Legislature(1997 - 1998)

04/10/1997 04:30 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               SENATE LABOR AND COMMERCE COMMITTEE                             
                         April 10, 1997                                        
                           4:30 P.M.                                           
 MEMBERS PRESENT                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Jerry Mackie, Vice Chairman                                           
 Senator Mike Miller                                                           
 Senator Tim Kelly                                                             
 Senator Lyman Hoffman                                                         
  MEMBERS ABSENT                                                               
 All members present                                                           
  COMMITTEE CALENDAR                                                           
 SENATE BILL NO. 162                                                           
 "An Act relating to payment of minimum wages to tipped employees;             
 and providing for an effective date."                                         
  - HEARD AND HELD                                                             
 HOUSE BILL NO. 18                                                             
 "An Act extending to certain partnerships and corporations the 10             
 percent procurement preference currently given to certain sole                
 proprietorships who are Alaska bidders and owned by persons with              
  - MOVED HB 18 OUT OF COMMITTEE                                               
 HOUSE BILL NO. 138                                                            
 "An Act relating to the Board of Storage Tank Assistance; and                 
 providing for an effective date."                                             
  - BILL POSTPONED                                                             
 PREVIOUS SENATE COMMITTEE ACTION                                              
 SB 162 - No previous action to consider.                                      
 HB 18 - No previous action to consider.                                       
 HB 138 - No previous action to consider.                                      
  WITNESS REGISTER                                                             
 Ms. Annette Kreitzer, Staff                                                   
 Senate Labor and Commerce Committee                                           
 State Capitol Bldg.                                                           
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Staff to sponsor of SB 162.                            
 Mr. Jack Amon                                                                 
 Marx Brothers Cafe                                                            
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Supported SB 162.                                      
 Mr. Chris Anderson                                                            
 Glacier Brew House                                                            
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Supported SB 162.                                      
 Mr. Bob Gill                                                                  
 Local 878                                                                     
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Opposed SB 162.                                        
 Mr. Fred Rosenberg                                                            
 Restaurant Management, Inc.                                                   
 Red Robin Alaska                                                              
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Supported SB 162.                                      
 Representative Jeannette James                                                
 State Capitol Bldg.                                                           
 Juneau AK 99801-1182                                                          
  POSITION STATEMENT:   Sponsor of HB 18                                       
 Mr. Vern Jones, Chief Procurement Officer                                     
 Division of General Services                                                  
 Department of Administration                                                  
 P.O. Box 110210                                                               
 Juneau, AK 99811-0210                                                         
  POSITION STATEMENT:   Supported HB 18.                                       
 Mr. Duane French, Director                                                    
 Division of Vocational Rehabilitation                                         
 Department of Education                                                       
 801 West 10th, Ste. 200                                                       
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Supported HB 18.                                       
  ACTION NARRATIVE                                                             
  TAPE 97-17, SIDE A                                                           
 Number 001                                                                    
            SB 162 MINIMUM WAGE FOR TIPPED EMPLOYEES                          
   CHAIRMAN LEMAN  called the Senate Labor and Commerce Committee           
 meeting to order at 4:30 p.m. and announced  SB 162  to be up for             
  MS. ANNETTE KREITZER,  Staff to Senate Labor and Commerce Committee,         
 said this bill would allow employers to apply a tip credit to wages           
 due an employee.  The federal government and 43 other states allow            
 for a tip credit.  Alaska is one of seven states to specifically              
 exclude a tip credit.  Alaska statute requires employers pay tipped           
 employees fifty cents more than the federal minimum wage whatever             
 that minimum wage is.  SB 162 does not change that.  Alaska's                 
 current minimum wage is $5.25 which is the federal minimum wage of            
 $4.75 plus the fifty cent requirement for Alaska statute.  She                
 explained that a second phase federal minimum wage increase will              
 take effect in September, bumping the minimum wage to $5.65.                  
 CHAIRMAN LEMAN asked if this would help alleviate some of the                 
 disparities that occur in the restaurant business, especially for             
 tipped employees where the tipped employees are making                        
 substantially more than the minimum wage of the non-tipped                    
 employees.  MS. KREITZER replied that is her understanding from               
 talking to some in the restaurant industry.                                   
