HOUSE STATE AFFAIRS STANDING COMMITTEE March 10, 1994 8:00 a.m. MEMBERS PRESENT Representative Al Vezey, Chairman Representative Pete Kott, Vice Chairman Representative Bettye Davis Representative Gary Davis Representative Harley Olberg Representative Jerry Sanders MEMBERS ABSENT Representative Fran Ulmer COMMITTEE CALENDAR HB 407: "An Act relating to issuance of commemorative gold rush motor vehicle license plates." CSHB 407 PASSED OUT OF COMMITTEE *HB 307: "An Act relating to the Uniform Probate Code, including nonprobate transfers, guardianships, trusts, and multiple-party accounts; relating to the Uniform Simultaneous Death Act; amending Alaska Rule of Probate Procedure 5; and providing for an effective date." HELD IN COMMITTEE *HB 489: "An Act repealing the state requirement to provide overtime compensation and relating to liquidated damages for unpaid minimum wages." PASSED OUT OF COMMITTEE HB 459: "An Act relating to liquidated damages and attorney fees for minimum wage and overtime compensation claims." CSHB 59 PASSED OUT OF COMMITTEE *HB 389: "An Act relating to criminal mischief." NOT HEARD HB 347: "An Act relating to long-term plans of certain state agencies." NOT HEARD WITNESS REGISTER TIM BENINTENDI, Staff Representative Carl Moses Alaska State Capitol, Room 204 Juneau, AK 99811-0460 Phone: 465-4451 POSITION STATEMENT: Gave the sponsor statement for SSHB 307 ART PETERSON, Attorney Dillon & Findley Alaska Uniform Law Commissioner 350 N. Franklin Juneau, AK 99801 Phone: 586-4000 POSITION STATEMENT: Supported SSHB 307 JOHN GEORGE American Council of Life Insurance 9515 Moraine Way Juneau, AK 99801 Phone: 789-0172 POSITION STATEMENT: Stated concerns on SSHB 307 J.R. `RANDY' CARR, Chief Wage & Hour Division Department of Labor P.O. Box 107021 Anchorage, AK 99510-7021 Phone: 269-4913 POSITION STATEMENT: Answered questions on HB 489 and HB 459 KEN LEGACKI 425 G Street, Ste. 760 Anchorage, AK 99501 Phone: 258-2422 POSITION STATEMENT: Commented on HB 459 and HB 489 REPRESENTATIVE ELDON MULDER Alaska State Legislature Alaska State Capitol, Room 116 Juneau, AK 99811-0460 Phone: 465-2647 POSITION STATEMENT: Addressed HB 459 PREVIOUS ACTION BILL: HB 407 SHORT TITLE: COMMEMORATIVE GOLD RUSH LICENSE PLATES SPONSOR(S): REPRESENTATIVE(S) FOSTER,Toohey JRN-DATE JRN-PG ACTION 01/27/94 2166 (H) READ THE FIRST TIME/REFERRAL(S) 01/27/94 2166 (H) STATE AFFAIRS, FINANCE 01/31/94 2207 (H) COSPONSOR(S): TOOHEY 03/01/94 (H) STA AT 08:00 AM CAPITOL 102 03/01/94 (H) MINUTE(STA) 03/05/94 (H) MINUTE(STA) 03/08/94 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 307 SHORT TITLE: UNIFORM PROBATE CODE SPONSOR(S): REPRESENTATIVE(S) MOSES,Ulmer JRN-DATE JRN-PG ACTION 01/03/94 2007 (H) PREFILE RELEASED 01/10/94 2007 (H) READ THE FIRST TIME/REFERRAL(S) 01/10/94 2007 (H) STATE AFFAIRS,JUDICIARY,FINANCE 01/31/94 2204 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 01/31/94 2204 (H) STATE AFFAIRS,JUDICIARY,FINANCE 03/10/94 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 489 SHORT TITLE: OVERTIME COMPENSATION SPONSOR(S): REPRESENTATIVE(S) VEZEY JRN-DATE JRN-PG ACTION 02/14/94 2379 (H) READ THE FIRST TIME/REFERRAL(S) 02/14/94 2379 (H) STATE AFFAIRS 02/18/94 2461 (H) L&C REFERRAL ADDED 03/10/94 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 459 SHORT TITLE: DAMAGES & ATTY FEES FOR UNPAID WAGES SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 02/09/94 2321 (H) READ THE FIRST TIME/REFERRAL(S) 02/09/94 2321 (H) L&C,STATE AFFAIRS,JUDICIARY 02/22/94 (H) L&C AT 03:00 PM CAPITOL 17 02/22/94 (H) MINUTE(L&C) 02/23/94 2495 (H) L&C RPT 2DP 4NR 02/23/94 2495 (H) DP: PORTER, MULDER 02/23/94 2496 (H) NR: SITTON, WILLIAMS, GREEN, HUDSON 02/23/94 2496 (H) -ZERO FISCAL NOTE (LABOR) 2/23/94 03/10/94 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 389 SHORT TITLE: INCREASED PENALTIES FOR JOYRIDING SPONSOR(S): REPRESENTATIVE(S) NORDLUND,Finkelstein JRN-DATE JRN-PG ACTION 01/21/94 2124 (H) READ THE FIRST TIME/REFERRAL(S) 01/21/94 2124 (H) STATE AFFAIRS,JUDICIARY,FINANCE 03/10/94 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 347 SHORT TITLE: STATE LONG-TERM PLANNING SPONSOR(S): REPRESENTATIVE(S)PARNELL,Hanley,Therriault, B.Davis,James JRN-DATE JRN-PG ACTION 01/07/94 2018 (H) PREFILE RELEASED 01/10/94 2018 (H) READ THE FIRST TIME/REFERRAL(S) 01/10/94 2019 (H) STATE AFFAIRS, FINANCE 01/12/94 2043 (H) COSPONSOR(S): THERRIAULT 01/13/94 2056 (H) COSPONSOR(S): B. DAVIS 01/14/94 2084 (H) COSPONSOR(S): JAMES 03/08/94 (H) STA AT 08:00 AM CAPITOL 102 03/08/94 (H) MINUTE(STA) 03/10/94 (H) STA AT 08:00 AM CAPITOL 102 ACTION NARRATIVE TAPE 94-26, SIDE A Number 000 CHAIRMAN AL VEZEY called the meeting to order at 8:00 a.m. Members present were REPRESENTATIVES SANDERS, OLBERG, G. DAVIS, and B. DAVIS. HB 407 - COMMEMORATIVE GOLD RUSH LICENSE PLATES CHAIRMAN VEZEY opened CSHB 407, Version J, for discussion under bills previously heard. He stated a fiscal note had been received from the Department of Public Safety which stated CSHB 407 would average a positive revenue of $22,500 a year. CSHB 407: "An Act relating to issuance of commemorative gold rush motor vehicle license plates; and providing for an effective date." (REPRESENTATIVE KOTT joined the meeting at 8:01 a.m.) Number 045 REPRESENTATIVE GARY DAVIS moved to pass CSHB 407 from committee with attached fiscal notes and individual recommendations. Number 048 CHAIRMAN VEZEY asked the committee secretary to call roll on the motion. The House State Affairs Committee passed CSHB 407. IN FAVOR: VEZEY, KOTT, SANDERS, G. DAVIS, OLBERG, B. DAVIS. OPPOSED: NONE ABSENT: ULMER HB 307 - UNIFORM PROBATE CODE CHAIRMAN VEZEY opened discussion on SSHB 307. Number 067 TIM BENINTENDI, AIDE FOR REPRESENTATIVE CARL MOSES, gave the sponsor statement for SSHB 307. The sponsor summary reads as follows: "SSHB 307 would provide a comprehensive upgrade of Alaska's probate code by adopting revisions to AS 13.11 and AS 13.31, as recommended by the National Conference of Commissioners on Uniform State Law (NCCUSL). Revisions to AS 13.11 involve Intestacy, Wills, and Donative Transfers. There would also be changes to AS 13.06, General Provisions, and to AS 13.16, Probate of Wills and Administration. "Changes to AS 13.11 are primarily aimed at enhanced spousal and family protection, reduced risk of technical invalidation of wills, and greater