Legislature(2003 - 2004)
04/14/2003 03:22 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 14, 2003
3:22 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Bob Lynn, Vice Chair
Representative Nancy Dahlstrom
Representative Carl Gatto
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 257
"An Act relating to the disclosure requirements for real estate
licensees, to disciplinary action against real estate licensees,
to private actions against real estate licensees, and to real
estate licensee agency relationships, fiduciary duties, and
other duties; and providing for an effective date."
- MOVED HB 257 OUT OF COMMITTEE
HOUSE BILL NO. 255
"An Act amending the Alaska Wage and Hour Act as it relates to
flexible work hour plans, the provision of training wages, and
the definitions of certain terms; and repealing the exemption in
the Act from the payment of minimum wages for learners."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 257
SHORT TITLE:REAL ESTATE LICENSEES:DUTIES & CLAIMS
SPONSOR(S): REPRESENTATIVE(S)ROKEBERG
Jrn-Date Jrn-Page Action
04/10/03 0912 (H) READ THE FIRST TIME -
REFERRALS
04/10/03 0912 (H) L&C, JUD
04/14/03 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 255
SHORT TITLE:WAGES:TRAINING/FLEX-TIME/DEFINITIONS
SPONSOR(S): REPRESENTATIVE(S)ROKEBERG
Jrn-Date Jrn-Page Action
04/09/03 0868 (H) READ THE FIRST TIME -
REFERRALS
04/09/03 0868 (H) L&C, FIN
04/14/03 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE NORMAN ROKEBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As sponsor, presented HB 257 and HB 255.
PEGGY ANN McCONNOCHIE, Realtor;
Member
Agency Task Force
Alaska Association of Realtors
Juneau, Alaska
POSITION STATEMENT: As a member of an industry task force that
is rewriting the real estate agency law, spoke in opposition to
HB 257.
SHAWN PAUL, Associate Broker
ReMax of Juneau;
President-Elect
Southeast Board of Realtors
Juneau, Alaska
POSITION STATEMENT: Testified against HB 257 as president-elect
of the Southeast Board of Realtors.
CAROLE WINTON, Licensed Real Estate Broker;
President
Alaska Association of Realtors
Juneau, Alaska
POSITION STATEMENT: Testified against HB 257 on behalf of the
Alaska Association of Realtors.
TRACEY RICKER, Broker
Ricker and Associates;
President
Southeast Board of Realtors
Juneau, Alaska
POSITION STATEMENT: Questioned why HB 257 would diminish
protection of the public.
JEANNIE JOHNSON, Licensed Broker
Juneau, Alaska
POSITION STATEMENT: Identified two concerns with HB 257
involving the low threshold for exempting commercial
transactions and the retroactivity clause that affects a current
lawsuit.
JEAN KAY, President
Valley Board of Realtors;
Real Estate Agent
ReMax of Wasilla;
Board Member
Alaska Association of Realtors
Wasilla, Alaska
POSITION STATEMENT: Opposed HB 257 which promotes commercial
real estate interests.
PADDY COAN, Associate Broker
Valley Office
Prudential Vista Real Estate;
Past President
Valley Board of Realtors;
Secretary
Alaska Association of Realtors;
President-Elect
Wasilla Chamber of Commerce
Wasilla, Alaska
POSITION STATEMENT: Spoke in support of HB 257, noting that
buyers and sellers can still file complaints with brokers, make
a claim against the surety fund, or file a lawsuit over fraud.
DON ZIMMERMAN
RealEstateAlternative.com
Wasilla, Alaska
POSITION STATEMENT: Testified in support of HB 257, noting that
it does not harm consumers who are more sophisticated and can do
their own research on the Internet.
MARK LEE, CCIM (Certified Commercial Investment Member), Broker
Lee Realty
Wasilla, Alaska
POSITION STATEMENT: Testified in favor of HB 257, but
recommended excluding all lease activity from any disclosure
requirements.
HOWARD TRICKEY
Prudential Vista;
Prudential Jack White
Anchorage, Alaska
POSITION STATEMENT: Testified in support of two sections and
(two proposed amendments to) HB 257 that halt frivolous lawsuits
on technicalities and affect pending lawsuits.
RICK FULLER, Owner, Broker
Prudential Vista Real Estate
Anchorage, Alaska
POSITION STATEMENT: As the owner of the company currently
involved in the lawsuit that would be affected by HB 257,
answered questions.
CHRIS STEPHENS, CCIM, President
Bond, Stephens & Johnson
Anchorage, Alaska
POSITION STATEMENT: Representing the largest commercial real
estate firm in Alaska, testified in favor of HB 257 and
described the problems with dual agency and disclosure under the
current law.
TOM MARTIN, Broker,
A+ Realty
Kodiak, Alaska
POSITION STATEMENT: Testified against HB 257 and supported
raising the threshold for commercial transaction exemptions.
DAVE FEEKEN, Chair
Legislative Committee
Alaska Association of Realtors
ReMax of the Peninsula
Kenai, Alaska
POSITION STATEMENT: Spoke in opposition to HB 257, describing
some of the background of the current agency dispute.
DAVID GARRISON, Associate Broker
AAR #1 Buyers' Agency;
Member
Anchorage Board of Realtors;
Buyer Agent
National Association of Exclusive Buyer Agents
Anchorage, Alaska
POSITION STATEMENT: Testified against HB 257, noting an agent's
fiduciary responsibility to represent either the buyer or the
seller.
LINDA GARRISON
AAR #1 Buyers' Agency
Anchorage, Alaska
POSITION STATEMENT: Spoke in opposition to HB 257.
FRANK ROSE, President
Alaska Hotel and Lodging Association;
Owner, Alaska Lodging Management
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 255.
JON FAULKNER, Owner/operator
Land's End Resort
Homer, Alaska;
Van Guilder Hotel
Seward, Alaska
POSITION STATEMENT: Spoke in support of HB 255, particularly
the provisions clarifying the definitions of supervisory,
professional, and executive employees.
KAREN ROGINA, Alaska Hospitality Alliance
Anchorage, Alaska
POSITION STATEMENT: Testified in favor of HB 255.
ACTION NARRATIVE
TAPE 03-34, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:22 p.m. Representatives
Anderson, Lynn, Dahlstrom, Gatto, Rokeberg, Crawford, and
Guttenberg were present at the call to order.
HB 257-REAL ESTATE LICENSEES:DUTIES & CLAIMS
Number 0045
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 257, "An Act relating to the disclosure
requirements for real estate licensees, to disciplinary action
against real estate licensees, to private actions against real
estate licensees, and to real estate licensee agency
relationships, fiduciary duties, and other duties; and providing
for an effective date."
Number 0080
REPRESENTATIVE LYNN disclosed that he is a licensed real estate
agent, associate broker licensee with Prudential Vista Real
Estate of Anchorage.
Number 0097
REPRESENTATIVE ROKEBERG, as sponsor of HB 257, disclosed that he
is a licensed real estate broker. He said that if the bill
passes, it could give some benefit to his business, although he
is not actively pursuing real estate at this time. He explained
that he is still licensed and could sell real estate in the
future.
REPRESENTATIVE ROKEBERG recalled that several years ago he
sponsored a bill which rewrote most of the Alaska real estate
law. With the help of the Alaska Association of Realtors and
local [real estate] boards, the occupational licensing laws [for
real estate] were substantially updated and rewritten. One
section of the real estate law, AS 08.88.396 [Disclosure of
agency to prospective buyers and sellers] was not revised in
anticipation of industry input. Representative Rokeberg said he
has been working with an industry task force for the last year
and a half, waiting for an overall fix for this part of the law.
Because of the complexity of this issue, an industry -generated
solution is not yet available, he noted. Members of the real
estate industry are currently working on a draft of a different
bill, which will eventually come before this committee.
