Legislature(2003 - 2004)

03/01/2004 03:20 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 1, 2004                                                                                          
                           3:20 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Tom Anderson, Chair                                                                                              
Representative Carl Gatto, Vice Chair                                                                                           
Representative Nancy Dahlstrom                                                                                                  
Representative Bob Lynn                                                                                                         
Representative Norman Rokeberg                                                                                                  
Representative Harry Crawford                                                                                                   
Representative David Guttenberg                                                                                                 
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 488                                                                                                              
"An Act  relating to actionable  claims against  state employees;                                                               
relating  to  the  state's defense  and  indemnification  of  its                                                               
employees  and former  employees with  respect to  claims arising                                                               
out of conduct  that is within the scope  of employment; amending                                                               
the Public Employment Relations  Act regarding claims against the                                                               
state or state employees; and providing for an effective date."                                                                 
     - HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE                                                                                 
HOUSE BILL NO. 517                                                                                                              
"An Act relating  to registration in beneficiary  form of certain                                                               
security  accounts,  including certain  reinvestment,  investment                                                               
management, and custody accounts."                                                                                              
     - MOVED HB 517 OUT OF COMMITTEE                                                                                            
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 488                                                                                                                  
SHORT TITLE: CLAIMS AGAINST STATE EMPLOYEES                                                                                     
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       L&C, JUD                                                                                               
03/01/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
BILL: HB 517                                                                                                                  
SHORT TITLE: SECURITY ACCOUNT BENEFICIARY DESIGNATION                                                                           
SPONSOR(S): LABOR & COMMERCE                                                                                                    
02/23/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/04       (H)       L&C, JUD                                                                                               
03/01/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
WITNESS REGISTER                                                                                                              
GAIL VOIGTLANDER, Chief Assistant Attorney General -                                                                            
Statewide Section Supervisor                                                                                                    
Torts and Worker's Compensation Section                                                                                         
Civil Division (Anchorage)                                                                                                      
Department of Law                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Introduced HB 488 and answered questions.                                                                  
KATHLEEN STRASBAUGH, Assistant Attorney General                                                                                 
Labor and State Affairs Section                                                                                                 
Civil Division (Juneau)                                                                                                         
Department of Law                                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions on HB 488.                                                                              
BRAD THOMPSON, Director                                                                                                         
Division of Risk Management                                                                                                     
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 488.                                                                            
JIM GASPER, Counsel                                                                                                             
Public Safety Employees Association                                                                                             
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Expressed concerns about HB 488.                                                                           
JOE D'AMICO, Business Manager                                                                                                   
Public Safety Employees Association                                                                                             
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Voiced concern about the effects of HB 488                                                                 
on law enforcement personnel and said it is bad public policy.                                                                  
JOSH APPLEBEE, Staff                                                                                                            
to Representative Tom Anderson                                                                                                  
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    As committee  aide,  introduced  HB  517,                                                               
sponsored by the House Labor and Commerce Standing Committee.                                                                   
LORIE HOVANEC, Senior Trust Administrator                                                                                       
Wells Fargo Bank                                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 517.                                                                            
ACTION NARRATIVE                                                                                                              
TAPE 04-22, SIDE A                                                                                                            
Number 0001                                                                                                                     
CHAIR TOM ANDERSON  called the House Labor  and Commerce Standing                                                             
Committee  meeting  to  order  at   3:20  p.m.    Representatives                                                               
Anderson, Gatto,  Dahlstrom, and  Guttenberg were present  at the                                                               
call  to order.    Representatives Lynn,  Rokeberg, and  Crawford                                                               
arrived as the meeting was in progress.                                                                                         
HB 488-CLAIMS AGAINST STATE EMPLOYEES                                                                                         
CHAIR ANDERSON announced  that the first order  of business would                                                               
be  HOUSE BILL  NO. 488,  "An Act  relating to  actionable claims                                                               
against  state employees;  relating  to the  state's defense  and                                                               
indemnification  of  its  employees  and  former  employees  with                                                               
respect  to claims  arising out  of  conduct that  is within  the                                                               
scope  of employment;  amending the  Public Employment  Relations                                                               
Act regarding  claims against the  state or state  employees; and                                                               
providing for an  effective date."  [HB 488 was  sponsored by the                                                               
House Rules Standing Committee by request of the governor.]                                                                     
Number 0118                                                                                                                     
GAIL VOIGTLANDER,  Chief Assistant  Attorney General  - Statewide                                                               
Section  Supervisor,  Torts  and Worker's  Compensation  Section,                                                               
Civil  Division (Anchorage),  Department of  Law, noted  that she                                                               
supervises  and  practices in  defense  of  the state  and  state                                                               
employees in court  actions.  She explained that  HB 488 provides                                                               
a  process  by  which  claims   filed  against  individual  state                                                               
employees are  subject to  the scrutiny  of the  attorney general                                                               
(AG); if  the AG finds  that the  actions complained of  arose in                                                               
the  course  and scope  of  the  employee's  work, the  claim  is                                                               
converted into  a claim  against the state.   The  state employee                                                               
would  be  dismissed  from  the  case, and  the  state  would  be                                                               
substituted in as the defendant in the action.                                                                                  
MS. VOIGTLANDER  said the  language is  taken from  AS 09.50.250,                                                               
which was  taken directly from  the Federal Tort Claims  Act; she                                                               
noted  that  the  certification  process,  another  part  of  the                                                               
Federal Tort Claims Act, is missing.                                                                                            
MS.  VOIGTLANDER discussed  why  she  believes the  certification                                                               
process  is a  positive one.    In lawsuits  where several  state                                                               
employees are sued  in addition to the state, the  AG's office is                                                               
involved either  for the state or  for the state employee.   When                                                               
several state employees are sued  individually, the process takes                                                               
them  off the  job and  they  are distracted  by the  litigation;                                                               
reviewing documents, preparing  depositions, and staying informed                                                               
about litigation  requires the employee  to be absent  from work.                                                               
She  provided an  example, saying  this bill  would enable  state                                                               
employees to continue  to do their jobs; the  litigation would be                                                               
handled  by the  Office of  the Attorney  General, and  the state                                                               
would be  the named defendant.   She said this  process parallels                                                               
how the Federal Tort Claims Act works.                                                                                          
MS.  VOIGTLANDER pointed  out that  the second  part of  the bill                                                               
sets forth in one place,  in one statute, the state's obligations                                                               
to  its  employees when  they  are  sued, including  the  state's                                                               
defense and indemnification  obligations.  It sets  rules for the                                                               
state  employees' obligations  when they  are sued,  in terms  of                                                               
giving notice  to the AG  and cooperating  in the defense  of the                                                               
MS.  VOIGTLANDER   explained  that  many   collective  bargaining                                                               
agreements have  provisions dealing  with defense  and indemnity,                                                               
and several labor  agreements don't have sections  on defense and                                                               
indemnity.   There is  no unifying law  regarding suits  that the                                                               
AG's  office   can  point  an  employee   towards  that  includes                                                               
collective   bargaining   agreements,   labor   agreements,   and                                                               
partially exempt and exempt employees.                                                                                          
Number 0456                                                                                                                     
MS. VOIGTLANDER said  this bill would put in  statute the answers                                                               
to a  state employee's questions.   All state employees  would be                                                               
handled the  same way and would  have the same obligations.   The                                                               
state  would  also  have  the  same  obligations  to  defend  and                                                               
indemnify them in the action.   She admitted the bill is somewhat                                                               
