Legislature(1999 - 2000)
04/15/2000 02:50 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE April 15, 2000 2:50 p.m. MEMBERS PRESENT Senator Jerry Mackie, Chairman Senator Tim Kelly, Vice Chairman Senator Dave Donley Senator Loren Leman Senator Lyman Hoffman MEMBERS ABSENT All members present COMMITTEE CALENDAR Confirmation Hearing on Governor's Appointees: Alaska Workers' Compensation Board -Harriet M. Lawlor Alaska State Board of Accountancy -Lottie Fleeks and Dean W. Nelson Alcoholic Beverage Control Board -Robert Klein and ToniLee Jackson State Board for Registration for Architects, Engineers, and Land Surveyors -Kathleen L. Gardner and Ernie Seimoneit Board of Barbers and Hairdressers - Darae Crews Alaska Labor Relations Agency -Richard D. Brickley and Robert Doyle Board of Marine Pilots - Captain Michael Spence, Jeffrey Thompson and Barbara Huff Tuckness Occupational Safety and Health Review Board - Timothy Sharp Personnel Board - Charles Borg Board of Certified Real Estate Appraisers - Eileen Bechtol Board of Veterinary Examiners - Dr. Jean Battig Alaska Workers' Compensation Board - Harriet Lawlor CONFIRMATIONS ADVANCED HOUSE BILL NO. 265 "An Act extending the termination date of the Alaska regional economic assistance program; and providing for an effective date." -MOVED HB 265 OUT OF COMMITTEE CS FOR HOUSE BILL NO. 310(L&C) "An Act relating to the Alaska Insurance Guaranty Association." -MOVED CSHB 310(L&C) OUT OF COMMITTEE CS FOR HOUSE BILL NO. 398(JUD) "An Act relating to the Alaska Life and Health Insurance Guaranty Association." -MOVED CSHB 398(JUD) OUT OF COMMITTEE CS FOR HOUSE BILL NO. 337(JUD) "An Act relating to claims against permanent fund dividends to pay amounts owed to the Department of Labor and Workforce Development under the Alaska Employment Security Act and to fees for processing certain claims against permanent fund dividends; and providing for an effective date." -MOVED CSHB 337(JUD) OUT OF COMMITTEE CS FOR HOUSE BILL NO. 339(L&C) "An Act authorizing the Alaska Commercial Fishing and Agriculture Bank to make loans relating to tourism and development or exploitation of natural resources." -MOVED CSHB 339(L&C) OUT OF COMMITTEE SENATE CS FOR HOUSE BILL NO. 422(L&C) "An Act relating to workers' compensation benefits for injuries resulting from consumption of alcohol or use of drugs; and providing for an effective date." -MOVED SCSHB 422(L&C) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION HB 265 - No previous action to record. HB 310 - No previous action to record. HB 398 - No previous action to record. HB 337 - No previous action to record. HB 339 - No previous action to record. HB 422 - No previous action to record. WITNESS REGISTER Ms. Melanie Lesh Staff to Representative Austerman Alaska State Capitol Juneau, AK 99811 POSITION STATEMENT: Commented on HB 265. Ms. Janet Seitz Staff to Representative Rokeberg Alaska State Capitol Juneau, AK 99811 POSITION STATEMENT: Commented on HB 310. Mr. Don Thomas, Counsel Alaska Insurance Guaranty Association No address provided POSITION STATEMENT: Commented on HB 310. Mr. John Manley Staff to Representative Harris Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Testified for the sponsor of HB 398. Mr. Dwight Perkins Deputy Commissioner Department of Labor and Workforce Development PO Box 21149 Juneau, AK 99802-1149 POSITION STATEMENT: Supports HB 337. Mr. Dale Anderson Staff to Representative Mulder Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Testified for the sponsor of HB 339. Mr. Ed Crane, President Alaska Commercial Fishing and Agriculture Bank 2550 Denali Anchorage, AK POSITION STATEMENT: Supports HB 339. Representative Norm Rokeberg Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of HB 422. ACTION NARRATIVE TAPE 00-15, SIDE A Number 001 CHAIRMAN MACKIE called the Senate Labor and Commerce Committee meeting to order at 2:50 p.m. Present were Senators Leman, Hoffman and Mackie. CHAIRMAN MACKIE announced that all appointees were available to testify before the Committee on the previous Thursday but the meeting was canceled. He noted the following names were forwarded to the Committee for consideration. Alaska State Board of Accountancy -Lottie Fleeks and Dean W. Nelson Alcoholic Beverage Control Board -Robert Klein and ToniLee Jackson State Board for Registration for Architects, Engineers, and Land Surveyors -Kathleen L. Gardner and Ernie Seimoneit Board of Barbers and Hairdressers - Darae Crews Alaska Labor Relations Agency -Richard D. Brickley and Robert Doyle Board of Marine Pilots - Captain Michael Spence, Jeffrey Thompson and Barbara Huff Tuckness Occupational Safety and Health Review Board - Timothy Sharp Personnel Board - Charles Borg Board of Certified Real Estate