Legislature(1993 - 1994)
03/10/1994 08:00 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 459 - DAMAGES & ATTORNEY FEES FOR UNPAID WAGES CHAIRMAN VEZEY resumed control of the gavel and opened HB 459 for discussion. The HOUSE LABOR & COMMERCE COMMITTEE is the sponsor of HB 459. Number 602 REPRESENTATIVE ELDON MULDER, MEMBER, HOUSE LABOR & COMMERCE COMMITTEE, addressed HB 459. He stated HB 459 "addresses the awarding of punitive damages and claims of underpaid overtime compensation where, statutory minimum wages under the Alaska Wage & Hour Act, state statute imposes the payment of unpaid minimum wages that are overtime compensation to an employee, by an employer, who has violated provisions of the Alaska Wage & Hour Act." The employer may be liable for mandatory liquidated damages of an equal amount, whereby if an employer is found in violation of not paying overtime, HB 459 would double that amount as a penalty. REPRESENTATIVE MULDER stated the 1991 Alaska Supreme Court case involving Kinney Shoes ruled that liquidated damages are mandatory, and that individual settlements out of court, that did not include liquidated damages were invalid. Prior to the Kinney Shoes decision, an employee with a claim for underpaid overtime or minimum wages had two options: 1) They could file a complaint with the DOL who was able to negotiate a settlement; or 2) they could attempt to reach a private settlement with the employer in question. With either option the settlement could be reached for an amount below full liquidated damages. REPRESENTATIVE MULDER explained current law states an employer in violation of Alaska's Minimum Wage or Overtime Compensation Laws is automatically liable for liquidated damages, regardless of the circumstances. Though intended to be a deterrent to employers, this law creates an imbalance in certain situations. An employer who makes an unintentional mistake is treated as severely as the employer who was trying to cheat their employee. In this case, the employer faces the possibility of paying full liquidated damages, plus court costs, or settling out of court for the claim, plus full liquidated damages. The Federal Labor Standards Act (FLSA), upon which the Alaska Wage & Hour Act is based, contains identical language to AS 23.10.110 (a) in HB 459. REPRESENTATIVE MULDER noted the FLSA also states if the employer shows to the satisfaction of the court, that the act or omission giving rise to such action, was in "good faith" and he had reasonable grounds for believing his act or omission was not in violation of the FLSA, the court may, in its sound discretion award no liquidated damages or award any amount thereof, not to exceed the amount specified in 29 U.S. Code 216. This language, he felt, allowed employers flexibility in overtime disputes. REPRESENTATIVE MULDER stated the goal of HB 459 is to change state standards regarding the awarding of liquidated damages to be congruent with the federal standards as they currently exist. There will still be protection for the employee to seek punitive damages and the employer who makes a mistake in "good faith" is allowed flexibility, provided they meet the burden of proof. He emphasized "good faith" is contingent upon the proof that the employer demonstrated some sort of action to act in good faith. CHAIRMAN VEZEY questioned the interpretation of section 2, subparagraph (c). He interpreted "the prevailing party will be allowed cost according to court rule, and if the commissioner's the prevailing party, he will still pay the costs." REPRESENTATIVE MULDER responded currently, if an employee takes their employer to court and prevails for liquidated damages, the employer is liable for both party's attorney fees. However, in this instance if the employer had prevailed, the employer is not allowed any attorneys fees. He noted the employee has nothing to lose other than paying for his/her own attorney. Section 2, subparagraph (c), allows whichever party prevails in the court case to seek attorneys fees. Number 688 CHAIRMAN VEZEY clarified under current law "plaintiff" is the only one to recover costs and HB 459, section 2, subparagraph (c), would change this to the "prevailing party." TAPE 94-27, SIDE A Number 000 CHAIRMAN VEZEY continued. He felt HB 459 stated when the commissioner is the prevailing party, the commissioner shall remit the attorneys fees. Number 006 REPRESENTATIVE MULDER corrected the second sentence, of section 2, clarifies what is already in current statute. Current statute states, "to be paid by the defendant." He explained when the commissioner is the prevailing party in an action, brought under section 2, the commissioner shall remit the attorneys fees to the Department of Revenue, into the general fund. CHAIRMAN VEZEY thought HB 459 may be clearer if words were added to clarify the commissioner shall remit the fees to the Department of Revenue. REPRESENTATIVE MULDER responded the operative words are, "When the commissioner