Legislature(1995 - 1996)
01/30/1995 03:03 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE January 30, 1995 3:03 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Brian Porter Representative Jerry Sanders Representative Beverly Masek Representative Kim Elton Representative Gene Kubina MEMBERS ABSENT None OTHER HOUSE MEMBERS PRESENT Representative Eldon Mulder Representative Mark Hanley COMMITTEE CALENDAR * HB 99:"An Act extending the Alaska Public Utilities Commission; and relating to regulatory cost charges." PASSED OUT OF COMMITTEE * HB 115:"An Act relating to settlement and payment of claims for minimum wage and overtime compensation claims and to liquidated damages and attorney fees for minimum wage and overtime compensation claims." HEARD AND HELD WITNESS REGISTER JIMMY JACKSON, Attorney General Communications Inc. 2550 Denali No. 1000 Anchorage, AK 99503 Telephone: (907) 265-5545 POSITION STATEMENT: Testified in favor of HB 99. JIM ROWE, Director Alaska Telephone Association 4341 B. Street, Suite. 304 Anchorage, AK 99501 Telephone: (907) 563-4000 POSITION STATEMENT: Testified in favor of HB 99. JIM ARNESEN Commercial Refuse 1825 Ship Avenue Anchorage, AK 99501 Telephone: (907) 277-3725 POSITION STATEMENT: Testified in favor of HB 99. DAVE HUTCHENS, Executive Director Alaska Rural Electric Cooperative Association, Inc. 703 W. Tudor Rd., Suite 200 Anchorage, AK 99503 Telephone: (907) 561-6103; 463-3636 POSITION STATEMENT: Testified in favor of HB 99 and amendments. DON SCHRAER, Chairman Alaska Public Utilities Commission 1016 W. 6th Avenue, No. 406 Anchorage, AK 99501 Telephone: (907) 276-6222 POSITION STATEMENT: Testified in favor of HB 99 BOB LOHR, Executive Director Alaska Public Utilities Commission 1016 W. 6th Ave. No.406 Anchorage, AK 99501 Telephone: (907) 276-6222 POSITION STATEMENT: Provided information regarding HB 99 ROBERT P. BLASCO, Attorney Robertson, Monagle and Eastaugh Box 21211 Juneau, AK 99801 Telephone: (907) 586-3340 POSITION STATEMENT: Testified in favor of HB 115. KEN LEGACKI 425 G. Street, Suite 760 Anchorage, AK 99501 Telephone: (907) 258-2422 POSITION STATEMENT: Testified against HB 115. ED FLANAGAN, Assistant Commissioner Department of Labor P.O. Box 21149 Juneau, AK 99802-1149 Telephone: (907) 465-2700 POSITION STATEMENT: Provided information regarding HB 115. PREVIOUS ACTION BILL: HB 99 SHORT TITLE: APUC EXTENSION & REGULATORY COST CHARGE SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 01/20/95 101 (H) READ THE FIRST TIME - REFERRAL(S) 01/20/95 101 (H) L&C, FIN 01/30/95 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 115 SHORT TITLE: DAMAGES & ATTY FEES FOR UNPAID WAGES SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 01/25/95 130 (H) READ THE FIRST TIME - REFERRAL(S) 01/25/95 130 (H) L&C, JUD 01/30/95 (H) L&C AT 03:00 PM CAPITOL 17 ACTION NARRATIVE TAPE 95-2, SIDE A Number 000 CHAIRMAN PETE KOTT called the meeting of the House Labor and Commerce Standing Committee to order at 3:03 p.m. Members present were Representatives Kott, Rokeberg, Sanders, Masek, Kubina, Porter, and Elton. HL&C - 01/30/95 Number 015 HB 99 - APUC EXTENSION AND REGULATORY COST CHARGE CHAIRMAN KOTT stated that HB 99 is a committee bill and read the following sponsor statement for HB 99: "The Alaska Public Utilities Commission (APUC) is charged with the task of regulating public utilities and pipeline carriers in the State of Alaska. It does so with the goal of promoting the public interest by enhancing the reliable delivery of affordable utility services. It also does so with the objective of achieving minimal impact on the economic coffers of the state by passing on its costs to the utilities it regulates. "The APUC is in its sunset year, and unless the legislature extends its existence, there soon will be no state entity regulating utilities. Because of the unique nature of utility service, this would result in anarchy, conflict among providers, and the possibility of interruptions in utility services. This would not be wise and would ill serve the public. HB 99 acts to avoid this danger in two important respects. "First, it extends the APUC for an additional four years, until June 30, 1999. This ensures that a public body, responsible to Alaska's citizens, will continue to regulate and control the delivery of vital utility services. "Second, HB 99 enacts regulatory cost charges for both traditional utilities and pipeline carriers. The mechanism that is employed is tailored to adjust the charges so as to reflect the amounts appropriated by the legislature. Said charges are collected by the Department of Revenue and go into the General Fund. Utilities may, but need not, pass the charges along to their customers. In the event that regulatory cost charges