ponderous,  but said  she felt  a state  employee could  read the                                                               
language and know his or her obligations and those of the state.                                                                
Number 0516                                                                                                                     
KATHLEEN STRASBAUGH, Assistant Attorney  General, Labor and State                                                               
Affairs  Section, Civil  Division  (Juneau),  Department of  Law,                                                               
testified to  share the source of  the language in this  bill and                                                               
identify the circumstances under which  it would arise.  The AG's                                                               
office used some  of the language in HB 110,  introduced by then-                                                               
Representative Porter,  and also  borrowed from virtually  all of                                                               
the    collective   bargaining    agreements    that   have    an                                                               
indemnification provision in them.   She said they took the basic                                                               
principles and  exact language,  for the  most part,  and applied                                                               
them  to  everybody.   These  provisions,  starting  at  proposed                                                               
Sec. 09.50.254, would apply in cases  where [Sec. 09.50].253, the                                                               
first section of the bill, does not.                                                                                            
MS.  STRASBAUGH  noted that  43  U.S.C.  Sec. 1983,  the  federal                                                               
statute  under which  people sue  for constitutional  violations,                                                               
authorizes and  compels a plaintiff to  sue individual officials.                                                               
There  are  a  few  other statutes,  possibly  the  whistleblower                                                               
section,   that  authorize   relief   against  individual   state                                                               
employees.  She continued:                                                                                                      
     For those  cases, we must  have a process, and  we have                                                                    
     had  a process  in  place which  covered  all of  these                                                                    
     types of cases.  It will  now cover only a small number                                                                    
     because the  quitclaims will take virtually  all of the                                                                    
     court cases  out of  the process  and have  those cases                                                                    
     pursued only with the state.                                                                                               
     For those,  everyone gets a  defense unless  they acted                                                                    
     willfully or negligently or outside  the scope of their                                                                    
     employment.    These are  the  standards  that are  now                                                                    
     applied  to  those,  both  in and  out  of  court,  the                                                                    
     binding agreements.  One of  the aims is to enshrine it                                                                    
     in  statute,  rather than  continuing  to  leave it  to                                                                    
     collective  bargaining.    [One  of the  aims]  is  the                                                                    
     uniform treatment of state employees. ...                                                                                  
     This  type of  decision must  be left  to the  attorney                                                                    
     general,  and  it  is  not  suitable  for  arbitration.                                                                    
     However, there  has been some  litigation filed  by the                                                                    
     correctional  office  of  the Public  Safety  Employees                                                                    
     Association that  is now before the  supreme court, and                                                                    
     we are  concerned, as  we've indicated  elsewhere, that                                                                    
     the result  of the litigation  might be that  they have                                                                    
     to arbitrate defense decisions.                                                                                            
Number 0733                                                                                                                     
MS. STRASBAUGH pointed out that  this bill also provides a remedy                                                               
for the rather  small group of employees that the  AG declines to                                                               
defend on  the basis  that they  generally are  being disciplined                                                               
for misconduct.   She said she felt uniformity  and a predictable                                                               
procedure were  appropriate, and operating under  court rules for                                                               
disagreeing about the defense decision was best.                                                                                
REPRESENTATIVE CRAWFORD  asked what the practical  application of                                                               
this bill was.   He gave the  example of a state  employee who is                                                               
driving to a meeting and  inadvertently hits another vehicle.  He                                                               
asked how this bill would limit  a lawsuit, and whether the state                                                               
would be  held accountable for  the actions of the  individual in                                                               
some cases.                                                                                                                     
MS. VOIGTLANDER  responded that if  the plaintiff in  that action                                                               
had  sued  both  the  state and  the  individual  state  employee                                                               
driver, then,  if the  driver had merely  been negligent,  the AG                                                               
would determine that the employee  was acting within the scope of                                                               
employment.   That employee would  be dismissed from the  case as                                                               
an  individually  sued  defendant,  and the  claim  would  simply                                                               
proceed against  the State  of Alaska.   The defenses  that might                                                               
then be asserted would be those  found in AS 09.50.250, which has                                                               
a list  of excluded  torts, the  same as  the Federal  Tort Claim                                                               
Act.   She  opined  that in  Representative Crawford's  scenario,                                                               
none of those excluded torts would be implicated.                                                                               
Number 0943                                                                                                                     
REPRESENTATIVE CRAWFORD  asked what the  outcome would be  if the                                                               
scenario included that the employee had been drinking.                                                                          
MS. VOIGTLANDER replied  if the state employee  had been drinking                                                               
at the time of the accident,  the AG would probably find that the                                                               
person  wasn't  acting  within   the  scope  of  employment,  and                                                               
wouldn't  certify that  state  employee in  this  process.   That                                                               
employee would continue  to be an individually  sued defendant in                                                               
the  action,   and  would  have   to  provide  for   his/her  own                                                               
representation because, if drinking on  the job, the person would                                                               
clearly not be acting within the course of employment.                                                                          
MS. VOIGTLANDER  said the only  scenario she could think  of that                                                               
gets to the core of the  question would occur if a state employee                                                               
were to assault someone on the  job.  Assault is an excluded tort                                                               
under  AS  09.50.250(3).    If the  AG  under  the  circumstances                                                               
somehow found that, despite the  assault, the employee was acting                                                               
within the  course and scope  of the  job, then it  would convert                                                               
into a claim against the state,  and the state cannot be sued for                                                               
an assault.   If, however,  the individual employee  had actually                                                               
committed  an  assault, he  or  she  might  well be  outside  the                                                               
parameters  of state-paid  defense and  indemnity, in  which case                                                               
there wouldn't be that certification process.                                                                                   
REPRESENTATIVE CRAWFORD asked if that  was the only instance that                                                               
Ms.  Strasbaugh could  think of  where this  bill would  actually                                                               
change the outcome.  He noted  that this bill isn't very broad in                                                               
Number 1077                                                                                                                     
MS.  VOIGTLANDER  reiterated that  HB  488  mirrors the  way  the                                                               
Federal Tort  Claims Act handles claims  against state employees.                                                               
She  opined that  it would  be  the rare  case that  would get  a                                                               
certification and  yet trip  into an area  where the  state would                                                               
have  an  exclusion under  AS  09.50.250.   Civil  rights  claims                                                               
founded  upon  the  U.S.  Constitution  are  excluded  from  that                                                               
certification process.                                                                                                          
REPRESENTATIVE CRAWFORD  surmised that this bill  wouldn't have a                                                               
practical effect on anyone's life.                                                                                              
MS.  VOIGTLANDER answered  that she  felt it  would have  a great                                                               
effect  on state  employees' lives  because many  state employees                                                               
are distracted  when they have  their name listed as  a defendant                                                               
in a  civil action for  damages where the  claim may be  made for                                                               
several  hundreds of  thousands or  millions of  dollars, whether                                                               
they're  defended and  indemnified by  the  state or  not.   They                                                               
worry about the litigation and they're  taken off the job to have                                                               
to work on  the litigation.  She said she  thought there'd be few                                                               
circumstances  in which  this  proposed  law would  substantively                                                               
affect a claimant's ability to pursue a claim, however.                                                                         
Number 1173                                                                                                                     
REPRESENTATIVE GATTO referred to the  phrase "within the scope of                                                               
employment" and said:                                                                                                           
     Let's say we  hire somebody to go and  change the light                                                                    
     right  up there  in the  corner.   You  put the  ladder                                                                    
     there; while  we're here, he  doesn't secure  the door,                                                                    
     somebody walks in, knocks him  off the ladder, he falls                                                                    
     on   the   Representative    from   Fairbanks.      The                                                                    
     Representative from  Fairbanks now has a  claim against                                                                    
     that individual.  Was he  operating within the scope of                                                                    
     his  employment  by  not making  the  area  safe,  even                                                                    
     though  he's operating  within the  scope  that he  was                                                                    
     asked to go and change the light?                                                                                          
MS.  VOIGTLANDER replied  that the  state employee's  malfeasance                                                               