Number 0333
REPRESENTATIVE ROKEBERG testified that HB 257 exempts licensees
acting on commercial real estate transactions from the current
disclosure requirements. In addition, the bill provides that
licensees handling exempt transactions have the duty to act with
honesty, fairness, and good faith in representing both parties.
He explained that these [three terms] are legal standards which
are commonly used in the uniform commercial code and in other
commercial transactions. These standards protect the interest
of the parties in the commercial activity.
REPRESENTATIVE ROKEBERG also noted that HB 257 provides that if
a licensee fails to properly disclose a relationship, [the
injured party] can file a claim against the Real Estate Surety
Fund but [cannot file a lawsuit] in court. A retroactivity
clause in the bill applies to any actions pending in court for
which a final judgment has not been rendered.
Number 0503
REPRESENTATIVE ROKEBERG said he sponsored HB 257 because the
industry is facing vexatious litigation. He pointed out that 25
percent of Alaska's domestic product involves the sale of real
estate, commercial brokerage appraisal, construction, and
similar activities. He said that this legislature should take
note of these activities and their importance to the state's
[economy]. He said there's a potential class action suit
against every real estate broker and licensee in the state that
could cost millions of dollars and bring the real estate
industry to its knees.
REPRESENTATIVE ROKEBERG pointed out that some members of the
real estate profession are not happy with HB 257. He said he
has alerted the task force that if it could not craft a
comprehensive solution for this matter, he intended to proceed
on a small version of the bill, until the industry can work out
the larger solution. He said he is happy to work with all folks
in the industry to resolve this issue. However, he didn't
believe it is prudent for the legislature to wait until the
industry crafts a final resolution.
Number 0663
REPRESENTATIVE CRAWFORD asked about Section 7, page 5, lines 6-
15, which deals with applicability and retrospectivity. He also
asked if there were any pending lawsuits that this bill would
impact.
REPRESENTATIVE ROKEBERG said he was aware of only one [court]
action that HB 257 would affect, and indicated he supported that
[intervention] because the legislature has the right to [write
laws that affect pending lawsuits].
Number 0719
REPRESENTATIVE GATTO asked who will be the winners and the
losers if HB 257 passes.
REPRESENTATIVE ROKEBERG replied that the winners will be the
people of Alaska if commerce can be conducted in the way it was
before the current law was written in the early 1990s. He said
that the current law has never worked properly. Witnesses will
testify today about the barriers erected by the current law,
such as the [excessive] amount of paperwork it requires. For
example, one commercial real estate brokerage firm has developed
17 pages of forms to meet the disclosure requirements as to what
type of agency relationship the broker has with the buyer, the
seller, or both.
REPRESENTATIVE GATTO clarified his question to ask who would
gain and who would lose monetarily under this bill. He said he
guessed that the people who would gain monetarily would be the
people who engage in the transactions.
REPRESENTATIVE ROKEBERG said that is not the case. He said the
current losers are the public and perhaps the licensees. The
only winner [under the current law] is the person who's bringing
the lawsuit [against the commercial brokerage firm]. He said
the interests of the consumer should be paramount in this
statute. Therefore, this bill specifically deals with
commercial agents, [under circumstances] where there is no
defendable consumer protection theory. [Clients of commercial
real estate transactions are] sophisticated and knowledgeable
parties. The other [impetus behind HB 257] is to cut off the
class-action litigation on a law that was poorly drafted,
difficult to implement, and has needed fixing for a number of
years. [Even though the industry] couldn't reach general
consensus [on how to repair this law], this bill cuts off the
massive litigation that is occurring in the Lower 48.
Number 0932
PEGGY ANN McCONNOCHIE, Realtor; Member, Agency Task Force,
Alaska Association of Realtors, explained that she has been a
realtor since 1982. She testified that [HB 257] does not
reflect realtors' standards of practice in Alaska. Furthermore,
no other state in the country exempts commercial real estate
agents from disclosing whom they work for to the buying,
selling, renting, or leasing public.
MS. McCONNOCHIE noted that [Section 1, the Legislative Findings
and Intent, page 1, lines 8-12] reads,
(1) the purpose of the requirement that a real estate
licensee make certain disclosures about the licensee's
representation is to provide consumer protection to
those people who may not be familiar with their legal
responsibilities and rely in part on real estate
licensees for advice when buying, selling, and leasing
real estate;
MS. McCONNOCHIE disagreed with the description of a commercial
real estate transaction [on page 4, lines 16-23] that involves
the sale or lease of a four-plex or larger structure, the sale
of commercial property worth $100,000 or more, or the sale or
lease of real estate having a gross lease revenue that exceeds
$12,000 a year. She asked why a person buying, selling,
renting, or leasing [under these circumstances] needs less
protection than a person buying a $300,000 residence.
MS. McCONNOCHIE said that the "Agency Task Force" has spent
almost 11 months rewriting [real estate] agency laws. She said
the law is very complex; the rewrite is not going to happen in a
day, and her group wants it done correctly. She said her group
appreciates the past revisions to the agency law and has long
recognized that the current agency law does not work as well as
it should. However, [commercial agent disclosure] needs to be
thought through and planned very carefully; her group does not
want to come back in another year, saying "Whoops, we forgot
something; we'd like to change it." The Agency Task Force has
proposed regulation changes that the Department of Law is
reviewing. She said she hopes those changes will go through
quickly because those changes will take care of some of the
problems evident in the industry. She predicted a wholesale
change in agency law in the near future, saying "If we could
have it to you today, we would, but we don't." She said the
[Alaska Association of Realtors] should complete its review by
the end of the month and she guaranteed that it will be back to
the committee with a completed bill. In the meantime, [HB 257]
does not do it, she said.
MS. McCONNOCHIE cautioned against the retroactive part of the
bill because it does not protect the public. She said her group
believes that real estate statutes must do two things: protect
the buying, selling, leasing, and renting public and assure
accountability on the part of real estate agents. She commended
Representative Gatto's question about identifying the winners
and losers [of HB 257]. She said the winner would be a small
group of [commercial] real estate agents who don't want to
follow the agency laws. She reminded committee members that
buying a $100,000 commercial property or four-plex is no
different than buying a $300,000-$350,000 house. She urged the
committee not to pass the bill out of committee.
MS. McCONNOCHIE, in response to Representative Rokeberg, replied
that she is speaking for the Alaska Association of Realtors,
whose president will testify today that the association is
opposed to the bill. The Agency Task Force and the
[association's] legislative committee met again today to review
the bill and voted against HB 257.
Number 1217
SHAWN PAUL, Associate Broker, ReMax of Juneau; President-Elect,
Southeast Board of Realtors, explained that board had an
emergency meeting today and voted against supporting [HB 257]
for many of the reasons outlined by Ms. McConnochie. He
addressed the question of who wins and who loses [with the
passage of this bill]. He reiterated that the losers will be
the buying, selling, renting, and leasing public; the winners
will be those agents who aren't following the disclosure laws or
the [real estate industry's] standards of practice. He
highlighted the bill's change of "agent" to "licensee" and
cautioned against doing away with the concept of agent. He said
[the Southeast Board of Realtors] is opposed to the "get out of
jail free" clause at the end of the bill [Section 7, page 5].
REPRESENTATIVE ROKEBERG asked if a person getting a real estate
license has to know Alaska real estate law.
MR. PAUL replied yes.
REPRESENTATIVE ROKEBERG asked what other part of the real estate
law uses the word agent.
MR. PAUL said he understands that the term agent is a commonly
used term.
REPRESENTATIVE ROKEBERG pointed out that when the rest of the
real estate statutes were revised six years ago, the word
"licensee" replaced the use of "agent". He also asked whether
commercial realtors in Anchorage and larger cities practice
differently than those in Southeast Alaska.