harmony of the rules of presumed intention for property transfers at death. "Changes to AS 13.31 center on the clarification of the law of joint tenancy and tenancy in common for deposit accounts held by multiple parties. It also includes Transfer-On- Death provisions for investment security accounts. "The Sponsor Substitute added the changes to AS 13.31, the Nonprobate Transfers. It also deletes some definitions as found in the NCCUSL language, which are duplicative or unnecessary. Other modifications convert NCCUSL language into Alaska's drafting style. This version also places the registry for international wills in the Department of Commerce and Economic Development..." MR. BENINTENDI stated the registry for international wills may eventually be placed in the court system, but without the court system completing its review of SSHB 307, they were not prepared to recommend this change. The sponsor summary continued: "HB 307 is supported by the Attorney General, the Alaska Uniform Law Commission, and the American Association of Retired Persons. The Alaska Court System is currently reviewing its provisions. It carries zero fiscal notes from DCED, LAW, and the Court System." Number 126 CHAIRMAN VEZEY commented SSHB 307 dealt with a very complicated subject. ART PETERSON was asked to be the next individual to testify. CHAIRMAN VEZEY stated he had received a letter from MR. PETERSON earlier in the week. Number 166 ART PETERSON, DILLON & FINDLEY ATTORNEY, ALASKA UNIFORM LAW COMMISSIONER, testified in favor of SSHB 307. He stated SSHB 307 is an attempt by the NCCUSL, in conjunction with the Joint Editorial Board for the Uniform Probate Code, to update discrepancies they have found in Uniform Law. He noted families are not the same as they were when the original version of Uniform Law was being drafted. Families now have multiple parents due to divorces and remarriages, and mixed children within them. He stated questions arise when a decedent, in his will says, "I give to my children all of my property," because it is hard to define which children, out of which marriage, are to be included in the distribution. MR. PETERSON stated if a person dies without a will, currently the Intestacy provisions divide the assets of the deceased. SSHB 307 will rearrange some of the traditional provisions on Intestacy. The surviving spouse will get a larger share under the amendments in SSHB 307. In second marriage situations, the second marriage may occur much later in life; therefore, SSHB 307 recognizes the number of years of marriage will go to the percentage that the survivor will receive. Descendants and parents of the decedent will have distribution changes. MR. PETERSON mentioned the Alaska delegation to the National Conference supports SSHB 307. He commented SSHB 307 really only has one provision which has a state impact which is the registry for international wills. This would be a state repository for performing international wills registration. He stated SSHB 307 regulates the distribution of property among private individuals. MR. PETERSON said the letter the committee received from the Association of Retired Persons to REPRESENTATIVE MOSES, December 1, 1993, highlights SSHB 307 well. MR. PETERSON explained there were two basic parts to SSHB 307, Article II, Intestacy and Wills, and Article IV, Nonprobate Transfers. Alaska already has some provisions which regard the concept of "pay on death," whereby a decedent's bank account can automatically be transferred into a survivor's name. Current law, however, relates to multiple party accounts, and the amendment in SSHB 307 would allow the law to address single party accounts. The transfer provisions for securities will be expanded to cover an individual's certain range of assets, whereby upon death, a person's stocks would avoid probate and be transferred directly to the property of a designated person. (REPRESENTATIVE SANDERS left the meeting at 8:15 a.m.) Number 353 CHAIRMAN VEZEY noticed the section of SSHB 307 regarding Alaska Native Corporation stock and pointed out it did not sound like a national issue. Number 360 MR. PETERSON responded the Alaska Native Corporation stock section was an "Alaska wrinkle." When he worked with House Judiciary in the early 1970s, they amended the probate code to include that provision because the Alaska Native Claims Settlement Act (ANCSA) had just passed in 1971. He noted certain provisions of state law had to be enacted to implement the federal law. Therefore, the special situation of ANCSA stock had to be recognized in SSHB 307. MR. PETERSON pointed out the provision was on page 9, lines 18-20, which states, "The intested share of the surviving spouse in settlement common stock, or other inalienable stock, in a corporation organized under ANCSA..." He noted there have been attempts to tailor SSHB 307 to fit both the Alaska format in drafting style, as well as a "wrinkle" such as the ANCSA provision. Number 380 CHAIRMAN VEZEY asked MR. PETERSON to explain what SSHB 307 would do with Native corporation stock. (REPRESENTATIVE OLBERG left the meeting at 8:20 a.m.) Number 385 MR. PETERSON replied when there is no will, the surviving spouse will get all of the decedents assets if there are no children. If there are children, the surviving spouse would get half of the assets. Number 390 CHAIRMAN VEZEY questioned the phrase "surviving issue." Number 392 MR. PETERSON responded SSHB 307 helps clarify and improve terminology such as "child, children, issue, descendants, etc..." "Surviving issue" would normally be the descendant children. Number 401 CHAIRMAN VEZEY commented the revision of Uniform Probate Code has been worked on for 20 or more years and he observed society has not necessarily changed. He noted the divorce rate in Alaska today is less than that of 25 years ago. He asked if MR. PETERSON had been referring to societal changes which had been occurring from the mid-1970s to the current date. Number 416 MR. PETERSON answered he was referring to the complete continuum. He said he based his testimony on the comments produced by the drafters when SSHB 307 came out. The drafters were addressing the changes which occurred during the 20 year original promulgation and enactment of the original version of the Uniform Probate Code. The drafters pointed out along with the