Legislature(2019 - 2020)BELTZ 105 (TSBldg)

02/20/2020 01:30 PM LABOR & COMMERCE

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Audio Topic
01:32:12 PM Start
01:33:27 PM Confirmation Hearings
01:47:21 PM Presentation: Employment Preference Overview
02:36:21 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Consideration of Governor's Appointees: TELECONFERENCED
- Board of Barbers & Hairdressers -
Michelle McMullin
- Occupational Safety & Health Review Board -
Vincent Perez
-- Public Testimony on all Appointees --
+ Presentation: TELECONFERENCED
"Alaska Hire, Title 36 Analysis" by Joe Dunham,
DOLWD Wage & Hour
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                       February 20, 2020                                                                                        
                           1:32 p.m.                                                                                            
                                                                                                                                
                                                                                                                              
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Click Bishop, Chair                                                                                                     
Senator Gary Stevens, Vice Chair                                                                                                
Senator Mia Costello                                                                                                            
Senator Joshua Revak                                                                                                            
Senator Elvi Gray-Jackson                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Cathy Giessel                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CONFIRMATION HEARINGS                                                                                                           
                                                                                                                                
Alaska Workers' Compensation Board                                                                                            
Lake Williams - Fairbanks                                                                                                       
                                                                                                                                
     - CONFIRMATION ADVANCED                                                                                                    
                                                                                                                                
Board of Barbers and Hairdressers                                                                                             
Michelle McMullin - Anchorage                                                                                                   
                                                                                                                                
     - CONFIRMATION ADVANCED                                                                                                    
                                                                                                                                
Occupational Safety and Health Review Board                                                                                   
Vincent Perez - Wasilla                                                                                                         
                                                                                                                                
     - CONFIRMATION ADVANCED                                                                                                    
                                                                                                                                
PRESENTATION: ALASKA EMPLOYMENT PREFERENCE LAWS SINCE THE 1960s                                                                 
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                              
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
LAKE WILLIAMS, Appointee                                                                                                        
Alaska Workers' Compensation Board                                                                                              
Department of Labor and Workforce Development (DOLWD)                                                                           
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT: Testified as re-appointee to the Alaska                                                                   
Workers' Compensation Board.                                                                                                    
                                                                                                                                
VINCENT PEREZ, Appointee                                                                                                        
Occupational Safety and Health Review Board                                                                                     
Department of Labor and Workforce Development (DOLWD)                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified as appointee to the Occupational                                                                
Safety and Health Review Board.                                                                                                 
                                                                                                                                
MICHELLE MCMULLEN, Appointee                                                                                                    
Board of Barbers and Hairdressers                                                                                               
Department of Commerce, Community and Economic Development                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified as appointee to the Board of                                                                    
Barbers and Hairdressers.                                                                                                       
                                                                                                                                
JOSEPH DUNHAM, Supervisor                                                                                                       
Wage and Hour Section                                                                                                           
Labor Standards and Safety Division                                                                                             
Department of Labor and Workforce Development (DOLWD)                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Participated in the presentation on Alaska's                                                              
employment preference laws since the 1960s.                                                                                     
                                                                                                                                
JOSEPH KNOWLES, Deputy Director                                                                                                 
Division of Labor Standards and Safety                                                                                          
Department of Labor and Workforce Development (DOLWD)                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Participated in the presentation on Alaska's                                                              
employment preference laws since the 1960s.                                                                                     
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:32:12 PM                                                                                                                    
CHAIR CLICK BISHOP called the  Senate Labor and Commerce Standing                                                             
Committee meeting  to order at 1:32  p.m. Present at the  call to                                                               
order  were Senators  Gray-Jackson,  Costello,  Revak, and  Chair                                                               
Bishop. Senator Stevens arrived soon thereafter.                                                                                
                                                                                                                                
^Confirmation Hearings                                                                                                          
                     CONFIRMATION HEARINGS                                                                                  
               Alaska Workers' Compensation Board                                                                           
               Board of Barbers and Hairdressers                                                                            
          Occupational Safety and Health Review Board                                                                       
                                                                                                                                
1:33:27 PM                                                                                                                    
CHAIR  BISHOP announced  the  first order  of  business would  be                                                               
consideration of governor appointees.  He asked each appointee to                                                               
place  their name  and affiliation  on the  record, give  a brief                                                               
introduction, and  discuss the reason  they want to serve  on the                                                               
board or  commission. He advised  that public testimony  would be                                                               
taken after all appointees have  testified and the names would be                                                               
forwarded to  the full  body for  consideration. The  hearing was                                                               
not a recommendation on any subsequent vote.                                                                                    
                                                                                                                                
1:35:20 PM                                                                                                                    
LAKE  WILLIAMS, Appointee,  Alaska  Workers' Compensation  Board,                                                               
Department   of   Labor   and  Workforce   Development   (DOLWD),                                                               
Fairbanks,  Alaska,  stated  that  he  was  born  and  raised  in                                                               
Fairbanks.  He  attended  and received  a  Bachelor  of  Business                                                               
Administration from the  University of Iowa in  2000. During that                                                               
time he  was also an  apprentice with the International  Union of                                                               
Operating  Engineers  Local  302   and  Senator  Bishop  was  his                                                               
apprentice coordinator.  He graduated  from that program  in 2002                                                               
and  is currently  the district  representative of  Local 302  in                                                               
Fairbanks.  He  related  that  he had  served  on  the  Fairbanks                                                               
Chamber  Board and  the Fairbanks  Economic Development  Council,                                                               
and was  currently the  president of  the Fairbanks  Building and                                                               
Construction Trades. He  noted that he was also  a training trust                                                               
trustee and a Big Brother from Big Brothers Big Sisters.                                                                        
                                                                                                                                
