03/04/2004 01:32 PM Senate L&C
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 4, 2004
1:32 p.m.
TAPE(S) 04-19, 20
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Gary Stevens
Senator Hollis French
MEMBERS ABSENT
Senator Bettye Davis
COMMITTEE CALENDAR
SENATE BILL NO. 311
"An Act providing for a special deposit for workers'
compensation insurers; relating to the board of governors of the
Alaska Insurance Guaranty Association; relating to covered
workers' compensation claims paid by the Alaska Insurance
Guaranty Association; stating the intent of the legislature, and
setting out limitations, concerning the interpretation,
construction, and implementation of workers' compensation laws;
relating to restructuring the Alaska workers' compensation
system; eliminating the Alaska Workers' Compensation Board;
establishing a division of workers' compensation within the
Department of Labor and Workforce Development and assigning
certain Alaska Workers' Compensation Board functions to the
division and the Department of Labor and Workforce Development;
establishing a Workers' Compensation Appeals Commission;
assigning certain functions of the Alaska Workers' Compensation
Board to the Workers' Compensation Appeals Commission; relating
to agreements that discharge workers' compensation liability;
providing for hearing officers in workers' compensation
proceedings; relating to workers' compensation awards; relating
to an employer's failure to insure and keep insured or provide
security; providing for appeals from compensation orders;
relating to workers' compensation proceedings; providing for
supreme court jurisdiction of appeals from the Workers'
Compensation Appeals Commission; providing for a maximum amount
for the cost-of- living adjustment for workers' compensation
benefits; providing for administrative penalties for employers
uninsured or without adequate security for workers'
compensation; relating to assigned risk pools and insurers; and
providing for an effective date."
MOVED SB 311 OUT OF COMMITTEE
HOUSE BILL NO. 340
"An Act relating to damages in an action for a defect in the
design, construction, and remodeling of certain dwellings; and
providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 323
"An Act relating to a project owner's liability for workers'
compensation and the exclusiveness of liability for workers'
compensation."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 311
SHORT TITLE: INSURANCE & WORKERS' COMPENSATION SYSTEM
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/09/04 (S) READ THE FIRST TIME - REFERRALS
02/09/04 (S) L&C, FIN
02/10/04 (S) L&C AT 1:30 PM BELTZ 211
02/10/04 (S) Heard & Held
02/10/04 (S) MINUTE(L&C)
02/19/04 (S) L&C AT 1:30 PM BELTZ 211
02/19/04 (S) Heard & Held
02/19/04 (S) MINUTE(L&C)
02/26/04 (S) L&C AT 1:30 PM BELTZ 211
02/26/04 (S) Heard & Held
02/26/04 (S) MINUTE(L&C)
03/04/04 (S) L&C AT 1:30 PM BELTZ 211
BILL: HB 340
SHORT TITLE: DAMAGES IN CONSTRUCTION CLAIMS
SPONSOR(s): REPRESENTATIVE(s) MEYER
01/12/04 (H) PREFILE RELEASED 1/2/04
01/12/04 (H) READ THE FIRST TIME - REFERRALS
01/12/04 (H) L&C, JUD
01/23/04 (H) L&C AT 3:15 PM CAPITOL 17
01/23/04 (H) Moved CSHB 340(L&C) Out of Committee
01/23/04 (H) MINUTE(L&C)
01/26/04 (H) L&C RPT CS(L&C) 1DP 4NR
01/26/04 (H) DP: ANDERSON; NR: CRAWFORD, LYNN,
01/26/04 (H) GATTO, GUTTENBERG
02/04/04 (H) JUD AT 1:00 PM CAPITOL 120
02/04/04 (H) -- Meeting Canceled --
02/09/04 (H) JUD AT 1:00 PM CAPITOL 120
02/09/04 (H) Moved CSHB 340(JUD) Out of Committee
02/09/04 (H) MINUTE(JUD)
02/12/04 (H) JUD RPT CS(JUD) 5DP 1NR
02/12/04 (H) DP: OGG, SAMUELS, HOLM, ANDERSON,
02/12/04 (H) MCGUIRE; NR: GARA
02/23/04 (H) TRANSMITTED TO (S)
02/23/04 (H) VERSION: CSHB 340(JUD) AM
02/25/04 (S) READ THE FIRST TIME - REFERRALS
02/25/04 (S) L&C, JUD
03/04/04 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 323
SHORT TITLE: WORKERS COMPENSATION AND CONTRACTORS
SPONSOR(s): SENATOR(s) SEEKINS
02/13/04 (S) READ THE FIRST TIME - REFERRALS
02/13/04 (S) L&C, JUD
03/04/04 (S) L&C AT 1:30 PM BELTZ 211
WITNESS REGISTER
Mr. Douglas L. Smith
Arctic Slope Regional Corporation
Division of Energy Services
Anchorage AK
POSITION STATEMENT: Supports SB 311.
Mr. Michael Jensen
Anchorage AK
POSITION STATEMENT: Commented on SB 311.
Mr. Don Gray, Claims Administrator
Arctic Slope Regional Corporation (ASRC)
Anchorage AK
POSITION STATEMENT: Supports SB 311.
Mr. Dennis Mellinger
Arctic Slope
Anchorage AK
POSITION STATEMENT: Supports SB 311.
Ms. Laura Jackson, Claims Manager
University of Alaska
Anchorage AK
POSITION STATEMENT: Supports SB 311.
Representative Kevin Meyers
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 340.
Mr. Dave Dillard
321 Construction Inc.
Fairbanks AK
POSITION STATEMENT: Supports HB 340 and commented on SB 323.
Mr. Jeff DeSmet
Alaska Homebuilders Association
PO Box 83149
Juneau AK
POSITION STATEMENT: Supports HB 340.
