Legislature(1995 - 1996)
02/01/1995 03:01 PM House L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HL&C - 02/01/95 HB 115 - DAMAGES & ATTY FEES FOR UNPAID WAGES Number 369 CHAIRMAN KOTT reconvened at 3:33 p.m. HB 115, the labor wage and hour bill, was brought before the committee. Chairman Kott summarized the previous meeting of January 31, 1995; the changes needed on HB 115 were concerning settlements between employees and employers and also the way attorney fees are paid to the prevailing party. Chairman Kott said the employee could work through the Department of Labor. Chairman Kott called on his committee aide to give a brief overview of McKennon v. Nashville Banner Publishing Co. and how it ties in with Mr. Legacki's testimony of January 31, 1995. Number 403 GEORGE DOZIER, Committee Aide, House Labor & Commerce Committee. Mr. Dozier cited McKennon v. Nashville Banner Publishing Co. Supreme Court #93-1543, decided January 23, 1995. Mr. Dozier described the case as the employee, Mrs. McKennon, had worked for said company for 30 years, she was 62, and felt she was going to be let go because of her age. She started taking confidential memos on the financial status of the company and showed them to her husband. The employer let her go allegedly because of a re- entrenchment of the company. Mrs. McKennon then brought suit under the federal act. Mr. Dozier explained that later in the case, Mrs. McKennon had given a deposition and it came out that she had shown confidential material to her husband. The company then let her go again saying they had just cause. The employer's attorney then brought a summary judgment motion against her in U.S. District Court and argued that because the employer had just cause to dismiss her even though they had no knowledge at the time, this gave them an absolute defense to the age discrimination suit. Number 436 MR. DOZIER related that both the District Court and Circuit Courts ruled in her favor. The Supreme Court was then faced with deciding whether the existence of just cause, not known to the employer, constitutes a defense for dismissal in an age discrimination case. Mr. Dozier stated the Supreme Court ruled that no, it didn't constitute an absolute defense. This was after noting that some of the portions of the Age Discrimination Act were very similar to the remedial portions of the Fair Labor Standards Act (FLSA). Mr. Dozier explained that Congress, in enacting the Age Discrimination Act, had a dual purpose both public and private. The public act was to discourage employers from discriminating against individuals, and the private motivation was to enable those individuals discriminated against to recoup their damages. Mr. Dozier summarized that the intent of the decision is, that just focusing on the private aspect of the Act would be sufficient in allowing individuals to recoup damages, but the public aspect wouldn't be served. Essentially, Mr. Dozier commented that what the Supreme Court did was adjust the damages and allowed the lawsuit to proceed with the ruling that damages would be cut off as of the date the employer learned it had just cause. Number 466 REPRESENTATIVE PORTER asked if it did decide that the damages were cut off at the time of cause? MR. DOZIER said that damages could not be computed at the time the employer learned of (Indisc.--static). CHAIRMAN KOTT asked if there were additional questions for Mr. Dozier. REPRESENTATIVE PORTER asked what the connection is between this case and HB 115. CHAIRMAN KOTT responded that it did seem impossible to tie in some connection. TERRY CRAMER, Attorney, Legal Services Division, Legislative Affairs Agency, stated that the case sounded like there were similar statutes which may be changed by the legislature. Number 485 REPRESENTATIVE ELTON asked if the body should get back in touch with Mr. Legacki to see if they'd missed his point of testimony. MR. DOZIER stated that only connection with HB 115 and McKennon v. Nashville Banner Publishing Co., and he felt it a weak connection, was that perhaps Mr. Legacki was arguing that like the Supreme Court emphasized the public purpose, the dual aspect of this particular statute, the age discrimination placed reliance on an importance on the public purpose behind the Act, thereby allowing the damages. He stated that perhaps by way of analogy it would do the same when confronted with the Fair Labor Standards Act and further by way of inference that state statutes would diminish remedial rights of the FLSA. Mr. Dozier stated this was the only connection that he could perceive. Number 507 REPRESENTATIVE ELTON stated they should move HB 115 forward to Judiciary so they could get back in touch with Mr. Legacki to see if they missed something. Number 513 CHAIRMAN KOTT turned to public testimony in Juneau. SHERRIE GOLL representing the Alaska Women's Lobby, indicated her concern that HB 115 seemed contrary to the letter of the Fair Labor Standards Act. Ms. Goll outlined three areas that concerned her the most. The first was the change from current exemption from court rule; specifically, prohibiting the defendant from collecting attorney fees. She asked why we can get away with changing the Act in the state, but under the larger umbrella act we can't get away with it? She went on to say this change would say that liquidated damages can be bargained away or waived. She also stated if the case is taken through the Department of Labor, damages would be automatic, but if you have an attorney, your damages may or may not be awarded. She talked to someone from the Department of Labor prior to testifying and asked them what would make an employee not take their case through the Department of Labor. She explained