HB 490 - EMPLOYMENT SECURITY ACT AMENDMENTS Number 0385 CHAIR McGUIRE announced that the next order of business would be HOUSE BILL NO. 490, "An Act relating to the release of employment security records, to the admissibility of determinations and decisions regarding unemployment compensation benefits, and to contributions, interest, penalties, and payments under the Alaska Employment Security Act; providing that property under the Alaska Employment Security Act is not subject to the Uniform Unclaimed Property Act; and providing for an effective date." Number 0401 THOMAS NELSON, Director, Division of Employment Security, Department of Labor & Workforce Development (DLWD), explained that he would be speaking to Sections 4-7, 9, and 11-13 of HB 490 and that a representative from the Department of Law (DOL) would address other sections of the bill. He characterized the proposed changes as largely housekeeping measures and clarification of existing statute that will provide Alaska a language alignment with federal law and bring Alaska into compliance with the unemployment insurance overpayment arrangement it has with other states. MR. NELSON said that Section 4 authorizes the DLWD to adopt regulations providing for the distribution of unclaimed, excess contributions. Sections 5, 6, and 9 clarify statute by adding the terms "manager" and "limited liability company" to existing definitions. Section 7 brings Alaska into conformity with the interstate reciprocal overpayment recovery arrangement and provides the Division of Employment Security the ability to collect unemployment insurance overpayments on behalf of other states for reasons other than fraud; states participating in this agreement already provide this service to Alaska. MR. NELSON said that Section 11 aligns Alaska language with federal law by clarifying which healthcare professionals are excluded from the definition of employment; only student nurses and medical interns are excluded, and Section 11 clears up existing language. Section 12 clarifies language that provides an exclusion, from the definition of wages, of payments or benefits provided by an employer for purposes of educational assistance to its employees; federal law already provides this exclusion from its definition of wages. Section 13 removes reference to the provisions of Department of Revenue (DOR) law regarding disposal of abandoned property; federal law requires that unclaimed excess contributions be deposited back into the unemployment insurance trust fund. CHAIR McGUIRE said she sees nothing particularly controversial about HB 490 in that it appears to bring Alaska law into compliance with federal law. Number 0654 TOBY NANCY STEINBERGER, Assistant Attorney General, Labor and State Affairs Section, Civil Division (Anchorage), Department of Law (DOL), explained that Sections 1-3 pertain to allowing the release of employment security records for criminal investigation and prosecution purposes, and that Section 8 pertains to the binding effect of unemployment compensation decisions. Sections 1-3 will help federal, state, and municipal prosecutors in investigating and prosecuting criminal cases by helping them locate suspects, witnesses, victims, and persons on parole. When paying employment security taxes, employers provide quarterly payroll information for each employee to the Division of Employment Security; thus the location information on employees is very current. MS. STEINBERGER also pointed out that because the Division of Employment Security pays unemployment benefits to qualifying persons, these persons provide the division with information about where they reside. The Division of Employment Security is heavily federally funded, she remarked, and the U.S. Department of Labor requires that the employment security records be kept confidential, but has allowed, over the years, a number of exceptions, which are found in AS 23.20.110. Unfortunately none of the current exceptions allow for the release of information for criminal prosecution and investigation purposes other than for prosecuting cases against claimants who have fraudulently received unemployment compensation benefits. MS. STEINBERGER relayed that over the years, because the Division of Employment Security's information is updated quarterly, the Criminal Division of the DOL has requested this information in order to find witnesses and victims. Unfortunately, the Division of Employment Security has had to deny these requests. She noted that upon review of Sections 1-3 of HB 490, the U.S. Department of Labor has approved the proposed changes and has in fact permitted other states to allow the release of employment security information for purposes of criminal investigations and prosecutions. These other states include Washington, Iowa, Arkansas, Georgia, Utah, and Oklahoma. MS. STEINBERGER, directing attention to Section 8, which will amend AS 23.20.497, explained that persons who are denied unemployment benefits are entitled to a hearing, but current statute provides that unemployment compensation decisions are not admissible in a subsequent action or proceeding in another forum, for example, if an employee brings a lawsuit against his/her employer. Employers have little incentive to participate in unemployment compensation proceedings because, unless