substantial divorce rate, there is a substantial remarriage rate. Remarriages produce children with multiple sets of parents and SSHB 307 deals with the questions that arise because of these changes in the family. (REPRESENTATIVE OLBERG returned to the meeting at 8:24 a.m.) Number 442 CHAIRMAN VEZEY stated the biggest change he was aware of in the last 30 years was the number of illegitimate births. MR. PETERSON agreed, assuming CHAIRMAN VEZEY meant the parties are out of wedlock and may or may not be living together. He stated SSHB 307 tries to simplify both the intested, and will situation, so there is an emphasis on executing the intent of the person with the will. Secondly, for those without a will, SSHB 307 tries to determine what the decedent would most want to have happen to their property. He noted SSHB 307 does not specifically point out illegitimate children, but it does define "children" as including adopted children, and in a single parent situation a "child" is still defined as a child. Number 469 REPRESENTATIVE G. DAVIS inquired if there had been any attempts to ensure that residents of a state do have a will in trying to reduce the amount of probate problems that arise. MR. PETERSON did not know of a state that has made the making of wills an official state policy by some state agency. He knew Bar Associations around the country are encouraging people to get wills and make their intent clear. (REPRESENTATIVE SANDERS returned to the meeting at 8:27 a.m.) Number 483 CHAIRMAN VEZEY asked what changes there are in circumstances that would trigger a person's estate going to the state. Number 487 MR. PETERSON did not believe there were significant changes by SSHB 307 in the circumstances. An estate goes the state when there is no will and there is no identifiable descendant or antecedent who could inherit from the decedent. Number 495 REPRESENTATIVE JERRY SANDERS referred to AS 13.12.108 on page 11, which states,"after born heirs, an individual in gestation at a particular time is treated as living." He inquired as to the definition of "a particular time." Number 500 MR. PETERSON assumed "particular time" means the time of death of the decedent. In the case of the woman who dies while a child is in gestation, typically the child would also die. He stated the example of a father who dies and his will speaks before his child is born. AS 13.12.108 attempts to address this problem if the individual lives 120 hours more after the birth. Number 511 REPRESENTATIVE SANDERS clarified the newborn child could not be disinherited. Number 515 MR. PETERSON said the child would be treated as a living child if it survived 120 hours after birth. He noted the 120 hours were similar to the provisions in the Simultaneous Death Act, which Alaska now has and is slightly modified by SSHB 307. Number 521 REPRESENTATIVE BETTYE DAVIS asked if there had not been any changes to the Uniform Probate Code since it was enacted 20 years ago. Number 525 MR. PETERSON answered there had been no comprehensive revisions. Number 526 REPRESENTATIVE B. DAVIS questioned if there was a mandate for the changes, or were the Uniform Probate Code changes reviewed and the states were left to decide if they should implement them. Number 530 MR. PETERSON answered there was not a federal mandate for the Uniform Probate Code changes, although there is an international convention in effect which the United States has not signed onto yet. He stated if states were to adopt the international wills provisions in SSHB 307, it would encourage the federal government sign on. Number 535 REPRESENTATIVE B. DAVIS clarified the changes started on a state by state basis. Number 536 MR. PETERSON affirmed REPRESENTATIVE B. DAVIS. Number 542 MR. PETERSON pointed out in Article II there are some random amendments, but basically the Uniform Code in the 1972 version. He stated the Joint Editorial Board for the Uniform Probate Code is comprised of several component organizations that bring the topics together. The Uniform Laws Conference then creates a drafting committee who then works for a minimum of two, or more years to reach the final stages. The drafting committee then brings the draft to the floor of the National Uniform Laws Conference where it is debated by the entire group for two separate years. Number 557 CHAIRMAN VEZEY introduced JOHN GEORGE as the next individual to testify. Number 561 JOHN GEORGE, AMERICAN COUNCIL OF LIFE INSURANCE, stated his concerns about SSHB 307. He stated life insurance agencies are very concerned about SSHB 307 because the beneficiary to a life insurance policy is designated by the person buying the policy, or there are contingent beneficiaries, assuming the named beneficiary is deceased. He noted SSHB 307 might change the beneficiary of the life insurance policy to someone other than designated. Insurance would be pulled into probate, whereas before life insurance policies have been excluded from probate. Number 583 CHAIRMAN VEZEY clarified the American Council of Life Insurance is asking for more time to review SSHB 307. Number 587 MR. GEORGE felt MR. PETERSON and other researchers should review SSHB 307 with them. He noted SSHB 307 had a number of committee referrals and there would probably be time to go over SSHB 307 and deal with any problems they may find in another committee. Number 596 REPRESENTATIVE B. DAVIS asked MR. PETERSON to speak to MR. GEORGE's concern. CHAIRMAN VEZEY added he had received communication from five attorneys in the Fairbanks area who practice probate and have asked for time to review SSHB 307. They stated the Probate Committee for the Alaska Bar Association had not reviewed SSHB 307. Number 604 MR. PETERSON responded the Alaska Bar Association, Probate Section, has had the opportunity to study and review SSHB 307. The Bar Association puts out a monthly newsletter listing the different sections of the bar, and in that schedule for 1992-1993, they were taking up Article II revisions in several meetings. He noted the Bar Association has had SSHB 307 in their formal study system for nearly two years. He said the chair of the probate section advised him that some members expressed serious concerns to him (the chair). He wrote back, October 4, 1993, and asked them for their concerns so they could get them straightened out. In the same letter he