lapse into the general fund at the end of the fiscal year, the amount of said lapsed funds is determined by the Department of Administration. Thereafter, the Legislature may, but need not, appropriate the amount of lapsed funds into the next fiscal year budget. When that occurs, the APUC must adjust downward regulatory cost charges by an equal amount. "HB 99, by extending the APUC and concomitantly providing for a funding mechanism, acts to ensure the delivery of uninterrupted, affordable utility services to Alaska's people and businesses. Your support is appreciated." Number 089 JIMMY JACKSON, testifying via teleconference from Anchorage, stated that he is an attorney from General Communications Corporation (GCI). He testified that GCI believes it is very important to extend the APUC and to pass the legislation authorizing the extension of the APUC and the regulatory cost charge as soon as possible. He urges this committee and others to pass it through quickly. He hopes that the other issues that arose last year and any others that arise now can be handled in a bill separate from the extension. He said that the extension is unanimous and should be passed as soon as possible. JIM ROWE, testifying via teleconference from Anchorage, stated that he is also very interested in seeing a speedy reauthorization of APUC. He stated that his organization does agree that the regulatory cost charges (RCC) should run concurrent with the time of the Commission. He stated that they will pursue other ventures after re authorization. Number 151 JIM ARNESEN, representing Commercial Refuse, reiterated that he is also in favor of the APUC. He stated that he thinks that many utilities need to be regulated, but that the refuse industry needs to be regulated to the same degree. He stated that he will send written testimony. He said that the refuse industry does not share the characteristics of the natural monopoly because of it's lack of heavy investment required for the high degree of infrastructure as is seen in other utilities. He concluded that Alaska is one of the few states that still regulates refuse at all. Number 183 CHAIRMAN KOTT asked for testimony from Juneau. DAVE HUTCHENS, Executive Director, Alaska Rural Electric Cooperative Association, came to the table. He restated the two subjects of the bill and thanked the Committee that the version was the same as the one that failed to make it to the floor last year. He pointed out that this version is different from previous legislation in that it reallocates the RCC slightly by having the electrics deduct the cost of generating their power from their revenues. He gives the example that this bases the charge for electrics and telephones on the provision of local services rather than the cost of generating the product. The second point he mentions is that his organization, Alaska Rural Electric Cooperative Association, Inc. (ARECA) supports the extension of APUC because APUC stopped the territorial wars of the 1960s. He submitted two amendment proposals. The first amendment has two sections; the first of which amends section 221 by adding a new subsection. He stated that it would read, "A certificate issued under this section to a public utility providing electric service establishes an exclusive service area for the public utility providing the service." He stated that the corrected version is the one that he is discussing. Number 283 CHAIRMAN KOTT clarified that he would call this corrected version Amendment 1 and the amendment that has to do with AS 42.05.141 will be called Amendment 2. MR. HUTCHENS stated that the second part of Amendment 1 proposes to amend AS 42.05.990(3) by removing the phrase "presently or formerly served by." This deletion is also needed to define service areas. He explained that because of the history of this phrase it is now misleading. In the past, this phrase was needed to refer to a person who has never taken services from the existing utility. Today, this same phrase has been interpreted to mean that a new facility going into a service area assigned to an electric utility was exempt from doing their business with that utility. Therefore, a new provider could come in and prevent the utility from having the growth in that area. This loophole needs to be eliminated by striking this phrase. MR. HUTCHENS then introduced Amendment 2 that has to do with eliminating the phrase "and the powers of the commission shall be liberally construed to accomplish its stated purpose." His organization felt that this gave too much authority and they have proposed language that limits this power a small amount. They would like to amend the bill by adding that the Commission may "do all things necessary or proper to carry out the purposes and