Legislature(2017 - 2018)BARNES 124

04/10/2017 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 3:45 PM --
Moved CSHB 38(L&C) Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 9(L&C) Out of Committee
-- Public Testimony --
Moved CSHB 124(L&C) Out of Committee
-- Public Testimony --
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         April 10, 2017                                                                                         
                           3:51 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Sam Kito, Chair                                                                                                  
Representative Adam Wool, Vice Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Louise Stutes                                                                                                    
Representative Chris Birch                                                                                                      
Representative Gary Knopp                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
MEMBERS ABSENT                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
Representative Bryce Edgmon (alternate)                                                                                         
OTHER MEMBERS PRESENT                                                                                                         
REPRESENTATIVE DAN SADDLER                                                                                                      
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 9                                                                                                                
"An  Act relating  to  the  Board of  Pharmacy;  relating to  the                                                               
licensing and  inspection of  certain facilities  located outside                                                               
the state; relating  to drug supply chain  security; and creating                                                               
a  position   of  executive  administrator   for  the   Board  of                                                               
     - MOVED CSHB 9(L&C) OUT OF COMMITTEE                                                                                       
HOUSE BILL NO. 38                                                                                                               
"An  Act relating  to  the calculation  and  payment of  workers'                                                               
compensation   benefits  in   the  case   of  permanent   partial                                                               
impairment; relating  to the calculation and  payment of workers'                                                               
compensation death  benefits payable  to a  child of  an employee                                                               
where there is  no surviving spouse; relating  to the calculation                                                               
and  payment  of  workers' compensation  death  benefits  for  an                                                               
employee without a surviving spouse  or child; relating to notice                                                               
of  workers' compensation  death benefits;  and providing  for an                                                               
effective date."                                                                                                                
     - MOVED CSHB 38(L&C) OUT OF COMMITTEE                                                                                      
HOUSE BILL NO. 124                                                                                                              
"An   Act    relating   to   corporations,    including   benefit                                                               
corporations, and other entities; and providing for an effective                                                                
     - MOVED CSHB 124(L&C) OUT OF COMMITTEE                                                                                     
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB   9                                                                                                                  
SHORT TITLE: PHARMA BD & EMPLOYEES;DRUG DIST/MANUFAC                                                                            
SPONSOR(s): REPRESENTATIVE(s) SADDLER                                                                                           
01/18/17       (H)       PREFILE RELEASED 1/9/17                                                                                
01/18/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/17       (H)       L&C, FIN                                                                                               
04/07/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
04/07/17       (H)       Heard & Held                                                                                           
04/07/17       (H)       MINUTE(L&C)                                                                                            
04/10/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
BILL: HB  38                                                                                                                  
SHORT TITLE: WORKERS' COMPENSATION: DEATH BENEFITS                                                                              
SPONSOR(s): REPRESENTATIVE(s) JOSEPHSON                                                                                         
01/18/17       (H)       PREFILE RELEASED 1/13/17                                                                               
01/18/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/17       (H)       L&C, FIN                                                                                               
02/24/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/24/17       (H)       Heard & Held                                                                                           
02/24/17       (H)       MINUTE(L&C)                                                                                            
04/10/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
BILL: HB 124                                                                                                                  
SHORT TITLE: BENEFIT CORPORATIONS                                                                                               
SPONSOR(s): REPRESENTATIVE(s) KITO                                                                                              
02/15/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/15/17       (H)       L&C, FIN                                                                                               
04/01/17       (H)       L&C AT 1:00 PM BARNES 124                                                                              
04/01/17       (H)       Heard & Held                                                                                           
04/01/17       (H)       MINUTE(L&C)                                                                                            
04/07/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
04/07/17       (H)       Scheduled but Not Heard                                                                                
04/10/17       (H)       L&C AT 3:15 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
RICHARD HOLT, PharmD                                                                                                            
Vice Chair, Board of Pharmacy                                                                                                   
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in support of HB 9.                                                                            
BIANCA CARPENETI, Staff                                                                                                         
Representative Sam Kito                                                                                                         
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   On behalf  of  Representative Kito,  prime                                                             
sponsor of  HB 124,  explained the changes  made in  the proposed                                                               
committee substitute, Version D.                                                                                                
ACTION NARRATIVE                                                                                                              
3:51:49 PM                                                                                                                    
CHAIR  SAM KITO  called  the House  Labor  and Commerce  Standing                                                             
Committee meeting  to order at  3:52 p.m.   Representatives Kito,                                                               
Sullivan-Leonard, Knopp, Birch, Josephson,  and Wool were present                                                               
at  the call  to order.    Representative Stutes  arrived as  the                                                               
meeting was in progress.                                                                                                        
          HB 9-PHARMA BD & EMPLOYEES;DRUG DIST/MANUFAC                                                                      
3:52:37 PM                                                                                                                    
CHAIR KITO  announced that the  first order of business  would be                                                               
HOUSE BILL  No. 9,  "An Act  relating to  the Board  of Pharmacy;                                                               
relating to  the licensing and  inspection of  certain facilities                                                               
located  outside  the  state;  relating   to  drug  supply  chain                                                               
security; and creating a position  of executive administrator for                                                               
the Board of  Pharmacy."  [Before the committee  was the proposed                                                               