gave an example of a concern and offered alternative approaches to solve the problem. MR. PETERSON said he still has not received a response to his October 4, 1994, letter and he doubted the seriousness of their concerns. MR. PETERSON referred to Former Attorney General, Charlie Cole, who supported SSHB 307. He stated in reference to the section on spousal share, Mr. Cole supported a more extreme version which gave the spouse even more. MR. PETERSON would like to know the specific comments by the Fairbanks attorneys because he felt they had had time to study SSHB 307. MR. PETERSON did not quite understand MR. GEORGE'S statement, therefore, he felt it would be good to meet with his organization and discuss their concerns. Number 647 CHAIRMAN VEZEY commented the letters received by the attorneys would become public record and MR. PETERSON would have access to them. Due to the complex nature of SSHB 307, CHAIRMAN VEZEY decided to hold SSHB 307 in committee and it would be rescheduled at a later date. HB 489 - OVERTIME COMPENSATION CHAIRMAN VEZEY opened HB 489 for discussion. The House State Affairs Committee filed HB 489, and it has a referral to the House Labor & Commerce Committee. CHAIRMAN VEZEY, in order to give the sponsor statement on HB 489, turned the gavel over to VICE CHAIRMAN KOTT. Number 661 VICE CHAIRMAN KOTT asked CHAIRMAN VEZEY to address HB 489. Number 665 CHAIRMAN VEZEY addressed HB 489 for the House State Affairs Committee. He stated HB 489 would adjust Alaska's overtime laws to allow workers to work longer workdays and shorter work weeks. The inability to do this has been a frequent complaint, CHAIRMAN VEZEY had heard. Alaska currently has an entire section in statute which deals with the number of hours in a workday. In drafting HB 489, he thought making more statutes would nullify other current statutes; therefore, the most flexible approach would be to adopt the federal standard and repeal Alaska's current overtime statutes. The federal standard states if a person works more than 40 hours a week, they will be paid overtime. Collective bargaining agreements are also clarified by the federal standard, whereby the employer/employee can agree upon their own terms as long as they do not require individuals to work over 40 hours a week without overtime. CHAIRMAN VEZEY stated the second part of HB 489 addresses the area in Alaska statute which regulates the failure to pay overtime. TAPE 94-26, SIDE B Number 000 CHAIRMAN VEZEY explained current statute states if overtime is not paid, for any reason, the employer accrues a 100 percent liquidated damage penalty. He stated a vast majority of employers act in good faith and there are misunderstandings, whereby overtime may not have been paid. He felt a 100 percent penalty may not be in the best interest of promoting employer/employee relationships. He suggested this portion of the statute be amended to clarify, if the matter is settled administratively, that liquidated damages would not apply. CHAIRMAN VEZEY felt this would be the simplest approach. Number 032 REPRESENTATIVE B. DAVIS asked who requested the drafting of HB 489. CHAIRMAN VEZEY stated there was not a specific request, but he has had several employers and employees confront him with the issue that they would like to work short workweeks, allowing them longer weekends. Number 042 REPRESENTATIVE B. DAVIS inquired if employers were not already working with employees to allow them longer work hours. CHAIRMAN VEZEY responded Alaska has two pages of statutes regarding the "8-hour workday." Rather than add more pages of exceptions to the "8-hour workday," he advocated the federal standard of a 40-hour workweek be adopted. Number 056 REPRESENTATIVE B. DAVIS felt employees already have the opportunity to work long days, and asked how HB 489 make the system any different. Would HB 489 make it easier to have longer workdays? CHAIRMAN VEZEY said REPRESENTATIVE B. DAVIS was correct. Number 063 REPRESENTATIVE B. DAVIS asked if HB 489 would eliminate overtime for any of the individuals who work more than 40 hours. Number 065 CHAIRMAN VEZEY said no, HB 489 adopts the mandate that overtime has to be paid after 40 hours a week, by federal law. He could not see the point of duplicating federal law; therefore, he opted to adopt federal law and repeal Alaska's overtime regulations. Number 074 REPRESENTATIVE B. DAVIS clarified liquidated damages would be settled on an employer/employee basis and the employees would not be paid the liquidated damages. Number 084 CHAIRMAN VEZEY affirmed REPRESENTATIVE B. DAVIS. If the employee has to adjudicate the matter, however, there would be a mandated 100 percent liquidated damages. Number 089 REPRESENTATIVE B. DAVIS asked how HB 489 would allow a person to work longer hours in order to have a three-day weekend. Number 093 CHAIRMAN VEZEY answered there would not be two pages of Alaska statutes to comply with in order to exceed the 8-hour work day. Number 098 REPRESENTATIVE B. DAVIS asked for an example of things needed to be done to comply with the statutes. CHAIRMAN VEZEY replied currently each employer, for each project, has to submit a specific plan to the Department of Labor and have it approved. REPRESENTATIVE B. DAVIS clarified HB 489 eliminates this requirement and an employee need only fulfill the 40-hour workweek in some way, in order to get a three day weekend. Number 108 CHAIRMAN VEZEY stated collective bargaining agreements would still have to be honored. Number 110 REPRESENTATIVE B. DAVIS stated Department of Labor did not have a statement of disagreement with HB 489. She clarified the 40 hours could be worked in any way the employer/employee decide, unless there would be a labor bargaining agreement setting the standards. Number 120 CHAIRMAN VEZEY stated the bargaining agreement would be between the employer and the employee. Number 122 REPRESENTATIVE G. DAVIS thought it was apparent federal law did not recognize a 4-day, 10-hour workweek. He questioned if current state law states a person who works 10 hours a day would receive overtime for the extra two hours. Number 129 CHAIRMAN VEZEY responded the requirement to pay that overtime is in state statute, and the two hours would be paid as overtime, unless there was a work plan approved by the Department of Labor. Number 137 VICE CHAIRMAN KOTT