MR. WILLIAMS stated  that he was first appointed  to the Workers'                                                               
Compensation Board By Governor Parnell  in 2014 and this would be                                                               
his second reappointment. He said  the decisions this board makes                                                               
affect  people's  lives  but  it  also  makes  a  difference.  He                                                               
emphasized that he was committed  to trying to improve the system                                                               
for contractors,  employers, and  workers. Serving  can sometimes                                                               
be difficult and this board requires  its members to do the work,                                                               
he said. Fortunately, his employer supports his service.                                                                        
                                                                                                                                
1:38:20 PM                                                                                                                    
SENATOR REVAK  commented that Mr.  Lake has lots  of professional                                                               
experience  and he  appreciates  that  he is  a  Big Brother.  It                                                               
speaks volumes to his character.                                                                                                
                                                                                                                                
MR.  WILLIAMS  responded that  he  was  matched with  his  little                                                               
brother  Ryan when  he was  12 and  they remained  together until                                                               
they  timed out  when  Ryan reached  age 18.  They  are still  in                                                               
contact as he and his mother became part of the Williams family.                                                                
                                                                                                                                
1:38:56 PM                                                                                                                    
SENATOR STEVENS joined the committee.                                                                                           
                                                                                                                                
CHAIR BISHOP  shared that  it had always  been his  philosophy to                                                               
get all the education possible.  Therefore, as the apprenticeship                                                               
coordinator he allowed  Mr. Williams to attend college  and get a                                                               
BA from the University of Iowa while he was an apprentice.                                                                      
                                                                                                                                
He recognized that Senator Giessel was in attendance.                                                                           
                                                                                                                                
1:40:30 PM                                                                                                                    
VINCENT PEREZ,  Appointee, Occupational Safety and  Health Review                                                               
Board,  Department of  Labor and  Workforce Development  (DOLWD),                                                               
Anchorage, Alaska,  stated that this  was a reappointment  and he                                                               
had enjoyed  serving for the last  two years. He related  that he                                                               
chose  to move  to  Alaska  and raise  his  family  here. He  had                                                               
enjoyed working  in the  safety field since  leaving the  Army in                                                               
1991. Serving on  this board is a  small way to give  back to the                                                               
state that has given him so much, he said.                                                                                      
                                                                                                                                
1:41:57 PM                                                                                                                    
CHAIR BISHOP  reviewed Mr.  Perez's resume  and described  him as                                                               
consistent  in  his  education  and   work  which  was  now  with                                                               
Anchorage Municipal Light and Power  (ML&P). It is important work                                                               
to keep employees safe so there  was no need to visit the appeals                                                               
commission.                                                                                                                     
                                                                                                                                
MR. PEREZ responded that was why he was in business.                                                                            
                                                                                                                                
1:42:52 PM                                                                                                                    
MICHELLE MCMULLEN, Appointee, Board  of Barbers and Hairdressers,                                                               
Department  of  Commerce,   Community  and  Economic  Development                                                               
(DCCED),  Anchorage,  Alaska,  thanked   the  committee  for  the                                                               
opportunity for  a reappointment. She  stated that she  had lived                                                               
in Alaska since  1996. She received her license in  Georgia to be                                                               
a  nail technician  before age  18  and moved  to Alaska  shortly                                                               
thereafter.  She  raised  her  family  in  Alaska.  In  2012  she                                                               
received  her  esthetician's license  from  a  local school.  She                                                               
expressed gratitude for  the opportunity to help  the industry in                                                               
Alaska to  ensure it was in  tune with what was  happening in the                                                               
Lower 48, licensees follow appropriate  standards, and the public                                                               
was safe.                                                                                                                       
                                                                                                                                
CHAIR BISHOP commented  on her extensive experience  and that she                                                               
knows what to look for.                                                                                                         
                                                                                                                                
MS. MCMULLEN agreed.                                                                                                            
                                                                                                                                
1:45:01 PM                                                                                                                    
CHAIR BISHOP  stated that  in accordance  with AS  39.05.080, the                                                               
Senate  Labor  and  Commerce   Standing  Committee  reviewed  the                                                               
following  and  recommends the  appointments  be  forwarded to  a                                                               
joint session for consideration:                                                                                                
                                                                                                                                
Board of Barbers and Hairdressers                                                                                             
Michelle McMullin - Anchorage                                                                                                   
                                                                                                                                
Alaska Workers' Compensation Board                                                                                            
Lake Williams - Fairbanks                                                                                                       
                                                                                                                                
Occupational Safety and Health Review Board                                                                                   
Vincent Perez - Wasilla                                                                                                         
                                                                                                                                
He   reminded  members   that  signing   the  reports   regarding                                                               
appointments  to  boards  and  commissions  in  no  way  reflects                                                               
individual members'  approval or  disapproval of  the appointees;                                                               
the nominations are merely forwarded  to the full legislature for                                                               
confirmation or rejection.                                                                                                      
                                                                                                                                
1:45:39 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
^Presentation: Employment Preference Overview                                                                                   
          Presentation: Employment Preference Overview                                                                      
                                                                                                                                
1:47:21 PM                                                                                                                    
CHAIR  BISHOP  reconvened the  meeting  and  announced the  final                                                               
order of business  would be an overview  of employment preference                                                               
in Alaska.                                                                                                                      
                                                                                                                                