exercise the powers expressly granted or reasonably implied in this chapter." He then stated his key point is that every time the APUC needs to be extended, it should be the business of the legislature and not the courts. He reaffirmed that this amendment passed the Senate last year and he wants this reinserted again. CHAIRMAN KOTT clarified that Amendment 2 was part of the bill last year. REPRESENTATIVE BRIAN PORTER questioned whether these were additions or amendments. MR. HUTCHENS clarified that it would be a new section in the bill, but the section of law would be amended. Number 358 VICE CHAIRMAN NORMAN ROKEBERG asked to clarify if the bill includes that any utility that purchases power from a wholesaler gets to deduct that amount form their base and how the RCC is calculated. He asked if an electric utility in this state that does not generate any power and buys all of its power on a wholesale basis would charge their consumers no RCC? MR. HUTCHENS explained that the RCC is based on the retail sales for the power less their cost of power, regardless of whether the utility obtained their's wholesale or generated their own. He offered the example of the Matanuska Electric Association (MEA) consumers and estimated their reduction at 45 percent. He states that the cost of furnishing the service is therefore roughly comparable to other services, like local telephone services as an example. VICE CHAIRMAN ROKEBERG asked if this bill meant that the MEA consumers would get a 45 percent reduction in the RCC, and 55 percent would apply to their distribution lines and other expenses. MR. HUTCHENS answered "yes." Number 433 VICE CHAIRMAN ROKEBERG asked if the effect of the amendment meant a shift away from electric utility consumers to other consumers of other types of utilities? He asked why the money would be reallocated? MR. HUTCHENS explained that the work load for electrics was 34 percent during a three year study period, and they were paying for 39 percent of the cost through RCC. Last year's data showed that a 13 percent differentiation rather than a 5 percent. Number 468 CHAIRMAN KOTT asked Mr. Hutchens if he meant that his organization was paying for services that were supposed to be forthcoming but were never received because they weren't needed. MR. HUTCHENS explained that the view from his membership was that they were thankful that they were not getting all of the regulation that they were paying for. REPRESENTATIVE PORTER asked if a double charge exists now and this bill would eliminate that. MR. HUTCHENS said no that this would eliminate the cost of the product itself out of the RCC, so that what is left is the RCC being based on the provision of local service. VICE CHAIRMAN ROKEBERG asked if Mr. Hutchens was suggesting that his constituents would have an increase in their electric bill, while people from another area would have a decrease because the RCC is shifting? MR. HUTCHENS answered, "no." He clarified that all of the electrics in the state would be treated similarly, and there would be a shift away from electric to other kinds of utilities. VICE CHAIRMAN ROKEBERG restated his question, asking if certain utilities, more commonly found in an urban areas will experience a net increase in this reallocation of the RCC, whereas more rural areas will have a decrease? MR. HUTCHENS continued by saying that Vice Chairman Rokeberg's constituents in Anchorage would pay close to the same thing after this legislation, but they would pay more to other utility bills and less to electric. Number 500 REPRESENTATIVE KIM ELTON asked if subsection E would give the commission the ability to reallocate costs with money reappropriated back to APUC? MR. HUTCHENS said that he could not answer that because he does not understand "E" to read that way, but that "E" would be a credit to the utilities in proportion to the RCC that they paid. REPRESENTATIVE ELTON clarified that Mr. Hutchens reads "E" as saying that reallocation is not based on cost but on the amount paid in by the utility. Number 522 DON SCHRAER, Chairman, APUC, then testified and introduced Bob Lohr who could answer technical questions. Mr. Schraer suggested that the APUC have a ten year extension rather than a four year extension. He stated that the time crunch that is caused by the present extension may cause him to have to refuse business in the future. He then asked if the amendments suggested by Mr. Hutchens could be added onto another bill to expedite passing their extension. He said that there is already a second bill in the Senate regarding the exclusive service area. He said that he did not understand why the reallocation was necessary because it makes no difference to the consumer whether he pays the amount to one utility