Mr. Ray Hickel
Alaska State Homebuilder Association
Juneau AK
POSITION STATEMENT: Supports HB 340.
Mr. Larry Partusch
Partusch Plumbing and Heating and Northern Sheet metal
Fabricators
Juneau AK
POSITION STATEMENT: Supports HB 340.
Ms. Robin Ward, Legislative Chair
Alaska State Homebuilders Association
Anchorage AK
POSITION STATEMENT: Supports HB 340.
Mr. Mike Lessmeier
State Farm Insurance
Juneau AK
POSITION STATEMENT: Commented on SB 323.
ACTION NARRATIVE
TAPE 04-19, SIDE A
SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:32 p.m. Present were Senators
Gary Stevens, Ralph Seekins, Hollis French and Chair Con Bunde.
Senator Bettye Davis was excused. The first order of business to
come before the committee was SB 311.
MR. DOUGLAS L. SMITH, Arctic Slope Regional Corporation, Energy
Services Division, supported SB 311 as it is written. "It does
not sway the advantage to either company or employee, but, in
fact, favors both." He did not have a copy of the proposed
amendment.
CHAIR BUNDE said a copy of the amendment was being faxed to him.
MR. MIKE JENSEN, Anchorage attorney who specializes in
representing injured workers in Alaska workers' compensation
claims, said he has 20 years of experience in this area and
three other attorneys, Chancy Croft, Joe Calamites and Steven
Constantino have extensive experience as well. They have all
looked at the proposed amendment and have some concerns.
We do not feel the current system is broken and should
be fixed, especially if it means creating a new
bureaucracy that is estimated to cost in excess of
$700,000 a year more than the current system.
The current system does provide for a representative
of industry and a representative of labor. These
proposed amendments would take that away - so that the
decision maker would be solely a hearing officer at
the initial administrative level and then three
commissioned members who are selected by the
administration.
As far as the current system and expediency, we do not
think the amendments would add anything as far as
expediency. The current system issues over 300
opinions per year. Of those, only 10 percent are ever
appealed to the courts. Of those 10 percent, I would
say only a third are ever reversed. In other words of
the minority of appeals that are taken to the courts,
the vast majority of those appeals wind up affirming
what the board has done.
As far as the time concerns that the administration
pointed out, they did cite the case of Bradbury v.
Chugach Electric. That was the case in which I
represented Mr. Bradbury whose wife died at work. The
administration states that the time [indisc.] as the
reason for making these proposed changes.
I should point out to Mr. Chairman and the other
members of the committee...that decision, first of
all, it wasn't 1,400 days. The administration was off
by about a half a year and, of that time, over a
third, if not more, was spent between the Superior
Court waiting for the Supreme Court to issue its
decision. As far as the board was concerned, it heard
the case within six to nine months after the claim was
filed and we don't see how creating an appeals
commission would in any way speed that process up.
But, if the appeals commission is a good amendment to
adopt, we feel it could be improved to make it less
political in that we would urge the committee to
require that the appeals commission have at least one
representative who has experience with the practice of
law representing industry and then let the other
representative or member with experience represent
labor. Then, of course, the third member could be
either way. At least that way, there would be an
assurance that at least depending upon who is in the
administration, Democrat or Republican, that at least
one representative of industry is always there as well
as one representative of labor. It would thereby take
out what I feel would otherwise politicize the
commission.
In addition, we would propose that the commission
members be given terms of up to a minimum of five
years. That, again, would foster the idea of
depoliticizing the commission. In addition, it would
enlarge the pool of applicants that the administration
could choose from in selecting commission members,
because with five years, it's my understanding that
the commission member would be vested in the PERS
system thereby making it more attractive for members
to be found.
There are some other changes that we would propose. As
far as at the hearing level, we would recommend that
instead of having the decision decided strictly by one
hearing officer, that these cases be heard as the
board is currently constituted with a representative
of industry again and a representative of labor again
with a hearing officer on that board. That would
insure, again, that this process remains neutral, that
it remains fair to both sides and that it
depoliticizes the system.
MR. JENSEN said additional changes were stated in a letter that
would be sent to the Legislature as soon as the other three
lawyers had signed off on it. It asks that intent language
states that nothing in the amendment changes the substance of
law - clarifying that the changes are strictly procedural and,
thereby, avoiding additional unnecessary litigation.
In addition, I think that if attorney's fees could be
limited to $400 without obtaining board or director
approval of fees, that would allow a lot of needless
litigation in that currently a lot of unrepresented
injured workers are unable to get the advice of an
attorney and then wind up filing claims that need to
be litigated by industry. By allowing these workers to
at least seek the advice of competent counsel, may
avoid filing any unnecessary litigation that it caused
from misinformation and misunderstanding of the act.
He said these changes would make a much fairer system and
protect the interests of both industry and labor and
depoliticize the system. He also understands that the ad hoc
committee was not involved in the proposed changes and now that
they are involved he thought:
By creating a permanent workers' compensation advisory
council... with two members from industry and two
members from labor, as well as the members from the
guaranty association, the public or the Division of
Insurance might assist the Legislature in getting
competent advice and proposals to act upon.
MR. DON GRAY, Claims Administrator, Arctic Slope Regional
Corporation, supported SB 311 as written and without the
amendment. [Indisc.]
MR. DENNIS MELLINGER, Arctic Slope, supported SB 311.
MS. LAURA JACKSON, Claims Manager, University of Alaska, said
she is also a member of the Multidisciplinary Insurance
Association of Alaska and past president of the Alaska Adjusters
Association. She is currently on the board of the Workers'
Compensation Committee of Alaska and a member of the ad hoc
committee. She said she was testifying on her own behalf today
as a person who has assisted people through the Alaska Workers'
Compensation system for over 17 years.