Number 1376
MR. PAUL said he doesn't practice in Anchorage so doesn't know
if there are differences in day-to-day practices. He said he
does refer clients to Anchorage professionals who have high
ethical standards and who perform a good service. He said
realtors in [Southeast Alaska] do a fine job of disclosure [to
clients]. In response to Representative Rokeberg's question
about the amount of commercial activity in Juneau and Southeast
Alaska, he deferred to other witnesses.
REPRESENTATIVE CRAWFORD asked about the difference between
"agent" and "licensee" and asked why it was necessary to change
these terms in the real estate statutes.
REPRESENTATIVE ROKEBERG replied that there was concern about
what agency means in common law principle of agent and its
application to real estate brokerage. It's a great source of
confusion between the practitioners, the public, and the courts.
There's no use of the agency principle laws in the creation of
fiduciary relationships between any kind of marketer of any kind
of commodity in the world, except real estate brokerage where
the term agent comes into play, where one is actually an agent.
When the words "broker" and "agent" were used in real estate
law, the original intention was to indicate the broker as the
principle and the agent as the subagent, or the relationship
between the licensee and the broker, not the client and the
licensee. This is where there's been a corruption. The courts
have corrupted that. It's a very unique situation under the
common law where there's been applications such as that. What
"we" did actually compounded the confusion by statute over the
years. That's why when the law was rewritten the language was
changed from "agent" to "licensee" because the agent is the
agent of the broker, the principle; if there's an
agency/principle relationship, it exists between the broker and
the licensee. Otherwise the individual client, if there is in
fact an agency/principle relationship under the law, will be
vicarious liable for the act of the licensee, an issue that came
up on the floor of the House just last week. He explained that
vicarious liability is actually being created on the part of the
clientele, which isn't the intent. It gets complicated, he
said.
REPRESENTATIVE ROKEBERG explained that [HB 257] removes the
requirement that commercial agents make disclosure and allows an
injured client to [seek financial redress] through the real
estate surety fund. It's a simple approach, he said, an
"interim stop-gap measure." He noted his disappointment with
the testimony [in opposition to HB 257].
Number 1533
REPRESENTATIVE GATTO confirmed that Mr. Paul works for ReMax [of
Juneau], that he is an associate broker, an agent, and a
licensee. Representative Gatto asked if Mr. Paul uses the words
agent and license interchangeably.
MR. PAUL replied that an agent has received a license through
the state and that every licensee is an agent.
REPRESENTATIVE ROKEBERG explained that under Alaska statute,
[real estate professionals] are licensees, which is the source
of the confusion.
Number 1586
REPRESENTATIVE CRAWFORD said that when he has contracted with an
agent to buy property, that person was acting as his agent. He
said he doesn't understand why the legislature changed the term
[agent] to licensee.
Number 1613
REPRESENTATIVE ROKEBERG clarified that the real estate person is
not his agent but his contractee. He said Representative
Crawford contracted with this person to perform a service. So
the person has a contractual obligation with him. To establish
the agency/principle relationship is not accurate other than the
superior courts in Alaska corrupted the [distinction] by using
that common law principle. The real estate person is not your
agent, the person is your contractee that performs duties that
arise out of the nature of the relationship. They don't have a
common law principal/agency relationship. In Alaska law, the
[real estate] listings belong to the broker; they don't belong
to the licensee, which is problematic because it gets into an
area called "subagency." He indicated the need to eliminate
that [area of law]. Part of the problem is public perception,
the public believes that special duties arise out of the fact
that they're dealing with this licensee. Although duties do
exist, the question is with regard to the scope of duties and
whether the agency/principle relationship exists.
Number 1672
REPRESENTATIVE CRAWFORD recounted occasions when he has bought
houses and never communicated with the sellers. He said he
thought the real estate licensee was working as his agent. He
noted that when he represents his fellow ironworkers as a job
steward, he's acting as their agent. He said he didn't
understand [why agent is not an accurate term for a person
selling real estate]. This bill appears to take some of the
[disclosure] responsibility away from the licensee.
REPRESENTATIVE ROKEBERG said that Representative Crawford may be
confused because of the way this one section of the law still
reads. In Representative Crawford's case, [the real estate
licensee] would be a buyer's agent because that's what the
statute says. However, the point is that the courts and the
practice has been that there's been this artificial
agency/principle relationship established. Under the real
estate statutes written around 1991 or 1992, there could arise
situations of dual agency in which the buyer's agent is also the
seller's agent. He said there are duties between the client and
the particular licensee; those duties should be defined not as
an agent/principle relationship but as a contract relationship.
He pointed out that one issue in HB 257 is to help consumers
understand what they'll get [from a real estate licensee
handling commercial property]. [The issue] is pretty
complicated, he admitted. All [HB 257 does] is exempt
commercial agents [from disclosure requirements].
Number 1765
REPRESENTATIVE GUTTENBERG asked if Representative Rokeberg is
changing the word "agent" to "licensee" because of some court
decisions.
REPRESENTATIVE ROKEBERG replied yes, in part. He added that
this change [in terminology] will make this part of the [real
estate] law conform with the rest of the statute, which uses the
term licensee not agent. This bill is really pretty innocent,
except for what it does for commercial agents, he remarked.
Number 1809
REPRESENTATIVE DAHLSTROM inquired as to how the public is best
served by removing the disclosure [requirement].
REPRESENTATIVE ROKEBERG explained that the bill does not remove
disclosure [responsibility from all real estate licensees]; it
just exempts commercial agents from disclosure. [A forthcoming]
bill will change that, but this bill doesn't. It only exempts
commercial agents and makes any [subsequent] lawsuits subject to
surety fund recoveries.
REPRESENTATIVE DAHLSTROM confirmed that a regular licensee
[selling residential real estate] is not exempt [from
disclosure], only [a licensee selling] commercial property.
REPRESENTATIVE ROKEBERG confirmed that [HB 257] won't affect
most of the people testifying today unless they do commercial
work.
REPRESENTATIVE DAHLSTROM asked what percentage of [real estate]
business is commercial.
REPRESENTATIVE ROKEBERG said it depends on the locale.
Number 1872
CAROLE WINTON, Licensed Real Estate Broker; President, Alaska
Association of Realtors, informed the committee that she has
been licensed since 1974 and does [residential] sales as well as
commercial leases and sales. She noted that she has been a
member of the [association's] Agency Task Force since its
inception June 2002. The group has met almost weekly, with
Representative Rokeberg in attendance most of the time. She
said she appreciates his sponsoring a bill handling the agency
changes that are necessary for the real estate industry. She
clarified that all real estate brokers are licensed under the
same license; there is no separate license for people selling
commercial real estate. Therefore, it would be very difficult
for some licensees to abide by rules of agency while others did
not.
MS. WINTON said [the Agency Task Force] has tried [addressing
the problem] through two directions; the first was through
regulation changes. Those changes passed the board of directors
[of the Alaska Association of Realtors] last September and were
forwarded to the Real Estate Commission, which approved them.
The Department of Law is now reviewing the changes. She said
that Representative Rokeberg had alerted the association that he
would take action. She emphasized that she would like to see
[the solution] done right the first time, [thereby avoiding a
subsequent request] to the legislature for a revision. Ms.
Winton explained that the second part of the proposed solution
is a statute change, which would reflect the standards of
practice in the industry today. This bill does not reflect the
industry's current standards of practice, she observed.
MS. WINTON noted that a real estate licensee must disclose
whether he or she is the agent of the buyer, the agent of the
seller, or a dual agent. She said that most licensees don't
have any problem doing that; it is the law. She said she's not
sure why some realtors doing commercial work in other parts of
the state have a problem with disclosure. She said that clients
want to know up front who the licensee is working for -- the
buyer, the seller, or both. The law has a provision for
[notifying the client of dual agency]; it is clearly described
and is used all the time, she said.