committee substitute  (CS) for HB 9,  Version 30-LS0131\J, Bruce,                                                               
4/6/17, adopted on 4/7/17 as the working document.]                                                                             
CHAIR KITO  opened the hearing  with the continuation  of invited                                                               
3:53:28 PM                                                                                                                    
RICHARD HOLT,  PharmD, Vice Chair,  Board of  Pharmacy, testified                                                               
in support of HB 9.  He  said the Board of Pharmacy is requesting                                                               
the  authority  to  license and  write  regulations  around  that                                                               
statute to have the ability  to oversee the pharmacy supply chain                                                               
of medication coming  into Alaska.  It is not  uncommon for other                                                               
states  to  have similar  legislation  for  the safety  of  their                                                               
patients, he pointed  out.  Only Alaska, Hawaii,  Guam, Utah, and                                                               
Massachusetts don't  have the ability to  license these wholesale                                                               
distributors.  The Board of  Pharmacy is asking for the licensing                                                               
opportunity  to take  care  of patients  in  Alaska and  maintain                                                               
their safety.                                                                                                                   
DR.  HOLT  stated  that   the  proposed  executive  administrator                                                               
position is really needed to assist  the Board of Pharmacy in all                                                               
the  regulations that  the board  is  currently working  on.   He                                                               
noted that  pharmacy continues to  evolve very rapidly  to things                                                               
that are being  seen elsewhere in the country,  but which haven't                                                               
begun to be touched upon  in Alaska, which really impacts patient                                                               
safety.  This legislation is very important to achieve, he said.                                                                
3:55:19 PM                                                                                                                    
REPRESENTATIVE  KNOPP  inquired  whether  he is  correct  in  his                                                               
understanding  that Alaska,  Guam,  and Hawaii  have  not set  up                                                               
inspection programs.                                                                                                            
DR. HOLT  replied that the  information he has from  the National                                                               
Association  of Boards  of Pharmacy  is that  the last  remaining                                                               
areas  that have  not [set  up inspection  programs] are  Alaska,                                                               
Hawaii,  Guam, Utah,  and Massachusetts.    He said  he has  been                                                               
informed  that   those  other  areas  are   actively  working  on                                                               
legislation, but the legislation is not finalized.                                                                              
REPRESENTATIVE KNOPP stated  it is a good bill in  concept and he                                                               
is not opposed to it.   However, he continued, he is reluctant to                                                               
create a  position in  the current fiscal  climate because  he is                                                               
not  big on  growing  government.   He asked  why  [the Board  of                                                               
Pharmacy] doesn't think Alaska is  adequately protected if [other                                                               
states]  have  an  inspection process  and  verification  of  the                                                               
supply chain.                                                                                                                   
DR. HOLT  responded that  [the Board  of Pharmacy]  currently has                                                               
statutory authority to register  out-of-state pharmacies and part                                                               
of  that is  reviewing  out-of-state inspections.    Some of  the                                                               
inspections he has seen coming  in from other states, he advised,                                                               
show him great cause to be alarmed.   Some of them have little to                                                               
no  detail  at  all,  yet   [the  board]  accepts  them  in  that                                                               
circumstance.   He noted that  with professionals in  this field,                                                               
licensed pharmacists,  and two public members,  [the board] feels                                                               
that it is  its profession to protect the patients  in Alaska, so                                                               
having the authority to do inspections is important.                                                                            
DR. HOLT further  advised that it must be kept  in mind that even                                                               
if a  facility has  a great inspection  and meets  the adequacies                                                               
that  [the Board  of  Pharmacy] would  write  regulations to,  if                                                               
something happens  [the board] still  doesn't have  the authority                                                               
over that  wholesale distributor  or other  facility if  there is                                                               
not  this  piece  of  legislation.   He  explained  that  if  the                                                               
wholesaler shipped a drug and  something happened to the patients                                                               
in Alaska, [the board] could  not reprimand that facility because                                                               
the facility is out of the board's jurisdiction.                                                                                
3:58:18 PM                                                                                                                    
REPRESENTATIVE WOOL  noted that Massachusetts doesn't  have a law                                                               
like this  and it has  a strong  medical community.   He inquired                                                               
why Massachusetts doesn't have a law like this.                                                                                 
DR. HOLT answered he doesn't know  the current status, but he has                                                               
been told Massachusetts  is working on this in light  of the 2012                                                               
compounding  situation  in  which  the  New  England  Compounding                                                               
Center  was an  unlicensed manufacturer  of steroid  medications.                                                               
Based  on   whether  the  medication   was  mislabeled   or  from                                                               
unsanitary contamination, the result was  64 people dying and 800                                                               
people sick with fungal meningitis  from what this center shipped                                                               
across the country.                                                                                                             
REPRESENTATIVE  WOOL  offered  his  understanding that  HB  9  is                                                               
trying to solve a few problems,  one of them being bad actors and                                                               
unclean  conditions  in  compounding facilities,  and  the  other                                                               
being pharmacists  approached by  midlevel distributors  that are                                                               
often  cheaper  but without  a  way  of  knowing the  source  and                                                               
perhaps the  medication being  counterfeit.   He recalled  it was                                                               
the sourcing  of the medication that  was in question and  not so                                                               
much  the process.    He said  he  shares Representative  Knopp's                                                               
concern about  having to hire  someone to do more  digging around                                                               
to verify  these licenses.   He asked  whether it is  possible to                                                               
avoid   midlevel  distributors   and   go   with  certified   big                                                               
pharmaceutical distributors.                                                                                                    
DR.  HOLT replied  that  in  his capacity  with  his retailer  he                                                               
