Legislature(1995 - 1996)

02/09/1995 01:35 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
              SENATE LABOR AND COMMERCE COMMITTEE                              
                        February 9, 1995                                       
                           1:35 p.m.                                           
  MEMBERS PRESENT                                                              
 Senator Tim Kelly, Chairman                                                   
 Senator John Torgerson, Vice Chairman                                         
 Senator Mike Miller                                                           
 Senator Judy Salo                                                             
 Senator Jim Duncan                                                            
  MEMBERS ABSENT                                                               
  COMMITTEE CALENDAR                                                           
 SENATE BILL NO. 45                                                            
 "An Act relating to settlement and payment of claims for minimum              
 wage and overtime compensation claims and to liquidated damages and           
 attorney fees for minimum wage and overtime compensation claims."             
  PREVIOUS ACTION                                                              
 SB 45 - See Labor and Commerce minutes dated 2/2/95.                          
  WITNESS REGISTER                                                             
 Sherman Ernouf, Legislative Aide                                              
 Senator Tim Kelly                                                             
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Presented overview of SB 45.                           
 Pam Neal, President                                                           
 Alaska State Chamber of Commerce                                              
 217 2nd Street                                                                
 Juneau, AK 99501                                                              
  POSITION STATEMENT:   Supported SB 45.                                       
 Ed Flanagan, Assistant Commissioner                                           
 Department of Labor                                                           
 P.O. Box 21149                                                                
 Juneau, AK 99802-1149                                                         
  POSITION STATEMENT:   Supported the intent of SB 45, but didn't              
 support the bill as written.                                                  
 Bob Blasco                                                                    
 Robertson, Monagle, and Eastaugh, Attorneys                                   
 801 W. 10th, Suite 300                                                        
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Supported SB 45.                                       
 Parry Grover, Attorney                                                        
 550 W. 7th Street                                                             
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Supported SB 45.                                       
 Ken Legecki, Attorney                                                         
 425 G Street                                                                  
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Opposed SB 45.                                         
 Dwight Perkins, Special Assistant                                             
 Department of Labor                                                           
 P.O. Box 21149                                                                
 Juneau, AK 99802-1149                                                         
  POSITION STATEMENT:   Commented on SB 45.                                    
 Dario Notti, Intern                                                           
 Senator Duncan                                                                
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Opposed SB 45.                                         
  ACTION NARRATIVE                                                             
  TAPE 95-4, SIDE A                                                            
  Number 001                                                                   
 SL&C 2/9/95                                                                   
          SB  45 DAMAGES & ATTY FEES FOR UNPAID WAGES                         
 CHAIRMAN KELLY called the Labor and Commerce meeting to order at              
 1:35 p.m. and announced SB 45 to be up for consideration.  He said            
 this legislation went through both houses last year, but died in              
 the Senate waiting for concurrence.  It was controversial at the              
 SHERMAN ERNOUF, Legislative Aide to Senator Kelly said SB 45 seeks            
 to remedy four main problems with the current system of awarding              
 punitive damages in claims for payment of overtime compensation and           
 statutory minimum wages under the Alaska Wage and Hour Act.  The              
 first problem is with the Kinney Shoe decision that ruled                     
 liquidated damages are mandatory. The second problem is that the              
 court ruled private settlements that do not include liquid damages            
 clauses are invalid. The third problem is that only the plaintiff             
 is allowed to recover attorney's fees and costs. The fourth problem           
 is that the Commissioner of Labor has no authority to settle wage             
 or overtime compensation claims.                                              
 Presently an employer who makes an honest mistake is punished as              
 severely as an employer who knowingly and willingly violates the              
 act, Mr. Ernouf said.  If passed, Section 3d would reverse current            
 law and would provide for complete or partial waiver of the liquid            
 damages requirement if it could be shown that an employer acted in            
 good faith and on reasonable grounds.  This language is almost                
 identical to the language in the Federal Labor Standards Act.                 