1:47:50 PM                                                                                                                    
JOSEPH  DUNHAM,   Supervisor,  Wage   and  Hour   Section,  Labor                                                               
Standards and Safety Division, Department  of Labor and Workforce                                                               
Development  (DOLWD),  Anchorage,  Alaska,  stated  that  he  and                                                               
Deputy Director Joseph Knowles were  asked to provide an overview                                                               
of  Alaska's employment  preference laws  since 1960.  He related                                                               
that  he  started as  an  investigator  with  the Wage  and  Hour                                                               
Section  in 2005  and was  promoted  to his  current position  as                                                               
statewide supervisor in 2011.                                                                                                   
                                                                                                                                
MR.  DUNHAM  advised  that  the  terms  "employment  preference,"                                                               
"resident  hire,"  and  "36.10"   are  synonymous  but  he  would                                                               
primarily refer to resident hire  throughout the presentation. He                                                               
reported that  the first  resident hire law  was enacted  in 1960                                                               
with  the intention  of putting  Alaskans  to work  on the  Trans                                                               
Alaska  Pipeline. The  next resident  hire law,  which passed  in                                                               
1972, applied to all oil  and gas leases, easements or rights-of-                                                               
way  permits  for  oil  or  gas  pipeline  purposes,  utilization                                                               
agreements,  or any  renegotiation  of any  of  the preceding  to                                                               
which  the  state was  a  party.  The  law  included a  one  year                                                               
durational residency requirement.                                                                                               
                                                                                                                                
1:52:54 PM                                                                                                                    
MR. DUNHAM  turned to the  first Constitutional Challenge  to the                                                               
law,  Hicklin v.  Orbeck, 437  US 518  - Supreme  Court 1978.  He                                                               
reviewed the following from slide 4:                                                                                            
                                                                                                                                
     In  1975, the  Department received  numerous complaints                                                                    
     that  alleged nonresident  workers  were dispatched  to                                                                    
     jobs   on  the   Trans-Alaska  Pipeline   while  Alaska                                                                    
     resident  workers were  not.  The  Commissioner of  the                                                                    
     Department of  Labor issued cease and  desist orders to                                                                    
     labor unions who had dispatched  workers to the job and                                                                    
     required that  qualified Alaska residents  be preferred                                                                    
     and   dispatched   before    any   non-residents   were                                                                    
     dispatched. As such,  several workers including Hicklin                                                                    
     were unable to gain employment on the project.                                                                             
                                                                                                                                
     Alaska's Supreme Court ruled  that the 1-year residency                                                                    
     requirement  unfairly  discriminated against  newcomers                                                                    
     to  the   state,  but  held  that   the  Act's  general                                                                    
     preference  for Alaska  residents was  constitutionally                                                                    
     permissible.                                                                                                               
                                                                                                                                
     Hicklin appealed to the US Supreme Court.                                                                                  
                                                                                                                                
     US  Supreme Court  reversed  the  Alaska Supreme  Court                                                                    
     decision. The US Supreme Court  held that the State did                                                                    
     not  show  that  the   hiring  of  nonresident  workers                                                                    
     constituted  a peculiar  source of  the "evil  at which                                                                    
     the statute is aimed." The  US Supreme Court found that                                                                    
     "Alaska  Hire" violated  the Privileges  and Immunities                                                                    
     Clause of Art. IV, ?  2 and the Equal Protection Clause                                                                    
     of the Fourteenth Amendment.                                                                                               
                                                                                                                                
1:53:34 PM                                                                                                                    
CHAIR BISHOP  noted that last  week the committee heard  that the                                                               
US Supreme  Court talked about  the law  in terms of  a "peculiar                                                               
source of  evil." He then  asked Mr.  Dunham if he  recalled when                                                               
residents were issued an Alaska resident hire card                                                                              
                                                                                                                                
MR. DUNHAM answered no.                                                                                                         
                                                                                                                                
1:54:33 PM                                                                                                                    
MR. DUNHAM moved to slide 5 that lists the following points in                                                                  
the first revision of the Alaska resident hire law:                                                                             
                                                                                                                                
     Alaska's Legislature drafted a new law that was                                                                            
     designed to give Alaska residents preference on                                                                            
     public works projects and on construction jobs.                                                                            
                                                                                                                                
     AS 36.10.010 required that all work on all public                                                                      
     construction projects be performed almost entirely                                                                         
     by Alaska residents.                                                                                                       
                                                                                                                                
     The   Alaskan    preference   applied   to    all   job                                                                    
     classifications regardless of  whether Alaska residents                                                                    
     in those classifications were in need of work.                                                                             
                                                                                                                                
He noted that this law required 95 percent resident hire                                                                        
unless the project had 10 or fewer employees in which case                                                                      
only 90 percent resident hire was required.                                                                                     
                                                                                                                                
1:55:25 PM                                                                                                                    
MR. DUNHAM directed attention to slide 6, Constitutional                                                                        
Challenge No. 2. He paraphrased the following points:                                                                           
                                                                                                                                
     Robinson v. Francis 713 P. 2d (Alaska 1986)                                                                                
                                                                                                                                
     Department issued  enforcement notice to  contractor on                                                                    
     a  public  construction  contract at  North  Pole  High                                                                    
     School   in   1983.    Subsequently,   a   non-resident                                                                    
     ironworker  was  terminated. Terminated  non-  resident                                                                    
     worker sued the State seeking                                                                                              
          declaration     that      AS     36.10.010     was                                                                    
          unconstitutional  under privileges  and immunities                                                                    
          and   equal   protection   clauses   of   the   US                                                                    
          Constitution and the Alaska Constitution.                                                                             
          Injunctive relief and damages under 42 U.S.C. ?                                                                       
          1983                                                                                                                  
                                                                                                                                