I am here to tell you that the Workers' Compensation
system in Alaska is broken. It is cumbersome,
confusing, slow-moving and not user friendly to either
the employer or the employee. The recommended changes
will simplify and clarify the process. Replacing the
delays due to the lengthy Superior Court appeals
process with an appeals commission comprised of people
knowledgeable about the act and the process will speed
the resolution of the disputes.
In addition, in response to Senator French's
amendment, the decisions that come out of Superior
Court are inconsistent as have been the decisions that
come out of the board, itself, and their panels. I
believe that people specifically knowledgeable about
the act and the act as it was intended by the
Legislature, you our representatives, when it was
promulgated, that it would be a more consistent fair
and expeditious process being heard by people who
understand and know the act and are familiar with it.
It is my belief that in short order we will all find a
workers' compensation system that will indeed be more
efficient and predictable. Therefore, it will decrease
the cost to employers and the time delay to employees
and more importantly result in fair and adequate
compensation to our injured workers.
MS. JACKSON "put on her ad hoc hat" to read a letter into the
record from the Alaska Labor Management Ad Hoc Committee on
Workers' Compensation, dated March 4, 2004, addressed to Speaker
of the House, Pete Kott, and Senate President, Gene Therriault.
Gentlemen:
The Ad Hoc Committee, which consists of
representatives from industry and labor historically
has met periodically to address issues that affect
substantive changes, issues that affect benefits in
the Workers' Compensation Act. In January, management
and labor decided that time had come to address such
issues again. In the meantime, the administration
proposed SB 311 and HB 450, which deal with procedural
issues, issues regarding the makeup and management of
the board. Although the Ad Hoc Committee had never
dealt with such issues previously, labor recommended
the Ad Hoc Committee consider the bill. The committee
reached agreement on sections of the bill that refer
to the Guaranty Fund, capping out-of-state workers'
compensation at what the employees would have earned
in-state, placing administrative responsibilities
formerly rested in the board with the Workers'
Compensation Division director, uninsured penalties
and replace the Superior Court with an appeals
commission. The committee has scheduled no further
meetings on the issue. We do, however, anticipate
meeting in the future on substantive issues of concern
to both management and labor.
Sincerely,
Judith A. Peterson, President, WCCA
Kevin Dougherty, Alaska Laborers
Members of the Ad Hoc Committee
MR. KEVIN DOUGHERTY, Co-Chair, Ad Hoc Committee, said he is
attorney for the Alaska District Council of Laborers and that
they did reach agreement on the Guaranty Fund and the non-
resident cost of living adjustment and agreed to preserve the
board as it is, but have an appeals commission replace the
Superior Court and added some uninsured employer penalties of a
civil nature. They hadn't agreed on a number of issues and he
suggested that those items not move forward.
I would like to point out that the Ad Hoc Committee
has been in place for about 23 years. After
legislation that we have worked on jointly with the
employer, the decreases in premiums have added up to
over 40 percent decrease in premiums. During that
time, our goal has been to retain benefits and we go
at it in the same sphere as here. So, it is critical
that the administration's bill does nothing to impact
benefits. That's, of course, why my organization, the
Alaska Laborers, are opposed to section 9 of the bill
and opposed to section 10 of the bill, which would
have wiped out the bill. But, fortunately, we have the
news to report to you, as Ms. Jackson said, that we do
have agreement on five solid issues which we hope will
help the act overall.
CHAIR BUNDE asked if anyone else wanted to testify on SB 311.
Seeing no one, he closed public testimony.
SENATOR FRENCH moved amendment 1.
23-GS2023\A.1
Craver
A M E N D M E N T 1
OFFERED IN THE SENATE BY SENATOR FRENCH
TO: SB 311
Page 1, lines 10 - 11:
Delete "Workers' Compensation Appeals Commission"
Insert "workers' compensation hearings office"
Page 1, line 12:
Delete "Workers' Compensation Appeals Commission"
Insert "workers' compensation hearings office"
Page 2, lines 5 - 6:
Delete "providing for supreme court jurisdiction of appeals
from the Workers' Compensation Appeals Commission;"
Page 5, line 22:
Delete "Workers' Compensation Appeals Commission"
Insert "workers' compensation hearings office"
Page 5, line 24:
Delete "Workers' Compensation Appeals Commission"
Insert "workers' compensation hearings office"
Page 6, line 1:
Delete "Workers' Compensation Appeals Commission"
Insert "workers' compensation hearings office"
Page 7, lines 21 - 22:
Delete "Workers' Compensation Appeals Commission"
Insert "workers' compensation hearings office"
Page 7, line 27, through page 11, line 2:
Delete all material and insert:
"* Sec. 11. AS 23.30 is amended by adding a new section to
read:
Sec. 23.30.007. Workers' compensation hearings
office. (a) There is established in the Department of
Labor and Workforce Development a workers' compensation
hearings office. The hearings office hears original
petitions when a claim is filed under this chapter and has
jurisdiction to hear appeals from decisions and orders of
the director.
(b) The commissioner shall appoint a chief hearing
officer and assistant hearing officers.
(c) The chief hearing officer may
(1) employ and supervise office staff and
hearing officers and appoint a hearings office clerk;
(2) establish and implement a time management
system for the hearings office, staff, and hearing
officers;
(3) assign the work of the hearing officers and
staff so that hearings and appeals are resolved as
expeditiously and competently as possible, including
designating hearing officers to hear preliminary matters;
and
(4) prepare an annual budget of the hearings
office.
(d) The hearings office, in its administrative
capacity, shall maintain, index, and make available for
public inspection the final administrative decisions and
orders of the hearing officers. To promote consistency
among legal determinations, the chief hearing officer may
review and circulate among the other hearing officers the
drafts of formal decisions, decisions upon reconsideration,
and other legal opinions of the other hearing officers of
the hearings office. The drafts are confidential documents
and are not subject to disclosure.