doesn't purchase  directly.   But, he  advised, that  would limit                                                               
the  sources  and  options  for   the  patients  receiving  those                                                               
medications,  as  well as  impacting  the  economical side  of  a                                                               
business.  The intention is not  to limit business, but rather to                                                               
make sure that  the sources of these  compounded medications, the                                                               
wholesale distributors,  and so forth  are licensed.   Whether it                                                               
is a  clinic, hospital, or  retail pharmacy, there is  comfort in                                                               
knowing something about  that business, he said.   Right now [the                                                               
board] doesn't  license them and  it is unknown where  things are                                                               
coming from,  nothing has been  looked at.   He pointed  out that                                                               
under HB  9 the  executive administrator  (EA) position  would be                                                               
paid from  the fees  from these  three licensing  categories, not                                                               
just from wholesale distributors.                                                                                               
4:02:50 PM                                                                                                                    
CHAIR KITO closed public testimony  on HB 9 after ascertaining no                                                               
one else wished to testify.                                                                                                     
4:03:17 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON commented he thinks  HB 9 is a fine bill                                                               
and  is  a  quintessential  example of  how  the  public  doesn't                                                               
understand all  the things that  the State  of Alaska does.   The                                                               
bill,  he continued,  is a  textbook example  of what  government                                                               
must do.                                                                                                                        
4:03:47 PM                                                                                                                    
REPRESENTATIVE WOOL moved to report  CSHB 9, Version 30-LS0131\J,                                                               
Bruce, 4/6/17,  out of committee with  individual recommendations                                                               
and  the accompanying  fiscal notes.  There  being no  objection,                                                               
CSHB  9(L&C)  was reported  from  the  House Labor  and  Commerce                                                               
Standing Committee.                                                                                                             
4:04:15 PM                                                                                                                    
The committee took an at-ease from 4:04 p.m. to 4:07 p.m.                                                                       
           HB  38-WORKERS' COMPENSATION: DEATH BENEFITS                                                                     
4:07:19 PM                                                                                                                    
CHAIR KITO announced  that the second order of  business would be                                                               
HOUSE  BILL NO.  38,  "An  Act relating  to  the calculation  and                                                               
payment  of  workers'  compensation   benefits  in  the  case  of                                                               
permanent  partial impairment;  relating to  the calculation  and                                                               
payment  of workers'  compensation  death benefits  payable to  a                                                               
child  of  an  employee  where  there  is  no  surviving  spouse;                                                               
relating to the calculation and  payment of workers' compensation                                                               
death  benefits for  an employee  without a  surviving spouse  or                                                               
child;  relating   to  notice  of  workers'   compensation  death                                                               
benefits; and providing for an effective date."                                                                               
4:07:26 PM                                                                                                                    
REPRESENTATIVE  WOOL  moved  to   adopt  the  proposed  committee                                                               
substitute  (CS)   for  HB  38,  Version   30-LS0160\J,  Wallace,                                                               
3/23/17,  as the  working document.   There  being no  objection,                                                               
Version J was before the committee.                                                                                             
4:07:59 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON,  prime sponsor  of HB 38,  reviewed the                                                               
two changes in Version  J.  He said the first  change is that the                                                               
amount of money that would be  received by the estate of a person                                                               
who  died without  a spouse  or  children is  reduced from  about                                                               
$125,000 in  the original version to  $70,000 in Version J.   The                                                               
reason for  that reduction, he  continued, is  that it is  a more                                                               
modest number, but is also  pegged at the highest number afforded                                                               
by  a state  in the  U.S., which  is Louisiana  which is  also at                                                               
approximately  $70,000.   He  pointed  out that  New  York is  at                                                               
REPRESENTATIVE JOSEPHSON said the second  change is that there is                                                               
a category of dependents, as noted  on page 3, lines 12-16, where                                                               
a  person   may  be  living   alone  but  have  people   who  are                                                               
recognizable as legal dependents.   For example, a man might have                                                               
an 80-year-old  mother living in  an independent  living facility                                                               
that is reliant him  for $1,000 a month and it  could be that the                                                               
man's estate could prove that.   In that group, he explained, the                                                               
bill would reduce  that number to $100,000, which  had been based                                                               
on the whole-body number of $255,000.                                                                                           
REPRESENTATIVE JOSEPHSON  discussed the two things  that the bill                                                               
would do.  First, he said,  for the first time in Alaska history,                                                               
the life of  a person who never married and  didn't have children                                                               
but who dies at work would  have legally recognizable value.  The                                                               
bill says  it's recognizable as  $70,000, whereas  currently it's                                                               
only  recognizable in  a funeral  benefit  of $10,000.   This  is                                                               
paying homage and  respect to single childless people  who die at                                                               
work.  Second,  he stated, the bill would  increase the permanent                                                               
partial  impairment  (PPI) whole  body  number  from $177,000  to                                                               
$255,000 to reflect an increase in inflation.                                                                                   
4:11:41 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  brought  attention to  his  PowerPoint                                                               
presentation entitled,  "HB 38, Abigail Caudle  Act".  Displaying                                                               
the fourth  slide entitled,  "What is the  current law?"  he said                                                               
the current  law for  PPI is  $177,000 and  HB 38  would increase                                                               
that  to $255,000.   He  referenced a  document in  the committee                                                               
packet from  Legislative Research  Services that says  the amount                                                               
would be  $255,000 had  the consumer price  index been  in effect                                                               
the last 17 years.   A way to think about  this, he suggested, is                                                               
