Legislature(1995 - 1996)
04/13/1995 08:05 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 218 - PROMPT PAYMENT OF TRUCKING SUBCONTRACTORS Number 097 CHAIR JAMES announced the next item on the agenda was HB 218. She stated she had drafted a new sponsor statement, which she felt would clarify some of the previous concerns. She said this bill was filed at the request of the Alaska Independent Truckers Association to provide for their prompt payment. Recent events have demonstrated the inability of truckers to receive prompt payment. She argued this was not only an economic issue, but a safety issue as well. To solve this, she recommended that the truckers would need to organize their own contract and billing system, which they are currently doing. She stated that subcontractors are covered under statutes for prompt pay and employees are covered by labor laws. She pointed out this statute support does not include the owner-operators of trucks. She thought the independent owner-operators of trucks must be able to depend on prompt payment in order to maintain their trucks to guarantee safe operation of them on our roads. She pointed out this bill was specific to the owner-operator of trucks and did not include any other segment of small business. She said the truckers were instituting a system of semi-monthly billings and this bill would allow for those bills to be paid within 14 days. She stated there were people to testify on teleconference and she would like to hear their testimony before any other discussion of this bill by the committee. Number 142 BOB EAKMAN, General Manager, Alaska Independent Truckers Association, expressed his support of HB 218. He mentioned they did have problems getting paid, occasionally being delayed as long as six months. He said this type of situation cannot continue and agreed that semi-monthly billing would be a partial solution. He pointed out the owner-operators are unique in that they are sometimes hired for a job as they are driving for another, and so cannot always get a signed contract. He thought this was something the industry would have to strive for. He stated they asked for the twice monthly billing law in order to keep their trucks maintained and in compliance. He pointed out that the long haul truckers already are required to be paid on a twice monthly basis, regardless of whether or not those companies hiring them got paid or not. In closing, he argued that everyone in the state was affected by the lack of owner-operators getting paid promptly. He argued when there was a delay in payment, the first thing to be compromised was the maintenance of their trucks. BILL EVANS, Owner, Eagle Equipment, reiterated that prompt payment for independent owner-operators was an issue of public safety. He stated there were three incidents he was aware of where the lack of prompt payment led to poor maintenance of trucks, which caused the deaths of individuals involved in accidents. Thus, he thought it was going to be a question of who would die next. He stated he had equipment that he would not allow on the highway, because he did not have the money to keep them maintained. He commented he had just recently received payment for work he had completed the previous July, after several phone calls and duplication of the paperwork. He said he was a small business and needed the guarantee of prompt payment, so that he could pay his bills and keep his trucks properly maintained. He reiterated his main concern was public safety. Number 288 REPRESENTATIVE OGAN verified that Mr. Evans had trucks he could not afford to repair and operate, because he had not received payment for work completed. MR. EVANS agreed. REPRESENTATIVE OGAN asked if independent truckers had the right to attach liens on jobs, when not receiving payment. MR. EVANS stated this was the case in some instances, if the owner-operator could find the contractor and get all of the paperwork completed. He gave an example of a personal circumstance, where he had tried to collect payment and could not locate the contractor and had to duplicate paperwork and phone calls without success. REPRESENTATIVE OGAN asked whether the contractors were required to be bonded. MR. EVANS agreed, but reiterated it was difficult to make contact with them. CHAIR JAMES explained that the problem was with the brokers. She stated the contractors may pay the broker, who may or may not pay the owner-operators. She explained the reason that the owner-operator is not covered by law is that they are not considered subcontractors. She further pointed out that the broker may or may not be bonded, and so this may not be an option of recourse for the owner-operators. She added that those brokers that are responsible, usually put their truck drivers on payroll. She stated her investigation documented that the real problem was usually with the brokers, but argued that outlawing brokers would really hinder entrepreneurial enterprises that create jobs. She thought that a requirement of prompt payment following semi-monthly billing would at least eliminate those brokers that were not responsible. MR. EVANS agreed and