Legislature(2003 - 2004)
03/14/2003 03:16 PM House L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
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= bill was previously heard/scheduled
HB 155-PUBLIC CONSTRUCTION PROJECT REQUIREMENTS
Number 0075
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 155, "An Act relating to the submission of
payroll information by contractors and subcontractors performing
work on a public construction contract; and providing for an
effective date."
Number 0102
GREG O'CLARAY, Commissioner, Department of Labor & Workforce
Development, presented HB 155, legislation introduced at the
request of the governor. He described how the Wage and Hour
section of the Division of Labor Standards & Safety enforces the
prevailing wage law [AS 36.05, Wages and Hours of Labor]. The
office investigates complaints of noncompliance against
contractors on public projects by examining their certified
payroll reports. He explained that budget cuts have reduced the
clerical staff who examine the thousands of certified payrolls
submitted by contractors. At one time, there were five
employees doing this work; now there is one person, he said.
Number 0358
COMMISSIONER O'CLARAY displayed a certified payroll form; the
back of the form includes a statement of compliance with Title
36 [Public Contracts] which must be signed by the contractor.
During the height of the construction season, the department
receives 24,000 of these forms a week, he noted. The lone clerk
who receives the forms barely has time to file the forms, much
less check for errors, he said. Organized labor and individual
citizens "police" the accuracy of these payroll forms and notify
the department if a contractor appears to be out of compliance.
An investigator is assigned to the complaint, scheduling a site
visit to review payroll records. Commissioner O'Claray said
that the department's head investigator estimates that only 20
percent of the payroll errors are caught.
Number 0602
COMMISSIONER O'CLARAY said HB 155 does two things. First, it
sets up a user fee that will support the cost of the Division's
staff. Second, the bill follows the Washington state law that
requires the various contracting agencies to receive the
certified weekly payrolls. He said his department does not have
the staff to go through these volumes of reports to catch and
correct contractors who are not in compliance. He noted that
last year the Wage and Hour section conducted 540
investigations: 491 under Title 23 [Labor and Workers'
Compensation] and 49 under Title 36.
Number 0723
REPRESENTATIVE CRAWFORD noted from his personal experience that
many complaints don't get to the investigation stage. He said
that if a payroll certification is lacking certain classes of
workers on a job, the clerk will request the information from
the contractor who usually corrects the payroll certification
right away. He said the department is able to recover thousands
of dollars of back or incorrectly reported wages before a
complaint reaches the investigation stage.
COMMISSIONER O'CLARAY asked whether these corrections occur
because the clerk discovered the errors.
REPRESENTATIVE CRAWFORD explained that a labor representative
gets lists of jobs by contractors and compares that information
with the payroll reports. The union person notifies the
department clerk; she will call the contractor directly, and
many times that will result in a correction. He said the
majority of contractors are not trying to cheat; once they are
made aware or an error, they correct it. He said that this
process is much preferred to a full-fledged investigation.
COMMISSIONER O'CLARAY stated that this bill is a means for
making the department more effective in enforcement. He said he
welcomes suggested improvements by the committee, labor, and the
public.
Number 1002
COMMISSIONER O'CLARAY noted that HB 155 would produce $1 million
in revenue a year by charging contractors and subcontractors
$100 fees at the start and finish of each job. He said the
administration is seeking sustainable revenue for the division's
work to protect it from future cuts. The bill does not set up a
particular fund for these fees; the money would flow into the
state's general fund. The contractors would send the certified
payrolls to the contracting agencies. He predicted that this
change would improve compliance by contractors.
Number 1149
REPRESENTATIVE GUTTENBERG asked if the low rate of compliance
would improve with additional investigators. He asked if there
would there be increased revenue [from fines].
COMMISSIONER O'CLARAY said enforcement staff were cut several
years ago, and the administration is trimming the budget, not
adding more positions.
Number 1219
REPRESENTATIVE CRAWFORD expressed strong concerns about
dispersing the certified payrolls to different contracting
agencies. He explained that federal contracts use that system.