they are self insured, they have no financial interest in the outcome. Section 8 will clarify that unemployment compensation decisions are not only inadmissible in a court or administrative proceeding but are also inadmissible in an arbitration proceeding. Number 0884 REPRESENTATIVE GRUENBERG asked whether there would be any objections to adding the words "to them" to page 3, line 7; the text of Section 7 would then read in part, "if the sums were obtained by an individual who is not entitled to them". CHAIR McGUIRE surmised that such language is not needed. REPRESENTATIVE HOLM surmised that that meaning is implicit. REPRESENTATIVE GRUENBERG, turning attention to page 3, line 15, asked whether "limited partnership" and "limited liability partnership" should be added. MS. STEINBERGER pointed out that "partnership" is already included in the text of Section 9, which merely updates Title 23 to include "limited liability company", which is a whole new entity that has been provided for in Title 10. REPRESENTATIVE GRUENBERG offered his recollection, however, that Title 32 was recently amended by adding a new chapter pertaining to "limited liability partnerships", which are not addressed in the "uniform partnership Act." MS. STEINBERGER said, "You may want to add 'limited liability partnerships'." CHAIR McGUIRE suggested that they make a conceptual amendment "to ask the drafters to be clear that whenever these forms of businesses or employing units are referenced throughout, that it includes all of the various forms of partnerships, limited liability partnerships, limited liability companies, and so on, that it could." Number 1049 REPRESENTATIVE GRUENBERG made a motion to adopt Chair McGuire's suggestion as Conceptual Amendment 1. There being no objection, Conceptual Amendment 1 was adopted. REPRESENTATIVE GRUENBERG turned attention to Section 2 of the bill and asked if it should include language allowing the release of information for the purpose of enforcing child support. MS. STEINBERGER relayed that such an exception is already included in AS 23.20.110(o). REPRESENTATIVE GARA asked whether the state is allowed to provide unemployment benefits to people whom the federal government does not. MS. STEINBERGER noted that current Alaska law [allows benefits] to "health professionals and health nurses," but HB 490 attempts to conform state law to federal law. REPRESENTATIVE GARA mentioned that he is referring specifically Sections 11 and 12. MR. NELSON said of Section 11, "We already have existing language, but it's quite confusing to some employers in Alaska, so we're spelling it out, exactly who is exempt from the definition of employment for the purposes of unemployment insurance contributions." REPRESENTATIVE GARA said he is not sure he agrees with the policy of limiting the availability of unemployment compensation to medical and nursing interns and of not counting the benefits referred to in Section 12 as wages for unemployment purposes. Number 1223 MS. STEINBERGER remarked that the language in the bill will provide that student nurses will not get unemployment benefits and the employer will not have to pay taxes on student nurses or medical students who are interning and receiving some income. CHAIR McGUIRE characterized the foregoing as an incentive to employers who hire student nurses. MR. NELSON said that Section 12 speaks to training systems provided by employers to employees and those amounts of money not being counted toward wages. Federal law currently allows for "this," but Alaska law does not yet. He said that the exclusion provided for via Section 11 is not a change; rather, the language is simply being clarified. He added: And the reason we asked for that is, there was an instance in the state several years ago, or within the last two years, in which an employer misinterpreted this and it resulted in a mistake on their unemployment insurance contributions as an employer, and it was quite expensive, and the remedy and the cost of recovering that amount of money was quite extensive. MR. NELSON, in response to a question, said that in the aforementioned instance, the employer employed nurses that were not student nurses but didn't pay their contributions, and so the [DLWD] had to recover those monies because, under current law, the employer is required to pay for nurses that are not student nurses. CHAIR McGUIRE acknowledged that the current statutory language could be misinterpreted to apply to all nurses. Number 1351 REPRESENTATIVE HOLM moved to report HB 490, as amended, out of committee with individual recommendations and the accompanying zero fiscal note. Number 1369 REPRESENTATIVE GARA objected for the purpose of providing a comment. He said: There's potentially another side to this whole story and I don't know that I've heard it ... - maybe there's not, maybe there is - and I feel uncomfortable voting on this with the amount of information I have right now. ... To the extent that I hear information that makes me think otherwise, I might vote against it on the floor; I just wanted you to know that. REPRESENTATIVE GARA then withdrew his objection. Number 1393 CHAIR McGUIRE asked whether there were any further objections to the motion. There being no objection, CSHB 490(JUD) was reported from the House Judiciary Standing Committee.