or the other. Mr. Schraer said that he did not have a position on the amendment concerning exclusive service area because he had not reviewed that yet. Number 562 REPRESENTATIVE GENE KUBINA asked why APUC is a $5 million commission? MR. SCHRAER corrected that they have a $3.7 million budget and that over $3 million of that is personnel and contract costs. He said the payroll is $2 million and contracts are $900,000, and then office expenses are added to that. He said that they are getting more efficient and that inflation is largely responsible for the large cost. REPRESENTATIVE KUBINA said that with everybody else cutting back, it bothers him that in five years APUC expects to increase their budget $1.3 million, and this would come out of the peoples' pockets. Number 582 BOB LOHR, Executive Director, APUC, answered this question that the increase is based on a two percent population growth and an inflation factor of between three and four percent. The increase in staff is to meet the needs of increase in population. REPRESENTATIVE KUBINA asked for a breakdown as to what each utility would pay? MR. LOHR replied that he did not have that kind of information because that kind of itemization has not been required to date. He stated that this has been recommended, but it would have a substantial fiscal impact to produce this itemization. CHAIRMAN KOTT asked if Mr. Lohr had any firm estimate as to when the APUC would have to shut its doors? MR. SCHRAER replied that the actual deadline date is June 13, 1995, but he would estimate that after April 1, the crunch would come. MR. LOHR supplemented his answer stating that this would be the impact relating to APUC's ability to process new filings. He then asked if opening a new regulatory proceeding makes sense given that the new regulations could not possibly take effect before June 13, unless they were emergency regulations. He said that there is a clear impact on staff retention. He said as a result of the sunset, they have already lost employees who could find more stable work elsewhere. They have also had difficulty recruiting for their key positions because they can only assure work for up to three months. He said therefore, they are having difficulty obtaining the right people for the job. Number 643 CHAIRMAN KOTT then asked how APUC was able to operate this year with an expired ability to collect their regulatory charges? MR. SCHRAER replied that they collected the full annual charge in December, for the full fiscal year. TAPE 95-2, SIDE B Number 000 MR. LOHR explained that it was creative financing that allowed them to operate. Number 056 VICE CHAIRMAN ROKEBERG questioned the dollar impact on the consumer? MR. LOHR answered that the reallocation was immaterial, because the RCC, itself, is nearly immaterial. He estimated that it is in the range of $10 a year. VICE CHAIRMAN ROKEBERG asked about the accuracy of the workload for collecting utilities. MR. LOHR said that this estimate is definitely accurate, that he personally determined it. He said that essentially it is hard to argue that anyone is significantly overpaying for the amount of regulatory services they are receiving. Number 089 CHAIRMAN KOTT agreed with Mr. Schraer about the need for a longer period of extension, but stated that very few boards and commissions have more than a four year extension. MR. SCHRAER restated that APUC has been meeting its public purpose and that no one is testifying that they should be sunsetted. CHAIRMAN KOTT closed public testimony and opened the debate of the committee. Number 147 REPRESENTATIVE JERRY SANDERS moved Amendment 1, as proposed by the ARECA. VICE CHAIRMAN ROKEBERG objected and asked for the purpose of discussion. REPRESENTATIVE SANDERS clarified that this is the amendment for "exclusive service areas." He stated that he believes now is the time to add this amendment, because the chances of this being done after the APUC extension are very slim. VICE CHAIRMAN ROKEBERG said that he would like more time to look over these amendments, and he did not want to hold up the APUC extension. Therefore, he did not support either of the amendments. REPRESENTATIVE PORTER expressed his concern that Amendment 1 is new this year, and he would like this amendment and Amendment 2 to be handled with the Senate bill. REPRESENTATIVE ELTON agreed that he did not think the committee should hold up the extension and that the amendments should be addressed with the Senate bill. REPRESENTATIVE KUBINA asked the intent of the Chair in reference to moving this bill. Number 232 CHAIRMAN KOTT expressed his intent to move the bill out of committee today. REPRESENTATIVE KUBINA stated that he supports both amendments. Number 261 CHAIRMAN KOTT stated that Amendment 1 was