introduced RANDY CARR as the next to testify. Number 145 J.R. `RANDY' CARR, CHIEF WAGE & HOUR DIVISION, DEPARTMENT OF LABOR (DOL), answered questions on HB 489 and the impact it will have. The DOL opposed HB 489. He stated, in current law, there is an exemption from the overtime statutes that provide for an employer to submit a flexible work hour plan request to the DOL. The statutes define fairly specific criteria that the request can contain, and it is essentially a 4-day, 10-hour workweek. He said current law was written in the early 1980s as a result of a legislature's attempt to do what HB 489 is now trying to do. The banking and airline industry was concerned that their employees were not able to work 4-day, 10-hour workweeks to receive a 3-day weekend. He pointed out the current laws were the resolution to these concerns. A plan need only be submitted to the DOL for approval. After approval, the employer and employee can enter into voluntary arrangements to work under the approved schedule. MR. CARR stated the elimination of a state overtime requirement will have a negative impact on Alaska employers. Because Alaska has been enforcing its overtime law, greater than the federal standard, the U.S. DOL has taken action in enforcing the Federal Labor Law. The Fair Labor Standards Act (FLSA) has a provision which states if there is a state law with a higher standard, the state law prevails. He noted if Alaska's overtime is completely eliminated, the federal government will have no alternative but to begin enforcing the FLSA. The FLSA enforces the payment of overtime after 40 hours differently than state law with a civil money penalty. A civil money penalty is like a ticket, MR. CARR stated, with the potential of up to $1000 for each violation an employer is found guilty of. The state would have to write tickets on top of collecting the unpaid overtime and assessing punitive liquidated damages. MR. CARR did not believe CHAIRMAN VEZEY would be aware of this, because they had not met on the issue. MR. CARR addressed liquidated damages regarding having them not be assessed if the matter was settled administratively. The DOL did support this concept. In previous years, the payment of liquidated damages was variable and not mandatory; however, as the result of a 1993 court decision the payment of liquidated damages is now mandatory. He did not know if the language used in HB 489 would properly accomplish the desired end result. MR. CARR stated if overtime, under state law, is eliminated there will be a sector of employees in the state that will be totally disenfranchised. The FLSA applies to 75-80 percent of businesses in the state, but this will leave 20- 25 percent of businesses in state that are not subject to federal law; therefore, their employees would be disenfranchised. He noted these employees are not the type usually represented by collective bargaining, but the unions may seek these people to join into collective bargaining. MR. CARR related to the history of overtime as it began as a penalty levied against employers to encourage them to hire more workers, rather than work their existing work force longer hours. Employees now, however, view overtime as a reward for working longer hours. MR. CARR emphasized overtime is meant to be punitive, and with 10 plus percent of unemployment in Alaska, the law still has valid purpose. Number 311 REPRESENTATIVE OLBERG asked if the state of Alaska would cease enforcing any overtime provision with the passage of HB 489. Number 315 MR. CARR replied HB 489 would eliminate the word overtime from Alaska statutes, therefore the state would not have authority to enforce any overtime requirements because it would no longer have a state law. Number 319 REPRESENTATIVE OLBERG asked CHAIRMAN VEZEY if this was his intent. CHAIRMAN VEZEY responded he deliberately left the state's ability to pursue violations of federal overtime laws or collective bargaining agreements in statute. MR. CARR stated there is presently a serious doubt the state would be able to enforce the federal overtime requirement. The state has statutory power to enforce contracts, whereby if an employer violated its stated overtime policy, the state could enforce it. He did not believe it was plausible to think the state would be able to go to state court to enforce federal overtime requirements found in the FLSA. Number 341 CHAIRMAN VEZEY asked MR. CARR to describe groups of employees that would not be covered under the FLSA. Number 344 MR. CARR replied it would be easier to state what groups the FLSA does cover. The FLSA addresses enterprises, any business doing $500,000 gross business annually. Small businesses, doing less than $500,000 gross business annually, would not be subject to the FLSA. Businesses involved in interstate commerce, selling manufactured items which are transported across state lines, are also covered by the FLSA. He noted the service industry, which is rapidly growing in Alaska, generally falls into the small business category and those businesses would not be subject to the current FLSA. Number 366 REPRESENTATIVE OLBERG asked why the DOL did not supply a negative fiscal note for HB 489 if the bill meant the state of Alaska would be taken out of overtime enforcement. If HB 489 were to pass, those individuals involved in the enforcement of overtime would then be unemployed. Number 371 MR. CARR responded overtime enforcement is only one element of nine programs the Division of Wage & Hour administers, and HB 489 would not have a great impact on the employees. The Wage & Hour work force would merely be redirected. Number 379 CHAIRMAN VEZEY interpreted the DOL zero fiscal note as though the state did not spend a lot of time pursuing overtime issues. Number 383 MR. CARR responded that the DOL handles approximately 800 wage claims per year statewide. Of these claims, 30 percent have some overtime element involved. Number 390 CHAIRMAN VEZEY pointed out "some element involved," as stated by MR. CARR, and responded there is also other issues involved; therefore, the time in handling the case would not substantially change if overtime was not an issue. Number 392 MR. CARR said CHAIRMAN VEZEY was correct. He clarified the DOL would still have enough work without overtime cases. Number 395 CHAIRMAN VEZEY asked why Alaska allowed for