Legislature(2001 - 2002)
04/19/2001 03:25 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 19, 2001
3:25 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
Representative Pete Kott
COMMITTEE CALENDAR
HOUSE BILL NO. 230
"An Act relating to wage and hour protections for employees of
the Alaska Railroad Corporation; and providing for an effective
date."
- MOVED HB 230 OUT OF COMMITTEE
HOUSE BILL NO. 157
"An Act relating to trust companies and providers of fiduciary
services; amending Rules 6 and 12, Alaska Rules of Civil
Procedure, Rule 40, Alaska Rules of Criminal Procedure, and
Rules 204, 403, 502, 602, and 611, Alaska Rules of Appellate
Procedure; and providing for an effective date."
- MOVED CSHB 157(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 212
"An Act relating to an employer's liability for providing
workers' compensation coverage."
- MOVED CSHB 212(L&C) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 230
SHORT TITLE:RAILROAD EMPLOYEE SALARIES AND WAGES
SPONSOR(S): LABOR & COMMERCE
Jrn-Date Jrn-Page Action
04/04/01 0842 (H) READ THE FIRST TIME -
REFERRALS
04/04/01 0842 (H) L&C
04/19/01 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 157
SHORT TITLE:TRUST COMPANIES & FIDUCIARIES
SPONSOR(S): REPRESENTATIVE(S)MURKOWSKI
Jrn-Date Jrn-Page Action
02/28/01 0463 (H) READ THE FIRST TIME -
REFERRALS
02/28/01 0463 (H) L&C, JUD
03/28/01 (H) L&C AT 3:15 PM CAPITOL 17
03/28/01 (H) Heard & Held
MINUTE(L&C)
04/18/01 (H) L&C AT 3:15 PM CAPITOL 17
04/18/01 (H) Bill Postponed
04/19/01 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 212
SHORT TITLE:WORKERS' COMP:CONTRACTORS & SUBCONTRACTOR
SPONSOR(S): LABOR & COMMERCE BY REQUEST
Jrn-Date Jrn-Page Action
03/26/01 0729 (H) READ THE FIRST TIME -
REFERRALS
03/26/01 0729 (H) L&C
04/19/01 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
WENDY LINDSKOOG, Director
External Affairs
Alaska Railroad Corporation
PO Box 107500
Anchorage, Alaska 99510
POSITION STATEMENT: Presented HB 230.
ANN COURTNEY, Senior Attorney
Labor and Employment
Alaska Railroad Corporation
327 West Ship Creek
Anchorage, Alaska 99501
POSITION STATEMENT: Answered questions on HB 230.
KEVIN BERGSRUD, Locomotive Engineer
Alaska Railroad Corporation;
Director
United Transportation Union
5325 East 41st Street
Anchorage, Alaska 99508
POSITION STATEMENT: Answered questions on HB 230.
ROBIN PHILLIPS, Staff
to Representative Lisa Murkowski
Alaska State Legislature
Capitol Building, Room 408
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor on HB
157.
DOUGLAS BLATTMACHR, President and CEO
Alaska Trust Company
1029 West 3rd Avenue
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 157.
VINCE USERA, Senior Securities Examiner
Division of Banking, Securities & Corporations
Department of Community and Economic Development
PO Box 110807
Juneau, Alaska 99811
POSITION STATEMENT: Testified on HB 157.
TERRY LUTZ, Chief Financial Institution Examiner
Division of Banking, Securities & Corporations
Department of Community and Economic Development
PO Box 110807
Juneau, Alaska 99811
POSITION STATEMENT: Testified on HB 157.
AMY ERICKSON, Staff
to Representative Lisa Murkowski
Alaska State Legislature
Capitol Building, Room 408
Juneau, Alaska 99801
POSITION STATEMENT: As committee aide for the House Labor and
Commerce Standing Committee, sponsor by request, explained HB
212.
ALAN WILSON
6014 Lund Street
Juneau, Alaska 99811
POSITION STATEMENT: Testified on behalf of himself on HB 212.
PAUL GROSSI, Director
Division of Worker's Compensation
Department of Labor & Workforce Development
PO Box 25512
Juneau, Alaska 99802
POSITION STATEMENT: Testified on HB 212.
ROBIN WARD
PO Box 91443
Anchorage, Alaska 99503
POSITION STATEMENT: Testified on behalf of herself on HB 212.