He said it has taken him as long as a year to track down a
federal contracting agent and to get the payroll information.
He said it is so much more convenient to call the Department of
Labor & Workforce Development offices in Juneau, Anchorage, or
Fairbanks, where the payroll reports are in a central
repository. He asked if the department eliminates this single
position, who would [do this function] in the different
contracting agencies. Who will make sure that the contractors
are paying the correct wages, he queried.
Number 1313
COMMISSIONER O'CLARAY replied that each contracting agency
receives a percentage of the contract funds to monitor contract
compliance to meet Title 36 requirements. He said he
understands that it's more convenient to have the documents all
filed in the Department of Labor & Workforce Development but
indicated that the clerk has no time to find errors. He invited
the committee to find a solution and funding for this problem.
He suggested that HB 155 could require the contracting agent to
assign a person to review payroll compliance. He agreed that
it's a cost shift from the general fund [Department of Labor &
Workforce Development] to the [contracting agencies].
REPRESENTATIVE CRAWFORD commented that it's important to make
the payroll compliance as streamlined as possible. He suggested
requiring a bi-weekly or monthly-certified payroll report --
instead of a weekly report -- or an on-line filing for those who
have computer capability. He said he spoke to his union
counterparts in Washington state and was told that the certified
payroll reports are accessible in the Seattle area but not in
the remote areas. He said that he is very concerned about
tracking down certified payrolls in rural Alaska, for example, a
Department of Transportation and Public Facilities contract in
Bethel. He said that the best part of Alaska's system is having
[the payroll reports] in a centralized place. He said he has
watched the office shrink from three clerks to one person who is
very overworked. He said she saves people thousands of dollars
per month.
Number 1605
REPRESENTATIVE DAHLSTROM asked about the amount of the fees and
why they are being charged: $100 at the beginning and end of
the project. She also noted on page 2, line 19-20, that the
contractor must get approval from the Department of Labor &
Workforce Development to pay the subcontractor. Payment can be
withheld if the contractor hasn't paid the $200 fees and for
several other reasons, including subcontractor violations.
COMMISSIONER O'CLARAY said the intent is that the violator would
not be paid. Withholding of payment is used to enforce the
current law. The department has to wait until the end of the
job to withhold final payment; however the contracting agency
can stop payment immediately upon proof of a violation.
Number 1734
REPRESENTATIVE CRAWFORD said he received many faxes and letters
opposing HB 155. He referenced a [March 14, 2003 fax] from
Alaska Concrete Sawing [in Anchorage], which illustrates what
the $100 fee means to a small contractor who spends less than
four hours total on a job. Representative Crawford said he
often does welding jobs that take only a day or two. If the fee
is $100 in and $100 out of a job, contractors won't be able to
pass that along to the contracting agency. He suggested a fee
break on the size of job. He said for a general contractor
building a job the size of the Houston high school, $100 is not
an issue, but for a business like Alaska Concrete Sawing, it is.
COMMISSIONER O'CLARAY said he agreed and suggested that the bill
use a graduated fee based on the amount of the contracts.
Number 1816
JOHN BITNEY, Lobbyist for Alaska State Homebuilders Association
["Homebuilders"], asked for additional time for his group to
review the bill. For the most part, he said, homebuilders are
small family-owned operations. If they're going to bid on
prevailing wage jobs, they prefer a level playing field that has
a consistent compliance system. He said the Homebuilders would
like to work with the department to make this bill work. In
response to a question from Chair Anderson, he stated that the
$100 in and out fee would severely impact homebuilders.
Homebuilders are doing very small, one- or two-day jobs at the
request of numerous agencies; they augment their normal work
with these small jobs. He agreed to bring in correspondence
next week from the Homebuilders group.
Number 1936
DON ETHERIDGE, Lobbyist, Alaska State AFL-CIO, stated that his
group opposes HB 155 as drafted. He said his main concern is
who gets the certified payrolls. This bill increases revenue to
the department but shifts work away from it. He said he agrees
that the fees should be increased on a graduated scale, but the
funds should be dedicated to the department so it can do the job
correctly.