moved and asked for a roll call vote. Voting for the Amendment was Representative Sanders, and Kubina. Voting in opposition were Representatives Kott, Rokeberg, Masek, Porter, and Elton. CHAIRMAN KOTT stated that Amendment 1 failed. Number 262 REPRESENTATIVE SANDERS moved Amendment 2. VICE CHAIRMAN ROKEBERG objected. REPRESENTATIVE SANDERS stated that he thinks this amendment should be passed because now is the time to tighten the language of this bill. VICE CHAIRMAN ROKEBERG again expressed his concern that he did not have time to review this amendment and that he did not want to hold up the extension. REPRESENTATIVE SANDERS apologized that this amendment was offered late, and proceeded to say that he thinks it needs to be done now or it will not be done at all. CHAIRMAN KOTT explained that this amendment is fairly innocuous and called Mr. Schraer back to the table to address this amendment. MR. SCHRAER restated that his intention was to keep the extension free from any business that might hold up the extension. He said that this issue is addressed in the Senate bill. He stated that when this issue was brought to trial, the courts ruled in favor of the APUC in the majority of the cases. He explained that the phrase "liberally construed" has in the past allowed them to conduct necessary business, and he considers that the language is a matter for the attorneys. CHAIRMAN KOTT asked if the proposed substitute phrase "necessary or proper" would not allow them to conduct the same business. Number 330 MR. SCHRAER answered that he personally thinks that it would, but that he thinks it is necessary to ask an attorney. CHAIRMAN KOTT asked for a roll call vote to change this language by adopting Amendment 2. Voting for the amendment were Representatives Kubina, Sanders, and Kott. Representatives Rokeberg, Masek, Porter, and Elton voted against the amendment. Number 353 CHAIRMAN KOTT affirmed that the amendment failed. VICE CHAIRMAN ROKEBERG moved on page two, Section 1 (c), delete (3) which is a reallocation away from electric utility users to other utility users in the state. CHAIRMAN KOTT offered this as amendment number three that deletes lines nine through eleven on page two. REPRESENTATIVE KUBINA notes that line seven reads that the APUC is charging .8 percent. He stated that he believes this is an increase, and that removing lines nine through eleven means that more money would be collected than what the fiscal note says. MR. SCHRAER said, "No, the APUC would not collect more money because their budget is still set by the legislature." He called Mr. Lohr to explain the technical difference between .61 percent and .8 percent. MR. LOHR affirmed that Representative Kubina was correct. He continued the purpose in the increase of the cap from .61 percent to .8 percent was precisely because of the cost of power exclusion. He suggested that to be consistent, both lines my be changed to 6.1 percent. MR. LOHR said that the APUC does not oppose the changes made in this bill and he elaborated that the change is very minuscule in the charge to any one family. VICE CHAIRMAN ROKEBERG said that this is exactly his point. He stated that he does not understand the need for a change when it is already changed in the statute. MR. LOHR again stated that his point is to accept what is in the bill with no amendments, in order to expedite the extension. REPRESENTATIVE ELTON reminded that the intent is to pass a clean bill. VICE CHAIRMAN ROKEBERG stated that the way this bill is presented is a change and that by approving the bill the committee would be changing the law as it currently stands. He stated that he wants to go back to the status quo. Number 438 MR. LOHR suggested that Vice Chairman's statement depends on the baseline. He states that they are really starting from scratch because the other act was automatically repealed December 31. He stated that it would be a change from the two year period during which the RCC operated. VICE CHAIRMAN ROKEBERG then amended his amendment to include the change to .61 percent. CHAIRMAN KOTT stated that Amendment 3 has been amended to change page 1, line 7 from .8 percent to 6.1 percent. He then objected to the amendment as he stated that the amendment to the amendment affects the regulatory charges in Section 3, page 4, line 2. MR. SCHRAER confirmed that this line too must be changed to be consistent. Number 478 CHAIRMAN KOTT asked for clarification if the change from .8 percent to .61 percent needed to be done in only Section 1 or does it need to include the pipeline carrier regulatory cost charges as well? MR. SCHRAER stated that the change would need to be made in both areas. REPRESENTATIVE PORTER recommended that neither change be made because it appears that it is