     The Alaska Superior Court  entered partial judgment for                                                                    
     Francis  in  the  amount  of   $30,676  in  wages,  and                                                                    
     declared  AS  36.10.010  violated  the  privileges  and                                                                    
     immunities clause. The State and Francis appealed.                                                                         
                                                                                                                                
     The  Alaska  Supreme  Court   held  that  AS  36.10.010                                                                    
     violated  the  privileges   and  immunities  clause  of                                                                    
     article IV,    2  of the  US Constitution.  However, it                                                                    
     reversed  the Superior  Court's  award  of damages  and                                                                    
     held that the State may  not be held liable for damages                                                                    
     arising from  the passage  of a law  later found  to be                                                                    
     unconstitutional                                                                                                           
                                                                                                                                
In response to the Alaska Supreme Court ruling, the Alaska                                                                      
resident hire law underwent revision No. 2. He spoke to the                                                                     
following points from slides 7 and 8:                                                                                           
                                                                                                                                
     Legislature  enacted a  new  statute  designed to  give                                                                    
     residents preference  on public  works and construction                                                                    
     jobs  in May  of 1986.  Became effective  in spring  of                                                                    
     1987.                                                                                                                      
                                                                                                                                
     Created four hiring preferences.                                                                                           
            • Eligible individuals residing within a zone                                                                       
              of underemployment (AS 36.10.150)                                                                                 
            • Eligible  residents   of   an   economically                                                                      
              distressed zone (AS 36.10.160)                                                                                    
            • Eligible economically disadvantaged minority                                                                      
              residents of a zone (AS 36.10.170)                                                                                
            • Eligible economically disadvantaged female                                                                        
              residents of a zone ((AS 36.10.175)                                                                               
                                                                                                                                
     The revised law differed  from the previous versions in                                                                    
     that:                                                                                                                      
             • The law was only triggered when the                                                                              
               unemployment rate reached certain levels,                                                                        
             • The Commissioner of the Department Labor                                                                         
               made employment preference determinations,                                                                       
                  • Preference required on a craft-by-craft                                                                     
                    basis,                                                                                                      
                  • Imposed only for those job categories                                                                       
                    that had high resident unemployment,                                                                        
                    and                                                                                                         
                  • Included  special    provisions    for                                                                      
                    minority and female hire preference.                                                                        
                                                                                                                                
MR. DUNHAM reviewed the points of the third constitutional                                                                      
challenge of resident hire outlined on slide 9:                                                                                 
                                                                                                                                
     State v. Enserch  Alaska Const., Inc., 787 P.  2d 624                                                                      
     Alaska: Supreme Court 1989.                                                                                                
                                                                                                                                
     The State and  Enserch entered into a  contract for the                                                                    
     construction of the Red Dog  Mine Road Project in 1987.                                                                    
     Later  that same  year,  the  Northwest Arctic  Borough                                                                    
     requested that  the Commissioner  of Labor  declare the                                                                    
     borough   an   economically    distressed   zone.   The                                                                    
     Commissioner   reviewed   and   evaluated   information                                                                    
     related  to  the  Borough's  request  and  subsequently                                                                    
     issued emergency regulations  that declared the Borough                                                                    
     was an economically distressed Zone.                                                                                       
                                                                                                                                
CHAIR BISHOP commented that the borough requested that the                                                                      
commissioner determine that the borough was an economically                                                                     
distressed zone.                                                                                                                
                                                                                                                                
MR. DUNHAM agreed and continued to review the challenge:                                                                        
                                                                                                                                
     The  Red  Dog project  was  subject  to the  employment                                                                    
     preference requirements of AS  36.10.160   dealing with                                                                    
     residents of an economically distressed zone.                                                                              
          (at the time 50% resident hire required)                                                                              
                                                                                                                                
     In 1987, Enserch filed suit seeking                                                                                        
             • declaration that AS 36.10.160 violated equal                                                                     
               protection guarantees and federal privileges                                                                     
               and immunities clause                                                                                            
             • damages for increased costs incurred to                                                                          
               comply with the law.                                                                                             
                                                                                                                                
     Alaska  Superior Court  entered  partial judgement  for                                                                    
     Enserch, the State appealed                                                                                                
                                                                                                                                
MR. DUNHAM highlighted the request for damages.                                                                                 
                                                                                                                                
CHAIR BISHOP observed that the superior court entered a partial                                                                 
judgement for Enserch and the state appealed.                                                                                   
                                                                                                                                
MR. DUNHAM said yes and one of the issues was the request for                                                                   
damages. He continued to review the third constitutional                                                                        
challenge to the resident hire law outlined on slide 11:                                                                        
                                                                                                                                
     The Alaska Supreme Court found that:                                                                                       
             • The disparate   treatment   of   unemployed                                                                      
               workers in  one region in order  to confer an                                                                    
               economic   benefit  on   similarly-  situated                                                                    
               workers   in  another   region   was  not   a                                                                    
               legitimate legislative goal,                                                                                     
             • Alaska's constitution guarantees rights of                                                                       
               "persons",  not communities.  Communities are                                                                    
               separate from  the people who  constitute the                                                                    
               communities,                                                                                                     
             • AS 36.10.160 and implementing regulations                                                                        
               contravened  the equal  protection clause  of                                                                    
               the state constitution, and                                                                                      
             • Enserch had no right to seek damages for the                                                                     
               State's  enforcement of  the unconstitutional                                                                    
               law.                                                                                                             
                                                                                                                                