would  probably be  simply in  the nature  of negligence,  and so                                                               
would still  be within  the course and  scope.   The definitional                                                               
section under  Section 3 defines  acting within the scope  of the                                                               
employee's  office  or employment  and  is  basically looking  to                                                               
those  services that  the employer  authorized to  perform.   The                                                               
employee  is  performing within  the  authorized  time and  space                                                               
limit, activated by purpose to  serve the state, and this doesn't                                                               
constitute acting  or failing to  act with willful,  reckless, or                                                               
intentional misconduct, gross negligence, or malice.                                                                            
Number 1241                                                                                                                     
REPRESENTATIVE GATTO asked whether the  outcome would be the same                                                               
if the employee  had had a previous warning,  or several previous                                                               
warnings, about a similar action.                                                                                               
MS. VOIGTLANDER replied that even  with a previous warning, it is                                                               
still the  nature of the employee's  acts that are at  issue.  In                                                               
the case of  several previous warnings, it's still  the point, if                                                               
that conduct  on this  one occasion  is what is  going to  be the                                                               
test  for purposes  of  the lawsuit.   If  that  conduct on  that                                                               
occasion was  no longer merely  negligent, but rose to  the level                                                               
to those excluded areas, then  the employee wouldn't be operating                                                               
within the course and scope.                                                                                                    
Number 1292                                                                                                                     
CHAIR ANDERSON said:                                                                                                            
     Let's  say an  employee  is accused  of misconduct  and                                                                    
     receives  discipline;   then  the   alleged  misconduct                                                                    
     results  in a  lawsuit,  and that's  filed against  the                                                                    
     state and  the employee.   Your office  determines that                                                                    
     the  employee is  not entitled  to  be indemnified  and                                                                    
     defended   at  state   expense.     Then,  under   this                                                                    
     hypothetical,  let's say  the union  files a  grievance                                                                    
     challenging  the  state's  misconduct decision  and  it                                                                    
     wins.    So, now,  the  union's  won.   The  employee's                                                                    
     discipline  for  misconduct   under  this  scenario  is                                                                    
     reversed  in arbitration.   How  will that  arbitration                                                                    
     award  affect  the attorney  general's  indemnification                                                                    
MS. STRASBAUGH replied  that the outcome depends on  timing.  She                                                               
said  she  hadn't  encountered this  particular  scenario;  she'd                                                               
rarely encountered the  scenario where the AG  wouldn't defend an                                                               
employee,  since  discipline had  occurred  and  a grievance  was                                                               
pending.  Describing this situation  as a "horserace" between the                                                               
arbitration and the tort suit, she elaborated:                                                                                  
     The  problem  is  that  if  arbitration  results  in  a                                                                    
     finding that  they tolerate mistakes in  law, mistakes,                                                                    
     in fact,  lessening mediation  of penalty,  and whether                                                                    
     or not  that finding would  ... prevent the  state from                                                                    
     going  forward   with  its  initial   decision,  really                                                                    
     depends  on  the  circumstances  of  each  arbitration.                                                                    
     Arbitrations  are  binding  on  the  parties  for  many                                                                    
     purposes,  but possibly  not for  causes  of action  in                                                                    
     court.  This is an area  that varies from case to case.                                                                    
     ...   I  don't  mean ...  to be  vague,  but it's  very                                                                    
     difficult to answer your question.                                                                                         
Number 1423                                                                                                                     
CHAIR   ANDERSON  asked   how   many   grievances  were   pending                                                               
arbitration as a challenge to  the AG's decision not to indemnify                                                               
a state employee.                                                                                                               
MS.  STRASBAUGH replied  that  perhaps two  or  three cases  were                                                               
MS. VOIGTLANDER added  that based on her knowledge  of the court,                                                               
it is  rare that  the state  doesn't provide  defense to  a state                                                               
REPRESENTATIVE  GUTTENBERG asked  what other  states' legislation                                                               
had been used to model this bill.                                                                                               
MS.  VOIGTLANDER  replied that  several  states  had adopted  the                                                               
Federal Tort  Claim Act, but she  didn't have the names  of those                                                               
states at this time.                                                                                                            
Number 1573                                                                                                                     
REPRESENTATIVE  ROKEBERG asked  if  this bill  would  be able  to                                                               
screen the  state and  the employee because  the state  can claim                                                               
sovereign immunity in  certain instances.  He  also asked whether                                                               
this bill would decrease vexatious litigation.                                                                                  
MS. VOIGTLANDER replied that sovereign  immunity for the State of                                                               
Alaska  is   covered  in  the   area  of  excluded   torts  under                                                               
AS 09.50.250(3):      assault,   battery,   false   imprisonment,                                                               
interference  with  a   contract,  misrepresentation,  and  other                                                               
excluded  torts.   Once the  lawsuit was  converted to  a lawsuit                                                               
only against  the state, if  any of  those excluded torts  were a                                                               
basis  for  the  claim,  they'd  fall  out  under  the  sovereign                                                               
immunity that the state has retained in AS 09.50.250.                                                                           
REPRESENTATIVE  ROKEBERG asked,  "So our  assertion of  sovereign                                                               
immunity  is based  on our  statutory scheme  right now;  is that                                                               
MS. VOIGTLANDER affirmed that.                                                                                                  
Number 1591                                                                                                                     
REPRESENTATIVE   ROKEBERG  wondered   if  the   impact  of   this                                                               
legislation was to  standardize collective bargaining activities.                                                               
He asked  if the  intention was  to remove  this as  a bargaining                                                               
point  within contract  negotiations or  was simply  to make  the                                                               
effect of this type of legislation consistent.                                                                                  
MS.  STRASBAUGH acknowledged  that HB  488 has  a provision  that                                                               
would  take   the  issue  out  of   collective  bargaining  while                                                               
preserving existing collective bargaining agreements.                                                                           
Number 1648                                                                                                                     
REPRESENTATIVE ROKEBERG asked  if this was a  point of contention                                                               
in the past in bargaining agreements.                                                                                           
MS.   STRASBAUGH  replied   that  traditionally   the  collective                                                               
bargaining  agreements between  the state  and those  unions that                                                               
bargain  about  it  have  a  provision  that  says  this  defense                                                               
provision  of  the  contract  is   not  subject  to  arbitration,                                                               
although  one unit  that does  have such  language has  brought a                                                               
suit  forward  asking the  administrative  appeal  to the  Alaska                                                               
Labor  Relations  Agency  (ALRA).   Subsequently,  the  court  is                                                               
asking  that  the  state  be forced  to  arbitrate  the  decision                                                               
because it's a  mandatory subject of bargaining.   She noted that                                                               
ALRA  said it  was waived,  but Judge  Reese said  under previous                                                               
case law  of the  Alaska Supreme  Court it  had to  be arbitrated                                                               
under [AS] 23.10; that issue is before the Alaska Supreme Court.                                                                
REPRESENTATIVE  ROKEBERG observed  that  this  bill would  settle                                                               
this issue prospectively, but not retrospectively.                                                                              
MS. STRASBAUGH agreed.                                                                                                          
REPRESENTATIVE  ROKEBERG asked  if  Judge Reese's  opinion was  a                                                               
surprise to the state.                                                                                                          
Number 1734                                                                                                                     
MS.  STRASBAUGH  replied, "There  is  an  old  case that  made  a                                                               
holding similar  to this.   The  supreme court  will be  asked to                                                               
consider its ruling."                                                                                                           
REPRESENTATIVE  ROKEBERG asked  if the  administration's position                                                               
was  that  this  bill  was  not  intended  to  affect  collective                                                               
bargaining activities.                                                                                                          
MS.  STRASBAUGH said  the  intent of  the bill  was  to make  the                                                               
process uniform  and "take it  off the  table" so that  in future                                                               
years it would not be subject to bargaining.                                                                                    
REPRESENTATIVE ROKEBERG asked  if it was a problem  in the recent                                                               
past in the collective bargaining process.                                                                                      
MS.  STRASBAUGH  answered  that   she  wasn't  aware  that  other                                                               
bargaining units  had argued about  the scope of  this particular                                                               
Number 1783                                                                                                                     
REPRESENTATIVE GUTTENBERG referred  to page 7, line  5, "does not                                                               
include an  employee of  (i) the University  of Alaska;  (ii) the                                                               