 MR. ERNOUF said that SB 45 would allow the court to award                     
 liquidated damages in an amount less than required.  Section 3 f              
 encourages private out of court settlements of these claims,                  
 stipulating criteria for the written agreement.  Section 2c would             
 award attorneys fees and costs to the prevailing party in a law               
 suit - similar to Civil Rule 82.                                              
 PAM NEAL, President, Alaska State Chamber of Commerce, supported SB
 42.  As the law now stands the employer is automatically saddled              
 with liquidated damages even if there was no intent.                          
 Number 187                                                                    
 SENATOR SALO asked how a person could accidentally breach the Wage            
 and Hour Act.  MS. NEAL replied that particularly in overtime                 
 payments the laws can be complicated and you don't even realize               
 that you are breaking them.  She thought there should be the                  
 opportunity for some judgement in these matters.                              
 Number 217                                                                    
 ED FLANAGAN, Assistant Commissioner, Department of Labor, said he             
 supported the intent of SB 45, but it actually goes much further              
 than taking the situation back to what it was before the Kinney               
 Shoe decision of the Supreme Court.  He said the State Wage and               
 Hour Act was working good for 32 years before the Kinney decision.            
 He believes there should be a way to settle before going to court.            
 This flexibility was removed from the Department with that                    
 He explained that there is an inherent imbalance in the                       
 employer\employee relationship and this is not the only law in                
 federal or state statute that allow for prevailing attorney's fees.           
 The Alaska Wage and Hour Act is not that confusing.  Indeed there             
 are many other codes that employers comply with that are more                 
 complex like the IRS code and Worker's Compensation.                          
 Giving attorney fees to the defendant or reducing fees that are out           
 there is going to have a severe chilling effect on the ability of             
 the employee to make a claim.  There are very little funds within             
 the Department of Labor to enforce this and other laws.  If there             
 is a deterrent and they know the possibility of liquidated damages            
 is out there, they will inform themselves and obey the law like               
 they did for years.                                                           
 Number 250                                                                    
 BOB BLASCO, Attorney representing Holland America, said there is no           
 prohibition to modifying this law as long as it doesn't restrict              
 benefits that are provided under federal law.  Saying you can't               
 modify attorney fees is not accurate, because the federal law                 
 indicates you cannot modify benefits that are provided to the                 
 employee.  Attorney fees are not benefits to the employee.  This              
 bills is very expansive in its protection of the employee and the             
 goal of the federal and state law is to prevent over-reaching.                
 SENATOR KELLY asked if he was a registered lobbyist.  MR. BLASCO              
 answered that he was.  SENATOR KELLY asked who had retained him on            
 this issue.  MR. BLASCO said Holland America had retained his firm.           
 Number 300                                                                    
 SENATOR SALO asked him to explain "over-reaching."  MR. BLASCO                
 explained that it means the employer is in a situation of being               
 able to take advantage of the employee.                                       
 SENATOR SALO asked him if the provisions in the bill allow for                
 over-reaching.  MR. BLASCO responded no.                                      
 SENATOR SALO commented that provision #1 removed great                        
 disincentives to breach the Wage and Hour Act by eliminating the              
 potential of liquidated damages.  If there is no potential of                 
 liquidated damages, all that's being done is deferring wages.  MR.            
 BLASCO responded that the only change in the liquidated damage                
 provision is to allow a good faith exception allowed under federal            
 law.  He continued that protections are built in along the way.               
 For instance, if a judge or jury determines that the good faith               
 burden is not met by the employer, then there's no change in                  
 liquidated damages.                                                           
 SENATOR SALO asked why the potential of private settlements doesn't           
 allow for intimidation by the employer.  She said she didn't agree            
 that the employer/employee relationship is a level playing field.             
 She also wanted more information on bogus claims.                             
 MR. BLASCO said there is not a level playing field between the                
 employer and employee.  That's why the extensive protections are              
 built in.  The only thing this bill does is specify a long list of            
 protections in a situation where there can be a settlement.  There            
 is nothing that would compel a settlement.  In general, he said,              
 they are trying to present more options to deal with the kinds of             
 cases that come up.                                                           
 SENATOR SALO asked how many bogus claims there were in Alaska.  MR.           