JUDY PETERSON
Workers' Compensation Committee of Alaska
3330 Arctic Boulevard
Anchorage, Alaska 99503
POSITION STATEMENT: Testified in support of HB 212.
JACK HEBERT, President
Alaska State Homebuilders Association
(No address provided)
Fairbanks, Alaska
POSITION STATEMENT: Testified on HB 212.
SARA McNAIR-GROVE, Property and Casualty Actuary
Division of Insurance
Department of Community & Economic Development
PO Box 110805
Juneau, Alaska 99811
POSITION STATEMENT: Answered questions on HB 212.
CHARLES MILLER
Alaska National Insurance Company
(No address provided)
POSITION STATEMENT: Answered questions on HB 212.
ACTION NARRATIVE
TAPE 01-62, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:25 p.m. Members
present at the call to order were Representatives Murkowski,
Halcro, Rokeberg, and Crawford. Representatives Meyer and Hayes
joined the meeting as it was in progress.
HB 230-RAILROAD EMPLOYEE SALARIES AND WAGES
CHAIR MURKOWSKI announced that the first order of business would
be HOUSE BILL NO. 230, "An Act relating to wage and hour
protections for employees of the Alaska Railroad Corporation;
and providing for an effective date."
Number 0134
WENDY LINDSKOOG, Director, External Affairs, Alaska Railroad
Corporation (ARRC), came forth to present HB 230. She stated:
House Bill 230 accomplishes two very important
objectives for the Alaska Railroad and its employees.
It amends the Alaska Railroad statute AS [42.40.710].
First, the bill clarifies that ARRC does in fact fall
under the Alaska Wage and Hour Act. And second, the
bill would allow the members of the United
Transportation Union [UTU] - these are our conductors,
our brakemen, and our engineers - ... the flexibility
to negotiate an agreement that would allow UTU union
employees to be paid on a salary-type basis, rather
than an hourly-type basis.
MS. LINDSKOOG gave some background to the bill. She stated:
When we began negotiations several months ago with the
UTU union members, we discovered that there was in
fact question whether the Alaska Railroad fell under
the Alaska Wage and Hour Act. Because the Alaska
Railroad is a rail carrier, we are exempt from the
federal Fair Labor Standards Act - ... that's the
federal law governing minimum wage ... and overtime
issues. Since the state purchased the railroad we
have always operated and believed that we were
regulated by the Alaska Wage and Hour Act, so to find
out that we weren't was a bit of a surprise. ... With
this cloud of uncertainty about our status under the
Act, we do believe that it's important for our nearly
700 employees to clarify this issue. One thing that
is important to point [out]: the UTU union members
would still have protection from overtime and wage
issues. Basically, they do fall under the Hours of
Service Act, and this prevents excessive or
unreasonable work hours by limiting the number of
hours they can work to 12 hours before they need to
rest.
Both management and UTU members would benefit from the
exemption. For example, being paid on a salary-type
basis would enhance the UTU member retirement
benefits, and management would gain some flexibility
in terms of some efficiency methods ... in the future.
We do have letters of support from UTU union members,
... Alaska Public Employees Association, [the]
American Train Dispatchers Department, and the Alaska
Railroad workers, and we do have verbal support from
the AFL-CIO [American Federation of Labor and Congress
of Industrial Organizations]. I understand a letter
might be forthcoming on that.
Number 0402
REPRESENTATIVE HALCRO asked Ms. Lindskoog whether this would
give the railroad and the employees greater flexibility when
determining work schedules.
MS. LINDSKOOG responded that this would provide [ARRC] the
flexibility to go into negotiations with the UTU union only, and
it would have to be an agreement that was mutually agreed to by
both the UTU and management.
REPRESENTATIVE ROKEBERG asked Ms. Lindskoog whether it is an
exemption under the [Alaska] Wage and Hour Act to allow "flex"
time or whether [ARRC] will have to get approval from the
commissioner.
MS. LINDSKOOG answered that the Department of Labor [and Welfare
Development] mentioned to [ARRC] that as long as it made this
change through their statute, it wouldn't go into the AS
[23.10.050].
REPRESENTATIVE ROKEBERG remarked that if Ms. Lindskoog is
stipulating by this bill that [ARRC] is under AS 23, then [ARRC]
is bound by the provisions of AS 23. He asked whether that
means [ARRC] needs to have approval of the commissioner to adopt
a flexible work schedule, or whether it is exempt under that
because the bargaining unit is a member of organized labor.
