Legislature(2003 - 2004)

03/24/2004 03:28 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 490-EMPLOYMENT SECURITY ACT AMENDMENTS                                                                                     
CHAIR ANDERSON announced  that the final order  of business would                                                               
be  HOUSE BILL  NO.  490,  "An Act  relating  to  the release  of                                                               
employment   security   records,    to   the   admissibility   of                                                               
determinations and decisions  regarding unemployment compensation                                                               
benefits,   and  to   contributions,  interest,   penalties,  and                                                               
payments  under the  Alaska  Employment  Security Act;  providing                                                               
that property  under the  Alaska Employment  Security Act  is not                                                               
subject to the Uniform Unclaimed  Property Act; and providing for                                                               
an effective date."                                                                                                             
Number 0466                                                                                                                     
TOM  NELSON, Director,  Employment Security  Division, Department                                                               
of  Labor   &  Workforce  Development,  noted   that  he'd  speak                                                               
primarily to  Sections 4-7, 9,  and 11-13.  He  characterized the                                                               
proposed changes  as largely "housekeeping" and  clarification of                                                               
existing statute.  The changes  align Alaska's statutory language                                                               
with federal law, and will  bring Alaska into compliance with the                                                               
unemployment  insurance overpayment  arrangement that  Alaska has                                                               
with other states.                                                                                                              
MR.  NELSON said  Section 4  authorizes the  department to  adopt                                                               
regulations providing  for the  distribution of  unclaimed excess                                                               
contributions,  while Sections  5, 6,  and 9  clarify statute  by                                                               
adding  the terms  "manager" and  "limited liability  company" to                                                               
existing definitions.   Section  7 brings Alaska  into conformity                                                               
with the  interstate reciprocal  overpayment-recovery arrangement                                                               
that  would  allow  Alaska   to  collect  unemployment  insurance                                                               
overpayments on  behalf of  other states  for reasons  other than                                                               
fraud.   He  explained that  other states  participating in  this                                                               
agreement already provide this service to Alaska.                                                                               
MR.  NELSON  further  explained  that  Section  11  aligns  state                                                               
statute  with  federal  law  by   clarifying  which  health  care                                                               
professionals  are excluded  from the  definition of  employment.                                                               
Section 12  clarifies language that  provides exclusion  from the                                                               
definition  of wages,  of  payments or  benefits  provided by  an                                                               
employer,  for  the purposes  of  educational  assistance to  its                                                               
employees.  He noted that  federal law already excludes this type                                                               
of  educational   assistance  from   the  definition   of  wages.                                                               
Section 13 removes  reference to provisions of  the Department of                                                               
Revenue  law  regarding disposal  of  abandoned  property.   This                                                               
would allow  for unclaimed excess  contributions to  be deposited                                                               
back into the  unemployment insurance (UI) trust fund,  as is the                                                               
case with federal law.                                                                                                          
Number 0629                                                                                                                     
MR. NELSON,  in response to Representative  Guttenberg, explained                                                               
that excess  contributions relate  to overpayments for  fraud and                                                               
nonfraud purposes  such as  mistakes on behalf  of a  claimant or                                                               
mistakes that  the department  might make.   An example  would be                                                               
the  department's  mistakenly writing  a  check  in excess  of  a                                                               
claimant's  eligibility.   In further  response, he  said "excess                                                               
contributions" refers  to the benefit-payment  portion of  the UI                                                               
system; he gave the example of  an employer who overpays into the                                                               
UI  system  and  said  this  would  result  in  the  department's                                                               
providing a refund or credit to that employer.                                                                                  
REPRESENTATIVE ROKEBERG  said he dislikes  this type of  bill and                                                               
explained, "You never know if there's a ringer in here."                                                                        
Number 0743                                                                                                                     
REPRESENTATIVE  GUTTENBERG referred  to  Section  7, page 3,  and                                                               
asked whether there is a national standard for entitlement.                                                                     
MR. NELSON  explained that the interstate  reciprocal overpayment                                                               
arrangement with  other states was  written in 1955,  was amended                                                               
in  1977, and  isn't  currently in  alignment  with that  federal                                                               
agreement.    He added,  "Currently  we  only are  providing  the                                                               
fraudulent  pieces  with  the  other states.    Other  states  do                                                               
provide  recovery  of  those  payments back  to  Alaska,  but  we                                                               
currently, because of our statute  definition, do not provide the                                                               
other to the other states."                                                                                                     
REPRESENTATIVE  GUTTENBERG asked  whether Alaska  was facing  any                                                               
sanctions for not being in alignment.                                                                                           
MR.  NELSON  said not  currently,  but  the department  wants  to                                                               
emphasize  recovery   of  overpayments  through   its  regulatory                                                               
processes with the  federal government.  The annual  audit of the                                                               
federal  program  had  mentioned  that the  department  needs  to                                                               
review and update the applicable statute.                                                                                       