MS. WINTON explained that consumer protection and public
awareness are the primary goals of the changes in the
regulations and statutes. The public should be well informed
and should know for whom the licensee works.
Number 2011
REPRESENTATIVE ROKEBERG noted that he removed the [reference to]
rental activities from [HB 257] based on his earlier
conversation with her. He asked why Ms. Winton stated that this
bill doesn't reflect standards of practice in the industry and
questioned if it is because the bill exempts commercial
transactions from disclosure.
MS. WINTON confirmed his statement.
CHAIR ANDERSON restated Ms. Winton's position that this standard
of practice [of disclosure] is relevant to all realtors and this
bill exempts one group of realtors [those doing commercial
business].
MS. WINTON agreed. She said all of a sudden in this bill,
commercial realtors don't have to tell their clients for whom
they are working.
Number 2046
REPRESENTATIVE GATTO referenced the applicability and
retrospectivity clause in Section 7, page 5, and asked Ms.
Winton her opinion of this provision, which reads:
"(a) The provisions of this Act apply to a real estate
transaction that occurs before, on, or after the
effective date of this Act, and to that extent, are
retrospective...
(b)...applies to an action pending in a court in the
state in which a final judgment has not been rendered
before the effective date of this Act and, to that
extent, is retrospective..."
CHAIR ANDERSON confirmed that Ms. Winton is president of the
Alaska Association of Realtors. He asked how many members are
commercial realtors versus residential realtors.
Number 2130
MS. WINTON said that realtors don't distinguish between people
who deal in commercial or residential property.
CHAIR ANDERSON cited the letter in the members' bill packet from
the company of Bond, Stephens & Johnson, which offers commercial
real estate services. He asked if any members of that firm were
active in the Alaska Association of Realtors.
MS. WINTON said she did not have a list of association members
at hand.
CHAIR ANDERSON confirmed that the association includes realtors
who handle commercial and residential property, and that the
association members voted, urging the [House Labor and Commerce
Standing] Committee to vote against this bill.
REPRESENTATIVE ROKEBERG asked whether the association's
legislative committee or the full membership voted against the
bill.
MS. WINTON explained that the legislative committee with the
approval of the president is tantamount to getting the approval
of the board of directors.
Number 2179
REPRESENTATIVE ROKEBERG said he has been a broker in Alaska for
almost 30 years. He asked if commercial real estate licensees
are active in the Alaska Association of Realtors.
MS. WINTON replied that the association includes quite a few
commercial brokers. She said she doesn't know how many
commercial brokers are licensed in the state. There are
licensees who are not realtors, she said. Realtors conform to a
higher code of ethics.
REPRESENTATIVE ROKEBERG asked if, generally speaking, commercial
realtors are not involved in the association.
MS. WINTON responded that she has no way of knowing that, since
the association doesn't distinguish between realtors handling
residential and commercial property.
REPRESENTATIVE ROKEBERG said that in Anchorage, there are
realtors who specialize in commercial activity. In his
experience, commercial brokers are not active in the
association, which tends to focus on residential brokerage
activities.
CHAIR ANDERSON asked if there's a commercial brokerage
association.
MS. WINTON replied yes; it's a subsidiary of the National
Association of Realtors. She explained that the Alaska
Association of Realtors is one of the 50 state members of the
National Association of Realtors.
Number 2249
REPRESENTATIVE CRAWFORD explained that he is looking at buying
some acreage for commercial purposes. When he called the
realtor listed on the sign, the person asked if he would be
using his own agent or if he would like this company to be his
agent for a dual agency. He noted that this is a typical
conversation in his experience and asked what would change if
[HB 257] passed.
MS. WINTON replied that the realtor wouldn't have to advise him
that he has the option of using his own agent or of working with
that realtor. According to current state law, the broker needs
to inform the client during the first main contact that the
broker is working for the seller, or can work for both with the
approval of the seller and the buyer.
REPRESENTATIVE CRAWFORD asked if the bill takes away the right
of [court] action against a realtor who doesn't disclose [these
options].
Number 2329
CHAIR ANDERSON asked for an example of how HB 257 would
adversely affect the consumer.
Number 2370
MS. McCONNOCHIE said a consumer would call a broker whose sign
was posted on a commercial property. The broker would give some
information about the property. The consumer might have
concerns about the use of the property and the required zoning
for the commercial enterprise. The broker would have no
responsibility to tell the seller whether the current zoning is
applicable for the client's use.
TAPE 03-34, SIDE B
Number 2380
MS. McCONNOCHIE explained that the broker would have no
responsibility to the owner or the seller -- only to the
broker's own pocketbook. She described that [lack of
responsibility] as the fatal flaw [in HB 257].
REPRESENTATIVE ROKEBERG said he took exception to Ms.
McConnochie's description; he said that's not the intention of
the bill.
REPRESENTATIVE CRAWFORD said that he learned from other sources
that a good portion of this property was listed as wetlands.
The first agent he talked to said he could use his own agent.
He asked if there's any wrong doing since that broker didn't
have a responsibility to disclose the wetland status of the
property.
MS. McCONNOCHIE said disclosing information about the property
is a separate issue than disclosing agency requirements [e.g.,
who the broker is working for]. The basic information about the
type of property would still have to be disclosed, regardless of
whether the broker was or wasn't his agent. A broker working
for the buyer would help the buyer figure out how to use the
property.
REPRESENTATIVE ROKEBERG directed attention to the language on
page 4, lines 30-31, requiring that licensees have to "act with
honesty, fairness, and good faith" in representing or dealing
with these people. He said the standards change in HB 257, but
realtors will still be responsible, and standards of practice
and legal standards will apply.
REPRESENTATIVE GATTO said that honesty, fairness and good faith
are laudable, and if everyone followed them, laws and bills
would not be necessary.
REPRESENTATIVE ROKEBERG replied that the courts must enforce
these [behaviors].
Number 2293
REPRESENTATIVE GUTTENBERG asked if there are any court cases
involving the failure [of realtors] to disclose.
MS. WINTON replied that the one case she knows about involved
residential property.
Number 2274
TRACEY RICKER, Broker, Ricker and Associates; President,
Southeast Board of Realtors, stated the board's position that it
does not support [HB 257] as written. She said she would defer
to other witnesses waiting to testify. She expressed concern
why, when the industry is trying to simplify the existing
disclosure law of agency, the bill excludes commercial real
estate transactions. Why would the bill diminish any public
protection in this industry, she asked.
Number 2237
REPRESENTATIVE ROKEBERG stated that in his 30 years as a
commercial broker this [disclosure] law, as it has evolved in
the past decade, has made his practice almost impossible. When
he has to file this kind of paperwork [referencing the 17-page
sample disclosure forms], he said he can't even talk to a client
who has to send all these forms to his legal staff back in
Detroit. He stated that he is being put out of business.
Therefore, [HB 257] is trying to balance the needs of the
general public and those of the commercial public. He stated
that the amount of commercial activity that goes on in this
community and Southeast Alaska is a thimbleful of what goes on
in the rest of the state. He said although he appreciates [the
witnesses'] concerns, [HB 257 doesn't harm] the practice of real
estate in Southeastern Alaska. This section of the law is
upsetting and destroying commerce in this state, he said, and
it's creating a moving target for lawyers. There's always been
tension between brokers of residential and commercial real
estate, he added.
MS. RICKER clarified that she is also a commercial broker.
Number 2168
JEANNIE JOHNSON, Licensed Broker, explained that she has been
licensed in Alaska for 28 years. She has practiced 20 of those
years in Anchorage and eight years in Juneau and does both
residential and commercial transactions. She said she
appreciates Representative Rokeberg's work on behalf of the
industry; he has been the [legislative] workhorse for a very
long time. However, she expressed concern about HB 257.
Regarding questions [raised today] about realtors and commercial
agents, the premier designation of a commercial real estate
broker is a Certified Commercial Investment Member (CCIM),
issued through the National Association of Realtors.
