Legislature(2013 - 2014)BARNES 124

02/10/2014 03:15 PM House LABOR & COMMERCE


Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 276 MOTOR VEHICLE DEALER EMPLOYEES TELECONFERENCED
Moved Out of Committee
*+ HB 211 EMPLOYMENT OF PERSONS WITH DISABILITIES TELECONFERENCED
Moved CSHB 211(L&C) Out of Committee
*+ HB 213 GOLF COURSE ALCOHOLIC BEVERAGE LICENSES TELECONFERENCED
Moved CSHB 213(L&C) Out of Committee
             HB 276-MOTOR VEHICLE DEALER EMPLOYEES                                                                          
                                                                                                                                
3:48:12 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  next order of business  would be                                                               
HOUSE BILL NO.  276, "An Act making the Alaska  Wage and Hour Act                                                               
inapplicable to  certain employees of motor  vehicle dealers; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
3:48:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STEVE  THOMPSON,  Alaska  State  Legislature,  as                                                               
sponsor,  said this  bill would  clarify that  auto sales  staff,                                                               
auto service writers, and auto  finance personnel are exempt from                                                               
Alaska's minimum wage and hour act.   These employees are paid on                                                               
commission and  have never been  hourly employees.   He explained                                                               
that HB  276 was drafted in  response to confusion caused  by the                                                               
regulation,  8  AAC  15.910  (a)   (16),  which  read,  "straight                                                               
commission" means a  fixed percentage of each dollar  of sales an                                                               
employee  makes; ...."   This  regulation  became interpreted  to                                                               
mean that the  commission must be applied to the  gross amount of                                                               
the sale.   While  this interpretation  might be  appropriate for                                                               
some  commission   sales,  such  as   real  estate,  it   is  not                                                               
appropriate  or customary  for auto  sales.   An auto  dealership                                                               
must pay for the vehicle first  from the sale price.  Advertising                                                               
laws prevent  an "add on charge"  to an advertised sale  price to                                                               
accommodate a commission.   Thus, if a net sale  is three percent                                                               
of  the  gross,  the  dealer  cannot pay  a  commission  of  five                                                               
percent.   This  bill will  clarify the  long-standing employment                                                               
practices  of  the industry  by  maintaining  a commission  based                                                               
employment  system   that  works  well  for   both  employer  and                                                               
employees.     The  DLWD  has   been  helpful  and   amended  its                                                               
regulations; however, as  a result of litigation  it is necessary                                                               
to seek final clarification in statute.                                                                                         
                                                                                                                                
3:50:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked for the distinction  between auto                                                               
sales transactions and  other industries.  He  asked whether this                                                               
requirement should apply to other retail sales' businesses.                                                                     
                                                                                                                                
JANE PIERSON, Staff, Representative  Steve Thompson, Alaska State                                                               
Legislature, said she  did not think store  sales commissions are                                                               
supplemented by  salaries.  For example,  it would take a  lot of                                                               
shoes to make a living.   She related her understanding that auto                                                               
sales are  one of the few  industries in which the  dealership is                                                               
selling a product it purchased from the manufacturer.                                                                           
                                                                                                                                
3:52:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON remarked  department stores  likely own                                                               
the goods.  He related  his understanding that the definition for                                                               
straight commission  applied to gross,  but not net cost  for the                                                               
dealership.                                                                                                                     
                                                                                                                                
MS. PIERSON answered yes.                                                                                                       
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked  whether this  bill would  exempt                                                               
all auto dealership employees from the wage and hour statutes.                                                                  
                                                                                                                                
MS.  PIERSON  deferred  to Marten  Martensen,  president  of  the                                                               
Alaska Auto Dealers Association to answer.                                                                                      
                                                                                                                                
3:53:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked  whether  federal  wage and  hour                                                               
regulations would offer protections to auto employees.                                                                          
                                                                                                                                
