Legislature(2003 - 2004)
04/10/2003 09:00 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 120
"An Act relating to the state's sovereign immunity for certain
actions regarding injury, illness, or death of state-employed
seamen and to workers' compensation coverage for those seamen;
and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken pointed out this bill was introduced by request of
the Governor and, "requires the Alaska Marine Highway System (AMHS)
crew members work-related injuries or illnesses to be covered under
the State Workers' Compensation Act. Currently this coverage is
provided through the federal jurisdiction of the Jones Act."
SUSAN COX, Chief, Assistant Attorney General, Civil Division,
Department of Law testified this bill would assert the State's
sovereign immunity in cased involving injuries, illness or death of
employees of the State who are seamen. She informed that, for
litigation purposes these workers are currently covered by
traditional maritime remedies of maintenance and care, unearned
wages as well as the Jones Act. This legislation, she stated, would
instead provide workers' compensation coverage to effectively
provide a uniform system of remedy for State employees who are
injured on the job.
Ms. Cox noted this would be accomplished by amending AS 09.52.50,
the statute that waives the State's sovereign immunity to be sued
in court. She told of a 1990 Alaska Supreme Court decision on State
of Alaska versus Robert Brown involving the Department of Public
Safety, which determined that the State's workers' compensation law
could not be applied as the exclusive remedy for seamen because the
State had unconditionally waived it's immunity to be sued and was
therefore subject to federal maritime remedies in the Jones Act.
However, she pointed out this decision also ruled that if the State
desired to withdraw its consent to sue, it could do so and provide
workers' compensation by amendment the aforementioned statute. She
informed that this approach was utilized by other states, including
Texas and North Carolina, and has been addressed at the federal
level as well.
Ms. Cox pointed out this legislation would not impact privately
employed seamen, only those employed by the State.
Ms. Cox further noted this legislation would not only affect AMHS
employees, as the Department of Public Safety, the Department of
Fish and Game and other departments also employ some workers who
qualify as seamen. However, she stated that most seamen employed
by the State work in the AMHS.
Ms. Cox stated that between 1983 and 1991, the AMHS ferry employees
were covered by workers' compensation as a result of collective
bargaining agreements with three unions. She detailed the
agreements, which provided workers' compensation coverage in lieu
of traditional maritime remedies and Jones Act litigation. In 1991,
she informed, the Alaska Supreme Court ruled that arrangement, as a
result of collective bargaining, was not enforceable and that the
unions could not waive their individual members' rights under
federal law. She stated that the only option to substitute workers'
compensation for State-employed seamen would therefore be through
legislation.
Ms. Cox expected this change would save the State money reporting
that currently seaman injured or ill on a vessel, regardless of
whether the injury or illness was caused by work, is entitled to
certain no-fault remedies. She listed these remedies as including
payment of wages until the conclusion of the voyage without
reduction to sick leave accounts; payment of the approximately $45
daily stipend, also called maintenance, until recovery and
resumption of work; and continued payment of maintenance to augment
sick leave payments until work is resumed. She compared this to
workers' compensation practices whereby most illnesses are not
covered unless occupational diseases, concluding that this
legislation would result in the use of sick leave for payment of
wages during most illnesses incurred by seamen.
Ms. Cox pointed out that workers' compensation would treat seamen
with injuries "more favorably" in that workers would collect
workers' compensation insurance rather than the $45 per day
maintenance payment. She reported the insurance payments are closer
to the amount of the employee's regular wages and no deductions
would be taken from the employee's leave account. Therefore, she
stated that workers' compensation is more beneficial for injured
employees who do not intend to sue the State for damages than other
no fault remedies provided under maritime law.
Ms. Cox qualified that the range of possible damages allowed under
the Jones Act is greater for those employees who do sue the State
for damages due to work-related injuries. However, she stressed
that the employee must prove fault or negligence on the part of the
employer and are subject to affirmative defenses, such as
comparative negligence. She furthered that the employee must hire
an attorney and pay a contingent fee. She noted that both sides in
a litigation matter incur expenses and she expected that the
absence of litigation provided in the workers' compensation program
would also save the State money.
Ms. Cox stated that State-employed seamen have benefits that many
privately employed seamen do not, including sick leave, annual
leave, health insurance, disability benefits, etc.
Ms. Cox concluded that the effective date of this legislation
provides that the changes would affect new injuries or illnesses
occurring after July 1, 2003. She noted the three-year statute of
limitations for bringing claims or lawsuits under the Jones Act and
therefore, litigation would continue for a few years.