Appraisers - Eileen Bechtol Board of Veterinary Examiners - Dr. Jean Battig Alaska Workers' Compensation Board - Harriet Lawlor CHAIRMAN MACKIE asked if any member wished to comment on the Governor's appointees. There being no questions or comments, SENATOR LEMAN moved to forward the names of the appointees to the Senate for consideration during a joint session. There being no objection, it was so ordered. HB 265-ALASKA REGIONAL ECONOMIC ASSIST. PROGRAM MS. MELANIE LESH, aide to Representative Alan Austerman, explained that HB 265 will extend the sunset date of the Alaska Regional Development Organizations (ARDORs) to 2003. To date, 13 regional entities have been organized to promote economic development in Alaska and a plan is underway to add one more in Fairbanks. This program is funded with an AIDEA dividend given to the Department of Community and Economic Development (DCED) through a reimbursable services agreement. Of the $650,000 total, $620,000 is directly granted to the 13 ARDORs. DCED's budget contains the remaining $30,000 for administration; half is used for travel expenses for non-employee members for ARDOR travel. SENATOR LEMAN moved to report HB 265 with its accompanying fiscal note from committee with individual recommendations. There were no objections and it was so ordered. HB 310-ALASKA INSURANCE GUARANTY ASSOCIATION CHAIRMAN MACKIE announced HB 310 to be up for consideration. MS. JANET SEITZ, staff to Representative Rokeberg, sponsor of HB 310, informed committee members this legislation was introduced at the request of the Alaska Insurance Guaranty Association. HB 310 provides a mechanism to protect policy holders and claimants in the event that a property and liability insurer licensed to sell policies in Alaska becomes insolvent. It updates the Alaska Act to bring it into conformance with the 1996 National Association of Insurance Commissioners' Post Assessment Property and Liability Insurance Guaranty Model Act. SENATOR LEMAN asked if Section 2 applies to fraternal benefit societies. MR. DON THOMAS, Executive Director of the Alaska Life and Health Guaranty Association, said it does not apply to fraternal organizations. SENATOR LEMAN noted that fraternal societies are not included in the list of excluded organizations. MR. THOMAS replied he was told they are not admitted members of the Association. There being no further questions or testimony, SENATOR LEMAN moved to report HB 310 from committee with individual recommendations and its accompanying zero fiscal note. There being no objection, the motion carried. HB 398-LIFE AND HEALTH INSURANCE GUARANTY ASSN CHAIRMAN MACKIE announced HB 398 to be up for consideration. JOHN MANLEY, staff to Representative Harris, prime sponsor of HB 398, explained that HB 398 is very similar to HB 310 except that it applies to the Alaska Life and Health Insurance Guaranty Association (ALHIGA). It adopts a model act produced by the National Association of Insurance Commissioners and updates Alaska statutes to make them consistent and on par with other states. HB 398 will ensure that the ALHIGA benefits are implemented more promptly, efficiently, and at a lower cost to policy holders; it clarifies ambiguous language that could promote lawsuits; and it provides added benefits to policy holders by extending it to other people. He noted Mr. George and Mr. Thomas were available to answer questions. SENATOR LEMAN asked if HB 398 does not apply to the fraternal benefit societies because they do not belong to ALHIGA. MR. MANLEY said that is correct. SENATOR LEMAN moved to report HB 398 from committee with individual recommendations and its accompanying zero fiscal note. There being no objection, the motion carried. HB 337-AMTS OWED ON UNEMPLOYMENT TAX: CLM V. PFD CHAIRMAN MACKIE announced HB 337 to be up for consideration. DWIGHT PERKINS, Deputy Commissioner of the Department of Labor and Workforce Development (DOLWD), stated support for HB 337 and made the following comments. HB 337 will speed the recovery of overpaid unemployment insurance benefits that are indebted to the State of Alaska by attaching permanent fund dividends after due process has been followed. The total debt balance of overpaid claims as of 12/31/99 was more than $9 million. The two categories of fraud and non-fraud overpaid unemployment insurance benefits would be returned to the trust fund when collected. The penalty amount will be deposited directly into the general fund. With the passage of HB 337, DOLWD estimates it could return over $1.5 million to the trust fund and over $750,000 to the general fund. Every year thereafter, DOLWD expects to deposit $700,000 to $800,000 in the trust fund and $400,000 to $500,000 in the general fund. The passage of this