach to the
wrongdoer.
SENATOR PASKVAN, with regard to the assertion that contractual
indemnification provisions effect a scam, pointed out that
although he agrees that allowing for such provisions constitutes
bad public policy, it isn't the workers who are involved in that
process but rather the business owners who are deciding whether
to assume risk or not. He urged the committee to not continue
to allow the immunization of at-fault conduct, which, he opined,
is what current law does. With regard to the aforementioned
term, "double jeopardy", he opined that that's the wrong term to
be using with regard to contractual indemnification provisions.
With regard to the argument that passage of SB 303 would result
in litigation, he pointed out that wasn't the case during the 45
years prior to the enactment of Senate Bill 323, and so won't be
the case if SB 303 is adopted. And if there is a concern
regarding indemnification provisions, he ventured, then the
statutes being addressed via SB 303 should be returned to what
they were prior to 2004. The words, "and justice for all" - as
used in the pledge of allegiance - should not be just hollow
words for workers injured due to the fault of someone other than
themselves or their employer, he concluded.
CHAIR RAMRAS expressed a preference for maintaining the current
statutes.
5:39:57 PM
REPRESENTATIVE HERRON moved to report 2d CSSB 303(RLS) out of
committee with individual recommendations and the accompanying
fiscal notes.
CHAIR RAMRAS objected.
A roll call vote was taken. Representatives Lynn, Gruenberg,
and Holmes voted in favor of reporting 2d CSSB 303(RLS) out of
committee. Representatives Herron, Gatto, and Ramras voted
against it. Therefore, 2d CSSB 303(RLS) failed to be reported
from the House Judiciary Standing Committee by a vote of 3-3.
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