Senator Bunde asked the amount of claims and the cost of litigation
of the current system versus the anticipated financial impact of a
change to workers' compensation coverage.
BRAD THOMPSON, Director, Division of Risk Management, Department of
Administration, informed that the Division administers the self-
insurance program for the State agencies and operations, including
workers' compensation coverage for State employees as well as the
first $1 million coverage for claims of State-employed seamen
covered under the federal maritime laws.
Mr. Thompson directed attention to the fiscal note, which indicates
significant cost saving would occur in the future. He emphasized
that the savings amount is not specified due to the "method of
funding the risk management program." He explained the program is
funded on a "cash flow basis…for the claims expected to be paid in
the next fiscal period," noting that the outstanding claims are
"far greater than the sums that we put into the appropriation for
that next fiscal period." He stated that were the program funded in
the annual manner in which private insurance operates, the premium
rates would be reduced with enactment of this legislation.
Mr. Thompson referenced a collection of spreadsheets with an
accompanying analysis [copies on file.] He stressed this data
reflects only claims resulting in an expense to the State from
illnesses and injuries. He detailed the analysis as follows.
An analysis of AMHS crew claims costs compared to those
provided under the Alaska Workers Comp Act (AWCA) for all
other state employees.
The enclosed Excel workbook contains detailed breakouts of the
actual incurred loss (cost to date plus anticipated expense)
by each individual AMHS vessel for the past six fiscal years.
To objectively analyze the AMHS employee's injury experience
to the state's overall employee injury rate, both frequency
(number of claims) and severity (loss cost) are averaged and
compared on a per 100 FTE (full time equivalent) basis.
Additional analysis was performed between AMHS and the five
state agencies with the highest workers' compensation loss
experience - to provide comparison to similar physically
demanding jobs.
AMHS shows a five year average loss rate of 41 claims per 100
FTE's in comparison the state overall workers' compensation
injury rate of 8, with the highest five agencies showing
average loss experience of 10 claims per 100 FTE's.
On a cost per 100 FTE's analysis; AMHS actual claims
experience during the last five years shows an average cost of
$197,065 compared to the top five state agencies averaged cost
of $64,145 during the same period.
The most significant difference is the award for the non-
economic damages, not provided under workers compensation
remedies and that life illnesses that are alleged to manifest
during a voyage are covered under the Jones Act.
Mr. Thompson reported that this legislation would result in an
approximate savings of $850,000 in future years.
Senator Bunde asked whether a comparison was made against the
period of time when the employees were covered under workers'
compensation insurance in accordance with the bargaining unit
agreements.
Mr. Thompson replied that because the information is co-mingled
with claims submitted by other Department of Transportation and
Public Facilities employees, such a comparison has not been
undertaken.
Senator Hoffman asked why this change to workers' compensation
coverage was not implemented in the past given the predicted
significant savings.
Ms. Cox responded the matter has been considered for several years,
although it has been "in need of a sponsor". She furthered that
although the 1990 Alaska Supreme Court decision "suggested" this
change is allowable, uncertainty over the federal constitutionality
was not settled until recently.
SFC 03 # 44, Side B 09:49 AM
Senator Taylor asked what information the fiscal note is based
upon. He asked whether evidence of a savings exists and when this
savings would be realized.
Mr. Thompson referenced the spreadsheets showing a five-year
historical average comparison of the rate of claims and cost per
claims of MHS employees to other State employees, which
demonstrates. He qualified that the duties performed by MHS
employees is different than other Department of Transportation and
Public Facilities employees and the employees of the four other
comparison agencies, but pointed out that Department of Labor and
Workforce Development statistics indicate similar numbers of
Occupational Safety and Health Administration (OSHA) reports of
non-fatal injuries.
Senator Taylor asked if State policy requires MHS employees file
notification of injuries regardless of whether costs are incurred.
Mr. Thompson replied that recently enacted regulations require such
reporting, although this process is under implementation.
Therefore, he noted the data does not reflect the incidents that
had no expense.
Ms. Cox added that federal and international law requires reporting
of all work-related injuries, in part, to accurately track safety
issues. She noted the higher incidences of claims for MHS employees
because illnesses and non-work related injuries are reported as
well.
Senator Taylor understood the difficulty in comparing apples to
oranges.
Ms. Cox agreed and stated that many incidences do not result in a
claim.
Senator Taylor commented on the State workers' compensation system
and opined that it is inadequate in protecting workers injured on
the job.
Co-Chair Wilken noted a response would come later.
Co-Chair Wilken ordered the bill HELD in Committee.
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