that it's as if minimum wage is  being paid at whatever it was in                                                               
the  year  2000.   The  bill  would  raise  the PPI  rating  from                                                               
$177,000 for the whole body to  $255,000 and would link it to the                                                               
consumer price index.                                                                                                           
REPRESENTATIVE  JOSEPHSON continued  discussing the  fourth slide                                                               
and  explained  that, under  current  law,  for deceased  workers                                                               
there is  no provision for  compensating the estate if  there are                                                               
no  surviving  widow,  widower, or  dependents.    Two  different                                                               
concepts are  included in  the same  bill, he  explained, because                                                               
they both are in workers' compensation  statutes and it is like a                                                               
mini-omnibus workers' compensation bill.                                                                                        
REPRESENTATIVE JOSEPHSON moved to  the fifth slide entitled, "How                                                               
do we fix  it?" and discussed the first bullet  point.  He stated                                                               
that if the  PPI were properly set at $177,000  in the year 2000,                                                               
then it would be  proper that it's set at $255,000  now.  If it's                                                               
not that  now, he continued,  then one  is really saying  that it                                                               
never should have  been $177,000 in the year 2000.   He addressed                                                               
the next set of bullet points  and noted that if the deceased did                                                               
not have dependents that lived  at home but there were dependents                                                               
that relied  on the  deceased, then the  bill would  increase the                                                               
amount from $20,000 to $100,000.   He pointed out that the figure                                                               
of $20,000 hasn't changed since 1968,  so the amount of money the                                                               
state  gives  to those  dependents  hasn't  changed in  about  50                                                               
years.    The real  reform,  along  with  reforming the  PPI,  he                                                               
stated, is the creation of  a workers' compensation award for the                                                               
estate of the person who died unmarried and without children.                                                                   
4:14:44 PM                                                                                                                    
REPRESENTATIVE KNOPP brought attention to  page 3, line 19, which                                                               
states, "if  there is no widow  or widower or child  or children,                                                               
and  the father,  mother,  grandchildren,  brothers, and  sisters                                                               
were not  dependent on the deceased  at the time of  injury, then                                                               
$70,000 is payable in a lump  sum to the estate of the decedent."                                                               
He asked  why the  state would  in this case  pay $70,000  to the                                                               
REPRESENTATIVE JOSEPHSON replied that  there are three things the                                                               
state can do with single people who  could be of any age.  One is                                                               
nothing  - leave  the law  the  way it  is.   But, he  continued,                                                               
imagine talking to the parent of  a 22-year-old child who died at                                                               
the work  place, like Abigail  Caudle did,  but hadn't yet  met a                                                               
spouse or  borne a  child.   Raven Electric,  Inc. did  have some                                                               
OSHA  fines, and,  in effect,  it is  being said  that all  Raven                                                               
Electric  had  to  do  was  cut a  check  for  Abigail's  funeral                                                               
expenses.  He  asked,  How would you have  that conversation with                                                               
Marianne Burke, her mother?   It  is being said that the value of                                                               
a single person's life is less  to the legal system than everyone                                                               
else.    Other  states  provide this  benefit,  he  pointed  out.                                                               
Version J cuts this benefit almost  in half, down to $70,000 from                                                               
the original  [proposed] benefit of  $125,000.  This  benefit, he                                                               
argued, would create a little  further incentive for a company to                                                               
say  it better  have a  safe work  place.   This is  an exclusive                                                               
remedy,  he  further noted,  as  these  single, childless  people                                                               
cannot sue, and their estates cannot sue.                                                                                       
REPRESENTATIVE  JOSEPHSON  continued  his   answer  by  posing  a                                                               
scenario in  which two people  are in  an elevator at  a business                                                               
when  the  elevator  suddenly   crashes  downward,  killing  both                                                               
people.  One of the people  was an unmarried, childless worker at                                                               
the  business and  the  other a  customer of  the  business.   He                                                               
explained that  the customer  could collect  potentially millions                                                               
of  dollars in  damages, but  under Alaska  law the  worker would                                                               
receive  nothing.   Two  lives  experienced  the same  thing,  he                                                               
continued, and  this is an  injustice that [the  legislature] can                                                               
correct.   He  referred to  the [Division  of Legal  and Research                                                               
Services']  research  paper  provided to  committee  members  and                                                               
pointed  out that  it states  there would  not be  an appreciable                                                               
amount  of  workers'  compensation   impact.    For  example,  he                                                               
continued, the  State of Oregon  said a change in  these benefits                                                               
would not  materially affect workers' compensation  premium rates                                                               
due to the small number of compensable deaths each year.                                                                        
4:18:36 PM                                                                                                                    
REPRESENTATIVE KNOPP maintained  that the aforementioned elevator                                                               
scenario  is  not  an  apples-to-apples  comparison  because  the                                                               
customer  would collect  under civil  or criminal  litigation and                                                               
the employee's  family would have the  same option.  It  isn't an                                                               
apples-to-apples comparison,  he continued, because  the customer                                                               
would  not collect  under workers'  compensation litigation.   He                                                               
asked why  an employee's family  would not be eligible  under the                                                               
same  rules that  applied  to the  customer as  far  as civil  or                                                               
criminal litigation.                                                                                                            
REPRESENTATIVE  JOSEPHSON  responded  that Title  9  is  Alaska's                                                               
personal injury  or torts statute  and is  the rules of  the road                                                               
for personal  injury damages, and  Title 23 is Alaska's  rules of                                                               
the road  for workers' compensation.   In the  elevator scenario,                                                               
he  explained, the  worker's benefits  would fall  entirely under                                                               
[Title 23],  and that statute  says the worker would  get $10,000                                                               