MR. ETHERIDGE said he wants to see a level playing field and
everybody paid at the proper rate. Most of his union members
are informed about their rate of pay; if they're not paid
correctly, they call the union office, which addresses the
problem with the department. However, he expressed concern
about the nonunion workers who are not paid properly. If the
department stays on the contractor, the employees will get paid
the proper rate. He said that having the contracting agency
monitor the worker's wages is like sending the dog to watch the
hamburger. In most cases, the contracting agency would prefer
to pay workers a lower wage because it can get more work done at
a lower price.
MR. ETHERIDGE expressed concern that the contracting agencies
would set aside and forget [the payroll reports]. He said in
some areas, the mandatory worker training is not happening. The
contracting agencies are supposed to be monitoring the training,
and they're not doing it.
Number 2070
JOHN BROWN, President, Fairbanks Central Labor Council;
Operating Engineers, said that the Department of Labor &
Workforce Development needs the certified payroll reports to
continuing enforcing the prevailing wage. He said in his work
he needs that information easily available. Sending the payroll
reports to various agencies would hinder the unions' ability to
help the department enforce the prevailing wage law. Any
increased revenue should be given to the department, which needs
it to enforce the law as written.
Number 2140
DON SHIESL, Public Works Director, City of Wasilla, asked
Commissioner O'Claray if a $100 fee must accompany the
submission of every payroll.
COMMISSIONER O'CLARAY explained that the $100 fee would be paid
at the initial registration and then again at the close of the
job.
MR. SHIESL testified that in larger contracts, these fees will
be passed on to the contracting agency. An agency like the City
of Wasilla will ultimately be paying these fees out of their
contracts. He said his bigger concern is in the contract
compliance part of HB 155. He said he has neither the manpower
nor the training to monitor certified payroll reports. Wasilla
and other small cities do not receive a percentage of funds for
contract compliance. He said he is concerned about a new type
of compliance whose cost will be shifted to local government.
He also said the committee should look at increasing penalties
to force contractors to submit these certified payrolls.
Number 2255
RON TRUINI, Ironworkers Local 751, testified that his main
concern with HB 155 is enforcement. He said that penalties are
not severe enough; he said they are currently Class A
misdemeanors. He said ignorance of the law [requiring the
payment of prevailing wages] is no excuse for contractors. His
other concern involves the contracting officer [who would be
receiving the certified payroll reports]. Organized labor will
be monitoring the contracting officers rather than focusing on
the real problem of watching that contractors comply with state
wage and hour laws.
TAPE 03-21, SIDE B
Number 2367
BLAKE JOHNSON, Laborers International Union of North America
Local 341, said that contractors will have a hard time keeping
track of where to send their certified payrolls if they are sent
to other agencies besides the Department of Labor & Workforce
Development. He used the example of the Anchorage School
District, which wouldn't have the personnel to deal with
certified payroll reports. He said the state won't save much
money eliminating the two positions that handle the certified
payroll reports. If the reports are in one location, the unions
can [continue to] come in and look at the reports. He
recommended increasing the fines of contractors who are not in
compliance, and then the state would have more money for
investigations.
Number 2294
REPRESENTATIVE CRAWFORD commented that [paying prevailing wages]
is not just a union issue. He said there are many nonunion
firms that check the payroll reports to see if their competitors
are paying the correct prevailing wages, making sure that there
is a level playing field. He said that one of his constituents,
Consolidated Enterprises, [Anchorage] submitted a [March 13,
2003] letter contained in the members' packets. He said this
company is a nonunion company that regularly checks its
competitors' wage records
Number 2220
SCOTT BRIDGES, Business Representative, General Teamsters Local
959 Alaska, said he represents workers in the construction
industry and favors a graduated approach to the user fee. He
proposed having the contractor on the larger project pay a
larger fee. He said this is an enforcement issue as well. He
said investigators at the Wage and Hour section take far more
[wage complaints] than they can respond to adequately. He said
he didn't think department investigators can pursue claims that
don't come with all the facts in hand. He said from his
experience with the division, unprosecuted claims reach into the
hundreds of thousands of dollars annually. The dispersal of the
department's responsibilities to these contracting agencies
would further dilute the wage earner's [opportunity to receive a
fair wage]. The contract compliance money given to contracting
agencies might cover technical issues but it does not include
monitoring wage and hour issues. Contractors could send two
copies by email to the department, which could forward the
second copy to the contracting agency.
