Legislature(2003 - 2004)
03/24/2004 03:28 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 contributions. 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 benefits. 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 here. 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 fund. 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.