(e) The hearings office, in its administrative
capacity, may adopt regulations implementing its authority
and duties under this chapter, including rules of procedure
and evidence for proceedings before hearing officers in
workers' compensation proceedings under AS 23.30.090 and
23.30.110 and for the adjudication of all claims and
petitions under this chapter. The provisions of AS 44.62
(Administrative Procedure Act) apply to the adoption of
regulations by the hearings office.
(f) The hearings office shall award a successful
party reasonable costs and, if the party is represented by
an attorney, attorney fees that the hearings office
determines to be fully compensatory and reasonable.
However, the hearings office may not make an award of
attorney fees against an injured worker unless the hearings
office finds that the worker's position on appeal was
frivolous or unreasonable or the appeal was taken in bad
faith.
(g) The hearings office, in its administrative
capacity, may adopt and alter an official seal and do all
things necessary, convenient, or desirable to carry out the
powers expressly granted or necessarily implied in this
chapter."
Page 13, line 9:
Delete "with the office of the commission [BY"
Insert "by a hearing officer ["
Page 14, line 9:
Delete "commission"
Insert "hearings office"
Page 29, lines 27 - 28:
Delete "office of the commission"
Insert "hearings office"
Page 30, line 3:
Delete "or commission"
Page 30, line 14:
Delete "office of the commission, and the office of the
commission "
Insert "hearings office, and the hearings office"
Page 31, line 4, following "defense.", through line 17:
Delete all material.
Insert "[IF A DISCOVERY DISPUTE COMES BEFORE THE BOARD FOR
REVIEW OF A DETERMINATION BY THE BOARD'S DESIGNEE, THE BOARD MAY
NOT CONSIDER ANY EVIDENCE OR ARGUMENT THAT WAS NOT PRESENTED TO
THE BOARD'S DESIGNEE, BUT SHALL DETERMINE THE ISSUE SOLELY ON
THE BASIS OF THE WRITTEN RECORD. THE DECISION BY THE BOARD ON A
DISCOVERY DISPUTE SHALL BE MADE WITHIN 30 DAYS. THE BOARD SHALL
UPHOLD THE DESIGNEE'S DECISION EXCEPT WHEN THE BOARD'S
DESIGNEE'S DETERMINATION IS AN ABUSE OF DISCRETION.]"
Page 32, line 1:
Delete "office of the commission"
Insert "hearings office"
Page 32, lines 8 - 9:
Delete "office of the commission"
Insert "chief hearing officer"
Page 32, lines 27 - 28:
Delete "commission"
Insert "director"
Page 34, line 7:
Delete "commission"
Insert "hearings office"
Page 34, line 11:
Delete "partially exempt service under AS 39.25.120"
Insert "classified service under AS 39.25.100"
Page 34, lines 12 - 13:
Delete ", but is not a public employee for purposes of
AS 23.40"
Page 34, line 31:
Delete "commission"
Insert "hearings office"
Page 35, line 5:
Delete "commission"
Insert "hearings office"
Page 35, lines 30 - 31:
Delete "commission or"
Page 36, line 5:
Delete "commission or"
Page 36, line 6:
Delete "The commission clerk"
Insert "A hearing officer"
Page 36, line 9:
Delete "commission"
Insert "hearing officer"
Page 36, line 24:
Delete "office of the commission"
Insert "hearings office"
Page 36, line 27:
Delete "office of the commission"
Insert "hearings office"
Page 37, line 2:
Delete "commission"
Insert "hearings office"
Page 37, line 4, through page 41, line 21:
Delete all material and insert:
"* Sec. 64. AS 23.30.125(a) is amended to read:
(a) A compensation order becomes effective when filed
with the director [IN THE OFFICE OF THE BOARD] as provided
in AS 23.30.110, and, unless proceedings to suspend it or
set it aside are instituted as provided in (c) of this
section, it becomes final on the 31st day after it is
filed.
* Sec. 65. AS 23.30.125(c) is amended to read:
(c) If not in accordance with law, a compensation
order filed by a hearing officer as provided in (a) of this
section may be suspended or set aside, in whole or in part,
through injunction proceedings in the superior court
brought by a party in interest against the division [BOARD]
and all other parties to the proceedings [BEFORE THE
BOARD]. The payment of the amounts required by an award
may not be stayed pending final decision in the proceeding
unless upon application for an interlocutory injunction the
court on hearing, after not less than three days' notice to
the parties in interest and the director [BOARD], allows
the stay of payment, in whole or in part, where irreparable
damage would otherwise ensue to the employer. The order of
the court allowing a stay must [SHALL] contain a specific
finding, based upon evidence submitted to the court and
identified by reference to it, that irreparable damage
would result to the employer, and specifying the nature of
the damage.
* Sec. 66. AS 23.30.125(d) is amended to read:
(d) If an employer fails to comply with a
compensation order making an award that has become final, a
beneficiary of the award or the director [BOARD] may apply
for the enforcement of the order to the superior court. If
the court determines that the order was made and served in
accordance with law, and that the employer or the officers
or agents of the employer have failed to comply with it,
the court shall enforce obedience to the order by writ of
injunction or by other proper process to enjoin upon the
employer and the officers and agents of the employer
compliance with the order.
* Sec. 67. AS 23.30.125(f) is amended to read:
(f) Subject to an employer's or employee's burden of
proof, a finding of fact made by the hearing officer
[BOARD] as a part of a compensation order is conclusive
unless the court specifically finds that a reasonable
person could not have reached the conclusion made by the
hearing officer [BOARD]."
Renumber the following bill sections accordingly.
Page 46, lines 4 - 11:
Delete all material.