Number 0567
ANN COURTNEY, Senior Attorney, Labor and Employment, Alaska
Railroad Corporation, testified via teleconference. She
responded that she believes everyone at the Alaska Railroad
Corporation who is not in a collective bargaining unit would
have to get approval from the Department of Labor and Workforce
Development in order to work flexible time. Employees
represented by a collective bargaining agreement may do that
without permission from the commissioner or from the department.
If this legislation passes, and the railroad and the union are
able to mutually agree in a collective [bargaining] agreement
that they would be exempt, flex-time will no longer be an issue
for the UTU. They would be exempt from all aspects of the
[Alaska] Wage and Hour Act. The remaining employees of the
railroad would remain subject to the Act, and nonrepresented
employees would have to have approval for a flex-time program.
REPRESENTATIVE ROKEBERG referred to AS 23.10.060, subsection
(d)(14), which provides for the voluntary flexible work hour
plan. He remarked that it is limited to 40 hours a week and not
more than 10 hours a day, and he asked how that would work.
MS. COURTNEY responded that if this legislation passes, the UTU
would be exempt from that requirement. The UTU and the railroad
could then mutually agree upon any method of payment and any
scheduling of work, subject to the restrictions of the Hours and
Service Act.
REPRESENTATIVE ROKEBERG asked whether that was because of the
provisions in Section 1 of the bill.
MS. COURTNEY answered that it would be because they were exempt
from the Act altogether. She clarified that in AS 23.10.060
there is a section that indicates who this Act does not apply
to, and there is a long list of employees who are not subject to
the Alaska Wage and Hour Act. If this legislation passes, the
UTU would fall in the same category as those employees.
REPRESENTATIVE ROKEBERG remarked that it wouldn't reflect in the
statute because it would be within its own chapter.
MS. COURTNEY said that's correct.
REPRESENTATIVE ROKEBERG asked whether it was limited to train or
engine service employees.
Number 0818
MS. COURTNEY responded that he was correct. The term "train and
engine service" is shorthand for saying, "those employees at the
Alaska Railroad Corporation who actually run the trains: the
conductors, the locomotive engineers, and the brakemen."
CHAIR MURKOWSKI stated that in the fiscal note there is a
notation that approximately 545 of the Alaska Railroad
Corporation's employees are represented by five unions. She
asked whether the exemption to [the Alaska Wage and Hour Act]
would only apply to those UTU's members and not to any other
collective bargaining groups.
MS. COURTNEY responded that she was correct.
CHAIR MURKOWSKI asked whether the UTU getting this exemption
would cause a problem or concern amongst any of the other
bargaining units or union members.
Number 0963
KEVIN BERGSRUD, Locomotive Engineer, Alaska Railroad
Corporation; Director, United Transportation Union, testified
via teleconference. He stated that rail workers and train
dispatchers have both provided letters of support. He said to
the best of his knowledge there is no conflict.
REPRESENTATIVE CRAWFORD asked Mr. Bergsrud whether this is
something the UTU would like to do - to go under salary.
MR. BERGSRUD responded that it is his understanding that this is
for the benefit of UTU.
REPRESENTATIVE MEYER remarked that he met with both Ms.
Lindskoog and Mr. Bergsrud and thinks this is ideal.
REPRESENTATIVE HALCRO commented that two of the exemptions under
AS 23.10.060 were put in by the House Labor and Commerce
Standing Committee over the past two years.
CHAIR MURKOWSKI asked Ms. Lindskoog whether she would like to
acknowledge that she has had conversations with the Department
of Labor and Workforce on this.
MS. LINDSKOOG replied that she feels uncomfortable speaking for
[the department] but [ARRC] has talked to the department, which
requested specifically that the bill be done through [ARRC's]
statute and not AS 23.
Number 1170
REPRESENTATIVE ROKEBERG commented that this is another example
of the inherent bias in statutes to those employees who are
represented by bargaining units to have a "leg up."
REPRESENTATIVE ROKEBERG made a motion to move HB 230 from
committee with individual recommendations and the attached zero
fiscal note. There being no objection, HB 230 moved from the
House Labor and Commerce Standing Committee.
HB 157-TRUST COMPANIES & FIDUCIARIES
CHAIR MURKOWSKI announced that the next order of business would
be HOUSE BILL NO. 157, "An Act relating to trust companies and
providers of fiduciary services; amending Rules 6 and 12, Alaska
Rules of Civil Procedure, Rule 40, Alaska Rules of Criminal
Procedure, and Rules 204, 403, 502, 602, and 611, Alaska Rules
of Appellate Procedure; and providing for an effective date."