MS.  PIERSON answered  no;  that this  provision  falls under  AS                                                               
23.10.055(a),  which  pertains  to  exemptions,  compensation  of                                                               
executives, administrators, and professionals.                                                                                  
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked whether it was  her understanding                                                               
that  federal  law would  not  apply,  in  instances in  which  a                                                               
salesperson did not earn sufficient commissions.                                                                                
                                                                                                                                
MS. PIERSON answered no.                                                                                                        
                                                                                                                                
3:54:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON said under HB  276, the car sales person                                                               
would not have a guaranteed  minimum wage or straight commission,                                                               
but would earn a commission on net sales.                                                                                       
                                                                                                                                
MS. PIERSON answered yes.                                                                                                       
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked  whether the  employee negotiates                                                               
with the dealer on the definition of net sales.                                                                                 
                                                                                                                                
MS. PIERSON  understood that the  employee would have an  idea of                                                               
the approximate  purchase price and adjust  the sale accordingly,                                                               
such  as make  the decision  to take  a three  percent commission                                                               
rather than not sell the car.                                                                                                   
                                                                                                                                
3:55:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  said he was surprised  that the service                                                               
writer who isn't selling anything is also on commission.                                                                        
                                                                                                                                
MS. PIERSON deferred to Mr. Martensen to answer.                                                                                
                                                                                                                                
3:57:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD asked whether  any issues were identified                                                               
prior to  adoption of these  regulations.  She clarified  she was                                                               
interested in the reason the DLWD adopted the regulations.                                                                      
                                                                                                                                
GREY  MITCHELL,  Acting  Assistant  Commissioner,  Department  of                                                               
Labor & Workforce Development (DLWD),  said the department wanted                                                               
to change  the regulatory definition of  straight commission from                                                               
a very narrow definition to  ensure that the explanation the DLWD                                                               
provides  employers and  employees pertaining  to straight  sales                                                               
matched the regulatory definition.   The department said that its                                                               
application  of  the  narrow definition  of  straight  commission                                                               
wasn't being used and the regulation changes addressed this.                                                                    
                                                                                                                                
3:58:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD asked  whether  the department  received                                                               
any "pushback" during public comment.                                                                                           
                                                                                                                                
MR.  MITCHELL recalled  that  the department  did  not receive  a                                                               
significant  number   of  comments.     He  suggested   that  the                                                               
department may  have received  approximately five  comments, with                                                               
three in support, with two opposed.                                                                                             
                                                                                                                                
REPRESENTATIVE  REINBOLD asked  whether  the  DLWD realized  that                                                               
these changes  represented significant  impacts to  the industry.                                                               
She  suggested  that  the  dealerships  weigh  in  to  brief  the                                                               
committee on how the regulations impact them.                                                                                   
                                                                                                                                
MR. MITCHELL agreed.                                                                                                            
                                                                                                                                
4:00:04 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON asked  whether other industries were  impacted by the                                                               
regulation changes.                                                                                                             
                                                                                                                                
MR. MITCHELL  offered his belief  that the bill has  a definition                                                               
for "motor vehicle dealers' under  AS [08.66.350], which involves                                                               
more than  just cars,  for example,  boats.   He deferred  to the                                                               
sponsor to answer.                                                                                                              
                                                                                                                                
CHAIR OLSON remarked boats are a form of transportation.                                                                        
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  pointed  out that  the  definition  in                                                               
proposed Sec. 2  of the bill refers to a  separate definition for                                                               
motor vehicles.  He clarified that this section refers to AS 45.                                                                
                                                                                                                                
MR.  MITCHELL  agreed  that  proposed  Sec.  2,  referred  to  AS                                                               
[45.25.990]  and  the  definition   under  [AS  08.66.350].    In                                                               
response  to a  question,  he  said he  was  not  certain of  the                                                               
nuances in paragraph (3) of proposed Sec. 2.                                                                                    
                                                                                                                                