Renumber the following bill sections accordingly.
Page 55, line 24:
Delete ", the commission,"
Page 56, lines 3 - 9:
Delete all material and insert:
"(35) "director" means the director of the
division of workers' compensation;
(36) "division" means the division of workers'
compensation;
(37) "hearing officer" means a hearing officer
employed under AS 23.30.112 to hear workers' compensation
claims and petitions under this chapter;
(38) "hearings office" means the workers'
compensation hearings office established by AS 23.30.007."
Page 56, lines 13 - 20:
Delete all material and insert:
"* Sec. 103. AS 39.25.120(c) is amended by adding a new
paragraph to read:
(20) the reemployment benefits administrator of
the division of workers' compensation in the Department of
Labor and Workforce Development."
Renumber the following bill sections accordingly.
Page 56, line 25:
Delete "and"
Insert ";"
Following "AS 23.30.395(3)":
Insert "; and AS 39.50.200(b)(31)"
Page 56, line 28:
Delete "sec. 86"
Insert "sec. 87"
Page 56, line 29:
Delete "sec. 86"
Insert "sec. 87"
Page 57, lines 13 - 18:
Delete all material.
Renumber the following bill sections accordingly.
Page 58, line 13:
Delete "Section 110"
Insert "Section 109"
Page 58, line 14:
Delete "sec. 111"
Insert "sec. 110"
CHAIR BUNDE objected for discussion purposes.
SENATOR FRENCH explained that amendment 1 would remove the
appeals commission that would replace the appeals function of
the Superior Court. SB 311 calls for the appointment of three
appeals commissioners who would be confirmed by the Legislature.
The bill calls for two range 29 commissioners with the
commission chair set at range 30.
Our committee heard testimony... that the Superior
Court hears some 36 workers' comp appeals each year.
Creating three new highly paid state employees to hear
36 appeals per year seems extravagant. The proposed
amendment would keep the appeals function in the
Superior Court.
The amendment also keeps the hearing officers in
classified service. SB 311 as it stands would
reclassify the hearing officers into partially exempt
service. Keeping the hearing officers in classified
service gives these decision makers greater autonomy.
The proposed amendment does not alter the basic thrust
of SB 311; it merely streamlines the reforms that the
bill envisions. I'll close by saying that I believe
the most apolitical appeals panel available is in the
Superior Court. These are judges appointed to long
terms. They are mostly isolated from the political
process. They have all the autonomy in the world to
hear these appeals. From the testimony we heard from
Mr. Wooliver [Alaska Court System], they're rarely
overturned when those decisions go to the Supreme
Court.
I also took to heart the part of his testimony about
how a litigant feels facing an in-house appeals
commission. I can just speak for myself - I'd want a
guy in a black robe to decide my case. I'd want
someone who isn't a state employer per se in the
Department of Administration to hear my case. And I
think what we're going to do is simply create this
enormous pass-through of decisions through the appeals
commission on to the Supreme Court clogging their
calendar more. So, I think in these tough budget times
to create three new - two range 29s and a range 30 - a
range 30 is over $100,000 per year. I just think that
there are school districts all over the state that
would love to have some of these employees that we're
thinking about creating here.
For that reason and also for the reason of keeping the
hearing officers in classified service, that's a way
to give them some political cover for the tough
decisions they make every day. Keep them in classified
service and let them go about their business
unsupervised, really, by a state supervisor who may be
putting pressure on them to go one way or the other.
CHAIR BUNDE remarked that his concern about the cost resonates
with him.
I, at this point, think that maybe the total cost to
the public might be less avoiding the Superior Court,
but again those are areas that I don't have a lot of
personal experience. I would prefer to send the bill
forward as it is and let Judiciary review that issue
and continue my opposition to the amendment.
A roll call vote was taken on amendment 1. Senators Gary Stevens
and Chair Bunde voted nay; Senator French voted yea. Amendment 1
was not adopted.
1:58 - 2:04 - at ease
CHAIR BUNDE said that SB 311 would be set aside for the moment.
HB 340-DAMAGES IN CONSTRUCTION CLAIMS
CHAIR CON BUNDE announced HB 340 to be up for consideration.
REPRESENTATIVE KEVIN MEYERS, sponsor, said that HB 340 limits
damages that can be collected due to a construction defect to
four things: the actual cost of the repairs necessary, the
reasonable attorney costs and fees, reasonable costs of
temporary housing and the reduction in market value, if any,
caused by the construction defect.
What this bill doesn't do, it doesn't cap the cost
that can be collected if the construction defect was
done through gross negligence or if there was personal
injury or death involved.
The reason we are bringing this bill forward is that,
as you know, in the State of Alaska general liability
insurance is a requirement for the folks in the
homebuilding and construction industry. Unfortunately,
it is extremely difficult for them to get this
insurance. When they do get it, it is very limited and
very costly. Unfortunately, those costs then get
passed on to our constituents, the consumer, when they
try to buy a new house. In fact, the State of Nevada
has estimated that every time the insurance goes up
$1,000, - 1,400 people then do not qualify for a home
and these folks are first-time homebuyers.
Currently, there are two companies writing insurance
in Alaska. What we're hoping this bill will do is
encourage more insurance companies to write. A
question that is frequently asked is well, if we pass
this bill, will the insurance rates go down and I
can't guarantee that, Mr. Chairman, and I don't think
anybody can. However, what we do know is that if you
have more competition, then theoretically, the rates
should come down.
As we all know, the price of housing is going up
statewide and we certainly can't control labor costs
and we can't control the price of goods that they have
to pay for or even the availability of land. What we
can do is attempt to control the cost of insurance,
which is a requirement that we have put on this
industry.