MS. JOHNSON said she has two concerns with HB 257. The
[standards for exclusions in HB 257] are very low. For example,
exempting transactions of four-plex [residential units] or
$100,000; she said that a Fortune 500 company would not be
dealing with such small transactions. Therefore, she suggested
making the limits [for exempted transactions] higher. She asked
if the Prudential lawsuit would be affected by the retroactivity
clause of this bill.
Number 2094
REPRESENTATIVE ROKEBERG said the pending case involves a $50,000
lot.
MS. JOHNSON confirmed that the [affected] case was not the
Prudential suit. She expressed her concern about the
retroactivity of this bill. She informed the committee that she
has just returned from a convention of the Association of Real
Estate Licensed Law Officials (ARELLO), attended by U.S. and
Canadian commissioners who regulate real estate licensing. She
said Alaska is now famous for one particular court case, which
she cannot discuss because she sits on the Real Estate
Commission, who will eventually adjudicate [issues related to]
that suit.
REPRESENTATIVE ROKEBERG said the Prudential lawsuit has been
settled in court and a disciplinary action is pending before the
Real Estate Commission. The Prudential suit would not be
affected by HB 257 because there has been a final judgment or
settlement. He noted that there's another case [in court that
may be the subject of] a class action lawsuit. In that case the
defendants have done everything they can to settle the case, but
[the plaintiffs have not made] an effort to [show] there was an
injury to any person. He stated that there's ulterior motives
[harmful to the real estate industry], and that's why [HB 257]
is before the committee.
MS. JOHNSON reiterated her concern about the bill's
retroactivity provision, which sets a precedent. There are
other [court cases] pending in the residential field, and she's
expressed concern about a "get out of jail free card." She
said, "We work very long and hard in this industry to be
professionals."
Number 1986
REPRESENTATIVE ROKEBERG disagreed that [the retroactivity
clause] is a "get out of jail free card." The legislature can
act retroactively, he explained. He said he has personally
brought before this committee a number of [statutory fixes to
court] cases. This is not [the case of] a bad actor [getting
off the hook], he said.
MS. JOHNSON suggested that the retroactivity clause be clarified
because other members of the committee have read it the same
way.
Number 1950
JIM WAKEFIELD said he would forgo his testimony in favor of
other witnesses.
Number 1939
JEAN KAY, President, Valley Board of Realtors; Real Estate
Agent, ReMax of Wasilla; board member, Alaska Association of
Realtors, explained that she was speaking only for part of her
membership because she was unable to poll all of the members
before this hearing. She testified that HB 257 does not reflect
the standards of practice of the real estate industry today.
The Alaska Association of Realtors has been working since 2002
on the issue of agency disclosure. She reiterated earlier
testimony that the association's effort has taken two
directions: proposed regulation changes to the Real Estate
Commission and proposed statutory changes that reflect the
standards of practice of the industry in this country. This
committee [of the Alaska Association of Realtors] has spent
countless hours meeting twice a month, and a number of state
laws were reviewed and are still under consideration by the
committee. She stated that HB 257 primarily promotes the
interests of commercial realtors.
MS. KAY noted that [classifying] a four-plex as a commercial
[transaction] doesn't make sense. Owner-occupied financing is
available through FHA [Federal Housing Administration] for four-
plexes, and many times those buyers and sellers are not
sophisticated. She said that the primary goal of both
regulation changes and the proposed statue change has been
consumer protection. Consumers need to be aware for whom the
agents work and how they are compensated. She said that this is
realtors' livelihood; how they treat people makes all the
difference. She asked that HB 257 not pass out of committee
until the Agency Task Force has a chance to present its findings
of fact. Some states that have passed real estate agency laws
are having to revise them because of errors, she mentioned.
Number 1767
PADDY COAN, Associate Broker, Valley Office, Prudential Vista
Real Estate; past president, Valley Board of Realtors;
Secretary, Alaska Association of Realtors, President-Elect,
Wasilla Chamber of Commerce, said that she was originally
licensed in 1982. She supervises 40 agents working in land
sales, residential sales, property management, and commercial
sales and leasing. She testified that in the first three months
of 2003, her office closed $25 million in real estate
transactions.
MS. COAN said that currently, real estate licensees can be sued
and held liable for damages, including punitive damages, for a
failure to disclose dual agency in writing in a timely manner.
She said that [this liability situation] does not help the
public. She said she prefers that dissatisfied buyers and
sellers come to brokerages to resolve problems rather than file
court cases over technicalities. She proposed eliminating
lawsuits over technical violations of the disclosure law and
having the real estate commission handle failures to comply with
licensing laws. In her area, which is the fasting growing in
the state, [dual agency] disclosures for construction
[transactions] are very difficult [to determine]. She said that
the [Agency] Task Force has learned how difficult it is to
determine when dual agency must be disclosed. For example, a
broker could meet someone at an open house, and the person could
decide right then to write an offer on the property; the broker
could technically be in violation of timely disclosure.
MS. COAN noted that under HB 257, buyers and sellers can still
file complaints with brokers; they can make a claim against the
surety fund; and they can still, if defrauded, bring a lawsuit
to the court. Commercial practitioners understand that there's
a period of due diligence [to disclose agency]. In commercial
transactions, there's usually a greater degree of sophistication
of the parties. There's no loss of consumer protection in HB
257, she testified. Ms. Coan clarified that this bill does not
exempt commercial practitioners; it exempts commercial
transactions. In her office, she supervises people who do all
types of real estate activities, and they would not be
prohibited from disclosing their agency. The transaction
[whether residential or commercial] would be the event that
would change that [requirement to disclose]. She thanked
Representative Rokeberg for introducing HB 257, and stated that
she supports the bill.
Number 1585
DON ZIMMERMAN, RealEstateAlternative.com, testified that he has
sold real estate since 1985. He spoke in support of HB 257. He
said he'd like for the Agency Task Force to continue its work on
the issue. He reiterated that [under HB 257], the disclosure is
determined by the type of transaction. He agreed that buyers
are more sophisticated than they were 10 years ago. He pointed
out that buyers can use the Internet to research agents and
properties. Even on the residential side, he noted, consumers
can go to classes before they engage in any transactions. He
said he didn't' believe HB 257 in any way harms the public.
Legislation should consider real estate licensees as members of
the public who need protection. He recommended [raising] the
limits [on exempted transactions] on page 4, line 20, but he
would prefer [the exemption] being confined to commercial
transactions and eliminating any reference to dollar limits
because those change with the times.
Number 1500
MARK LEE, CCIM (Certified Commercial Investment Member), Broker,
Lee Realty, testified that his practice is in commercial real
estate only. He said he does primarily leasing and some sales
of commercial land. He commented that the $12,000 lease, on
page 4, line 23, is the equivalent of a $1,000 lease per month.
Leasing should be on a completely different plane because the
broker is dealing with commercial people and with small
businesses that have their bankers' advice. He'd like to see
leasing excluded [from disclosure requirements] because the
agent always represents the property owner. The person out
looking for space to lease certainly has enough business savvy
to recognize that fact. He supports this bill and would like to
see it move forward.
REPRESENTATIVE ROKEBERG asked Mr. Lee about his statement to
exclude leasing activities. He asked if he would exclude leases
below $12,000 a year or raise the leasing limit.
Number 1399
MR. LEE replied that he deals with leases for very small spaces,
and they range from $650 to $3,000 a month. He suggested that
leasing activities be exempt from disclosure requirements. He
said the general public understands the leasing agent's
responsibilities.