funeral  expenses, period.   If  the family  goes to  the supreme                                                               
court like Abigail  Caudle's mother did, he said,  he thinks that                                                               
ultimately the  court will say  it can't help because  the people                                                               
in  Juneau won't  help.   Abigail's  mother went  to the  [Alaska                                                               
Workers'  Compensation Appeals  Commission], he  continued, which                                                               
told her that  policy arguments must be  directed to legislature,                                                               
which will  be in connection with  currently pending legislation.                                                               
He added, "That is the bill before us."                                                                                         
REPRESENTATIVE JOSEPHSON  continued and stated that  the ultimate                                                               
answer to Representative Knopp's question  is, "It's not like you                                                               
could  really, really  try to  file  a wrongful  death and  maybe                                                               
they'll let you do  it - it is 1,000 percent  prohibited."  If it                                                               
is not in  the workers' compensation statute,  he continued, "and                                                               
you're  a worker,  you don't  get a  benefit."   In the  elevator                                                               
scenario,  he  added,  the  customer's family  at  least  gets  a                                                               
feeling  that the  issue of  not checking  the elevator  shaft or                                                               
doing maintenance  will get  recognized and  the family  can come                                                               
after the  business for damages  as appropriate.   The customer's                                                               
family would get that, but the worker's family would not.                                                                       
4:21:14 PM                                                                                                                    
REPRESENTATIVE BIRCH stated that  this must be hugely frustrating                                                               
to attorneys.   He said  he looks  at workers' compensation  as a                                                               
form  of insurance  providing for  wage  replacement and  medical                                                               
benefits to employees injured in  the course of employment.  But,                                                               
he posited,  what is  being talked  about [in  the bill]  is life                                                               
insurance.  While workers' compensation  pays to bury someone, he                                                               
said,  he  struggles  to  understand  how  workers'  compensation                                                               
migrates over into a life  insurance policy, which is effectively                                                               
what  the  bill does.    Every  employer  must pay  for  workers'                                                               
compensation and it is for  medical benefits and to replace wages                                                               
lost due  to injury.  He  asked what prohibits any  employee from                                                               
buying  a large  [life] insurance  policy  like he  has done  for                                                               
himself.    He requested  the  sponsor  to address  how  workers'                                                               
compensation is being migrated into a life insurance deal.                                                                      
REPRESENTATIVE  JOSEPHSON  answered  that  it  presumes  that  an                                                               
unsophisticated person  in their early twenties  would think that                                                               
they could die  at this job and  need to provide a  remedy to the                                                               
people who  care about  him or her.   It's not  a fix  for unsafe                                                               
workplaces, so it doesn't solve that  problem, he said.  The bill                                                               
adds [paragraph] (6)  to a death benefit section  where there are                                                               
already  death benefits  being paid  out.   He  noted that  other                                                               
states do  this and  that the [proposed]  award is  fairly modest                                                               
and would not materially change  the workers' compensation rates.                                                               
There really  are only three  options, he  said:  do  nothing; do                                                               
something  like  this  bill; or  offer  these  single,  childless                                                               
people  the chance  to sue  [the  employer's] pants  off.   Under                                                               
wrongful death,  he continued, they  would then carry  the burden                                                               
by a preponderance  of the evidence that  they themselves weren't                                                               
negligent.   He added that if  he were an employer,  he would not                                                               
be sure he'd  want the third option because the  damages total in                                                               
workers' compensation  could be  far greater.   Given  that other                                                               
states are doing  this, if he were the employer,  he would say he                                                               
could work with this.  Otherwise, it seems highly unjust.                                                                       
REPRESENTATIVE  BIRCH  noted that  the  Department  of Labor  and                                                               
Workforce  Development  can  fine  an employer  for  unsafe  work                                                               
conditions, so he  surmised the department would also  be able to                                                               
 sue the pants off of" an  employer for an unsafe work condition.                                                               
He  said  all  he  hears   about  workers'  compensation  is  how                                                               
expensive  it is,  especially for  jobs that  are more  dangerous                                                               
than others.   Workers' compensation  rates are high  and getting                                                               
higher, he  opined, and HB  38 doesn't seem  like it is  going to                                                               
mitigate  the  cost of  workers'  compensation  and therefore  he                                                               
would like to see the additional cost component.                                                                                
4:26:30 PM                                                                                                                    
REPRESENTATIVE    WOOL   recalled    Representative   Josephson's                                                               
statement about  how to  have the  conversation with  the family.                                                               
Obviously,   he  continued,   it  would   be  a   very  difficult                                                               
conversation, whether or  not the individual has  dependents.  He                                                               
said  he  agrees in  some  ways  with Representative  Birch  that                                                               
workers' compensation  insurance covers  certain things  and life                                                               
insurance covers  other things.   He  offered his  agreement that                                                               
the current $10,000  for funeral expense is a paltry  amount.  He                                                               
inquired whether  the sponsor  is saying that  by adding  more it                                                               
would make a bad situation a little better.                                                                                     
REPRESENTATIVE JOSEPHSON replied yes.   He related that last year                                                               
in Anchorage  a hole  was dug in  the ground and  the man  in the                                                               
hole died  when it  caved in.   The man  was young  and therefore                                                               
could have been single and childless.   He said the difference is                                                               
that it is one  thing to go to the other family  and say that the                                                               
state has  a remedy  for the  widow or  children that  will offer                                                               
them a modicum  of solace.  It's another thing,  he continued, to                                                               
go to  the other person and  say your child didn't  have any kids                                                               
and never married and while the  parent can sue it will likely be                                                               