stated he would be glad to be placed on the payroll of a company as an employee. Number 344 MR. EAKMAN stated the owner-operators would agree to be placed on payroll if there was no other alternative. He said they were independent businessman, who had to carry insurance and get a business license. Thus, he argued that most of the owner-operators would agree to go on payroll as an employee, but would prefer to remain as independent businessmen. REPRESENTATIVE OGAN asked if the brokers had any type of performance bonds or surety bonds required when they bid on jobs. He stated he assumed they were bidding as a subcontractor. MR. EAKMAN answered there was no bonding requirements for the brokers themselves. REPRESENTATIVE OGAN thought it would be more reasonable to require bonding for the brokers as subcontractors. He thought owner-operators would then have something they could attach with liens. He stated that should the brokers lose their surety bond, because of lack of payment of their bills, they would then not be able to stay in business, as no one would insure them. Number 381 CHAIR JAMES stated she was not sure that this would apply in this situation. She mentioned that the brokers qualify as subcontractors and receive their payment within seven days after payment to the prime contractor. She added that everyone is covered except the owner-operators under the current law. She stated that under current law, the only way the truckers would be covered would be if they were listed as payroll, which is not applicable as they provide not only their labor, but their trucks and equipment also. Number 399 REPRESENTATIVE PORTER stated the only difference he saw between the provision for paying the subcontractor and this bill, was that the subcontractor received payment 7 days after the prime contractor gets paid, where this bill requires payment to the owner-operator 14 days after billing. It does not take into account whether the subcontractor got paid or not. He did not think this necessarily created a fair situation. CHAIR JAMES suggested this was the same situation as payroll. She said subcontractors are required to meet payroll, whether or not they receive their payment. She stated that the responsible brokers are already paying their owner-operators on a semi-monthly basis. Number 417 REPRESENTATIVE PORTER stated he did not disagree with her statements, but argued there was a difference in that this bill covers a relationship between two entrepreneurs and the other situation is a businessman/employee relationship. He pointed out this bill was requiring one entrepreneur to be paid by another who may or may not have been paid. CHAIR JAMES agreed, arguing that if a broker does not have sufficient funds to pay an owner-operator, who would otherwise be on payroll, they will not be in business. REPRESENTATIVE PORTER thought this was maybe the case with the broker, because the contractor did not pay them. Number 423 REPRESENTATIVE GREEN said he could understand the concerns of Representative Porter, but thought Chair James was trying to establish a mini-call. He explained that a contractor receives segments of their pay as they progress through the contract. He added that the owner-operators do not have this ability, citing stories of truckers having their jobs change en route. He understood that the problem was that owner-operators were not in the position to contract and make calls. CHAIR JAMES stated she had studied this issue thoroughly and could even cite names of individuals involved. She thought this was a situation that needed some type of control, and that this bill was the best way to implement it. She said the owner-operators were already implementing a system of semi-monthly billing and whenever possible, would try to get the terms of their contracts written down. She pointed out that these people are unique in that they are independent contractors, that fit the mold of payroll employees. She thought this bill would give the owner-operators an opportunity to write the prime contractor and state they are not getting paid. This would allow the prime contractor to require the subcontractor to pay these people when receiving future payments. Number 477 REPRESENTATIVE OGAN disagreed that owner-operators fit the mold of payroll employees. He argued they were running a business, getting the tax benefits, and were writing off the depreciation of their equipment. He further stated they were working their own hours. Thus, he felt they were not really payroll-type employees. He said that with the benefits of owning a business, come some risk. He stated he did not have a problem with affording owner-operators some protection for prompt pay, but not on a semi-monthly basis. He argued they needed to follow the same type of system as the rest of the construction industry, which was that they would get paid seven days after the subcontractor got paid. Number 493 REPRESENTATIVE ROBINSON said she supported this bill, but was curious as to why the sponsor chose a schedule of 14 days, rather than another period of time such as 30 days. Number 498 CHAIR JAMES replied that she thought