not simple to return to the way things were because of other verbages, that now exist in the bill, that are inconsistent with what the rates were before the change. He says that attempting to quickly alter the bill now may change the original intent, and that it is safer to pass the bill as it was written. VICE CHAIRMAN ROKEBERG agreed and offered to withdraw his amendment if he could make another amendment to delete the words "and purchased power reported to the commission," in Section 1 (c) (3) lines 10 and 11. CHAIRMAN KOTT clarified that Vice Chairman Rokeberg had withdrawn Amendment 3 and submitted Amendment 4 which in essence deletes these words on page 2. REPRESENTATIVE ELTON objected and offered that these suggestions be addressed in the Senate bill. CHAIRMAN KOTT agreed with Representative Porter that the bill should not be altered in bits and pieces at this point. REPRESENTATIVE KUBINA stated that Amendment 4 would penalize one segment over another. CHAIRMAN KOTT asked for a roll call vote. Representative Rokeberg voted for Amendment number four. Representatives Kott, Sanders, Masek, Porter, Elton, and Kubina voted against the amendment. Thus, Amendment 4 failed. REPRESENTATIVE PORTER moved that HB 99 be moved from the committee. Hearing no objection, CHAIRMAN KOTT stated that the HB 99 was unanimously moved from the committee. HL&C - 01/30/95 Number 435 HB 115 - DAMAGES AND ATTORNEY FEES FOR UNPAID WAGES CHAIRMAN KOTT then introduced that HB 115 was the next order of business. He then invited Representative Mulder to the table. CHAIRMAN KOTT read the sponsor statement for HB 115. He stated the following: "The Alaska Wage and Hour Act (AWHA) requires the payment of minimum wage and overtime compensation under defined conditions and contains procedures for the enforcement of these requirements. The principal statute addressing remedies is AS 23.10.110(a), which provides that employers who violate AWHA are liable to their employees for the amount of unpaid compensation as well as an equal amount of `liquidated damages.' "Until recently, aggrieved employees seeking to enforce their rights to overtime compensation and minimum wage rates had several avenues to obtain redress. They could settle the matter directly with their employers. They could file a complaint with the Department of Labor and obtain its assistance in effecting a resolution. In addition, employees could sue their employers in Superior Court. "Employees who elected to settle their claims directly with their employers had the option of waiving all or part of the liquidated damages. Similarly, the Department of Labor could negotiate a settlement containing terms waiving all or part of the liquidated damages. This flexibility tended to encourage employers to settle prior to the filing of a lawsuit because if their cases progressed to court full liquidated damages were mandated. "All of this was changed, though, as a result of a decision rendered by the Alaska Supreme Court in McKeown v. Kinney Shoe Company, 820 P.2d 1068 (Alaska 1991), which modified the law in an extremely important respect. Full liquidated damages are now required in all settlements, even when the employer acted reasonably and in good faith. Furthermore, this is the case when a settlement is negotiated by the Department of Labor. "HB 115 acts to cure certain deficiencies in the law as it now stands. First, it grants the court, in actions filed pursuant to AWAH, discretion to award less than full liquidated damages. It also may altogether decline to award liquidated damages. This discretion may be exercised if, but only if, the employer proves both that it acted in good faith and with reasonable grounds. The employer has the burden of proof with respect to these elements before the court can exercise its discretion. However, even assuming both elements are proved, the court retains discretion as to whether or not liquidated damages are awarded. "Second, it permits the Department of Labor to negotiate settlements omitting all or part of the liquidated damages. If employee claimants agree to the terms of such negotiated settlements, they waive their right to further assert their claims for unpaid wages and liquidated damages. "Third, employees may directly settle with their employers, provided that certain procedural safeguards are satisfied. Such safeguards are specifically tailored to apprise employees of their rights and the consequences of their actions. If all procedural safeguards are satisfied, the resulting settlements constitute a waiver of claims for unpaid compensation and liquidated damages. "Fourth, HB 115 changes existing law with respect to the award of attorney fees and costs. As the law now stands, reasonable attorney fees and costs