CHAIR BISHOP commented that this ruling gets to the current law.                                                                
                                                                                                                                
1:59:42 PM                                                                                                                    
MR. DUNHAM agreed. He reviewed the current law under AS 36.10 as                                                                
outlined on slide 12:                                                                                                           
                                                                                                                                
     Current Law AS 36.10                                                                                                     
                                                                                                                                
       90% of workers in applicable crafts must be Alaska                                                                       
     residents.                                                                                                                 
          Per   AG   guidelines   addressed  in   WHPL   71A                                                                    
          (12/27/1984),   Employment   Preference  is   only                                                                    
          enforced if classification  appears in Laborers' &                                                                    
         Mechanics' Minimum Rates of Pay, Pamphlet 600.                                                                         
                                                                                                                                
          Not enforced for Foremen or Superintendents who                                                                       
          do not perform hands-on work, i.e., Architects,                                                                       
          Engineers                                                                                                             
                                                                                                                                
     Penalties are assessed on a weekly basis and are equal                                                                     
        to the wage amount that should have been paid to                                                                        
     displaced Alaska resident workers.                                                                                         
                                                                                                                                
      Applies to non-federally funded public construction                                                                       
      contracts let by the state or political subdivisions                                                                      
     of the state and certain construction contracts which                                                                      
     utilize state funds.                                                                                                       
                                                                                                                                
        Requires 90% preference for qualified, eligible                                                                         
     residents.                                                                                                                 
                                                                                                                                
          Residents must be eligible for preference AS                                                                          
     36.10.140.                                                                                                                 
                                                                                                                                
MR. DUNHAM  clarified that a  state-funded project  that receives                                                               
no  federal  money would  trigger  the  resident hire  employment                                                               
preference.                                                                                                                     
                                                                                                                                
2:01:57 PM                                                                                                                    
CHAIR  BISHOP thanked  him for  the  clarification and  commented                                                               
that that narrowed the scope of applicability.                                                                                  
                                                                                                                                
MR.  DUNHAM agreed  and continued  to  review the  points in  the                                                               
current resident hire law:                                                                                                      
                                                                                                                                
       Worker must reside in zones of underemployment (AS                                                                       
     36.10.150)                                                                                                                 
             • Determinations made by Commissioner of Labor                                                                     
               and Workforce Development valid for 2 fiscal                                                                     
               years.                                                                                                           
             • Unemployment rate in the zone must be 10% or                                                                     
               greater than the federal rate.                                                                                   
             • The Commissioner's most recent determination                                                                     
               (July 2019) identifies the entire state as a                                                                     
               zone of underemployment.                                                                                         
                         Alaska's   unemployment   rate   in                                                                    
                         December of 2019 was 6.1%.                                                                             
                         The federal unemployment rate was                                                                      
                         3.5%.                                                                                                  
                                                                                                                                
CHAIR BISHOP  advised that next  week people from  DOLWD Research                                                               
and Analysis will discuss the mechanics of those determinations.                                                                
                                                                                                                                
2:04:08 PM                                                                                                                    
MR. DUNHAM directed  attention to slide 14 that  depicts the most                                                               
recent DOLWD  Employment Preference  Determination. It  lists the                                                               
23  craft  classifications  that  qualify for  a  minimum  of  90                                                               
percent resident hire preference.                                                                                               
                                                                                                                                
He  referenced slide  15 and  explained that  while the  attorney                                                               
general declined  to defend  the current  resident hire  law, the                                                               
statute  was  still  on  the   books.  Many  agencies  are  still                                                               
enforcing  the  employment  preference laws  on  their  contracts                                                               
because it is  the law and the contractors  are questioning DOLWD                                                               
in light of  the attorney general opinion. He described  it as an                                                               
odd scenario.                                                                                                                   
                                                                                                                                
2:06:04 PM                                                                                                                    
MR. DUNHAM turned to slide 16 and discussed the waivers                                                                         
available under certain circumstances:                                                                                          
                                                                                                                                
     Waivers 8 AAC 30.078(d)                                                                                                  
                                                                                                                                
         Contractors who are unable to locate eligible                                                                          
            resident workers can request waivers to                                                                             
          employ non-resident workers.                                                                                          
                                                                                                                                
He recalled  the situation  where the inside  of the  silo at the                                                               
Kodiak rocket station was  corroding from the salt air and had to                                                               
be  painted with  a  special  epoxy paint  that  required special                                                               
expertise to  prep and  apply. The contractor  requested a waiver                                                               
and it was granted.                                                                                                             
                                                                                                                                
CHAIR BISHOP commented that common sense applies, which was why                                                                 
there is a waiver process.                                                                                                      
                                                                                                                                
MR. DUNHAM agreed and continued to review the formal waiver                                                                     
process outlined on slide 16:                                                                                                   
                                                                                                                                
     Waivers 8 AAC 30.078(d) (cont'd)                                                                                         
                                                                                                                                
          Formal process:                                                                                                       
             • Request must be submitted seven calendar                                                                         
               days   prior   to   the   waiver   being                                                                         
               considered for approval                                                                                          
             • Should include minimum qualifications                                                                            
               for position that the contractor wishes                                                                          
               to employ non-resident worker                                                                                    
             • Department      reviews        minimum                                                                           
               qualifications                                                                                                   
             • Once  minimum    qualifications    are                                                                           
               approved, employer must advertise using                                                                          
               at    least   one    public    form   of                                                                         
               advertisement                                                                                                    
                                                                                                                                