thrown out immediately, no damages can  be filed, and there is no                                                               
award from workers' compensation.                                                                                               
4:28:41 PM                                                                                                                    
REPRESENTATIVE  WOOL posed  a scenario  in which  he works  for a                                                               
company and is driving the company  car one day when suddenly the                                                               
brakes don't work, and he drives off  the road and is killed.  He                                                               
said he  would think  he has some  legal recourse  for negligence                                                               
and  that people  could sue,  so he  therefore finds  it hard  to                                                               
believe that that would not be  the case.  He further stated that                                                               
it is hard  to believe that if it were  blatant negligence then a                                                               
customer  could  sue to  the  full  extent  of  the law,  but  an                                                               
employee could  not, which  is shocking, he  added.   He surmised                                                               
that  more  people  die  in  the fishing  industry  than  in  the                                                               
restaurant industry and asked whether  the fishing industry would                                                               
therefore be more affected.                                                                                                     
REPRESENTATIVE JOSEPHSON  offered his  belief that the  Jones Act                                                               
or other  maritime acts  would answer  that.   He said  he thinks                                                               
fishermen are covered  differently.  He added  that for fishermen                                                               
there is  a huge carve-out  under federal  law often in  terms of                                                               
Jones Act damages.   In terms of  Representative Wool's scenario,                                                               
he agreed  it would  be negligent  of the company.   He  gave his                                                               
assurance  to  the  committee  that it  truly  is  the  exclusive                                                               
remedy.   He  said it  might be  that if  the brake  manufacturer                                                               
could be sued  independent of the company that owned  the car for                                                               
which  the  brakes  gave  out   there  could  be  possibility  of                                                               
litigation.  Workers' compensation is  the grand compact that was                                                               
designed  to  end litigation,  he  continued,  although it  never                                                               
really did do that.                                                                                                             
REPRESENTATIVE STUTES pointed out  that fishermen are independent                                                               
contractors and  therefore not covered by  workers' compensation,                                                               
so the bill's provisions would not  apply.  She commented that it                                                               
seems odd  to have any  kind of law  that would make  a carve-out                                                               
where it had to  be said to someone that his or  her child has no                                                               
value.  She said it is  inconceivable to her to think along those                                                               
lines and  therefore it is very  difficult for her when  it is an                                                               
easy remedy to fix.                                                                                                             
4:32:00 PM                                                                                                                    
REPRESENTATIVE  KNOPP  stated that  instead  of  putting a  death                                                               
benefit into the  workers' compensation bill he  would rather see                                                               
legislation  that would  allow  surviving  members, dependent  or                                                               
not, to  have a course of  legal action against the  employer for                                                               
something  unjust.   He said  he has  issues with  there being  a                                                               
death benefit of  $10,000 in funeral expense on page  2, line 27,                                                               
and $70,000 in addition to be  given to the estate of someone who                                                               
has died  and has no  dependents, and  this figure being  tied to                                                               
the  rate of  inflation.   More important,  he continued,  is the                                                               
provision for partial impairment.   He drew attention to language                                                               
on page  1, line 12,  through page 2,  line 2, which  states: "In                                                               
case  of  impairment  partial  in   character  but  permanent  in                                                               
quality,  and not  resulting in  permanent total  disability, the                                                               
compensation is $255,506 [$177,000]  multiplied by the employee's                                                               
percentage  of permanent  impairment of  the whole  person."   He                                                               
opined that this is complicated and complex.                                                                                    
REPRESENTATIVE JOSEPHSON responded that  the $70,000 provision is                                                               
not tied to  inflation and is a fixed amount.   Twenty years from                                                               
now, he continued, $70,000 may not  seem like what it is now, and                                                               
someone may  ask to increase  it.  Regarding  partial impairment,                                                               
he pointed out  that the cited language is existing  law, not the                                                               
bill, and that  what HB 38 does is grow  the number from $177,000                                                               
to $250,000.  He further pointed  out that that is not the amount                                                               
the person gets,  it is the base amount from  which a permanently                                                               
damaged appendage or bodily organ  would be multiplied.  He noted                                                               
that about a  dozen other states do this;  for example, Minnesota                                                               
provides  $60,000;  New  York  provides  $50,000;  and  Louisiana                                                               
provides $75,000 to each surviving parent.                                                                                      
4:36:01 PM                                                                                                                    
REPRESENTATIVE  WOOL  moved  to   report  CSHB  38,  Version  30-                                                               
LS0160\J,  Wallace, 3/23/17,  out  of  committee with  individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no  objection, CSHB  38(L&C) was  reported from  House Labor  and                                                               
Commerce Standing Committee.                                                                                                    
4:36:27 PM                                                                                                                    
The committee took an at-ease from 4:36 p.m. to 4:38 p.m.                                                                       
                  HB 124-BENEFIT CORPORATIONS                                                                               
4:38:41 PM                                                                                                                    
CHAIR KITO  announced that the  final order of business  would be                                                               
HOUSE BILL NO.  124, "An Act relating  to corporations, including                                                               
benefit corporations,  and other  entities; and providing  for an                                                               
effective date."                                                                                                                
4:38:46 PM                                                                                                                    
REPRESENTATIVE  WOOL  moved  to   adopt  the  proposed  committee                                                               
substitute for  HB 124, Version 30-LS  0348\D, Bannister, 4/4/17,                                                               
as the working document.                                                                                                        
4:39:00 PM                                                                                                                    