Number 1254
REPRESENTATIVE HALCRO made a motion to adopt the proposed
committee substitute (CS) for HB 157, version 22-LS0139\L,
Bannister, 4/19/01, as a work draft. There being no objection,
Version L was before the committee.
ROBIN PHILLIPS, Staff to Representative Lisa Murkowski, Alaska
State Legislature, came forth on behalf of the sponsor to
explain the changes made in the proposed CS. She explained that
on page 3, under AS 06.26.020, the first change in paragraph (1)
states that the department would set the trust numbers, and
includes a definition of "law firm". She said the guidelines
that the department will follow are under subsection (b) on page
5. The next change is paragraph (4) of the same section, which
provides a more precise definition. In both paragraph (4) and
(5) the "solely incidental" language was removed. Paragraph (8)
was changed to have the numbers set by the department, which
falls under subsection (b) on page 5. Also in that paragraph is
a definition of "accounting firm".
MS. PHILLIPS continued, stating that paragraph (10) under the
exemptions originally had two subparagraphs. Subparagraph (B)
was deleted, which made (A) unnecessary. In the old version,
she said, there was a paragraph (16), which has been deleted
completely; therefore, there is a new paragraph (16). The new
paragraph (17) sets the number of trusts that an individual can
serve in if he or she is not a member of a family. The limit
has been set to 20 different settlors, and in this case a
husband and wife can create a joint trust and be considered as
one settlor.
Number 1453
REPRESENTATIVE ROKEBERG asked why the number 20 [was decided
upon].
CHAIR MURKOWSKI responded that [the bill] had been all over the
board with regard to the number, and essentially a compromise
has been reached.
REPRESENTATIVE ROKEBERG remarked that he thinks there are some
individuals in the Anchorage area who are working on
representing people who have received settlement money, and they
are endeavoring to skirt any kind of regulatory control under
this. He said he is not sure that's the right thing to do,
particularly if those people are recipients of the settlement.
He added that he is leaning toward the number 10 because of what
he has heard.
DOUGLAS BLATTMACHR, President and CEO, Alaska Trust Company,
testified via teleconference and stated that originally it was
set at 10 different settlors. This allows that if one settlor
sets 10 trusts, then that individual is only acting as if for
one settlor. He said the ideas was to have it so that there
could be not just ten trusts, because sometimes one settlor may
have ten children and set up a separate trust for each child,
and therefore the individual who wanted to be trustee would
basically be limited to that one only. Now, that person can act
for [20] separate settlors, but there is no limit to the number
of trusts they can act for.
REPRESENTATIVE ROKEBERG stated that this is, however, an
exemption from the regulation.
MR. BLATTMACHR responded that he was correct. He explained that
in theory after the person was acting as trustee for more than
20 settlors, he or she would have to be deregulated by the
division.
CHAIR MURKOWSKI asked Mr. Blattmachr whether he could speak to
Representative Rokeberg's concern that 20 may be too many.
MR. BLATTMACHR responded that it seems like quite a lot to him.
Number 1717
VINCE USERA, Senior Securities Examiner, Division of Banking,
Securities & Corporations, Department of Community and Economic
Development, came forth and suggested reverting back to the
provision that would allow the division to set the number by
regulation. They could then gain some experience and figure out
what the right number is. He stated that trying to change
legislation like this every time there's a change of need is
terribly difficult.
REPRESENTATIVE ROKEBERG stated that he doesn't think that helps
the division a lot because it takes as long to get the
regulations in place as it does to pass the bill. If there
isn't a stipulated amount, then [the division] won't know whom
to exempt.
MR. USERA responded that [the division] worded it so that it
could change the number by either order or regulation.
Therefore, in the early stages of this procession, it would have
the utmost flexibility.
CHAIR MURKOWSKI remarked that there simply is nothing to
reference. She remarked that the number shouldn't be too high,
because [the division] could experience the exact thing
Representative Rokeberg is concerned about, and it shouldn't be
too low.
REPRESENTATIVE ROKEBERG stated that he thinks he would be more
comfortable putting "10" in there. He said it would be unusual
to find somebody with more than 10 or 12 settlors who wouldn't
be doing it commercially. And a person who is doing it
commercially, should be under the regulatory scheme.