a 56-hour workweek for the mining industry. MR. CARR replied there is a specific exemption in state law for small mining, whereby they can work up to 56 hours a week before overtime is incurred. This exemption exists because there is a federal exemption for the mining industry. VICE CHAIRMAN KOTT moved to the Anchorage teleconference site. Number 413 KEN LEGACKI, an attorney in Anchorage, expressed his concerns regarding HB 459 and HB 489 combined. The analysis of HB 459 concerned him because it does not address how HB 459 effectuates its purpose and policies. He noted HB 459 is in conflict with the work fare bill submitted by REPRESENTATIVE MARK HANLEY and SENATOR LOREN LEMAN, which would help people get into the work force and off public assistance. He felt HB 459 did not encourage employment and it would reward "unscrupulous employers who try to circumvent and escape the law." He related to employers who avoid paying overtime and, when they are caught, then try to wager down the earnings to be paid in restitution. MR. LEGACKI stated he was involved in a case against one of the worlds largest insurance companies "who bragged that their overhead is 5 percent lower than their competition." However, their overhead is low only because they force their employees to work long hours. He noted this company is being sued in four states by the Federal Department of Labor. This company is using the "good faith defense" and has been found in violation of the overtime law several times. He felt Alaska's overtime laws are very important because it protects the employers, employees, and it encourages employment. From his analysis, he believed if HB 459 were to pass, several sections of the bill would be in violation with federal law and would then become nullified. Number 516 CHAIRMAN VEZEY asked MR. LEGACKI what bill he was testifying on. Number 518 MR. LEGACKI replied HB 459 and some of his comments related to HB 489. Number 522 REPRESENTATIVE B. DAVIS commented the problems CHAIRMAN VEZEY intended to take care of with HB 489 would be taken care of in HB 459. She asked if HB 459 would be listened to before action was taken on HB 489. Number 529 VICE CHAIRMAN KOTT replied the committee intended to take action on HB 489 so it may proceed through the process with HB 459. He noted if there is a duplication "they will be rolled by an amendment into one or the other." Number 533 REPRESENTATIVE B. DAVIS stated, since HB 489 only had one referral, she was not interested in moving it out of committee at that time. She felt HB 489 deserved more consideration by the committee. Number 538 REPRESENTATIVE SANDERS agreed with REPRESENTATIVE B. DAVIS and would like to hold HB 489 for further consideration. Number 543 VICE CHAIRMAN KOTT noted HB 489 also has a referral to Labor and Commerce. Number 549 REPRESENTATIVE G. DAVIS commented his copy of HB 489 only reads one referral to State Affairs. He asked if the HB 489 really did have a referral to Labor & Commerce. CHAIRMAN VEZEY said the Speaker has given HB 489 an additional referral to the Labor & Commerce committee. Number 554 REPRESENTATIVE B. DAVIS commented the bill should state the referrals it has and the problems may be able to be addressed in Labor & Commerce. Number 557 REPRESENTATIVE OLBERG moved to pass HB 489 from committee with the accompanying fiscal note and individual recommendations. Number 560 REPRESENTATIVE SANDERS objected to the motion. He felt HB 489 was not clearly a good bill and it should be reviewed more. Number 567 REPRESENTATIVE B. DAVIS added HB 489 should at least be held until HB 459 is heard. Number 570 VICE CHAIRMAN KOTT recognized the motion and asked the committee secretary to call the roll. IN FAVOR: VEZEY, KOTT, G. DAVIS, OLBERG. OPPOSED: B. DAVIS, SANDERS. ABSENT: ULMER VICE CHAIRMAN KOTT announced HB 489 passed from the House State Affairs Committee with attached fiscal notes and individual recommendations. Number 582 CHAIRMAN VEZEY clarified, for technical purposes, if a quorum is present bills can be amended by the majority of those present. Bills cannot move out of committee without a majority of the total committee, which is four votes. HB 459 - DAMAGES & ATTORNEY FEES FOR UNPAID WAGES CHAIRMAN VEZEY resumed control of the gavel and opened HB 459 for discussion. The HOUSE LABOR & COMMERCE COMMITTEE is the sponsor of HB 459. Number 602 REPRESENTATIVE ELDON MULDER, MEMBER, HOUSE LABOR & COMMERCE COMMITTEE, addressed HB 459. He stated HB 459 "addresses the awarding of punitive damages and claims of underpaid overtime compensation where, statutory minimum wages under the Alaska Wage & Hour Act, state statute imposes the payment of unpaid minimum wages that are overtime compensation to an employee, by an employer, who has violated provisions of the Alaska Wage & Hour Act." The employer may be liable for mandatory liquidated damages of an equal amount, whereby if an employer is found in violation of not paying overtime, HB 459 would double that amount as a penalty. REPRESENTATIVE MULDER stated the 1991 Alaska Supreme Court case involving Kinney Shoes ruled that liquidated damages are mandatory, and that individual settlements out of court, that did not include liquidated damages were invalid. Prior to the Kinney Shoes decision, an employee with a claim for underpaid overtime or minimum wages had two options: 1) They could file a complaint with the DOL who was able to negotiate a settlement; or 2) they could attempt to reach a private settlement with the employer in question. With either option the settlement could be reached for an amount below full liquidated damages. REPRESENTATIVE MULDER explained current law states an employer in violation of Alaska's Minimum Wage or Overtime Compensation Laws is automatically liable for liquidated damages, regardless of the circumstances. Though intended to be a deterrent to employers, this law creates an imbalance in certain situations. An employer who makes an unintentional mistake is treated as severely as the employer who was trying to cheat their employee. In this case, the employer faces the possibility of paying full liquidated damages, plus court costs, or settling out of court for the claim, plus full liquidated damages. The Federal Labor Standards Act (FLSA), upon which the Alaska Wage & Hour Act is based, contains identical language