legislation is good for the unemployment insurance trust fund, it is good for employers, and it is good for the general fund. It provides another tool to collect money that is lawfully owed to the State of Alaska. SENATOR LEMAN asked why it took DOLWD so long to suggest this change. He noted this bill could have been attached to legislation pertaining to collections that passed last year. DEPUTY COMMISSIONER PERKINS replied that each year DOLWD looks for good housekeeping legislation that makes sense and will bring in money to the State. SENATOR LEMAN expressed support for HB 337. There being no further testimony or questions, SENATOR LEMAN moved HB 337 from committee with individual recommendations. He thought the fiscal note should show a gain but he pointed out the bill will be heard in the Senate Finance Committee. With no objection, the motion carried. Number 209 HB 339-CFAB LOANS FOR TOURISM & NAT RESOURCES CHAIRMAN MACKIE announced HB 339 to be up for consideration. MR. DALE ANDERSON, staff to Representative Mulder, explained the measure expands the lending authority of the Commercial Fishing and Agriculture Bank (CFAB) to two new areas: tourism and natural resource development. Nearly 20 years ago the State appropriated $32 million to CFAB, which has been repaid. At this point, CFAB is operating as a private enterprise lending institution in Alaska. HB 339 will expand and strengthen the portfolio of the organization. He offered to answer questions. SENATOR TIM KELLY asked what CFAB knows about natural resource extraction. MR. ANDERSON replied CFAB representatives were available to answer that question. SENATOR TIM KELLY asked if natural resource development will include oil and gas projects. MR. ANDERSON said, that like any private lending institution getting involved in a new area, CFAB may not have the expertise in that area at this time but it could hire a loan officer with that expertise. He does not think it is unusual for an institution to expand its scope of operations but it must be done with care. SENATOR TIM KELLY noted CFAB will be competing with banks in the private sector that make loans in these areas. MR. ANDERSON said CFAB will be in competition. He explained that the only tie CFAB has to the State at this juncture is the seed money, which was paid back in full. CFAB employees are not State employees. CFAB currently operates in areas of Alaska that other banks do not. CFAB has been involved with the fishing industry. Many people have told Representative Mulder that HB 339 is the answer to their needs in rural Alaska because of the effective way that CFAB has dealt with small businesses in those areas. SENATOR LEMAN asked how CFAB will secure loans in the areas of tourism and natural resource development. MR. ANDERSON said the only restriction in the bill is that CFAB cannot hold a limited entry permit as collateral for a loan outside of a fishing industry use. SENATOR TIM KELLY asked if CFAB is subject to the Alaska Banking Code. MR. ANDERSON said it is not. SENATOR TIM KELLY asked if CFAB pays taxes. MR. ANDERSON replied CFAB pays income tax to both the State and the federal government. He added that CFAB has given many other benefits to the state in the form of donations for the fight to keep the IRS's hands off of limited entry permits. He noted that CFAB serves a niche that banks do not always extend into. SENATOR LEMAN asked if this bill will dilute CFAB's commitment to the fishing industry in Alaska. MR. ANDERSON said he believes the bill will strengthen it by giving CFAB an expanded portfolio. Right now the borrowers are the owners of CFAB. The CFAB board of directors is made up of fishermen except for one farmer. They will be monitoring the growth of the organization. The House Labor and Commerce Committee placed loan limits in the bill and the House Finance Committee tightened it further so that borrowers must be residents, must use the funds in Alaska, and must use the funds directly in the industry they are borrowing for. SENATOR TIM KELLY asked if the board of directors, made up of fishermen, will be making decisions on tourism loans and natural resource loans. MR. ANDERSON replied the make-up of the board can be changed. SENATOR TIM KELLY asked if CFAB has changed the make-up of the board yet. MR. ANDERSON said it has not because right now CFAB is a fishing bank. SENATOR TIM KELLY again asked what fishermen know about tourism loans and natural resource loans. SENATOR LEMAN noted, as others get involved, they may be elected to the board. Number 352 SENATOR TIM KELLY asked if a person becomes a member by getting a loan. MR. ANDERSON said that is correct. CHAIRMAN MACKIE commented he is somewhat sympathetic to CFAB's desire to expand its portfolio