  MR. JACK AMON , Marx Brothers Cafe, said he also represents Cabaret,         
 Hotel, and Restaurant and Retailers Association (CHARR) and the               
 Alaska Restaurant Association.  He explained that a unique                    
 situation regarding compensation exists in their industry.  While             
 minimum wage is set up to guarantee a floor of income for working             
 people, in the restaurant industry minimum wage employees are                 
 generally tipped employees, who because of their tipped income, are           
 substantially over minimum wage and often are among the most highly           
 compensated personnel in the restaurant.                                      
 MR. AMON explained that the federal government has for some years             
 considered tipped income as wages.  Because they feel the minimum             
 wage of the Alaskan employees is considerably over the minimum                
 wage, they have asked for a freeze in the cash part of the wage               
 which is currently $5.25 per hour.  This still leaves Alaskan                 
 people among the highest paid in the country.                                 
 When the federal government increased the minimum wage last year,             
 it froze the cash portion of the wage under federal guidelines at             
 $2.13 per hour, providing a tip credit of $2.67 per hour.  He is              
 only looking for a .40 per hour tip credit in September.  He is not           
 in any way trying to cap the minimum wage.  Under statute the                 
 employer would always be responsible for making sure that the                 
 employee earned at least the State's minimum wage.  They have                 
 documentation showing that tipped employees make $9 - $20 per hour.           
 He didn't know of any other industry that had people on that kind             
 of wage scale that was mandated by the government to give them a              
 minimum wage that was not an across the board wage for everyone.              
 CHAIRMAN LEMAN asked if he could respond to his question to Ms.               
 Kreitzer.  MR. AMON explained that dish washers and kitchen help do           
 not benefit at all from this minimum wage increase since their pay            
 scales always put them above minimum wage scales ($6.50 - $8.50 per           
 hour) and actually creates a disparity in the back of the house.              
  SENATOR KELLY  said he understands that this legislation would allow         
 as the minimum wage goes up, that everyone would receive the                  
 current minimum wage, but tip credit would kick in at $5.25.  They            
 would always get the current minimum wage.  MR. AMON explained that           
 was correct, and since the tipped income is counted as wages                  
 employers are allowed to use that.  He said should a tipped                   
 employee not generate sufficient income in their tips to meet the             
 minimum wage standards, the employer is still responsible to make             
 up that difference.                                                           
 SENATOR KELLY asked if that applied to the new minimum wage.  MR.             
 AMON replied yes, any minimum wage whatever it might be.                      
 SENATOR KELLY asked if this was based on an individual rather than            
 pooling tips.  MR. AMON replied yes, because even with pooling tips           
 each employee has their own individual reporting requirements to              
 the employer.                                                                 
 SENATOR KELLY asked how this would affect the employee's tax                  
 reporting responsibility.  MR. AMON replied it would have no affect           
 on their tax reporting.                                                       
 SENATOR KELLY asked how the employer gets the cash to make up the             
 difference between the $5.25 and the $5.65.  MR. AMON replied they            
 don't take the cash from them; it's just a paper exchange.  There's           
 no financial impact on the employee.                                          
 Number 225                                                                    
 SENATOR KELLY asked if this is adding another exception to the                
 minimum wage law.  CHAIRMAN LEMAN replied no and Mr. Perkins,                 
 Department of Labor, could respond further on that.                           
  MR. CHRIS ANDERSON , Glacier Brew House, explained a sheet comparing         
 wages that he sent the committee.  He said they could see that the            
 risk of falling below the minimum wage standard was very slim; and            
 his people are well compensated.  He currently estimates about                
 50,000 hours of tipped employee hours which means this will cost              
 him an additional $20,000 to pay for the increase in minimum wage             
 that will go to his top people and he would like to be able to                
 provide that $20,000 to the most needy people on his staff and                
 that's why he supports this legislation.                                      
 CHAIRMAN LEMAN summarized that the change in federal law                      
 inadvertently creates a greater disparity between the better                  
 compensated employees and the lesser compensated employees.  MR.              
 ANDERSON agreed.                                                              
 Number 317                                                                    
  MR. BOB GILL,  Local 878, said he represents almost 2,000 people in          
 the hotel and restaurant industry.  They vigorously oppose SB 162.            