Number 1856
REPRESENTATIVE ROKEBERG made a motion to adopt conceptual
Amendment 1, to change "20" to "10" on page 5, line 2. There
being no objection, conceptual Amendment 1 was adopted.
MS. PHILLIPS continued, stating that following paragraph (17)
[on page 3] there have been three additions: subsections (b),
(c), and (d). Subsection (b) sets the policies that will be
followed by the regulations under (a)(1) and (a)(8) for
establishing the reasonable number of trusts. Subsection (c)
allows the department, in addition to the exemptions identified,
to grant exemptions if the person [demonstrates] good cause.
Subsection (d) says, in addition to all of these requirements,
[a person] cannot be offering fiduciary services to the general
public. She added that on page 23, the definition of "general
public" was also amended.
MS. PHILLIPS continued, stating that the next two amendments
were added in the realization that federal credit unions can
exercise a limited scope of trust powers. The first addition is
on page 2, paragraph (11), allowing federal credit unions to act
as a fiduciary. The last change is on page 59, paragraph (30),
which defines "state financial institutions".
REPRESENTATIVE ROKEBERG asked Mr. Lutz from the Division of
Banking, Securities & Corporations whether state charter banks'
deposits are FDIC (Federal Deposit Insurance Corporation)
insured.
TERRY LUTZ, Chief Financial Institution Examiner, Division of
Banking, Securities & Corporations, Department of Community and
Economic Development, came forth and responded that they are
required to have insurance.
CHAIR MURKOWSKI asked Mr. Lutz whether the proposed CS is
acceptable to the division.
Number 2102
MR. LUTZ answered that he agrees 100 percent and thinks it is a
good, workable product.
REPRESENTATIVE ROKEBERG asked whether there are other sets of
regulations that need to be adopted.
MR. LUTZ responded that [the division] would have to draft some
regulations, which is one reason why the bill has a January 1,
2002, effective date. He noted that there is a zero fiscal
note.
MR. BLATTMACHR remarked that he has no objection to the bill.
[The Alaska Trust Company] has talked to the department and has
agreed to make some changes to the private fiduciary section
through regulations.
Number 2240
REPRESENTATIVE HALCRO made a motion to move CSHB 157, version
22-LS0139\L, Bannister, 4/19/01, as amended, from committee with
individual recommendations and the attached zero fiscal note.
There being no objection, CSHB 157(L&C) moved from the House
Labor and Commerce Standing Committee.
HB 212-WORKERS' COMP:CONTRACTORS & SUBCONTRACTOR
CHAIR MURKOWSKI announced that the last order of business would
be HOUSE BILL NO. 212, "An Act relating to an employer's
liability for providing workers' compensation coverage."
Number 2307
AMY ERICKSON, Staff to Representative Lisa Murkowski, Alaska
State Legislature, came forth as committee aide to the House
Labor and Commerce Standing Committee, sponsor by request of HB
212. She stated:
House Bill 212 addresses a decade long issue regarding
[compensation] coverage for sole proprietors. Over
the past several years, the Division of Workers'
Compensation has received numerous complaints from
general contractors [who have] paid increased workers'
[compensation] premiums for subcontracting a job with
a sole proprietor who could be considered a employee
of the general contractor rather than independent
contractor. Current statute requires that contractors
require [compensation] insurance for employees of
[subcontractors] unless they provide their own
coverage. Sole providers of proprietors have not been
required to have workers' [compensation] coverage.
The Workers' [Compensation] Board has found in certain
cases that sole proprietors are employees of the
general contractors; therefore, the general contractor
has been responsible for providing the sole provider's
coverage. Because of these cases, insurance companies
have charged general contractors additional premiums
for sole proprietors' subcontractors. These premium
charges often occur after the general's policy has
been audited, and in some cases the general has been
required to pay additional premiums not accounted for
or included in his bid costs.
House Bill 212 is the best solution to a longstanding
problem. It puts sole proprietors under the same
requirements as contractors by requiring that they
provide their own coverage. It also gives clarity and
fairness to all parties. We recognize that enactment
of [HB] 212 will result in [increased] cost in
premiums and services, but it will also increase the
likelihood of adequate insurance coverage to a broader
range of individuals and contractors. And contractors
can anticipate the costs and include them in their
bids. The bill meets the needs of the Division of
Workers' [Compensation] and the Alaska [State]
Homebuilders Association, who requested the
legislations.