and financial strength. He asked a CFAB representative to respond to the fact that CFAB was created to help Alaskan fishermen purchase permits and boats at a time when many wealthier people from out of state were buying up permits and boats. He also asked what kind of a guarantee CFAB can give to ensure that rural Alaskans will be able to come to CFAB to get into the fishing industry if this legislation passes. MR. ED CRANE, President and CEO of CFAB, replied that CFAB's first internal discussion about this expansion was in 1990 so this idea is not new. Regarding CFAB's original purpose and mission, Chairman Mackie is correct. CFAB learned how to do what it does the hard way as it made mistakes in its early years. Since 1985 however, CFAB has been a contradiction in terms. It has been relatively conservative when financing commercial fishermen, processors and agricultural projects. The most significant practical restraint on CFAB is that in order to maintain its current source of funding, which is borrowed from the National Bank of Cooperatives, the majority of CFAB loans must be to producers that are fishermen. Beyond that, six of CFAB's seven directors are commercial fishermen. The orientation of the bank is commercial fishing and CFAB does not intend to change that. CFAB sees now and in the years ahead a greater need for CFAB's services in that area simply because so many of the people who obtained the original permits in 1975 are reaching the age of retirement. MR. CRANE stated that HB 339 was not introduced so that CFAB could find something else to do. The fact is that CFAB's concentration on commercial fishing has had some negative impacts from time to time in terms of cash flow and operations. During 1997 and 1998, when Bristol Bay had salmon run failures, CFAB had a difficult time. In addition, that concentration makes lenders extremely nervous. Ten years ago CFAB was one of the largest borrowers from the Spokane Bank for Cooperatives - CFAB was important to them. Due to mergers and consolidations, CFAB now represents only .003 percent of the loan volume of the National Bank of Cooperatives. CFAB is the only borrower of its kind and that makes the National Bank very nervous. MR. CRANE repeated that concentrating in one area is too risky. CFAB addressed natural resource industries and tourism for a number of reasons. Both industries are spread throughout the State and exist in rural Alaska. The smaller operators, from a credit standpoint, tend to look like the fishermen that CFAB is familiar with. Regarding CFAB's knowledge of the oil and gas industry, CFAB's current knowledge is very limited but the expertise is available. Beyond that, CFAB is not looking to get a piece of BP's business, but many support activities will need financing. CFAB is thinking about the entrepreneurs and small businesses that are part of the total infrastructure. MR. CRANE commented that State agencies like AIDEA or the Agricultural Revolving Loan Fund have a board that functions as the loan making body. CFAB's board does not do that; instead it represents the owners, the stockholders, and the established standards and they approve the hiring of staff. CFAB's professional staff make the loan decisions. The Board's function is to ensure that the staff conforms to basic credit standards. CHAIRMAN MACKIE asked if CFAB was developed because the fishermen and farmers had difficulty getting commercial loans. MR. CRANE said the amount available for loans through CFAB is based on CFAB's capital, which is presently just under $20 million, as well as the quality of its loans. Based on CFAB's current loan agreements, it could actually make 3½ times the loans it currently has before it would run up against any borrowing constraints. CFAB's board of directors is totally committed to expanding. In addition, CFAB informed fishermen statewide about HB 339 and asked them to respond. Of the 26 percent who responded, 82 percent were in favor of pursuing HB 339. These fishermen understand that it is their capital that is at risk because if CFAB fails, part of the $20 million will be lost. CHAIRMAN MACKIE asked if the initial investment in CFAB has been paid back to the State. MR. CRANE replied CFAB retired the last of that stock in September of 1998. CHAIRMAN MACKIE asked Mr. Crane to address the Alaska Banker's Association question regarding why CFAB would make a loan that a traditional bank would reject and how that will strengthen CFAB's financial portfolio. MR. CRANE stated it is an oversimplification on the part of the Alaska Bankers' Association to say that if a borrower cannot borrow from them, it is because the borrower is weak. He noted that most of the loans that CFAB makes today to commercial