Legislature(2007 - 2008)BELTZ 211
01/22/2008 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB28 | |
| SB107 | |
| SB147 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 147 | TELECONFERENCED | |
| += | SB 120 | TELECONFERENCED | |
| += | SB 28 | TELECONFERENCED | |
| += | SB 107 | TELECONFERENCED | |
SB 147-WORKERS' COMP EMPLOYER LIABILITY
2:15:40 PM
CHAIR ELLIS announced SB 147 to be up for consideration.
SENATOR FRENCH, sponsor of SB 147, stated this bill makes a tiny
change to the workers' compensation statutes and said that
workers' compensation is basically a no-fault insurance policy
that says if you're hurt at work, you get payment for your
injuries. He read the sponsor statement:
Workers' compensation laws represent a simple bargain
between employers and employees. By purchasing a
worker's comp policy, an employer gains immunity from
lawsuits that arise out of workplace injuries. This
part of the workers' comp bargain is referred to as
'exclusiveness of remedy,' meaning that the employer
who buys the policy knows that there won't be
expensive and time consuming court cases arising out
of workplace accidents. Injured workers get worker's
comp benefits and nothing more.
By entering into the bargain the employee gives up the
right to sue for damages. In exchange for giving up
the possibility of a large court award, the employee
gets a relatively swift and fair, though smaller,
compensation benefit for his or her injuries. Both
sides also agree to a 'no fault' provision, meaning
that there is no inquiry into who was at fault in the
events giving rise to the accident.
Revisions to the workers' comp statutes in 2004 added
a clause to the workers' comp laws that undermine this
bargain, and works to the detriment of workers injured
by third parties who do not purchase workers' comp
policies. Under the 2004 changes, employers who are
merely 'potentially liable' for buying a workers' comp
policy, but who do not actually purchase a policy, can
still get the benefit of the 'exclusiveness of remedy'
provisions in workers' comp.
This legal imbalance is having real world
consequences, most notably at large worksites where a
project owner is supervising many subcontractors.
Because the project owner is 'potentially liable' for
purchasing workers' comp policies to cover all the
work that takes place at the work site, the project
owner enjoys immunity from lawsuits that result from
its own negligence. Severe injuries take place at some
of these large construction projects. When these
injuries are caused by the negligence of the owner,
the injured worker is left with only workers' comp
benefits, which, as the attached letter shows, do not
fully cover the damages inflicted by the injury.
Removing the phrase 'or potentially liable' from the
statute restores the bargain to its proper form. If an
employer wants immunity, he or she must buy a policy.
An employer who gets immunity without buying a policy
is getting something for nothing. Basic fairness
should not allow such a situation to continue. Please
join me in supporting a small change to the law that
will result in big changes to the lives of working
people.
2:21:38 PM
SENATOR STEVENS said he thought he was missing something and
asked what the employee loses if he is already covered under
workers' compensation.
SENATOR FRENCH replied that he loses the ability to sue for more
damages than a lawsuit allows - like future loss of income or
pain and suffering for instance. Workers' compensation has
fairly strict remedies that while being certain are smaller.
2:22:22 PM
SENATOR BUNDE asked if this law will benefit the people who sell
workers' compensation more than the injured worker.
SENATOR FRENCH answered that is right. He added, "In those
instances where the general does the responsible thing and pays
money for a policy, yes, he or she will enjoy that coverage."
SENATOR BUNDE asked how often a general contractor is
potentially liable for not purchasing workers' compensation.
2:23:55 PM
PAUL LISANKIE, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development (DOLWD), answered
that he couldn't say. When the bill passed in 2004, he
understood the intention was that general contractors and
project owners would have some type of insurance policy that
would pick up this potential contingent liability. He didn't
know if that had started to happen or not.
SENATOR BUNDE asked if Linda Hall, Director, Division of
Insurance, would be a resource the committee would want to
contact on who is buying insurance.
CHAIR ELLIS replied they could do that for the next meeting.
2:25:37 PM
SENATOR HOFFMAN asked why the change was made in 2004.
MR. LISANKIE replied that his notes weren't complete on those
discussions.
2:26:30 PM
SUSAN ORLANSKY, Feldman & Orlansky & Sanders, said her firm
represents a wide variety of clients in litigation including
both injured employees and companies that are sued for
negligence at a job site. She underscored Senator French's
perspective that SB 147 is a simple fix for a couple of problems
that were created by the 2004 language that added the words "or
potentially liable" to AS 23.30.055. There are three good
reasons for this fix; first undoing those words will promote job
safety. She explained that right now general contractors and
project owners who are the entities with the greatest oversight
over the project have no incentive to be concerned about safety.
They are technically liable to pay workers' compensation
benefits to any worker on the job site; so the general
contractor and project owner are now totally exempt from any
risk of tort liability no matter how unsafe their own practices
may be. "In reality, what is unfair about it is they don't ever
have to pay workers' compensation benefits to the employees of
the subcontractors," she said. The law already requires and has
required for decades that each subcontractor carry its own
workers' compensation insurance for its own employees. General
contractors and owners can enforce this through they have master
subcontracts which require subs to show a certificate of having
purchased workers' compensation insurance for their employees
before they ever begin any work on the project. This means the
general contractor and project owner have assumed a potential
liability, but it's never a realistic one.
This leads to the second reason for SB 147. The 2004 law added a
protection from tort liability for employers who actually don't
secure worker's compensation insurance and don't pay workers'
compensation benefits by designing a system where employers and
employees each made a tradeoff. It introduced a new benefit for
large employers and project owners and a new disadvantage for
employees of subcontractors with no corresponding tradeoff. SB
147 would restore the basic workers' compensation principal so
that those who pay workers' compensation benefits are exempt
from tort suit and those that don't pay are not.