are awarded to prevailing plaintiffs. Defendants, when they prevail, are not entitled to costs and attorney fees. Obviously, this creates a climate whereby those with extremely weak and bogus claims have no financial disincentives to bringing lawsuits. HB 115 takes a different approach. It awards attorney fees and costs to whichever party prevails. Moreover, instead of requiring the payment of "reasonable" attorney fees, this bill specifies that such fees are to be determined according to court rule, thus bringing these types of cases in line with the treatment accorded other civil actions. "It respectfully is submitted that HB 115 constitutes a significant improvement on existing law. As recognized by the Alaska Supreme Court in Kenney, `liquidated damages' in the context of wage and hour cases are in reality a type of punitive damages. That being the case, it makes very little sense to punish those who act reasonably and in good faith the same as those who callously and purposefully violate the law. In that regard, it may be noted that the corresponding federal statute grants discretion to federal courts to award no liquidated damages, or partial liquidated damages, when employers establish that they acted reasonably and in good faith. Thus, this bill acts to bring Alaska law into conformity with federal law. "It is also submitted that according the parties flexibility in negotiating settlements, either directly or through the Department of Labor, is desirable. The preponderant majority of such cases can be settled to the satisfaction of all parties before they enter the judicial system, which would have the effect of relieving an already overburdened court case load. Finally, awarding attorney fees to all prevailing parties, and not just to prevailing plaintiffs, will discourage the filing of bogus lawsuits, thus reducing the drain on Alaska's judicial and economic resources. "Your support is appreciated." Number 617 CHAIRMAN KOTT opened the testimony to the teleconference lines. Number 621 ROBERT BLASCO, Attorney, Robertson, Monagle, and Eastaugh, testified, via teleconference, from Sitka. He reaffirmed that the summary read by the Chair was accurate. He stated that he supports HB 115 because it corrects and improves deficiencies in the law and because of a general philosophy of fairness that applies to all of our civil systems. He stated that the double damage provision is a punitive measure. TAPE 95-3, SIDE A Number 000 MR. BLASCO continued by saying that the change in procedure created by this bill is not dramatic but from a fairness standpoint, the change is very dramatic. He stated that the second portion of the bill is very necessary to eliminate the question of who is liable for attorney fees. KEN LEGACKI testified, via teleconference, from Anchorage. He stated that HB 115 does not address the language set forth in the state case of Webster vs. Bechtel, citation 621 Pacific 2nd 890. Mr. Legacki stated that the Webster case did an analysis of the relationship between the Fair Labor Standards Act and The Alaska Wage and Hour Act. Mr. Legacki quoted the Webster case that states on page 897, "The state statute is void to the extent that it actually conflicts with the valid federal statutes. A conflict will be found where compliance with both federal and state regulations is difficult in possibility or the state law stands (Indecif)... "At page 900 which it states, we must include that the Alaska Act can only be "void" to the extent that it actually conflicts with the valid federal statues. Mr. Legacki stated that this past Monday, January 30, 1995, the United States Supreme Court reiterated the importance of the mandatory awarding of attorney fees. HB 115 that would adopt our ruling too, it is specifically prohibited by the Fair Labor Standards Act. Mr. Legacki cited a case McEnnon v. Nashville Banner Publishing Co., and said the violation of that case was Section 29 USC 626 which stops remedial provisions of the Fair Labor Standards Act regarding attorney fees. On the other provision of this bill the court stresses the importance of adding full mandatory attorney fees to employees. Mr. Legacki furthered that the private settlement provision of HB 115 is prohibited by the FLSA, Brooklyn Savings Bank v. O'Neil the U.S. Supreme Court stated that "private settlements are void as against public policy", Mr. Legacki related that you cannot have them under the Fair Labor Standards Act. Another case that reiterated that position was Lynn's Food Stores Inc. v. the United States, that citation 679 F.2d 1350 (Eleventhth Cir.) 1982. It again reiterates that private settlements are prohibited. Mr. Legacki felt HB 115 would not survive judicial scrutiny. He further stated that it didn't