Alaska  Railroad  Corporation".    He asked  why  Alaska  Housing                                                               
[Finance Corporation] or other state agencies weren't included.                                                                 
MS. VOIGTLANDER  explained that  the University  of Alaska  has a                                                               
separate  existence from  the state.   Claims  against it  aren't                                                               
claims against the  state, but must be made  directly against the                                                               
university, and only  university assets may be used  to satisfy a                                                               
judgment.  Statutes governing the  University of Alaska also have                                                               
their  own defense  and indemnity  language,  and the  university                                                               
isn't  defended  by  the  AG,  but has  its  own  counsel,  risk-                                                               
management  program,  and  insurance.     Similarly,  the  Alaska                                                               
Railroad  Corporation  (ARRC),  by   its  statute,  has  a  legal                                                               
existence as  a corporation and has  to be sued in  its own name.                                                               
Again,  state  assets may  not  be  used  to satisfy  a  judgment                                                               
against ARRC,  it isn't  represented by the  AG's office,  and it                                                               
isn't part of the state's risk-management arrangements.                                                                         
MS. VOIGTLANDER pointed out, however,  that the Alaska Industrial                                                               
Development  and Export  Authority  (AIDEA) is  within the  risk-                                                               
management system.  A claim against  AIDEA is a claim against the                                                               
Number 1880                                                                                                                     
BRAD THOMPSON, Director, Division  of Risk Management, Department                                                               
of Administration,  testified that  his division  administers the                                                               
self-insurance program for  the State of Alaska  and its agencies                                                               
and employees.   He spoke  in strong support of  this legislation                                                               
because  of  the belief  it  will  provide the  same,  consistent                                                               
protection from  tort liability for all  state employees, whether                                                               
they are in  a classified position or are not  within the defense                                                               
provisions.   The bill basically codifies  the existing practice.                                                               
He said the  intention wasn't to leave anybody "out  in the cold"                                                               
that wouldn't have been prior to this bill.                                                                                     
MR.  THOMPSON  explained  that the  process  would  be  different                                                               
because actions  against the individual  would be treated  now as                                                               
against  the state  only.   He  said the  attorney general  would                                                               
defend these  actions, as well  as the Department  of Corrections                                                               
or the  Department of  Public Safety  (DPS).   He felt  this bill                                                               
would simplify the  process and make employees  much more secure.                                                               
He commented  that then-Representative  Porter was  still dealing                                                               
with  suits  from  his  former  days  with  the  Municipality  of                                                               
Anchorage and the police department;  he was still being named in                                                               
litigation many  years after his  service to the  Municipality of                                                               
Anchorage,   and  this   was  his   motive   for  putting   forth                                                               
legislation.    He  also  felt it  would  bring  consistency  and                                                               
conformity  to  union  agreements  and the  state's  practice  in                                                               
defending its employees.                                                                                                        
Number 1950                                                                                                                     
REPRESENTATIVE  ROKEBERG  asked  Mr.   Thompson  to  analyze  the                                                               
incidence and source  of these types of cases.   He surmised that                                                               
the  Department of  Corrections and  DPS might  have the  largest                                                               
MR. THOMPSON replied that each  agency, due to it operations, has                                                               
unique  exposures  and  activities.    The  commissioner  of  the                                                               
Department  of  Transportation  [& Public  Facilities]  often  is                                                               
named solely  as the executive  of that agency, even  though that                                                               
person really  doesn't have any  involvement with  that activity.                                                               
Corrections is  a very active  environment for litigation  by the                                                               
inmates,  and he  said healthcare  and family-and-youth  services                                                               
are two more areas in which liability claims are brought.                                                                       
Number 2005                                                                                                                     
REPRESENTATIVE ROKEBERG  asked if  the incidence of  these claims                                                               
was rising.                                                                                                                     
MR. THOMPSON surmised  that detailed statistics are  kept on each                                                               
agency's claims history, costs incurred,  and outcomes.  However,                                                               
identification  isn't  kept  with regard  to  individually  named                                                               
employees  or   officers.    He   offered  to   provide  detailed                                                               
information  for  every fiscal  year's  activity  claim for  each                                                               
REPRESENTATIVE ROKEBERG asked about the supplemental budget.                                                                    
MR. THOMPSON  said the request  would be  for far less  than last                                                               
year,  partly because  the  state is  totally  self-insured.   He                                                               
reported that the  state had had excess  liability insurance that                                                               
it  no longer  has.   Thus the  state is  much more  exposed than                                                               
formerly.  The difficulty with  large, significant court cases is                                                               
that it takes years to go  through all the process.  For example,                                                               
last year  funding was requested  for the resolution of  one case                                                               
involving five  wrongful deaths from  an air crash  that happened                                                               
over  10 years  ago.   The  state had  excess  coverage for  that                                                               
incident, he noted.                                                                                                             
Number 2100                                                                                                                     
REPRESENTATIVE  ROKEBERG  asked  if  Mr.  Thompson  recalled  the                                                               
annual premium  for the  insurance that  was excessive,  and also                                                               
wanted to know the number of annual cases.                                                                                      
MR. THOMPSON replied that he'd provide that information.                                                                        
REPRESENTATIVE GUTTENBERG  asked where the law  had been "broken"                                                               
to the extent it needed to be fixed with this bill.                                                                             
MR. THOMPSON said he believes  this bill would codify an existing                                                               
practice,  except for  the transition  of the  individually named                                                               
employees that would be converted as  against the state only.  He                                                               
said  the   state,  as  the   employer,  is  in   most  instances                                                               
responsible  for the  acts  of  its employees.    Other than  the                                                               
conversion   of  the   individually  named   officers  or   state                                                               
employees,  the purpose  of  the  rest of  the  bill  is to  move                                                               
through  the process  consistently and  make it  uniform to  all,                                                               
rather  than for  just  those select  few  in certain  classified                                                               
units that have negotiated different terms and conditions.                                                                      
Number 2187                                                                                                                     
JIM GASPER, Counsel, Public  Safety Employees Association (PSEA),                                                               
informed  members that  he was  the  attorney who  took the  case                                                               
before the Alaska  Labor Relations Agency now  pending before the                                                               
Alaska Supreme Court;  he offered to answer  questions about that                                                               
litigation.    Addressing  the exclusion  of  this  process  from                                                               
collective  bargaining, he  spoke on  behalf of  the correctional                                                               
officers and police  officers represented by PSEA.   He explained                                                               
that it is typical that someone  in law enforcement is exposed to                                                               
a greater  probability of being  sued by  someone for his  or her                                                               
official conduct than the average public employee is.                                                                           
MR.  GASPER   said  aspects  to  this   legislation  place  those                                                               
individuals - who already are  in a position of making immediate,                                                               
snap decisions that  come back to haunt them  in litigation later                                                               
on -  in a position of  being victimized by this  process.  These                                                               
employees are  constantly involved in  litigation of one  sort or                                                               
another;  either they  are prosecuting  someone  or answering  to                                                               
some  agency  that   would  review  their  conduct,   say,  in  a                                                               
correctional  institution.   Litigation is  part of  their lives,                                                               
and they are  less concerned with time away from  their jobs than                                                               
with protecting their legal rights.                                                                                             
MR. GASPER  said the  average public  employee who  doesn't cross                                                               
into  the  court's  threshold  doesn't have  the  same  level  of                                                               
concern that someone in public safety  might have.  He noted that                                                               
PSEA has had  in its trooper-airport police  contract, for almost                                                               
20 years,  a provision that  says the state will  indemnify, very                                                               
similar to  what the legislation  intends to accomplish.   But it                                                               
doesn't have an  exclusion if the decisions  are being challenged                                                               
through the grievance-arbitration process.                                                                                      
TAPE 04-22, SIDE B                                                                                                            
Number 2272                                                                                                                     
MR. GASPER  explained that  the law says  all grievances  will be                                                               
subject  to  final and  binding  arbitration.    As a  matter  of                                                               
policy, decisions about employee conduct  have to go through this                                                               
informal  dispute-resolution process.    On the  other hand,  the                                                               