REPRESENTATIVE GUTTENBERG  asked who  pays into  the UI  fund and                                                               
how often the  excess in the fund is examined  to recalibrate the                                                               
MR. NELSON  explained that the  employer contributes  80 percent,                                                               
and  20  percent  is  contributed  by employees.    The  fund  is                                                               
examined  annually, and  there is  a trust  fund solvency  factor                                                               
examined  yearly  that  is  based  on  several  years'  worth  of                                                               
contributions and  payments into and out  of the trust fund.   If                                                               
payments into the  fund exceed outgoing payments,  a reduction in                                                               
taxes could result, and visa versa.                                                                                             
Number 0948                                                                                                                     
TOBY  NANCY STEINBERGER,  Assistant Attorney  General, Labor  and                                                               
State Affairs Section, Civil  Division (Anchorage), Department of                                                               
Law,  noted that  she'd  address Sections  1-3,  which deal  with                                                               
allowing the release of employment  security records for criminal                                                               
investigation  and  prosecution  purposes, and  Section 8,  which                                                               
deals  with  the  binding effects  of  unemployment  compensation                                                               
decisions.  She told members:                                                                                                   
     Sections 1  through 3  of the  bill will  help criminal                                                                    
     prosecutors - state,  federal and municipal prosecutors                                                                    
     - to  investigate and prosecute criminal  cases because                                                                    
     it will help them  locate suspects, witnesses, victims,                                                                    
     and persons who are on parole  or probation.  As way of                                                                    
     background,   employers  provide   payroll  information                                                                    
     quarterly to the  Unemployment Security Division, along                                                                    
     with their employment security taxes. ...                                                                                  
     The  division also  provides  unemployment benefits  to                                                                    
     qualifying persons,  and the division  is substantially                                                                    
     federally funded.  ... The United States  Department of                                                                    
     Labor  has required  that  employment security  records                                                                    
     are  confidential,  but has  allowed  for  a number  of                                                                    
     exceptions within  Alaska Statute 23.20.110.   But none                                                                    
     of  these   exceptions  allows   for  the   release  of                                                                    
     information  for  criminal  prosecution other  than  in                                                                    
     prosecuting   cases   against    claimants   who   have                                                                    
     fraudulently    obtained   unemployment    compensation                                                                    
     The  Criminal Division  in the  U.S. Attorney's  Office                                                                    
     has  frequently wanted  employment security  records to                                                                    
     find suspects, witnesses, and  even victims, since this                                                                    
     information  is   updated  so  frequently.     However,                                                                    
     because  the statute  does not  allow for  an exception                                                                    
     for these  criminal purposes,  the division  has denied                                                                    
     the request.                                                                                                               
     We have  had the U.S.  Department of Labor  review this                                                                    
     amendment,  and ...  [it]  has approved  it.   And,  in                                                                    
     fact, the U.S. Department  of Labor has permitted other                                                                    
     states  to allow  the  release  of employment  security                                                                    
     information   for  ...   criminal  investigations   and                                                                    
     prosecutions,  and  these  states  include  Washington,                                                                    
     Iowa, Arkansas, Georgia, Utah, and Oklahoma. ...                                                                           
     Section  8   would  amend  Alaska   Statute  23.20.497.                                                                    
     Currently,  that  statute  provides  that  unemployment                                                                    
     compensation   decisions  are   not  admissible   in  a                                                                    
     subsequent  action  or  proceeding  in  another  forum.                                                                    
     This is  because in unemployment cases,  employers, ...                                                                    
     because they  have little incentive to  participate ...                                                                    
     in  an   unemployment  case  where   someone's  seeking                                                                    
     unemployment  benefits,  ...   because  employers  have                                                                    
     little  financial  interest,  because  they  don't  pay                                                                    
     unless  they  are  self-insured,   they  don't  have  a                                                                    
     financial interest in the outcome.                                                                                         
     This  amendment  would   clarify  that  ...  subsequent                                                                    
     action  would also  include an  arbitration proceeding.                                                                    
     So  it  wouldn't just  be  court  proceedings or  other                                                                    
     administrative  proceedings,  but  also  would  include                                                                    
     arbitration proceedings.                                                                                                   
Number 1152                                                                                                                     
REPRESENTATIVE  ROKEBERG  asked  Ms. Steinberger  to  comment  on                                                               
Section 4.                                                                                                                      
MS.  STEINBERGER   deferred  to  Tom  Nelson,   but  offered  her                                                               
understanding that  this section  refers to  excess contributions                                                               
paid by employers when the  department hasn't been able to locate                                                               
those persons.                                                                                                                  
REPRESENTATIVE GUTTENBERG asked Ms.  Steinberger if she is saying                                                               
there is an arbitration process built into the bill.                                                                            
MS.  STEINBERGER replied  no.   She clarified  that a  person who                                                               