4:02:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON said  he wanted to grasp  the concept of                                                               
commissions.   He expressed interest  that the  auto dealership's                                                               
financing  staff is  also on  commission since  that job  is more                                                               
administrative in nature.                                                                                                       
                                                                                                                                
MR.  MITCHELL  answered  that  the   questions  pertain  more  to                                                               
industry  question since  the DLWD  hasn't  done a  study on  car                                                               
dealership employees.  He assumed  employees fell under a variety                                                               
of  salary payment  methods, which  might be  the reason  for the                                                               
attempt to exempt  the employees.  For example,  if the employees                                                               
were paid on  a straight commission, they would  be excluded from                                                               
overtime.   Thus, changing  the law  and excluding  this specific                                                               
group would mean it wouldn't matter  if the employees were paid a                                                               
straight commission or an hourly rate.                                                                                          
                                                                                                                                
4:04:20 PM                                                                                                                    
                                                                                                                                
MARTEN  MARTENSEN,  President,  Alaska Auto  Dealers  Association                                                               
(AADA), offered to provide in  layman's terms the reason the AADA                                                               
supports HB  276.   He said  that two years  ago, an  AADA member                                                               
came to the  board and explained the business was  being sued for                                                               
not paying their  commission sales staff overtime.   He said that                                                               
car dealers  don't pay sales  associates overtime since  they are                                                               
exempt under AS  23.10.055, and earn a straight  commission.  The                                                               
plaintiff's attorney  argued that the  employees are not  paid on                                                               
straight  commission  since  the   employees  do  not  receive  a                                                               
commission based on the fixed  percentage of each sales dollar as                                                               
defined in  regulations 8 AAC  15.910.   At this point,  the AADA                                                               
met with DLWD's  Commissioner Bishop and Mr.  Mitchell to express                                                               
concern  over  8AAC 15.910.    The  AADA explained  the  standard                                                               
industry  practice  of dealerships  is  to  pay sales  associates                                                               
based on the net sales value or "profit."                                                                                       
                                                                                                                                
4:06:40 PM                                                                                                                    
                                                                                                                                
MR. MARTENSEN  related a  scenario in which  in which  the dealer                                                               
has an on the lot vehicle  for sale at $20,000, after having paid                                                               
$18,000.  The  Continental Motors would pay  its sales associates                                                               
25  percent  of the  $2,000  profit,  or  $500.   The  department                                                               
considered this and later agreed  to change the regulation, which                                                               
was accomplished in September 2012.                                                                                             
                                                                                                                                
MR.  MARTENSEN   said  that  with   the  regulation   change  the                                                               
dealership thought it  was finally paying its  sales staff within                                                               
the law, but the plaintiff's  attorney argued that federal law 29                                                               
CFR  779.413  [pertaining to  straight  salary  or hourly  rates]                                                               
defines  straight   commission  as  Alaska's  law.     Since  the                                                               
regulations help  to clarify the  law, the judge agreed  with the                                                               
plaintiff's  attorney so  the auto  dealers still  have problems.                                                               
Therefore,  the AADA  supports  HB 276  to  change the  statutes.                                                               
Finally, a  federal law,  29 USC  213 (b)  (10) (a),  exempts car                                                               
sales associates from overtime, but Alaska statutes does not.                                                                   
                                                                                                                                
4:08:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  said  he  was  amazed  that  this  has                                                               
recently arisen.   He asked whether  in the past 20  years anyone                                                               
has raised the  issue and asked for clarification  of the federal                                                               
statutes.                                                                                                                       
                                                                                                                                
MR. MARTENSEN answered  no; the issue has never  been raised, and                                                               
it caught  the industry off  guard.   He explained that,  by law,                                                               
dealers must have written pay plans.   He said his dealership has                                                               
been in business for 45 years  and has had written pay plans that                                                               
clearly identify the salary provisions.   Employees sign pay plan                                                               
agreements  that  specify  straight commission.    Unfortunately,                                                               
this seems to represent a loophole  and the judge agreed that his                                                               
dealership is not abiding by law.                                                                                               
                                                                                                                                