The other thing I like about this bill, Mr. Chairman,
is that it rewards the good builders and punishes the
bad builders in the sense that this bill does not
pertain to those builders out there who are in gross
negligence, but it will help those who are trying to
do good...and the industry would agree....
MR. DAVID DILLARD, 321 Construction, Inc., said he builds upper-
end custom homes from $150,000 to $600,000 and about 5 - 6 per
year. Jack Randall with State Farm Insurance has been his
representative for 15 years. He has never had any claims. Last
year workers' compensation cost him about $6,500 per million,
but this year the only company that talked to him so far wanted
$20,000 for less coverage. Another company wouldn't even talk to
him for less than $50,000. He didn't know how he could pay
$10,000 per house for insurance. He supported HB 340 although it
isn't a cure-all bill. [Indisc.]
MR. JEFF DESMET, Alaska Homebuilders Association, said he is
considered one of the better builders in the area, but he is
considering getting out of the business next year because it's
more and more difficult to be a small business owner, especially
with increasing insurance premiums. Last year he was able to
acquire insurance for this year, but for double the premium for
less coverage. He supported everything Mr. Dillard said about
the difficulty he faces as a builder. "I just want to go on
record saying I support HB 340...."
MR. RAY HICKEL, Alaska Homebuilders Association, supported HB
340. [His testimony was indisc.].
MR. LARRY PARTUSCH, Partusch Plumbing and Heating and Northern
Sheet Metal Fabricators, said that Representative Meyer did a
great job with this bill. He put some numbers together on new
construction homes and the cost of insurance for a $220,000 home
is 7 percent, which is really ridiculous. "Since 1982, I've
plumbed about 6,000 houses and I've had one claim against my
insurance and I've heated about 4,500. [Indisc.]"
MS. ROBIN WARD, Legislative Chair, Alaska State Homebuilders
Association, said she supported all builders' previous comments
and would answer questions.
CHAIR BUNDE said that her members were doing a good job for her.
"You'd better be careful or they'll ask you for a refund." He
asked Representative Meyer if he had any concluding comments. He
indicated not. The chair said the bill would be held for a
hearing next week.
SENATOR GARY STEVENS asked if any builders avoid carrying
insurance and is that an issue.
REPRESENTATIVE MEYER replied, "That is the concern...."
2:18 - 2:20 - at ease
SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM
CHAIR CON BUNDE announced SB 311 to be back before the committee
and that public testimony had been closed. Amendments had been
addressed.
SENATOR RALPH SEEKINS moved to pass SB 311 from committee with
individual recommendations and attached fiscal note. SENATOR
FRENCH objected. A roll call vote was taken. Senators Seekins,
Gary Stevens and Chair Bunde voted yea; and Senator French voted
nay; and SB 311 moved from committee. The chair noted that he
would ask the Senate President for a Judiciary referral.
SB 323-WORKERS COMPENSATION AND CONTRACTORS
CHAIR CON BUNDE announced SB 323 to be up for consideration.
SENATOR RALPH SEEKINS, sponsor, explained that it revises the
workers' compensation acts as it applies to contractors and
subcontractors.
The two principal modifications are really as follows:
First, the responsibility for payment of workers'
compensation is extended up the chain of contracts to
include project owners. Secondly, injured parties in
receipt of benefits under the Workers' Compensation
Act would be barred from double dipping via a tort
liability claim. Under AS 23.30.045(a), an injured
employee only has recourse to workers' compensation
benefits against his immediate employer and, if the
employer is a subcontractor, against the contractor
who retained the subcontractor.
The proposed legislation allows recourse for payment
of compensation benefits against project owners as
well as contractors and subcontractors. This extension
of the rights of injured employees is sensible
inasmuch as the project owner is the beneficial user
of the work performed by the injured employee. It
should be noted that a project owner does not include
individuals who have engaged the services of
contractors to build or renovate a residential home.
Finally, the proposed legislation extends the
exclusivity provision set forth in AS 23.30.055 to all
parties in the contracting claim chain related to a
project. This includes the employer of the injured
employee and those parties that are upstream in the
chain of contracts from the employer of the injured
employee. In other words, if an injured employee works
for a subcontractor, then the subcontractor, the
contractor and project owner would be free of tort
liability so long as the injured employee receives the
benefits set forth in the Alaska Workers' Compensation
Act.
SB 323 will encourage all parties participating in a
project to identify and enforce strict safety
standards for the benefit of all workers rather than
deflecting responsibility through the use of indemnity
agreements as is the common practice currently. At the
same time, it insures that the injured workers will
receive all benefits available under the Alaska
Workers Compensation Act. It is intended, Mr.
Chairman, to eliminate double dipping, but to make
sure that every employee on a project is covered under
the act.
CHAIR BUNDE explained that this would expand the requirement to
carry workers' compensation insurance from the subcontractor and
the contractor to the project manager.
SENATOR SEEKINS replied that everyone in the up chain must make
sure that every worker on the job is covered no matter who they
work for.
CHAIR BUNDE asked if currently you're a contractor, you need
workers' compensation.
SENATOR SEEKINS replied yes, for employees.
CHAIR BUNDE said that subcontractors might not have the
insurance because they might not be covered by the owner's
insurance.
SENATOR SEEKINS responded that a subcontractor might be a sole
proprietorship and might say he doesn't need to buy workers
compensation.
CHAIR BUNDE wanted to go the other way and asked if the
contractor has a policy, does the project manager have to have a
policy as well.
SENATOR SEEKINS replied that the project manager has the
responsibility to make sure that they are covered.