Number 2384
REPRESENTATIVE ROKEBERG made a motion to adopt the proposed
committee substitute (CS) for HB 212, version 22-LS0755\J, Ford,
4/13/01, as a work draft. There being no objection, Version J
was before the committee.
REPRESENTATIVE ROKEBERG explained that the proposed CS tightens
the title and changes the effective date in Section 2 to January
1, 2002. He explained the reason for the change in the
effective date and stated that last year, the committee
increased the benefits for workers' compensation payments,
effective July 1, which had the effect of changing the premium
impacts and costs particularly felt by small businesses that had
not planned for that increase during the summer season. It
particularly affected those businesses that had entered into
contracts prior to the enactment of the legislation.
TAPE 01-62, SIDE B
CHAIR MURKOWSKI remarked that she appreciates both of the
changes.
Number 2446
ALAN WILSON came forth to testify on behalf of himself. He
stated that he is a builder and remodeler, and also serves as a
legislative co-chair for the Alaska State Homebuilders
Association. He noted that it was that committee that came
before the [House Labor and Commerce Standing] Committee last
year with this issue. He said he believes HB 212 is the
compromise that everyone can live with. He added:
Many of us feel that we should be able to not have
insurance on ourselves. Then again, we all realize in
today's society that is not probably a real attitude
to even have. So this requirement, by requiring sole
proprietors to cover themselves while operating under
a general contractor, is a fix; [it] takes care of the
gray area that exists in the current statutes. ...
Some of the benefits we see of requiring this is ... a
framing subcontractor would pay roughly $2,600 a year
himself - that's pretty cheap insurance when you
compare it to what health insurance costs. Most
health insurance policies don't even cover you on the
job. ... One other real important factor I believe
with this piece of legislation is that it will help
level the playing field. Many sole proprietors will
be [bidding] against me and my company, and when I'm
trying to play by all the rules and have all the
insurances for my employees, it makes it hard to
compete sometimes when someone has reduced their base
cost by 18 [or] 20 percent.
CHAIR MURKOWSKI referred to a handout in the committee's packets
and asked Mr. Wilson whether a "policy with no employees"
[mentioned in the last paragraph] is something that could work.
MR. WILSON responded that within his association there were many
[members] that didn't even know that existed, and when they
tried to obtain it, they learned it really is not an item that's
available for them.
Number 2283
REPRESENTATIVE ROKEBERG asked Mr. Wilson whether he thinks this
bill will ultimately save his association's members premium
money.
MR. WILSON answered that his association has had many
discussions about what the cost of this is going to do to the
final cost of a house. He said in his business he puts a number
on the bottom line to compensate for the potential risk of
having his insurance carrier audit him and find some sole
proprietors that he did not cover. He is not going to do that
now because they will all be covered; therefore, there could be
some additional cost. He remarked that he believes having more
people writing insurance spreads the cost out amongst those
potential users of the insurance, rather than spreading it
amongst general contractors or society as a whole.
REPRESENTATIVE ROKEBERG stated that the point he wanted to make
was that he thinks the Alaska State Homebuilders Association has
been responsibly trying to deal with these few issues for
several years, and he thinks that by passing this bill [the
committee] is helping them come to grips with one of their cost
elements, and doing so helps make sure that those people who
should be covered are covered to avoid litigation. He added
that he wanted to compliment the association.
REPRESENTATIVE HAYES commented that he doesn't think that this
is the best solution, but it is the best solution that [the
committee] could come up with.
Number 2147
PAUL GROSSI, Director, Division of Worker's Compensation,
Department of Labor & Workforce Development, came forth and
stated that the department and the division support the bill and
think it is a fix of a long-term problem. It solves that gray
area in the law as to whether someone is truly a subcontractor
or an employee.
CHAIR MURKOWSKI asked Mr. Grossi about the "policy with no
employees" as a viable option.
MR. GROSSI responded that sole proprietors have always been able
to cover themselves under the workers' compensation system.
These policies are already in existence and are written for
those people to choose to purchase them.
REPRESENTATIVE ROKEBERG referred to a letter from Combs
Insurance Agency, Inc., which indicates that Mr. Combs has some
problems with the bill, particularly with the definitions of
"employer" and "employee". He asked Mr. Grossi whether or not
he agrees with the points Mr. Combs brought up.
MR. GROSSI replied that there are a number of issues Mr. Combs
brought up. First of all, he said, "employer" and "employee"
are defined in statute, but later in the letter, Mr. Combs
writes that he feels everybody who works should be covered by
the workers' compensation law. Mr. Grossi stated that he thinks
the letter basically supports the issue; Mr. Combs just wants it
to be more encompassing. As to the executive officer waivers,
Mr. Grossi said he believes this statute would cover that.