          The    public   advertisement    and   facilitated                                                                    
          recruitment must run for at least 3 days, and                                                                         
          both must                                                                                                             
             • State that the purpose of the request is to                                                                      
               satisfy Employment Preference requirements                                                                       
               under AS 36.10: applicants must be residents                                                                     
               of the state,                                                                                                    
             • List  the    job    title    and    minimum                                                                      
               qualifications accepted by the department,                                                                       
             • Identify the rate of pay including fringe                                                                        
               benefits and other compensation,                                                                                 
             • Identify the job location, expected duration                                                                     
               of the job, and the number of expected daily                                                                     
               and weekly work hours, and                                                                                       
             • Specify that all job seekers apply through                                                                       
               the Alaska Job Center Network.                                                                                   
                                                                                                                                
          Once recruitment process concludes, employer completes                                                                
          a waiver request form to the Department.                                                                              
                                                                                                                                
          If an employer can establish that there are no                                                                        
          qualified eligible residents, the department will                                                                     
          approve the waiver.                                                                                                   
             • Waivers are issued for specific workers                                                                          
             • Waivers are not retroactive                                                                                      
             • Waivers expire after 6 months.                                                                                   
                                                                                                                                
2:08:57 PM                                                                                                                    
CHAIR BISHOP recognized that Senator Olson had joined the                                                                       
committee.                                                                                                                      
                                                                                                                                
MR. DUNHAM turned to slide 19 that discusses how the law is                                                                     
enforced. He reviewed the following:                                                                                            
                                                                                                                                
     How is the law enforced?                                                                                                 
                                                                                                                                
          Currently,   the   majority  of   violations   are                                                                    
          identified through the  audit of certified payroll                                                                    
          reports; and through  complaints from stakeholders                                                                    
          such  as   contractors,  labor   unions,  resident                                                                    
          workers and contracting agencies.                                                                                     
                                                                                                                                
          Regarding  Employment Preference,  where potential                                                                    
          violations   were  identified,   an  investigation                                                                    
          would  be  opened,  and the  contractor  would  be                                                                    
          afforded  due process  under 8  AAC 30.090,  and 8                                                                    
          AAC   30.100.  This   process   also  applies   to                                                                    
          Prevailing Wage violations.                                                                                           
                                                                                                                                
MR.  DUNHAM explained  that if  an Alaskan  was displaced  for 40                                                               
hours  per week  for eight  weeks, that  money would  be withheld                                                               
from the contract. He noted  that some investigations resulted in                                                               
$100,000 violations.                                                                                                            
                                                                                                                                
CHAIR  BISHOP asked  if there  was a  provision to  negotiate the                                                               
penalty down.                                                                                                                   
                                                                                                                                
MR. DUNHAM answered yes; that would be addressed on slide 21.                                                                   
                                                                                                                                
2:13:27 PM                                                                                                                    
SENATOR STEVENS asked  what happens to the  money that's assessed                                                               
for  violations and  if the  Alaskans who  are left  out of  work                                                               
receive any benefit.                                                                                                            
                                                                                                                                
MR. DUNHAM  replied the  money is  subtracted from  the contract,                                                               
per the statute, and retained by the agency.                                                                                    
                                                                                                                                
                                                                                                                                
MR. DUNHAM reviewed the investigative  process outlined in slides                                                               
20-22:                                                                                                                          
                                                                                                                                
     Investigative Process (8 AAC 30.900)                                                                                     
                                                                                                                                
          Division investigates potential  violations on its                                                                    
         own motion or on the complaint of any person.                                                                          
                                                                                                                                
          Where   department  finds   probable  cause   that                                                                    
          violation exists,  the respondent  receives a copy                                                                    
          of  the   complaint  or  description   of  alleged                                                                    
          violation via personal service or certified mail.                                                                     
                                                                                                                                
          Under  current regulations  and procedure,  copies                                                                    
          of complaint  must also  be provided  to the prime                                                                    
          contractor and contracting agency                                                                                     
                                                                                                                                
          Division   attempts  to   eliminate  the   alleged                                                                    
          violation through conference and persuasion.                                                                          
             Provide respondent/prime opportunity for an                                                                        
             informal conference to discuss matter and                                                                          
             attempt to eliminate alleged violation                                                                             
                                                                                                                                
          If  informal  conference   fails  to  resolve  the                                                                    
          violation,  Division issues  a Notice  of Findings                                                                    
          to the violating contractor.                                                                                          
             Notice is copied to prime contractor and to                                                                        
             contracting agency.                                                                                                
             Includes notification of the failure of the                                                                        
             informal    conference    failed,    and    the                                                                    
             Department's investigative findings.                                                                               
                                                                                                                                
          Respondents have  the right  to challenge our                                                                         
          findings. 30 day period from date of findings                                                                         
          to request  a formal  hearing as  part of the                                                                         
          administrative process.                                                                                               
                                                                                                                                
          After  Notice  of  Findings,  Department  may                                                                         
          issue a notice to withhold funds in an amount                                                                         
          equal  to potential  penalties,  or  may wait                                                                         
          until 30  day period has  lapsed depending on                                                                         
          the amount of funds left on the contract.                                                                             
                                                                                                                                
For example, a $30,000 penalty that was not disputed would                                                                      
be subtracted from the contract and the state agency would                                                                      
retain those funds.                                                                                                             
                                                                                                                                
          If  no  formal   hearing  is  requested,  the                                                                         
          decision of  the Department  becomes final. A                                                                         
          notice  is issued  to the  contracting agency                                                                         
          which directs them to withhold and retain the                                                                         
          calculated penalty.                                                                                                   
                                                                                                                                