If that means they have to carry the policy, I guess
they would have to. It's a downstream responsibility
to make sure that every worker that's on that project
is covered.... We're trying to avoid the situation
that does exist where someone is injured and a
subcontractor, for example, is saying that he is a
sole proprietorship and doesn't need it. Then they're
injured and they go and say we were really an employee
and goes to the board saying we want coverage. In many
cases that happens. [END OF TAPE]
TAPE 04-19, SIDE B
[SIDE B IS BLANK. GO ON TO TAPE 04-20, SIDE A]
TAPE 04-20, SIDE A
2:25 p.m.
SENATOR SEEKINS continued:
That means that the project owner, before he can hire
that subcontractor or contractor has to make sure that
those people are covered or carry that coverage,
themselves.
CHAIR BUNDE said in all likelihood, the project manager wouldn't
hire contractors who don't carry insurance or would require some
kind of proof of coverage rather than purchase the insurance,
themselves.
SENATOR SEEKINS said project managers generally sign an
indemnification agreement. They don't care because their
negligence can go right back to the contractor. Because of the
way courts have ruled in some cases, project owners don't even
want to get into whether the contractor is having safety
meetings, etc., because then, they are knowingly involved.
SENATOR GARY STEVENS asked what kind of proof would be required
so a project owner would not have to purchase it.
SENATOR SEEKINS replied, "Through certificates of insurance."
SENATOR FRENCH asked why people who build a residential home are
excluded from the bill.
SENATOR SEEKINS answered:
I am excluding homeowners who may hire someone to come
in to fix their driveway or fix their roof or fix
their bathroom leak from being included in the
definition of project owner.
SENATOR FRENCH asked if they would still have tort liability.
SENATOR SEEKINS said they are looking primarily at commercial
applications.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
said this issue was brought forward by her membership. Her
personal experience in this area is limited, but she promised to
take any questions she couldn't answer to the group.
We are in support, obviously, of this legislation....
This has been done in several other states. The risk
of injury to employees engaged in work on a project is
the same regardless of whether the employer works for
a subcontractor, the contractor or the project owner.
The immediate employer and other project participants
are obligated to an injured employee's workers'
compensation benefits regardless of fault in causing
the injury. So, all project participants should be
free of tort liability. The project participants take
an integrated approach to completion of the project;
they are a part of it. Therefore, the price of the
insurance is worked into the contract when someone
contracts to build something for someone.... So the
project owner is, in essence, paying part of the
workers' compensation insurance. In the event a worker
is injured, he or she is entitled to receive the
compensation benefits regardless of fault. This
includes situations where no one is at fault and where
the injured employee, himself, is exclusively at
fault. In exchange for accepting liability payments of
workers' compensation benefits regardless of fault,
the injured employees need an employer and all other
parties who are potentially liable for the payments of
workers' compensation benefits should enjoy the
immunity from tort claims.
Evidently, in Alaska law, project owners were not
historically liable for injuries caused by action or
inaction of independent contractors they retained. For
example, when the State of Alaska retains a qualified
contractor as an independent contractor to construct a
roadway, the state should not be liable for injuries
suffered by the employees of the contractor. In that
situation, by contract, the contractor represents that
he has the necessary expertise to build the road, that
he has the necessary tools and equipment and the
experienced workmen to complete the work. Because the
contractor, not the state, prosecutes the work, the
state should be free of court liability in the event
that an employee of the contractor is injured in his
course of work.
In Alaska, the courts have substantially diminished
the independent contractor rule by adoption of what is
referred to as the retained control doctrine. Under
the doctrine, parties other than an employee's
immediate employer can be liable in tort for any
injury to an employee of an independent contractor if
the party retains any amount of control over the work,
including the right to review the contractor's safety
practices. That's one of the benefits that this bill
would bring about. Right now, the project owner is
better to have hands-off control over the contractors,
including their safety practices, in order to protect
themselves. With the passage of this legislation, the
benefit would be that they would have more of a reason
and it would be to their benefit to make sure that all
safety practices are followed.
Secondly, the Alaska Workers' Compensation Act is
intended to provide injured workers with reasonable
compensation for their work-related injuries without
regard or fault. If the levels of compensation
benefits are not adequate to fully compensate injured
workers, then the amount and type of recoverable
benefits should be reviewed. However, an injured
worker should not be allowed to recover workers'
compensation benefits and then be allowed to assert
tort claims for that same work-related injury. Injured
employees should be compensated only once for their
work-related injuries and the Workers' Compensation
system has been set up specifically to do just that.
Third, the tort claims based on the retained control
doctrine burden the court system by allowing claims
under the workers' compensation system and separate
claims in state Superior Court based on tort law. The
proposed amendment would encourage all parties
participating in a project to identify and enforce
strict safety standards for the benefit of all workers
while at the same time insuring that injured workers
will receive all benefits available under the Alaska
Workers' Compensation Act. Job safety should be
everyone's main concern and the proposed amendment is
the best way to meet the goal while at the same time
protecting the injured workers.
CHAIR BUNDE asked her if she was contending that if this passed,
a project owner would demand proof under potential legal
liability for loss that their contractor has workers'
compensation and then the contractor would have the same demand
on subcontractors. He wondered about the double coverage.
MS. LABOLLE replied that is her understanding, but she would
check.
CHAIR BUNDE said if that were true, he thought that project
owners should want to have some kind of workers' compensation
coverage as well, in the event someone was fraudulent in their
representation.
SENATOR FRENCH indicated to Ms. LaBolle that he was addressing
his remarks to the people who do have expertise. He had some
issues with her statement from the State Chamber, especially the
part about Alaska law and wanted their response.
I'll begin by saying that I read both the cases that
the Alaska law section of your report refers to, both
the Martinson vs Arco case and the Miloso vs State
case. The real issue I have with some of the remarks
in here specifically with respect to safety practices
is this. The assertion is - in this section - that a
project owner can be liable in tort for any injury to
an employee of an independent contractor if the party
retains any amount of control over the work including
the right to review the contractor's safety practices.