Those types of waivers would be void because the subcontractor
is required to be covered.
REPRESENTATIVE ROKEBERG asked Mr. Grossi whether a person who is
the president of his or her own corporation and acts as a
[subcontractor] would have to cover himself or herself [under
the bill], but currently wouldn't have to.
MR. GROSSI responded that that's correct. He clarified that
[the division] is requiring that all subcontractors cover their
employees and themselves.
Number 1853
ROBIN WARD testified via teleconference on behalf of herself.
She stated that she is the other legislative co-chair for the
Alaska State Homebuilders Association. She said she and Mr.
Wilson made a commitment last year that they would encourage a
broad-based task force to be created. She remarked that they
had all the players at the table to come up with a solution.
This was the best solution that took care of the problem with
the most consistency, and that leveled the playing field.
CHAIR MURKOWSKI asked Ms. Ward who was represented on the task
force.
MS. WARD responded that there were members from the WCCA
(Workers' Compensation Committee of Alaska), the Alaska
National's group, the Alaska State Homebuilders Association, the
Division of Insurance, and independent brokers.
REPRESENTATIVE ROKEBERG asked Ms. Ward whether they had
discussed the issue of if there's no payment, then the fault or
liability still rests with the contractor and not the
subcontractor.
MS. WARD responded that the opportunity has been left open that
if a prime contractor chooses to cover a sole proprietor, he or
she can. However, it will be up to the prime contractor to
enforce this by securing the certificate of insurance prior to
having a full proprietor subcontractor work on his or her
jobsite.
REPRESENTATIVE HALCRO asked Ms. Ward whether that puts in place
a procedure for the general contractor to make sure that all the
subcontractors have coverage, to avoid the problem of the
insurer coming back to the general contactor for back premiums.
MS. WARD responded that that's correct. She stated that
currently when she looks through her workers' compensation and
general liability audit, if she does not have a certificate of
insurance and she tells her insurance company that that person
is a sole proprietor, it is really up to her insurer whether or
not to decided to exact premiums. With this legislation passed,
she said she knows that they will if she does not have a
certificate of insurance.
Number 1616
JUDY PETERSON, Workers' Compensation Committee of Alaska (WCCA),
testified via teleconference. She read a letter that was sent
to Chair Murkowski:
The WCCA board of directors has reviewed House Bill
212, currently pending before the [House] Labor &
Commerce Committee, and has voted to endorse the
proposed legislation. WCCA directors feel that the
proposed change fills an obvious void in the state's
workers' compensation law. The language in the
legislation provides the necessary protection for both
sole proprietors and general contractors in a fair and
equitable way.
... [WCCA is] a private, nonprofit organization
supported entirely through its membership. WCCA
represents the interests of employers statewide with
the mission to ensure the quick, efficient, fair and
predictable delivery of indemnity and medical benefits
to injured workers at a reasonable cost to employers.
We encourage the committee to recommend passage of
House Bill 212.
Number 1554
JACK HEBERT, President, Alaska State Homebuilders Association,
testified via teleconference. He stated that he thinks this is
a great bill for the insurance companies. He said he has
reluctant enthusiasm, as a builder, for the bill, but feels it
will define and end the gray issue. It is going to be a
difficult adjustment for small subcontractors and small builders
who have not carried workers' compensation on themselves in the
past. He shared that he has been working in Alaska for 27 years
and has never had a workers' compensation policy for himself.
He remarked that he thinks there should be no mistake that
really what this bill does is make sure that everyone is
covered, which isn't a bad idea, but also allows the insurance
companies to be sure that they will collect premiums on everyone
in the building industry. This leaves wide open owner-builders
who can subcontract to refuse to go along with this policy and
choose to work for private individuals and homeowners, rather
than general contractors. He added that it doesn't solve the
whole problem, but for those businesses it defines it clearly.
REPRESENTATIVE ROKEBERG asked Mr. Hebert whether his concern
that he would have to have coverage for the first time is
because he acts as a subcontractor sometimes.
MR. HEBERT responded that he has always been a general
contractor, but he works on-the-job. He said as he reads the
bill, everyone will need to be covered.
REPRESENTATIVE ROKEBERG remarked that he doesn't agree with
that. He said this really speaks to the subcontractor.