state,  through  this legislation,  wants  to  take the  decision                                                               
making out of that realm of scrutiny.   He said, in a sense, when                                                               
an  employee   is  told,  "You've  committed   gross  negligence,                                                               
willful, or  intentional, or reckless misconduct,"  that employee                                                               
is being  told he or she  has acted improperly by  an agency that                                                               
doesn't expect to be reviewed  unless the employee goes to court.                                                               
If this  bill becomes law,  this employee, who through  the union                                                               
had some  level of  protection, would have  to defend  himself or                                                               
herself.  This person most likely lost  his or her job or faces a                                                               
significant suspension.   The person has to find  an attorney and                                                               
litigate  the issue  of  whether or  not  he/she committed  gross                                                               
misconduct or some other willful act.                                                                                           
Number 2245                                                                                                                     
MR.  GASPER   explained  that   under  a   collective  bargaining                                                               
agreement, a  history of  the meaning of  the terms  is developed                                                               
that  is  useful  in analyzing  one  employee's  conduct  against                                                               
another's.   Furthermore,  employees'  actions that  may lead  to                                                               
independent litigation  against them - and  whether they've acted                                                               
outside the scope of their  official authority or duties - create                                                               
a history if  that issue has been challenged.   If someone has to                                                               
go to court each  time to ask the court whether  or not he/she is                                                               
eligible  for indemnification,  that will  create an  opportunity                                                               
for  inconsistency:   one superior  court, one  judicial district                                                               
versus a superior court in  another judicial district, every case                                                               
turning  on  its  own  facts  in separate  forums.    Mr.  Gasper                                                               
suggested this  process gives  the state the  upper hand  when it                                                               
decides not to represent the  individual, and that individual has                                                               
to then undertake a significant expense to change that decision.                                                                
MR. GASPER agreed this bill  was patterned, to some extent, after                                                               
federal law.   In  his experience, however,  he said  federal law                                                               
significantly circumscribed  the collective bargaining  rights of                                                               
federal  employees; many  rights and  obligations that  employees                                                               
have  under  state  law  are  absent  because  it  is  so  highly                                                               
regulated.   He  didn't  think  it a  good  parallel  to use  the                                                               
federal practice, in this level of  detail, to take this issue of                                                               
indemnification  out of  collective  bargaining.   Similarly,  he                                                               
noted, there  had been  no testimony  telling the  committee that                                                               
states which have adopted the  federal equivalent have collective                                                               
bargaining  like Alaska  does.   That representation  hadn't been                                                               
made, so  he wondered how  those states, in adopting  the federal                                                               
equivalent,  would   apply  it   in  the   collective  bargaining                                                               
MR.  GASPER  pointed   out  that  PSEA  hasn't   in  its  history                                                               
challenged  an AG's  decision  to  go to  the  court and  provide                                                               
representation to a member that "we" represent under this long-                                                                 
standing  contractual clause.   It  has  not been  a problem,  he                                                               
said.    He  added  that  he thinks  this  bill  is  particularly                                                               
suspicious  in that  it wants  to  take it  out of  the realm  of                                                               
collective  bargaining for  a group  of employees  for whom  it's                                                               
very important to have union representation.                                                                                    
MR. GASPER  mentioned a provision  that gives a  short timeframe,                                                               
30 days, for  the employee to give notice; thus  the employee has                                                               
to find  an attorney to  bring a challenge within  this timeframe                                                               
or lose  the right  to bring  a challenge.   This  forecloses the                                                               
opportunity  to effectively  defend  oneself under  circumstances                                                               
that would be viewed as very negative for the individual.                                                                       
Number 2117                                                                                                                     
MR. GASPER  pointed out that this  legislation wouldn't indemnify                                                               
an  employee in  a  civil  rights action.    He  said police  and                                                               
correctional officers typically are  sued under the federal civil                                                               
rights statute,  since people who make  allegations against their                                                               
use of official  power sue under that statute.   He said, "Yet we                                                               
view our  indemnification clause  in the  contract to  have broad                                                               
sweep to  encompass that type  of representation, so if  a member                                                               
defends himself, he's going to be  repaid the cost of doing that,                                                               
of performing his official job."                                                                                                
Number 2086                                                                                                                     
CHAIR ANDERSON posed a situation:                                                                                               
     Let's  suppose that  the  attorney  general refuses  to                                                                    
     indemnify an employee and  then the employee challenges                                                                    
     the  AG's determination  in the  court system,  and the                                                                    
     court  favors, ultimately,  the employee.   What's  the                                                                    
     cost of litigating these  issues, including the state's                                                                    
     obligation to indemnify an employee  who is then denied                                                                    
     the representation?                                                                                                        
MR. GASPER responded:                                                                                                           
     The employee,  of course, has  to find an  attorney who                                                                    
     will  represent   the  litigants  in   these  seemingly                                                                    
     hopeless  situations where  they have  been accused  of                                                                    
     some   level   of   conduct  that   did   not   justify                                                                    
     indemnifications.  That's the first hurdle.                                                                                
     The second is that,  most likely, they've suffered some                                                                    
     type of economic calamity -  lost their job or whatever                                                                    
     - and are not able  to underwrite the cost of potential                                                                    
     litigation.   Since  we're dealing  in situations  that                                                                    
     ... may  be remote,  but we  want to  completely change                                                                    
     the law  in the  State of  Alaska to  reflect something                                                                    
     that might happen someday, if  we're going to speculate                                                                    
     about this,  the cost  of getting  independent, private                                                                    
     litigation  is going  to be  significant compared  with                                                                    
     the  cost   of  being   represented  by   the  attorney                                                                    
     general's office.                                                                                                          
     In  that particular  situation  that  you mentioned  in                                                                    
     Anchorage,  the  typical insurance-litigation  attorney                                                                    
     charges  between   $175  and   $325  an  hour.     This                                                                    
     individual is  going to proceed against  the state and,                                                                    
     if  successful, be  entitled to  an  award of  attorney                                                                    
     fees against  the state for having  that issue resolved                                                                    
     against the state.                                                                                                         
     In fact,  the state has  a provision in here  that they                                                                    
     may reserve rights against the  employee.  This appears                                                                    
     at [Sec.]  09.50.257.  So basically  what they're doing                                                                    
     is  telling you,  "We'll  defend you,  but  we want  to                                                                    
     protect ourselves."  So they  created this dual status.                                                                    
     Under Alaska  case law, in insurance  defense law, when                                                                    
     an insurance  company tells  a covered  individual that                                                                    
     we're going to accept your  tender of defense but we're                                                                    
     going  to   reserve  these  rights  against   you,  the                                                                    
     employee  doesn't have  to accept  the attorney  that's                                                                    
     provided by  the insurance  company.   They can  go out                                                                    
     and get  somebody else, and then  the insurance company                                                                    
     is obligated to pay that individual.                                                                                       
     Is  it the  AG's  intent that  if  they reserve  rights                                                                    
     against somebody in this  situation, ... the individual                                                                    
     is  going   to  select   outside  counsel  to   do  the                                                                    
     representation  and the  AG's office  is going  to fund                                                                    
     that?     In   that  sense,   this  statute   raises  a                                                                    
     significant  question  that's  going  to  provoke  some                                                                    
     level of judicial interpretation,  and that question is                                                                    
     not answered.                                                                                                              
Number 2017                                                                                                                     
CHAIR ANDERSON said it seemed less expensive to have an                                                                         
assistant AG represent the employee than to hire a private                                                                      
MR. GASPER noted that state attorneys general are paid as state                                                                 
employees, and thus there are substantial savings.                                                                              
Number 1930                                                                                                                     
REPRESENTATIVE ROKEBERG asked Mr. Gasper to repeat the citation                                                                 
he had referred to earlier and to tell the committee if it was                                                                  