Number 1353
HOWARD TRICKEY, Prudential Vista; Prudential Jack White, said
his comments would be limited to subsection (g) on page 5, lines
1-5, and subsection (b), on page 5, lines 12-15. He said that
subsection (g) does not change or eliminate the obligation of a
residential broker to make a dual agency disclosure. All that
this section does is protect the broker from a frivolous lawsuit
where there's been no harm or damage done to any buyer or
consumer. Subsection (g) is intended to treat a technical
failure to disclose a dual agency relationship in writing in a
timely fashion. He said that it proposes to treat that failure
as a licensure violation for which disciplinary action could be
taken against the agency. If there's actual loss or harm
suffered [because of] a technical violation, a buyer may bring a
claim under the [real estate surety] fund. The subsection does
not change a buyer's right under common law to bring a tort or
negligence action.
MR. TRICKEY noted that this change is consistent with the only
ruling on this subject by the Alaska Supreme Court in 1979 in a
case entitled Deeds Beets(ph) v. Meiers Real Estate Agent (ph).
He said that the supreme court ruled that an innocent,
unintentional failure to make a disclosure should not give rise
to a claim to disgorge a commission or turn over a commission
after an actual damage or loss to the buyer. He said that
subsection (g) protects real estate agents and brokers from
frivolous lawsuits in cases when they have made a disclosure of
the agency relationship in good faith but may not have
technically made it in writing in a timely fashion.
Number 1201
MR. TRICKEY said he is currently defending Prudential Vista in a
class action lawsuit over a technical violation of the statute.
He said the lawsuit seeks that the agents and brokers, who
represented the sellers and buyers in the transactions and made
disclosure but didn't make the disclosure timely, should forfeit
all commissions earned over the past six years. He warned that
such a ruling would have a devastating impact on the industry.
That case also seeks punitive damages for a technical violation
of the statute, which the Alaska Supreme Court wouldn't
recognize as a breach of a fiduciary duty under the common law.
[He] said he supports a proposed [amendment] to subsection (g)
that is before the committee.
Number 1138
MR. TRICKEY said subsection (b) [applies retroactively] to
pending cases for which no final judgment has been entered.
When some people object to a "get out of jail free card," they
are referring to the well-known Bonnie Mehner case, which has
been settled, he noted. He said that the applicability
[provision] in Section 7 would not change the outcome of that
case, with its judgment for compensatory damages, nor the
pending disciplinary proceedings. The court found that she made
a material misrepresentation, and the two proposed amendments,
which he supports, would not change that outcome. [Under HB 257
and the two proposed amendments,] no buyer is left unprotected
where they suffer an actual loss as the result of a
misrepresentation or fraud or deceit. The proposed amendments
to Section 6, subsections (g) and (f) [would prohibit] a suit
based on a technical violation of failure to make disclosure in
a timely fashion. These proposed changes do not relieve
residential brokers of their obligation to make disclosures.
These two subsections, Section 6(g) and Section 7(b), are
applicable only to residential brokers. He said he doesn't have
any comments to make on the commercial brokerage provisions of
the bill. He also commented that if this bill passes, the
losers would be the lawyers bringing frivolous lawsuits. After
these two sections [are amended], no buyers or consumers would
lose, he said.
Number 0985
RICK FULLER, Owner/Broker, Prudential Vista Real Estate,
responded to a question from Representative Rokeberg about why
[HB 257] is important to him. He explained that he has been a
broker for 28 years, and was chairman of the Real Estate
Commission for five years. He said that his company has an
outstanding reputation, is proactive in solving problems, and
doesn't have a rash of litigation. He said he doesn't think
that the litigator [who has a filed a lawsuit against his
company] is going to get class action status; however, he wants
to stop that possibility. He said that this court case is not
about solving problems; it's about using a technical violation
to strip his company and the industry of the right to practice.
He said that the losers would be the public because the real
estate industry does a very good job of buying and selling real
estate. He said his company is being sued on a $50,000
transaction by owners of companies that do a billion dollars
worth of business annually. He said he has a reputation of
taking complaint referrals and solving them. He noted that no
other attorneys or clients have jumped on the [class action]
bandwagon. He said he objects to an attorney getting rich on a
technicality.
Number 0827
CHRIS STEPHENS, CCIM, President, Bond, Stephens & Johnson,
explained that he's in a conference room with five other
brokers; another three had to leave earlier. He authored the
[April 14, 2003] letter in the members' packets. He explained
that his company is the largest commercial brokerage company in
the state. The company has 12 agents and last year the company
did 200 exclusively commercial transactions, worth $300-$400
million. He has been in the business 22 years and most of the
company's agents have five or more years of experience.
Number 0703
MR. STEPHENS referred to several unintentional drafting errors
in HB 257. He stated that HB 257 is trying to rectify two
issues in current law: dual agency and disclosure. He said
that in a dual agency situation, the law prohibits brokers from
discussing price or terms with a client. Dual agency occurs
when the broker has an established relationship with the other
party or if the other agent works for the same company. If the
buyer is brought in by an agent from another company, then it's
not dual agency. The aforementioned leads to some ridiculous
situations. His company experiences a large proportion of dual
agency commercial transactions for several of reasons. Mr.
Stephens explained that [Alaska] has a very small business and
investment community. So he ends up dealing with the same
people and the organizations on all sides of a transaction quite
frequently. He said the result is a dual agency relationship.
All commercial property [transactions] tend to be complex; the
agents know one another and talk about their properties. He
noted that his firm has been hired by his clients because of its
tremendous expertise, but the law prohibits his firm from
[exercising that expertise]. He described the loser as the
person who wants to put these transactions together; his agents
can't say anything because of the dual agency statutes.
MR. STEPHENS described a recent situation, in which he had a
property he was selling for the heirs of an estate. He had
three offers, two from agents outside his company, and one from
agents in his company. He said he sat down with the heirs to
review these offers and to decide which of these offers to
counter and pursue. He could discuss the first two but he
couldn't discuss the offer from an agent within his company. He
concluded that [this legal restraint] doesn't help the public,
the consumer, or the economy. To try to do business under these
circumstances is just about impossible, he said. He said the
current law is making criminals of honest people, who are trying
to do the best they can for their clients.
Number 0519
MR. STEPHENS next discussed the disclosure forms, included in
his letter to the committee, which was developed by an attorney
for his company so it could comply with the law. He said the
paperwork is voluminous. He said he deals with a lot of
national companies, and their [representatives] just put [the
disclosure forms] aside because they might not have the
authority to sign them and they don't want to take the time to
send them to their national real estate department someplace [to
be reviewed]. Local businesses don't know what to do with the
forms either, he said. His company is trying to transact
[business] and these [forms] aren't helping. He deals with
experienced business people who, if they want somebody to
represent them, will say so.
MR. STEPHENS stated that, contrary to the prior testimony, this
[sophisticated understanding of agency and disclosure] is a
standard of practice of commercial real estate in Anchorage and
in Alaska for the past 22 years. He said he also works with
national brokers selling properties to people outside the state.
He noted that another five people are waiting patiently at his
site to testify.
CHAIR ANDERSON announced that the bill will not be passed out of
committee today because of the number of people who still want
to testify.
Number 0302
REPRESENTATIVE ROKEBERG invited him to send written comments.
MR. STEPHENS stated there were other people extremely concerned
about the bill who wanted to testify. He said several agents
from other companies had already left because they could not
stay for the whole hearing. The following people introduced
themselves: Stuart Bond, Tim Spernak, Joe LoMonaco, Greg
Johnson, Mike McElligott, Bob Arms, and Marc Dunne.
CHAIR ANDERSON noted that these agents were members of Mr.
Stephens' firm.