Number 2081
VINCE BELTRAMI, President, Anchorage Western Alaska Building &
Trades Council, Anchorage, opposed HB 155. He said if the
department lets the certified payroll go out the door to the
contracting agencies, department employees will be chasing after
the information instead of having it at their fingertips as they
presently do; they need it in hand to efficiently process a
payroll violation claim. He citied the bill's briefing paper
that states that contractors are required to file duplicate
reports with both the contractor and the department, but that's
true only under limited circumstances. He disagreed that
eliminating a range 12 position, which costs the state less than
$40,000 a year, would save the state money. He opined that the
absence of that position would create additional work for the
wage and hour investigators and cost the state much more than
$40,000. The department has the authority under the statute to
do enforcement and impose fines and penalties. The user fee has
some merit if it could be applied to enforcement of this
program.
Number 1926
REPRESENTATIVE LYNN asked if he preferred a graduated or a flat
fee, if a fee were imposed.
MR. BELTRAMI replied that a graduated fee would be fairer to
smaller contractors. He said he wants any fee funneled back to
the department to make this a viable program. The prevailing
wage program falls a little short of being highly effective.
Number 1882
TIM ROGERS, Legislative Program Coordinator, Municipality of
Anchorage, noted that HB 155 makes the city the record keeper
for the Department of Labor & Workforce Development. There's no
instruction on how to handle the forms nor compensation for
staffing the work. The state would collect $200 per contractor
but pass the work on to the contracting agency. There's no
provision for emergency work, for example, the recent windstorm
[in Anchorage]. The city cannot approve final payment until
authorized by the state, but the city has no idea how long that
will take, and it has to pay high interest on the monies owed to
the contractors. If every contractor and subcontractor is
assessed the $200 fees, either small contractors won't bid on
the projects, thus driving up the cost of projects, or they will
pass the expense on to the municipality. One way or another,
the municipality will end up doing more work and will pay more
money on the contracts. He said Mayor George Wuerch will be
sending in a letter [detailing these concerns].
Number 1786
RAYMOND SMITH, Business Manager, International Union of Painters
and Allied Trades Local 1140, said he has no problem with a
graduated user fee, which would be passed on [to the contracting
agency] anyway. He said it would be a real detriment if the
department gave up [this monitoring] on behalf of the worker.
He said he has just sent a letter today to the commissioner
about a contractor with violations in two locations. Because
the person filing the reports doesn't have time to review them,
everybody has to be watching for payroll abuses, including union
and nonunion contractors. If the department is looking for more
revenue, he said, the state should nail the violators with large
fines. He said he couldn't stress enough the state's need to
enforce the laws on the books and to return user fees to the
Department of Labor & Workforce Development. The prevailing
wage program is viable and needs to stay where it is, he
affirmed.
Number 1656
CHAIR ANDERSON summarized that HB 155 needs some revision.
People have testified that there's merit in the fees if they are
graduated. He said the committee will consider the idea of
having contractors file certified payroll reports with
contracting agencies instead of the Department of Labor &
Workforce Development. He said he will hold testimony open and
keep the bill in committee.
Number 1613
REPRESENTATIVE LYNN commented on the consistent testimony of the
public favoring graduated fees for this program, for the
business license, and for other programs.
CHAIR ANDERSON said that the starting point for an amendment to
HB 155 will be a graduated fee. [HB 155 was held in committee.]
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