is the prevailing party,..." Thereby, he shall remit the attorneys fees to the Department of Revenue, the general fund. He felt HB 459, as written, is legally correct, however, it may be confusing in laymen terms. Number 063 REPRESENTATIVE OLBERG felt section 2, lines 13-14, would be clearer if it stated, "recovered attorneys fees." Number 072 REPRESENTATIVE MULDER was amenable to REPRESENTATIVE OLBERG's revision. He clarified HB 459 shall state, "The commissioner shall remit the recovered attorneys fees." CHAIRMAN VEZEY felt this revision would clarify the section. Number 082 REPRESENTATIVE OLBERG moved for an amendment to HB 459, whereby on line 14, after the word "the", insert "recovered." Hearing no objection, CHAIRMAN VEZEY announced the amendment to HB 459 was adopted. Number 095 REPRESENTATIVE B. DAVIS asked the definition of "good faith." Number 102 REPRESENTATIVE MULDER replied the definition of "good faith" is outlined through precedents within previous federal court cases. He said they had tried to define "good faith," but they did not because they would have been establishing a standard which may not be congruent with the federal standard. The purpose of HB 459 is to minimize litigation, but by creating a new definition of "good faith," he felt they would be encouraging more litigation. Number 130 REPRESENTATIVE OLBERG clarified HB 459 gives the court an option by saying "the court may decline to award liquidated damages," if in fact, the employer had acted in "good faith." Number 137 REPRESENTATIVE SANDERS stated he had trouble with HB 459 as both a laborer, and a businessman. He felt overtime problems with honest employers were usually settled outside of court, one on one with employer/employee. He believed overtime cases were not taken to court unless "you are trying to screw somebody." Number 148 REPRESENTATIVE MULDER responded, under the current interpretation of law, settling overtime disputes out of court was illegal. The dispute with the employee could have only been settled by doubling the amount owed to them. One on one settlements cannot be settled for anything less than double what that individual claims to be owed. Number 160 CHAIRMAN VEZEY clarified REPRESENTATIVE SANDERS point as the courts do not have the chance to enforce the law unless the action is brought before them. Number 188 J.R. 'RANDY' CARR, CHIEF WAGE & HOUR DIVISION, DEPARTMENT OF LABOR, answered questions on HB 459. He stated the Kinney Shoes decision established a rule of law that no one had ever anticipated would exist. MR. CARR said, the 1959 Liquidated Damage statute was first interpreted by the Supreme Court in 1979, in Musara v. AIA Industries. In this case, the Supreme Court ruled that liquidated damages were a mandatory penalty; however, the jury waived the liquidated damages for this employer, found guilty of overtime violations. On appeal, the Supreme Court clarified, if a matter goes to court and a judgment is rendered, the judgment must include a 100 percent penalty. He termed this law as a "competitive assistance to employers." MR. CARR explained in the Kinney Shoe case, the employer was subject to a class action lawsuit; however, they approached the employees out of court and settled with them for about 30 cents on the dollar, of the actual documented overtime they were due. Kinney Shoes eroded the legal class being represented. The employees' attorneys argued that the penalties were punitive and not compensatory; therefore, the penalties are not the employees' to give up. The court agreed with this argument. MR. CARR stated prior to Kinney Shoes, most disputes were settled by the Department of Labor (DOL). He believed every one of the cases were settled for less than the full amount of liquidated damages. After Kinney Shoes, the DOL asked the Employment Law section of the Bar Association if they would play the DOL's past supervising approval authority role over settlements. MR. CARR clarified the DOL does support the concept of returning the law to the condition it was in pre-Kinney Shoes. If this were to happen, both the DOL and specific parties could settle cases for less than liquidated damages, short of court judgment. The DOL is willing to enter into a arrangement, whereby they can review and approve settlement agreements submitted to them by private council. The DOL does, however, want to maintain the mandatory status of a liquidated damage as defined by the Musara v. AIA Industries decision. The leverage gained by this decision has enabled the state to settle 100 percent of its overtime cases, because employers know they must deal fairly in settlements or they will have to go to court and pay an additional 100 percent on top of the actual claim. MR. CARR felt HB 459 goes beyond necessity. Section 3 is a concern to the DOL because it deals with elements that exceed current federal law. The DOL felt, because the commissioner could settle for less than liquidated damages and would not have