fishermen are loans that commercial banks are not likely to deal with, simply because of the relatively small size or, from a credit standpoint, they are "messy." CFAB applicants tend to be relatively unsophisticated financially. Commercial banks serve their stockholders and do not have CFAB's mission. CFAB has found that in communities like Sitka, Petersburg, and Kodiak, when a commercial bank wants a particular borrower, CFAB cannot compete because it does not have the physical presence nor does it offer the services that commercial banks do. He maintained that he does not understand the Alaska Bankers' Association's concern about competition because there is nothing wrong with competition. On the other hand, if CFAB is making unsound loans, who would it being competing with? He said CFAB is certainly not going to put anyone out of business. Number 502 SENATOR HOFFMAN asked if the Alaska Bankers' Association's opposition was made known to the House. MR. CRANE replied it was from day one. CHAIRMAN MACKIE said he just wanted to be sure that CFAB's mission is intact. SENATOR TIM KELLY asked why CFAB decided to expand into both the tourism and natural resource industries when it decided to increase its risk factor. He noted that is a big bite for a small operation with 13 employees. MR. CRANE replied that HB 339 is broad in that respect. CFAB has no plans to make big splashes but it is looking for diversification and as much flexibility as possible. In addition, he would prefer to make the changes at one time rather than approach the legislature several times. He stated that he suspects that the current players will be gone before HB 339 has an impact on CFAB's portfolio. He repeated that CFAB is not thinking that by next year it will have invested $15 million in these new industries. SENATOR TIM KELLY asked if CFAB is regulated by the Banking Securities Act. MR. CRANE replied CFAB is audited by the State, through the Legislature and the Executive Branch. SENATOR TIM KELLY asked if CFAB is subject to the Alaska Banking Code. MR. CRANE said it is not. He noted that subject is misleading. CFAB is not subject to the Alaska Banking Code because 20 years ago the Legislature concluded it should be called a bank rather than a loan company. CFAB does not take deposits or establish trust accounts. CFAB borrows and lends money only. CFAB is incorporated under a specific statute. He said he does not know what provisions of the Alaska Banking Code would apply to CFAB anyway. CFAB's statute is fairly comprehensive in terms of clarifying what it can and should do. Beyond that, CFAB is required to make annual reports to the Legislature. It must be audited by public auditors and provide the audit to the public, the Legislature and the Executive Branch. The State bank examiners report on CFAB each year and that report is distributed to legislators. In addition, the Legislature could send its own auditor to audit CFAB's books. The final point of regulation is that CFAB is member owned. It's board of directors is elected by its members. CHAIRMAN MACKIE stated the issue is why the Legislature would be unwilling to let CFAB expand when it has met its obligations to the State and its stockholders stand to lose. MR. CRANE agreed and pointed out if the Legislature could invest $32 million in a capital project that would create economic opportunities and had no maintenance costs, and then be paid back, it would be a good investment. SENATOR TIM KELLY asked if the $32 million investment in CFAB was paid back in cash. MR. CRANE replied it was paid back on a discounted present value basis. The actual amount of cash paid between 1992 and 1998 was $23 million. The money was not due until July 20, 2000. CFAB had entered into an agreement with the Department of Revenue to pay in installments and the amount was indexed to U.S. government agency obligations. The idea behind the arrangement was that the State could invest in that mix of treasury obligations, pay State debt down or put that money into higher-yielding State loan funds and come out with the equivalent of $32 million. TAPE 00-15, SIDE B There being no further testimony, SENATOR LEMAN moved HB 339 from committee with individual recommendations and its accompanying fiscal note. There being no objection, it was so ordered. HB 422-WORKERS' COMPENSATION: DRUGS & ALCOHOL CHAIRMAN MACKIE announced the committee would consider HB 422. REPRESENTATIVE NORM ROKEBERG, sponsor of HB 422, explained that this measure is a simple bill that changes the standards of the workers' compensation statutes regarding intoxication and use of drugs. It changes the standard from intoxication to consumption of alcoholic beverages and from the use of drugs to being under the