to AS 23.10.110 (a) in HB 459. REPRESENTATIVE MULDER noted the FLSA also states if the employer shows to the satisfaction of the court, that the act or omission giving rise to such action, was in "good faith" and he had reasonable grounds for believing his act or omission was not in violation of the FLSA, the court may, in its sound discretion award no liquidated damages or award any amount thereof, not to exceed the amount specified in 29 U.S. Code 216. This language, he felt, allowed employers flexibility in overtime disputes. REPRESENTATIVE MULDER stated the goal of HB 459 is to change state standards regarding the awarding of liquidated damages to be congruent with the federal standards as they currently exist. There will still be protection for the employee to seek punitive damages and the employer who makes a mistake in "good faith" is allowed flexibility, provided they meet the burden of proof. He emphasized "good faith" is contingent upon the proof that the employer demonstrated some sort of action to act in good faith. CHAIRMAN VEZEY questioned the interpretation of section 2, subparagraph (c). He interpreted "the prevailing party will be allowed cost according to court rule, and if the commissioner's the prevailing party, he will still pay the costs." REPRESENTATIVE MULDER responded currently, if an employee takes their employer to court and prevails for liquidated damages, the employer is liable for both party's attorney fees. However, in this instance if the employer had prevailed, the employer is not allowed any attorneys fees. He noted the employee has nothing to lose other than paying for his/her own attorney. Section 2, subparagraph (c), allows whichever party prevails in the court case to seek attorneys fees. Number 688 CHAIRMAN VEZEY clarified under current law "plaintiff" is the only one to recover costs and HB 459, section 2, subparagraph (c), would change this to the "prevailing party." TAPE 94-27, SIDE A Number 000 CHAIRMAN VEZEY continued. He felt HB 459 stated when the commissioner is the prevailing party, the commissioner shall remit the attorneys fees. Number 006 REPRESENTATIVE MULDER corrected the second sentence, of section 2, clarifies what is already in current statute. Current statute states, "to be paid by the defendant." He explained when the commissioner is the prevailing party in an action, brought under section 2, the commissioner shall remit the attorneys fees to the Department of Revenue, into the general fund. CHAIRMAN VEZEY thought HB 459 may be clearer if words were added to clarify the commissioner shall remit the fees to the Department of Revenue. REPRESENTATIVE MULDER responded the operative words are, "When the commissioner is the prevailing party,..." Thereby, he shall remit the attorneys fees to the Department of Revenue, the general fund. He felt HB 459, as written, is legally correct, however, it may be confusing in laymen terms. Number 063 REPRESENTATIVE OLBERG felt section 2, lines 13-14, would be clearer if it stated, "recovered attorneys fees." Number 072 REPRESENTATIVE MULDER was amenable to REPRESENTATIVE OLBERG's revision. He clarified HB 459 shall state, "The commissioner shall remit the recovered attorneys fees." CHAIRMAN VEZEY felt this revision would clarify the section. Number 082 REPRESENTATIVE OLBERG moved for an amendment to HB 459, whereby on line 14, after the word "the", insert "recovered." Hearing no objection, CHAIRMAN VEZEY announced the amendment to HB 459 was adopted. Number 095 REPRESENTATIVE B. DAVIS asked the definition of "good faith." Number 102 REPRESENTATIVE MULDER replied the definition of "good faith" is outlined through precedents within previous federal court cases. He said they had tried to define "good faith," but they did not because they would have been establishing a standard which may not be congruent with the federal standard. The purpose of HB 459 is to minimize litigation, but by creating a new definition of "good faith," he felt they would be encouraging more litigation. Number 130 REPRESENTATIVE OLBERG clarified HB 459 gives the court an option by saying "the court may decline to award liquidated damages," if in fact, the employer had acted in "good faith." Number 137 REPRESENTATIVE SANDERS stated he had trouble with HB 459 as both a laborer, and a businessman. He felt overtime problems with honest employers were usually settled outside of court, one on one with employer/employee. He believed overtime cases were not taken to court unless "you are trying to screw somebody." Number 148 REPRESENTATIVE MULDER responded, under the current interpretation of law, settling overtime disputes out of court was illegal. The dispute with the employee could have only been settled by doubling the amount owed to them. One on one settlements cannot be settled for anything less than double what that individual claims to be owed. Number 160 CHAIRMAN VEZEY clarified REPRESENTATIVE SANDERS point as the courts do not have the chance to enforce the law unless the action is brought before them. Number 188 J.R. 'RANDY' CARR, CHIEF WAGE & HOUR DIVISION, DEPARTMENT OF LABOR, answered questions on HB 459. He stated the Kinney Shoes decision established a rule of law that no one had ever anticipated would exist. MR. CARR said, the 1959 Liquidated Damage statute was first interpreted by the Supreme Court in 1979, in Musara v. AIA Industries. In this case, the Supreme Court ruled that liquidated damages were a mandatory penalty; however, the jury waived the liquidated damages for this employer, found guilty of overtime violations. On appeal, the Supreme Court clarified, if a matter goes to court and a judgment is rendered, the judgment must include a 100 percent penalty. He termed this law as a "competitive assistance to employers." MR. CARR explained in the Kinney Shoe case, the employer was subject to a class action lawsuit; however, they approached the employees out of court and settled with them for about 30 cents on the dollar, of the actual documented overtime they were due. Kinney Shoes eroded the legal class being represented. The employees' attorneys argued that the penalties were punitive and not compensatory; therefore, the penalties are not the employees' to give up. The court agreed with this argument. MR. CARR stated prior to Kinney Shoes, most disputes were settled