 BLASCO said he couldn't give her figures, but he had an example of            
 someone who came up with many sheets of overtime which was all done           
 on the same day with the same pen on the same form.  SENATOR SALO             
 asked if that person wouldn't lose the case anyway.  MR. BLASCO               
 said that was right, but if they allow someone to bring a                     
 fabricated case with no down-side risk, which creates all of the              
 loss of time and expense before court, in court, and through the              
 whole case, that person and their attorney can just walk away.                
 He stressed there wasn't a prohibition in the federal law, but it             
 was just silent on the subject.                                               
 Number 412                                                                    
 SENATOR DUNCAN said the provision about the attorney's fees bothers           
 him because most of the people involved in this sort of case are              
 lower paid individuals.  Even if they think they have a claim, they           
 will be very hesitant to hire an attorney and go to court knowing             
 that Westmark Hotels or Holland American have a lot of money and              
 can hire top notch attorneys.  Applying Civil Rule 82 to very low             
 paid employees seems to deter them from going to court and                    
 collecting what is rightfully theirs.                                         
 MR. BLASCO said that should be a concern if you were talking about            
 attempting to prevent good cases and marginal cases.  This                    
 provision matters where someone has essentially no case, but is               
 attempting to get something through the system.                               
 SENATOR DUNCAN asked to see language stating that the only cases              
 it's going to impact are those that don't have merit.  MR. BLASCO             
 said it wouldn't say that anywhere.  He said chances are if a low             
 paid individual has a claim, it would be on a contingency basis,              
 and the attorney would not be paid until the claim was paid.                  
 Number 450                                                                    
 SENATOR KELLY asked if there were any plaintiff's attorneys                   
 KEN LEGECKI said he was an attorney and did this kind of work and             
 wished strongly to testify.  While he wasn't representing anyone              
 specifically he felt so strongly about this bill that he had to               
 testify against it.  He perceives this as another attempt by big              
 corporations to try to exploit little people.                                 
 MR. LEGECKI held up a free pamphlet from the Federal and Alaska               
 Department of Labor explaining the terms of the Fair Wage and Hour            
 Act. He invoked stories of less pay and longer hours that took                
 place during the depression.  He emphasized that it was the                   
 Legislature's job to make sure that there is a level playing field            
 between employer and employee.                                                
 MR. LEGECKI suggested getting an opinion on the bill from the                 
 Attorney General.  He didn't see how an employer could have read              
 that pamphlet and not know that he was to pay overtime for over 8             
 hours in a day and 40 hours in a work week.                                   
 He asked if Holland America and other similar firms had consulted             
 with the Department of Labor to find out if they were in                      
 He said he represents people who work for an hourly wage and they             
 cannot afford an attorney.  The Kinney case did not change the law            
 he said; it was their outrageous behavior in that particular case             
 that forced it to go to the Supreme Court.                                    
 The question is, how does an employee who makes an hourly rate                
 fight an employer without worrying about how to protect his job?              
 He has not heard of one horror story of one employer getting sued             
 unfairly, but he has many stories from people he has represented              
 who have been treated unfairly.  He pointed out also, that it is              
 difficult for underpaid people to get representation, because they            
 might not be able to pay the attorney even if he prevails in his              
 claim.  This means the law will not be followed.                              
 SENATOR MILLER asked him if he had lost any of these cases.  MR.              
 LEGECKI answered that he had lost only one, and he disagreed                  
 strongly with the court on that one.                                          
  TAPE 95-4, SIDE B                                                            
  Number 587                                                                   
 SENATOR MILLER said he understood his frustration and thought it              
 was mostly toward big business, but noted this issue also applies             
 to small businesses in the State of Alaska.  He said he is a small            
 business owner and he doesn't have the big money he is talking                
 about.  He thought by and large that small Alaskan businesses were            
 "honest" and believed that if you are wrong, you pay.                         
 MR. LEGECKI said that the nature of business is to try to make as             
 much money as possible, and he thought employers would skirt the              
 law if it made more money for them.  He also asked if as a small              
 business owner obeying the law, would it be fair to you if your               
 competitor is allowed to violate the law and "get ahead of you."              