influence of drugs. The intent of HB 422 is to make people more responsible for their actions and allow companies to establish a zero tolerance policy that can be reflected in the determination of the workers' compensation board. The current law as interpreted by the board has resulted in payment of benefits even though in certain instances the workers had been drinking alcohol. HB 422 gives employers a better standard by which to evaluate the ability to deny benefits to workers. In other words, a person who violates a zero tolerance policy will not receive benefits. HB 422 does not shift the burden of proof; the employer must still have a preponderance of the evidence and prove the proximate cause of the injury was alcohol or drug use. SENATOR DONLEY noted there can be more than one proximate cause of an incident and adding consumption as a proximate cause does not seem appropriate at all if the other proximate causes were the responsibility of the employer. REPRESENTATIVE ROKEBERG said he agrees with Senator Donley if other proximate causes exist. SENATOR DONLEY said the bill says if one of the proximate causes is drinking then the claim is cut off, even if there are other proximate causes. REPRESENTATIVE ROKEBERG said that is correct. If the employee had been drinking and the drinking was the proximate cause of the injury, the employee is cut off. SENATOR DONLEY repeated if someone negligently backed up and dumped a load of dirt on top of the employee another proximate cause would exist. REPRESENTATIVE ROKEBERG replied the preponderance standard is there for proximate cause. The employer would have to prove that alcohol or drug use was the proximate cause of the injury. SENATOR DONLEY asked where the preponderance standard is located. REPRESENTATIVE ROKEBERG said it is in case law. SENATOR DONLEY stated this bill will change the statute. REPRESENTATIVE ROKEBERG maintained that proximate cause is still there. SENATOR DONLEY indicated the preponderance standard is not in the statute and the bill changes the standard from intoxication to alcohol use. REPRESENTATIVE ROKEBERG stated language on page 2, line 9, reads, "the injury was not proximately caused by," which is where the proof comes in. The only change is whether the employee was completely intoxicated or was using drugs. The employee's legal rights are protected if alcohol or drug use was not the proximate cause in the injury. SENATOR DONLEY said he thinks the statute makes sense as is. Intoxication is a different standard than mere consumption. Intoxication as an element of the cause makes sense. REPRESENTATIVE ROKEBERG agreed that it lowers that standard but it does not change the proof requirements for proximate cause. Number 449 CHAIRMAN MACKIE stated the bill says consumption or use versus intoxication or under the influence. REPRESENTATIVE ROKEBERG said that is correct and clarified that the proximate cause standard of proof remains so the proof must be based on a preponderance of evidence according to the court rules. CHAIRMAN MACKIE asked if, under current statute, the injured employee would have to prove to the board that the proximate cause was not intoxication. REPRESENTATIVE ROKEBERG said the proximate cause issue is separate from the use issue. He gave the following example. In the BB case before the Workers' Compensation Board, an employee on the North Slope went through a guard gate. Other people smelled alcohol on the employee's breath. The company has a zero tolerance policy. The employee was driving on a straight road, swerved, flipped the truck and injured himself. A bottle of whiskey was found in the truck. He was taken back to the camp and examined by a doctor but a blood alcohol test was not taken for hours. The Board concluded that the company could not prove the employee was intoxicated even though the Board said in its findings he had been drinking alcohol. The Board determined the proximate cause was the truck flipping. CHAIRMAN MACKIE noted a person cannot be charged with drinking while intoxicated unless one can prove that person was intoxicated beyond the legal limit. He pointed out that using Representative Rokeberg's example, if an employee had one drink and flipped a truck, the employee would not be eligible for workers' compensation benefits under HB 422. REPRESENTATIVE ROKEBERG said that is where the proximate cause comes in because the employer would have to prove that the use of alcohol was the proximate cause of the accident. SENATOR DONLEY noted that is what he finds objectionable about the bill. He said dominant or substantial causes are easier to understand. If liquor was the dominant cause of the accident, he could understand the denial of benefits but that is why he thinks