by the Department of Labor (DOL). He believed every one of the cases were settled for less than the full amount of liquidated damages. After Kinney Shoes, the DOL asked the Employment Law section of the Bar Association if they would play the DOL's past supervising approval authority role over settlements. MR. CARR clarified the DOL does support the concept of returning the law to the condition it was in pre-Kinney Shoes. If this were to happen, both the DOL and specific parties could settle cases for less than liquidated damages, short of court judgment. The DOL is willing to enter into a arrangement, whereby they can review and approve settlement agreements submitted to them by private council. The DOL does, however, want to maintain the mandatory status of a liquidated damage as defined by the Musara v. AIA Industries decision. The leverage gained by this decision has enabled the state to settle 100 percent of its overtime cases, because employers know they must deal fairly in settlements or they will have to go to court and pay an additional 100 percent on top of the actual claim. MR. CARR felt HB 459 goes beyond necessity. Section 3 is a concern to the DOL because it deals with elements that exceed current federal law. The DOL felt, because the commissioner could settle for less than liquidated damages and would not have the "good faith" exception, the dual status created with the private parties council would be found unconstitutional in the future. If the dual status is found unconstitutional, the state will lose the ability to have the mandatory penalty and to settle cases short of 100 percent liquidated damages. The DOL believed section 3, subparagraph (e), to be the heart of the concept, whereby the chief labor official would have approval authority to oversee settlement agreements. Section 3, subparagraph (f), was a concern because they felt parties, without representation, were "too unsophisticated to understand their rights and what they may be giving up..." MR. CARR expressed there are very few minimum wage complaints, compared to overtime complaints under the Wage & Hour Act. The DOL would like all employers to have the same competitive advantage. Employers acting in "good faith" should have an advantage, but confusing language such as "good faith" may be questioned in the future and increase litigation. Number 383 REPRESENTATIVE G. DAVIS asked the DOL proposed definition of "good faith" they may want to see incorporated into HB 459. Number 389 MR. CARR answered "good faith" need not be defined in HB 459, because it is defined through previous decisions. The problem is the facts are different for every case, and if a definition of "good faith" was supplied, the facts would still be arguable for every case. Number 400 REPRESENTATIVE B. DAVIS questioned if MR. CARR had testified before the Labor & Commerce Committee. Number 402 MR. CARR replied he was unavailable at the previous hearing. Number 403 REPRESENTATIVE MULDER stated the DOL had testified. Number 407 REPRESENTATIVE B. DAVIS inquired why REPRESENTATIVE MULDER did not take the suggestions from the DOL because HB 459 appeared unchanged. Number 409 REPRESENTATIVE MULDER responded he was still trying to pursue the definition of "good faith." It was the Labor & Commerce Committee's opinion to not stop HB 459, with his assurance that HB 459 would not be put to the floor until they had come to an adequate solution about the definition of "good faith." Number 419 REPRESENTATIVE B. DAVIS asked REPRESENTATIVE MULDER'S view of the DOL's request to have the laws as they were pre- Kinney Shoes decision. She thought the DOL's request may be suitable. Number 423 REPRESENTATIVE MULDER answered HB 459 does revert to pre- Kinney Shoes decision; however, it does supercede pre-Kinney Shoes by relating directly to "good faith," and the legislature's ability to determine what is "good faith." The inclusion of attorneys costs in HB 459 was an attempt to make a level playing field, whereby those who prevail are entitled to attorneys fees. He emphasized the agreement on an adequate definition of "good faith" was very close. Number 440 MR. CARR agreed with REPRESENTATIVE MULDER that negotiations are still taking place to accomplish a suitable result. Number 442 REPRESENTATIVE KOTT commented HB 459 did have a Judiciary Committee referral, and as a member of that committee, he felt they would take care of the definition problem. Number 450 MR. CARR clarified the DOL does support amending the law, so that the mandatory penalties are somewhat reduced; however, a mandatory penalty is still required to maintain leverage. Number 456 REPRESENTATIVE MULDER agreed that those found guilty of purposeful negligent overtime compensation should be penalized. He felt HB 459 is intended to help those who never intended to cheat their employees. REPRESENTATIVE SANDERS responded the amount of those who do honestly make mistakes are already correcting the disputes internally. He believed the laws should address those who intentionally continue to avoid overtime compensation over the years. CHAIRMAN VEZEY asked the pleasure of the committee. He stated he would not be opposed to bringing a committee substitute before the committee which incorporates the adopted amendment. Number 473 REPRESENTATIVE G. DAVIS commented he would like to see HB 459 moved from committee. He felt the DOL had a vested interest and they would follow HB 459 to the Judiciary Committee. REPRESENTATIVE KOTT is also a member of Judiciary Committee and he would be able to convey the committee's interests. REPRESENTATIVE G. DAVIS moved to adopt CSHB 459 reflecting the amendment adopted in committee. Hearing no objection, the House State Affairs Committee adopted CSHB 459, as amended. REPRESENTATIVE G. DAVIS moved to pass CSHB 459 as amended from committee, with attached fiscal notes and individual recommendations. Number 490 CHAIRMAN VEZEY asked the committee secretary to call the roll on REPRESENTATIVE G. DAVIS' motion. IN FAVOR: VEZEY, KOTT, B. DAVIS, G. DAVIS, SANDERS, OLBERG. OPPOSED; NONE ABSENT: ULMER CHAIRMAN VEZEY announced CSHB 459, as amended passed from the House State Affairs Committee. ADJOURNMENT CHAIRMAN VEZEY adjourned the meeting at 10:01 a.m. BILLS NOT HEARD HB 389 - INCREASED PENALTIES FOR JOY RIDING HB 347 - STATE LONG TERM PLANS