          If a formal  hearing is requested, the Department                                                                     
          would follow regulation 8 AAC.30.100. Pending the                                                                     
          outcome of the hearing, the Department may direct                                                                     
          the  agency  to  withhold  and  retain  funds  or                                                                     
          release funds.                                                                                                        
                                                                                                                                
SENATOR GRAY-JACKSON asked how frequently violations occur.                                                                     
                                                                                                                                
MR. DUNHAM replied there were 24 violations in FY2019 and a                                                                     
total of $78,632.00 was withheld from those contracts.                                                                          
                                                                                                                                
SENATOR GRAY-JACKSON asked for the statistics for violations for                                                                
the last 10 years.                                                                                                              
                                                                                                                                
MR. DUNHAM agreed to provide the information to the committee.                                                                  
                                                                                                                                
2:19:22 PM                                                                                                                    
CHAIR BISHOP asked if there is still the ability to negotiate                                                                   
the penalty down, even after a formal hearing.                                                                                  
                                                                                                                                
MR. DUNHAM said yes, although there are times the contractor                                                                    
doesn't want to negotiate. The department does not try to be                                                                    
heavy-handed; it always offers options.                                                                                         
                                                                                                                                
SENATOR STEVENS asked  if the department had found  that the same                                                               
companies  commit  multiple violations  or  if  they learn  their                                                               
lesson once a fine is assessed.                                                                                                 
                                                                                                                                
MR.  DUNHAM  replied there  have  been  frequent fliers  but  the                                                               
majority  are  first-time  offenders. Oftentimes  the  contractor                                                               
stops the work  when they are informed that  they are potentially                                                               
in violation.                                                                                                                   
                                                                                                                                
SENATOR STEVENS  asked if the  department was less  forgiving for                                                               
frequent fliers.                                                                                                                
                                                                                                                                
MR.  DUNHAM answered  yes, especially  if the  previous violation                                                               
was recent. The  department's policy had always been  to offer an                                                               
informal conference to  the contractor and seek a  remedy. If the                                                               
mitigating  factors  showed  that   the  contractor  didn't  know                                                               
better,  the penalty  would be  reduced 90  percent. If  it's the                                                               
second  time, and  the  mitigating explanation  was  that it's  a                                                               
special  craft that  required a  particular crew,  the department                                                               
would  explain  the waiver  process  and  reduce the  penalty  50                                                               
percent.  Thereafter, the  department  would  generally have  the                                                               
agency withhold 100 percent of the penalty from the contract.                                                                   
                                                                                                                                
2:25:08 PM                                                                                                                    
SENATOR  GRAY-JACKSON asked  if  there was  an  RFP [request  for                                                               
proposal] process before a contract was awarded.                                                                                
                                                                                                                                
MR. DUNHAM replied the agency  is supposed to let the contractors                                                               
know the requirements of a project.                                                                                             
                                                                                                                                
SENATOR GRAY-JACKSON expressed  concern that contractors wouldn't                                                               
be aware  of the rules  because the  RFP was supposed  to contain                                                               
information about a resident hire requirement.                                                                                  
                                                                                                                                
2:26:01 PM                                                                                                                    
CHAIR  BISHOP  asked him  to  include  in Senator  Gray-Jackson's                                                               
request for 10  years of data on violations a  breakdown of which                                                               
violations  were from  out-of-state  contractors  and which  were                                                               
instate contractors.                                                                                                            
                                                                                                                                
MR.  DUNHAM said  he'd provide  the data  but the  violations are                                                               
primarily from out-of-state contractors.                                                                                        
                                                                                                                                
2:26:59 PM                                                                                                                    
MR. DUNHAM turned to slide  23 that highlights the differences in                                                               
staffing at  the Division of  Labor Standards and  Safety between                                                               
1988 and 2020. He reviewed the following points:                                                                                
                                                                                                                                
     Staffing at Wage and Hour  Then and Now                                                                                  
                                                                                                                                
         In  1988, LSS  [the  Division of  Labor                                                                                
         Standards  and  Safety]  had  12  staff                                                                                
         members [in the Wage  and Hour Section]                                                                                
         statewide   dedicated  solely  to   the                                                                              
         enforcement of Employment Preference.                                                                                  
                                                                                                                                
         In  2020, LSS  has 21  positions statewide [in                                                                         
         the   Wage   and   Hour   Section]   that  are                                                                         
         responsible  to  enforce  all  Wage  and  Hour                                                                       
         programs.                                                                                                              
                                                                                                                                
He added that  until recently the four investigators  in the Wage                                                               
and Hour  Section looked into potential  violations of employment                                                               
preference as they found a problem.                                                                                             
                                                                                                                                
SENATOR STEVENS  asked if  he understood  correctly that  in 1988                                                               
there were 12 people enforcing  the employment preference law and                                                               
now there are only four.                                                                                                        
                                                                                                                                
MR.  DUNHAM clarified  that the  division has  four investigators                                                               
but they are primarily looking  for prevailing wage deficits, not                                                               
the   enforcement   of   employment  preference.   Staffing   was                                                               
insufficient  to  look  specifically  for  employment  preference                                                               
violations.                                                                                                                     
                                                                                                                                
2:28:29 PM                                                                                                                    
MR. DUNHAM turned  to slide 24 that discusses the  history of the                                                               
penalties  that have  been assessed.  He  reviewed the  following                                                               
points:                                                                                                                         
                                                                                                                                