intoxication is a better standard. HB 422 is based on the fact that alcohol consumption was in the chain of events. Preponderance is an evidentiary standard, not a cause standard, therefore, finding alcohol use to be a proximate cause by a preponderance of the evidence does not mean that the proximate cause was the dominant cause of the event. REPRESENTATIVE ROKEBERG stated a preponderance of the evidence standard is used by the Workers' Compensation Board. CHAIRMAN MACKIE said for someone to be entitled to a workers' compensation claim, that person would have to show that the consumption of alcoholic beverages did not cause the injury while under current law the person would have to prove he or she was not intoxicated. REPRESENTATIVE ROKEBERG said that is the distinction. He pointed out if an employee had a cocktail with lunch and then had an accident during work hours, the scope of duties of the employee will come into play. Number 1 would be the employer's written policy about consumption of alcohol use. According to Paul Grassi, the Director of the Workers' Compensation Division, a company does not have to controvert the claim. If an employee had a few drinks after work but was called back to work and informed the employer of the drinking, any injury that occurred would be covered under workers' compensation. SENATOR DONLEY said if the employee was injured while driving back to work, that would be covered under tort law. CHAIRMAN MACKIE asked if workers' compensation would cover the employer while driving back to work under current law. REPRESENTATIVE ROKEBERG said that would depend on company policy. SENATOR DONLEY felt that would apply if the employee was driving from one work location to another but not when driving from home to work. CHAIRMAN MACKIE commented the bill does not change the proximate cause provision but it does change the standard from intoxication to consumption. SENATOR DONLEY stated if the bill goes to a looser standard, it should redefine whether it is the dominant cause. CHAIRMAN MACKIE asked Representative Rokeberg if he agreed with Senator Donley. REPRESENTATIVE ROKEBERG was unsure. Number 436 SENATOR DONLEY noted the Committee has to think about what will happen to the employee if denied. The employee has already given up his or her rights to the tort system so the employee is only covered under workers' compensation. He questioned if the employee loses the workers' compensation rights whether that person will be precluded from any recovery at all. REPRESENTATIVE ROKEBERG could not answer. SENATOR LEMAN recounted a case in which a widow sued under tort law after her husband was killed on the job. She used that system because she knew that the payment under workers' compensation would be [inaudible]. He thought both systems were available to people. REPRESENTATIVE ROKEBERG stated the issue is whether the Legislature, as a matter of policy, wants to support the employers if they have a zero tolerance policy or tell the workers that they will be covered under workers' compensation even if they drink or use drugs on the job. The current law requires intoxication so an employee can have a few drinks but not be drunk, which he believes is lax. SENATOR LEMAN said he believes the consumption of any alcoholic beverages increases one's chances of an accident or injury, especially when operating equipment. Therefore, giving employers the right to make that decision, especially if they have equipment, is the right move. He said he has no problem with this standard. CHAIRMAN MACKIE agreed. REPRESENTATIVE ROKEBERG offered to work with Senator Donley to prepare amendments to be heard in the Senate Rules Committee. SENATOR DONLEY noted he would prefer to work on amendments in the Labor and Commerce Committee. He noted that Alaska statute may already set out that people should be discouraged from drinking at the workplace, but if an employee had a drink and that is only one of the causes of an accident, he questioned whether it is the best public policy to cut them off entirely so that their families end up on welfare with no way to pay the medical bills. CHAIRMAN MACKIE asked Senator Donley if he thought he could draft an amendment to improve the bill. SENATOR DONLEY said yes, and that first he would like to find out how the proximate cause interplays with dominant versus one factor. He would also find out what the remedy would be if this does occur. REPRESENTATIVE ROKEBERG said this bill is about the State's public policy toward backing up employers when employees breach a zero tolerance policy. CHAIRMAN MACKIE asked Representative Rokeberg to work with Senator Donley and noted he would bring the bill up again next week. He then adjourned the meeting at 3:02 p.m.