 SENATOR MILLER said the vast majority of businesses in this State             
 do not try to cheat their employees.                                          
 SENATOR DUNCAN asked if he represented his clients on a contingency           
 basis.  MR. LEGECKI said yes, that his fee is usually 1/3 of the              
 gross or, if the court awards, a higher fee.                                  
 SENATOR DUNCAN commented that if they pass the bill in its current            
 form, section 2 that deals with Civil Rule 82, says that all                  
 attorneys would go on a contingency basis.  So the employee would             
 have to go to court to collect wages and might end up getting 60%             
 of what is due him which doesn't seem fair.  MR.LEGECKI agreed and            
 added that there are costs involved like depositions that cost                
 anywhere from $500 - $1,000.  He also said that employers fight               
 these claims vigorously, because it sets a precedent for the rest             
 of their employees.                                                           
 Number 445                                                                    
 PERRY GROVER, Attorney from Anchorage, supported SB 45.  He said he           
 is not representing anyone but himself, although the majority of              
 his experience is with representing employers.  He also has served            
 as a neutral in resolving labor disputes.  He said Alaska has the             
 harshest Wage and Hour Act of any of the states on the west coast.            
 He said that section 3 merely builds a defense that has existed               
 under the Federal Fair Labor Standard Act for many years.  Many               
 cases that end up in court in Alaska would not get there under the            
 federal system.                                                               
 He said he respects the opinions and abilities of the people in the           
 Department of Labor, but they are not always correct.                         
 Mr. Grover said Section e was requested by the Commissioner of                
 Labor because he wanted the power to make settlements (taken away             
 in the Kinney Shoe decision) restored.  He had no objection to                
 Section f allows private settlements with safeguards taken from the           
 Federal Age Discrimination and Employment Act.  Even if this bill             
 passes there are many ways in which the Alaska law will remain                
 harsher than the Federal Fair Labor Standards Act, he said.                   
 Number 335                                                                    
 DENNIS BRANDON, Vice President, Westmark Hotels, said they are the            
 only non-union hotel chain in Alaska.  He said they are in total              
 support of the SB 45.  He said the Fair Labor Standards Act, on               
 which the Alaska Statute is based, provides the flexibility of the            
 federal law.  Alaska businesses should not be placed under a more             
 burdensome standard than the thousands of businesses in other                 
 DARIO NOTTI, Intern for Senator Duncan, said he was representing              
 himself and said he had much construction experience.  He commented           
 that he thought about a third of the companies he worked for had              
 some sort of a "scam" to reduce overhead.  He related the times he            
 had worked overtime, through coffee breaks, and at other very                 
 questionable times.  He said he's been told this is a right to work           
 state and if you don't like it, we can lay you off tonight and have           
 another guy working in your place in the morning.                             
 MR. NOTTI said that employees need protection that the current law            
 Number 209                                                                    
 C.J. ZANE, Holland America Line, said he believed that Alaskan                
 employers, big and small, make every effort to comply.  Claims come           
 from areas where employees are hired in an exempt category who also           
 perform work outside of that employment that would have fallen                
 under Wage and Hour, and then produced some log that they kept.               
 Once the claim is made, the only option the employer has is to                
 defeat that claim outright which is very difficult; or pay double             
 what the claim is.  There is nothing in between under Alaska law.             
 That is just not fair, he stated.                                             
 Regarding Rule 82, for instance, victims of sexual harassment are             
 certainly as outraged as people who are out some wages.  Rule 82              
 applies to those very important bodies of cases in this state. It             
 just means that the attorney and his client need to think hard                
 about bringing the case.                                                      
 Number 256                                                                    
 SENATOR DUNCAN requested a more definitive position paper by the              
 Department of Labor on this legislation.  He was concerned with               
 subsection f on page 2.  SENATOR KELLY concurred with that request            
 and said the Committee would take up the bill at a future date.               
 SENATOR KELLY adjourned the meeting at 3:00 p.m.                              

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