address the reasons behind the Wage and Hour Act., which is to protect employees from overreaching employers. He explained that the court has had to jump in because the employee is economically dependent on the employer. He detailed that if the employer tells the employee, take this settlement or you're out of a job, the employee has no choice. Mr. Legacki asked that this bill be re-thought, analyzed to see how it helps the employee for which the policy of the act is mandated. Number 160 CHAIRMAN KOTT asked if there were any more questions. Number 165 REPRESENTATIVE BRIAN PORTER asked Mr. Legacki to fax the citations stated. Number 180 CHAIRMAN KOTT asked for testimony from Juneau. ED FLANAGAN, Deputy Commissioner, Department of Labor, gave his initial concern with HB 115, regarding its inflexibility with settlements short of court. Mr. Flanagan believes department's supervision is important so employees don't get coerced into anything. Mr. Flanagan offered to work with committee on that portion of HB 115. Mr. Flanagan stated that he had serious concerns dealing with the change in attorney fees from the plaintiff to the prevailing party. He mentioned that there was a more recent case than that cited by Mr. Legacki, interpreting the FSLA, that says plaintiffs can recover damages from defendants. Mr. Legacki stated that it doesn't say either and that this has been ruled by the Sixth Circuit Court of Appeals in D.C., to be invalid. He further stated that this was an attempt to get damages from the plaintiff. The issue is often minimum wage, and they often can't find an attorney to take the case if they're faced with prospect of a long drawn out case with the employer that has many more resources at their command. This would eliminate a large number of cases. Mr. Flanagan also had a concern with the good-faith exception, and feels it would have to be much more stringent than what was in the bill. If the exception is too loose, ignorance of the law being permitted as defense, basically then no employer has an incentive to obey the law. Mr. Flanagan commented that all's he's going to pay in court is basically what he should have paid in the first place. That is why the punitive damages are in there. Also another concern of Mr. Flanagans was Section 4, that states letter A section E, applies to agreements entered into on or after the effective date of the act. Section B F. 2310 110F applies to written agreement into on or after the effective date. Letter C, except as provided in A and B of this section both constitutionally permitted, this act applies to actions commenced on or before the effective date of this act. In the sectional analysis, what concerned Mr. Flanagan was that under section 4C, to the extent constitutionally permitted the rest of the act applies to actions in which a final judgment has not been entered on the date the act takes effect. If this is to give retroactivity to any actions that have been undertaken to try and recover wages, he feels that it would be blatantly unfair to the workers involved. Mr. Flanagan does not support this bill in the present form but would work with the committee for changes. Number 266 REPRESENTATIVE ELTON asked how long this hearing was to last. Are we carrying this hearing over? Number 275 CHAIRMAN KOTT stated there was another committee scheduled for 5:00 p.m., so they would continue questions with current witness, then adjourn and hold the bill until Wednesday, at which point they could bring the bill back. Number 284 REPRESENTATIVE PORTER asked if HB 115 wouldn't be unfair to future employees, then why is it unfair to present employees? MR. FLANAGAN replied that because the present employees already have actions going, they've engaged attorneys, exposed themselves to retaliation and it seems it would be unfair to change the rules after something is in effective. Mr. Flanagan also stated that he had only seen this bill this morning. Number 297 REPRESENTATIVE ELTON stated that he had made an assumption after reading the sectional that maybe the provision in HB 115 changed under Section 4, but the sectional may have been brought up from last year and maybe they didn't change that provision in the sectional. He further stated that this act would only apply to actions that commence on or after the effective date and there would not be any retroactivity. CHAIRMAN KOTT stated that was also his understanding. MR. FLANAGAN replied that he had last years bill, and that would more accurately describe the last Section 4C of that bill, than the current version. CHAIRMAN KOTT asked if there were further questions or comments? Seeing none, we will hold this bill over to the next committee meeting of Wednesday. ADJOURNMENT The meeting adjourned at 5:01 p.m.