Number 0212
TOM MARTIN, Broker, A+ Realty, stated that he has been in the
real estate industry since 1991, is the past president of the
Kodiak Board of Realtors, and does both residential and
commercial work. He said he disagrees with the bill. He
mentioned recent regulatory changes that are improving the
standards of practice within the industry. He compared the
[unethical] practices of Arthur Anderson [a national accounting
firm] with common practices in the real estate industry. He
noted that "all of a sudden when the stuff hits the fan, it was
looked at from a totally different perspective." Mr. Martin
described the need to carefully disclose agency to individuals
who have limited knowledge of the English language. He
recommended increasing the [threshold for commercial exemptions]
in Section 6, changing the $100,000 limit on page 4, line 20, to
$500 million and changing the $12,000 a year limit on page 4,
line 23, to $1 million. He favored letting the courts settle
litigation [rather than including the retroactive clause in HB
257].
Number 0076
DAVE FEEKEN, Chair, Legislative Committee, Alaska Association of
Realtors; ReMax of the Peninsula, summarized the history of the
disclosure issue. In 1984, there was a lawsuit in Hawaii, where
the standard real estate practice was subagency, that is, a real
estate agent represented the seller only. The lawsuit inspired
a federal review of agency practices in the real estate
industry. That commission found that 80 percent of [consumers]
who were working with an agent thought the agent was
representing them. This prompted the National Association of
Realtors (NAR) [tape ends mid-statement.]
TAPE 03-35, SIDE A
Number 0010
MR. FEEKEN recounted that NAR agreed to push agency disclosure
laws in all states in order to prevent the nationalization of
the real estate industry. He cited a 1989 case in Minnesota,
the Edina Real Estate case, that dealt with an undisclosed dual
agency situation very similar to the class action suit pending
in Alaska. He explained that there are two types of dual
agency: disclosed, consensual dual agency that is legal, and
undisclosed dual agency, which is illegal in all 50 states. The
result of undisclosed dual agency can be the forfeiture of
commission if found guilty, recession of the contract, fraud,
punitive damages, and the loss of license. Mr. Feeken opined
that this bill trivializes what the two lawsuits and the federal
government consider a very important consumer protection issue.
He stated that Representative Rokeberg is attempting to abrogate
common law. Thirteen states have attempted this [approach] in
their licensing laws, and none of them have been successful [in
court]. He said that there's got to be a [standard] rulebook,
and when people get in trouble in all of these other states,
they go back to common law to decide how to deal with the issue.
Number 0219
DAVID GARRISON, Associate Broker, AAR #1 Buyers' Agency; member,
Anchorage Board of Realtors; Buyer Agent, National Association
of Exclusive Buyer Agents, explained that he works only on the
buyer's side of the transaction and that his firm handles both
commercial and residential properties. He warned that if the
[the legislature] stops requiring agency disclosure, the
consumer will be hurt. He explained that he is doing a real
estate transaction with an agent in Chicago, and that person
discloses whom he is representing. He said that the issue is
not about the different disclosure practices between realtors in
big towns and small towns. Mr. Garrison said he favors
retaining the disclosure requirement [in state law]. He opposes
the "get out of jail free" provision in [Section 7 of] the bill.
He said an agent should have a fiduciary duty to represent the
buyer or the seller. If that is changed, he said the
[legislature] should sunset the Real Estate Commission and let
the [real estate] marketplace go [unregulated].
Number 0392
REPRESENTATIVE LYNN confirmed that the Chicago transaction Mr.
Garrison mentioned was of a commercial nature.
Number 0439
LINDA GARRISON, AAR #1 Buyers' Agency, questioned why the big
hurry to pass HB 257. She noted the work of the [Alaska
Association of Realtors'] legislative committee, the Agency Task
Force committee, and its subcommittee, and urged the committee
to wait until these groups had finished their work, even if it
means waiting until next session. Ms. Garrison said she opposes
any retroactive provisions in state law because they remove the
checks and balances between the legislature and judicial
systems. She testified that [HB 257] protects the real estate
agent, not the public or the consumer. She said that buyer
agency and seller agency are very simple relationships with a
fiduciary duty. Ms. Garrison stated that dual agency only
benefits one person; but buyers and sellers have the right to
decide whether they want a dual agent or their own
representation. She said she does not support abrogation of
common law.
Number 0635
CHAIR ANDERSON closed public testimony on HB 257.
Number 0649
REPRESENTATIVE DAHLSTROM moved to report HB 257 out of committee
with individual recommendations and the accompanying fiscal
note. There being no objection, HB 257 was passed from the
House Labor and Commerce Standing Committee.
HB 255-WAGES:TRAINING/FLEX-TIME/DEFINITIONS
Number 700
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 255, "An Act amending the Alaska Wage and Hour
Act as it relates to flexible work hour plans, the provision of
training wages, and the definitions of certain terms; and
repealing the exemption in the Act from the payment of minimum
wages for learners."
Number 0845
REPRESENTATIVE ROKEBERG, as sponsor of HB 255, testified that
the bill covers three sections of the Alaska Wage and Hour Act
[AS 23.10.050-150] and the related regulations. He said HB 255
adjusts the definitions of who is management, looks at flexible
work hour provisions, and revises the provisions for training
wages [for workers less than 20 years of age].
Number 0900
FRANK ROSE, President, Alaska Hotel and Lodging Association;
Owner, Alaska Lodging Management, spoke in support of HB 255.
He testified that Sections 1 and 2 of the bill realistically
define executive, administrative, and professional positions as
they relate to exempt employees and overtime status. He said
the bill also makes the definitions consistent with federal law.
He said that is a very important [factor] in his business
operations. Section 3 of the bill provides for long-overdue
changes to the voluntary flexible work hour plan, allowing
flexible work hours [simply] upon agreement [after] filing
[paperwork with the Department of Labor] for the flexible work
hour [plan]; approval usually involves a rubber stamp [by the
department]. The [law] assures that the employer and the
employee agree on the terms of a 40-hour work week, [usually]
with four 10-hour days. And lastly, he noted, the hospitality
industry supports changes to the training wage legislation that
give employers more opportunities to train young people in new
work environments. He said that businesses need to be able to
employ young people for full work weeks so that they can be
given the training. [Current regulations limit youth on lower
wages to 30 hours per week.] This provision provides an
incentive to hire [young] people who don't have experience and
who wouldn't otherwise be hired, he said.
Number 1024
REPRESENTATIVE ROKEBERG asked Mr. Rose to explain what he meant
by getting the voluntary flexible work hour plan rubber-stamped.
MR. ROSE explained that two of his companies have needed
flexible work hour plans. They filled out the forms and sent
them to the Department of Labor; and two weeks later they came
back approved. He confirmed that they were for 4-day, 10-hour
work weeks.
REPRESENTATIVE ROKEBERG commented that the Department of Labor
will approve 4-day, 10-hour work weeks but nothing else. He
noted that working parents are demanding more flexibility in
their schedules so they can look after their children. He asked
if that worked for his industry.
MR. ROSE replied yes, and that it's a real incentive for an
employee if they can [get these flexible hours]. He said it
benefits the employer as well.
Number 1085
CHAIR ANDERSON asked his thought about AS 23.10.055(11), which
exempts from Alaska's minimum wage youth who are under the age
of 18 and work less than 30 hours a week; they can be paid at
the lower rate of $5.15 per hour. He asked Mr. Rose how he
would respond to folks who protest being hired at the lower
wage.
Number 1140
MR. ROSE said that businesses are providing a service to young
people; training that individual to do the job is pretty
intensive. He said that many employers would prefer to hire an
experienced person to do the job. The question is whether these
hires are just to save money. He assured the committee that the
[employer's] effort to train a 17-year-old to be a productive
worker is a public service.
Number 1169
JON FAULKNER, Owner/operator, Land's End Resort; Van Guilder
Hotel, explained that he has run these hotels for 14 years. He
said he employs 125 people in the summertime and roughly 75 in
the winter. Land's End Resort is the largest private sector
employer in Homer; Homer is perennially one of the areas of
highest unemployment in the state. He said he knows what it
means to put people to work and the effort it takes to stay open
in the wintertime.