MR. HEBERT stated that it is not clear whether he would have to
have it on himself or not. He said he is more concerned with
the small individuals who have worked for him for the past 20-
some years who are sole proprietors. He added that his plumber
told him that he is going to work for individuals who aren't in
business.
REPRESENTATIVE ROKEBERG responded that Mr. Hebert could retain
[his plumber's] services by still covering him.
Number 1356
MR. GROSSI remarked that for the contractor there wouldn't be
any change, it's just for the subcontractor, because it is
difficult to distinguish a subcontractor from an employee.
REPRESENTATIVE HALCRO asked Mr. Grossi who would be liable for
the workers' compensation, if a homeowner hires a sole
proprietor to paint his or her house, and the painter falls and
does not have workers' compensation.
MR. GROSSI responded that the homeowner is a consumer, not an
employer.
CHAIR MURKOWSKI asked whether that [sole proprietor] would then
be out of luck.
MR. GROSSI stated that she was correct.
MR. HEBERT stated that he thinks many of the [members of the
committee] must be aware that there is a false industry in
Alaska of owner-builders who build one house per year, and it is
essentially a business. Many of the small subcontractors who do
not want to work for general contractors can find work in that
little niche.
CHAIR MURKOWSKI asked whether or not the "policy with no
employees" would be available for some of the individuals who
need an option.
Number 1168
SARA McNAIR-GROVE, Property and Casualty Actuary, Division of
Insurance, Department of Community & Economic Development, came
forth and stated that the "policy with no employees" has been
around for a couple of years and really doesn't address the
issue because it doesn't cover the sole proprietor. Its purpose
is simply to provide the sole proprietor a means of having some
coverage for any employees on an emergency basis. For example,
the sole proprietor might not have planned on having any
employees this year, but might get sick or have extra work that
he or she can't do alone. Therefore, he or she would need an
employee on a temporary basis.
CHAIR MURKOWSKI asked, if a sole proprietor knew that in March
he or she would have to have someone fill in, whether Ms.
McNair-Grove is suggesting that the sole proprietor get a policy
at the beginning of the year.
MS. McNAIR-GROVE responded that if the person knew ahead of time
that in March he or she was going somewhere, he or she would get
a policy in February. She added that this really is to be used
on an emergency basis.
Number 0975
CHARLES MILLER, Alaska National Insurance Company, came forth
and stated that the exit audits create quite a bit of strain
between his company and the policyholders, because this is a
very unpredictable area. If there were a retroactive
determination by the board that a sole proprietor is in fact an
employee, and there's a claim involved, the only rational
premium would be the cost of the claim. However, no one wants
to pay the cost of a claim for premium. Insurance companies,
he said, are not going to make a windfall of any nature out of
this bill; this is not for the benefit of the insurance
companies. The sole proprietors are given two refusals and then
are assigned risk. The administrative company then processes
[the sole proprietor's] policy and takes care of the future
claims. He added that he understands that now the cost of
premium in the assigned risk isn't even covering the cost of the
program. Every company that writes workers' compensation in
Alaska is then assigned a proportional piece of the loss of the
business.
REPRESENTATIVE HALCRO asked Mr. Miller, if there is a loss in a
given year, whether he passes that through to the employer in
the form of higher workers' compensation rates.
MR. MILLER responded that it wouldn't be the employer who is
paying the premium in the assigned risk. Every other
policyholder in Alaska will pay.
REPRESENTATIVE HALCRO asked: If a person is not in that
affected group or has not suffered the loss, would his or her
premiums still be negatively impacted if the overall pool
suffers a loss in a given year?
MR. MILLER answered that [they would be], but he is pretty sure
it would be minor. He remarked that another issue about the
assigned pool is that the minimum premium policy makes some of
these policies less impactful than they could be otherwise. He
explained that there is a set limit of $20,100. If a person
contracts out for $80,00 in the year, he or she would still only
pay for his or her category on $20,100. He remarked that it is
still cheaper than what it would cost if the person were an
employee to be covered by a general contractor for the sole
proprietor, because the minimum premium is all he or she gets
charged.
Number 0610
REPRESENTATIVE HALCRO made a motion to move CSHB 212, version
22-LS0755\J, Ford, 4/13/01, from committee with individual
recommendations and the attached zero fiscal note. There being
no objection, CSHB 212(L&C) moved from the House Labor and
Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:50 p.m.
| Document Name | Date/Time | Subjects |
|---|