After I read Martinson and after I read Miloso, I was
left with the belief that that's just not true, at
least under those two cases. That's absolutely not
true. Indeed, the Martinson case says that everybody
does have a common law duty to provide a safe worksite
to independent contractor employees, if the employer
supplies or controls the worksite. That's the retained
control. So, if you supply the warehouse and you know
there's a vat of poisonous waste inside the worksite,
you should probably put a sign on there that says
don't weld here, don't drill here, don't get in behind
this poisonous vat. The Martinson case goes on to say
that there are bright lines of what constitutes
retained control. It further says that an employer
does not retain control if the employer only reserves
the right to inspect the work to see that the contract
specifications are met - while the independent
contractor controls how and when the work is done.
Then it says an employer does retain control if the
employer retains the right to direct the manner of the
independent contractor's performance or assumes
affirmative duties with respect to safety.
So, when I read in this synopsis of Alaska law that
you can be sued in court for simply reviewing the
contractor's safety practices, I find the statement
almost directly in opposition to that in Martinson.
So, I would appreciate it if you can go on to whoever
wrote that and come back and say no, no, no, here's a
better read on that. So, I guess my question is are
there other cases that I'm unaware of besides these
two that you've cited that I've gone ahead and read or
is it simply the position of the author of this paper
that these cases really do stand for what's here in
this write up. Thank you.
MS. LABOLLE said she would take that back to the author.
SENATOR SEEKINS said this bill makes project owners responsible
to make sure that any of the workers that are hired either by a
contractor or by a subcontractor are covered with workers'
compensation insurance regardless of the area of responsibility,
because that's a point that can be argued on both sides.
I've talked to some of the attorneys on both sides of
the issue as well. But in this case, as I read this
bill and the way we've put this bill together, it
would now require that every employee on that site be
covered with workers' compensation [insurance]. Am I
correct?
MS. LABOLLE replied that is her understanding.
SENATOR SEEKINS asked if that is good public policy or bad.
MS. LABOLLE replied that she thought that is good public policy.
SENATOR SEEKINS continued his thought saying that it protects
the employee at whatever level. He has had experience with
people who have said they don't want any employees; all their
employees were going to be subcontractors with subcontractor
agreements - the idea being that they don't want to have to pay
workers' compensation insurance. He asked if she had seen that
happen.
MS. LABOLLE replied yes.
SENATOR SEEKINS said this bill absolutely makes that impossible
to happen.
MS. LABOLLE replied that is her understanding.
SENATOR SEEKINS said:
That's what we're after. Whether we argue where the
line of responsibility is, what we're trying to
protect here, Mr. Chairman, is the employer who may be
forced into a subcontractor situation because that's
the kind of scumbag he might be working for as a
contractor. We've all seen it done.... The intent here
is to say everyone is covered and you have an
exclusive remedy.
CHAIR BUNDE said he had personal knowledge of people who have
been creative in defining subcontractors to avoid insurance
payments. He said there was a question earlier about the
relationship of the homeowner contracting to have some repairs
or to have a house built; he saw headshaking from the insurance
section of the audience.
SENATOR SEEKINS responded:
Mr. Chairman, I wouldn't have any problem with that as
long as the homeowner is willing to make sure that
they provide workers' compensation for somebody on the
same basis that a project owner would.
MR. MIKE LESSMEIER, State Farm Insurance, said he practiced law
in this state for almost 25 years and could answer Senator
French's question.
Right now under the law, if you hire a plumber to come
into your house or an electrician or even a general
contractor to build your house for you, it's hard for
me to see how you would have any liability to someone
that was injured on the job. The analysis that you
talked about when you reviewed those two cases would
probably be the analysis to go through. In other
words, you would look to see if the homeowner retains
sufficient control over the details of the work that
is performed. I've rarely seen that kind of liability;
I've rarely even seen the attempt to make homeowners
liable under those sorts of circumstances. One of our
concerns in looking at this bill was whether it was
intended to cover homeowners and people, but it does
not.
CHAIR BUNDE thanked him and asked if anyone else wanted to
testify on SB 323.
MR. DAVE DILLARD, 321 Construction, asked, "Why can't we make a
homeowner liable for whoever has worked on his house to build
that house?"
CHAIR BUNDE replied, "I'm not sure why we can't. I'm sure we
could. The question might be why would you want to, but."
MR. DILLARD replied:
Because technically, a homeowner can call up job
service and have the people come out and start
building the house and if he pays over $600, he's got
to hold back federal income tax and stuff, but
technically, he doesn't have to cover them under
liability workers' compensation. Why wouldn't we want
him to cover that person?
CHAIR BUNDE answered that he would have to ask the insurance
industry again, but he suspected there would be personal
liability.
SENATOR SEEKINS inserted:
I wouldn't have a problem holding homeowners
responsible provided - but here again we're getting
into a situation where when I hire someone to work on
my house, they're a sole proprietorship and under
current law, as I understand it, as long as I haven't
set a booby trap for them some way or another, they
are the expert in what a safe workplace would be and
I'm just a homeowner who may not be capable, or should
not even be capable of, being able to assess that
responsibility. But the professional holding himself
out as professional has that additional
responsibility....
MR. DILLARD said he could build one house a year as a homeowner
and not have to pay any of that. His son and wife could build a
house a year, too. He thought everyone should be able to build
his own house, but he didn't see why they shouldn't have to
take liability for people who were hired to work on it the same
way a professional builder has to.
CHAIR BUNDE said, "I think if you're going to have a potential
homeowner have workers' compensation, well, why would they ever
have a general contractor then, because that's just doubling
their expense?"
CHAIR BUNDE said this bill would be set aside for a future date.
There being no further business to come before the committee, he
adjourned the meeting at 2:50 p.m.
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