different from the current status.                                                                                              
MR. GASPER stated it to be [Sec.] 09.50.257.  He said he didn't                                                                 
know what the present practice is.  In his union contract, he                                                                   
said, typically a member would advise the AG.  He explained:                                                                    
     The  departments  that  our  members  work  under  have                                                                    
     procedures that govern these practices.   You will have                                                                    
     a certain period of time to  notify us and let us know.                                                                    
     They do not  cover this particular instance  here.  But                                                                    
     what this does  is, it gives them the  right to decide,                                                                    
     if  we  have a  reservation,  we  may provide  a  legal                                                                    
     defense.   But the term  "may" is discretionary.   They                                                                    
     may  not.   Then the  individual is  going to  be right                                                                    
     where  they started.   It  is typical  that people  who                                                                    
     accept (indisc.)  defense raise reservations.   I'm not                                                                    
     aware that  any members  have had to  defend themselves                                                                    
     if the attorney general's  office creates a reservation                                                                    
     that needs to be addressed by individuals.                                                                                 
Number 1856                                                                                                                     
REPRESENTATIVE ROKEBERG asked:                                                                                                  
     Isn't  that permissive  word there  because many  times                                                                    
     there are issues whether or  not, inside or outside the                                                                    
     scope of  work, and  the attorney general,  by default,                                                                    
     would take the  case and in the trial of  fact ... that                                                                    
     would  come  out.   The  case  itself  would  determine                                                                    
     ultimately, in the judgment of  the court, to where the                                                                    
     facts  and the  judgment  of the  court might  militate                                                                    
     towards a  - I'm  trying to find  what the  proper term                                                                    
     for that would  be - to be based on  the reservation of                                                                    
     rights.  You're suggesting  that's not included in your                                                                    
     contract currently.                                                                                                        
MR. GASPER replied:                                                                                                             
     That is not presently  included in our contract because                                                                    
     the  term "indemnification"  is  broadly  drawn, so  it                                                                    
     would have a greater scope in  trying to detail it.  If                                                                    
     you were going to draft  a clause that was as extensive                                                                    
     as this statute, it would  be a significant negotiating                                                                    
Number 1815                                                                                                                     
REPRESENTATIVE  ROKEBERG asked  if  the current  status of  civil                                                               
rights  actions is  that the  cause of  action would  be directed                                                               
towards   the   individual   under  federal   statute   and   the                                                               
constitutional claim.                                                                                                           
MR.  GASPER  replied,  "That  is  the  status.    And  typically,                                                               
however, our  members, when  they successfully  defend themselves                                                               
in these  actions, expect to  be reimbursed, since  their actions                                                               
would come within the scope of their regular employment."                                                                       
REPRESENTATIVE ROKEBERG  asked if  their contract called  for the                                                               
AG to  make the primary  defense.   If that didn't  happen, would                                                               
the   membership  make   the  primary   defense  and   then  seek                                                               
indemnification from the state?                                                                                                 
MR. GASPER said  the contract didn't call for the  AG to make the                                                               
primary defense.  He continued:                                                                                                 
     I can tell  you that we had a trooper  that was accused                                                                    
     of  excessive force,  and he  retained  an attorney  to                                                                    
     defend him.   He was not ultimately sued  by the person                                                                    
     who  complained,  because  they  raised  the  complaint                                                                    
     through  the   [U.S.]  Department  of   Justice,  which                                                                    
     commissioned the FBI  [Federal Bureau of Investigation]                                                                    
     to  investigate.   He  did  need  representation.   The                                                                    
     position of the  state was, "We can't  provide you with                                                                    
     legal representation at this phase."   So he would have                                                                    
     to  take that  up on  his  own.   When he  successfully                                                                    
     defeated the  claim and  the investigation  resulted in                                                                    
     no further  prosecution by the U.S.  Attorney's office,                                                                    
     he was reimbursed for his cost of defense.                                                                                 
Number 1743                                                                                                                     
REPRESENTATIVE ROKEBERG asked  if this example is  similar to the                                                               
status quo,  and if this  proposed statutory change  would affect                                                               
that  particular area  of contracts.    He asked  Mr. Gasper  if,                                                               
under this statute, the state  would be obligated to reimburse an                                                               
employee for the defense.                                                                                                       
MR. GASPER replied:                                                                                                             
     I  would have  to speculate  about the  motives of  the                                                                    
     state in  excluding that from the  realm of indemnified                                                                    
     conduct,  but there  is not  even the  supposition that                                                                    
     the   employee  would   be   successful  in   defending                                                                    
     themselves.  Under  our collective bargaining agreement                                                                    
     the state has provided coverage.                                                                                           
Number 1707                                                                                                                     
REPRESENTATIVE ROKEBERG stated:                                                                                                 
     You indicated  the case  at bar right  now is  one that                                                                    
     this  bill would  affect how  you  believe the  current                                                                    
     status  is of  arbitration.   I don't  understand those                                                                    
     regulations  and  rules.   Is  that  because  of  Judge                                                                    
     Reese's  decision or  because of  the current  contract                                                                    
     that  you made  that statement,  that would  change the                                                                    
     current status quo?                                                                                                        
MR. GASPER responded:                                                                                                           
     There  is currently  case law  from the  Alaska Supreme                                                                    
     Court  saying   that  because  the   Public  Employment                                                                    
     Relations  Act has  mandatory grievance  arbitration in                                                                    
     every  collective  bargaining agreement,  ...  possibly                                                                    
     anything  within  a  contract  has to  go  through  the                                                                    
     grievance  arbitration process  if  there's a  dispute.                                                                    
     The language  in the correctional  officers' bargaining                                                                    
     agreement  that is  the subject  of this  challenge was                                                                    
     borrowed  from the  General Government  Unit collective                                                                    
     bargaining  agreement; at  the  time, the  correctional                                                                    
     officers left  the General  Government Unit  and became                                                                    
     part of PSEA.  In  the interim, there was acceptance of                                                                    
     what  had been  the  standing  General Government  Unit                                                                    
     We  had several  members who  were sued  by individuals                                                                    
     who claimed  that they engaged in  certain conduct, and                                                                    
     there  was a  determination by  the attorney  general's                                                                    
     office  that  they  were involved  in  misconduct  that                                                                    
     disqualified  them.    We  wanted  to  challenge  those                                                                    
     determinations, saying  they were punitive.   The state                                                                    
     refused to  proceed to arbitration.   What we  did was,                                                                    
     we presented  the issue to  the Alaska  Labor Relations                                                                    
Number 1672                                                                                                                     
     The Alaska  Labor Relations  Agency made  two findings.                                                                    
     The first  was that under federal  private-sector labor                                                                    
     law, and  those states that have  collective bargaining                                                                    
     who  have addressed  the  issue,  indemnification is  a                                                                    
     mandatory subject  of bargaining.  However,  the agency                                                                    
     said  there was  no  opportunity or  obligation on  the                                                                    
     part of PSEA to insist  that this piece of the contract                                                                    
     and  disputes  over  that  piece  of  the  contract  go                                                                    
     through grievance arbitration.                                                                                             
     We  appealed  that  decision  to  the  superior  court.                                                                    
     Judge  Reese  ruled,  "Well,  you  have  this  previous                                                                    
     decision of the supreme court  saying that, as a matter                                                                    
     of public  policy, contracts have  to have  a grievance                                                                    
     arbitration provision.   So if  they do, then,  if it's                                                                    
     in  the  contract,  it  has   to  be  subject  to  that                                                                    
     procedure.    Now, if  that  issue  is decided  by  the                                                                    
     supreme court  -- and I  can tell you that  the supreme                                                                    