terminates and  files for  unemployment compensation  is entitled                                                               
to benefits  immediately if the  termination was for  good cause.                                                               
If it was  without good cause or because  of misconduct connected                                                               
with the job, benefits are delayed for six weeks.                                                                               
MS.   STEINBERGER  provided   the  example   that  sometimes   an                                                               
individual will claim at the  employment security hearing that he                                                               
or she was  terminated due to discrimination,  while the employer                                                               
isn't able  to attend the  hearing but maintains  the termination                                                               
was because  of poor work habits.   She said it  is possible that                                                               
the  employee would  prevail at  the  hearing and  later bring  a                                                               
lawsuit  against  the  employer;   in  this  case,  the  evidence                                                               
submitted at the initial proceeding  and the decision wouldn't be                                                               
admissible in  a court  proceeding or  a Human  Rights Commission                                                               
proceeding.  She pointed out that  this bill would add that it is                                                               
also not admissible in an arbitration proceeding.                                                                               
Number 1297                                                                                                                     
REPRESENTATIVE  ROKEBERG requested  clarification  on Section  4;                                                               
particularly  the  part  indicating  that the  bill  deletes  the                                                               
sentence that says the regulations  must be substantially similar                                                               
to the provisions of the statute.  He remarked:                                                                                 
     That just scares ... me. ...  Then I looked over at the                                                                    
     sectional analysis, and  then it told me  ... what your                                                                    
     motives  were here.    That's why  I  wanted to  verify                                                                    
     this.    Under  the  sectional it  says  that  the  ESD                                                                    
     [Employment   Security   Division]  may   have   excess                                                                    
     contributions  from  employers.   Currently,  they  are                                                                    
     disposed of  under the Uniform Unclaimed  Property Act.                                                                    
     ...  So it  would appear  that ...  the intent  of this                                                                    
     section  is  to  allow  the  department  to  write  new                                                                    
     regulations  that will  allow you  to dispose  of these                                                                    
     unclaimed  funds,  as  your new  regulations  see  fit,                                                                    
     without  having to  go  through  the Uniform  Unclaimed                                                                    
     Property Act.  Would that be a correct assertion?                                                                          
Number 1403                                                                                                                     
BILL  KRAMER,  Chief  of   Unemployment  Insurance,  Division  of                                                               
Employment   Security,   Department    of   Labor   &   Workforce                                                               
Development, responded:                                                                                                         
     Section   4   authorized   the  department   to   adopt                                                                    
     regulations   providing   for   the   distribution   of                                                                    
     unclaimed,  excess contributions,  taxes.   The  change                                                                    
     removes reference  to the provisions of  the Department                                                                    
     of   Revenue  law   regarding  disposal   of  abandoned                                                                    
     property.  ...   Unemployment  insurance   federal  law                                                                    
     requires   that  unclaimed   excess  contributions   be                                                                    
     deposited  back  into  the  federally  administered  UI                                                                    
     trust fund, and that's the  reason that this section is                                                                    
REPRESENTATIVE ROKEBERG  asked if  the intent of  the legislature                                                               
had  to be  subverted because  of federal  law and  the supremacy                                                               
clause in the U.S. Constitution.   He asked if the department had                                                               
tried to refund excess payments to employers.                                                                                   
MR.   KRAMER  affirmed   that  the   department  refunds   excess                                                               
contributions  directly  to the  employer  and  said that  wasn't                                                               
being challenged in  Section 4.  He said under  the Department of                                                               
Revenue's laws,  unclaimed or abandoned  property is to  be swept                                                               
back into the  general fund.  The  federal unemployment insurance                                                               
tax Act  stipulates that these  dollars be returned to  the trust                                                               
Number 1506                                                                                                                     
LEONARD M. LINTON, Jr., District  Attorney, 3rd Judicial District                                                               
(Anchorage), Department  of Law,  testified regarding  Section 2.                                                               
He said this  provision allows his department to  stay in contact                                                               
with  victims of  crime and  witnesses through  sometimes-lengthy                                                               
court proceedings.   When people  relocate, the  department often                                                               
doesn't  have current  contact information.   He  said this  bill                                                               
helps  locate out-of-state  witnesses  and victims  of crime  and                                                               
also aids in the investigation  of sophisticated fraud cases, for                                                               
example,  a  doctor who  is  cheating  Medicaid or  an  insurance                                                               
broker  by  not  forwarding  premium payments  to  the  insurance                                                               
company.    The  district  attorney can  locate  and  investigate                                                               
former employees through their UI records.                                                                                      
CHAIR ANDERSON, upon  determining no one else  wished to testify,                                                               
closed public testimony.                                                                                                        
Number 1627                                                                                                                     
REPRESENTATIVE DAHLSTROM moved to report  HB 490 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  HB 490 was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                  

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