that the Department of Labor sometimes tells employees to get counsel. She stated further the federal act doesn't allow people to waive their rights. She pointed out for the record that when HB 115 was in the session last year in the senate, in the title there was a court rule change, because this bill was making a change to Alaska Rule of Civil Procedure 82. She asked why a court rule change was required by the same legislation, and with the new redrafted version, there was no required court rule change in the title. CHAIRMAN KOTT asked if there was anyone else to testify on HB 115. CHAIRMAN KOTT described a memo from Parry Grover dated May 9, 1994, that appeared to be relevant. Chairman Kott noted in the memo it states that federal law does not prohibit states from adopting their own wage and hour laws. Chairman Kott pointed out that prior to the Kinney case, settlements between employers and employees were the most expeditious thing to do to resolve matters. Chairman Kott commented that since the Kinney case though, that was no longer the case. He further stated the purpose behind HB 115 was to bring us back to pre-Kinney days. Chairman Kott described what HB 115 was attempting to do, and that was to grant the court discretion to award less than full liquidated damages with no guarantee that the court has to do this, since the burden of proof is on the employer. The Department of Labor is only there to negotiate. If the employee agrees with the negotiation, he/she can then waive their rights and then a settlement can take place. Chairman Kott explained that with this, they were opening up an option for the employee to deal directly with the employer with certain safeguards that must be followed, which are detailed in HB 115. Chairman Kott summarized that the last provision of HB 115 was that they were conforming to civil law by awarding the prevailing party attorney fees. Chairman Kott then reiterated that HB 115 has a Judicial referral, and they would attempt to contact Mr. Legacki and Mr. Blasco for further testimony if needed. Number 610 REPRESENTATIVE KUBINA requested permission to ask Terry Cramer who drafted HB 115 some questions. He stated that when we change a court rule it takes a two-thirds vote, and he asked, if we exempt something from court rule, what majority does that take? Number 614 TERRY CRAMER answered she didn't believe that it did, but she would check. She also stated she wasn't sure why the Senate version had a court rule change notation and this didn't. REPRESENTATIVE KUBINA stated that when HB 115 was written originally as awarding to the plaintiff, it doesn't appear from what was taken out, it referred to a court rule and would have had the effect of altering the court rule. MS. CRAMER replied that if, the court rule were in existence at the time this was written. CHAIRMAN KOTT remarked that then what they were doing in essence, was repealing an exemption to the existing court rule and not actually changing the court rule; so therefore a court rule change wouldn't be required in this legislation. Number 634 REPRESENTATIVE PORTER remembered that last year when this went through Judiciary, they addressed the same question and determined that it wasn't required; it was a substantive change, not a procedural change. REPRESENTATIVE ELTON stated he was concerned with the sectional analysis; it says the rest of the Act applies to actions in which a final judgment hasn't been entered yet. He further stated in Section 4 of HB 115 (indisc.--paper shuffling). TAPE 95-4, SIDE B Number 000 REPRESENTATIVE ELTON asked whether an employer could present the employee with a written settlement agreement prior to employing that person and whether signing that agreement could be a condition of employment. Number 032 MS. CRAMER stated that would be something that this doesn't directly address, but it sounds like the employer would have too much power holding the employee to that bargain. She further stated it really depends on the facts of the case. Number 046 CHAIRMAN KOTT asked what the terms would be in that type of waiver. REPRESENTATIVE ELTON replied that perhaps the employee wouldn't seek liquidated damages, or if they did, they couldn't collect more than fifty cents on the dollar of minimum wage or overtime. Representative Elton essentially wanted to make sure that a written settlement couldn't be a condition of employment. MS. CRAMER believed that a court might not recognize that as a settlement if it were entered into before there was a claim. Ms. Cramer stated that a settlement was a resolution of an existing dispute and there is no dispute until the hours have been worked. CHAIRMAN KOTT concurred that you couldn't settle something until it exists. Number 050 REPRESENTATIVE ELTON asked whether the Federal Fair Labor Standards Act would allow the state to set a standard that is less than the federal standard; and if so, would the federal standard prevail despite the lower state standard. MS. CRAMER responded that the federal standard would apply for the Feds and they have the responsibility for enforcing the Federal Fair Labor Standards Act; the state has the responsibility for enforcing the state act. She stated the state act was different in that our minimum wage is higher by statute, and our overtime provisions specify no more than an eight hour day. The federal statute says that after forty hours a week, you're entitled to overtime. Ms. Cramer stated if there was a case that violated both federal and state laws, and the federal government wanted to enforce their Act, then the federal law would apply. She stated that any state standards not included in the federal law should not be available. She noted that when the