     court's  case-management page  says  there  is a  draft                                                                    
     circulating on this appeal,  meaning there's an opinion                                                                    
     due to come out.                                                                                                           
Number 1591                                                                                                                     
REPRESENTATIVE ROKEBERG asked  if his position was that  it was a                                                               
case of second  review or second impression and  therefore he was                                                               
"served against  the law."  He  also asked the timeframe  of this                                                               
MR. GASPER replied that was correct and said:                                                                                   
     We  are  trying to  apply  existing  precedent to  this                                                                    
     particular  practice, saying  that  the contract  can't                                                                    
     exclude indemnification  decisions from  the grievance-                                                                    
     arbitration process.   The agency  decided the  case in                                                                    
     2001.   Judge  Reese decided  the  case in  2002.   The                                                                    
     supreme  court  had  oral argument  last  May  on  this                                                                    
Number 1552                                                                                                                     
JOE   D'AMICO,   Business   Manager,  Public   Safety   Employees                                                               
Association, testified  that he was  also a retired  Alaska State                                                               
Trooper, having  served twenty years  with the troopers  and then                                                               
two years  with the  U.S. Marshals.   He  said the  troopers were                                                               
very  concerned about  the proposed  fundamental  change in  that                                                               
state troopers are currently indemnified.   He had been sued as a                                                               
state  trooper, he  noted,  and said  the  current system  worked                                                               
quite well, in his experience.                                                                                                  
MR. D'AMICO reviewed  the current process, saying  he thought the                                                               
troopers, when notified of a lawsuit,  had a period of 10 days to                                                               
notify the AG's office of that suit.   At that time, the AG steps                                                               
in  to  defend,  since  the  contract  requires  that  the  state                                                               
indemnify the  AG unless a  court decides that the  trooper acted                                                               
outside the  scope of his or  her duties.  The  third-party court                                                               
is the  entity that decides whether  or not this trooper  did the                                                               
wrong thing or didn't operate correctly.                                                                                        
MR. D'AMICO  pointed out  that the  proposed system  removes that                                                               
level of  third-party neutrality  to other  state employees.   He                                                               
said  the  problem  with  this  bill,  from  the  law-enforcement                                                               
standpoint, is  that most  decisions made  by troopers  and other                                                               
law enforcement officers that result  in litigation happen in the                                                               
blink of  an eye.  For  example, he was  shot at a few  years ago                                                               
and  had to  decide instantly  whether to  shoot back;  he didn't                                                               
shoot, he noted,  which was the right decision  because there was                                                               
a hostage involved whom he was unaware of.                                                                                      
MR.  D'AMICO  pointed out  that  under  this bill,  however,  the                                                               
decision  of  whether his  conduct  was  just  would be  made  by                                                               
someone who gets to sit in an office  and refer to law books.  He                                                               
said,  "It's just  not right.    We have  a system.   The  system                                                               
works.   It's not broken with  regard to the troopers  or airport                                                               
police.  It is broken with regard to correctional officers."                                                                    
Number 1455                                                                                                                     
MR.  D'AMICO informed  the committee  that when  the correctional                                                               
officers came into the PSEA,  the language in their contract that                                                               
was  written by  the  General Government  Union  came with  them.                                                               
This  language,  he believed,  was  inadequate  to protect  them,                                                               
since correctional  officers work with very  litigious people who                                                               
have a lot  of time on their hands.   Inmates bring many lawsuits                                                               
against the state and state  employees, many of which he believed                                                               
were unjust.   He cited examples  where the state had  chosen not                                                               
to indemnify an employee and said:                                                                                              
     This new  bill may work  well for employees  who aren't                                                                    
     faced with life-and-death decisions  in the blink of an                                                                    
     eye or  working with people  who have nothing  but time                                                                    
     on their  hands and  want to  sue the  state.   I can't                                                                    
     speak for  those.   But I  can tell  you, from  the law                                                                    
     enforcement  standpoint,   this  bill  is   bad  public                                                                    
     policy.  It scares the  death out of state troopers and                                                                    
     the other employees I represent.                                                                                           
     We have  a 20-year contract  with the troopers,  and we                                                                    
     have a system  that works quite well.   To go backwards                                                                    
     on that  now is robbing  these employees.   There's not                                                                    
     enough troopers out there already.   It puts a big fear                                                                    
     over their  head.  They're  not distracted  now because                                                                    
     the  state  indemnifies  them.   They're  going  to  be                                                                    
     distracted  because  they  don't know  if  the  state's                                                                    
     going to indemnify  them.  And it's no  longer going to                                                                    
     be up  to a judge; it's  going to be up  to someone who                                                                    
     isn't a  neutral third party.   That's what  we believe                                                                    
     is the problem with this bill.                                                                                             
REPRESENTATIVE  DAHLSTROM thanked  Mr. D'Amico  for his  years of                                                               
service to the State of Alaska.                                                                                                 
Number 1314                                                                                                                     
MS.  VOIGTLANDER responded  to  previous  testimony, stating  her                                                               
understanding  that  the  current contract  allows  defense  with                                                               
"reservational" rights.  She said  the AG oftentimes defends with                                                               
a reservation  of rights and  that this  is included in  the PSEA                                                               
contract under Article  29, subsection (e).   Generally, a letter                                                               
is sent to the state employees  being sued, saying the state will                                                               
defend  and  indemnify  the  employee  with  the  reservation  of                                                               
punitive  damages,  because in  the  contract  the state  doesn't                                                               
cover punitive  damages.  She  said this bill doesn't  change the                                                               
way  the  state defends  employees  in  terms of  reservation  of                                                               
MS. VOIGTLANDER said  she believed the case where  a trooper paid                                                               
his costs  of defense involved a  federal criminal investigation,                                                               
and   the  state   doesn't   defend   individuals  for   criminal                                                               
investigations.  Under  this particular agreement, if  there is a                                                               
criminal   investigation  and   the   trooper   is  absolved   of                                                               
misconduct, then  he or she  can come  back and ask  for defense.                                                               
But the  state, which  is oftentimes  the prosecutor  of actions,                                                               
cannot prosecute with one hand and  defend a state trooper who is                                                               
alleged to  have committed a  criminal act  with the other.   She                                                               
said the  contract is different from  other collective bargaining                                                               
agreements  that  allow defendants  who  are  found to  not  have                                                               
committed  the  criminal conduct  to  ask  for reimbursement  for                                                               
defense costs in the action.                                                                                                    
MS. VOIGTLANDER  said she routinely defends  state employees when                                                               
they are  sued for civil  rights actions.   In this bill,  the AG                                                               
can certify  that an  employee was within  the course  and scope,                                                               
and can  convert the suit  to a claim  against the state  for the                                                               
reason that the  state cannot be sued for a  violation of federal                                                               
constitutional  rights, since  the state  is not  a person  under                                                               
that law.   If civil rights  actions were included in  this bill,                                                               
it would create a "dead end" for that plaintiff.                                                                                
Number 1130                                                                                                                     
REPRESENTATIVE  ROKEBERG  said  Ms.  Voigtlander  had  previously                                                               
testified that  the right to  defend was already in  the contract                                                               
and that the state is currently defending in those cases.                                                                       
MS. VOIGTLANDER reiterated that the  state is defending, but this                                                               
bill  could  not   convert  a  civil  rights   claim  against  an                                                               
individual into a claim against  the state because, under federal                                                               
law, the state is  not a person who is subject  to a civil rights                                                               
claim for damages.                                                                                                              
REPRESENTATIVE  ROKEBERG asked  if this  bill excludes  PSEA from                                                               
negotiating  with the  administration  to have  an exception  for                                                               
that particular ability to defend.   He suggested that many times                                                               
the civil  rights statutes are  used as a  tool to try  to attack                                                               
law enforcement people.                                                                                                         
MS. VOIGTLANDER  responded that the  state defends  troopers when                                                               
they are  sued in their  own names  for those actions,  and would                                                               
continue to  defend them when  they're sued.   The first  part of                                                               