 He explained that many servers are single mothers who must support            
 family who do not make $40,000 - $50,000 per year.  Most                      
 restaurants and eateries are more moderate priced restaurants than            
 the Glacier Brew Pub or the Marx Brothers Cafe.  Many of the people           
 in this State work for less than $10 per hour when you figure in              
 their tips.  Many servers are lucky to net between $20,000 -                  
 $30,000 per year.  Income statistics from the Department of Labor             
 show that a three person family that makes $25,000 per year is                
 considered very low income; $32,000 per year qualifies many for               
 government programs.  He said it seems they are trying to get                 
 people off the welfare rolls and this bill hurts working people,              
 single mothers, and young children.  Servers would have their cash            
 wages reduced .40 per hour as of October 1 and their future wages             
 would be frozen at $5.25 per hour for the foreseeable future.                 
 Forty cents an hour equates to $800 per year which could buy                  
 diapers, meals, and school clothes for children.                              
 MR. GILL said if they were just talking about employees, that he              
 represents, who work at better eateries that is one thing, but the            
 majority of people who spend money in restaurants in Alaska spend             
 it at moderately priced eateries.  In that sense they don't have a            
 representative sampling of restaurants.  He thought they should be            
 talking about raising the minimum wage and not lowering it, because           
 this, in effect, is another exception to the minimum wage.                    
 CHAIRMAN LEMAN said his concern is for the employees who are not              
 tipped employees who may not get an increase or get a benefit                 
 program because of this.  He asked if he was hearing from people in           
 the back of the house.  MR. GILL replied that the people in the               
 back of the house in their contracts are at higher rates of pay.              
 He agrees that they need more, but they do make greater salaries              
 and benefit packages than the unrepresented sector.                           
  MR. FRED ROSENBERG,  Restaurant Management, Inc. and Red Robin               
 Alaska, said he had submitted excerpts from payroll records showing           
 the dollar value of tips reported to them by individual employees.            
 Based on the reported tips, their servers are making on the low               
 side, $3.75 - $8.09 per hour in tips alone.  He said the average              
 check for a person at lunch time is $8.50, and at night it's about            
 $10.50.  He said we are one of the very few states that doesn't               
 have tip credit and very strongly supported this bill because it              
 allows business owners to allocate monies where they feel it's                
 appropriate like to people in the back of the house.                          
 MR. DWIGHT PERKINS,  Department of Labor, accepted the Chairman's             
 offer to come back the next time the bill is heard on Tuesday since           
 a quorum was not present.                                                     
 MR. FRANK ROSE , Alaska Hotel/Motel Association, supported SB 162             
 because it would help people in the back of the house and other               
 hotel personnel, like desk people, as well.                                   
 CHAIRMAN LEMAN thanked everyone for their testimony and said SB 162           
 would be held over until next Tuesday.                                        
        HB  18 STATE PROCUREMENT DISABILITY PREFERENCES                       
 CHAIRMAN LEMAN announced  HB 18  to be up for consideration.                  
  REPRESENTATIVE JEANNETTE JAMES,  sponsor of HB 18, said existing law         
 for disabled people provides a bidder preference.  There is a                 
 preference for people who are identified as severely disabled by              
 the Division of Vocational Rehabilitation, but it doesn't allow               
 them a preference when they are a corporation or a partnership or             
 other organized entity.  This gives them the option of determining            
 what fits their needs the best.  There is a $0 fiscal note and                
 support from the impacted departments of Education and                        
 Administration.  She said she has heard of no opposition to this              
  MR. VERN JONES,  Chief Procurement Officer, State of Alaska,                 
 supported HB 18 because it corrects some inequities and has a $0              
 fiscal note.                                                                  
  MR. DUANE FRENCH,  Director, Division of Vocational Rehabilitation,          
 said he supports HB 18 because it would be a more equitable system            
 for procurement for individuals with disabilities and will allow              
 partnerships where all partners are individuals with disabilities             
 to qualify under the bidders preference.  It's very positive for              
 people with disabilities so they can move off the public assistance           
 rolls and into the work force.                                                
 CHAIRMAN LEMAN announced an at ease from 5:12 - 5:13.                         
 Number 561                                                                    
  SENATOR MACKIE  moved to pass HB 18 with individual recommendations          
 and the $0 fiscal note.  There were no objections and it was so               
 CHAIRMAN LEMAN adjourned the meeting at 5:14 p.m.                             

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