4:10:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD summarized that  the lawsuit ensued, that                                                               
the  state sided  with plaintiff  and overturned  the traditional                                                               
practices.  She asked if she understood the issue correctly.                                                                    
                                                                                                                                
MR. MARTENSEN answered yes.                                                                                                     
                                                                                                                                
4:10:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  remarked that  his  sense  of this  is                                                               
different;   the  state   tried  to   support  clarification   of                                                               
regulations helpful  to the  industry, but  the court  system did                                                               
not support the practice.                                                                                                       
                                                                                                                                
MS. PIERSEN, in response to  an earlier question, said that motor                                                               
vehicles  fall under  AS  28.10, which  is  where the  definition                                                               
exists.  The DLWD worked  "hand-in-hand" with the auto dealership                                                               
to change  the regulation,  which was  not recognized  by federal                                                               
law.   This bill would  place the  regulation into statute.   She                                                               
did  not think  this  bill would  impact  industry pay  practices                                                               
since its  payment practices  haven't changed;  in fact,  this is                                                               
how the system has worked.                                                                                                      
                                                                                                                                
REPRESENTATIVE JOSEPHSON remarked that he  was glad to hear about                                                               
the written pay plan.                                                                                                           
                                                                                                                                
CHAIR  OLSON,  after first  determining  no  one else  wished  to                                                               
testify, closed public testimony on HB 276.                                                                                     
                                                                                                                                
4:12:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD   moved  to  report  HB   [276]  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.   There being  no objection,  HB 276  was reported                                                               
from the House Labor and Commerce Standing Committee.                                                                           

Document Name Date/Time Subjects
HB213 ver A.pdf HL&C 2/10/2014 3:15:00 PM
HB 213
HB213 Sponsor Statement.pdf HL&C 2/10/2014 3:15:00 PM
HB 213
HB213 Sectional Analysis.pdf HL&C 2/10/2014 3:15:00 PM
HB 213
HB213 Fiscal Note-DCCED-ABC-02-06-14.pdf HL&C 2/10/2014 3:15:00 PM
HB 213
HB276 ver U.pdf HL&C 2/10/2014 3:15:00 PM
HB 276
HB276 Sponsor Statement.pdf HL&C 2/10/2014 3:15:00 PM
HB 276
HB276 Fiscal Note-DOLWD-WHA-02-07-14.pdf HL&C 2/10/2014 3:15:00 PM
HB 276
HB276 Supporting Document-Letter DOLWD to Auto Dealers 12-6-2013Correspondence between Auto Dealers and DOL.pdf HL&C 2/10/2014 3:15:00 PM
HB 276
HB276 Supporting Documents-Letter AK Auto Dealers Assoc 01-23-2014.pdf HL&C 2/10/2014 3:15:00 PM
HB 276
HB211 ver A.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Sponsor Statement.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Sectional Analysis.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Fiscal Note-DHSS-CDDG-02-05-14.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Fiscal Note-DOA-DOP-02-07-14.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Fiscal Note-DOLWD-CS-02-07-14.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Fiscal Note-EED-SSA-2-7-14.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Supporting Document-BMC Psychiatry Report.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Supporting Document-Governor's Council on Disabilities and Special Education Summary of HB 211.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Supporting Document-NACDD Report.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB211 Supporting Document-State Employment Leadership Network Report.pdf HL&C 2/10/2014 3:15:00 PM
HB 211
HB213 Supporting Documents-Letter O'Malley's on the Green 2-7-2014.pdf HL&C 2/10/2014 3:15:00 PM
HB 213
HB213 Supporting Documents-Letter FEDCO 02-7-2014.pdf HL&C 2/10/2014 3:15:00 PM
HB 213
HB211 Supporting Documents-Letter FOCUS, Inc 02-6-2014.PDF HL&C 2/10/2014 3:15:00 PM
HB 211