the  bill speaks  to this  conversion whereby  a claim  against a                                                               
state employee is converted into a  claim against the state.  The                                                               
second part  talks about  when that  mechanism is  not available,                                                               
for  example, in  a civil  rights case;  it says  the state  will                                                               
defend and  indemnify an  employee who  is individually  sued, as                                                               
long  as  it's  within  the   scope  of  employment.    Directing                                                               
attention  to page  3,  line 13,  Sec. 09.50.254,  she said  this                                                               
would  be the  operative provision  for a  state employee  who is                                                               
individually sued  for violation of federal  constitutional right                                                               
under 42 U.S.C. Sec. 1983.                                                                                                      
Number 1026                                                                                                                     
REPRESENTATIVE  GUTTENBERG cited  an example  of a  trooper doing                                                               
what his supervisor says and  following procedures, but something                                                               
happens  to  someone   who  then  sues,  saying   his  civil  and                                                               
constitutional rights  were violated.   Representative Guttenberg                                                               
offered   his  understanding   that  the   trooper  wouldn't   be                                                               
indemnified under this bill.                                                                                                    
MS. VOIGTLANDER replied that the  state would indemnify unless it                                                               
didn't  provide  state-paid  defense,  and  except  for  punitive                                                               
damages.    If  the  finding  stated  the  employee  did  violate                                                               
constitutional rights, but the facts  showed he didn't act, there                                                               
would  actually  be no  violation  because  in order  to  violate                                                               
someone's  civil   rights,  clearly   established  law   must  be                                                               
violated.   If  the  officer didn't  violate clearly  established                                                               
law, he  has a qualified-immunity  defense to  the constitutional                                                               
rights violation and  cannot be held liable  for a constitutional                                                               
rights  violation.    A constitutional  rights  violation  always                                                               
requires something more than negligence, she pointed out.                                                                       
Number 0827                                                                                                                     
CHAIR ANDERSON assigned a  subcommittee chaired by Representative                                                               
Dahlstrom,   with  Representatives   Guttenberg,  Crawford,   and                                                               
Rokeberg as  the other  members.  He  requested that  they assess                                                               
the indemnification aspect of the bill.                                                                                         
REPRESENTATIVE ROKEBERG suggested the  Department [of Law] should                                                               
be involved  because of the different  approaches, the exceptions                                                               
for  law enforcement  officers, and  the issue  of civil  rights.                                                               
[HB 488 was held over.]                                                                                                         
HB 517-SECURITY ACCOUNT BENEFICIARY DESIGNATION                                                                               
CHAIR ANDERSON announced  that the final order  of business would                                                               
be  HOUSE BILL  NO.  517,  "An Act  relating  to registration  in                                                               
beneficiary form of certain  security accounts, including certain                                                               
reinvestment, investment management, and custody accounts."                                                                     
[Chair Anderson turned the gavel over to Vice Chair Gatto.]                                                                     
Number 0725                                                                                                                     
JOSH  APPLEBEE,  Staff  to Representative  Tom  Anderson,  Alaska                                                               
State  Legislature, speaking  as the  committee aide,  introduced                                                               
HB 517,  which was  sponsored  by the  House  Labor and  Commerce                                                               
Standing Committee.   He  said HB 517  will permit  an investment                                                               
management or  custody account  with a trust  company or  a trust                                                               
division  of a  bank  with  trust powers  to  have a  beneficiary                                                               
designation take effect  upon death of the owner.   Under current                                                               
law,  securities  and  brokerage accounts  may  have  beneficiary                                                               
designations take effect upon the  death of the owner pursuant to                                                               
the Uniform Transfer on Death Security Registration Act.                                                                        
MR. APPLEBEE  explained that the current  definition of "security                                                               
account"  in  the  uniform  Act isn't  broad  enough  to  include                                                               
investment management  or custody  accounts, which  are generally                                                               
used by  trust departments.   The legislation  will allow  all of                                                               
these products  - and thus bank  customers - to avoid  probate by                                                               
providing  a   statutory  authorization  to  use   a  beneficiary                                                               
designation.   It  will also  put  bank trust  departments on  an                                                               
equal  footing  with brokerage  firms.    Mr. Applebee  said  the                                                               
problem cannot be solved other  than by statute.  Several states,                                                               
including  California, Idaho,  Iowa,  Minnesota, and  Washington,                                                               
have enacted similar legislation in the last three years.                                                                       
Number 0584                                                                                                                     
LORIE  HOVANEC, Senior  Trust  Administrator,  Wells Fargo  Bank,                                                               
Anchorage,   noting  that   she   is   an  attorney,   reinforced                                                               
Mr. Applebee's explanation.   She said under  current law whereby                                                               
securities   and   brokerage   accounts  may   have   beneficiary                                                               
designations that  take effect  upon the  death of  the account's                                                               
owner,  the   assets  of  the   account  pass   automatically  to                                                               
designated  beneficiaries upon  the  death of  the owner  without                                                               
having  to  go  through  probate.   The  definition  of  security                                                               
accounts in  this transfer-on-death  statute wasn't  broad enough                                                               
to include  investment management for custody  accounts, products                                                               
generally offered by bank trust  departments.  Alaska's transfer-                                                               
on-death statute  is similar  to that  in other  states.   It was                                                               
initially drafted  as a  uniform state  law and  subsequently was                                                               
adopted in most states.                                                                                                         
MS. HOVANEC  said custody and investment  management accounts are                                                               
similar to brokerage  accounts except they are  accounts at banks                                                               
or  trust  companies, not  at  brokerages.   These  accounts  may                                                               
contain  stocks  and bonds,  just  like  brokerage accounts.    A                                                               
custody account is customer-directed:   the bank or trust company                                                               
holds or  "custodies" assets  and then  the customer  manages and                                                               
directs the  investment by picking  the stocks, bonds,  and other                                                               
assets.   In contrast,  in an  investment management  account the                                                               
bank or trust company manages the assets.                                                                                       
Number 0410                                                                                                                     
MS.  HOVANEC  provided  her understanding  that  when  the  model                                                               
transfer-on-death statute was drafted and  adopted in Alaska, the                                                               
drafters were  focused on accounts  offered by  brokerages, since                                                               
it  was generally  assumed that  bank accounts  would fall  under                                                               
another statute.   She said HB 517 would simply  make it possible                                                               
to  meet  customer  expectations.   The  proposal  would  benefit                                                               
customers  directly by  avoiding  probate in  the  same way  that                                                               
other  pay-on-death  and  transfer-on-death  accounts  may  avoid                                                               
probate through  use of  these beneficiary forms.   She  said she                                                               
didn't think  this change  was controversial,  and said  in other                                                               
states in which this law had  been enacted there haven't been any                                                               
problems with customers, to her knowledge.                                                                                      
VICE CHAIR  GATTO asked  if the probate  process is  difficult in                                                               
MS. HOVANEC replied that probate "isn't  too bad" in Alaska.  She                                                               
said Alaska  adopted the Uniform  Probate Code, which  helped the                                                               
process.   In response  to a  question from  Representative Lynn,                                                               
she  said  the  avoidance  of  probate is  the  main  reason  she                                                               
supports this bill.                                                                                                             
REPRESENTATIVE  ROKEBERG said  sometimes  trusts provide  ongoing                                                               
income on a periodic basis to  recipients of the trust.  He asked                                                               
if this bill  would help prevent interrupting the  cash flow from                                                               
these trusts.  He gave the example  of a child as a sole survivor                                                               
after the death  of his only parent and asked  if the transfer by                                                               
avoiding probate would be faster.                                                                                               
MS. HOVANEC affirmed that.                                                                                                      
REPRESENTATIVE  ROKEBERG asked  if  this bill  would only  affect                                                               
those  security accounts  within the  trust situation  or affects                                                               
checking accounts or other types of accounts.                                                                                   
MS.  HOVANEC replied,  "The language  in the  amendment specified                                                               
investment  management account  or  custody  accounts, which  are                                                               
with the trust division of a bank with trust powers."                                                                           
TAPE 04-23, SIDE A                                                                                                            
Number 0010                                                                                                                     
REPRESENTATIVE DAHLSTROM moved to report  HB 517 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  HB 517 was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                    
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
4:57 p.m.                                                                                                                       

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