2:30:01 PM
Third, she said the 2004 changes resulted in some very illogical
and unfair situations where two employees injured in exactly the
same way get very different kinds of compensation and it has
nothing to do with who actually pays the workers' compensation
benefit. Right now little subcontracting companies may be liable
in tort to employees of larger general subcontractors but not
vice versa. "It's not fair and it's not logical."
She said SB 147 would remedy the unfairness. She has a client
who is employed by Tesoro; he was injured at a Tesoro refinery.
His own employer paid him workers' compensation benefits. Tesoro
didn't do anything for him, but under the 2004 law, it is exempt
from having to pay tort damages.
SENATOR BUNDE asked how two employees could receive different
amounts of money. In the Tesoro case the injured employee would
be compensated by workers' compensation, but if both
subcontractor and Tesoro have workers' compensation, the
employee is not going to get any additional money.
2:31:54 PM
MS. ORLANSKY answered if you have two different subcontractors
and one mid-level subcontractor and it's the employee of the
mid-level contractor who acts negligently, the employee of the
subcontractor directly under that person is only going to get
workers' compensation benefits under the law the way it's set
up, but the employee of the other subcontractor who is not a
subcontractor under a contractor is entitled to sue and recover
in court. Those damages could be many, many times different.
Court damages can be 10 times as high as workers' compensation
benefits, which are designed to be sort of minimal - some
guaranteed recovery paid relatively quickly. It's a good system
when nothing else is available, but the common law has also
developed a tort system which is more complicated for employees
to choose go that route, but it can also end up compensating
them much more generously.
2:33:06 PM
KIP KNUDSON, Government Relations Manager, Tesoro Alaska, said
the current law is good for labor and commerce and the proposed
changes are probably a step backwards for both. He said Tesoro
has a core value of safety for its workers; but he said it is a
constant battle to keep employees safe. He remarked, "Some
people have said that employers have no motivation to keep their
employees safe; I gotta tell you, these guys aren't grown on
trees; we want to keep them as safe as possible. And we want
them to come and go every day in the same condition."
He said that workers' safety is a duty that requires significant
resource and effort on everyone's part. He said that all Alaskan
workers should be covered by a workers' compensation policy and
that all businesses benefit from safe employees and reduced
legal expenses.
MR. KNUDSON said the 2004 change freed up resources and efforts
on projects to allow better coordination of safety programs
between employers and contractors with the resulting benefit of
safer workers. He opined that exclusive liability motivates
project owners to make sure that everybody that is on a project
site has a workers' compensation policy in place.
2:38:14 PM
He illustrated his point with a picture of five different people
that might be on a worksite - the project owner, an employee, a
project contractor employee, a project subcontractor employee,
someone that is a contract employee, but not working on the
project and a visitor who just happens to be there - all being
injured simultaneous in the same event. In the first scenario
the project owner is at fault. Pre-2004 the picture showed the
remedy for the employee of the project owner would be workers'
compensation and everyone else had both (workers' compensation
and tort claim) available. If the same thing happened today,
workers' compensation was available to all of them. However, if
the project subcontractor for some reason allows a sub on site
without a workers' compensation policy in place, that employee
is still allowed to sue the project owner. (If the policy is not
in place one does not get the benefit of the exclusive remedy.)
He also did scenario 3 that showed the situation Senator French
was discussing. If the project contractor is in place, his
employees can only make use of workers' compensation and
everyone else can sue the project contractor. Today, the
imbalance is where the project contractor and all his subs can
avail themselves of workers' compensation, but the project owner
employee could potentially sue down. His only response was that
it is the project owner's responsibility to make sure that
everyone has workers' compensation on the project site - the
reason the remedy flows back to him.
SENATOR BUNDE said he appreciated fairness and asked if before
the 2004 change one could have a workers' compensation claim and
a tort claim in three of his situations where people are working
on site.
MR. KNUTSON replied that Senator French talked about a bargain
between an employer and an employee, but whenever he took a job
he didn't understand it that way. This is public policy that has
been set. The goal of the 2004 law change (on slide 2) is to
have all contractors working on a project treated equally during
an injury. There is a no fault provision.
SENATOR BUNDE said he would like to invite Linda Hall to explain
if there is double coverage if the contractor and the sub both
have workers' compensation coverage. It doesn't necessarily get
the worker any more money.
2:43:14 PM
SENATOR FRENCH wrapped up that the basic unfairness on slide 2,
situation 2, is that the project owner is getting a workers'
compensation remedy without actually having bought a policy. So,
essentially he has less desire to have a safe workplace.
2:44:17 PM
SENATOR STEVENS asked what he thought about Senator Bunde's
question about multiple carriers.
SENATOR FRENCH replied that Linda Hall would be the best person
to answer that; he guessed that a project owner would pay less
for a workers' compensation policy where every single
subcontractor was also carrying a policy because he is then only
covering those instances where he is at fault - the time when a
drunken truck driver employed by a Collins Construction worker
drives over an Alasco employee. That contractor is protected
from tort liability because of a workers' compensation policy
that the subcontractor has paid for. He said:
That's the imbalance. If the situation were reversed,
if the drunken subcontractor runs over a project
employee, the project employee is going to sue the
pants off of those folks, because of the
outrageousness of the conduct and the fact that the
liability only and the protection only runs downhill.
CHAIR ELLIS thanked him and said SB 147 would be held for
further work. There being no further business to come before the
committee, he adjourned the meeting at 2:47:36 PM.
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