this period of time was generous, in that it was routine in the industry to pay on a semi-monthly basis. She said that long-haul truckers get paid on a semi-monthly basis. MR. EVANS agreed this was a standard schedule for the industry, giving an example of a job he had hauling snow for the state of Alaska. He said that he was paid every two weeks from the state on this job. KAREN CHASSE, Qwik Sand Trucking, said she wanted to address Representative Ogans comments about filing a lien against the subcontractors bond. She said the law currently requires them to file a lien within 90 days of completing work on the job. The normal pay situation was to wait more than 90 days for payment. Thus, they were too late to be able to file a lien when they realized they were not going to get paid. She commented her husband had been involved with the trucking industry for over 20 years and was the owner of Qwik Sand Trucking. They considered themselves a small business and filed all of the required paperwork, carried insurance, and billed monthly. She argued they were only asking to be paid in a prompt manner and failed to understand how anyone can be opposed. She thought the contractors had been taking advantage of the owner-operators for years to the point that most of the truckers were afraid to even ask for their money for fear of being black-balled. She stated the brokers were afraid to ask for their money for the same reason. She argued the whole system worked on fear and intimidation. She said there were many owner-operators who wished to testify, but were too scared. She thought the only way this situation could be stopped was by passage of this bill. She offered to answer any questions from the committee. Number 564 REPRESENTATIVE PORTER asked what the difficulty would be if this bill were amended to read that the owner-operator would be paid x number of days after the broker or subcontractor got paid. He thought this would be more in line with the laws for payment to subcontractors. MS. CHASSE said the problem was that the prime contractors were not paying the subcontractors in a timely manner. She stated the subcontractors/brokers were not asking for their money, as they were just as intimidated as the owner-operators. REPRESENTATIVE PORTER said he did not doubt the validity of this, but asked what she suggested to do in a situation where the broker was not paid by the prime contractor, but under this bill would be required to pay the owner-operators regardless. MS. CHASSE thought this bill would force the broker to demand their money from the prime contractor. Number 597 REPRESENTATIVE OGAN commented that some of the statements he heard made him shake his head. He said he had been in business himself for 20 years and never felt intimidated to ask for his money. He stated he wanted to help, but was uncomfortable with the provision requiring payment within 14 days. He would rather see an approach along the line of payment for subcontractors, requiring payment a certain amount of time after the contractor gets paid. He thought that with the way the bill was written, it was placing an undue burden on the subcontractors/brokers. He said the demands were just too great to have a payroll situation for an independent businessman. He stated that everyone else was on a 30-day cycle for payment. CHAIR JAMES reiterated that twice a month was standard for the trucking industry. Number 629 REPRESENTATIVE ROBINSON noted this bill was additionally referred to the Transportation and Judiciary Committees. She thought the Transportation Committee might be more appropriate to deal with the concerns raised. Thus, she moved to adopt the proposed committee substitute, Version G, dated 3/6/95, as the working document for the committee. CHAIR JAMES asked if there were any objections. Hearing none, the committee substitute was adopted. Number 649 REPRESENTATIVE ROBINSON moved to pass CSHB 218(STA), Version G, dated 3/6/95, out of committee with individual recommendations and with the suggestion that the sponsor work with those members who had concerns, to see that they were addressed before the bill is heard in the next committee. CHAIR JAMES agreed that the Transportation Committee was the appropriate place for these concerns to be heard. She asked if there were any objections. Number 657 REPRESENTATIVE OGAN objected for purposes of discussion. He said he would like to see this bill amended to fit standard contracting practices, where the owner-operators would be paid in x amount of days after the subcontractor/broker. He also suggested they look at some bonding requirements for the brokers. He also recommended that the owner-operators get together with their association and draft contracts, and then not go to work before contracts are written and signed. He stated it seemed as if this was a situation of Big Brother helping out people who do not do their paperwork and then get in trouble. He stated that having mentioned his concerns, he would remove his objection. CHAIR JAMES asked if there were any other objections. Hearing none, CSHB 218, Version G, dated 3/6/95, passed out of committee.