MR. FAULKNER said he supports HB 255, Sections 1 and 2 in
particular. He stressed that it is critical to clarify and
define what is supervisory, professional, and executive. He
said he has been sued [over the definition of supervisory] and
lost and came close to filing bankruptcy [to pay the court-
ordered damages] in the case, Land's End v. Chase. He stated
that when these cases are settled, they cost the industry
millions of dollars every year and are a lawyer's delight. The
current Alaska law [AS 23.10.055. Exemptions] varies so far from
the federal law that employers [are handicapped by] very
ambiguous definitions of supervisory. His case involved his
restaurant manager who operated a year-round restaurant with 65
employees, who hired and fired staff, and negotiated $200,000
purchase contracts with vendors. Yet in the wintertime, when
the business fell down to 15 dinners a night, she managed the
floor and kitchen from the hostess station. This manager proved
that she spent more than 20 percent of her time standing in a
hostess station, so the court determined that she did line level
work and was not exempt from overtime pay. The result was
treble damages and her lawyer's fees; he wrote a check for
$100,000 that took him to the edge of bankruptcy. As a result,
he placed every employee on hourly pay and refuses to hire
anyone on salary. Mr. Faulkner said that this policy hurts
employees because they don't qualify for certain benefits, and
it restricts them in other ways. He said HB 255 affects
independent, Alaskan-owned, and -operated businesses that are
the backbone of rural economic development.
REPRESENTATIVE ROKEBERG asked if he deals with the voluntary
flex time issue.
Number 1491
MR. FAULKNER replied that he uses flex time in his maintenance
department, which has seasonal work. He said it helps people
who have to work two jobs. He said the Department of Labor
approval is very cumbersome. There is often a two-week delay in
getting the paperwork back. He said he only uses the 4-10 work
week, usually with maintenance, sometimes with security
employees.
CHAIR ANDERSON asked about the training wages as described in
Section 4, page 5.
MR. FAULKNER said he supported the concept, but pointed out
troublesome language [lines 6-9] which read,
An employer may not take an action to displace an
employee, including partial displacements such as
reduction in hours, wages, or employment benefits, for
purposes of hiring individuals at the wage authorized
in this subsection.
MR. FAULKNER explained his point with the example of hiring a
maintenance or server trainee. Two months later, he reduces
hours, because [in the hospitality industry, the employer] is
always changing the staff levels. A disgruntled employee will
point out that his hours were reduced so that another employee
could be hired at the training wages. He warned that this
language will create exposure for the employer. Ninety days is
not very long to have someone at a training wage. He suggested
making certain positions eligible for training wages.
Number 1609
REPRESENTATIVE GUTTENBERG asked two questions about the benefits
Mr. Faulkner offers to his hourly and salaried employees.
Number 1642
MR. FAULKNER said he used to expect more of a salaried employee.
When he stopped paying salaries, he no longer paid the benefits
associated with salary positions. He confirmed that paying
benefits is discretionary; the law does not require the employer
to pay benefits. He said he had offered his salaried employees
health benefits of a reimbursable type.
KAREN ROGINA, Alaska Hospitality Alliance, explained that her
organization includes the Alaska Hotel and Lodging Association,
the Alaska Restaurant and Beverage Association, and the Alaska
Hospitality Alliance Education Foundation. She testified in
favor of HB 255. She said her membership includes over 80
percent of the lodging rooms in the state and over 100 food and
beverage operations in the state, employing over 20,000
Alaskans. She said that employees in the industry gain valuable
work experience that readily transfers to other industries.
According to the National Restaurant Association, over one third
of the labor force today in the United States got its start in
the hospitality industry. "We are the training ground of
America's work force," she said.
MS. ROGINA said she supports HB 255 because it encourages
employment and the development of workers in the industry while
protecting the slim profit margins of the members' operations.
She testified that the current statute discourages employment
growth and development while eroding bottom-line profits. Given
the recent changes in the wage and hour law [mandating an annual
cost of living adjustment in the minimum wage], the current
economic downturn has also been very hard on the industry. She
noted that the alliance recently commissioned a study to
quantify the impacts of the economic downturn and the minimum
wage law. She added that anecdotal information shows that
employees are being laid off, employee benefits are being cut,
vacation packages are being cut, and fewer workers under the age
of 21 are being hired because of these factors. She stated that
HB 255 encourages the development of employees, and she urged
the committee to pass HB 255 out of committee.
Number 1845
REPRESENTATIVE ROKEBERG asked her opinion of the current
training wage provision that allows young people to work 30
hours a week.
MS. ROGINA replied that the current statute allows young people
[up to age 18] to be paid $5.15 an hour, up to 30 hours a week.
She cautioned that if they work beyond 30 hours a week, there
isn't a mechanism in place to track those hours and send up an
alert. This [bill] changes that to 40 hours a week, and every
employer has that mechanism in place to identify when an
employee hits the 40-hour limit [for purposes of computing
overtime]. So, administratively, this is a lot easier to put
into place, she said. The increase [in the age limit from 18 to
20] years opens up a pool of young people who need that
experience in the workforce and the opportunity to ascend [the
job ladder].
CHAIR ANDERSON asked about a 17-year old working at Wendy's 20
hours a week. He asked her to explain how that works.
Number 1915
MS. ROGINA said that currently they can be paid the training
wage only if they work less than 30 hours ongoing. In the
summertime, they might work more hours. It's so difficult to
track [the 30 hours] that people just don't do it.
CHAIR ANDERSON confirmed that if young person works one hour
more than the 30 hour [limit], all 31 hours must be paid at the
higher [minimum] wage. He asked what happens when the young
worker turns 20 if this bill passes.
MS. ROGINA explained that if a 19-year-old works at the training
wage for a month, when she turns 20, she would have to be paid
at the higher wage. She confirmed that HB 255 allows for 40
hours a week for the first 90 days.
Number 1972
REPRESENTATIVE GUTTENBERG asked what percentage of employees fit
into these definitions of summer or seasonal hires and would be
eligible for the training wage.
MS. ROGINA said that information is not currently available, but
the Alaska Hotel and Lodging Association recently commissioned
the McDowell Group to do a study that quantifies that kind of
detail.
REPRESENTATIVE GUTTENBERG asked how many of the young people
hired in this industry are non-Alaskan, summer travelers.
MS. ROGINA replied that she didn't know but would find that
information and send it to him.
Number 2024
REPRESENTATIVE ROKEBERG noted that he didn't want to be accused
of running a child sweatshop. He asked Ms. Rogina if she thinks
this wage can be used properly to train young people for a job.
Is there anything in the bill that prevents paying a teenager at
the higher wages, he asked.
MS. ROGINA said HB 255 allows the market to [determine] what
young people are paid. Within 90 days, the employer has a good
sense of the value of that employee. She said there's high
turnover in the beginning.
Number 2079
REPRESENTATIVE ROKEBERG said that if an employer hires a young
person at the lower wage who proves of value, the employer might
raise the wage immediately to the $7.15 or above to hang on to a
good employee. He also asked whether the flex-time provisions
will help her member employers hire working parents who need
schedule flexibility.
MS. ROGINA said absolutely, especially on the hotel side, which
is a [round the clock] industry as is the case in restaurants as
well. The industry hires a lot of people that have unique
scheduling requirements. Offering employees flexible schedules
allows them to fit into the workforce more readily.
REPRESENTATIVE ROKEBERG confirmed that some of her larger hotels
and restaurants have union employees, and that some of the union
contracts allow for split shifts. He asked if they are exempt
from the Wage and Hour Act because they have collective
bargaining.
MS. ROGINA said that union contracts often negotiate this kind
of flex time. But nonunion employers are also able to, so this
levels the playing field.
CHAIR ANDERSON noted that the rest of the people in the
committee room were willing to wait until the next meeting to
testify. He noted that HB 255 will be held over.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:40 p.m.
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