the "good faith" exception, the dual status created with the private parties council would be found unconstitutional in the future. If the dual status is found unconstitutional, the state will lose the ability to have the mandatory penalty and to settle cases short of 100 percent liquidated damages. The DOL believed section 3, subparagraph (e), to be the heart of the concept, whereby the chief labor official would have approval authority to oversee settlement agreements. Section 3, subparagraph (f), was a concern because they felt parties, without representation, were "too unsophisticated to understand their rights and what they may be giving up..." MR. CARR expressed there are very few minimum wage complaints, compared to overtime complaints under the Wage & Hour Act. The DOL would like all employers to have the same competitive advantage. Employers acting in "good faith" should have an advantage, but confusing language such as "good faith" may be questioned in the future and increase litigation. Number 383 REPRESENTATIVE G. DAVIS asked the DOL proposed definition of "good faith" they may want to see incorporated into HB 459. Number 389 MR. CARR answered "good faith" need not be defined in HB 459, because it is defined through previous decisions. The problem is the facts are different for every case, and if a definition of "good faith" was supplied, the facts would still be arguable for every case. Number 400 REPRESENTATIVE B. DAVIS questioned if MR. CARR had testified before the Labor & Commerce Committee. Number 402 MR. CARR replied he was unavailable at the previous hearing. Number 403 REPRESENTATIVE MULDER stated the DOL had testified. Number 407 REPRESENTATIVE B. DAVIS inquired why REPRESENTATIVE MULDER did not take the suggestions from the DOL because HB 459 appeared unchanged. Number 409 REPRESENTATIVE MULDER responded he was still trying to pursue the definition of "good faith." It was the Labor & Commerce Committee's opinion to not stop HB 459, with his assurance that HB 459 would not be put to the floor until they had come to an adequate solution about the definition of "good faith." Number 419 REPRESENTATIVE B. DAVIS asked REPRESENTATIVE MULDER'S view of the DOL's request to have the laws as they were pre- Kinney Shoes decision. She thought the DOL's request may be suitable. Number 423 REPRESENTATIVE MULDER answered HB 459 does revert to pre- Kinney Shoes decision; however, it does supercede pre-Kinney Shoes by relating directly to "good faith," and the legislature's ability to determine what is "good faith." The inclusion of attorneys costs in HB 459 was an attempt to make a level playing field, whereby those who prevail are entitled to attorneys fees. He emphasized the agreement on an adequate definition of "good faith" was very close. Number 440 MR. CARR agreed with REPRESENTATIVE MULDER that negotiations are still taking place to accomplish a suitable result. Number 442 REPRESENTATIVE KOTT commented HB 459 did have a Judiciary Committee referral, and as a member of that committee, he felt they would take care of the definition problem. Number 450 MR. CARR clarified the DOL does support amending the law, so that the mandatory penalties are somewhat reduced; however, a mandatory penalty is still required to maintain leverage. Number 456 REPRESENTATIVE MULDER agreed that those found guilty of purposeful negligent overtime compensation should be penalized. He felt HB 459 is intended to help those who never intended to cheat their employees. REPRESENTATIVE SANDERS responded the amount of those who do honestly make mistakes are already correcting the disputes internally. He believed the laws should address those who intentionally continue to avoid overtime compensation over the years. CHAIRMAN VEZEY asked the pleasure of the committee. He stated he would not be opposed to bringing a committee substitute before the committee which incorporates the adopted amendment. Number 473 REPRESENTATIVE G. DAVIS commented he would like to see HB 459 moved from committee. He felt the DOL had a vested interest and they would follow HB 459 to the Judiciary Committee. REPRESENTATIVE KOTT is also a member of Judiciary Committee and he would be able to convey the committee's interests. REPRESENTATIVE G. DAVIS moved to adopt CSHB 459 reflecting the amendment adopted in committee. Hearing no objection, the House State Affairs Committee adopted CSHB 459, as amended. REPRESENTATIVE G. DAVIS moved to pass CSHB 459 as amended from committee, with attached fiscal notes and individual recommendations. Number 490 CHAIRMAN VEZEY asked the committee secretary to call the roll on REPRESENTATIVE G. DAVIS' motion. IN FAVOR: VEZEY, KOTT, B. DAVIS, G. DAVIS, SANDERS, OLBERG. OPPOSED; NONE ABSENT: ULMER CHAIRMAN VEZEY announced CSHB 459, as amended passed from the House State Affairs Committee. ADJOURNMENT CHAIRMAN VEZEY adjourned the meeting at 10:01 a.m. BILLS NOT HEARD
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