     History of penalties assessed                                                                                            
                                                                                                                                
          Donations made by contractors into Alaska training                                                                    
          opportunities were often accepted in lieu of penalty                                                                  
          retention by State agency.                                                                                            
                                                                                                                              
          First time  offenders were  often allowed  to have                                                                    
          only  a  portion  of  the  penalty  amount  to  be                                                                    
          retained  by  the  contracting  agency.  In  these                                                                    
          cases,  or  when  other  mitigating  factors  were                                                                    
          presented, penalties were often reduced by 90%.                                                                       
He explained that  since the Enserch ruling, a  tool the division                                                               
uses  in  the informal  conference  to  reduce or  eliminate  the                                                               
penalty  is to  offer  the  contractor the  option  to donate  an                                                               
equivalent  percentage of  the proposed  penalty to  any training                                                               
program in the  state that focuses on training  young Alaskans to                                                               
work  in  the blue  collar  construction  field. For  example,  a                                                               
contractor  in the  early 90s  who was  facing a  $50,000 penalty                                                               
would be  given the  option of  donating to  any of  the existing                                                               
training programs,  including the UAA welding  shop. The division                                                               
would  likely accept  that donation  (through the  conference and                                                               
persuasion process under AAC 30.090)  in lieu of the penalty. The                                                               
logic  was  that instead  of  those  funds  going back  into  the                                                               
general fund,  they were  directly supporting  the intent  of the                                                               
employment preference  law, which  was training Alaskans  to work                                                               
in Alaska. That decades long process  was changed a few years ago                                                               
when the attorney  general put a stop to it,  calling it a breach                                                               
of   ethics.   The   division   repeatedly   asked   under   what                                                               
circumstances  that  process  could  be used  and  recently  they                                                               
received an email from an  (assistant) attorney general that said                                                               
a donation to the University  of Alaska was acceptable because it                                                               
was a state agency.                                                                                                             
                                                                                                                                
2:32:45 PM                                                                                                                    
CHAIR BISHOP asked which attorney general issued the opinion.                                                                   
                                                                                                                                
MR. DUNHAM  replied it was  an email from the  assistant attorney                                                               
general  assigned  to  the  Department  of  Labor  and  Workforce                                                               
Development (DOLWD).  Responding to  a further question,  he said                                                               
the email was sent less than a year ago.                                                                                        
                                                                                                                                
CHAIR BISHOP pointed  out that an employer facing  a $50,000 fine                                                               
could  make the  donation to  the University  of Alaska  and take                                                               
advantage of the education tax credit.                                                                                          
                                                                                                                                
MR. DUNHAM agreed and added  that contractors who donated in lieu                                                               
of  their   penalty  have  followed   up  and   advertised  their                                                               
donations.                                                                                                                      
                                                                                                                                
2:34:03 PM                                                                                                                    
MR.  DUNHAM turned  to  slide 25  that  outlines the  alternative                                                               
penalty efforts. He reviewed the following points:                                                                              
                                                                                                                                
     Alternative Penalty Efforts  Workforce Investments                                                                       
                                                                                                                                
          Rationale                                                                                                             
               To reduce legal costs from both sides, donations                                                                 
               into various training programs that focused on                                                                   
               introducing and were accepted by providing blue-                                                                 
               collar skills to young Alaskans.                                                                                 
                                                                                                                                
               This type of settlement agreements has been                                                                      
               accepted by the Department for decades.                                                                          
                                                                                                                                
          Benefits                                                                                                              
               The  donated  funds  directly  supported  and                                                                    
               promoted  the   mission  of   the  Employment                                                                    
               Preference,  as opposed  to  the funds  being                                                                    
               retained  by the  various State  agencies and                                                                    
               placed back into the General Fund.                                                                               
                                                                                                                                
MR. DUNHAM discussed the following points outlined on slide 26                                                                  
relating to the fourth constitutional challenge of the                                                                          
employment preference law:                                                                                                      
                                                                                                                                
     Constitutional Challenge No. 4                                                                                           
                                                                                                                                
             • 17 projects identified as out of compliance                                                                      
             • Contractor's position was that the Employment                                                                    
              Preference Act was unconstitutional                                                                               
             • July 2019, the contractor filed suit                                                                             
             • AG agreed to issue a formal opinion declaring AS                                                                 
               36.10 to be unconstitutional.                                                                                    
             • Based on AG Opinion, the Department was directed                                                                 
               to  cease  enforcement  of  Employment  Preference                                                               
               provisions,  and all  investigations into  alleged                                                               
               or  potential   Employment  Preference  violations                                                               
               were closed.                                                                                                     
                                                                                                                                
MR.  DUNHAM explained  that in  July 2019,  a contractor  in                                                                    
Juneau filed  suit after 17  of his projects were  found out                                                                    
of  compliance  with  the  employment  preference  law.  The                                                                    
contractor  maintained that  the  Employment Preference  Act                                                                    
was unconstitutional.  As part  of the  negotiation process,                                                                    
Attorney  General Clarkson  agreed to  issue an  opinion and                                                                    
that  resulted in  DOLWD being  directed  to stop  enforcing                                                                    
employment preference  and all  cases of  alleged violations                                                                    
of that law were closed.                                                                                                        
                                                                                                                                
CHAIR BISHOP thanked him for the presentation and advised that                                                                  
he would have his staff follow up with another request for                                                                      
information from one of the committee members.                                                                                  
                                                                                                                                
2:36:21 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Bishop adjourned the Senate Labor and Commerce Standing                                                                   
Committee meeting at 2:36 p.m.                                                                                                  
                                                                                                                                
                                                                                                                                

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