CHAIR KITO objected for purposes of discussion.                                                                                 
[Chair Kito passed the gavel to Vice Chair Wool.]                                                                               
4:39:26 PM                                                                                                                    
CHAIR KITO,  prime sponsor of  HB 124, stated that  the committee                                                               
heard the  bill previously  and there are  some changes,  most of                                                               
which are technical.                                                                                                            
4:39:56 PM                                                                                                                    
BIANCA CARPENETI,  Staff, Representative  Sam Kito,  Alaska State                                                               
Legislature, on  behalf of Representative Kito,  prime sponsor of                                                               
HB 124,  reviewed the five  changes in Version  D.  She  said the                                                               
first  change is  to standardize  the  use of  the term  "general                                                               
public benefit".   Since this term  is a unitary concept  it does                                                               
not take  an indefinite  article, she  explained, and  there were                                                               
some inconsistencies  in the [original]  bill where there  was an                                                               
indefinite article.   This  change is  seen on  page 5,  line 29;                                                               
page 9,  lines 7 and 24;  page 10, line  7; and page 11,  line 2.                                                               
The second change, she stated,  is changing the word "reasonably"                                                               
to "rationally"  in keeping  with model  legislation establishing                                                               
benefit corporations.  This change  occurs in four places   twice                                                               
on page  6, lines 9  and 11, and  page 9, lines  17 and 19.   She                                                               
said the third  change is removal of "for  general public benefit                                                               
purposes" to  avoid redundancy on  page 15,  line 7.   The fourth                                                               
change,  she continued,  is  deletion of  the  word "purpose"  in                                                               
order  to use  the definition  of those  terms in  the definition                                                               
section  without tying  them to  the  public benefit  corporation                                                               
requirements.   This  change occurs  on page  15, line  11.   The                                                               
fifth  change,  she  reported,  is that  the  effective  date  is                                                               
changed to July 1, 2018.  This change occurs on page 17, line 7.                                                                
MS.  CARPENETI addressed  questions  asked  by committee  members                                                               
during  the bill's  previous hearing.   Regarding  Representative                                                               
Knopp's  question about  examples  of  benefit corporations,  she                                                               
noted  that   many  types  of  businesses   have  become  benefit                                                               
corporations since the first law  was passed in Maryland in 2010.                                                               
The benefit corporations currently  incorporated in the U.S. come                                                               
from  a range  of  industries,  including retail,  manufacturing,                                                               
technological,    service,    professional   services,    private                                                               
education, and  food and beverage  production.  They come  in all                                                               
sizes   from   one-person   service  companies   to   large-scale                                                               
international   brands.      Examples   of   well-known   benefit                                                               
corporations,  she  related,  include Method,  Kickstarter,  Plum                                                               
Organics,  King Arthur  Flour, Patagonia,  Solberg Manufacturing,                                                               
Laureate Education, and Alt School.                                                                                             
MS. CARPENETI addressed the committee's  question about whether a                                                               
benefit  corporation must  be publicly  traded and  reported that                                                               
they  do  not  have  to  be  publicly  traded  to  be  a  benefit                                                               
corporation.    She  said  the legal  designation  of  a  benefit                                                               
corporation does  not set  requirements as  to whether  a benefit                                                               
corporation  is publicly  traded  or privately  held.   Currently                                                               
there are  around 5,000 benefit corporations  throughout the U.S.                                                               
and only  one of  them is  publicly traded  and that  is Laureate                                                               
Education and Alt School, which went public in February 2017.                                                                   
MS. CARPENETI  addressed the  question about why  the need  for a                                                               
benefit corporation if  it isn't publicly traded.   She explained                                                               
that most of  the 5,000 benefit corporations  throughout the U.S.                                                               
are private  companies.  However,  she continued, many  have also                                                               
taken outside capital  in the form of venture  capital or private                                                               
equity  dollars  and  so  being able  to  protect  the  company's                                                               
mission  over  time  and   consider  stakeholders  is  incredibly                                                               
important  to   these  entrepreneurs,  especially   when  outside                                                               
capital has been raised.                                                                                                        
MS. CARPENETI noted there were  several questions about a special                                                               
taxation  benefit conferred  to benefit  corporations.   She said                                                               
there  is   no  special  tax   benefit  conferred,   the  benefit                                                               
corporation  status   only  affects  requirements   of  corporate                                                               
purpose,  accountability,  and  transparency.    Everything  else                                                               
regarding  corporation laws  and tax  laws remain  the same,  she                                                               
reported.   So, a  type of corporation    whether C  or S    must                                                               
still be elected.                                                                                                               
MS.  CARPENETI  addressed  Representative Wool's  question  about                                                               
whether  Newman's Own  is an  example of  a benefit  corporation.                                                               
She  said  she's  found  no  indication  of  Newman's  Own  being                                                               
registered as  a benefit corporation,  rather Newman's  Own gives                                                               
100  percent  of  its  after-tax  profits  to  the  Newman's  Own                                                               
Foundation, a private non-profit  foundation, which in turn gives                                                               
the money  to various  educational and  charitable organizations.                                                               
While  the   way  Newman's  Own  operates   is  commendable,  she                                                               
continued, it's  probably not a  good example of being  a benefit                                                               
corporation  because  being  a   benefit  corporation  means  the                                                               
business is  run in a  particular way.  So,  if a company  were a                                                               
poor  employer and  had  bad corporate  citizens  in a  community                                                               
where it operated  but gave away some of its  profits, that would                                                               
not  make  it  a  benefit  corporation.   The  focus  of  benefit                                                               
corporations,  she  continued,  is   on  being  profitable  in  a                                                               