state went to enforce its law, it would have to comply with what the legislature had established as state policy. REPRESENTATIVE ELTON asked if attorney fees by the employer could be classified as a business expense. MS. CRAMER replied she would assume that they could be, but she wasn't a tax lawyer. CHAIRMAN KOTT called Pam Neal to testify. Number 116 PAM NEAL, President of Alaska State Chamber of Commerce, stated the chamber was in support of HB 115. She feels it a punitive measure having to pay liquidated damages without giving thought to what the cause was. Ms. Neal said that bringing it more in line with federal law would be a fairer measure. Number 135 REPRESENTATIVE ELTON asked Ms. Neal if she had looked at the issue of attorney fees. MS. NEAL responded that there was more of move to balance the playing field with having attorneys fees. Knowing that if you lose you have to pay attorney fees might limit the number of frivolous lawsuits. Number 153 CHAIRMAN KOTT asked Ms. Neal if she felt that HB 115 would ease some of the burden on the court system. MS. NEAL responded not only the court system, but the administrative process also. Number 163 CHAIRMAN KOTT asked Ms. Neal to comment on some of the safeguards that have been built into the legislation; did she feel they were too weak or too strong? Number 167 MS. NEAL believed that the safeguards were still there for the employee. It isn't good for the business community, as a whole, not to be interested in the welfare of the employee. Ms. Neal explained there ought to be opportunity for hearing the intent behind the error, and these damages are punitive in thinking, and therefore, there should be some measure of judgment on whether there was fault or not. ED FLANAGAN, Assistant Commissioner for the Department of Labor, commented on Ms. Cramers' comments regarding a case of an employer having the employee sign a settlement prior to employment. Mr. Flanagan stated this was the situation down line after the claim is incurred. With regard to conformity under federal law, under the FLSA there isn't any provision for attorney fees for plaintiffs. The McKennon case reaffirmed public policy, where plaintiff suits are fostered by an award of attorney fees only to that party. Mr. Flanagan disclosed that the Department of Labor felt that unless there are some tight parameters, it's just too easy to end up in an ignorance of the law defense. Mr. Flanagan then described a federal case where a motel association put out a newsletter that showed how their employees weren't covered by the FLSA, and a motel owner went by that and was let off the hook for liquidated damages. Mr. Flanagan stated that the law is punitive, and the way to protect yourself is to be informed of the law. Number 224 REPRESENTATIVE ELTON asked if there might be more administrative resolving of these issues. If so, if more are diverted to administrative resolution, would the Department of Labor be involved. Number 233 MR. FLANAGAN agreed that it was possible. He stated that if we go to pre-Kinney where you could settle for less than full liquidated damages, the department would support that. Number 240 REPRESENTATIVE ELTON asked if there would be a fiscal impact on the department if they resolve more of these cases administratively. Number 248 MR. FLANAGAN responded that it could go either way. There probably will be less of these cases. If you go to the court rule, the issue is that the fees are 30 percent of the reasonable fees that currently are awarded with these cases. It will have an effect of putting more of a burden on the department because it would discourage employees from taking them on and attorneys from representing them. CHAIRMAN KOTT closed public testimony. Number 261 REPRESENTATIVE KUBINA stated he was concerned with the courts being able to award judgment on the prevailing party. He felt it would be hard for an employee to defend his rights. He brought up the fact that Tesoro supports this bill, but obviously they have attorneys on staff, so it's not as much of a burden for them as for an employee to try to find an attorney to represent them. Representative Kubina asked if the sponsor would consider it a friendly amendment to delete section two - to leave the lawyers the way the law is now. Number 290 CHAIRMAN KOTT replied that he would not consider it because what the intent is, is to reduce the number of frivolous lawsuits. Number 299 REPRESENTATIVE PORTER stated he supports moving HB 115 out. Number 334 REPRESENTATIVE ELTON agreed with the need to reduce the load on the courts, but didn't agree with the attorney fees paid by the prevailing party. Representative Elton described a case in the fishing industry where the company has made a practice of not paying overtime, and to pay less than minimum wage. Every time they get caught they declare bankruptcy, re-form under a new name and do it again. These people that are bringing the actions are minimum wage. What we're doing with the prevailing party provision in this bill is making them make an additional decision. He believes we're increasing the risk to them, they know they can't afford to lose. Essentially, Representative Elton stated he would feel a lot more comfortable voting to pass HB 115 out if section two was deleted. Number 386 CHAIRMAN KOTT asked what the will of the committee was. Number 391 REPRESENTATIVE MASEK made a motion to move HB 115 to the Judiciary Committee. CHAIRMAN KOTT stated there was a motion to move HB 115 out of the Labor & Commerce Committee to the Judiciary Committee. Hearing no objection, HB 115 with accompanying fiscal notes and individual recommendations was passed out.
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