responsible way, not  what the corporation does  with its profits                                                               
once they've been earned.                                                                                                       
MS.  CARPENETI  addressed  another question  from  Representative                                                               
Wool about whether benefit corporations  would be exempted if the                                                               
tax  law were  changed.    She explained  that  tax wise  benefit                                                               
corporations still  elect whether to  be C or S  corporations, so                                                               
this  benefit corporation  status only  affects the  requirements                                                               
for corporate purpose, accountability, and transparency.                                                                        
Everything else regarding the tax status remains the same.                                                                      
4:44:59 PM                                                                                                                    
REPRESENTATIVE  BIRCH posed  a scenario  of  Microsoft with  Bill                                                               
Gates  operates Microsoft  as  a regular  corporation.   He  said                                                               
whoever owns those shares can  decide whether to direct shares to                                                               
a charitable purpose.   He said he is still  trying to understand                                                               
the merits  of a  benefit corporation  since there  is not  a tax                                                               
benefit he is aware of.                                                                                                         
CHAIR  KITO   recounted  that  in  previous   discussion  it  was                                                               
mentioned that  it is  a culture of  social responsibility,  so a                                                               
corporate  structure  that  would allow  individuals  within  the                                                               
corporation  as well  as the  earnings of  the corporation  to be                                                               
utilized for a  tangible beneficial purpose.  With  just a profit                                                               
motive or fiduciary  motive then the profits could be  used for a                                                               
charitable purpose or  not.  But as was heard  last week from Mr.                                                               
Letourneau,  he continued,  a corporation  would like  to operate                                                               
with  a culture  of  being  responsible and  giving  back to  the                                                               
community  and this  can  be  done by  registering  as a  benefit                                                               
corporation, which  allows the company  to be accountable  to its                                                               
shareholders and that the shareholders  would also expect certain                                                               
behaviors from  employees, directors,  or others,  so not  just a                                                               
profit or charitable giving motivation.                                                                                         
REPRESENTATIVE BIRCH asked  what the advantage is in  doing it in                                                               
that manner as opposed to a non-profit like United Way.                                                                         
CHAIR  KITO  replied  that   there  are  significant  differences                                                               
between the  services provided by  a non-profit and  the services                                                               
provide by  a profit.  For  example, if he operated  a for-profit                                                               
corporation that made  and sold a "widget", he  doesn't know that                                                               
he would be  able to convert that into  a non-profit organization                                                               
and if he did,  100 percent of that benefit would  go to the non-                                                               
profit.   He  said it  is about  cultural sensitivity  and giving                                                               
back to  the community and,  depending on what form  a particular                                                               
owner,  or a  board of  directors would  want to  take for  their                                                               
corporation, they  could structure  with this bill  a corporation                                                               
that would allow them to do what  they would like to give back in                                                               
their way.   For example, if  their company was a  mountain guide                                                               
company,  rather than  just  making a  profit  the company  could                                                               
choose to  have its  employees do 20  hours of  community service                                                               
once a month and that could  be part of the corporate culture and                                                               
bylaws so that that whole  mountain guide company is committed to                                                               
giving back to some component of the community.                                                                                 
4:48:18 PM                                                                                                                    
VICE  CHAIR WOOL  recalled that  in the  committee's conversation                                                               
with  the gentleman  from Anchorage  last week  it was  said that                                                               
this could almost  be used as a marketing badge  to say, "This is                                                               
how we run our company and another reason to support them."                                                                     
CHAIR KITO said  that is one of those things  that are identified                                                               
specifically  in the  bill -  that it  is not  a designation  for                                                               
marketing purposes  - but it can  be utilized as a  selling point                                                               
of the company and what the company might be able to offer.                                                                     
MS.  CARPENETI   added  that  corporations  are   also  generally                                                               
expected  to put  the interests  of their  shareholders as  their                                                               
primary  consideration.   Two cases  have set  the precedent  for                                                               
this,  she said.   One  is Dodge  v. Ford  Motor Company  and the                                                             
other  is eBay  Domestic Holdings  Inc. v.  Newmark.   Both cases                                                             
affirmed  that all  activities of  a for-profit  corporation must                                                               
seek to maximize the economic value  for its stockholders.  It is                                                               
important to  note, she continued,  that the  benefit corporation                                                               
status is needed  to protect mainly directors from  being sued in                                                               
a derivative suit.  So, it is  a legal protection as well for the                                                               
corporation to say  that it is going to add  the consideration of                                                               
its mission in addition to its economic.                                                                                        
4:50:10 PM                                                                                                                    
CHAIR KITO removed his objection to  the adoption of Version D as                                                               
the working document.                                                                                                           
[Vice Chair Wool returned the gavel to Chair Kito.]                                                                             
4:50:21 PM                                                                                                                    
REPRESENTATIVE  WOOL  moved to  report  CSHB  124, Version  30-LS                                                               
0348\D,  Bannister,  4/4/17,  out of  committee  with  individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection,  CSHB 124(L&C)  was reported  from the  House Labor                                                               
and Commerce Standing Committee.                                                                                                
4:51:18 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
4:51 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB38 Supporting Document - 2017 Research Report 3.24.17.pdf HL&C 4/10/2017 3:15:00 PM
HB 38
HB0038 ver J 3.24.17.pdf HL&C 4/10/2017 3:15:00 PM
HB 38
HB038 Explanation of Changes version A to version J 4.10.17.pdf HL&C 4/10/2017 3:15:00 PM
HB 38
HB038 PowerPoint Presentation 4.10.2017.pdf HL&C 4/10/2017 3:15:00 PM
HB 38
HB038 ver J Sectional Analysis 4.10.2017.pdf HL&C 4/10/2017 3:15:00 PM
HB 38
HB038 ver J Side-by-side 4.10.2017.pdf HL&C 4/10/2017 3:15:00 PM
HB 38